10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended January 31, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-32215

Jackson Hewitt Tax Service Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-0779692
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3 Sylvan Way

Parsippany, New Jersey 07054

(Address of principal executive offices including zip code)

(973) 630-1040

(Registrant’s telephone number, including area code)

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes.  ¨    No.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  ¨    No  x

The number of shares outstanding of the registrant’s common stock was 28,768,695 (net of 10,739,867 shares held in treasury) as of February 28, 2010.

JACKSON HEWITT TAX SERVICE INC.

TABLE OF CONTENTS

		Page
PART 1 - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4.	Controls and Procedures	42
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	(Removed and Reserved)	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
	Signatures

PART 1 — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

JACKSON HEWITT TAX SERVICE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except per share amounts)

	As of
	January 31, 2010			April 30, 2009
Assets
Current assets:
Cash and cash equivalents	$	7,049		$	306
Accounts receivable, net of allowance for doubtful accounts of $3,383 and $1,869, respectively		70,783			24,272
Notes receivable, net		7,570			6,569
Prepaid expenses and other		19,723			14,195
Deferred income taxes		620			5,601
Total current assets		105,745			50,943
Property and equipment, net		25,998			27,685
Goodwill		147,241			418,674
Other intangible assets, net		87,033			87,324
Notes receivable, net		8,114			4,146
Other non-current assets, net		18,178			19,436
Total assets	$	392,309		$	608,208
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable and accrued liabilities	$	30,202		$	33,693
Current portion of long-term debt		25,000			—
Income taxes payable		34,881			48,305
Deferred revenues		6,336			10,370
Total current liabilities		96,419			92,368
Long-term debt		339,000			232,000
Deferred income taxes		19,124			23,589
Other non-current liabilities		12,523			16,587
Total liabilities		467,066			364,544
Commitments and Contingencies (Note 11)
Stockholders’ (deficit) equity:
Common stock, par value $0.01; Authorized: 200,000,000 shares; Issued: 39,508,562 and 39,290,418 shares, respectively		395			393
Additional paid-in capital		389,833			388,136
Retained (deficit) earnings		(158,359	)		161,988
Accumulated other comprehensive loss		(3,768	)		(4,178	)
Less: Treasury stock, at cost: 10,739,867 and 10,527,879 shares, respectively		(302,858	)		(302,675	)
Total stockholders’ (deficit) equity		(74,757	)		243,664
Total liabilities and stockholders’ (deficit) equity	$	392,309		$	608,208

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

1

JACKSON HEWITT TAX SERVICE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended January 31,						Nine Months Ended January 31,
	2010			2009			2010			2009
Revenues
Franchise operations revenues:
Royalty	$	24,575		$	29,620		$	25,819		$	30,893
Marketing and advertising		10,826			13,089			11,373			13,653
Financial product fees		12,490			21,182			18,150			26,256
Other		1,982			2,027			2,484			3,624
Service revenues from company-owned office operations		29,229			31,872			30,353			32,720
Total revenues		79,102			97,790			88,179			107,146
Expenses
Cost of franchise operations		8,773			8,980			23,298			24,933
Marketing and advertising		15,523			20,530			21,947			30,139
Cost of company-owned office operations		17,753			19,887			32,030			37,827
Selling, general and administrative		8,314			6,680			35,801			30,580
Goodwill impairment		274,150			—			274,150			—
Depreciation and amortization		3,526			3,296			10,560			9,689
Total expenses		328,039			59,373			397,786			133,168
(Loss) income from operations		(248,937	)		38,417			(309,607	)		(26,022	)
Other income/(expense):
Interest and other income		691			454			1,922			1,234
Interest expense		(5,825	)		(4,197	)		(16,262	)		(11,422	)
(Loss) income before income taxes		(254,071	)		34,674			(323,947	)		(36,210	)
Provision for (benefit from) income taxes		24,954			13,763			(3,604	)		(14,371	)
Net (loss) income	$	(279,025	)	$	20,911		$	(320,343	)	$	(21,839	)
(Loss) earnings per share:
Basic	$	(9.75	)	$	0.73		$	(11.20	)	$	(0.77	)
Diluted	$	(9.75	)	$	0.73		$	(11.20	)	$	(0.77	)
Weighted average shares outstanding:
Basic		28,617			28,489			28,591			28,478
Diluted		28,617			28,545			28,591			28,478
Cash dividends declared per share:	$	—		$	0.18		$	—		$	0.54

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2

JACKSON HEWITT TAX SERVICE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended January 31,
	2010			2009
Operating activities:
Net loss	$	(320,343	)	$	(21,839	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		10,560			9,689
Share-based compensation		3,443			2,663
Amortization of deferred financing costs		1,424			338
Amortization of development advances		1,182			1,457
Provision for uncollectible receivables, net		3,962			2,316
Deferred income taxes		(74	)		(3,723	)
Goodwill Impairment		274,150			—
Other		124			(75	)
Changes in assets and liabilities, excluding the impact of acquisitions:
Accounts receivable		(53,224	)		(53,770	)
Notes receivable		(2,634	)		(1,322	)
Prepaid expenses and other		(929	)		(1,546	)
Accounts payable, accrued, and other liabilities		(2,185	)		8,285
Income taxes payable		(14,851	)		(29,568	)
Deferred revenues		(6,816	)		(3,345	)
Net cash used in operating activities		(106,211	)		(90,440	)
Investing activities:
Capital expenditures		(7,784	)		(5,535	)
Capital expenditures – equipment leased to franchisees		(6,116	)		—
Funding provided to franchisees		(2,230	)		(4,848	)
Proceeds from repayment of franchisee notes		866			513
Cash paid for acquisitions		(2,070	)		(13,440	)
Net cash used in investing activities		(17,334	)		(23,310	)
Financing activities:
Common stock repurchases		(183	)		—
Borrowings under revolving credit facility		138,000			205,000
Repayments of borrowings under revolving credit facility		(6,000	)		(80,000	)
Dividends paid to stockholders		(60	)		(15,341	)
Proceeds from issuance of common stock		—			10
Debt issuance costs		(211	)		(881	)
Change in cash overdrafts		(1,258	)		1,399
Net cash provided by financing activities		130,288			110,187
Net increase (decrease) in cash and cash equivalents		6,743			(3,563	)
Cash and cash equivalents, beginning of period		306			4,594
Cash and cash equivalents, end of period	$	7,049		$	1,031

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BACKGROUND AND BASIS OF PRESENTATION

Description of Business

Jackson Hewitt Tax Service Inc. provides computerized preparation of federal, state and local individual income tax returns in the United States through a nationwide network of franchised and company-owned offices operating under the brand name Jackson Hewitt Tax Service^®. The Company provides its customers with convenient, fast and quality tax return preparation services and electronic filing. In connection with their tax return preparation experience, many of the Company’s customers select various financial products to suit their needs, including refund anticipation loans (“RALs”). “Jackson Hewitt” and the “Company” are used interchangeably in these notes to the Condensed Consolidated Financial Statements to refer to Jackson Hewitt Tax Service Inc. and its subsidiaries, appropriate to the context.

Jackson Hewitt Tax Service Inc. was incorporated in Delaware in February 2004 as the parent corporation in connection with the Company’s June 2004 initial public offering (“IPO”) pursuant to which Cendant Corporation, now known as Avis Budget Group, Inc. (“Cendant”), divested 100% of its ownership interest in Jackson Hewitt Tax Service Inc. Jackson Hewitt Inc. (“JHI”) is a wholly-owned subsidiary of Jackson Hewitt Tax Service Inc. Jackson Hewitt Technology Services LLC is a wholly-owned subsidiary of JHI that supports the technology needs of the Company. Company-owned office operations are conducted by Tax Services of America, Inc., which is a wholly-owned subsidiary of JHI. The Condensed Consolidated Financial Statements include the accounts and transactions of Jackson Hewitt and its subsidiaries.

Credit Facility

Based upon the information currently available, the Company believes that it is likely that it will breach the financial covenants in its credit facility as of April 30, 2010. Jackson Hewitt intends to initiate discussions with the lead agent under its credit facility regarding seeking relief in connection with these financial covenants. See Note 13, “Credit Facility” for additional information on the Company’s credit facility.

For the remainder of fiscal 2010, the Company expects its primary source of cash to be provided by operating activities, primarily from royalty and marketing advertising fees from franchisees, service revenues earned at Company-owned offices and financial product fees. The Company anticipates using cash generated during the 2010 tax season as its principal source of funding operations during the first nine months of the fiscal year leading up to the 2011 tax season. The Company intends to discuss with its lenders the Company’s future sources of funding operations, including cash generated during the 2010 tax season and borrowings under the credit facility.

Basis of Presentation

The accompanying unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. These interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and other financial information included in the Company’s Annual Report on Form 10-K which was filed with the SEC on July 2, 2009.

In presenting the Condensed Consolidated Financial Statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates. In the opinion of management, the accompanying interim Condensed Consolidated Financial Statements contain all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for the interim periods reported are not necessarily indicative of the results of operations that may be expected for any future interim periods or for the full fiscal year.

Management has evaluated all activity of the Company and concluded that no subsequent events have occurred since January 31, 2010 that would require recognition in the Condensed Consolidated Financial Statements.

4

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Comprehensive Income (Loss)

The Company’s comprehensive income (loss) is comprised of net income (loss) from the Company’s results of operations and changes in the fair value of derivatives. The components of comprehensive income (loss), net of tax, were as follows:

	Three Months Ended January 31,						Nine Months Ended January 31,
	(in thousands)						(in thousands)
	2010			2009			2010			2009
Net (loss) income	$	(279,025	)	$	20,911		$	(320,343	)	$	(21,839	)
Changes in fair value of derivatives		192			(2,151	)		410			(2,044	)
Total comprehensive (loss) income	$	(278,833	)	$	18,760		$	(319,933	)	$	(23,883	)

Computation of (loss) earnings per share

In loss periods, basic net loss per share and diluted net loss per share are identical since the effect of potential common shares is anti-dilutive and therefore excluded. Basic (loss) earnings per share is calculated as net (loss) income divided by the weighted average number of common shares and vested shares of restricted stock outstanding during the period. Diluted earnings per share is calculated by dividing net income by an adjusted weighted average number of common shares outstanding during the period assuming conversion of potentially dilutive securities arising from stock options outstanding and shares of unvested restricted stock.

For the three and nine months ended January 31, 2010 both basic and dilutive (loss) earnings per share computations exclude all performance vesting awards since the performance conditions had not been met for those periods. See “Note 6 – Share-Based Payments” for additional information on the Company’s performance vesting awards.

The following table summarizes the basic and diluted weighted average shares outstanding for the (loss) earnings per share calculations for the periods ended January 31, 2010 and 2009:

	Three Months Ended January 31,		Nine Months Ended January 31,
(in thousands)	2010	2009	2010	2009
Weighted average shares outstanding - basic	28,617	28,489	28,591	28,478
Effect of dilutive securities:
Stock options	—	10	—	—
Shares of restricted stock	—	46	—	—
Weighted average shares outstanding - dilutive	28,617	28,545	28,591	28,478

5

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

In addition, the following table summarizes the anti-dilutive securities that were excluded from the computation of the effect of dilutive securities on (loss) earnings per share:

	Three Months Ended January 31,		Nine Months Ended January 31,
(in thousands)	2010	2009	2010	2009
Stock options (1)	2,016	2,495	2,234	2,644
Shares of restricted stock (1)	221	9	165	49
Total anti-dilutive securities	2,237	2,504	2,399	2,693

(1) For periods with net income, exercise prices for stock options were greater than the average market prices for the Company’s common stock or shares of restricted stock are anti-dilutive due to the impact of the unrecognized compensation cost on the calculation of assumed proceeds in the application of the treasury stock method. In-the-money stock options are also included in periods with net loss.

2. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements. This standard requires new disclosures on the amount and reason for transfers in and out of Level 1 and 2 recurring fair value measurements. The standard also requires disclosure of activities (i.e., on a gross basis), including purchases, sales, issuances, and settlements, in the reconciliation of Level 3 fair value recurring measurements. The standard clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. The new disclosures regarding Level 1 and 2 fair value measurements and clarification of existing disclosures are effective for periods beginning after December 15, 2009. The disclosures about the reconciliation of information in Level 3 recurring fair value measurements are required for periods beginning after December 15, 2010. We are currently evaluating the impact of this standard on our financial statements.

3. FAIR VALUE MEASUREMENTS

Financial assets and liabilities subject to fair value measurements on a recurring basis are classified according to a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. Level 1 represents observable inputs such as quoted prices in active markets. Level 2 is defined as inputs other than quoted prices in active markets that are either directly or indirectly observable. Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. There were no changes to the Company’s valuation techniques used to measure asset and liabilities fair values on a recurring basis during the nine months ended January 31, 2010.

The Company’s investments that are held in trust for payment of non-qualified deferred compensation to certain employees consist primarily of investments that are either publicly traded or for which market prices are readily available. These funds are held in registered investment funds and common/collateral trusts.

The Company uses various hedging strategies including interest rate swaps and interest rate collar agreements to manage its exposure to changes in interest rates. The Company has designated these derivatives as cash flow hedges to manage the risk related to its floating rate debt. The Company’s derivative contracts represent interest rate swap and collar agreements to convert a notional amount of floating-rate borrowings into fixed rate debt. The fair value of the Company’s derivative contracts was derived from third party service providers utilizing proprietary models based on current market indices and estimates about relevant future market conditions. In connection with such cash flow hedges, the Company records unrealized gains (losses) to other comprehensive income. There was no amount recorded in the consolidated condensed statement of operations as there was no ineffectiveness as of January 31, 2010.

6

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The accompanying condensed consolidated balance sheet includes financial instruments that are recorded at fair value as noted below:

			Fair Value at Reporting Date Using
			(In thousands)
	Fair Value As of January 31, 2010		Quoted Prices in Active Markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets
Investments held in trust, current	$	161	$	155	$	6	$	—
Investments held in trust, non-current		89		85		4		—
Total	$	250	$	240	$	10	$	—
Liabilities
Derivative contracts	$	6,281	$	—	$	6,281	$	—
Total	$	6,281	$	—	$	6,281	$	—

			Fair Value at Reporting Date Using
			(In thousands)
	Fair Value As of April 30, 2009		Quoted Prices in Active Markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets
Investments held in trust, current	$	278	$	167	$	111	$	—
Investments held in trust, non-current		189		120		69		—
Total	$	467	$	287	$	180	$	—
Liabilities
Derivative contracts	$	6,963	$	—	$	6,963	$	—
Total	$	6,963	$	—	$	6,963	$	—

4. GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill by segment were as follows:

	Franchise Operations			Company-Owned Office Operations			Total
	(In thousands)
Balance as of April 30, 2009	$	336,767		$	81,907		$	418,674
Additions (Note 8)		—			2,717			2,717
Impairment of goodwill (a)		(223,734	)		(50,416	)		(274,150	)
Balance as of January 31, 2010	$	113,033		$	34,208		$	147,241

(a) The impairment charge, which is disclosed below, is the first goodwill impairment charge recorded by the Company since its inception.

7

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Goodwill is the excess of the purchase price over the fair value assigned to the net assets acquired in a business combination. Goodwill is not amortized, but instead is subject to periodic testing for impairment. The Company assesses goodwill for impairment by comparing the carrying values of its reporting units to their estimated fair values. Goodwill of a reporting unit is tested for impairment on an annual basis or between annual tests if events occur or circumstances change indicating that the fair value of a reporting unit may be below its carrying amount. Goodwill impairment is determined using a two-step approach in accordance with Accounting Standards Codification (“ASC”) Topic 350 “Intangibles – Goodwill and Other.”

Due to the loss of approximately 50% of the Company’s RAL program in the third quarter of fiscal 2010 and the decline in its stock price and resulting market capitalization since the beginning of such fiscal quarter, the Company concluded that a goodwill impairment triggering event had occurred for purposes of ASC Topic 350. Accordingly, the Company performed a testing of the carrying values of goodwill for both of its Franchise Operations and Company-owned Office Operations reporting units as of January 31, 2010. For purposes of the step one analyses, determination of the reporting units’ fair value was based on the income approach, which estimates the fair value of the Company’s reporting units based on discounted future cash flows. Based on completion of step one, the Company determined that the carrying values of the reporting units exceeded their fair value as of January 31, 2010.

Step two of the goodwill impairment test involves comparing the implied fair value of the reporting unit’s goodwill against the carrying value of the goodwill. Under step two, determining the implied fair value of goodwill requires the valuation of a reporting unit’s identifiable tangible and intangible assets and liabilities as if the reporting unit had been acquired in a business combination on the testing date. The difference between the fair value of the entire reporting unit as determined in step one and the net fair value of all identifiable assets and liabilities represents the implied fair value of goodwill. The goodwill impairment charge would be the difference between the carrying amount of goodwill and the implied fair value of goodwill upon the completion of step two. As a result of this testing, the Company concluded that the carrying value of its Franchise Operations and Company-owned Office Operations reporting units, including goodwill, exceeded the fair value of each respective reporting unit. As a result, the Company recorded a non-cash goodwill impairment charge of $274.1 million in the third quarter of fiscal 2010. The impairment was recorded as a pre-tax charge of $223.7 million in the Franchise Operations reporting unit and $50.4 million in the Company-owned Office Operations reporting unit.

Significant management judgment is required in assessing whether goodwill is impaired. The carrying value of the Company’s reporting units was determined by specifically identifying and allocating all of its consolidated assets and liabilities to each reporting unit based on various methods the Company deemed reasonable. Fair value of each reporting unit was estimated using an income approach which discounts future net cash flows to their present value at a rate that reflects the current return requirements of the market and risks inherent in the Company’s business. Estimated future cash flows are impacted by a multitude of factors and were based to a large extent on the Company’s internal business plan and adjusted, as appropriate, for management’s views of market participant assumptions, oversight of the providers of RAL product and an assessment related to whether these providers will be allowed to continue to offer such product in the future, and the renewal of certain material contracts. Additional factors affecting these future cash flows included, but were not limited to, franchise agreement renewal and attrition rates, markets and market share data, tax return sales volumes and prices, cost structure, and working capital changes. Estimates were also used for the Company’s weighted average cost of capital, which was adjusted, as appropriate, to account for company specific risk premiums in discounting the Company’s projected future cash flows and the Company’s long-term growth rate for purposes of determining a terminal value at the end of the forecast period. Management’s assumptions and views of these factors continually evolve, and such views and assumptions used in determining the fair value of the Company’s reporting units in the third quarter of fiscal 2010 changed significantly from those used in the 2009 annual impairment test.

The Company considered historical experience and all available information at the time the fair value of its reporting units was estimated. However, fair values that could be realized in an actual transaction may differ from those used by the Company to evaluate the impairment of its goodwill. The fair value of the reporting units was determined using unobservable inputs (i.e., Level 3 inputs) as defined by the accounting guidance for fair value measurements. As an overall test of reasonableness of the estimated fair values of the reporting units, the Company reconciled the combined fair value estimates of the reporting units to their market capitalization as of January 31, 2010. The reconciliation confirmed that the fair values were reasonably representative of the market views.

8

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

These underlying assumptions and estimates are made as of a point in time. Subsequent changes in management’s estimates of future cash flows could result in a future impairment charge to goodwill. The Company continues to remain alert for any indicators that the fair value of a reporting unit could be below book value and will assess goodwill for impairment as appropriate.

Other intangible assets consisted of:

	As of January 31, 2010							As of April 30, 2009
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)
Amortizable other intangible assets:
Franchise agreements (a)	$	16,052	$	(15,683	)	$	369	$	16,052	$	(15,605	)	$	447
Customer relationships (b)		12,829		(10,235	)		2,594		12,449		(9,246	)		3,203
Reacquired franchise rights (c)		442		(28	)		414		—		—			—
Acquired tradename		53		(22	)		31		53		(4	)		49
Total amortizable other intangible assets	$	29,376	$	(25,968	)		3,408	$	28,554	$	(24,855	)		3,699
Unamortizable other intangible assets:
Jackson Hewitt trademark							81,000							81,000
Reacquired franchise rights (d)							2,625							2,625
Total unamortizable other intangible assets							83,625							83,625
Total other intangible assets, net						$	87,033						$	87,324

(a) Amortized using the straight-line method over a period of ten years.

(b) Consists of customer lists and non-compete agreements. Customer lists are amortized using the double declining method over a period of five years and non-compete agreements are amortized using the straight-line method over a period of two to six years.

(c) Consists of franchise rights reacquired after the Company’s adoption of ASC subtopic 805, “Business Combinations” in which amounts are amortized over the remaining life of the franchise agreement from the date of acquisition.

(d) Consists of franchise rights reacquired prior to the Company’s adoption of ASC subtopic 805.

The Company reevaluated its other indefinite-lived intangibles for impairment in conjunction with the Company’s goodwill testing and concluded that the fair value of other intangible assets, including trademark, exceeded their carrying value, thereby indicating no impairment as of the third quarter of fiscal 2010.

The changes in the carrying amount of other intangible assets, net, by segment were as follows:

	Franchise Operations			Company-Owned Office Operations			Total
	(In thousands)
Balance as of April 30, 2009	$	84,072		$	3,252		$	87,324
Additions (Note 8)		442			380			822
Amortization		(106	)		(1,007	)		(1,113	)
Balance as of January 31, 2010	$	84,408		$	2,625		$	87,033

9

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Amortization expense relating to other intangible assets was as follows:

	Three Months Ended January 31,				Nine Months Ended January 31,
	2010		2009		2010		2009
Franchise agreements and reacquired rights	$	45	$	25	$	106	$	78
Customer relationships		331		372		989		965
Acquired tradename		6		—		18		—
Total	$	382	$	397	$	1,113	$	1,043

Estimated amortization expense related to other intangible assets for each of the fiscal years ended April 30 is as follows:

	Amount
	(In thousands)
Remaining three months of fiscal 2010		406
2011		1,231
2012		846
2013		546
2014 and thereafter		379
Total	$	3,408

5. PREPAID EXPENSES AND OTHER

	As of January 31, 2010		As of April 30, 2009
	(In thousands)
Other receivables due from franchise’s	$	5,919	$	2,380
Prepaid Gold Guarantee		5,405		6,704
Walmart kiosks and related receivables		3,826		—
Other prepaid expenses		2,189		3,171
Prepaid rent		1,247		1,184
Prepaid insurance		1,137		756
Total prepaid expenses and other	$	19,723	$	14,195

10

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

6. SHARE-BASED PAYMENTS

The Company’s amended and restated 2004 Equity and Incentive Plan (the “Amended and Restated Plan”) makes available for grant 6.5 million shares of common stock in the form of incentive stock options, nonqualified stock options, stock appreciation rights, shares of restricted stock, restricted stock units, and/or other stock or cash-based awards to non-employee directors, officers, employees, advisors, and consultants who are selected by the Company’s Compensation Committee for participation in the plan. As of January 31, 2010, 2.7 million shares remained available for grant. The Amended and Restated Plan provides for accelerated vesting of outstanding awards if there is a change in control. The Amended and Restated Plan includes nondiscretionary antidilution provisions in case of an equity restructuring.

Share-based payments under the Amended and Restated Plan include the following:

(i) Time-Based Vesting Stock Options (“TVOs”);

(ii) Performance-Based Vesting Stock Options (“PVOs”);

(iii) Time-Based Vesting Shares of Restricted Stock (“TVRS”);

(iv) Performance-Based Vesting Shares of Restricted Stock (“PVRS”); and

(v) Restricted Stock Units (“RSUs”).

(i) Time-Based Vesting Stock Options

TVOs are granted, with the exception of certain TVOs granted at the time of the Company’s IPO, with an exercise price equal to the New York Stock Exchange (“NYSE”) closing price of a share of common stock on the date of grant and have a contractual term of ten years. TVOs granted through April 30, 2007 become exercisable with respect to 25% of the shares on each of the first four anniversaries of the date of grant. TVOs granted in fiscal 2008 become exercisable with respect to 20% of the shares on each of the first five anniversaries of the date of grant. TVOs granted since fiscal 2009 become exercisable with respect to one-third of the shares on each of the first three anniversaries of the date of grant, with the exception of the Company’s June 2009 two-year grant to its current Chief Executive Officer. All TVOs granted are subject to continued employment on the vesting date.

The Company incurred share-based compensation expense of $0.35 million and $0.4 million in the three months ended January 31, 2010 and 2009, respectively, in connection with the vesting of TVOs ($2.0 million and $1.7 million in the nine months ended January 31, 2010 and 2009, respectively). The share-based compensation in the nine months ended January 31, 2010 included expense of $0.85 million related to the accelerated vesting of 160,642 TVOs attributed to the departure of the Company’s former Chief Executive Officer in June 2009.

The weighted average grant date fair value for TVOs granted in the nine months ended January 31, 2010 and 2009 was $3.41 and $3.02, respectively. The fair value of each TVO award was estimated on the date of grant using the Black-Scholes option-pricing model. The Company uses the method permitted under FASB ASC Topic 718 to determine the expected holding period and will continue to do so until the Company is able to accumulate a sufficient number of years of employee exercise behavior to make a more refined estimate of expected term. Expected volatility was based on the Company’s historical publicly traded stock price. The risk-free interest rate assumption was determined using the Federal Reserve nominal rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected holding period of the award being valued.

The following table sets forth the weighted average assumptions used to determine compensation cost for TVOs granted during the following periods:

	Nine Months Ended January 31,
	2010		2009
Expected holding period (in years)	5.94		6.00
Expected volatility	67.5	%	39.7	%
Dividend yield	—	%	5.6	%
Risk-free interest rate	2.7	%	3.3	%

11

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following table summarizes information about TVO activity for the nine months ended January 31, 2010:

	Number of TVOs		Weighted Average Exercise Price
Balance as of April 30, 2009	2,238,689		$	21.04
Granted	212,667		$	5.47
Forfeited	(128,350	)	$	16.94
Expired	(502,873	)	$	21.86
Balance as of January 31, 2010	1,820,133		$	19.29
Exercisable as of January 31, 2010	1,155,286		$	23.07
Vested and expected to vest as of January 31, 2010	1,786,889		$	20.15

As of January 31, 2010, there were no outstanding in-the-money TVOs that had an aggregate intrinsic value. The aggregate intrinsic value discussed in this paragraph represents the total pre-tax intrinsic value based on the Company’s closing stock price on January 31, 2010, which would have been received by the option holders had all in-the-money TVO holders exercised their TVOs on that date.

As of January 31, 2010, outstanding TVOs had an average remaining contractual life of 6.8 years. As of January 31, 2010, there were no exercisable in-the-money TVOs. As of January 31, 2010, exercisable TVOs had an average remaining contractual life of 5.5 years.

The following table summarizes information about unvested TVO activity for the first nine months of fiscal 2010:

	Number of TVOs		Weighted Average Grant Date Fair Value Per Share
Unvested as of April 30, 2009	979,159		$	5.99
Granted	212,667		$	3.41
Vested	(398,629	)	$	6.92
Forfeited	(128,350	)	$	4.62
Unvested as of January 31, 2010	664,847		$	4.87

As of January 31, 2010, there was $2.3 million of total unrecognized compensation cost related to unvested TVOs, which is expected to be recognized over a weighted average period of 1.5 years. The total fair value of stock options vested in the nine months ended January 31, 2010 and 2009 was $2.8 million and $3.3 million, respectively.

(ii) Performance-Based Vesting Stock Options

In July 2009, the Company granted 148,579 PVOs to certain executives with a $5.95 per share exercise price representing the NYSE closing price of a share of common stock on the date of grant. PVOs had a grant date fair value of $3.87 per share with a contractual term of ten years. These PVOs will vest after three years provided that the Company achieves a pre-determined Earnings Before Income Tax, Depreciation and Amortization (“EBITDA”) target for fiscal 2012. Additionally, vesting is subject to the executive being employed by the Company at the time the Company achieves such financial target in fiscal 2012, except in the case of the Company’s Chief Executive Officer, who needs only to have been employed through the term of his employment agreement, which ends on June 4, 2011.

No compensation expense related to the July 2009 PVO grant was recorded in the nine months ended January 31, 2010. If, and when, the Company determines it is probable that the performance condition will be achieved, compensation expense will be recognized cumulatively in such period from the date of grant through the date of the change in estimate for the awards under which the requisite service period has been rendered. The remaining unrecognized compensation expense for those awards would be recognized prospectively over the remaining requisite service period. In both the three and nine months ended January 31, 2009, share-based compensation expense was negligible in connection with the vesting of PVOs granted in July 2008.

12

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The weighted average grant date fair value for PVOs granted in the nine months ended January 31, 2010 and 2009 was $3.87 and $3.70, respectively. The fair value of each PVO award was estimated on the date of grant using the Black-Scholes option-pricing model. For both the July 2009 and July 2008 grants, the expected holding period, expected volatility and risk-free interest rate assumptions were determined using the same methodology as the TVO grants discussed earlier.

The following table sets forth the weighted average assumptions used to determine compensation cost for PVOs granted during the following periods:

	Nine Months Ended January 31,
	2010		2009
Expected holding period (in years)	6.50		6.00
Expected volatility	68.4	%	39.5	%
Dividend yield	—	%	5.0	%
Risk-free interest rate	2.8	%	3.5	%

The following table sets forth the weighted average assumptions used to determine compensation cost for PVOs granted during the nine months ended January 31, 2010:

	Number of PVOs		Weighted Average Exercise Price
Outstanding as of April 30, 2009	186,870		$	14.50
Granted	148,579		$	5.95
Forfeited	(209,480	)	$	13.58
Outstanding as of January 31, 2010	125,969		$	5.95
Exercisable as of January 31, 2010	—		$	—

On June 30, 2009, the Compensation Committee of the Board of Directors determined that the performance criteria required for vesting of the July 2008 award had not been achieved and, as a result, all such outstanding PVOs were forfeited.

As of January 31, 2010, there were no outstanding in-the-money PVOs. Outstanding PVOs as of January 31, 2010 had an average remaining contractual life of 9.5 years.

The following table summarizes information about unvested PVO activity for the first nine months of fiscal 2010:

	Number of PVOs		Weighted Average Grant Date Fair Value Per Share
Unvested as of April 30, 2009	186,870		$	3.70
Granted	148,579		$	3.87
Forfeited	(209,480	)	$	3.72
Unvested as of January 31, 2010	125,969		$	3.87

(iii) Time-Based Vesting Shares of Restricted Stock

The fair value of each TVRS grant is measured by the NYSE closing price of the Company’s common stock on the date of grant. Compensation expense related to the fair value of TVRS is recognized on a straight-line basis over the requisite service period based on those restricted stock grants that are expected to ultimately vest. One third of the shares of restricted stock vest on each of the first three anniversaries of the date of grant, subject to continued employment on the vesting date, except in the case of the Company’s Chief Executive Officer, whereby one half of the shares of restricted stock vest on each of the first two anniversaries of the date of grant, subject to continued employment on the vesting date.

The Company incurred share-based compensation expense of $0.2 million in each of the three months ended January 31, 2010 and 2009, respectively, in connection with the vesting of TVRS ($1.2 million and $0.7 million in the nine months ended January 31, 2010 and 2009, respectively). The share-based compensation in the nine months ended January 31, 2010 included expense of $0.55 million related to the accelerated vesting of 54,616 TVRS’s attributed to the departure of the Company’s former Chief Executive Officer in June 2009.

13

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following table summarizes information about TVRS activity during the nine months ended January 31, 2010:

	Number of TVRS		Weighted Average Grant Date Fair Value
Outstanding as of April 30, 2009	208,068		$	13.41
Granted	121,504		$	5.56
Vested	(105,740	)	$	14.08
Forfeited	(18,691	)	$	11.27
Outstanding as of January 31, 2010	205, 141		$	8.60
Expected to vest as of January 31, 2010	194,884		$	8.60

As of January 31, 2010, outstanding TVRS had an aggregate intrinsic value of $0.6 million.

As of January 31, 2010, there was $1.3 million of total unrecognized compensation cost related to unvested TVRS, which is expected to be recognized over a weighted average period of 1.3 years.

(iv) Performance-Based Vesting Shares of Restricted Stock

In July 2009, the Company granted 96,640 PVRS to certain executives with a grant date fair value of $5.95 per share. These PVRS will vest after three years provided that the Company achieves a pre-determined EBITDA target for fiscal 2012. Additionally, vesting is subject to the executive being employed by the Company at the time the Company achieves such financial target in fiscal 2012, except in the case of the Company’s Chief Executive Officer, who needs only to have been employed through the term of his employment agreement, which ends on June 4, 2011.

No compensation expense related to the July 2009 PVRS grant was recorded in the nine months ended January 31, 2010. If, and when, the Company determines it is probable that the performance condition will be achieved, compensation expense will be recognized cumulatively in such period from the date of grant through the date of the change in estimate for the awards under which the requisite service period has been rendered. The remaining unrecognized compensation expense for those awards would be recognized prospectively over the remaining requisite service period. In both the three and nine months ended January 31, 2009, share-based compensation expense was negligible in connection with the vesting of PVRS granted in July 2008.

The following table summarizes information about PVRS activity during the nine months ended January 31, 2010:

	Number of PVRS		Weighted Average Grant Date Fair Value
Outstanding as of April 30, 2009	143,053		$	14.50
Granted	96,640		$	5.95
Forfeited	(157,759	)	$	13.70
Outstanding as of January 31, 2010	81,934		$	5.95

On June 30, 2009, the Compensation Committee of the Board of Directors determined that the performance criteria required for vesting of the July 2008 award had not been achieved and, as a result, all such outstanding PVRS were forfeited.

As of January 31, 2010, outstanding PVRS had an aggregate intrinsic value of $0.2 million.

(v) Restricted Stock Units

The Company incurred share-based compensation expense of $0.1 million in each of the three months ended January 31, 2010 and 2009, respectively, in connection with the issuance of fully vested and non-forfeitable RSUs to certain non-employee directors that are payable in shares of the Company’s common stock as a one-time distribution

14

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

upon termination of services ($0.3 million in each of the nine month periods ended January 31, 2010 and 2009, respectively). In the nine months ended January 31, 2010, the Company granted 35,849 fully vested RSUs at a weighted-average grant price of $4.01 resulting in 170,948 fully vested RSUs outstanding as of January 31, 2010 with a weighted average grant price of $12.27.

In September 2009, the Company granted 10,730 RSUs at a grant price of $4.66 to its newly elected non-employee director, which will vest with respect to 25% of the award on each of the first four anniversaries of the date of the grant, subject to continued service on the Board on the vesting date. Share-based compensation expense in connection with this award was negligible for the three and nine months ended January 31, 2010.

15

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

7. LEASE TERMINATION ACCRUAL

As part of an overall effort to optimize company-owned store locations and improve profitability in fiscal 2009, approximately 303 under-performing store locations were either closed, or the Company decided to exit them in connection with its April 2009 restructuring action.

The following table summarizes the aggregate activity in the first nine months of fiscal 2010 in connection with the Company’s lease termination accruals:

	(In Thousands)
Accrued lease termination balance as of April 30, 2009 (a)	$	4,476
Additional accruals		54
Adjustments, net (b)		(274	)
Cash payments (c)		(3,111	)
Accrued lease termination balance as of January 31, 2010 (d)	$	1,145

(a) The balance as of April 30, 2009 consisted of $3.2 million in accounts payable and accrued liabilities and $1.3 million in other non-current liabilities in the accompanying Condensed Consolidated Balance Sheet.

(b) These adjustments were primarily contra-expense during the period as a result of favorable negotiations with certain landlords to buy out of leases early.

(c) Cash payments during the period consisted of $1.6 million in cash payments associated with early lease buyouts and $1.5 million associated with monthly contractual rental payments.

(d) The balance as of January 31, 2010 consisted of $0.2 million in accounts payable and accrued liabilities and $0.9 million in other non-current liabilities in the accompanying Condensed Consolidated Balance Sheet.

The Company expects to continue to adjust the fair value of this lease termination liability due to the passage of time as an increase in the liability and as an operating expense (accretion) over the remaining terms of the leases. The Company may be required to record an additional accrual in connection with these lease terminations to the extent that it is not able to buy out of the remaining leases early or sublet the stores according to its original projections.

8. ACQUISITIONS

Assets acquired and liabilities assumed in business combinations were recorded on the Consolidated Balance Sheet as of the respective acquisition dates based upon their estimated fair values at such dates. The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed was allocated to goodwill. The results of operations of businesses acquired by the Company have been included in the Consolidated Statements of Operations since their respective dates of acquisition.

In the nine months ended January 31, 2010, the Company acquired substantially all of the assets of three tax return preparation businesses from franchisees and began operating these stores as company-owned locations in the 2010 tax season. The total cost of the entities acquired during the nine months ended January 31, 2010 was $3.6 million, of which $1.4 million was paid since the closings, $2.1 million was applied to reduce certain receivables, and $0.1 million was included as a current liability as of January 31, 2010. The total cost of the acquired entities was allocated to (i) $0.1 million to property and equipment, (ii) $0.8 million to intangible assets (including $0.4 million in reacquired franchise rights); and (iii) $2.7 million to goodwill.

All goodwill associated with acquisitions in fiscal 2010 was allocated to the company-owned office operations segment and is deductible for tax purposes.

16

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

9. EQUIPMENT LEASES

In March 2009, the Company entered into an agreement with Walmart that grants Jackson Hewitt the exclusive right to provide tax preparation services within Walmart stores during the 2010 and 2011 tax seasons. In connection with this arrangement, beginning in the 2010 tax season, all franchised and company-owned offices in Walmart locations must operate from a kiosk meeting certain requirements and specifications. Through January 31, 2010, the Company purchased kiosks totaling $6.1 million, which have been leased to franchisees that chose not to purchase such equipment directly from the manufacturer. The term of each of the lease agreements approximates two and a half years, and lease payments are due to the Company in three annual installments at February 28^th of each year. Lease agreements accrue interest annually up to 7.5%. As of January 31, 2010, executed lease agreements totaling $2.0 million were classified as Lease Receivables-Current and included in Other Assets and $4.1 million was classified as Lease Receivables-Non-Current and included in Other Assets on the Condensed Consolidated Balance Sheet. Lease receivables will be reviewed periodically for collectability based on the underlying franchisee’s payment history and financial status. Payments to be received under the lease agreements are conditional upon the Company’s continued renewal of the Walmart agreement and continued availability to operate within the Walmart territory.

For leases executed through January 31, 2010, the future minimum lease payments to be received by the Company totaled $6.3 million, which includes unearned interest income of $0.2 million. Future minimum lease payments to be received over the term of the leases are as follows:

Fiscal Year	Principal Repayment		Interest Income		Total
					(In thousands)
Remaining three months fiscal 2010	$	2,039	$	79	$	2,118
2011		2,039		79		2,118
2012		2,038		80		2,118
Total	$	6,116	$	238	$	6,354

Under an agreement with the supplier of the kiosks, the Company has guaranteed the purchase of a minimum number of kiosks. If the minimum threshold is not met prior to July 2010, the Company is obligated to pay the supplier an amount equal to 50% of the shortfall in the number of kiosks that were to be purchased. The Company currently estimates that its maximum shortfall payment obligation would be approximately $0.7 million and anticipates placing orders for the current shortfall kiosk quantity prior to July 2010.

17

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

10. SEGMENT INFORMATION

The Company manages and evaluates the operating results of the business in two segments:

• Franchise operations—This segment consists of the operations of the Company’s franchise business, including royalty and marketing and advertising revenues, financial product fees and other revenues; and

• Company-owned office operations—This segment consists of the operations of the company-owned offices for which the Company recognizes service revenues primarily for the preparation of tax returns.

Management evaluates the operating results of each of its reportable segments based upon revenues and income (loss) before income taxes. Intersegment transactions approximate fair market value and are not significant.

	Franchise Operations			Company-owned Office Operations			Corporate and Other (a)			Total
	(In thousands)
Three months ended January 31, 2010
Revenues	$	49,873		$	29,229		$	—		$	79,102
Loss before income taxes (b)	$	(198,484	)	$	(43,003	)	$	(12,584	)	$	(254,071	)
Three months ended January 31, 2009
Revenues	$	65,918		$	31,872		$	—		$	97,790
Income (loss) before income taxes	$	36,584		$	7,359		$	(9,269	)	$	34,674

	Franchise Operations			Company-owned Office Operations			Corporate and Other (a)			Total
	(In thousands)
Nine months ended January 31, 2010
Revenues	$	57,826		$	30,353		$	—		$	88,179
Loss before income taxes (b)	$	(216,898	)	$	(60,164	)	$	(46,885	)	$	(323,947	)
Nine months ended January 31, 2009
Revenues	$	74,426		$	32,720		$	—		$	107,146
Income (loss) before income taxes	$	14,121		$	(14,717	)	$	(35,614	)	$	(36,210	)

(a) Corporate and other expenses include unallocated corporate overhead supporting both segments including legal, finance, human resources, real estate facilities and strategic development activities, as well as share-based compensation and financing costs.

(b) The Company recorded a non-cash goodwill impairment charge of $274.1 million in the third quarter of fiscal 2010. The impairment was recorded as a pre-tax charge of $223.7 million in Franchise Operations and $50.4 million in Company-owned Office Operations.

18

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

11. COMMITMENTS AND CONTINGENCIES

The Company is required to provide various types of surety bonds, such as tax return preparer bonds and performance bonds, which are irrevocable undertakings by the Company to make payment in the event the Company fails to perform certain of its obligations to third parties. These bonds vary in duration although most are issued and outstanding from one to two years. If the Company fails to perform under its obligations, the maximum potential payment under these surety bonds is $2.7 million as of January 31, 2010. Historically, no surety bonds have been drawn upon and there is no future expectation that these surety bonds will be drawn upon.

The Company provides customers of company-owned offices with a guarantee in connection with the preparation of tax returns that may require in certain circumstances the Company to pay penalties and interest assessed by a taxing authority. The Company had a liability of $0.1 million as of January 31, 2010 for the fair value of the obligation undertaken in issuing the guarantee. Such liabilities were included in accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets. In addition, the Company may be required to pay additional tax (or refund shortfall) assessed by a taxing authority for all customers that purchase the Company’s Gold Guarantee^® product. The Company may incur a liability to the extent that the total customer Gold Guarantee claims exceed maximum thresholds pursuant to the contract between the Company and the third party program provider. There have been no amounts paid by the Company under this arrangement in the past relating to such potential liability and the Company does not expect to be required to make payment in the future.

The transitional agreement with Cendant, provides that the Company continues to indemnify Cendant and its affiliates against potential losses based on, arising out of or resulting from, among other things, claims by third parties relating to the ownership or the operation of the Company’s assets or properties and the operation or conduct of the Company’s business, whether in the past or future, including any currently pending litigation against Cendant and any claims arising out of or relating to the Company’s IPO. Additionally, the transitional agreement provides that the Company is responsible for the respective tax liabilities imposed on or attributable to the Company and any of the Company’s subsidiaries relating to all taxable periods. Accordingly, the Company is required to indemnify Cendant and its subsidiaries against any such tax liabilities imposed on or attributable to the Company and any of the Company’s subsidiaries. While there have not been any indemnification claims against the Company under these arrangements since the Company’s IPO, the Company could be obligated to make payments in the future.

The Company routinely enters into contracts that include indemnification provisions that serve to protect the contracting parties from losses such parties suffer as a result of acts or omissions of the Company and/or its affiliates, including in particular indemnity obligations relating to (a) tax, legal and other risks related to the sale of businesses or the provision of services; (b) indemnification of the Company’s directors and officers; (c) indemnities of various lessors in connection with facility leases for certain claims arising from such facility or lease; and (d) third-party claims, including those from franchisees, relating to various arrangements in the normal course of business. There is no stated maximum payment related to these indemnities, and the term of indemnities may vary and in many cases is limited only by the applicable statute of limitations. The likelihood of any claims being asserted against the Company and the ultimate liability related to any such claims, if any, is difficult to predict. In addition, from time to time, the Company enters into other indemnity agreements in connection with the operations of the business.

19

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Legal Proceedings

On September 26, 2006, Willie Brown brought a purported class action complaint against the Company in the Ohio Court of Common Pleas, Cuyahoga County, on behalf of Ohio customers who obtained RALs facilitated by the Company, for an alleged failure to comply with Ohio’s Credit Services Organization Act, and for alleged unfair and deceptive acts in violation of Ohio’s Consumer Sales Practices Act, and seeking damages and injunctive relief. On November 10, 2008, the Company filed a motion to dismiss, or alternatively, to stay proceedings and to compel arbitration. On May 5, 2009, the Court granted the Company’s motion to stay proceedings and to compel individual arbitration of Plaintiff’s claims, and denied the Company’s motion to dismiss. On October 1, 2009, Plaintiff filed an appeal in the Court of Appeals for the Eighth Appellate District, Cuyahoga County, seeking reversal of the lower Court’s order. The Company believes it has meritorious arguments in opposing the appeal and will continue to contest this matter vigorously.

On October 30, 2006, Linda Hunter (now substituted by Christian Harper and Elizabeth Harper as proposed class representatives) brought a purported class action complaint against the Company in the United States District Court, Southern District of West Virginia, on behalf of West Virginia customers who obtained RALs facilitated by the Company, seeking damages for an alleged breach of fiduciary duty, for alleged breach of West Virginia’s Credit Service Organization Act, for alleged breach of contract, and for alleged unfair or deceptive acts or practices in connection with the Company’s RAL facilitation activities. On March 13, 2008, the Court granted the Company’s partial motion for summary judgment on Plaintiff’s breach of contract claim. On July 15, 2008, the Company answered the first amended complaint. On February 10, 2009, Plaintiffs filed a motion to certify a class. The Company opposed that motion. On February 11, 2009, Plaintiffs filed a motion for partial summary judgment. On February 11, 2009, the Company filed a motion for summary judgment. On March 6, 2009, the Company opposed Plaintiffs’ motion for partial summary judgment. On September 29, 2009, the Court denied the summary judgment motions without prejudice. A decision by the Court on the class certification motion is currently pending. On April 7, 2009, Plaintiffs filed a motion seeking the certifications of four legal questions to the West Virginia Supreme Court of Appeals. On November 12, 2009, the West Virginia Supreme Court of Appeals ordered the review of those four certified legal questions. The case is in its pretrial stage. Following a decision by the West Virginia Supreme Court of Appeals, the Company will continue to litigate this matter vigorously in the United States District Court, Southern District of West Virginia.

On April 20, 2007, Brent Wooley brought a purported class action complaint against the Company and certain unknown franchisees in the United States District Court, Northern District of Illinois. The complaint, which was subsequently amended, was brought on behalf of customers who obtained tax return preparation services that allegedly included false deductions without support by the customer that resulted in penalties being assessed by the IRS against the taxpayer for violations of the Illinois Consumer Fraud and Deceptive Practices Act, and the Racketeering and Corrupt Organizations Act, and alleging unjust enrichment and breach of contract, seeking compensatory and punitive damages, restitution, and attorneys’ fees. The alleged violations of the Illinois Consumer Fraud and Deceptive Practices Act relate to representations regarding tax return preparation, Basic Guarantee and Gold Guarantee coverage and denial of Gold Guarantee claims. Following dispositive motions, on December 24, 2008, the Company answered Plaintiff’s fourth amended complaint with respect to the remaining breach of contract claim. On January 29, 2010, Plaintiffs filed a Fifth Amended Complaint. On February 12, 2010, the Company Answered the Fifth Amended Complaint. The case is in its discovery and pretrial stage. The Company believes it has meritorious defenses and is contesting this matter vigorously.

On January 17, 2008, an attorney with the New York State Division of Human Rights (the “Division”) filed with the Division a Division-initiated administrative complaint against the Company for allegedly marketing loan products to individuals in New York based on their race and military status in violation of New York State’s Human Rights Law, and seeking injunctive and other relief. On February 19, 2008, the Company filed a response to the complaint with the Division. On June 30, 2008, the Division issued a determination of probable cause on the matter and determined that it had jurisdiction. The matter will be set for an administrative hearing. The Company believes that no jurisdiction exists, that it has meritorious defenses and is contesting this matter vigorously. On October 15, 2008, the Company filed a Complaint in the United States District Court, Southern District of New York against the Commissioner of the Division for injunctive and declaratory relief. On October 20, 2008, the Company filed a motion for a preliminary injunction against the Commissioner of the Division to prevent the Division from proceeding with its administrative complaint. At the request of the Division, the parties had entered into a number of stipulations to extend the Division’s response date to the Complaint until August 10, 2009 while maintaining the status quo in the administrative complaint process to permit the parties to engage in further discussions regarding these matters. Due to these ongoing discussions, on June 25, 2009, at the request of the Court, the Company agreed to withdraw its motion for a preliminary injunction without prejudice and with the understanding that the

20

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Company could refile its motion at a future date. On August 11, 2009, the Division filed a motion to dismiss the Complaint. On October 6, 2009, the Company filed a motion for summary judgment, and opposed the Division’s motion to dismiss. The parties have submitted a stipulation to the Court that provides for maintaining the status quo with respect to the administrative proceeding and providing for the completion of briefing on the motions to dismiss and for summary judgment. The Company is contesting this matter vigorously.

On February 8, 2008, H&R Block Tax Services, Inc. brought a patent infringement action against the Company in the U.S. District Court for the Eastern District of Texas alleging infringement of two patents (‘862 and ‘829) relating to issuing spending vehicles to an individual in exchange for the assignment of at least a portion of a payment that the individual is entitled to receive from a governmental agency, and seeking damages and injunctive relief. On April 3, 2008, the Company filed an answer denying infringement and asserting counterclaims of non-infringement and invalidity. On November 14, 2008, Plaintiff moved for leave to amend the action alleging infringement of a third patent (‘425) relating to providing a loan to a taxpayer prior to the end of the current year, the loan amount being based on the taxpayer’s estimated tax refund amount for such year. On December 23, 2008, the Court granted Plaintiff’s motion for leave to amend. On January 12, 2009, the Company answered the amended complaint denying infringement and asserting counterclaims of non-infringement and invalidity. On March 13, 2009, the Company filed a motion for summary judgment of invalidity of all asserted patent claims based on unpatentable subject matter. On August 28, 2009, the Company filed a motion for summary judgment of indefiniteness of certain of the asserted patent claims. On October 1, 2009, oral argument on the indefiniteness motion took place in connection with the claim construction (“Markman”) hearing. On November 10, 2009, the Magistrate Judge issued a Report and Recommendation that the Court hold all asserted claims of the ‘862 and ‘425 patents invalid and, in the alternative, indefinite. A decision by the District Judge on the Magistrate’s Recommendation is currently pending. On December 7, 2009, the parties filed a joint motion to stay the proceeding pending the United States Supreme Court’s decision in In re Bilski. On December 8, 2009, the Magistrate Judge issued the Court’s claim construction order. On December 10, 2009, the Court issued an order granting the parties’ joint motion to stay the proceedings. The Company believes it has meritorious defenses and is contesting this matter vigorously.

On February 16, 2009, Alicia Gomez brought a purported class action complaint against the Company in the Circuit Court of Maryland, Montgomery County, on behalf of Maryland customers who obtained RALs facilitated by the Company, for an alleged failure to comply with Maryland’s Credit Services Businesses Act, and for an alleged violation of Maryland’s Consumer Protection Act, and seeking damages and injunctive relief. On March 18, 2009, the Company filed a motion to dismiss. On June 18, 2009, the Court granted the Company’s motion to dismiss in all respects, dismissing the Plaintiff’s complaint. On July 17, 2009, Plaintiff filed an appeal in the Maryland Court of Special Appeals. The Company believes it has meritorious defenses and is contesting this matter vigorously.

On April 14, 2009, Quiana Norris brought a purported class action complaint against the Company in the Superior Court of Indiana, Marion County, on behalf of Indiana customers who obtained RALs facilitated by the Company, for an alleged failure to comply with Indiana’s Credit Services Organization Act, and seeking damages and injunctive relief. On May 1, 2009, the Company filed a notice removing the complaint to the United States District Court for the Southern District of Indiana. On June 8, 2009 the Company filed a motion to dismiss. On December 7, 2009, the Court granted the Company’s motion to dismiss in all respects, dismissing the Plaintiff’s complaint. On January 18, 2010, Plaintiff filed a First Amended Complaint. On February 4, 2010, the Company filed a motion to dismiss the First Amended Complaint. The Company believes it has meritorious defenses and is contesting this matter vigorously.

On April 29, 2009, Sherita Fugate brought a purported class action complaint against the Company in the Circuit Court of Missouri, Jackson County, on behalf of Missouri customers who obtained RALs facilitated by the Company, for an alleged failure to comply with Missouri’s Credit Services Organization Act, for an alleged violation of Missouri’s Merchandising Practices Act, and seeking damages and injunctive relief. On May 29, 2009, the Company filed a motion to dismiss. On March 10, 2010, the Court granted the Company’s motion to dismiss in all respects, dismissing the Plaintiff’s complaint. Plaintiff has the right to appeal. If Plaintiff appeals the Court’s decision, the Company will continue to contest this matter vigorously.

On September 2, 2009, Nancee Thomas brought a purported class action complaint against the Company in the Ohio Court of Common Pleas, Cuyahoga County, on behalf of Ohio customers who obtained RALs facilitated by the Company, for an alleged failure to comply with Ohio’s Credit Services Organization Act, and seeking damages and injunctive relief. On October 15, 2009, the Company filed a motion to dismiss. On December 8, 2009, Plaintiffs filed a First Amended Complaint adding Paul Thomas as an additional plaintiff. On December 11, 2009, the parties filed a joint motion to apply the previously filed motion to dismiss briefing

21

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

regarding the original Complaint to the First Amended Complaint. The Company believes it has meritorious defenses and is contesting this matter vigorously.

On January 24, 2007, Ellen and Frank Kaman brought an action against the Company, Daniel Prewett (“Prewett”), and J.H. Investment Services, Inc. (“J.H. Investment”) in the Circuit Court for Sarasota County, Florida. Plaintiffs’ Third Amended Complaint alleges actual agency, apparent agency and negligence against the Company alleging that the Company allowed J.H. Investment to utilize the Company’s name in a manner that caused Plaintiffs to believe that J.H. Investment was acting as the Company’s actual or apparent agent. On August 11, 2009, the Company filed a motion for summary judgment. On October 7, 2009, the Court granted the Company’s motion for summary judgment on Plaintiff’s actual agency count and denied the Company’s motion for the apparent agency and negligence counts. The case was tried before a jury from February 1, 2010 to February 10, 2010. The jury found the Company liable to Plaintiffs based on apparent agency and negligence. The jury declined to award punitive damages. The Court established Plaintiffs’ compensatory damages at $575,000. On February 22, 2010, the Company filed a motion for a judgment notwithstanding the verdict and a motion for a new trial. If the Company prevails in its motion for a new trial, the Company believes that it has meritorious defenses. If the Court does not grant the Company’s motions, the Company intends to file an appeal in the Florida Second District Court of Appeals. The Company believes that it has meritorious grounds for appeal, and is contesting this matter vigorously.

In addition to the Kaman matter, eleven other matters relating to J.H. Investment in which the Company is a defendant are pending in Sarasota County, Florida. These eleven other matters allege negligence, actual agency, apparent agency, constructive fraud, and breach of fiduciary duty against the Company, and assert an aggregate of approximately $13,000,000 in damages, in addition to seeking punitive damages. While any final results in the Kaman matter have no collateral estoppel effects on any of these matters, Court rulings on the Company’s motion for a judgment notwithstanding the verdict and a motion for a new trial in the Kaman matter, and on any subsequent appeal in the Kaman matter, are likely to affect the timing of when, and the strength of how, these matters are advanced. The Company believes that it has meritorious defenses and is contesting these matters vigorously.

The Company is from time to time subject to other legal proceedings and claims in the ordinary course of business, including matters more properly alleged against other parties (generally, the Company’s franchisees), none of which the Company believes is likely to have a material adverse effect on its financial position, results of operations or cash flows.

12. FINANCIAL PRODUCT AGREEMENTS

Amended Financial Product Agreements

The Company has contractual commitments covering 100% of its Assisted Refund program and 50% of its RAL program for the 2010 tax season, as compared to its RAL program for the prior tax season. The Company believes that a lack of availability of RALs in all of the tax preparation offices in the Company’s network for the 2010 tax season will have a material adverse effect on the Company’s business, financial condition and results of operations. Further, questions remain regarding the regulatory oversight of the providers of RAL product and whether such providers will be permitted to continue to offer such product in the future. The Company’s financial performance will be negatively impacted going forward should the RAL product be unavailable in the marketplace, and most detrimentally should the application of regulations on financial product providers result, in whole or in part, in the RAL product being unavailable across the Company’s entire network but available to the customers of the Company’s competitors.

Santa Barbara Bank & Trust, a division of Pacific Capital Bank, N.A.

On November 23, 2009, the Company entered into amendments (the “SBBT/PCB First Amendments”) to each of the Amended and Restated Program Agreement and the Amended and Restated Technology Services Agreement, each dated September 21, 2007 (the “SBBT/PCB Agreements”), with Santa Barbara Bank & Trust, a division of Pacific Capital Bank, N.A. (“SBBT/PCB”). The primary purposes of the SBBT/PCB First Amendments were to establish the fees to be paid by SBBT/PCB to the Company for the 2010 tax season and the number of Jackson Hewitt Tax Service locations during the 2010 tax season in which SBBT/PCB would offer, process and administer certain financial products, including RALs, to Jackson Hewitt Tax Service customers.

22

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

On December 20, 2009, SBBT/PCB informed the Company that SBBT/PCB would not be in a position to originate RALs for the 2010 tax season. SBBT/PCB stated that their determination was based upon a directive received by them from their regulator. The Company had expected SBBT/PCB to provide approximately 75% of its overall program for financial products for the 2010 tax season, including both RALs and Assisted Refunds. SBBT/PCB further stated to the Company that it had signed a non-binding letter of intent to sell its tax products business to Santa Barbara Tax Products Group, LLC (“TPG”). On January 14, 2010, the sale was completed, and the Company recognized as revenue $2.0 million of nonrefundable financial product fees that had previously been recorded as deferred revenues related to the 2009 tax season.

Santa Barbara Tax Products Group, LLC

On January 12, 2010, the Company entered into a Letter Agreement with TPG. Under the Letter Agreement, which became effective on January 14, 2010, the Company consented to assigning to TPG, and TPG accepted the assignment of and assumed the obligations under the SBBT/PCB Agreements with respect to the provision of Assisted Refunds through Jackson Hewitt Tax Service offices during the 2010 tax season. Under the Letter Agreement, TPG is contractually obligated to provide approximately 50% of the Company’s overall Assisted Refunds program. The Letter Agreement also set forth the fees to be paid by TPG to the Company with respect to the Assisted Refunds program.

Republic Bank & Trust Company

On November 23, 2009, the Company entered into the second amendments (the “Republic Second Amendments”) to each of the Program Agreement and the Technology Services Agreement, each dated September 19, 2007 (the “Republic Agreements”) with Republic Bank & Trust Company (“Republic”). The primary purposes of the Republic Second Amendments were to establish the fees to be paid by Republic to the Company for the 2010 tax season and the number of Jackson Hewitt Tax Service locations during the 2010 tax season in which Republic would offer, process and administer certain financial products, including RALs, to Jackson Hewitt Tax Service customers. The Republic Second Amendments provide Republic with the right to withhold certain monies otherwise payable by Republic to the Company in the event that Republic fails to attain a minimum number of financial products, Republic experiences a RAL delinquency in excess of a designated level or if Republic incurs costs in connection with the Company’s or any operator’s failure to maintain compliance with Republic’s policies and procedures.

On December 29, 2009, the Company entered into the third amendments (the “Republic Third Amendments”) to each of the Republic Agreements with Republic. The Republic Third Amendments generally amended the terms of the Republic Second Amendments and established that Republic would be the financial product provider for approximately 50% of the Company’s overall program for financial products (RALs and Assisted Refunds) for the next three tax seasons. The Republic Third Amendments extended the terms of the Republic Agreements to October 31, 2012, subject to early termination rights by Republic. Under the Republic Third Amendments, the fee structure for the 2010 tax season remained unchanged from the fee structure set forth in the Republic Second Amendments. The fee structure for each of the 2011 and 2012 tax seasons is also consistent with the fee structure for the 2010 tax season. The Republic Third Amendments are consistent with the Republic Second Amendments in providing Republic with the right to withhold certain monies otherwise payable by Republic to the Company in the event that Republic fails to attain a minimum number of financial products, Republic experiences a RAL delinquency in excess of a designated level or if Republic incurs costs in connection with the Company’s or any operator’s failure to maintain compliance with Republic’s policies and procedures. In addition, the Republic Third Amendments clarify the obligations of the Company and Republic with respect to document retention, insurance, training and marketing.

MetaBank

On November 16, 2009, the Company entered into the Second Amended and Restated Marketing Agreement (the “Second Amended and Restated Marketing Agreement”) with MetaBank d/b/a Meta Payment Systems (“MetaBank”), and a First Addendum (“Addendum”) to the Second Amended and Restated Marketing Agreement with MetaBank dated the same date. The Second Amended and Restated Marketing Agreement amended and superseded the Amended and Restated Marketing Agreement, dated November 17, 2008, between the Company and MetaBank. The Second Amended and Restated Marketing Agreement expires on October 31, 2011. The Addendum expires on the later of July 15, 2010 or the date upon which the parties’ obligations under the Addendum have been fulfilled.

23

JACKSON HEWITT TAX SERVICE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The Second Amended and Restated Marketing Agreement set forth the terms for the 2010 tax season under which MetaBank is responsible for issuing and managing the Company’s prepaid debit card program and providing line of credit products related to the card. The Company receives payment from MetaBank based on certain levels of revenues and gross profits. The Addendum provides that in the event MetaBank’s loan losses related to one of the line of credit products provided under the Second Amended and Restated Marketing Agreement significantly exceed MetaBank’s projected losses, the Company will make payments to MetaBank to offset such losses. The Company’s payment obligations will not arise unless MetaBank’s actual loan losses are approximately two times the level of MetaBank’s projected losses under the program. The Company’s maximum payment obligation is approximately $4 million, which will occur in the event that MetaBank’s actual loan losses are approximately two and a half times MetaBank’s projected losses. Based on historical experience with this financial product, the Company currently believes the likelihood to be remote of a material payment having to be made to MetaBank to offset actual loan losses.

13. CREDIT FACILITY

Based upon the information currently available, the Company believes that it is likely that it will breach the financial covenants in its credit facility as of April 30, 2010. The Company intends to initiate discussions with the lead agent under its credit facility, and inform all of the other banks in its lending syndicate, that it intends to seek relief in connection with its financial covenants. However, there can be no assurance that the Company will be successful in its efforts to modify the credit facility or obtain a waiver or forbearance arrangement from the lenders. A breach of the financial covenants could result in an event of default under the Company’s credit facility. Such event of default would allow the lenders to, among other things, terminate their commitments to lend any additional amounts to the Company and declare all borrowings outstanding, together with accrued and unpaid interest, to be immediately due and payable. The Company has met its financial covenants for the period ending January 31, 2010.

Due to the likelihood that the Company will not meet its financial covenants as of April 30, 2010, and the uncertainty at this time regarding any amendment or waiver to the credit facility, the Company may now be unable to refinance the $25.0 million term loan payment due on April 30, 2010. Accordingly, the Company has classified the $25.0 million term loan payment due on April 30, 2010 as a current obligation on its consolidated balance sheet. If the Company is not successful in its efforts to modify the credit facility or obtain a waiver or forbearance arrangement from the lenders, the remaining $339.0 million outstanding balance will also be classified as a current portion of long-term debt, and the Company will continue to seek alternative capital sources.

14. INCOME TAXES

The Company’s effective tax rate for the three and nine months ended January 31, 2010 is a provision rate of 9.82% and benefit rate of 1.11%, respectively. The primary difference between the Company’s effective tax rate and the federal statutory tax rate results from the $274.1 million goodwill impairment charge recorded in the third quarter of fiscal 2010, which is mostly non-deductible for tax purposes, as well as a $9.9 million charge related to a deferred tax asset valuation allowance noted below.

Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. The Company’s deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the Company’s deferred tax assets depends upon generating sufficient future taxable income during the period in which the Company’s temporary differences become deductible for tax purposes. In the third quarter of fiscal 2010, the Company established a valuation allowance against a portion of its deferred tax assets by recording a $9.9 million charge through provision for income taxes in its consolidated statement of operations.

24

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements, notes to the consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on July 2, 2009.

FORWARD-LOOKING STATEMENTS

Certain statements in this report, including, but not limited to, those contained in “Part I. Item 1—Financial Statements” and notes thereto, “Part I. Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II. Item 1—Legal Proceedings” included in this report are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, cash flows, plans, objectives, future performance and business of Jackson Hewitt Tax Service Inc. All statements in this report, other than statements that are purely historical, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may increase,” “may fluctuate” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” and “could.” These forward-looking statements involve risks and uncertainties.

Actual results may differ materially from those contemplated (expressed or implied) by such forward-looking statements, because of, among other things, the following potential risks and uncertainties: our ability to execute on our strategic plan and reverse our declining profitability, improve our distribution system or reduce our cost structure; our ability to successfully attract and retain key personnel; government initiatives that simplify tax return preparation or reduce the need for a third party tax return preparer, improve the timing and efficiency of processing tax returns or decrease the number of tax returns filed; delays in the passage of tax laws and their implementation; the success of our franchised offices; our responsibility to third parties, regulators or courts for the acts of, or failures to act by, our franchisees or their employees; government legislation and regulation of the tax return preparation industry and related financial products, including refund anticipation loans, and the failure by us, or the financial institutions which provide financial products to our customers, to comply with such legal and regulatory requirements; the effectiveness of our tax return preparation compliance program; increased regulation of tax return preparers; our exposure to litigation; the failure of our insurance to cover all the risks associated with our business; our ability to protect our customers’ personal and financial information; the effectiveness of our marketing and advertising programs and franchisee support of these programs; disruptions in our relationships with our franchisees; changes in our relationships with financial product providers that could reduce the revenues we derive from our agreements with these financial institutions as well as affect our customers’ ability to obtain financial products through our tax return preparation offices; changes in our relationship with Walmart or other large retailers and shopping malls that could affect our growth and profitability; the seasonality of our business and its effect on our stock price; competition from tax return preparation service providers, volunteer organizations and the government; our reliance on technology systems and electronic communications to perform the core functions of our business; our ability to protect our intellectual property rights or defend against any third party allegations of infringement by us; our reliance on cash flow from subsidiaries; our compliance with credit facility covenants; our exposure to increases in prevailing market interest rates; our quarterly results not being indicative of our performance as a result of tax season being relatively short and straddling two quarters; certain provisions that may hinder, delay or prevent third party takeovers; changes in accounting policies or practices and our ability to maintain an effective system of internal controls; the delisting of our common stock; and the effect of market conditions, general conditions in the tax return preparation industry or general economic conditions.

Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements, and the failure of such other assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control. As a result of these factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this report. We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

25

OVERVIEW

We manage and evaluate the operating results of our business in two segments:

• Franchise operations: This segment consists of the operations of our franchise business, including royalty and marketing and advertising revenues, financial product fees and other revenues; and

• Company-owned office operations: This segment consists of the operations of our company-owned offices for which we recognize service revenues primarily for the preparation of tax returns.

Jackson Hewitt Tax Service Inc. is the second largest paid individual tax return preparer in the United States based upon the number of individual tax returns prepared and filed with the Internal Revenue Service (“IRS”). As of January 31, 2010, our network consisted of approximately 6,400 franchised and company-owned offices and prepared nearly 1.0 million returns in the nine months ended January 31, 2010. Our revenues consist of fees paid by our franchisees, service revenues earned at company-owned offices and financial product fees.

“Jackson Hewitt,” “the Company,” “we,” “our,” and “us” are used interchangeably in this report to refer to Jackson Hewitt Tax Service Inc. and its subsidiaries, appropriate to the context.

Seasonality of Operations

The tax return preparation business is highly seasonal, and we historically generate substantially all of our revenues during the period from January 1 through April 30. In fiscal 2009, we earned 95% of our revenues during this period. We operate at a loss during the period from May 1 through December 31, during which we incur costs associated with preparing for the upcoming tax season.

Amended Financial Product Agreements

We have contractual commitments covering 100% of our Assisted Refund program and 50% of our RAL program for the 2010 tax season, as compared to our RAL program for the prior tax season. We believe that a lack of availability of RALs in all of the tax preparation offices in our network for the 2010 tax season will have a material adverse effect on our business, financial condition and results of operations. Further, questions remain regarding the regulatory oversight of the providers of RAL product and whether such providers will be permitted to continue to offer such product in the future. Our financial performance will be negatively impacted going forward should the RAL product be unavailable in the marketplace, and most detrimentally should the application of regulations on financial product providers result, in whole or in part, in the RAL product being unavailable across our entire network but available to the customers of our competitors.

Santa Barbara Bank & Trust, a division of Pacific Capital Bank, N.A.

On November 23, 2009, we entered into amendments (the “SBBT/PCB First Amendments”) to each of the Amended and Restated Program Agreement and the Amended and Restated Technology Services Agreement, each dated September 21, 2007 (the “SBBT/PCB Agreements”), with Santa Barbara Bank & Trust, a division of Pacific Capital Bank, N.A. (“SBBT/PCB”). The primary purposes of the SBBT/PCB First Amendments were to establish the fees to be paid by SBBT/PCB to us for the 2010 tax season and the number of Jackson Hewitt Tax Service locations during the 2010 tax season in which SBBT/PCB would offer, process and administer certain financial products, including RALs, to Jackson Hewitt Tax Service customers.

On December 20, 2009, SBBT/PCB informed us that SBBT/PCB would not be in a position to originate RALs for the 2010 tax season. SBBT/PCB stated that their determination was based upon a directive received by them from their regulator. We had expected SBBT/PCB to provide approximately 75% of our overall program for financial products for the 2010 tax season, including both RALs and Assisted Refunds. SBBT/PCB further stated to us that it had signed a non-binding letter of intent to sell its tax products business to Santa Barbara Tax Products Group, LLC (“TPG”). On January 14, 2010, the sale was completed, and we recognized as revenue $2.0 million of nonrefundable financial product fees that had previously been recorded as deferred revenues related to the 2009 tax season.

Santa Barbara Tax Products Group, LLC

On January 12, 2010, we entered into a Letter Agreement with TPG. Under the Letter Agreement, which became effective on January 14, 2010, we consented to assigning to TPG, and TPG accepted the assignment of and

26

assumed the obligations under the SBBT/PCB Agreements with respect to the provision of Assisted Refunds through Jackson Hewitt Tax Service offices during the 2010 tax season. Under the Letter Agreement, TPG is contractually obligated to provide approximately 50% of our overall Assisted Refunds program. The Letter Agreement also set forth the fees to be paid by TPG to us with respect to the Assisted Refunds program.

Republic Bank & Trust Company

On November 23, 2009, we entered into the second amendments (the “Republic Second Amendments”) to each of the Program Agreement and the Technology Services Agreement, each dated September 19, 2007 (the “Republic Agreements”) with Republic Bank & Trust Company (“Republic”). The primary purposes of the Republic Second Amendments were to establish the fees to be paid by Republic to us for the 2010 tax season and the number of Jackson Hewitt Tax Service locations during the 2010 tax season in which Republic would offer, process and administer certain financial products, including RALs, to Jackson Hewitt Tax Service customers. The Republic Second Amendments provide Republic with the right to withhold certain monies otherwise payable by Republic to us in the event that Republic fails to attain a minimum number of financial products, Republic experiences a RAL delinquency in excess of a designated level or if Republic incurs costs in connection with our or any of our operator’s failure to maintain compliance with Republic’s policies and procedures.

On December 29, 2009, we entered into the third amendments (the “Republic Third Amendments”) to each of the Republic Agreements with Republic. The Republic Third Amendments generally amended the terms of the Republic Second Amendments and established that Republic would be the financial product provider for approximately 50% of our overall program for financial products (RALs and Assisted Refunds) for the next three tax seasons. The Republic Third Amendments extended the terms of the Republic Agreements to October 31, 2012, subject to early termination rights by Republic. Under the Republic Third Amendments, the fee structure for the 2010 tax season remained unchanged from the fee structure set forth in the Republic Second Amendments. The fee structure for each of the 2011 and 2012 tax seasons is also consistent with the fee structure for the 2010 tax season. The Republic Third Amendments are consistent with the Republic Second Amendments in providing Republic with the right to withhold certain monies otherwise payable by Republic to us in the event that Republic fails to attain a minimum number of financial products, Republic experiences a RAL delinquency in excess of a designated level or if Republic incurs costs in connection with our or any of our operator’s failure to maintain compliance with Republic’s policies and procedures. In addition, the Republic Third Amendments clarify the obligations of us and Republic with respect to document retention, insurance, training and marketing.

MetaBank

On November 16, 2009, we entered into the Second Amended and Restated Marketing Agreement (the “Second Amended and Restated Marketing Agreement”) with MetaBank d/b/a Meta Payment Systems (“MetaBank”), and a First Addendum (“Addendum”) to the Second Amended and Restated Marketing Agreement with MetaBank dated the same date. The Second Amended and Restated Marketing Agreement amended and superseded the Amended and Restated Marketing Agreement, dated November 17, 2008, between us and MetaBank. The Second Amended and Restated Marketing Agreement expires on October 31, 2011. The Addendum expires on the later of July 15, 2010 or the date upon which the parties’ obligations under the Addendum have been fulfilled.

The Second Amended and Restated Marketing Agreement set forth the terms for the 2010 tax season under which MetaBank is responsible for issuing and managing our prepaid debit card program and providing line of credit products related to the card. We receive payment from MetaBank based on certain levels of revenues and gross profits. The Addendum provides that in the event MetaBank’s loan losses related to one of the line of credit products provided under the Second Amended and Restated Marketing Agreement significantly exceed MetaBank’s projected losses, we will make payments to MetaBank to offset such losses. Our payment obligations will not arise unless MetaBank’s actual loan losses are approximately two times the level of MetaBank’s projected losses under the program. Our maximum payment obligation is approximately $4 million, which will occur in the event that MetaBank’s actual loan losses are approximately two and a half times MetaBank’s projected losses. Based on historical experience with this financial product, we currently believe the likelihood to be remote of a material payment having to be made to MetaBank to offset actual loan losses.

Walmart Update

In March 2009, we entered into an agreement with Walmart that grants us the exclusive right to provide tax preparation services within Walmart stores during the 2010 and 2011 tax seasons. Under the expanded Walmart opportunity, we have added a significant number of new Walmart store locations to our overall distribution network, and we are working closely with Walmart to jointly drive tax preparation customers and Walmart associates to our Walmart store locations.

27

We are currently located in approximately 1,800 Walmart stores as of January 31, 2010, with approximately 84% of these locations operated by Jackson Hewitt’s franchisees and approximately 16% operated by Jackson Hewitt’s company-owned offices in the 2010 tax season. While we have seen an increase in overall tax return volumes from our expanded relationship with Walmart, performance has lagged relative to our expectations as such volumes have been negatively impacted by the absence of RAL product. We are continuing to work with Walmart to optimize our opportunity to operate in the 2011 tax year.

Jackson Hewitt Online

We initiated the offer of online tax preparation to the general public beginning in the current tax season. Revenues will be recognized upon the completion of a paid tax return by the customer. The level of returns generated in this tax year were not material, but provided an opportunity to evaluate the offer for future periods.

Potential Exposure to Credit Losses

As a result of the continued decline in franchisee profitability, including the loss of RALs by our franchisees served by SBBT/PCB, and the current difficult economic environment, we have experienced a significant increase in past due receivables from franchisees prior to the beginning of the 2010 tax season compared to the same period last year. Our balance sheet at January 31, 2010 included past due amounts from franchisees totaling approximately $8.7 million, which includes billed accounts and notes receivable that are classified within current assets. This compares to $3.5 million at January 31, 2009. The allowance for billed accounts and notes receivable was $2.5 million and $0.5 million at January 31, 2010 and 2009, respectively. Additionally, during the nine months ended January 31, 2010, we extended payment terms on receivables due from franchisees, that resulted in a transfer of amounts from Current to Non-Current on our Condensed Consolidated Balance Sheet of $5.1 million. There were no significant modifications to the original terms of the refinanced notes receivable. In the nine months ended January 31, 2010, we wrote-off $1.6 million in receivables against the allowance accounts. Our allowances for doubtful accounts require management’s judgment regarding collectability and current economic conditions to establish an amount considered by management to be adequate to cover estimated losses as of the balance sheet date. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered unlikely. There were no significant concentrations of credit risk with any individual franchisee or group of franchisees as of January 31, 2010. We believe that our allowance for doubtful accounts as of January 31, 2010 are currently adequate for the Company’s existing exposure to loss. We will be closely monitoring the performance of franchisees currently indebted to us for the remainder of the 2010 tax season, particularly for timely payment of past due and current receivables, and we will adjust our allowances accordingly if management determines that existing reserve levels are inadequate to cover estimated losses.

New Franchise Agreement

We and elected representatives of our franchisee community had made significant progress on the development of a new franchise agreement. Finalization of the new agreement has been delayed due to our, and our franchisees, focus on the 2010 tax season as well as our efforts around securing financial products. We expect to re-engage with the franchisee representatives in our fourth quarter of fiscal 2010. Approximately one quarter of our existing franchise agreements are up for renewal by the end of 2010. The more difficult operating circumstances in fiscal 2010, including the absence of the RAL in certain markets, may impact our success with our renewal program and there can be no assurances regarding the number of franchise agreements that will be renewed.

Management Consultant Engagement Concluded

In August 2009, the management consulting firm that we retained to work jointly with us to more fully understand the sources of our weak performance in the 2009 tax season concluded their engagement. The relative impact of their findings on our business and what we needed to do differently were clearly defined. The following areas represent the principal initiatives we are focusing our attention on and we believe will result in improved operational and financial performance in the 2010 tax season:

• Put into practice a renewed focus on our core business – tax return preparation with a keen emphasis on client satisfaction and retention;

28

• Improve tax return preparer training and retention;

• Effectively execute a more impactful pre-season financial product;

• Significantly enhance our overall marketing program with local marketing effectiveness at the forefront;

• Employ a more effective pricing strategy;

• Improve the performance of our company-owned office operations segment;

• Effectively execute on our exclusive Walmart arrangement;

• Successfully launch our first-ever online tax return preparation product; and

• Achieve a more collaborative partnership with our franchise community.

We are in the process of evaluating the effectiveness of the initiatives for the 2010 tax season and will determine what further actions would be appropriate for future periods.

Management Change

On June 4, 2009, the employment of Michael C. Yerington, formerly our Chief Executive Officer and President, was terminated. Upon termination, Mr. Yerington also resigned as a director of our Board. On the same day, our Board of Directors announced that Harry W. Buckley was appointed Chief Executive Officer, President and a director on our Board.

29

RESULTS OF OPERATIONS

Our consolidated results of operations are set forth below and are followed by a more detailed discussion of each of our business segments, as well as a detailed discussion of certain corporate and other expenses.

Condensed Consolidated Results of Operations

	Three Months Ended January 31,						Nine Months Ended January 31,
	2010			2009			2010			2009
	(in thousands)						(in thousands)
Revenues
Franchise operations revenues:
Royalty	$	24,575		$	29,620		$	25,819		$	30,893
Marketing and advertising		10,826			13,089			11,373			13,653
Financial product fees		12,490			21,182			18,150			26,256
Other		1,982			2,027			2,484			3,624
Service revenues from company-owned office operations		29,229			31,872			30,353			32,720
Total revenues		79,102			97,790			88,179			107,146
Expenses
Cost of franchise operations		8,773			8,980			23,298			24,933
Marketing and advertising		15,523			20,530			21,947			30,139
Cost of company-owned office operations		17,753			19,887			32,030			37,827
Selling, general and administrative		8,314			6,680			35,801			30,580
Goodwill Impairment		274,150			—			274,150			—
Depreciation and amortization		3,526			3,296			10,560			9,689
Total expenses		328,039			59,373			397,786			133,168
(Loss) income from operations		(248,937	)		38,417			(309,607	)		(26,022	)
Other income/(expense):
Interest and other income		691			454			1,922			1,234
Interest expense		(5,825	)		(4,197	)		(16,262	)		(11,422	)
(Loss) income before income taxes		(254,071	)		34,674			(323,947	)		(36,210	)
Provision for (benefit from) income taxes		24,954			13,763			(3,604	)		(14,371	)
Net (Loss) income	$	(279,025	)	$	20,911		$	(320,343	)	$	(21,839	)

The following table presents selected key operating statistics for our franchise and company-owned office operations.

	Three Months Ended January 31,				Nine Months Ended January 31,
	2010		2009		2010		2009
Offices:
Franchise operations		5,416		5,637		5,416		5,637
Company-owned office operations		960		962		960		962
Total offices—system		6,376		6,599		6,376		6,599
Tax returns prepared (in thousands):
Franchise operations		776		962		826		1,017
Company-owned office operations		128		142		133		147
Total tax returns prepared—system		904		1,104		959		1,164
Average revenues per tax return prepared:
Franchise operations (1)	$	232.54	$	226.73	$	229.56	$	223.71

30

	Three Months Ended January 31,				Nine Months Ended January 31,
	2010		2009		2010		2009
Company-owned office operations (2)	$	228.51	$	224.74	$	228.14	$	223.01
Average revenues per tax return prepared—system	$	231.97	$	226.47	$	229.36	$	223.63
Financial products (in thousands) (3)		846		1,003		870		1,028
Average fees per financial product (4)	$	14.76	$	21.12	$	20.86	$	25.54

(1) Calculated as total revenues earned by our franchisees, which does not represent revenues earned by us, divided by the number of tax returns prepared by our franchisees (see calculation below). We earn royalty and marketing and advertising revenues, which represent a percentage of the revenues received by our franchisees.

(2) Calculated as tax preparation revenues and related fees earned by company-owned offices (as reflected in the Condensed Consolidated Statements of Operations) divided by the number of tax returns prepared by company-owned offices.

(3) Consists of RALs, assisted refunds and Gold Guarantee products.

(4) Calculated as revenues earned from financial product fees (as reflected in the Condensed Consolidated Statements of Operations) divided by the number of financial products.

Calculation of average revenues per tax return prepared in Franchise Operations:

	Three Months Ended January 31,						Nine Months Ended January 31,
(dollars and tax return data in thousands)	2010			2009			2010			2009
Total revenues earned by our franchisees (A)	$	180,433		$	218,150		$	189,556		$	227,555
Average royalty rate (B)		13.62	%		13.58	%		13.62	%		13.58	%
Marketing and advertising rate (C)		6.00	%		6.00	%		6.00	%		6.00	%
Combined royalty and marketing and advertising rate (B plus C)		19.62	%		19.58	%		19.62	%		19.58	%
Royalty revenues (A times B)	$	24,575		$	29,620		$	25,819		$	30,893
Marketing and advertising revenues (A times C)		10,826			13,089			11,373			13,653
Total royalty and marketing and advertising revenues	$	35,401		$	42,709		$	37,192		$	44,546
Number of tax returns prepared by our franchisees (D)		776			962			826			1,017
Average revenues per tax return prepared by our franchisees (A divided by D)	$	232.54		$	226.73		$	229.56		$	223.71

Amounts may not recalculate precisely due to rounding differences.

Three Months Ended January 31, 2010 as Compared to Three Months Ended January 31, 2009

Total Revenues

Total revenues decreased by $18.7 million, or 19%, due to lower financial product fees in connection with the loss of 50% of our RAL program and a decrease in the number of tax returns prepared by our network. Average revenues per tax return prepared increased 2%. Our network of franchised and company-owned offices prepared approximately 1.0 million tax returns in the third quarter of fiscal 2010, a decline of 18% as compared to the same quarter last year.

31

We received notice in late December 2009 that SBBT/PCB would not be in a position to originate RALs based upon a directive received by them from their regulator. Upon receiving this news, we made significant efforts to provide our entire system with a RAL product offering by expanding Republic’s coverage from 25% to approximately 50% and making a diligent effort to obtain alternative RAL funding for the remaining 50% of our business.

We were unable to secure alternative RAL funding for the remaining 50% of our RAL business within the time frame that would have been beneficial to our system for the 2010 tax season given that the large majority of RAL demand is satisfied in the first part of the tax season. As a result, we entered the 2010 tax season at a competitive disadvantage. Accordingly, we took steps to retain customers and we moved to aggressively manage our expenses given that we anticipated there would likely be a sizeable revenue shortfall due to the loss of RALs. The absence of a RAL product in 50% of our markets has had a material adverse impact on our third quarter financial results and is expected to have similar affect for the full 2010 fiscal year.

In markets where the RAL product was available in Jackson Hewitt offices, total returns prepared were down 11% in the 2010 tax season and customer retention improved by approximately 6% to over 62%. We believe that the paid preparer market was down versus prior year at this same time on a comparable basis. Correspondingly, in markets where the RAL product was unavailable in Jackson Hewitt offices, total returns prepared were down 31% in the 2010 tax season and customer retention declined by over 6% to approximately 51%.

Please see Franchise Results of Operations and Company-Owned Office Results of Operations for additional highlights.

Total Expenses

Total operating expenses decreased $5.5 million, or 9%, excluding the goodwill impairment charge noted below. When combined with the goodwill impairment charge, the overall increase in total operating expenses of $268.7 million was significantly higher than total operating expenses in the same period last year. The following factors are some of the more significant items that contributed to, or partially offset, our overall total increase in operating expenses.

Cost of franchise operations: Cost of franchise operations decreased $0.2 million, or 2%, primarily due to the absence in fiscal 2010 of franchisee incentives of $2.1 million in connection with the number of prepaid debit cards issued by MetaBank partially offset by higher bad debt expense of $1.7 million.

Marketing and Advertising: Marketing and advertising expenses decreased $5.0 million, or 24%, primarily due to (i) lower media expense of $2.8 million; (ii) the absence of sponsorship-related expenses of $0.8 million; (iii) lower agency fees of $0.5 million; and (iv) the absence of mall marketing expenses of $0.4 million.

Cost of company-owned office operations: Cost of company-owned office operations decreased $2.1 million, or 11%, primarily due to lower labor costs of $1.3 million and lower storefront occupancy related costs of $0.6 million.

Selling, general and administrative: Selling, general and administrative expenses (“SG&A”) increased $1.6 million, or 25%, primarily due to (i) higher expenses of $1.2 million related to seeking alternative funding sources for RALs in the 2010 tax season; (ii) a litigation related matter of $0.6 million; and (iii) higher consulting fees of $0.2 million partially offset by lower external legal fees of $0.3 million.

Goodwill Impairment: Due to the loss of approximately 50% of our RAL program in the third quarter of fiscal 2010 and the decline in our stock price and resulting market capitalization since the beginning of such quarter, we concluded that a goodwill impairment triggering event had occurred. As a result of our testing, we recorded a non-cash goodwill impairment charge of $274.1 million in the third quarter of fiscal 2010. See “Critical Accounting Policies – Goodwill” for additional information related to this charge.

Other income (expense)

Interest expense: Interest expense increased $1.6 million, or 39%, primarily due to the higher credit spread under our amended credit facility and higher amortization of deferred financing costs of $0.4 million partially offset by lower market interest rates. Our pre-tax average cost of debt was 6.8% in the three months ended January 31, 2010 as compared to 4.7% in the three months ended January 31, 2009, respectively.

32

Provision for (benefit from) income taxes: Our effective tax rate for the three months ended January 31, 2010 and 2009 is 9.8% and 39.7%, respectively. The primary difference results from the $274.1 million goodwill impairment charge recorded in the third quarter of fiscal 2010, which is mostly non-deductible for tax purposes, as well as a $9.9 million charge to establish a valuation allowance against a portion of our deferred tax assets.

Nine Months Ended January 31, 2010 as Compared to Nine Months Ended January 31, 2009

Total Revenues

Total revenues decreased $19.0 million, or 18%, primarily due to the reasons discussed in the three month comparison. Average revenues per tax return prepared increased 2%. Our network of franchised and company-owned offices prepared nearly 1.0 million tax returns in the 2010 year-to-date period, a decrease of 18% compared to the same period last year.

Please see Franchise Results of Operations and Company-Owned Office Results of Operations for additional highlights.

Total Expenses

Total operating expenses decreased $9.5 million, or 7%, excluding the goodwill impairment charge noted below. When combined with the goodwill impairment charge, the overall increase in total operating expenses of $264.6 million was significantly higher than total operating expenses in the same period last year. The following factors are some of the more significant items that contributed to, or partially offset, our overall total increase in operating expenses.

Cost of franchise operations: Cost of franchise operations decreased $1.6 million, or 7%, primarily due to (i) the absence in fiscal 2010 of franchisee incentives of $2.1 million in connection with the number of prepaid debit cards issued by MetaBank; (ii) lower compensation-related costs of $0.9 million as a result of fiscal 2009 workforce reductions and other employee departures; (iii) lower meeting and convention costs of $0.6 million; (iv) lower Gold Guarantee costs of $0.5 million; (v) lower development advance note amortization of $0.3 million; and (vi) lower travel expenses of $0.2 million partially offset by higher bad debt expense of $2.0 million and higher consulting fees of $1.1 million.

Marketing and advertising: Marketing and advertising expenses decreased $8.2 million, or 27%, primarily due to (i) lower media expense of $2.8 million; (ii) lower sponsorship-related costs of $2.2 million; (iii) lower creative advertising of $0.8 million; (iv) lower promotional expenses of $0.8 million; (v) lower agency fees of $0.6 million; (vi) lower database marketing of $0.3 million; and (viii) lower miscellaneous expenses of $0.2 million.

Cost of company-owned office operations: Cost of company-owned office operations decreased $5.8 million, or 15%, primarily due to (i) the absence of a $1.6 million lease termination charge related to first quarter of fiscal 2009 restructuring initiative; (ii) lower labor costs of $1.9 million; and (iii) lower storefront occupancy related costs of $1.8 million.

Selling, general and administrative: SG&A expenses increased $5.2 million, or 17%, primarily due to (i) a $4.3 million termination charge related to the departure of our former Chief Executive Officer in June 2009; (ii) higher expenses of $2.3 million principally in connection with corporate advisory and strategy development activities; (iii) higher external legal fees of $1.4 million; (iv) the absence of a $1.5 million insurance recovery related to a legal settlement; (v) $1.2 million in expenses related to seeking alternative funding sources for RALs in the 2010 tax season; and (vi) a litigation related matter of $0.6 million. The increase in SG&A expenses was partially offset by (i) the absence of a $2.8 million legal settlement charge; (ii) a decrease in compensation-related expenses of $0.7 million primarily due to workforce reductions; (iii) lower employee termination expenses (excluding the charge associated with our former CEO in June 2009) of $0.8 million; (iv) lower share-based compensation of $0.6 million; (v) lower professional and recruiting expenses of $0.4 million; and (vi) lower commission expense of $0.2 million.

Goodwill Impairment: Due to the loss of approximately 50% of our RAL program in the third quarter of fiscal 2010 and the decline in our stock price and resulting market capitalization since the beginning of such quarter, we concluded that a goodwill impairment triggering event had occurred. As a result of our testing, we recorded a non-cash goodwill impairment charge of $274.1 million in the third quarter of fiscal 2010. See “Critical Accounting Policies – Goodwill” for additional information related to this charge.

33

Other income (expense)

Interest expense: Interest expense increased $4.8 million, or 42%, primarily due to the higher credit spread under our amended credit facility, and higher amortization of deferred financing costs of $1.1 million partially offset by lower market interest rates. Our pre-tax average cost of debt was 7.2% and 5.0% in the nine months ended January 31, 2010 and 2009, respectively.

Provision for (benefit from) income taxes: Our effective tax rate for the nine months ended January 31, 2010 and 2009 is a benefit rate of 1.1% and 39.7%, respectively. The primary difference results from the $274.1 million goodwill impairment charge recorded in the third quarter of fiscal 2010, which is mostly non-deductible for tax purposes, as well as a $9.9 million charge to establish a valuation allowance against a portion of our deferred tax assets.

Segment Results

Franchise Operations

	Three Months Ended January 31,					Nine Months Ended January 31,
	2010			2009		2010			2009
	(in thousands)					(in thousands)
Results of Operations:
Revenues
Royalty	$	24,575		$	29,620	$	25,819		$	30,893
Marketing and advertising		10,826			13,089		11,373			13,653
Financial product fees		12,490			21,182		18,150			26,256
Other		1,982			2,027		2,484			3,624
Total revenues		49,873			65,918		57,826			74,426
Expenses
Cost of operations		8,773			8,980		23,298			24,933
Marketing and advertising		13,085			17,581		19,280			26,904
Selling, general and administrative		822			915		2,727			2,991
Goodwill Impairment		223,734			—		223,734			—
Depreciation and amortization		2,535			2,249		7,485			6,607
Total expenses		248,949			29,725		276,524			61,435
(Loss) income from operations		(199,076	)		36,193		(218,698	)		12,991
Other income/(expense):
Interest and other income		592			391		1,800			1,130
(Loss) income before income taxes	$	(198,484	)	$	36,584	$	(216,898	)	$	14,121

Three Months Ended January 31, 2010 as Compared to Three Months Ended January 31, 2009

Total Revenues

Total revenues decreased $16.0 million, or 24%. Factors contributing to the decrease were as follows:

Royalty and marketing and advertising: Royalty revenues decreased $5.0 million, or 17%, and marketing and advertising revenues decreased $2.3 million, or 17%, both due to a 19% decrease in the number of tax returns prepared by our franchisees.

Financial product fees: Financial product fees decreased $8.7 million, or 41%, principally due to losing approximately 50% of our RAL program in connection with SBBT’s/PCB’s inability to originate RALs based upon a directive received by them from their regulator and lower negotiated economics with the providers of our financial products. Under our existing financial product agreements, we will earn less in total contractual fixed fees, which are accounted for on a percentage of completion method over the tax season.

34

Other revenues: Other revenues decreased marginally, or 2%, primarily due to a decrease in electronic filing fees resulting from a reduction in the number of tax returns prepared partially offset by higher territory sales. We sold 48 territories in the three months ended January 31, 2010 (of which 33 were associated with occupying Walmart store locations) as compared to five during the same quarter last year. Walmart territories sold during the current quarter will be recognized over each of the next ten tax seasons beginning in January 2010 and were generally sold at a lower fee than past territory sales. Revenue recognition for the Walmart territory sales is conditional upon the continuation of the Walmart agreement and continued availability to operate within the Walmart territory consistent with the terms of the territory sale promissory note.

Total Expenses

Total operating expenses decreased $4.5 million, or 15%, excluding the goodwill impairment charge noted below. When combined with the goodwill impairment charge, the overall increase in total operating expenses of $219.2 million was significantly higher than total operating expenses in the same period last year. The following factors are some of the more significant items that contributed to, or partially offset, our overall total increase in operating expenses.

Cost of franchise operations: Cost of franchise operations decreased $0.2 million, or 2%, as discussed in the Condensed Consolidated Results of Operations.

Marketing and Advertising: Marketing and advertising expenses decreased $4.5 million, or 26%, as discussed in the Condensed Consolidated Results of Operations.

Goodwill Impairment: Goodwill impairment charge of $223.7 million, as discussed in the Condensed Consolidated Results of Operations.

Nine Months Ended January 31, 2010 as Compared to Nine Months Ended January 31, 2009

Total Revenues

Total revenues decreased $16.6 million, or 22%. Factors contributing to the decrease were as follows:

Royalty and marketing and advertising: Royalty revenues decreased $5.0 million, or 16%, and marketing and advertising revenues decreased $2.3 million, or 17%, both due to a 19% decrease in the number of tax returns prepared by our franchisees.

Financial product fees: Financial product fees decreased $8.1 million, or 31%, principally due to the same reasons as discussed in the three month comparison.

Other revenues: Other revenues decreased $1.1 million, or 32%, primarily due to a decrease territory sales. Other revenues included the sale of 164 territories (of which 147 were associated with occupying Walmart store locations) as compared to 70 during the same period last year.

Total Expenses

Total operating expenses decreased $8.6 million, or 14%, excluding the goodwill impairment charge noted below. When combined with the goodwill impairment charge, the overall increase in total operating expenses of $215.1 million was significantly higher than total operating expenses in the same period last year. The following factors are some of the more significant items that contributed to, or partially offset, our overall total increase in operating expenses.

Cost of operations: Cost of operations decreased $1.6 million, or 7%, as discussed in the Condensed Consolidated Results of Operations.

Marketing and Advertising: Marketing and advertising expenses decreased $7.6 million, or 28%, as discussed in the Condensed Consolidated Results of Operations.

Selling, general and administrative: SG&A decreased $0.3 million, or 9%, principally due to lower compensation-related expenses.

35

Goodwill Impairment: Goodwill impairment charge of $223.7 million, as discussed in the Condensed Consolidated Results of Operations

Depreciation and amortization: Depreciation and amortization increased $0.9 million, or 13%, principally due to additions associated with the development of internal use software and the purchase of technology related assets.

Company-Owned Office Operations

	Three Months Ended January 31,					Nine Months Ended January 31,
	2010			2009		2010			2009
	(in thousands)					(in thousands)
Results of Operations:
Revenues
Service revenues from operations	$	29,229		$	31,872	$	30,353		$	32,720
Expenses
Cost of Operations		17,753			19,887		32,030			37,827
Marketing and advertising		2,438			2,949		2,667			3,235
Selling, general and administrative		634			630		2,329			3,293
Goodwill Impairment		50,416			—		50,416			—
Depreciation and amortization		991			1,047		3,075			3,082
Total expenses		72,232			24,513		90,517			47,437
(Loss) income from operations		(43,003	)		7,359		(60,164	)		(14,717	)
(Loss) income before income taxes	$	(43,003	)	$	7,359	$	(60,164	)	$	(14,717	)

Three Months Ended January 31, 2010 as Compared to Three Months Ended January 31, 2009

Total Revenues

Total revenues decreased $2.6 million, or 8%, primarily due to lower tax preparation revenues of $1.9 million. The number of tax returns prepared was approximately 128,000 as compared to 142,000 during the same quarter last year. Average revenues per tax return prepared increased 2%.

Total Expenses

Total operating expenses decreased $2.7 million, or 11%, excluding the goodwill impairment charge noted below. When combined with the goodwill impairment charge, the overall increase in total operating expenses of $47.7 million was significantly higher than total operating expenses in the same period last year. The following factors are some of the more significant items that contributed to, or partially offset, our overall total increase in operating expenses.

Cost of Operations: Cost of operations decreased $2.1 million, or 11%, as discussed in the Condensed Consolidated Results of Operations.

Marketing and advertising: Marketing and advertising expenses decreased $0.5 million, or 17%, primarily due to lower local marketing expense.

Goodwill Impairment: Goodwill impairment charge of $50.4 million, as discussed in the Condensed Consolidated Results of Operations.

36

Nine Months Ended January 31, 2010 as Compared to Nine Months Ended January 31, 2009

Total Revenues

Total revenues decreased $2.4 million, or 7%, primarily due to the reasons discussed in the three month comparison.

Total Expenses

Total operating expenses decreased $7.3 million, or 15%, excluding the goodwill impairment charge noted below. When combined with the goodwill impairment charge, the overall increase in total operating expenses of $43.1 million was significantly higher than total operating expenses in the same period last year. The following factors are some of the more significant items that contributed to, or partially offset, our overall total increase in operating expenses.

Total operating expenses decreased $7.4 million, or 16%. Factors contributing to the decrease were as follows:

Cost of Operations: Cost of operations decreased $5.8 million, or 15%, as discussed in the Condensed Consolidated Results of Operations.

Marketing and advertising: Marketing and advertising expenses decreased $0.6 million, or 18%, primarily due to lower local marketing expense.

Selling, general, and administrative: SG&A decreased $1.0 million or, 30%, primarily due to (i) lower employee termination expenses of $0.4 million; (ii) lower compensation-related expenses of $0.2 million primarily related to workforce reductions; (iii) lower external legal fees of $0.2 million; and (iv) lower recruiting expenses of $0.1 million.

Goodwill Impairment: Goodwill impairment charge of $50.4 million, as discussed in the Condensed Consolidated Results of Operations.

Corporate and Other

Corporate and other expenses include unallocated corporate overhead supporting both segments, including legal, finance, human resources, real estate facilities and strategic development activities, as well as share-based compensation and financing costs.

	Three Months Ended January 31,						Nine Months Ended January 31,
	2010			2009			2010			2009
	(in thousands)						(in thousands)
Expenses (a)
General and administrative	$	5,629		$	4,332		$	23,400		$	19,477
Insurance settlement		—			—			—			(1,500	)
Litigation related matter		575			—			575			2,833
Employee termination and related expenses		7			226			4,752			823
Share-based compensation		647			577			2,018			2,663
Total expenses		6,858			5,135			30,745			24,296
Loss from operations		(6,858	)		(5,135	)		(30,745	)		(24,296	)
Other income/(expense):
Interest and other income		99			63			122			104
Interest expense		(5,825	)		(4,197	)		(16,262	)		(11,422	)
Loss before income taxes	$	(12,584	)	$	(9,269	)	$	(46,885	)	$	(35,614	)

(a) Included in SG&A in the Condensed Consolidated Statements of Operations.

37

Three Months Ended January 31, 2010 as Compared to Three Months Ended January 31, 2009

Loss from operations

Loss from operations increased $1.7 million, or 34%, primarily due to higher expenses of $1.2 million related to seeking alternative funding sources for RALs in the 2010 tax season and a litigation related matter of $0.6 million partially offset by lower external legal fees of $0.3 million.

Other income/(expense)

Interest expense: Interest expense increased $1.6 million, or 39%, as discussed in the Condensed Consolidated Results of Operations.

Nine Months Ended January 31, 2010 as Compared to Nine Months Ended January 31, 2009

Loss from operations

Loss from operations increased $6.4 million, or 27%, primarily due to (i) a $4.3 million termination charge related to the departure of our former Chief Executive Officer in June 2009; (ii) higher expenses of $2.3 million principally in connection with corporate advisory and strategy development activities; (iii) the absence in fiscal 2010 of a $1.5 million insurance recovery related to a legal settlement; (iv) higher external legal fees of $1.4 million; (v) $1.2 million in expenses related to seeking alternative funding sources for RALs in the 2010 tax season; and (vi) a litigation related matter of $0.6 million. The increase was partially offset by (i) the absence in fiscal 2010 of a $2.8 million legal settlement charge; (ii) a decrease in compensation-related expenses of $0.7 million primarily due to workforce reductions; (iii) lower employee termination expenses of $0.8 million; and (iv) lower share-based compensation of $0.6 million.

Other income/(expense)

Interest expense: Interest expense increased a $4.8 million, or 42%, as discussed in the Condensed Consolidated Results of Operations.

Liquidity and Capital Resources

Historical Sources and Uses of Cash from Operations

Seasonality of Cash Flows

The tax return preparation business is highly seasonal resulting in substantially all of our revenues and cash flow being generated during the period from January 1 through April 30. Following the tax season, from May 1 through December 31, we primarily rely on excess operating cash flow from the previous tax season and our credit facility to fund our operating expenses and to reinvest in our business to support future growth. Given the nature of the franchise business model, our business is generally not capital intensive and has historically generated strong operating cash flow from operations on an annual basis. While we expect to continue to generate cash flow from operations during tax season, we currently anticipate that the level of funds generated during this period will be significantly reduced due to the loss of RALs in 50% of our markets.

Sources and Uses of Cash

In the nine months ended January 31, 2010, we used $15.8 million more cash for operations which was largely affected by the impact of lower revenues earned in the current reporting period due principally from the loss of RAL product in 50% of our markets. Described below are some of the more significant items that contributed to, or partially offset, our net cash used:

• Higher interest expense of $4.6 million;

• Higher employee termination payments of $3.9 million;

• Higher payments for technology consulting, and corporate advisory and strategy development activities of $3.7 million;

• Payment of $2.8 million related to a previously accrued legal settlement;

• Higher external legal fee payments of $2.7 million;

38

• Walmart subsidy payment to franchisees of $2.5 million;

• Higher lease termination payments of $2.3 million;

• The absence in fiscal 2010 of a $1.5 million insurance recovery related to a legal settlement; and

• Fees paid related to seeking alternative funding sources for RALs of $1.2 million.

Partially offsetting the factors discussed above were:

• Lower income tax payments of $7.6 million primarily due to the decrease in operating income between years;

• Lower employee payroll payments of $2.1 million primarily due to reductions in workforce in fiscal 2009 and other employee departures; and

• Lower bonus payments for full-time and seasonal employees as we paid $3.2 million in the nine months ended January 31, 2010 as compared to payments of $4.8 million in the nine months ended January 31, 2009 (accrued in fiscal 2008).

Investing activities

In the nine months ended January 31, 2010, we used $6.0 million less cash for investing activities as compared to the nine months ended January 31, 2009, primarily due to a $11.4 million reduction in cash paid for the acquisition of tax return preparation businesses and lower funding provided to franchisees of $2.6 million. Partially offsetting the overall decrease in net cash used for investing activities was the capital expenditures of $7.3 million for kiosks in our company owned stores and leased to franchisees in support of our expanded Walmart opportunity and $1.1 million for other capital expenditures primarily due to increased computer software development costs.

Financing activities

In the nine months ended January 31, 2010, we received $20.1 million more cash from financing activities as compared to the nine months ended January 31, 2009, primarily due to lower dividend payments of $15.3 million and higher net borrowings under our credit facility of $7.0 million.

Credit Facility

Based upon the information currently available, we believe that it is likely that we will breach the financial covenants in our credit facility as of April 30, 2010. We intend to initiate discussions with the lead agent under our credit facility, and inform all of the other banks in our lending syndicate, that we intend to seek relief in connection with the financial covenants. However, there can be no assurance that we will be successful in our efforts to modify the credit facility or obtain a waiver or forbearance arrangement from the lenders, and we do not know what changes, if any, will be made to the credit facility in connection with such waiver or forbearance arrangement. A breach of the financial covenants could result in an event of default under our credit facility. Such event of default would allow the lenders to, among other things, terminate their commitments to lend any additional amounts to us and declare all borrowings outstanding, together with accrued and unpaid interest, to be immediately due and payable. We have met our financial covenants for the period ending January 31, 2010.

Due to the likelihood that we will not meet the financial covenants as of April 30, 2010, and the uncertainty at this time regarding any amendment or waiver to the credit facility, we may now be unable to refinance the $25.0 million term loan payment due on April 30, 2010. Accordingly, we have classified the $25.0 million term loan payment due on April 30, 2010 as a current obligation on our consolidated balance sheet. If we are not successful in our efforts to modify the credit facility or obtain a waiver or forbearance arrangement from the lenders, the remaining $339.0 million outstanding balance will also be classified as a current portion of long-term debt, and we will continue to seek alternative capital sources.

39

Future Cash Requirements and Sources of Cash

Future Cash Requirements

Over the next 12 months, our primary cash requirements will be the funding of our operating activities (including contractual obligations and commitments), capital expenditure requirements, the funding of franchisee office expansion, and servicing our debt, as described more fully below.

• Marketing and advertising—We receive marketing and advertising payments from franchisees to fund our budget for most of these expenses. Marketing and advertising expenses include regional and local campaigns designed to increase brand awareness and attract both early season and late season customers. Such expenses are seasonal in nature and typically increase in our third and fourth fiscal quarters when most of our revenues are earned.

• Company-owned offices—Expenses to operate our company-owned offices begin to increase during the third fiscal quarter and peak during the fourth fiscal quarter primarily due to the labor costs related to the seasonal employees who provide tax return preparation services to our customers. We also continue to pursue selective acquisition opportunities on a limited basis for our company-owned office segment in economically attractive, high growth markets adjacent to our current operations. Under the terms of our credit facility, we are limited to annual acquisitions of $7.0 million.

• Capital expenditures—We anticipate spending between $1.5 million and $2.0 million on capital expenditures during the remainder of fiscal 2010 primarily for information technology upgrades, including funding payroll for employees responsible for developing internal use software.

• Purchases of kiosks—We anticipate spending between $0.5 million and $1.0 million prior to the beginning of the 2011 tax season for additional kiosks (for lease to franchisees and for use by Company-Owned Operations) in support of our expanded Walmart opportunity.

• Debt service—As of February 28, 2010, we had $364.0 million outstanding under our credit facility. A mandatory payment of $25.0 million is due on April 30, 2010 in connection with the amortizing term loan of $225.0 million. Additionally, under our existing credit facility, we anticipate having to spend between $23.0 million and $25.0 million in interest over the next twelve months.

Future Sources of Cash

For the remainder of fiscal 2010, we expect our primary source of cash to be provided by operating activities, primarily from royalty and marketing advertising fees from franchisees, service revenues earned at company owned offices and financial product fees. We anticipate using cash generated during the 2010 tax season as our principal source of funding operations during the first nine months of the fiscal year leading up to the 2011 tax season. We intend to discuss with our lenders future sources of funding operations, including cash generated during the 2010 tax season and borrowings under the credit facility.

Contractual Obligations

In fiscal 2010, we entered into contracts for certain administrative, technology-related, and other services, and for kiosks in connection with our expanded Walmart opportunity, resulting in additional purchase obligations as of January 31, 2010 totaling approximately $3.3 million. Amounts are due in each of the following respective fiscal periods: $2.2 million in the remainder of fiscal 2010 and $1.1 million in fiscal years 2011 through 2012.

Critical Accounting Policies

Our Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the amounts reported therein. Events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our consolidated results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our Condensed Consolidated Financial Statements were the most appropriate at that time. The following critical accounting policies may affect reported results which could lead to variations in our financial results both on an interim and fiscal year basis.

Goodwill

We evaluate the carrying value of goodwill and recoverability at least annually in our fourth fiscal quarter. We update the test between annual periods when an event occurs or if circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Determination of impairment requires comparison of the reporting unit’s fair value with the reporting unit’s carrying value, including goodwill. If this comparison indicates that the fair value is less than the carrying value, then the implied fair value of the reporting unit’s goodwill is compared with the carrying amount of the reporting unit’s goodwill to

40

determine the impairment loss to be charged to operations. The fair value of each of our reporting units was determined based upon using the income approach, which estimates fair value based on discounted cash flows.

Due to the loss of approximately 50% of our RAL program in the third quarter of fiscal 2010 and the decline in our stock price and resulting market capitalization since the beginning of such fiscal quarter, we concluded that a goodwill impairment triggering event had occurred for purposes of ASC Topic 350 “Intangibles – Goodwill and Other.” Accordingly, we performed a testing of the carrying values of goodwill for both of our Franchise Operations and Company-owned Office Operations reporting units as of January 31, 2010. After this testing, we concluded that the carrying value of our Franchise Operations and Company-owned Office Operations reporting units, including goodwill, exceeded the fair value of each respective reporting unit. As a result, we recorded a non-cash goodwill impairment charge of $274.1 million in the third quarter of fiscal 2010. The impairment was recorded as a pre-tax charge of $223.7 million in the Franchise Operations reporting unit and $50.4 million in the Company-owned Office Operations reporting unit.

Significant management judgment is required in assessing whether goodwill is impaired. The carrying value of our reporting units was determined by specifically identifying and allocating all of our consolidated assets and liabilities to each reporting unit based on various methods we deemed reasonable. Fair value of each reporting unit was estimated using an income approach which discounts future net cash flows to their present value at a rate that reflects the current return requirements of the market and risks inherent in our business. Estimated future cash flows are impacted by a multitude of factors and were based to a large extent on our internal business plan and adjusted, as appropriate, for our views of market participant assumptions, oversight of the providers of RAL product and an assessment related to whether these providers will be allowed to continue to offer such product in the future, and the renewal of certain material contracts. Additional factors affecting these future cash flows included, but were not limited to, franchise agreement renewal and attrition rates, markets and market share data, tax return sales volumes and prices, cost structure, and working capital changes. Estimates were also used for our weighted average cost of capital, which was adjusted, as appropriate, to account for company specific risk premiums in discounting our projected future cash flows and our long-term growth rate for purposes of determining a terminal value at the end of the forecast period. Our assumptions and views of these factors continually evolve, and such views and assumptions used in determining the fair value of our reporting units in the third quarter of fiscal 2010 changed significantly from those used in the 2009 annual impairment test.

We considered historical experience and all available information at the time the fair value of our reporting units was estimated. However, fair values that could be realized in an actual transaction may differ from those used by us to evaluate the impairment of our goodwill. The fair value of the reporting units was determined using unobservable inputs (i.e., Level 3 inputs) as defined by the accounting guidance for fair value measurements. As an overall test of reasonableness of the estimated fair values of the reporting units, we reconciled the combined fair value estimates of the reporting units to their market capitalization as of January 31, 2010. The reconciliation confirmed that the fair values were reasonably representative of the market views.

These underlying assumptions and estimates are made as of a point in time. Subsequent changes in our estimates of future cash flows could result in a future impairment charge to goodwill. We continue to remain alert for any indicators that the fair value of a reporting unit could be below book value and will assess goodwill for impairment as appropriate.

Other Indefinite-Lived Intangible Assets

We have $87.0 million in indefinite-lived intangible assets as of January 31, 2010. Other indefinite-lived intangibles, which consist of our trademark and reacquired rights under franchise agreements from acquisitions, are recorded at their fair value as determined through purchase accounting. Our trademark is reviewed for impairment annually in our fourth fiscal quarter. Additionally, we review the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amount might not be recoverable. If the fair value of our trademark is less than the carrying amount, an impairment loss would be recognized in an amount equal to the difference.

We reevaluated our other indefinite-lived intangibles for impairment in conjunction with our goodwill testing and concluded that the fair value of other intangible assets, including trademark, exceeded their carrying value, thereby indicating no impairment as of the third quarter of fiscal 2010. We will continue to monitor changes in our business, as well as overall market conditions and economic factors that could require additional impairment tests.

41

Accounting Standards Issued but Not Yet Adopted

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements. This standard requires new disclosures on the amount and reason for transfers in and out of Level 1 and 2 recurring fair value measurements. The standard also requires disclosure of activities (i.e., on a gross basis), including purchases, sales, issuances, and settlements, in the reconciliation of Level 3 fair value recurring measurements. The standard clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. The new disclosures regarding Level 1 and 2 fair value measurements and clarification of existing disclosures are effective for periods beginning after December 15, 2009. The disclosures about the reconciliation of information in Level 3 recurring fair value measurements are required for periods beginning after December 15, 2010. We are currently evaluating the impact of this standard on our financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We have entered into interest rate swap agreements with financial institutions to convert a notional amount of $100.0 million of floating-rate borrowings into fixed-rate debt, with the intention of mitigating the economic impact of changing interest rates. Under these interest rate swap agreements, the first $50.0 million of which became effective in October 2005 and the remaining $50.0 million in November 2007, we receive a floating interest rate based on the three-month LIBOR (in arrears) and pay a fixed interest rate averaging from 4.4% to 4.5%. These interest rate swap agreements were determined to be cash flow hedges in accordance with ASC subtopic 815 “Derivatives and Hedging Topic”.

In connection with extending the maturity date under our credit facility in October 2006, we entered into interest rate collar agreements to become effective after the initial interest rate swap agreements terminate. The interest rate collar agreements were entered into with financial institutions to limit the variability of expense/payments on $50.0 million of floating-rate borrowings during the period from July 2010 to October 2011 to a range of 5.5% (the cap) and 4.6% (the floor). These interest rate collar agreements were determined to be cash flow hedges in accordance with ASC subtopic 815.

We have financial market risk exposure related primarily to changes in interest rates. As discussed above, we attempt to reduce this risk through the utilization of derivative financial instruments. A hypothetical 1% change in the interest rate on our floating-rate borrowings outstanding as of January 31, 2010, excluding our $100.0 million of hedged borrowings whereby we fixed the interest rate, at an average ranging from 4.4% to 4.5%, would result in an annual increase or decrease in income before income taxes of $2.3 million. The estimated increase or decrease is based upon the level of variable rate debt as of January 31, 2010 and assumes no changes in the volume or composition of debt.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Exchange Act Rule 13a-15(e). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

(b) Changes in Internal Control over Financial Reporting.

During the third quarter of fiscal 2010, there were no changes that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

42

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

See “Part 1 – Item 1 –Note 11—Commitments and Contingencies,” to our Condensed Consolidated Financial Statements, which is incorporated by reference herein.

Item 1A. Risk Factors.

Our credit facility contains restrictive covenants and other requirements that may limit our business flexibility by imposing operating and financial restrictions on our operations.

The agreement governing our credit facility imposes operating and financial restrictions on us, including restrictive covenants that will require us to maintain specified financial ratios and satisfy financial condition tests. In addition, our credit facility contains various customary restrictive covenants that limit our ability to, among other things, (i) incur additional indebtedness or guarantees, (ii) create liens or other encumbrances on our property, (iii) enter into a merger or similar transaction, (iv) sell or transfer property except in the ordinary course of business and (v) make acquisitions. Our credit facility also prohibits us from paying dividends and repurchasing shares of our common stock. We are also required to make certain mandatory payments on the amortizing term loan portion of the credit facility in April 2010 and April 2011 and to prepay 50% of Excess Cash Flow (as defined in the amended credit facility), if any, for fiscal years 2010 and 2011. Our ability to comply with the covenants, ratios, tests or mandatory payments in our credit facility may be affected by events beyond our control, including prevailing economic, financial and industry conditions or our ability to make financial products available to our customers. A breach of any of these covenants, ratios, tests or mandatory payments could result in a default under our credit facility. In addition, these covenants may prevent us from incurring additional indebtedness to expand our operations and execute our business strategy, including making acquisitions.

Based upon the information currently available to us, we believe that it is likely that we will breach the financial covenants as of April 30, 2010. There can be no assurance that we will be successful in our efforts to modify the credit facility or obtain a waiver or forbearance arrangement from the lenders on terms acceptable to us, and we do not know what changes, if any, will be made to the credit facility in connection with such waiver or forbearance arrangement. In addition our ability to borrow additional funds may be impacted which could adversely impact our ability to fund our operating expenses. Our failure to successfully modify the terms of our credit facility on a timely basis will likely result in a default under our credit facility. Such default would allow the creditors to accelerate the outstanding debt. There is no guarantee we would be able to enter into a new credit facility at current commitment levels or on terms acceptable to us and the failure to have a credit facility, or other alternative sources of funding, would have a material adverse effect on our business, financial condition and results of operations.

Our business is, to some extent, dependent upon our customers’ ability to obtain financial products through our offices.

Our tax return preparation business is, to some extent, dependent on our customers’ ability to obtain financial products through our tax return preparation offices. Our ability to make financial products available through our tax preparation offices attracts customers and is a reason why our system is an attractive investment opportunity to franchisees. However, the financial products we facilitate are specialized financial products and relatively few financial institutions offer them. We currently have contractual arrangements with TPG and Republic covering approximately 100% of our Assisted Refunds program for the 2010 tax season and a contractual arrangement with Republic covering approximately 50% of our RAL program for the 2010 tax season as compared to our RAL program for the 2009 tax season. Our agreements with TPG and Republic expire on October 31, 2010 and October 31, 2012, respectively. In addition, the financial institutions that provide these financial products to our customers are also subject to increased regulatory oversight by federal and state regulators, including banking regulators. The failure to make financial products available through our tax preparation offices, due to the termination of the agreements with our existing partners, increased regulatory oversight of us or our banking partners or legislation, would have a material adverse effect on our business, financial condition and results of operations. In addition, changes in the industry, how financial products are permitted to be provided or the level of demand for these products by our customers could result in the financial product providers seeking to amend the agreements on terms which may not be favorable to us, either of which could cause our revenues or profitability to decline.

43

Federal and state legislators and regulators have increasingly taken an active role in regulating financial products such as RALs, and the continuation of this trend could impede or prevent our ability to facilitate these financial products and reduce demand for our services and harm our business.

From time to time, government officials at the federal and state levels introduce and enact legislation and regulations proposing to regulate or prevent the facilitation of RALs and other financial products. Certain of the proposed legislation and regulations could, if adopted, increase costs to us, our franchisees and the financial institutions that provide our financial products, or could negatively impact or eliminate the ability of financial institutions to provide RALs and other financial products through tax return preparation offices, which could cause our revenues or profitability to decline.

The financial institutions that provide financial products such as RALs to our customers are subject to significant regulation and oversight by federal and state regulators, including banking regulators. On December 18, 2009, SBBT/PCB, received a directive from the Office of the Comptroller of the Currency that it may not originate, purchase or hold RALs during the 2010 tax season. Republic has reported in its public filings with the Securities and Exchange Commission that it will be meeting with its regulator in March 2010 to discuss the future viability of its RAL business. Increased regulatory oversight of the financial institutions that provide RALs could result in additional providers of RALs being forced to exit the market or otherwise limit new entrants into the market, making it more difficult for us to find suitable partners to provide RALs for our entire system on terms acceptable to us or it may otherwise impact the economics we receive from financial institutions, which could cause our revenues or profitability to decline. Our continued inability to arrange for a RAL program for our entire system will have a material adverse effect on our business, financial condition and results of operations. In addition, if the RAL product is unavailable in the marketplace or the application of regulations on financial product providers results, in whole or in part, in the RAL product being unavailable across the Company’s entire network but available to the customers of our competitors, it would have a material adverse effect on our business, financial condition and results of operations.

Many states have statutes regulating, through licensing and other requirements, the activities of brokering loans and providing credit repair services to consumers as well as payday loan laws and local usury laws. Certain state regulators are interpreting these laws in a manner that could adversely affect the manner in which RALs and other financial products are facilitated, or permitted, or result in fines or penalties to us or our franchisees. Some states are introducing and enacting legislation that would seek to directly apply such laws to RAL facilitators. Additional states may interpret these laws in a manner that is adverse to how we currently conduct our business or how we have conducted our business in the past and we may be required to change business practices or otherwise comply with these statutes or it could result in fines or penalties or other payments related to past conduct.

We from time to time receive inquiries from various state regulatory agencies regarding the facilitation of RALs and other financial products. We have in certain states paid fines, penalties and other payments, as well as agreed to injunctive relief, to resolve these matters. In addition, consumer advocacy groups have increasingly called for a legislative and regulatory response to the perceived inequity of these types of financial products. Increased regulatory activity in this area could have a material adverse effect on our business, financial condition and results of operations.

Our operating results depend on the success and growth of our franchise system.

The success and growth of our franchise system depends on our maintaining a satisfactory working relationship with our existing franchisees and attracting new franchisees to our network. Poor performance, our inability to provide financial products, lawsuits and other disputes with our franchisees or between franchisees and our financial partners or other vendors, could discourage our franchisees from expanding their business within our network or from renewing their existing franchise agreements or lead to negative publicity which could discourage new franchisees from entering our network, and could have a material adverse effect on our business, financial condition and results of operations. In each of fiscal year 2008 and 2009, we had lower territory sales as compared to the prior fiscal year. The failure to grow our network could have a material adverse effect on our business, financial condition and results of operations.

In 1999 and 2000, we offered our franchisees the opportunity to renew their franchise relationship with us before their franchise agreement expired. In these early renewal programs, 93% of our franchisees entered into a new franchise agreement for a new 10-year term, and, as a result, approximately a quarter of our existing franchise agreements come up for renewal by the end of 2010. Our inability to renew a significant portion of these franchise agreements on terms satisfactory to our franchisees and us could have a material adverse effect on our business, financial condition and results of operations.

44

Disruptions in our relationship with Wal-Mart or other large retailers and shopping malls could negatively affect our growth and profitability.

The failure to successfully execute our operating plan under our agreement with Wal-Mart pursuant to which we were granted the exclusive right to provide tax preparation services within Wal-Mart stores during the 2010 and 2011 tax seasons, the termination of this agreement or the inability to renew the agreement on satisfactory terms could have a material adverse effect on our business, financial condition and results of operations. The Wal-Mart agreement provides Wal-Mart with several early termination rights, including in the event we receive a notice of default by our creditors under our credit facility. The termination of the Wal-Mart agreement by Wal-Mart could have a material adverse effect on our business, financial condition and results of operations. We also have offices in other retail-partner locations, typically retail stores and shopping malls. In the event we are unable to negotiate favorable agreements with these or comparable retailers or shopping malls or they close a significant number of stores, especially immediately prior to or during the tax season, or our operators are unsuccessful in opening these locations, it could have a material adverse effect on our business, financial condition and results of operations.

Our common stock could be delisted from the NYSE.

The listing of our common stock on the New York Stock Exchange, or NYSE, is subject to compliance with NYSE’s continued listing standards, including that the average market capitalization of our common stock over a consecutive 30 trading-day period cannot be less than $50,000,000 and, at the same time, total stockholders’ equity cannot be less than $50,000,000. As of the date of this filing, our average market capital over the prior 30 trading-day period was greater than $50,000,000 but total stockholders’ equity was less than $50,000,000. The NYSE can also, in its discretion, discontinue listing a company’s common stock pursuant to various other factors, including that the most recent independent public accountant’s opinion on the financial statements contains a qualified opinion or unqualified opinion with a “going concern” emphasis or the company is unable to meet current debt obligations or to adequately finance operations. If we do not satisfy the NYSE’s continued listing standards, our common stock could be delisted from the NYSE unless we cure the deficiency during the time provided by the NYSE. If the NYSE were to delist our common stock, it likely would result in a significant decline in the trading price, trading volume and liquidity of our common stock. We also expect that the suspension and delisting of our common stock would lead to decreases in analyst coverage and market-making activity relating to our common stock, as well as reduced information about trading prices and volume. As a result, it could become significantly more difficult for our shareholders to sell their shares of our common stock at prices comparable to those in effect prior to delisting or at all.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities.

Unregistered Sales of Equity Securities and Use of Proceeds:

There were no unregistered sales of equity securities during the three months ended January 31, 2010.

Issuer Purchases of Equity Securities:

There were no issuer purchases of equity securities during the three months ended January 31, 2010.

Item 3. Defaults Upon Senior Securities.

There were no defaults upon senior securities during the three months ended January 31, 2010.

Item 4. (Removed and Reserved)

Item 5. Other Information.

The Company typically conducts a goodwill impairment analysis each year following the fourth quarter. However, due to the previously announced loss of approximately 50% of the Company’s RAL program in the third quarter of fiscal 2010 and the decline in the Company’s stock price and resulting market capitalization since the beginning of such fiscal quarter, the Company concluded that a goodwill impairment triggering event had occurred for purposes of ASC Topic 350 “Intangibles – Goodwill and Other.” Accordingly, the Company performed a testing of the carrying values of goodwill for both of its Franchise Operations and Company-owned Office Operations reporting units as of January 31, 2010. As a result of this testing on March 10, 2010, the Company, following discussions with the Audit Committee of the Company’s Board of Directors, recorded a non-cash goodwill

45

impairment charge of $274.1 million in its third quarter of fiscal 2010. The Company also separately recorded a $9.9 million charge to provision for income taxes to establish a valuation allowance against a portion of the Company’s deferred tax assets during the same period. These charges are not expected to result in any current or future cash expenditures.

Item 6. Exhibits.

Exhibits: We have filed the following exhibits in connection with this report:

10.1*	Third Amendment to Program Agreement, dated December 29, 2009, between Jackson Hewitt Inc. and Republic Bank & Trust Company.
10.2*	Third Amendment to Technology Services Agreement, dated December 29, 2009, between Jackson Hewitt Technology Services LLC and Republic Bank & Trust Company.
10.3*	Letter Agreement, dated January 12, 2010, among Jackson Hewitt Inc., Jackson Hewitt Technology Services LLC and Santa Barbara Tax Products Group, LLC.
10.4**	Second Amended and Restated Marketing Agreement, dated November 16, 2009, between Jackson Hewitt Inc. and MetaBank d/b/a Meta Payment Systems.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Confidential treatment has been requested for the redacted portions of this agreement. A complete copy of the agreement, including the redacted portions, has been filed separately with the Securities and Exchange Commission.

** This agreement is being refiled pursuant to a revised confidentiality request to the Securities and Exchange Commission. A complete copy of the agreement, including the redacted portions, has been filed separately with the Securities and Exchange Commission.

46

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 17, 2010.

JACKSON HEWITT TAX SERVICE INC.
By:	/S/    HARRY W. BUCKLEY
	Harry W. Buckley
	President and Chief Executive Officer
	(Principal Executive Officer)
	/S/    DANIEL P. O’BRIEN
	Daniel P. O’Brien
	Executive Vice President and Chief Financial Officer
	/S/    CORRADO DEPINTO
	Corrado DePinto
	Vice President and Chief Accounting Officer

47

EX-10.1

Exhibit 10.1

[*] designates portions of this document that have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.

THIRD AMENDMENT TO PROGRAM AGREEMENT

This THIRD AMENDMENT (“Third Amendment”) to the September 19^th, 2007, Program Agreement as previously amended (the “Agreement”) by and between Republic Bank & Trust Company (“Republic”), a Kentucky banking corporation, and Jackson Hewitt Inc. (“JHI”), a Virginia corporation, is effective as of the 29^th day of December, 2009.

RECITALS

WHEREAS, Republic and JHI entered into the Agreement on September 19, 2007.

WHEREAS, Republic and JHI amended the Agreement on December 2, 2008 and November 23, 2009.

WHEREAS, Republic and JHI desire to Amend certain terms of the Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Republic and JHI do hereby agree to amend the Agreement as follows:

AMENDMENTS

1. Section 2.1 (c) is modified to read as follows:

(c) For each of Tax Seasons 2010, 2011 and 2012 Republic shall be the exclusive provider of Refund Anticipation Loans and Assisted Refunds to Jackson Hewitt Tax Service Customers for all locations operated in the following states: Arkansas, Florida, Indiana, Kentucky, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Texas and Virginia (For purposes of the 2010 Tax Season such ERO locations shall be referred to as “Designated ERO Locations”). Notwithstanding the foregoing and any other provision in the Agreement to the contrary, the Designated ERO Locations shall be permitted to accept applications for Money Now Loans by another financial institution designated by JHI, and the related Refund Anticipation Loan (and in the case of denials, the related Assisted Refund). In addition, it is understood that this Agreement solely relates to the provision of services to Customers in Designated ERO Locations by Jackson Hewitt Tax Service tax preparers and not any other method of distribution (e.g. online tax preparation services).

2. Section 2.2 (c) is modified to read as follows:

(c) For each of Tax Seasons 2010, 2011 and 2012, JHI shall designate Republic as the sole and exclusive Refund Anticipation Loan and Assisted Refund provider under the Program for the Designated ERO Locations, subject to the provisions of Section 2.1 (c) of the Agreement, as amended. The Designated ERO Locations serviced up to 45% of all Tax Season 2009 Customers. [*]

3. Section 4 (c) shall be modified to read as follows:

(c) For each of the 2010, 2011 and 2012 Tax Seasons, Republic shall make a payment to JHI of [*].

4. The following language is added to Section 4:

(g) With respect to each Tax Season, Republic shall have the right to withhold the respective 2010, 2011, and/or 2012 February and/or March payments under Section 4 (d) of this Agreement if Republic, reasonably determines (i) on February 26, 2010 and/or the last business day February of

2011 and/or 2012 that there has been a material adverse change that will likely result in the Designated ERO Locations failing to provide services to [*]; (ii) on or before March 31, 2010, March 31, 2011 and/or March 31, 2012 that the Republic Customers who have obtained RALs during the corresponding Tax Season will likely have, in the aggregate, a RAL delinquency in excess of [*] on August 31, 2010, August 31, 2011 and/or August 31, 2012; or (iii) on or before March 31, 2010, March 31, 2011 and/or March 31, 2012 that due to JHI’s, JHTSL’s, and/or a Designated ERO’s lack of compliance with Republic’s policies and procedures, Republic has and/or will likely be required to conduct additional audits, take corrective action and/or incur regulatory fines or penalties, or suffers or will likely suffer other additional financial costs due to such noncompliance; and in each case of (i), (ii) and/or (iii) above, to the extent Republic has, or reasonably expects to, suffer such resulting harm. Any such determinations shall be made in good faith by Republic and are subject to providing JHI with written notice no later than the date defined in each section of such determination including a detailed explanation of the reasons for such determination and detail of harm incurred or expected to be incurred. In the event Republic exercises this Section 4 (g), the parties agree to immediately begin dispute resolution proceedings as described in Section 15 of this Agreement. In the event any such notice is given, Republic shall have a duty to provide updates to JHI (and any additional information or documentation reasonably requested by JHI) regarding such resulting harm, including, without limitation, actual costs, expenses and losses and to deliver to JHI any amount withheld in excess of such actual costs, expenses and losses. JHI shall have the right to seek confirmation of such claims, by audit or otherwise. This section is in addition to and does not replace or negate the provisions of Section 9.4 of this Agreement. The dates set forth in this Section relate to each respective Tax Season only.

5. Section 6.6 is modified to read as follows:

(a) Retention. JHI shall require each participating ERO to retain a copy of the signed Application, Loan Agreement and Disclosure Statement, State Disclosure Documents, if any, as well as a copy of the federal and state income tax returns, in the Customer’s file maintained by them for a period of three (3) years following the preparation and filing thereof, after which time such documents shall be properly destroyed by commercially reasonable methods in order to assure confidentiality. At the reasonable request of Republic, JHI shall cause EROs to deliver to Republic a copy of any Application or other documentation within three (3) business days.

6. The following language is added to Section 6:

6.10 Insurance. JHI agrees to procure and maintain Commercial General Liability insurance of not less than Two Million Dollars ($2,000,000) per occurrence and Four Million Dollars ($4,000,000) in the aggregate and Professional Liability Insurance with policy limits of not less than Four Million Dollars ($4,000,000) per claim in the aggregate.

7. Section 7.7 is modified to read as follows:

7.7 Screening. [*] Republic shall provide to JHI the text of any disclosures required by Applicable Law to be provided to Customers. The results of such screening process shall be set forth in an electronic file and shall be presented in such form as JHI shall reasonably determine. Responsibility for the cost of activities undertaken pursuant to this Section 7.7 shall be determined by the mutual agreement of the parties.

8. Section 9.1 is modified to read as follows:

9.1 Term. This Agreement shall be effective upon its execution and applicable to the Program for Tax Seasons 2010, 2011 and 2012 and all related periods. This Agreement shall terminate and expire on October 31, 2012, unless extended by written agreement of the parties (the “Term”).

2

9. Section 9.4 is modified to read as follows:

9.4 Termination by Republic.

(a) Republic may, at its option, terminate this Agreement early by giving written notice of termination to JHI by June 30, 2010, which will terminate the Agreement with respect to the 2011 and 2012 Tax Seasons, or by June 30, 2011, which will terminate the Agreement with respect to the 2012 Tax Season.

(b) [*]

10. Republic and JHI enter into this Third Amendment only for the purposes stated herein. Unless otherwise amended herein, all other terms and conditions of the Agreement remain unchanged and in full force and effect.

IN WITNESS WHEREOF, this Third Amendment has been executed and delivered by a duly authorized officer of each party as of the date set forth above.

REPUBLIC BANK & TRUST COMPANY		JACKSON HEWITT INC.
By:	/s/ William R. Nelson	By:	/s/ Daniel P. O’Brien
Name:	William R. Nelson	Name:	Daniel P. O’Brien
Title:	President – TRS	Title:	EVP & CFO

3

EX-10.2

Exhibit 10.2

[*] designates portions of this document that have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.

THIRD AMENDMENT TO TECHNOLOGY SERVICES AGREEMENT

This THIRD AMENDMENT (“Third Amendment”) to the September 19^th, 2007, Technology Services Agreement as previously amended (the “Agreement”) by and between Republic Bank & Trust Company (“Republic”), a Kentucky banking corporation, and Jackson Hewitt Technology Services LLC (“JHTSL”), a Delaware limited liability company, is effective as of the 29^th day of December, 2009.

RECITALS

WHEREAS, Republic and JHTSL entered into the Agreement on September 19, 2007.

WHEREAS, Republic and JHTSL amended the Agreement on December 2, 2008 and November 23, 2009.

WHEREAS, Republic and JHTSL desire to amend certain terms of the Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Republic and JHTSL do hereby agree to amend the Agreement as follows:

AMENDMENTS

1. The definition of “Resource Rate” in Section 1.1 (g) (iii) is modified to read as follows:

(g) [*]

2. Section 1.5 (c) is modified to read as follows:

(c) For each of the 2010, 2011 and 2012 Tax Seasons, Republic shall make a payment to JHTSL of [*].

3. The following language is added to Section 1.5:

(g) With respect to each Tax Season, Republic shall have the right to withhold the respective 2010, 2011 and/or 2012 February and/or March payments under Section 1.5 of this Agreement and the Additional Fees under Section 1.6 of this Agreement if Republic, reasonably determines (i) on February 26, 2010 and/or the last business day February of 2011 and/or 2012 that there has been a material adverse change that will likely result in the Designated ERO Locations failing to provide services to [*]; (ii) on or before March 31, 2010, March 31, 2011 and/or March 31, 2012 that the Republic Customers who have obtained RALs during the corresponding Tax Season will likely have, in the aggregate, a RAL delinquency

in excess of [*] on August 31, 2010, August 31, 2011 and/or August 31, 2012; or (iii) on or before March 31, 2010, March 31, 2011 and/or March 31, 2012 that due to JHI’s, JHTSL’s, and/or a Designated ERO’s lack of compliance with Republic’s policies and procedures, Republic has and/or will likely be required to conduct additional audits, take corrective action and/or incur regulatory fines or penalties, or suffers or will likely suffer other additional financial costs due to such noncompliance; and in each case of (i), (ii) and/or (iii) above, to the extent Republic has, or reasonably expects to, suffer such resulting harm. Any such determinations shall be made in good faith by Republic and are subject to providing JHI with written notice no later than the date defined in each section of such determination including a detailed explanation of the reasons for such determination and detail of harm incurred or expected to be incurred. In the event Republic exercises this Section 1.5 (g), the parties agree to immediately begin dispute resolution proceedings as described in Section 10 of this Agreement. In the event any such notice is given, Republic shall have a duty to provide updates to JHI (and any additional information or documentation reasonably requested by JHI) regarding such resulting harm, including, without limitation, actual costs, expenses and losses and to deliver to JHI any amount withheld in excess of such actual costs, expenses and losses. JHI shall have the right to seek confirmation of such claims, by audit or otherwise. This section is in addition to and does not replace or negate the provisions of Section 9.4 of the Program Agreement. The dates set forth in this Section relate to each respective Tax Season only.

4. Section 1.6 is modified to read as follows:

1.6 Additional Fees. For each Tax Season under this Agreement, Republic shall pay additional consideration to JHTSL for additional services performed and additional resources required to support expansion in the Program over such Tax Seasons. [*].

5. Section 2.2 shall be modified to read as follows:

2.2 Training. JHTSL shall offer to all participating EROs training regarding Bank Products, and shall further require all participating EROs to satisfactorily complete such training. In connection therewith, JHTSL agrees to (i) submit said training program to Republic for prior review and approval, and (ii) incorporate Republic’s ERO compliance and operational training into such training program. JHTSL understands and agrees that Republic may offer and/or require participating EROs to receive additional training with respect to Bank Products.

6. Section 5.1 shall be modified to read as follows:

5.1 Term. This Agreement shall be effective upon its execution and applicable to the Program for Tax Seasons 2010, 2011 and 2012 and all related periods. This Agreement shall terminate and expire on October 31, 2012, unless extended by written agreement of the parties (the “Term”).

7. Schedule A of the Agreement shall be nullified and replaced with Schedule A, attached hereto which Schedule shall be applicable for each of the 2010, 2011 and 2012 Tax Seasons.

8. Republic and JHTSL enter into this Third Amendment only for the purposes stated herein. Unless otherwise amended herein, all other terms and conditions of the Agreement remain unchanged and in full force and effect.

IN WITNESS WHEREOF, this Third Amendment has been executed and delivered by a duly authorized officer of each party as of the date set forth above.

REPUBLIC BANK & TRUST COMPANY		JACKSON HEWITT TECHNOLOGY SERVICES LLC
By:	/s/ William R. Nelson	By:	/s/ Daniel P. O’Brien
Name:	William R. Nelson	Name:	Daniel P. O’Brien
Title:	President - TRS	Title:	EVP & CFO

Schedule A

[*]

EX-10.3

Exhibit 10.3

[*] designates portions of this document that have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.

January 12, 2010

RE: Program and Technology Agreements with Jackson Hewitt

Dear Harry:

As indicated in the December 31, 2009 letter to you from Santa Barbara Bank & Trust, a division of Pacific Capital Bank (the “Bank”), the Bank has been forced by its primary banking regulator, the Office of the Comptroller of the Currency, to discontinue making RALs. The Bank has agreed to sell its refund anticipation loan (“RAL”)/refund transfer (or as you refer to it, assisted refunds) (“RT”) and related tax products business (the “Business”) to our company Santa Barbara Tax Products Group, LLC (“TPG”). We have executed the definitive agreement to purchase the Business and, subject to regulatory approval, will close the transaction during the week of January 11, 2010. TPG will be led by Rich Turner, with substantially the same employees, systems and procedures that were used last tax season.

In addition, TPG has entered into a definitive agreement with MetaBank, a federal savings bank, to provide RTs for the upcoming tax season through Jackson Hewitt Tax Service offices immediately upon execution of this letter agreement and closing of the sale of the Business to TPG’s. As you know, MetaBank is experienced in the tax industry and has originated both RALs and RTs in the past. MetaBank has agreed that TPG will handle all day-to-day management of the tax product program. Accordingly, you will continue to do business with largely the same staff and in the same manner as in the past. As for RALs, we and MetaBank will not be in a position to provide RALs unless funding sources are obtained. We understand that you are continuing (as are we) to seek alternative funding sources for a RAL program and we will continue to use our commercially reasonable efforts to implement a RAL program for you this tax season if such funding sources materialize. However, no assurances of such funding are given herein.

In order for TPG and MetaBank to provide tax products to your customers, it is necessary to create a contractual relationship between TPG and you with respect to the tax products to be provided by TPG and MetaBank to your customers for the 2010 tax season. We believe the most efficient way to create this agreement for the 2010 tax season is for you to consent to the assignment of the existing Program Agreement and Technology Services Agreement, each as previously entered into and amended, between you or your affiliates and the Bank (the “Assumed Agreements”). By signing this letter and returning it to us, you consent to the respective assignments of, and we accept the respective assignments of and assume the obligations of, the Agreements for the 2010 tax season, as modified by the terms

January 12, 2010

Page 2

of this letter. The assignment and assumption of the Assumed Agreements will be effective upon the closing of TPG’s purchase of the Business. The Assumed Agreements as assigned to us will be deemed not to apply to RAL products until such time that we and you agree, in accordance with this letter, to provide RALs for the 2010 tax season. In such event, we and you agree to execute the appropriate mutually acceptable documentation to such effect.

In accordance with the above assignment of the Agreements, the Assumed Agreements between you and us (1) will apply to the offering of tax products in the upcoming tax season; and (2) be modified in the following manner (but will in no way alter the economic terms except as provided below):

• All references to the Bank will be deemed instead to refer to TPG. However, as set forth above, TPG has contracted with MetaBank to provide RT products under the Assumed Agreement. Thus, any references to the Bank, in its capacity as RT provider, or lender (if RALs are provided) will be deemed to refer to MetaBank.

• Neither TPG nor MetaBank will have any liability to you whatsoever regarding prior tax seasons. In addition, TPG’s assumed obligations under the Assumed Agreements only relate from this day forward and only to RT products offered by TPG during the 2010 tax season.

• The program shall be for up to 55% of your business as set forth in the Assumed Agreements and shall not include the states of Arkansas, Indiana, North Carolina, Ohio, Pennsylvania, South Carolina or Virginia. 2010 federal customers under the Assumed Agreements shall be at least [*] and state customers shall be at least [*]. Since RALs are not available under our program at this time, you may seek alternative arrangements for RALs and the corresponding RTs and in such event those offices will be excluded from the program.

• Under the Program Agreement we shall pay you [*]. Under the Technology Services Agreement we shall pay you [*]. Under the technology agreement, [*].

• MetaBank is granted third-party beneficiary status under the Assumed Agreements to enforce the rights under the Assumed Agreements that relate to the RAL and/or RT products it will provide through its agreement with TPG.

• Upon reasonable notice, MetaBank and the OTS will have the right to examine your books and records relating to your performance under the Assumed Agreements and to discuss your performance with you and your staff.

- 2 -

January 12, 2010

Page 3

• The force majeure provisions of the Assumed Agreements are modified such that, upon the occurrence of any significant event beyond the reasonable control of a party that impairs such party’s ability to perform its obligations under the Assumed Agreements, you and TPG will work in good faith to develop a mutually agreed upon commercially reasonable resolution. However, if such a resolution cannot be fashioned, either party will have the right to terminate the Assumed Agreements, and neither party thereto will have liability attributable to the event beyond a party’s reasonable control.

• [*]

- 3 -

January 12, 2010

Page 4

By signing below, you, on behalf of your affiliates and returning it to us, you agree to the terms above.

Very truly Yours,

/s/ Douglas A. Burcombe

Santa Barbara Tax Products Group, LLC

CONSENTED AND AGREED TO:
JACKSON HEWITT INC.
By:	/s/ Harry W. Buckley
	Name:	Harry W. Buckley
	Title:	President & CEO
JACKSON HEWITT TECHNOLOGY SERVICES LLC
By:	/s/ Harry W. Buckley
	Name:	Harry W. Buckley
	Title:	President & CEO

- 4 -

EX-10.4

Exhibit 10.4

Execution Version

[*] designates portions of this document that have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.

SECOND AMENDED AND RESTATED MARKETING AGREEMENT

This Second Amended and Restated Marketing Agreement (the “Agreement”) dated as of November 16, 2009 is by and between Jackson Hewitt Inc. whose address is 3 Sylvan Way, Parsippany, New Jersey 07054 (“Company”) and MetaBank d/b/a Meta Payment Systems whose address is 5501 Broadband Lane, Sioux Falls, South Dakota 57108 (“Bank”). Each may be referred to as a “Party” or collectively as “Parties.” Capitalized terms not defined in the context of a provision of this Agreement have the meanings set forth in Article I.

RECITALS

WHEREAS, Company and Bank are parties to that certain Card Marketing Agreement, dated December 10, 2007, as first amended and restated on November 17, 2008 (“Original Agreement”);

WHEREAS, Company (i) is the franchisor of the Jackson Hewitt Tax Service^® tax preparation system to independently owned and operated franchisees (“Franchisees”) and (ii) through Tax Services of America, Inc., a wholly owned subsidiary, owns and operates certain Jackson Hewitt Tax Service locations (“Corporate Stores,” and together with Franchisees, “Operators”);

WHEREAS, the Operators provide income tax return preparation with electronic filing and related services to their customers (“Customers”);

WHEREAS, Bank is a duly registered principal member of the MasterCard, Discover, and the Visa payment card associations (each a “System” and, collectively, the “Systems”) and is authorized to provide the Programs;

WHEREAS, Company desires to offer the Programs to (i) Customers, (ii) employees of Franchisees, Company, and Company’s affiliates (collectively, the “Employees”), and (iii) certain other eligible Persons; and

WHEREAS, Company and Bank wish to amend and restate the Original Agreement on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth, the receipt and sufficiency of which is acknowledged, the Parties, intending to be legally bound, agree as follows:

ARTICLE I - DEFINITIONS

Except as otherwise specifically indicated, the following terms shall have the following meanings in this Agreement (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Applicable Law” means, collectively, (i) the Rules, (ii) the Guidelines, and (iii) all other federal, state and local statutes, codes, regulations, rules, laws, published regulatory guidelines and judicial or administrative orders and interpretations which are applicable to the Cards, Programs, and each Party in the performance of its obligations under this Agreement, as they may be modified from time to time.

“Applicant” means any Person who applies for a Card or Credit Product.

“Business Day” means any day other than a Saturday, Sunday, legal holiday or other day on which banks in the State of South Dakota are required or permitted by law to be closed.

“Card” or “iPower Card” means a non-personalized or personalized System branded, prepaid, reloadable, debit card bearing Company Intellectual Property issued within a Card Program by Bank.

“Card Deliverables” means the Cards, Cardholder Agreements, Card Packets, and all disclosures, consents and procedures required under Applicable Law with respect to a Card Program.

“Card Packet” means the Card, Card carrier, Card activation sticker on the Card, welcome brochure or letter, Cardholder Agreement, Bank’s privacy policy, related promotional material (as mutually agreed), and the outer envelope and such other materials as Bank and Company mutually agree.

1

Execution Version

“Card Processor” means any Person engaged from time to time by Bank to (i) produce, emboss and deliver Cards, (ii) assemble enrollment kits, (iii) effect and process Cardholders’ transactions on the Cards, and (iv) perform any other Processing Services on behalf of Bank with respect to a Card Program.

“Card Program” means the iPower Card for Disbursements Program described in Exhibit A-1 or the iPower Card with iAdvance Program described in Exhibit A-2 (collectively, the “Card Programs”).

“Card Services” means the prepaid card services provided by Bank to Cardholders through use of the Cards, and all customer service provided by Bank to Cardholders in connection with the Cards, all as set forth in the Cardholder Agreement or this Agreement.

“Cardholder” means any Person to whom a Card is issued.

“Cardholder Agreement” means the agreement between Bank and a Cardholder governing the terms and use of a Card.

“Cardholder Funds” means the funds available for use by a Cardholder from Loads and/or Credit Disbursements after recording the debits and credits with respect to transactions originated by or on behalf of a Cardholder.

“Contract Year” means a period of twelve consecutive months beginning on the execution date of this Agreement or each anniversary of the execution date of this Agreement, whichever is applicable, and ending on the day immediately preceding the anniversary of the execution date of this Agreement.

“Credit Agreement” means the agreement between a Cardholder and Bank setting forth the terms and conditions applicable to each Credit Product Program. A copy of the Credit Agreement for each Credit Product Program is appended as an attachment to the exhibit describing each such Credit Product Program.

“Credit Disbursement” means the disbursement of loan advances under Credit Product Programs.

“Credit Documents” means the Credit Agreement, Credit Product application (including any acknowledgment or consent, to the extent applicable) and any other documents that evidence a Cardholder’s obligation to repay funds advanced by Bank to Cardholder under a Credit Product Program. For avoidance of doubt, the term Credit Documents shall not include any Company documents prepared in connection with any tax, budgeting, planning services, or related promotional offers, coupons, sweepstakes, and the like provided by Company to Customers, Employees or other Persons.

“Credit Processor” means any Person engaged from time to time by Bank to (i) effect and process transactions initiated by or on behalf of a Cardholder with respect to a Credit Product Program, and (ii) provide any other Processing Services on behalf of Bank with respect to the Credit Products.

“Credit Products” or “Credit Product Programs” means all credit programs provided by Bank to Customers, Employees, and other Persons, the financial terms of which are set forth on an exhibit to this Agreement. The term “Credit Products” is currently limited to the iAdvance Credit Product (as described in Exhibit A-3) and the iPower Plus Line of Credit Product (as described in Exhibit A-4).

“Credit Services” means the services provided by Bank to Cardholders in connection with a Credit Product Program, and all customer service provided by Bank to Cardholders in connection therewith, all as set forth in the applicable Credit Agreement or this Agreement.

“Effective Date” means December 10, 2007, the date the Original Agreement first went into effect.

“Funds Transfer Information” means information provided to Bank by Company so that Bank can credit or debit the Omnibus Account in connection with the Cardholder Funds made available to each Cardholder.

“Intellectual Property” means all Marks, and patents, copyrights, other information, art or design work, copy or other material for which a Party holds intellectual property rights, and all trade secrets, confidential and proprietary information, business models, methods of doing business, know-how and all other intellectual property rights.

“Load” means that value has been added to a Card from a source other than Credit Disbursements.

“Mark” means the service marks and trademarks of each member of the System, Bank, and Company, including but not limited to, the names and other distinctive marks or logos which identify the Systems, Bank, and Company. For avoidance of doubt, any brand names used to market the Cards or the iPower Plus Line of Credit Program, whether registered or unregistered, including but not limited to, the names “iPower Plus” and “MoneyPower”, or such other names as may be used from time to time hereafter, shall be considered Marks of Company. Likewise, any brand names used to market the iAdvance Credit Program, whether registered or unregistered, shall be considered Marks of Bank.

Confidential 2

Execution Version

“Marketing Materials” shall mean any marketing material, advertising pieces, sales literature, scripts, and other materials, including but not limited to, email solicitation messages, published advertising (such as newspaper and magazine advertisements), Internet media, telemarketing scripts, television or radio advertisements, brochures, card designs, disclosures, frequently asked questions, interview or public speaking scripts and talking points, sales materials, and press releases, produced by Company and used by Company and/or Operators relating to a Program (which materials shall expressly exclude any and all materials included in the Card Packet, and any other materials Bank may, in its discretion, produce and or distribute to prospective Applicants or Cardholders in accordance with the terms of the Agreement).

“Omnibus Account” means an account (i) that is insured by the Federal Deposit Insurance Corporation, (ii) that is created and established by Bank on behalf of Cardholders at Bank in connection with the Programs, and (iii) into which funds Loads and Credit Disbursements will be deposited to provide Cardholders access to Cardholder Funds.

“Person” means, as the context requires, a human being and/or any firm, corporation, partnership (including, without limitation, general partnerships, limited partnerships, and limited liability partnerships), limited liability company, joint venture, business trust, association or other legal entity other than a Party.

“Pre Tax Season” means the period beginning on [*] and ending on [*], or such other period as may otherwise be mutually agreed upon by the Parties.

“Processing Services” means those services described herein or commonly performed under the management and direction of Bank by a Card Processor or Credit Processor which are necessary to manage a Program and process transactions in accordance with Applicable Law. Such services shall include but shall not be limited to: set-up and maintenance of a Program and Cards, transaction authorization, processing, clearing and Settlement, System access, Card Services, Credit Services, Cardholder dispute resolution, collections, System compliance, regulatory compliance, security and fraud control, and activity reporting.

“Program” means a Card Program or a Credit Product Program (collectively, the “Programs”).

“Provider” means the financial institution(s) identified by Company, from time to time, as a provider of Tax Related Financial Products.

[*]

“Regulatory Authority” means, as the context requires, any System; the State of South Dakota; the Office of Thrift Supervision; the Federal Reserve Board; the Federal Deposit Insurance Corporation, and any federal or state agency having jurisdiction over Bank or Company.

“Rules” means, as applicable, the by-laws and operating rules of any System member and Bank’s published policies and procedures applicable to the Programs, as promulgated by Bank’s Board of Directors in good faith to ensure Bank’s safety and soundness.

“Settlement” means the movement and reconciliation of funds between Bank and System members in accordance with the Rules, and a Provider.

“Tax Refund” means a refund by a taxing authority of funds paid by a Customer in excess of such Customer’s tax liability to such taxing authority.

“Tax Related Financial Products” means loan and non-loan products provided by Providers to Customers from time to time through Operators. As of the date of this Agreement, Tax Related Financial Products consist of assisted refunds, refund anticipation loans, and Money Now loans.

“Tax Season” means the period beginning on January 2 or on such later date as the parties mutually agree upon and ending on April 15th or on such later date as the Internal Revenue Service permits the filing of federal income tax returns without the taxpayer requesting an extension. Unless otherwise specified, the term “Tax Season” shall also include the corresponding Pre Tax Season.

“Term Year” means any calendar year during the Term of this Agreement beginning January 1 and ending December 31, except that the first Term Year shall mean the period beginning on the Effective Date of this Agreement and ending on December 31 of the next calendar year.

Confidential 3

Execution Version

ARTICLE II - PRODUCTS

Section 2.1 Bank and Company have agreed to provide the Programs described in Exhibit A-1, Exhibit A-2, Exhibit A-3 and Exhibit A-4, beginning on one or more mutually agreeable dates after the Effective Date pursuant to the terms described in such Exhibits.

Section 2.2 Upon completion of development and testing, Bank intends to offer additional programs during the Term, including, without limitation, (a) [*], (b) the iPower Card Savings Program, as briefly described in Exhibit A-5, (c) a rewards program currently known as the iPower Rewards Program, and (d) any other customized programs that the Parties may mutually agree to make available to Customers, Employees and other Persons during the Term. Any additional programs provided by Bank pursuant to this Agreement, including the proposed programs described in this Section, shall be separately described and agreed to in writing by the Parties and attached as exhibits to this Agreement. Nothing in this Section 2.2 shall constitute a binding obligation on Bank to offer such additional programs.

Section 2.3 [*]

Section 2.4. Subject to Bank approval and provided such features and enhancements comply with Applicable Law, Bank agrees to use commercially reasonable efforts to introduce new features to or otherwise enhance a Card Program within a reasonable time and upon mutually agreeable terms after receipt of Company’s reasonable request.

ARTICLE III

ARTICLE III - DUTIES OF BANK

Section 3.1 General.

Bank shall perform through itself, or with Company’s prior written approval, the Bank’s processors or affiliates, all Processing Services, including, without limitation, the following:

(a) establish, maintain and manage the relationship between Bank, as the issuer of the Cards, and Applicants and Cardholders;

(b) prepare and produce the Card Deliverables,

(c) prepare the Credit Documents related to the Credit Products, which shall be reproduced and provided to Applicants by Operators exactly as agreed upon by the Parties, and, in the case of the iPower Line of Credit Program, signed by Applicants and, if applicable, the joint filer pursuant to Applicable Law;

(d) replenish non-personalized Card stock upon request by Company no later than December 15 of each year, as required by a Card Program at any other time of the year, or as otherwise mutually agreed upon by the Parties;

(e) distribute, as mutually agreed to ensure agreed upon delivery deadlines, (i) Card Packets and applicable Credit Documents (“Program Inventory”) to Company, Operators or otherwise (at Company’s reasonable discretion), (ii) any subsequent disclosures required to be provided to Cardholders under the terms of the Cardholder Agreement, Credit Agreement and/or Applicable Law or this Agreement, (iii) electronic transaction histories to Cardholders that detail the activity on such Cardholder’s Card, and (iv) periodic statements to participating Cardholders that detail the transaction history and rate information for each Credit Product Program in which they are enrolled; provided that with respect to subpart (i) in this Section 3.1(e), overnight delivery shall be the method of distribution if needed to ensure an Operator has sufficient supply of materials at all times during Tax Season;

(f) provide a Card manufacturing and embossing schedule upon mutual consent for the 2009/2010 Tax Season and for each subsequent Tax Season;

(g) deliver to Company’s processing centers the number of Cards that Bank and Company mutually agree is sufficient to meet reasonably anticipated demand;

(h) subject to Section 3.10, receive and process Funds Transfer Information and make funds available via a Load or Credit Disbursement for a Cardholder such that Cardholder Funds are available within one hour of Bank’s receipt of such Cardholder’s Funds Transfer Information;

Confidential 4

Execution Version

(i) at Bank’s expense, conduct all Office of Foreign Assets Control screening upon receipt of Funds Transfer Information;

(j) authorize and effect credits to and debits from Cardholder Funds in connection with transactions initiated on Cards by or on behalf of Cardholders, and maintain (or cause to be maintained on its behalf) records of such transactions and fees related thereto, consistent with industry standards;

(k) (i) include written disclosures in each Card Packet that lists all actions a Cardholder should take in the event such Cardholder’s Card or PIN is damaged, lost or stolen and, (ii) upon receiving notice from a Cardholder that his or her Card or PIN has been damaged, lost or stolen, take prompt action to block the Card and promptly issue a replacement Card in accordance with Applicable Law. Cards may be delivered via express delivery upon request by and at the sole cost of the Cardholder;

(l) maintain in full force and effect all licenses, permits and other governmental authorizations required of it to perform its obligations under this Agreement;

(m) comply with all the terms and conditions set forth in the Cardholder Agreement, the Credit Documents, the provisions of this Agreement, as the same may hereafter be amended in accordance with the terms of this Agreement, and Applicable Law in connection with the conduct of its business and its participation in each Program (including the provision of Processing Services);

(n) ensure that the Processing Services comply with Applicable Law, including, but not limited to, consumer protection laws, laws that regulate unfair and deceptive acts and practices, anti-money laundering laws and abandoned property laws;

(o) ensure that all Card Deliverables and Credit Documents comply with Applicable Law;

(p) promptly give written notice to Company of any material adverse change in the business, properties, assets, operations or condition, financial or otherwise, and any pending, or threatened litigation involving a Program;

(q) own or otherwise hold valid rights to use its Marks that are used in connection with a Program;

(r) maintain and protect the confidentiality of Customer Information (as defined in Section 9.3) furnished to Bank by (or on behalf of) Company, Operators, Customers, Employees or other Persons;

(s) provide to Company such documentation and information that Company may reasonably request to confirm Bank’s compliance with its obligations under this Agreement;

(t) comply with Bank’s privacy policy.

Section 3.2 Documentation for Programs

(a) Initial Program Documentation.

(i) With respect to the iAdvance Credit Product Program, the iPower Card Savings Program and any additional programs the Parties may mutually agree to offer to Cardholders year round, Bank, at its sole expense, shall design and provide to Company for review and reasonable suggestion and comment the proposed form and content of all Card Deliverables, Credit Documents, or iPower Card Savings Agreement, whichever is applicable (“the Program Documentation”), for each such Program at least thirty (30) days prior to implementation of any such Program.

(ii) With respect to the Card Programs, iPower Plus Line of Credit Program and any additional programs the Parties may mutually agree to offer only during a Tax Season, Bank, at its sole expense, shall design and provide to Company for review and reasonable suggestion and comment the proposed form and content of all Program Documentation for each such Program. Bank shall use reasonable efforts to provide all such Program Documentation to Company for review and reasonable suggestion and comment prior to September 1 of each upcoming Tax Season during the Term.

(b) Changes to Program Documentation.

(i) The Program Documentation relating to the Programs described in Section 3.2(a)(i) may be subsequently changed from time to time by Bank in its sole discretion as Bank deems necessary.

Confidential 5

Execution Version

(ii) Any changes to the Program Documentation for any for the applicable Programs described in 3.2(a)(ii) shall be provided by Bank to Company in writing at least thirty (30) days prior to the proposed change becoming effective (or such shorter time as may be required by a Regulatory Authority) by Bank delivering to Company a written notice of change that includes (i) a summary of the changes to the Program Documentation and the date when such changes are proposed to go into effect and (ii) the reason for the changes. Company may object to such changes if Company determines that Bank’s proposed changes violate Applicable Law or that such changes will have a significant adverse economic impact on Company (each a “Permissible Reason”). If Company objects to the proposed changes, Company must notify Bank by providing a written notice of objection within ten (10) Business Days of Company’s receipt of Bank’s written notice of change. Company’s written notice of objection must state the Permissible Reason for the objection and include written support for its determination. Following Bank’s receipt of Company’s notice of objection, the Parties shall use commercially reasonable efforts to work together to develop mutually acceptable changes that will satisfy Company’s objections. If the Parties are unable to develop mutually acceptable changes to the Program Documentation, either Party may terminate the Program to which the proposed changes relate pursuant to Section 8.3 of this Agreement. If for any reason, Company fails to respond to Bank with a notice of objection within the required time frame, such changes to the Program Documentation shall be deemed approved.

Section 3.3 Designated Contact.

Bank agrees to designate a program manager who shall serve as the primary contact for Company regarding the Programs, and to provide such other technical and operational support as Company may reasonably request to implement and manage the operation of the Programs.

Section 3.4 Customer Service.

(a) Cardholder Support. Bank shall perform all customer service functions with respect to the Programs. Each Card (and any Cardholder communication relating thereto) shall identify a toll-free telephone number and Internet website address through which Cardholders may obtain information and make inquiries regarding the Cards and Credit Products. Specifically, during the Term, Bank shall (i) maintain a toll free telephone number with Interactive Voice Response (“IVR”) service (in English and, except in the case of the iAdvance Credit Product, Spanish) and Internet websites for Cardholders to check available balances, transactions, or request a new PIN, or request Credit Disbursements (if applicable), which service shall be available 24 hours per day, seven days per week; and (ii) provide live operator customer service (in English and, except in the case of the iAdvance Credit Product, Spanish) for the Card Programs through the IVR service Monday through Friday 7 a.m. – 1 a.m., Saturday and Sunday 8 a.m. – 8 p.m. (with the exception of holidays and in all cases, Eastern time) and, with respect to any Credit Product, at such times as the parties shall mutually agree upon. Bank shall service all inquiries and matters relating to the Cards and Credit Products in a prompt and professional manner in accordance with industry standards of practice, and in compliance with Applicable Law. Without limiting the foregoing, Bank shall use commercially reasonable efforts to respond to Cardholder inquiries in accordance with the service level agreements (“SLAs”) established between Bank and the Card Processor or Credit Processor, which SLAs are attached hereto as Exhibit B. Bank shall send an updated copy of such SLAs to Company upon any revision of such SLAs. At all other times, Bank shall provide customer service levels that are customary for debit card providers based on the call forecasting provided by Bank to Company. Notwithstanding anything in this Agreement to the contrary, if the actual call volumes for the Card Programs or the iPower Plus Line of Credit Program at any time exceed the call volumes forecasted by Company by more than ten percent (10%) on a daily basis, to the extent such increase is not substantially caused by Bank, the Card Processor or a Credit Processor, the SLAs contained in Exhibit B pertaining to call center support with respect to the Program(s) shall not apply for any daily calls if actual daily call volume exceeds forecasted daily call volume by more than ten percent (10%). However, in such event or if (i) the specific SLAs set forth in Section 3(d) of Exhibit B are not met, or (ii) the queue size of the number of Cardholders on hold waiting for customer service for more than fifteen minutes is in excess of ten (10), Bank shall be required to perform the steps outlined set forth on Exhibit C to mitigate the impact of the excess call volume on customer support. Bank shall provide appropriate reports to confirm Bank’s compliance with the SLAs and other performance requirements outlined in Exhibit B.

(b) Operator Support. During the Term, maintain a toll free telephone number (separate from the telephone number established and maintained by Bank pursuant to Section 3.5(a)), with live operator customer service (in English and, except in the case of the iAdvance Credit Product, Spanish) for Operators to obtain information and make inquiries regarding the Programs, including the Cards, Credit Products, Processing Services and the terms and conditions set forth in the Cardholder Agreement and Credit Documents, which service shall be available (i) Monday through Friday 7 a.m. – 1 a.m., Saturday and Sunday 8 a.m. – 8 p.m. (with the exception of holidays and in all cases, Eastern time) and (ii) during

Confidential 6

Execution Version

all times during the Term, Monday through Friday 9 a.m. – 5 p.m. to provide such information and to handle such inquiries (with the exception of holidays and for each U.S. time zone). Bank shall service all inquiries of the Operators in a prompt and professional manner in accordance with industry standards of practice, and in compliance with Applicable Law. At all other times, Bank shall provide customer service levels that are customary for debit card providers and shall require that all customer service representatives are sufficiently familiar with all aspects of the Programs.

(c) Call Referrals. Company shall refer all Cardholder inquiries regarding the Programs, Card Services, or Credit Services to the toll-free phone number provided to it by Bank. Bank shall refer all inquiries regarding the status of any Cardholder’s Tax Refund or Tax Related Financial Product and all other inquiries that are unrelated to the Programs, Card Services, or Credit Services to Company’s customer service call center or to the relevant Provider call center, as applicable. Bank shall handle all inquiries or disputes relating to the Programs, Card Services or Credit Services, and Company shall handle all Cardholder inquiries or disputes relating to Company’s and its Providers’ products and services, in each case, in compliance with Applicable Law.

Section 3.5 Memberships in System.

Bank shall obtain and maintain its membership in each System and maintain all related licensing rights (“Membership”) at its sole expense, and shall timely pay all fees, dues, and assessments associated therewith. If a System elects to terminate Bank’s Membership for any reason, Bank shall give notice to Company promptly after it receives notice from such System.

Section 3.6 Program Services.

Bank shall be solely responsible for the production of all Card Packets, including, without limitation, all expenses related thereto, except as otherwise provided in this Agreement. The Cardholder Agreement shall identify Bank as the issuer of the Cards and holder of all Cardholder Funds.

Section 3.7 Bank Enhancements.

If during the Term Bank develops new features or functionality related to tax preparation services provided by Company or its Operators to Customers (“Bank Enhancements”), Bank will offer Bank Enhancements to Company prior to offering them to a Company Competitor. Bank Enhancements do not include features under development by Bank prior to the Effective Date of this Agreement that have been communicated to the market or otherwise disclosed to the Company, including such products as network messaging or any other feature that Bank develops at the request of any of Bank’s customers. As used herein “Company Competitor” means any business directly or indirectly engaged in the preparation of individual income tax returns, including, but not limited to, tax preparation services, aggregators and businesses engaged in the development of computer software used for the purpose of preparing individual income tax returns.

Section 3.8 New Features.

Bank agrees that for any new feature or functionality that Company designs and offers solely to Bank, Bank will not make any of these features or functionalities available to Company’s competitors. Notwithstanding the foregoing, should a Company competitor, without any support or assistance from Bank, create a similar feature, Bank shall have the right to support and deliver such feature, but only to the extent that it can do so without violating its obligations under this Agreement.

Section 3.9 Subcontractors.

Upon Company’s prior written consent, not to be unreasonably withheld by Company, Bank may contract with one or more Persons to perform services that enable Bank to perform its obligations under this Agreement, the Cardholder Agreement, or any Credit Agreement. Bank agrees that any Person with which it subcontracts shall be bound by the applicable obligations and representations and warranties and to the service levels described herein and that subcontracting shall not result in any degradation of the Processing Services. Notwithstanding anything to the contrary in any such subcontract, Bank shall retain full responsibility for any acts or omissions of any such subcontractor.

Section 3.10 Card Loads.

Bank covenants that 99% of all Loads requested by or for a Cardholder and Credit Disbursements requested by or for a Cardholder with respect to the iPower Plus Line of Credit Program shall be available for such Cardholder’s use within one hour of Bank’s receipt of a Cardholder’s Funds Transfer Information.

Confidential 7

Execution Version

Section 3.11 Pay Compensation.

Bank shall pay as and when due the compensation to which Company is entitled, as set forth in Exhibit A to this Agreement.

Section 3.12 Communications with Governmental Authorities.

Unless otherwise prohibited by Applicable Law or a Regulatory Authority, Bank shall promptly notify Company of any communications from or with a Regulatory Authority or any official thereof, including without limitation any member of Congress, official of the executive branch of the United States Government, state legislator, or federal or state agency with respect to a Program and promptly provide Company with a summary of any written or verbal correspondence or communications with or from any of the above parties, to the extent such correspondence or communications (a) negatively impact the continuation of the Program; (b) contain criticisms regarding operation of the Program; or (c) provide guidance to make changes to any aspect of the Program.

ARTICLE IV - DUTIES OF COMPANY

Section 4.1 General.

During the Term, Company shall:

(a) subject to the terms of this Agreement and Applicable Law, (i) distribute Cards and Credit Documents to Operators, as mutually agreed to ensure agreed upon delivery deadlines, (ii) provide Operators with the tools necessary to prepare and electronically transmit Customer tax returns to the Internal Revenue Service and applicable state taxing authorities, and (iii) facilitate the offer and sale of Tax Related Financial Products;

(b) for applicable Programs, require Operators to (i) verify the identity of Applicants who apply for a Card or Credit Product in accordance with Company’s standard authentication policies and procedures, which shall be of the same quality as Bank’s policies and procedures, (ii) distribute a Card Packet to Applicants who are approved for a Card, (iii) distribute a Credit Agreement to Applicants who are approved for a Credit Product in accordance with Applicable Law;

(c) subject to Applicable Law, exercise due care to accurately provide or require Operators to accurately provide Applicant’s personal data that may be required to participate in a Program, such as name, address, social security number, home phone number, and any other information Bank reasonably requests in connection with the issuance of Cards and providing of Credit Products to Applicants (“Enrollment Information”) to Bank (or its permitted designee) on the same day as the Enrollment Information becomes available to Company or its Operators, in such format and through such means or media as Bank and Company shall mutually agree;

(d) require its Operators to ensure that all applications for Cards and any applications, acknowledgement or consents related to the Credit Products are properly executed by the Applicant and, if applicable, the joint filer pursuant to Applicable Law;

(e) provide, or arrange for the provision of, Funds Transfer Information to Bank (or its permitted designee), on the same day as the such information becomes available to Company or its Operators, in such format and through such means or media as Bank and Company shall mutually agree;

(f) own or otherwise hold valid rights to use its Marks that are used in connection with a Program;

(g) provide reasonable efforts to act as the liaison between Bank and any Provider;

(h) maintain, and require Operators to maintain, in full force and effect, all licenses, permits and other governmental authorizations required of Company or an Operator to perform Company’s obligations under this Agreement or to provide any tax planning or budgeting services in conjunction with the Programs provided under this Agreement;

(i) comply with all the provisions of this Agreement, as the same may hereafter be amended in accordance with the terms of this Agreement, and Applicable Law in connection with the conduct of its business and its participation in a Program;

(j) promptly give written notice to Bank of any material adverse change in its business, properties, assets, operations or condition, financial or otherwise, and any pending or threatened litigation involving a Program, Tax Related Financial Product, or any other services or products provided by Company in connection with any of the Programs;

Confidential 8

Execution Version

(k) maintain and protect, and require its Operators maintain and protect, the confidentiality of Customer Information furnished to Company or its Operators by (or on behalf of) Bank or Cardholders;

(l) comply with Company’s privacy policy;

(m) provide to Bank such documentation and information that Bank may reasonably request to confirm Company’s compliance with its obligations under this Agreement;

(n) participate, and allow Cardholders to participate in, certain agreed upon Visa promotions and advertise or communicate, and require its participating Operators to advertise and communicate, such promotions to Cardholders to the extent Visa provides materials and support as agreed for each promotion;

(o) require each Operator who desires to participate in the Card Programs to execute a Card Program Franchisee Agreement with Bank prior to providing, marketing or otherwise participating in the Card Programs; provided, however, that each Operator’s participation in the Card Programs shall be subject to Bank’s approval in its sole discretion;

(p) require each Operator who desires to participate in the iPower Plus Line of Credit Program to execute an addendum to the Card Program Franchisee Agreement with Bank prior to providing, marketing or otherwise participating in such Credit Product Program; provided, however, that each Operator’s participation in the iPower Plus Line of Credit Program shall be subject to Bank’s approval in its sole discretion;

(q) actively market, and require its Operators actively market, Company’s tax planning and budget planning services to the general public on a stand-alone basis;

(r) require its Operators to maintain possession of all executed Card applications and Credit Product acknowledgments, applications and consents for a period of five years from the date of execution (or deliver the same to Bank, if so requested by Bank, at Bank’s cost and expense);

(s) requires its Operators to maintain hard copies or have access to electronic copies of any other Card Deliverables or Credit Documents that the Parties mutually agree to retain.

(t) ensure that Company complies with Applicable Law in conducting the following marketing activities in connection with the Programs: any pre-approved, telemarketing, e-mail, and SMS texting campaigns.

Section 4.2 Designated Contact.

Company shall designate a senior employee who shall serve as the primary contact for Bank with respect to the Programs, and to provide such other technical and operational support as Bank may reasonably request to implement and manage the operation of all Programs.

Section 4.3 Security Approval Form.

Company shall require each Operator to complete any security approval form required by each System (the “Security Form”) in respect of such Operator’s location(s). Company shall distribute, collect and retain (for at least one year following the date of collection) the Security Forms to be provided to Bank upon Bank’s request. Company shall not distribute Cards to any Operator or location that fails to complete a Security Form.

Section 4.4 Customer Service Support.

Company shall use commercially reasonable efforts to assist Bank in addressing Cardholder issues, as requested by Bank from time to time.

Section 4.5 Unused Cards.

Company shall require each Operator to destroy any unused non-personalized Cards within 40 Business Days after the end of each Tax Season (excluding the Pre Tax Season) or within such other periods as mutually agreed upon by the Parties, at Company’s expense. Company shall certify such destruction on a form to be provided by Bank.

Confidential 9

Execution Version

Section 4.6 Redistribution of Program Inventory.

To the extent certain Operators are in possession of excess Program Inventory and other Operators are in short supply of Program Inventory, prior to Company requesting Bank to ship additional Program Inventory, Company shall first use commercially reasonable efforts to ensure that any excess Program Inventory already in possession of Company or its Operators is redistributed to Operators who are in short supply of such Program Inventory, at Company’s expense.

Section 4.7 Operators.

Company shall deliver instructions to Operators and Providers as required under this Agreement and shall use commercially reasonable efforts to ensure that Operators comply with all such instructions, including, but not limited to, audit procedures to assess each participating Operator’s conformance to Company policies and procedures related to the Programs. Bank may cease providing the Card Programs or Credit Products described herein at any Operator location where compliance with Applicable Law or the requirements set forth in this Agreement have been found to be deficient by Bank or Company.

Section 4.8 System Integration.

Company and Operators will interface with Bank or its Card Processor and Credit Processor(s) via an integration method to be mutually agreed by the Parties, and at Company’s sole cost. Company shall establish such additional connections as reasonably requested by Bank at Company’s expense.

Section 4.9 Communications with Governmental Authorities.

Without first obtaining the express written consent of Bank, Company will not communicate with, respond to inquiries from, or lobby any Regulatory Authority or any official thereof, including without limitation any member of Congress, official of the executive branch of the United States Government, state legislator, or federal or state agency with respect to any matter which might, in any way, affect any Program. The foregoing restriction shall not prevent either Party from responding to any inquiries if: (a) the nature and timing of the inquiry does not reasonably allow for prior input and approval from the other Party, (b) the information being disclosed in such communication is already in the public domain or agreed-upon by the Parties in advance as talking points, or (c) the communication is in response to a request during the course of an earnings call or other public disclosure required under applicable securities laws, rules and regulations. Further, Company shall promptly notify Bank of any such inquiries with respect to a Program and promptly provide Bank with copies of any correspondence received pursuant to this Section 4.9, unless otherwise prohibited by law. For the purpose of clarity, this Agreement shall not restrict Company from engaging in Governmental Communications regarding Company services or products not otherwise pertaining to a Program.

Section 4.10 Marketing of Programs and Use of Training Materials.

(a) Program Promotion. Company shall use commercially reasonable efforts to (i) actively promote the Programs to Operators and prospective Cardholders and (ii) require participating Operators to actively promote the Programs to Customers, including requiring participating Operators to advertise the Programs to Customers through any means that Company, at its sole discretion, shall deem appropriate, including making available, in Company locations, a sales/information brochure to Customers. Notwithstanding the foregoing, Bank understands and agrees that Company makes no representation or warranty concerning participation in the Programs by any Operator, Customer, Employee or other Person.

(b) Company’s Production of Marketing Materials. Company shall create and produce Marketing Materials for each of the Programs of a character, quality and quantity in its sole discretion.

(c) Bank’s Approval of Company’s Marketing Materials and Training Materials. Any and all Marketing Materials and training materials produced by Company shall be subject to Bank’s prior approval, which shall not be unreasonably withheld. Bank shall (i) complete its review of any Marketing Materials and training materials submitted to it, and use commercially reasonable efforts to obtain any approvals required by the Systems, if applicable, within five (5) Business Days following such submission; (ii) ensure that the Marketing Materials comply with Applicable Law, and furnish to Company for inclusion with such Marketing Materials all notices and disclosures regarding Card Services or Credit Services that are required by Applicable Law; and (iii) be responsible for the accuracy of the content of the Marketing Materials relating to its own services and performance obligations. Notwithstanding the foregoing, Company and not Bank shall be solely responsible for ensuring that Marketing Materials comply with Applicable Law insofar as they pertain to any Tax Related Financial Product or Company’s tax planning or budget planning services.

Confidential 10

Execution Version

(d) Bank’s Production of Marketing Materials; Company’s Approval of Bank’s Marketing Materials. Bank agrees that Company may, in its sole discretion, provide Cardholders with promotional offers related to the services provided by Operators. Bank further agrees that any marketing or promotional materials that Bank wishes to distribute to prospective Applicants, Cardholders, or Customers regarding the Card Programs or Credit Programs or any of Bank’s current or future products to be provided by Company shall be subject to Company’s prior review and approval, which shall not be unreasonably withheld. Any such materials which Company approves shall be produced and distributed by Bank at Bank’s sole expense, unless otherwise mutually agreed upon by the Parties.

Section 4.11 Reimbursement of Termination and Performance Fees.

Prior to each Tax Season, Company will provide Bank with certain projections so that Bank may enter into or modify its contract with (a) a Card Processor for the provision of Processing Services, and (b) a Credit Processor for provision of iPower Plus Line of Credit Program. If at the end of a Contract Year it is determined that the projections such Contract Year have not been met due to the following events (i) Company notifies Bank of its decision not to offer the Card Programs and/or the iPower Plus Line of Credit Program, (ii) Company delays the start of the Card Programs and/or the iPower Plus Line of Credit Program, or (iii) less than a majority of Operators execute the Card Program Franchise Agreement with Bank and the addendum to the Card Program Franchise Agreement with Bank, then Company shall reimburse Bank for any termination fees or minimum volume fees payable by Bank to the Card Processor of the Card Programs and/or the Credit Processors of the iPower Plus Line of Credit Program. Notwithstanding anything in this Agreement to the contrary, if the actual call volume for the iPower Plus Line of Credit Program is not sufficient to generate at least seventy-five percent (75%) of the call volume projected jointly by Company and Bank, Company shall reimburse Bank for any minimum volume fees payable by Bank [ to the Card Processor of the Card Programs and/or the Credit Processors of the iPower Plus Line of Credit Program, provided, however, that Company shall not be liable for such reimbursement if the decrease in projections was proximately caused by Bank, the Card Processor or a Credit Processor.

Section 4.12 [*]

Section 4.13 Cardholder Complaints

(a) Company further agrees that it shall use commercially reasonable efforts to promptly notify the Bank of the following complaints received from Cardholders or any third party to the extent that such complaints have been brought to the attention of the Company at its national headquarters:

(i) any written complaints relating to the Card Program.

(ii) any written or verbal complaints relating to the Credit Product Program.

(b) Upon receipt of each such complaint by Company, the parties shall discuss and mutually determine if the complaint warrants a response, the general substance of any required response and who shall be responsible for responding to such complaint, subject to Bank’s final approval, which approval shall not be unreasonably withheld or delayed.

(c) Nothing herein shall prevent Company from immediately responding to any complaint that relates to the preparation of income tax returns or the provision of any related products and services that are not offered by Bank. Furthermore, Bank acknowledges and agrees that Company shall not be responsible for notifying Bank of any complaint that an Operator may have received from a Cardholder or any third party but which was not communicated by such Operator to Company.

Section 4.14 Insurance.

Each party shall maintain, at its sole expense and with a financially sound and reputable insurer acceptable to Bank, (a) an errors and omissions policy and a general comprehensive liability policy insuring Company for not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate; (b) a comprehensive crime policy, including employee dishonesty/fidelity, insuring Company for not less than Two Million Dollars ($2,000,000) per occurrence and Five Million Dollars ($5,000,000) in the aggregate; and (c) a data security policy insuring Company for not less than One Million Dollars ($1,000,000) per occurrence and One and One-Half Million Dollars ($1,500,000) in the aggregate. Each party shall provide to the other party hereto, on the date hereof and from time to time thereafter upon

Confidential 11

Execution Version

any change in or renewal of such policies, copies of the certificates of insurance evidencing such policies. Neither party shall take any action to cancel or terminate any of such policies unless a substantially similar policy is in effect providing the same coverage. Each party shall instruct its insurance carrier to notify the other party concurrently with the delivery of any notice regarding the renewal, termination, or cancellation by the issuer of any of such policies.

ARTICLE V - REPRESENTATIONS AND WARRANTIES

Section 5.1 Mutual Representations and Warranties.

Company and Bank represent and warrant to each other that as of the date of the Original Agreement and the date hereof (i) this Agreement is valid, binding and enforceable against each Party in accordance with its terms; (ii) each Party is duly incorporated, validly existing and in good standing under the laws of the state of its incorporation (with respect to Company) and Federal law (with respect to Bank); (iii) each Party, and in the case of the Company, its Operators, are authorized to do business in each state in which the nature of each party’s activities makes such authorization necessary; and (iv) each Party has the full power and authority to execute and deliver this Agreement and to perform all its obligations and the performance does not conflict with Company’s or Bank’s Articles of Incorporation, bylaws or any other agreement, contract, lease or obligation to which Company or Bank is a party or by which it is bound.

Section 5.2 Representations and Warranties of Company.

Company represents and warrants to Bank that as of the date of the Original Agreement and the date hereof:

(a) the Marketing Materials and any other materials and supplies, to the extent created by or at the direction of Company or its Operators, subsidiaries, affiliates or contractors, or to the extent they contain content relating to the Company’s products, services and performance obligations, shall comply with Applicable Law;

(b) all processing systems, software and hardware, and policies or procedures used by Company and all rules and protocols covering Company’s Operators, employees, agents, and independent contractors providing the services hereunder, contain commercially reasonable protections and security enhancements, and provide commercially reasonable safeguards and system protections, consistent with industry standards, to prevent hacking, viruses, security breaches, identity theft, fraud and loss of data, and to prevent any breach of Article IX, the Gramm-Leach-Bliley Act and the applicable regulations promulgated thereunder;

(c) all tax planning and budgeting services provided by Company in conjunction or association with any Program under this Agreement shall comply with Applicable Law;

(d) unless disclosed publicly otherwise by Company, there is not pending or threatened against Company or any of its Operators, to the extent known by Company, any litigation or proceeding, judicial, tax or administrative, the outcome of which might materially adversely affect the continuing operations of Company or its ability to perform its obligations under this Agreement; and

(e) as of the date of execution of this Agreement, no notice is required by the Company to the Bank under Section 4.12.

Section 5.3 Representations and Warranties of Bank.

Bank represents and warrants to Company that as of the date of the Original Agreement and the date hereof:

(a) it has the financial capacity to make and shall make the full amount of Cardholder Funds (as set forth in the Funds Transfer Information) accessible to Cardholders at the times and in the manner required by the terms of this Agreement;

(b) it has sufficient funds available at all times to pay, or cause the payment of all Credit Product disbursements authorized for disbursement;

(c) any Card Processor or Credit Processor selected by Bank shall have the same or better service standards as Bank’s current Card Processor and Credit Processor(s);

(d) any Cardholder Agreement or Credit Agreement shall be legally binding as to, and shall be honored by, Bank unless deemed invalid, fraudulent or prohibited by Applicable Law; and

(e) all processing systems, software and hardware, and policies or procedures used by Bank and all rules and protocols covering Bank’s employees, agents, and independent contractors providing the services hereunder, contain

Confidential 12

Execution Version

commercially reasonable protections and security enhancements, and provide commercially reasonable safeguards and system protections, consistent with industry standards, to prevent hacking, viruses, security breaches, identity theft, fraud and loss of data, and to prevent any breach of Article IX, the Gramm-Leach-Bliley Act and the applicable regulations promulgated thereunder.

(f) all Programs, and Bank services provided hereunder, including, but not limited to, Processing Services, Card Services, Credit Services, Credit Products, shall comply with Applicable Law.

(g) none of the Credit Products provided by Bank pursuant to this Agreement constitute a refund anticipation loan.

(h) it owns, or has the right to use, all Intellectual Property necessary to provide the iAdvance Credit Product Program described in Exhibit A-3.

ARTICLE VI - EXPENSES

Section 6.1 Expenses of Bank.

Bank shall pay any fees and penalties assessed by any System or Regulatory Authority due to Bank’s actions or the actions of any Person retained by Bank. Except as otherwise specifically set forth herein, Bank shall be responsible for all operational costs and expenses of the Programs including, without limitation, the costs of Processing Services and Card and Program production, together with the costs of printing the Credit Documents associated with the iPower Plus Line of Credit Product, subject to Section 6.3.

Section 6.2 Expenses of Company.

Company shall be solely responsible for the following: (i) advertising and other expenses associated with the marketing of the Programs to its Customers, Employees or other Persons; (ii) if applicable, Company’s internal costs for the design of Card plastics or other custom Marketing Materials that have design changes from the standard plastics provided by Bank in the Card Programs; and (iii) any Western Union Money Transfer fees for contingency funding associated with implementing Bank’s disaster recovery plan in connection with the iPower Plus Line of Credit Program, to the extent the interruption is caused by Company.

Section 6.3 Costs of Program Inventory. Prior to each Tax Season, the Parties shall cooperate in good faith to determine the volume of Program Inventory necessary to ensure that Operators remain in sufficient supply of such inventory during each Tax Season. If Company in good faith determines that the volume of Program Inventory necessary for the upcoming Tax Season is greater than the volume Bank has determined in good faith to be necessary for the upcoming Tax Season, Bank shall supply Company with the volume of Program Inventory requested by Company Notwithstanding anything to the contrary in this Section 6.3, Company shall promptly reimburse Bank for any unused Program Inventory exceeding twenty-five percent (25%) of the difference between the volume actually requested by Company and the volume Bank determined was necessary for such Tax Season.

ARTICLE VII - LIMITATION OF LIABILITY

Section 7.1 No Special Damages.

Neither Party shall be liable to the other for any special, indirect, incidental, consequential, punitive or exemplary damages, even if such Party has knowledge of the possibility of such damages. The limitation of liability provided under this Section 7.1 shall not apply with respect to either Party’s violations of the confidentiality provisions of Article IX and indemnity obligations under Section 13.1.

Section 7.2 Disclaimers of Warranties.

Except as expressly set forth in this Agreement, each Party specifically disclaims all warranties of any kind, express or implied, arising out of or related to this Agreement, including without limitation, any warranty of marketability or fitness for a particular purpose, each of which is hereby excluded by agreement of the Parties.

Confidential 13

Execution Version

ARTICLE VIII - TERM AND TERMINATION

Section 8.1 Term.

The term of this Agreement shall start on the Effective Date, and shall continue from the Effective Date through October 31, 2011 (“Term”).

Section 8.2 Termination of Agreement for Cause.

This Agreement may be terminated upon the occurrence of any of the following events:

(a) By mutual written agreement of the Parties within a mutually agreeable time period.

(b) By either Party if the other Party fails to materially perform that Party’s obligations hereunder, but only if the non-performing Party fails to cure such breach within 30 days (5 days during Tax Season) after the non-performing Party receives written notice specifying the failure. If the failure involves a failure to pay, the right to terminate will accrue if the failure is not remedied within 10 days after the non-performing Party receives written notice hereunder.

(c) If there is a change in Applicable Law or an order from a Regulatory Authority that prohibits or materially impairs a Party’s ability to perform its obligations under this Agreement (“Adverse Change”), the Parties will meet within 14 days of the affected Party’s written request to consider changes to this Agreement and/or administration of the Program(s) to address such Adverse Change. If the Parties are unable to agree to such changes within 30 days of the date of the original notice, then the affected Party may terminate this Agreement by providing written notice to the other Party.

(d) [*]

Section 8.3 Termination of Program for Cause.

A Program may be terminated upon the occurrence of any of the following events:

(a) By mutual written agreement of the Parties within a mutually agreeable time period.

(b) By either Party if the other Party fails to materially perform that Party’s obligations hereunder, but only if the non-performing Party fails to cure such breach within 30 days (5 days during Tax Season) after the non-performing Party receives written notice specifying the failure. If the failure involves a failure to pay, the right to terminate will accrue if the failure is not remedied within 10 days after the non-performing Party receives written notice hereunder.

(c) If there is a change in Applicable Law or an order from a Regulatory Authority that prohibits or materially impairs a Party’s ability to sell, collect funds, operate or provide a Program as contemplated by this Agreement, the Parties will meet within 14 days of the affected Party’s written request to consider changes to the administration of the Program to address such Adverse Change. If the Parties are unable to agree to such changes within 30 days of the date of the original notice, then the affected Party may terminate the Program by providing written notice to the other Party.

(d) Immediately by either Party upon delivery to the non-terminating Party of a termination notice if a Regulatory Authority orders Bank to cease providing a Program.

(e) Immediately by either Party if the Parties are unable to develop mutually acceptable changes to Program Documentation pursuant to Section 3.2(b)(ii).

(f) With respect to the iAdvance Credit Program, by Company in the event Company can demonstrate that any modifications proposed by Bank with respect to such Program would violate Applicable Law, reflect poorly on the goodwill of the Company or would be materially harmful to the interests of the Company or its Customers; .

(g) [*]

(h) [*]

Section 8.4 Effect of Termination.

In the event the Card Programs are terminated, the Credit Programs shall automatically terminate. Upon the termination or expiration of this Agreement or a Program for any reason, the Parties agree to cooperate in good faith to perform the following: (i) Company shall immediately cease, and use commercially reasonably efforts to ensure that its Operators cease, all Card and/or Credit Product sales, to the extent applicable; (ii) pursuant to the terms of this Agreement, Bank shall continue to provide Processing Services, and to pay [*], with respect to all Cards and Credit Products processed as

Confidential 14

Execution Version

of the date of termination until all Cards issued hereunder shall have expired or been cancelled in accordance with their terms or the Cardholder Funds associated therewith have been exhausted; and (iii) cooperate in order to ensure a smooth and orderly termination of their relationship, an orderly wind-down of the administration of the Programs and to preserve the goodwill of Cardholders. Upon such termination or expiration, all rights and licenses granted by either Party to the other Party shall immediately revert and be fully vested in the granting Party, as applicable. In such event, each Party shall cease using the other Party’s Intellectual Property; provided, however, that all outstanding Cards shall remain in full force and effect and continue to be honored until they have expired or been cancelled in accordance with their terms or the Cardholder Funds associated therewith shall have been exhausted. Subject to the foregoing, each Party shall dispose of materials containing the other Party’s name and Intellectual Property within 60 Business Days following the effective date of such termination or expiration at its expense. Each Party shall certify such destruction on a form to be provided by the other Party.

Section 8.5 Survival.

In addition to any payment obligations arising prior to the termination or expiration of this Agreement, the following provisions shall survive and continue in accordance with their terms: Article V, Article VII, Article VIII, Article IX, Article XI, Article XII and Article XIII.

ARTICLE IX - CONFIDENTIALITY

Section 9.1 Confidential Information.

The term “Confidential Information” means this Agreement and all proprietary information, data, trade secrets, business information and other information of any kind whatsoever which (i) a Party (“Discloser”) discloses, in writing, orally or visually, to the other Party (“Recipient”) or to which Recipient or its employees or agents obtain access to in connection with the negotiation and performance of this Agreement, and which (ii) relates to (A) the Discloser and its employees, customers and/or associates, or (B) Applicants and Cardholders who have made confidential or proprietary information available to Company or Bank, or either Party’s employees or agents. The definition of Confidential Information shall include Customer Information as defined in Section 9.3. Confidential Information does not include any information which a Party rightfully has in its possession, information which a Party independently develops without violating the terms herein, information which is or becomes known to the public other than by breach of this Section, and information rightfully received by a Party from any Person without the obligation of confidentiality.

Section 9.2 Protection of Confidential Information.

Recipient shall not disclose any Confidential Information to any Person without the prior written consent of Discloser and Recipient shall safeguard all Confidential Information with at least the same degree of care to avoid disclosure as Recipient uses to protect its own proprietary and confidential information, which, in any event, shall be no less than reasonable care. Recipient shall not utilize any Confidential Information for any purpose whatsoever other than for the purpose of performing its obligations under this Agreement. Recipient shall disclose the Confidential Information only to those of its employees and agents who need-to-know the same for the purpose of performing this Agreement and shall advise such employees and agents of the restrictions set forth with respect to the use of such Confidential Information. Recipient shall be responsible and liable for the unauthorized disclosure of any Confidential Information by its employees and agents. Unless otherwise prohibited by law, Recipient shall (i) promptly notify Discloser of any legal order, or any request for a legal order, to disclose Confidential Information and (ii) cooperate with Discloser’s efforts to prevent or limit such disclosure.

Section 9.3 Compliance with the Gramm-Leach-Bliley Act.

(a) The purpose of this section is to ensure that this Agreement conforms to the applicable provisions of the Gramm-Leach-Bliley Act (the “Act”). Company acknowledges and agrees that “Non Public Personal Information” and “Personally Identifiable Financial Information” (as defined in Sections 573.3(n) and (o) respectively of the Office of Thrift Supervision Regulations on Privacy of Consumer Information published at 12 CFR Chapter V) about Bank’s customers and Cardholders shall be considered as confidential and proprietary information of Bank, and shall not be disclosed to or shared with any Person without prior written consent of Bank. Non Public Personal Information and Personally Identifiable Financial Information are sometimes collectively called “Customer Information”. Company agrees to implement and maintain appropriate measures designed to meet the objectives of the guidelines establishing standards for safeguarding of Customer Information as adopted from time to time by the Office of Thrift Supervision. Except as provided in, and subject to the limitations stated herein, neither Party will compile, sell or otherwise distribute any lists of Bank’s

Confidential 15

Execution Version

customers/Cardholders for use by any third parties. Each Party will instruct its employees, agents and contractors (including the Card Processor, Credit Processor(s), Operators and Providers) as to the confidentiality of the Customer Information and will not disclose any such Customer Information to any Person. Each Party also agrees that any internal dissemination of Customer Information and any dissemination to agents and contractors shall be restricted to “a need to know basis” for the purpose of performance hereunder. Each Party shall protect all Customer Information from disclosure with no less than the same degree of care afforded by such Party to protect its own Confidential Information. The foregoing restrictions on disclosure of Customer Information shall apply for so long as is required under Applicable Law.

(b) Each Party warrants, agrees and represents to the other that it (and/or its processor) if applicable, will implement a security program including measures designed to be in compliance with Payment Card Industry (“PCI”) Standards and the Interagency Guidelines Establishing Standards for Safeguarding Customer Information (collectively, the “Guidelines”). Each Party warrants and agrees compliance with the Guidelines will be complete, and will provide the other Party with a certificate of compliance within 120 days of the execution date of this Agreement. Each Party has the right to make reasonable requests to inspect, during normal business hours and upon 30 days advance written notice, the other Party’s program, associated audit reports, summaries of test results or equivalent measures taken by such other Party or its agents to ensure that its security measures meet the objectives of the Guidelines in accordance with the Rules and this Agreement.

(c) In carrying out the above-described obligations to secure and protect their respective Customer Information, each Party agrees that it will protect the other Party’s Customer Information and will require any of its service providers or subcontractors to protect and safeguard the other Party’s Customer Information to the same degree required of such Party for its own Customer Information.

(d) Company agrees that in the event there is a breach of security resulting in unauthorized disclosure of Bank’s Confidential Information, Company will promptly notify Bank of such breach, the nature of such breach, and the corrective action taken to respond to the breach.

ARTICLE X - NON-SOLICITATION.

Section 10.1 Bank’s Non-Solicitation.

Bank agrees that during the Term, Bank will not knowingly, without Company’s prior written approval, directly solicit or attempt to solicit any Cardholders, Customers, or Employees for any product or service provided by Bank (“Bank Products”) except as provided herein. Following the Term, Bank will not use information gained solely from Company to market Bank Products to Cardholders, Customers, or Employees; provided, however, that Bank may continue to contact Cardholders, Customers, and Employees and other Persons to market the Programs. Bank may not market to a Customer or Employee who applied, but did not receive, a Card or Credit Product from the Bank. Bank shall never offer to a Cardholder, Customers, or Employees any other tax preparation service.

Section 10.2 [*]

ARTICLE XI - PROPRIETARY RIGHTS AND TRADEMARKS.

Section 11.1 Access to Marks.

During the Term, each Party hereby grants to the other Party a nonexclusive, nontransferable, non-sublicensable, royalty-free right to include the Marks designated by the granting Party in any approved advertising, promotional literature, documentation and other Marketing Materials related to the Programs and marketing efforts under this Agreement. A Party’s use of the other Party’s Marks in any such advertisement, promotional literature, documentation and other Marketing Materials will be subject to the granting Party’s prior review and approval, such approval not to be unreasonably withheld or delayed.

Section 11.2 Restrictions.

Company and Bank each own all right, title and interest in and to their respective Marks, along with all related intellectual property rights and associated goodwill. A Party will comply with the guidelines and procedures established by the other Party with respect to its use of such Party’s Marks and will otherwise cooperate and agree upon the details of such identification. A Party will not modify or alter the other Party’s Marks and will include an appropriate trademark notice (e.g., ^™ or ®, as the case may be) with each use of any of such Marks. Neither Party will adopt brands, logos, trademarks, trade name or other marks which are the same as or confusingly similar to the Marks of the other Party. In

Confidential 16

Execution Version

no event and under no circumstances shall a Party use the other Party’s Marks in any manner that is derogatory, negative, likely to confuse any Person as to source of goods or services, or otherwise injurious to the other Party, as determined by the other Party in its sole discretion. Upon expiration or earlier termination of this Agreement, each Party will immediately cease all display, advertising and use of all Marks of the other Party.

Section 11.3 Reservation of Rights.

No right, title or interest in, to or under any existing copyright, patent, trademark or, trade secret (collectively, the “Existing Proprietary Rights”) of any Party are created or assigned or otherwise transferred to the other Party pursuant to this Agreement. Nothing in this Agreement constitutes a work for hire agreement, and nothing in this Agreement constitutes an agreement by a Party to assign or otherwise convey title to any Existing Proprietary Rights to the other Party. Each Party will retain full ownership of and title to all equipment, materials, hardware and other items provided by such Party in connection with the Programs.

Section 11.4 Press Releases and Public Statements.

Neither Party shall issue any press release (or make any other public announcement or respond to any interview request) related to this Agreement, the Programs, or the transactions contemplated hereby without the prior written approval of the other Party hereto, except as may be necessary to comply with Applicable Law, including, without limitation, applicable securities laws, rules and regulations. The foregoing restriction shall not prevent either party from responding to any interview request or public inquiry if (a) the information being disclosing in such communication is already in public domain or agreed-upon by the Parties in advance as talking points and (b) either (i) the nature and timing of the interview request or public inquiry does not reasonably allow for prior input and approval from the other Party, or (ii) the information being disclosed in such communication is in response to a request during the course of an earnings call or other public disclosure required under applicable securities laws, rules and regulations. If any such disclosure is so required, the Party making the disclosure shall, to the extent practicable, consult with the other Party prior to making the disclosure, and the Parties shall use all reasonable efforts to agree upon a text for such disclosure that is satisfactory to both Parties. The Parties shall coordinate any and all public external communications, including any press releases related to this Agreement.

Section 11.5 Regulatory Examination and Financial Information.

Each Party agrees to submit to any examination which may be required by any Regulatory Authority with audit and examination authority over the other Party, to the fullest extent required by such Regulatory Authority. Each Party shall also provide to the other Party any information which may be required by any Regulatory Authority in connection with its audit or review of either Party or any of the Programs and shall reasonably cooperate with such Regulatory Authority in connection with any audit or review of a Party.

ARTICLE XII - RECORDS AND AUDIT RIGHTS

Section 12.1 Maintenance of Records.

Each Party shall maintain all records relating to the performance of its obligations under this Agreement as required by Applicable Law, and in any event, for a period of 5 years from the date such record is generated.

Section 12.2 Review of Records.

Throughout the Term and for 2 years thereafter, each Party shall have the right, upon 5 Business Days’ prior written notice to the other Party, to review the other Party’s books and records and to inspect the physical operations pertaining to the other Party’s participation in the Programs, including without limitation each Party’s compliance with Section 4.6 and Section 8.4. Such reviews shall be conducted no more frequently than once per calendar year, and the Party conducting the same shall use reasonable care not to interfere with the other Party’s normal business operations. Any such review shall be made during regular business hours where such books and records or physical operations are maintained, and shall be conducted without disruption on the Party’s behalf by an independent auditor or other Person reasonably satisfactory to the other Party. Neither Party’s acceptance of any information, nor its inspection or audit of records, however, shall waive its right later to dispute the accuracy or completeness of any information supplied by the Party being audited. In the event any such audit establishes an underpayment of commission by Bank to Company, Bank shall pay the amount of any undisputed deficit within 20 Business Days of notification of such deficiency. Any audit shall be conducted at the auditing Party’s sole expense, provided, however, that if an audit establishes an underpayment of commission by Bank to Company greater than 5% of the total commission then due and payable to Company, Bank shall

Confidential 17

Execution Version

pay for the costs and expenses of such audit. Bank reserves the right to review Company’s audit results, and in the event such audit establishes an overpayment, then Company shall pay Bank any undisputed amount of the overpayment within 20 Business Days of notification of such overpayment. If the Parties cannot promptly resolve the dispute through good-faith discussions, the Parties shall diligently proceed to resolve such dispute in accordance with the terms of Section 13.5 of the Agreement.

Section 12.3 Reports.

Within thirty (30) days after the end of each calendar quarter during the Term, Bank shall furnish to Company one or more written reports detailing Cardholder use in that calendar quarter. The reports shall, in totality, or as mutually agreed by the Parties, specify (i) with respect to each Cardholder, (A) an identification number unique to each Cardholder; (B) the Credit Product(s) purchased by such Cardholder; (C) the number of Loads on each Card; and (D) the commission payable to Company as a result of such purchases; (ii) the number of active Cards with positive balances; (iii) the number of active Cards with zero balances; (iv) the total amount of commissions payable to Company in respect of that calendar quarter; and (v) such other information as mutually agreed upon from time to time by the Parties.

ARTICLE XIII - GENERAL PROVISIONS

Section 13.1 Indemnification.

(a) Each Party (an “Indemnifying Party”) agrees to indemnify, defend and hold harmless the other Party, its parent, subsidiaries and affiliates, and their respective officers, directors, employees and permitted assigns, as such (each, an “Indemnified Party”), against any direct or indirect losses or expenses, including without limitation court costs, discovery costs, expert witness and attorneys fees, judgments, settlement payments, assessments, fines and penalties (collectively, “Losses”) arising from any breach of a representation or warranty or any failure to fulfill a covenant of this Agreement by the Indemnifying Party, where such Loss is sustained directly by the Indemnified Party, and/or any Losses arising from any Third Party Claim. As used herein, the term “Third Party Claim” means any legal action, claim, demand, investigation, audit, inquiry, or enforcement, assessment, arbitration or other proceeding brought or threatened against any Indemnified Party by any Person who is not an Indemnified Party or by any Regulatory Authority as a result of the following: (i) any breach of a representation or warranty or any failure to fulfill a covenant of this Agreement by either Party, in which case the such Third Party Claim shall be indemnified by that Party; (ii) any alleged violation of law in connection with Company’s tax planning or budget planning services (i.e., the Jackson Hewitt Money Manager), or Company’s sweepstake promotions, in which case such Third Party Claim shall be indemnified by Company and shall not be subject to indemnification by Bank; (iii) any alleged violation of law with respect to Credit Products, in which case such Third Party claim shall be indemnified by Bank; and (iv) any alleged actions or omissions by either Party or its agents to the extent not addressed in Section 13.1(a)(i)-(iii) above, in which case such Third Party Claim shall be indemnified by that Party. Notwithstanding the foregoing, but subject to Section 13.1(a)(ii), neither Company nor Bank shall have liability as an Indemnifying Party hereunder if it is determined by an arbitration panel or a court of competent jurisdiction entering a final non-appealable order, or otherwise making a final non-appealable written finding, that any Loss that otherwise would be indemnifiable hereunder was proximately caused in substantial part by the failure of an Indemnified Party to perform its obligations under this Agreement.

(b) Bank agrees to indemnify and hold harmless the Company, its parent, subsidiaries and affiliates, and their respective officers, directors, employees and permitted assigns, against any Losses arising from a Third Party Claim that the Intellectual Property used by Bank to provide the iAdvance Credit Product Program described in Exhibit A-3 (“iAdvance IP Third Party Claims”) infringes or violates a Person’s interest in such property.

(c) Company agrees to indemnify and hold harmless Bank, its subsidiaries and affiliates, and their respective officers, directors, employees and permitted assigns, against any Losses arising from a Third Party Claim that the Marks used by Company to market the iPower Plus Line of Credit Program described in Exhibit A-4 (“iPower Plus IP Third Party Claims”) infringe or violate a Person’s interest in such property.

(d) [*]

(e) If any Claim is asserted against any Indemnified Party by any Person in respect of which the Indemnified Party may be entitled to indemnification under this Section 13.1, written notice of such Claim shall promptly be given to the Indemnifying Party within 60 days of knowledge of the claim or demand. The Indemnifying Party shall have the right to assume control (subject to the right of the Indemnified Party to Participate at the Indemnified Party’s expense and with its counsel) of the defense or settlement of the matter. The failure of a Party to notify the other Party of such claim or

Confidential 18

Execution Version

demand within 60 days from the date of its receipt shall result in waiver of any rights the Indemnified Party may otherwise have only if the failure of a Party to so notify the other Party prejudices the other Party with respect to such claim or demand. Notwithstanding anything contained herein to the contrary, the Indemnifying Party shall not consent to the entry of a judgment or enter into a settlement which (i) does not include an unconditional release of the Indemnified Party by the claimant for all liabilities with respect to the claim or demand, or (ii) otherwise adversely affects the rights of the Indemnified Party, without the Indemnified Party’s consent, which shall not be unreasonably withheld.

Section 13.2 Relationship of Parties

Bank and Company agree they are independent contractors to each other in performing their respective obligations hereunder. Nothing in this Agreement or in the working relationship being established and developed hereunder shall be deemed, nor shall it cause, Bank and Company to be treated as partners, joint ventures, or otherwise as joint associates for profit.

Section 13.3 Governing Law

The Parties acknowledge that Bank, as a federally charted savings association, is regulated by the Office of Thrift Supervision, and is therefore subject to federal law, and entitled to preemption from state laws to the fullest extent permitted by Applicable Law. In any matters not so preempted (if any), this Agreement shall be governed by laws of: (i) the State of New York, exclusive of its conflicts of law provisions, with respect to Bank’s claims against Company; and (ii) the State of South Dakota, exclusive of its conflicts of law provisions, with respect to Company’s claims against Bank.

Section 13.4 Entire Agreement; Amendments

This Agreement (including the exhibits and attachments hereto) constitutes the entire agreement between the Parties and supersedes all prior agreements, understandings, and arrangements, oral or written, between the Parties with respect to the subject matter hereof, including without limitation the Original Agreement. This Agreement may not be modified or amended except by an instrument or instruments in writing signed by the Party against whom enforcement of any such modification or amendment is sought.

Section 13.5 Disputes

(a) Duty to Notify. In the event of any dispute, controversy, or claim arising out of or relating to this Agreement (“Dispute”), the Party raising such Dispute shall notify the other promptly and no later than 60 days from the date of its discovery of the Dispute. In the case of a Dispute relating to account or transaction statements or similar matter, the failure of a Party to notify the other Party of such Dispute within 60 days from the date of its receipt shall result in such matter being deemed undisputed and accepted by the Party attempting to raise such Dispute.

(b) Cooperation to Resolve Disputes. The Parties shall cooperate and attempt in good faith to resolve any Dispute promptly by negotiating between persons who have authority to settle the Dispute and who are at a higher level of management than the persons with direct responsibility for administration and performance of the provisions or obligations of this Agreement that are the subject of the Dispute.

(c) Arbitration. Any Dispute which cannot otherwise be resolved as provided in Section 13.5(b) shall be resolved by arbitration conducted in accordance with the commercial arbitration rules of the American Arbitration Association (AAA), and judgment upon the award rendered by the arbitral tribunal may be entered in any court having jurisdiction thereof. The arbitration tribunal shall consist of a single arbitrator mutually agreed upon by the Parties or designated by the AAA. The place of arbitration shall be New York, New York, for any claims by Bank, and Sioux Falls, South Dakota, for any claims by Company, unless otherwise agreed. The arbitral award shall be final and binding. The Parties waive any right to appeal the arbitral award. Each Party may seek judicial assistance: (i) to compel arbitration, (ii) to obtain interim measures of protection prior to or pending arbitration, (iii) to seek injunctive relief in the courts of any jurisdiction as may be necessary and appropriate to protect the unauthorized disclosure of its proprietary or confidential information, and (iv) to enforce any decision of the arbitrator, including the final award.

(d) Confidentiality. The arbitration proceedings shall be as confidential and private as permitted by Applicable Law. The Parties shall not disclose the existence, content or results of any proceedings, and materials submitted in connection with such proceedings shall not be admissible in any other proceeding.

Confidential 19

Execution Version

Section 13.6 Force Majeure

In the event either Party is unable to perform its obligations hereunder due to a Force Majeure Event such Party will so notify the other Party promptly and shall be relieved of any liability hereunder flowing from such inability to perform, until such time that the Force Majeure Event has ended. A “Force Majeure Event” means acts of God, fire, power outages, widespread communications network failures, governmental or regulatory changes, acts of war, terrorism. No Party shall be held responsible for delays in implementation or performance caused solely by the other Party hereto. Any such delay, which occurs during the Term, shall result, at the option of and upon timely notice by the non-delaying Party, in an extension of all prospective implementation schedule deadlines equal to the period of delay caused solely by such delaying Party.

Section 13.7 Drafting Presumption

Both Parties agree that they participated in the drafting of this Agreement, and in the event that any dispute arises in the interpretation or construction of this Agreement, no presumption shall arise that either one Party or the other drafted this Agreement.

Section 13.8 Notices

Notices shall be effective hereunder when and only when they are reduced to writing and delivered, by next day delivery service, with proof of delivery, or mailed by certified or registered mail, return receipt requested, to the appropriate party at its address stated below or to such Party and at such address as may be designated by notice hereunder. Notices shall be deemed given on the date delivered or date of attempted delivery, if service is refused.

Bank:	Company:
MetaBank d/b/a Meta Payment Systems	Jackson Hewitt Inc.
5501 S. Broadband Lane	3 Sylvan Way, Box 264
Sioux Falls, South Dakota 57108	Parsippany, New Jersey 07054
Attn: General Counsel	Attn: Financial Products Department
With a copy to:	With a copy to:
MetaBank d/b/a Meta Payment Systems	Jackson Hewitt Inc.
5501 S. Broadband Lane	3 Sylvan Way, Box 264
Sioux Falls, SD 57108	Parsippany, New Jersey 07054
Attn: Senior VP, Credit	Attn: Legal Department

Section 13.9 Severability

To the fullest extent possible each provision of this Agreement shall be interpreted in such fashion as to be effective and valid under Applicable Law. If any provision of this Agreement is declared void or unenforceable for particular facts or circumstances, such provision shall remain in full force and effect for all other facts or circumstances. If any provision of this Agreement is declared entirely void or unenforceable, such provision shall be deemed severed from this Agreement, which shall otherwise remain in full force and effect.

Section 13.10 Counterparts.

This Agreement may be executed in one or more counterparts (including via facsimile), each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

Section 13.11 No Waiver

No failure or delay by either Party in requiring strict compliance with any obligation or provision of this Agreement (or in the exercise of any right or remedy provided herein) and no custom or practice at variance with the requirements hereof shall constitute a waiver or modification of any such obligation, requirement, right or remedy or preclude exercise of any such right or remedy or the right to require strict compliance with any obligation set forth herein. No waiver of any particular default or any right or remedy with respect to such default shall preclude, affect or impair enforcement of any right or remedy provided herein with respect to any subsequent default. No approval or consent of either Party to a matter requiring such approval or consent shall be effective unless in writing and signed by an authorized representative of the party approving or consenting. Consent or approval may also be withheld for so long as the other Party is in default of any of its obligations under this Agreement.

Confidential 20

Execution Version

IN WITNESS WHEREOF, this Agreement is executed by the Parties’ authorized officer or representative as of the date set forth above.

COMPANY		MetaBank, d/b/a Meta Payment Systems
By:	/s/ Daniel P. O’Brien	By:	/s/ Trent J. Sorbe
Name:	Daniel P. O’Brien	Name:	Trent J. Sorbe
Title:	CFO	Title:	Senior Vice President/Credit

Confidential 21

Execution Version

Exhibit A

Compensation

This Exhibit A is attached to, and is part of, a Second Amended and Restated Marketing Agreement between Jackson Hewitt Inc. (“Company”) and MetaBank d/b/a Meta Payment Systems (“Bank”) dated, 2009 (the “Agreement”).

1. Compensation for iPower Card for Disbursements Program. From the beginning of each Tax Season through June 1 following each such Tax Season, Bank shall pay Company the fees and commissions set forth in Attachment 1 to Exhibit A with respect to all iPower Cards for Disbursements issued since the beginning of each such Tax Season. After June 1 each year, with respect to any iPower Cards for Disbursements issued since the beginning of the immediately preceding Tax Season through the beginning of the next Tax Season, the compensation payable by Bank to Company with respect to the iPower Card for Disbursement Program shall be identical to the compensation payable by Bank to Company with respect to the iPower Cards with iAdvance Program, as set forth in Paragraph 2 below. From the beginning of each Tax Season through June 1 following each such Tax Season, the iPower Card for Disbursements Program shall also qualify for profit sharing as outlined in Paragraph 4 of this Exhibit A with respect to all iPower Cards for Disbursements issued since the beginning of each such Tax Season. All other revenues generated by the iPower Card for Disbursements Program will belong to Bank.

2. Compensation for iPower Cards with iAdvance Program and iAdvance Credit Product Program; Exclusivity.

(a) Compensation/Program Costs for iPower Card with iAdvance Program and iAdvance Credit Product Program

(i) As of the end of each month during the Term, Bank will calculate iPower Card with iAdvance Program Revenues and iPower Card with iAdvance Program Expenses. If the difference between such amounts is positive, Bank will remit the iPower Card with iAdvance Profit Sharing Amount to Company by the last day of the following month.

(ii) As of the last day of each Quarterly True-Up Month, Bank shall calculate the Quarterly iPower Card with iAdvance Gross Profit. If the Quarterly iPower Card with iAdvance Gross Profit is greater than the aggregate of the iPower Card with iAdvance Gross Profit paid by Bank to Company during the preceding calendar quarter, Bank shall pay such difference to Company by the last day of the month following each Quarterly True-Up Month. If the Quarterly iPower Card with iAdvance Gross Profit is less than the aggregate of the iPower Card with iAdvance Gross Profit paid by Bank to Company during the preceding calendar quarter, Bank shall withhold the overpayment from the iPower Card with iAdvance Profit Sharing Amount until such overpayment has been repaid in full. In the event the Agreement terminates prior to the full repayment of such amount, Company shall pay the remaining balance to Bank within 20 Business Days of notification of such deficiency.

(iii) If at any time the cumulative iPower Card with iAdvance Program Gross Profit is negative, Bank will retain all iPower Card with iAdvance Program Gross Profit until the cumulative iPower Card with iAdvance Program Gross Profit is positive. Thereafter, Bank will pay the iPower Card with iAdvance Profit Sharing Amount to Company.

(iv) Bank shall pay all iPower Card with iAdvance Program Expenses until such time as iPower Card with iAdvance Program Gross Profit becomes positive.

(v) At the end of any Term Year, if the iPower Card with iAdvance Gross Profit is negative for that Term Year, Bank may terminate the iPower Card with iAdvance Program and the iAdvance Credit Product Program.

(vi) Subsequent to termination of the Agreement by Company, Company shall receive [*] of any compensation it would be entitled to receive were the Agreement not terminated. If the Agreement is terminated by Bank, or if Company terminates the Agreement or a Program for cause (as contemplated in Sections 8.2 and 8.3 of the Agreement), Company shall continue to receive all compensation it would be entitled to receive were this Agreement not terminated.

Confidential 22

Execution Version

(vii) In no event, however, shall Bank pay any commission or compensation of any kind to Company on any iPower Cards with iAdvance issued by Bank to Employees.

(viii) All other revenues generated by the iPower Card with iAdvance Program and the iAdvance Credit Product Program will belong to Bank.

(b) iPower Card with iAdvance Program Exclusivity. During the period beginning [*] and ending on [*] (the “iPower Card with iAdvance Exclusivity Period”), Bank will not directly or indirectly provide or offer a non-personalized or personalized, prepaid, reloadable debit card program with the iAdvance Credit Product to any Person that is primarily in the business of providing or offering income tax return preparation services to its customers, whether exclusively or in connection with any other products or services, for the purpose of making such cards available to other Persons as for the receipt of (i) payroll deposits and certain other disbursements, and (ii) the proceeds of products the same as or substantially similar to the iAdvance Credit Product. Without regard to the foregoing, Bank may offer Tax Credit Products to other Persons. The iPower Card with iAdvance Exclusivity Period will be extended for additional terms of one Term Year as follows:

(i) If a [*] Personalized Cardholders have used their Cards for the [*], the iPower Card with iAdvance Exclusivity Period shall be extended for [*] until [*].

(ii) If a [*] Personalized Cardholders have used their Cards for the [*], the iPower Card with iAdvance Exclusivity Period shall be extended until [*].

If the performance target for a particular Term Year has not been met, Bank shall not be obligated to extend the iPower Card with iAdvance Exclusivity Period, even if Company satisfies the performance target in a subsequent Term Year. Notwithstanding the foregoing, the iPower Card with iAdvance Exclusivity Period shall not extend beyond the termination date of this Agreement.

(c) Most Favored Nation Status for iPower Card with iAdvance Program

(i) Bank represents and warrants to Company that the terms, features and conditions of the iPower Card with iAdvance Program, including, without limitation, the compensation to be paid to Company pursuant to this Exhibit A, are, and will be, at least as favorable as the terms, features and conditions of any reloadable prepaid card program with the iAdvance Credit Product Program provided by Bank to any other Person whose principal business is providing income tax return preparation services and with whom Bank has entered into an agreement. In the event Bank enters into such an agreement with such a Person, and Bank reasonably concludes that the financial terms of such agreement are more beneficial than the financial terms of the Agreement, Bank shall immediately provide Company written notice of the terms, features, and conditions of such program and give Company the opportunity to offer such program on the same terms. Company shall be entitled to the benefit of such more favorable terms from the date that Bank provided such terms to such Person, not from the date Bank notifies Company.

(ii) Bank further agrees that if the number of Customers who become iPower Card with iAdvance Cardholders is among the top [*] of reloadable cards with related iAdvance Credit Product accounts provided by other Persons in conjunction with Bank, then the representation and warranty set forth in Paragraph 2(c)(i) above shall apply to any program provided by Bank to any Person, regardless of industry or type of business, and, specifically, shall not be limited to programs with Persons whose principal business is providing income tax return preparation services.

3. iPower Plus Line of Credit Program Compensation; Exclusivity

a. Compensation/Program Costs for iPower Plus Line of Credit Program. The iPower Plus Line of Credit Program is subject to the profit sharing description set forth in Paragraph 4 of this Exhibit A. All other revenues generated by the iPower Plus Line of Credit Program will belong to Bank.

Confidential 23

Execution Version

b. iPower Plus Line of Credit Program Exclusivity. During the period beginning [*] and ending on [*] (the “iPower Plus Line of Credit Exclusivity Period”), Bank shall not offer a product similar to iPower Plus Line of Credit to any competitor of the Company and any Person that provides or offers income tax return preparation services to Customers, whether exclusively or in connection with any other products or services.

4. Profit Sharing for iPower Card for Disbursements Program and iPower Plus Line of Credit Program.

If the Bank’s Gross Profit earned in any Contract Year from the iPower Cards for Disbursements Program described in Exhibit A-1 and the iPower Plus Line of Credit Program described in Exhibit A-4 exceeds [*], Bank shall pay Company additional compensation equal to [*] of the Gross Profit in excess of [*] per Contract Year. The compensation to be paid under this Paragraph 4 shall be paid by the 90^th day of the next Contract Year.

5. Definitions. Capitalized terms used in this Exhibit A which are not defined in the Agreement have the meanings set forth below:

a. “Gross Profit” means an amount equal to the difference, if any, between (a) the revenues generated by the iPower Cards for Disbursements Program and the iPower Plus Line of Credit Program with respect to iPower Plus Line of Credit Receivables retained by Bank, including all interest income, fee income, interchange, and other direct Cardholder fees with respect to the iPower Cards for Disbursements, plus any origination fees received by Bank with respect to the sale of Receivables generated under the iPower Plus Line of Credit Program and (b) the expenses generated by the above-described Card Program and Credit Program, including all direct expenses and outlays made by Bank in connection with, or arising out of, the iPower Cards for Disbursements Program, the iPower Card Savings Program, or the iPower Plus Line of Credit Program. Such expenses shall include: any compensation paid to Company under provisions other than Paragraph 4 above Bank’s cost of funds for Receivables funded by Bank, legal fees, card production, fulfillment, processing, network fees, customer service, IVR calls, long distance, chargeback processing, fraud management, and any other costs mutually agreed upon by the Parties, including pro-rated expenses associated with staff who are employed, in whole or in part, to support the iPower Cards for Disbursements Program or the iPower Plus Line of Credit Program.

b. “iPower Card with iAdvance Profit Sharing Amount” means [*] of iPower Card with iAdvance Program Gross Profit.

c. “iPower Card with iAdvance Program Expenses” means all direct expenses and outlays made by Bank in connection with, or arising out of, the iPower Card with iAdvance Program, the iPower Card Savings, Program or iAdvance Credit Product Program such as legal fees, card production, fulfillment, processing, network fees, customer service, IVR calls, long distance, chargeback processing, fraud management, and any other costs mutually agreed upon by the Parties, including pro-rated expenses associated with staff who are employed, in whole or in part, to support the iPower Card with iAdvance Program or the iAdvance Credit Product Program.

d. “iPower Card with iAdvance Program Gross Profit” means an amount equal to the difference, if any, between iPower Card with iAdvance Program Revenues and iPower Card with iAdvance Program Expenses.

e. “iPower Card with iAdvance Program Revenues” means all interest income relating to float on the Cards, fee income, interchange, and other direct Cardholder fees with respect to the iPower Cards with iAdvance, plus any origination fees received by Bank with respect to the sale of Receivables generated under the iAdvance Credit Product Program. In the event Bank retains a portion or all of the Receivables generated under the iAdvance Credit Product Program, the iPower Card with iAdvance Program Revenues shall further include an amount equal to the origination fees Bank would have received in connection with such retained Receivables had Bank sold such Receivables to a third party.

f. “Losses” means the principal amount and accrued finance charges on all iPower Plus Line of Credit Program disbursements which are deemed by Bank to be uncollectible, consistent with Applicable Law as of the end of each month during the Term.

Confidential 24

Execution Version

g. “Personalized Cardholders” means Cardholders who have converted their iPower Card for Disbursements (as defined in Exhibit A-1) to iPower Cards with iAdvance (as defined in Exhibit A-2), or who have directly applied for, and received, an iPower Card with iAdvance directly from Bank pursuant to Exhibit A-2.

h. “Quarterly iPower Card with iAdvance Gross Profit” means an amount equal to the difference, if any, between iPower Card with iAdvance Program Revenues and iPower Card with iAdvance Program Expenses for the calendar quarter immediately preceding each Quarterly True-Up Month.

i. “Quarterly True-Up Month” means each April, July, October, and January during the Term.

j. “Tax Credit Products” means loans or lines of credit that are associated with tax preparation and tax refunds (e.g., refund anticipation loans) that are not otherwise covered by the Agreement.

Confidential 25

Execution Version

Attachment 1 to Exhibit A

Company Fees & Compensation for the iPower Card for Disbursements Program

Bank shall pay the following compensation in connection with the iPower Card for Disbursements Program.

Bank will pay Company the following commissions based on the revenues earned by the Bank from the disbursement of Tax-Related Financial Products on iPower Cards for Disbursements:

Average Revenues per Card(1)	Commission to Company
Amounts less than [*] per card	[	*]
Between [*] and [*] per card	[	*]
Above [*] per card	[	*](2)

^{(1) “}Revenues per Card” consist of interchange and Cardholder fees earned by Bank from the disbursement of Tax-Related Financial Products on iPower Cards for Disbursements. “Average Revenues per Card” will be calculated by calculating the total revenues earned by Bank from the disbursement of all Tax-Related Financial Products on iPower Cards for Disbursements for a particular Tax Season during the Term and dividing such amount by the total number of iPower Cards for Disbursements that received a disbursement of a Tax-Related Financial Product for such Tax Season. Notwithstanding the foregoing, revenues earned by Bank from the disbursement of iPower Plus Line of Credit Product proceeds loaded on iPower Cards for Disbursements shall not be included in determining the Average Revenues per Card in instances where a Cardholder’s tax refund proceeds are not also loaded to the Cardholder’s iPower Card for Disbursements; provided, however, that Bank shall deduct from the revenue available for Company’s commissions an amount equal to [*] for each such Card, which amount is attributable to Bank’s fixed expenses for each such Card.

⁽²⁾ The [*] commission rate is payable in years iPower Card for Disbursement load volume exceeds [*]. Years for which load volume is below [*], the commission rate when Average Revenues per Card for Disbursements are in excess of [*] per card will continue to be [*].

Confidential 26

Execution Version

Exhibit A-1

iPower Card for Disbursements Program

This Exhibit A-1 is attached to, and is part of, a Second Amended and Restated Marketing Agreement between Jackson Hewitt Inc. (“Company”) and MetaBank d/b/a Meta Payment Systems (“Bank”) dated, 2009 (the “Agreement”).

1. iPower Card for Disbursements Program Description.

(a) [*]

(b) [*]

(c) Expiration. Each iPower Card for Disbursements shall carry an expiration date on its face of December 31 immediately following the issuance date or on such other date as the Parties may mutually agree. Cardholder’s access to his or her Cardholder Funds will cease on the expiration date and any remaining funds shall be disbursed as provided in the Cardholder Agreement.

(d) Pricing. Attachment 1 to Exhibit A-1 sets forth the complete list of the Cardholder fees that a Cardholder may be charged in connection with such Cardholder’s receipt and use of an iPower Card for Disbursements. Cardholder fees for the iPower Card for Disbursements are subject to change by Bank with the prior written approval of Company. Cardholder fees that are charged to a Cardholder and assessed after a Cardholder has activated an iPower Card for Disbursements shall be deducted by Bank from such Cardholder’s Cardholder Funds and remitted as appropriate.

2. iPower Card for Disbursements Program Terms and Conditions. Upon 15 Business Days’ prior written notice to Company, Bank may propose any adjustments or additions to the iPower Card for Disbursements Program; provided, however, that any such modifications are subject to Company’s prior written approval, which approval shall not be unreasonably withheld. Any such changes shall be documented in a revised Exhibit A-1, which shall be attached to this Agreement in lieu of the previous Exhibit A-1. Bank may revise the Cardholder Agreement from time to time pursuant to Section 3.2 of the Agreement.

3. Miscellaneous.

(a) Design. Bank shall produce, at its expense, all Cards based upon the design mutually approved by Bank and Company. Company shall design the front of the Cards, which may include Company Intellectual Property. Bank shall provide the design for the back of the Cards, including appropriate Bank-related Marks as to the issuer of the Cards, appropriate ATM logos, and customer service phone numbers and website addresses. Bank shall furnish all disclosures required by Applicable Law to appear on the Cards. Company shall have the right at any time to modify the design of the Cards (including to change the branding thereof) upon reasonable notice to and approval of Bank (such approval shall not be unreasonably withheld or delayed), and Bank shall produce new Cards to reflect such modifications; provided, however, if Company requests a card design change, Company will reimburse Bank for the cost of any unused Card inventory. Moreover, if the Card modifications requested by Company require a material increase in the cost of the Cards, Company shall reimburse Bank for the cost difference related to the requested modification; provided, however, that Bank shall submit an invoice to Company for any such costs and shall provide documentation evidencing such costs upon Company’s request. The form, design and content of the Cards shall be subject to any required approval or design standards of Bank and the Systems.

(b) Defective Manufacture. Bank shall produce the Cards, including encoding and embossing, in conformity with System Rules. If any Cards are defective, Bank shall promptly replace such Cards at its own expense.

(c) Card Functionality. Bank will be the issuer of all Cards. All Cards may be used to pay for purchases, cash withdrawals, and any other expenses that are allowed by Applicable Law, subject to the Cardholder Agreement. After issuance, each Card shall have the ability to accept Loads and, when available and subject to Bank’s approval of an application, Credit Disbursements. All Cardholder Funds shall be Federal Deposit Insurance Corporation insured.

(d) Cardholder Agreement. All aspects of the relationship between Bank and Cardholders shall be governed by the terms of the Cardholder Agreement.

(e) Cardholder Access to Cardholder Funds. Bank shall take commercially reasonable efforts to ensure that each Cardholder shall at all times have the ability to access his or her Cardholder Funds through (i) PIN-based POS terminals

Confidential 27

Execution Version

that accept the selected System’s Cards, (ii) ATMs owned or operated by Bank, (iii) any third party vendor networks retained by Bank to provide surcharge-free ATM access without any transaction fees or costs charged by Bank unless authorized by Company, and (iv) System merchants, as described in the Cardholder Agreement.

4. Omnibus Account.

(a) Funding. With respect to each Customer to whom a Card was issued to receive the proceeds of Tax Related Financial Products, Bank shall notify Company and the Providers of the Omnibus Account into which Providers will deposit funds. Company shall use commercially reasonable efforts to encourage Providers to make such deposits via wire. Company shall use commercially reasonable efforts to ensure Providers provide additional reconciliation support to Bank, as reasonably required, to enable Bank to settle on a daily basis. All discrepancies in any amount so settled shall be resolved and corrected within 3 Business Days.

(b) Funds Transfer Information. Bank shall, at its own cost and expense, provide Company and/or a Provider with an automated means to transmit Funds Transfer Information to Bank. Provider shall bear all costs related to transmitting funds via wire transfer or ACH credit and Bank shall bear all costs related to its receipt of such funds.

(c) Company’s Liability. If Company delivers to Bank incorrect Funds Transfer Information such that the funds credited to the Omnibus Account on behalf of a Cardholder by Bank does not match the amount authorized for disbursement on the Cardholder’s behalf by Provider, then Company shall be liable for any excess amount, if any, which was incorrectly identified as Cardholder Funds.

5. Definitions. Capitalized terms not defined in this Exhibit A-1 have the meanings set forth for such terms in the Agreement.

Confidential 28

Execution Version

Attachment 1 to Exhibit A-1

iPower Card for Disbursements Program Fee Schedule

DESCRIPTION	Pre May 1st			Post May 1st & Web Enrolled Cards		Employee Card		HSBC
Enrollment Fees
Activation Fee		0			0		0		0
Maintenance Fees
Monthly Fee		0		$	4.95		0	$	3.95
Dormancy Fee		0			0		0		0
Closure Fees
Cancellation Fee	$	10,00		$	10,00		0		0
Load Fees
Convenience Fee (Direct Deposit)		0			0		0		0
Convenience Fee (Retail Location)		0			0		0		0
Convenience Fee (MoneyGram)		0			0		0		0
Convenience Fee (Western Union)		0			0		0		0
Convenience Fee (PayXone)		0			0		0		0
Convenience Fee (PayPal)		0			0		0		0
Convenience Fee (Visa ReadyLink)	$	0.99		$	0.99	$	0.99	$	0.99
Signature Transaction Fees
Signature Transaction Fee (Domestic)		0			0		0		0
Signature Transaction Fee (Int’l)		0			0		0		0
Signature Transaction Decline Fee (Domestic)		0			0		0		0
Signature Transaction Decline Fee (Int’l)		0			0		0		0
PIN Transaction Fees
PIN Transaction Fee (Domestic)	$	0.50		$	0.25		0	$	0.25
PIN Transaction Fee (Int’l)	$	0.50		$	0.25		0	$	0.25
PIN Transaction Decline Fee (Domestic)		0			0		0	$	0.25
PIN Transaction Decline Fee (Int’l)		0			0		0	$	0.25
ATM Transaction Fees
ATM Withdrawal Fee (Domestic)	$	2.50		$	1.50 (2 free per month)	$	1.00 (2 free per month	$	1.50 (2 free per month)
ATM Withdrawal Fee (Int’l)	$	4.00		$	2.95	$	1.00	$	2.95
ATM Balance Inquiry Fee (Domestic)	$	0.50		$	0.50	$	0.25	$	0.25
ATM Balance Inquiry Fee (Int’l)	$	1.50		$	1.50	$	0.25	$	1.50
ATM Decline Fee (Domestic)	$	0.50			0	$	0.25	$	0.25
ATM Decline Fee (Int’l)	$	1.50			0	$	0.25	$	0.50
Cash Advance Transaction Fees
Over-the-Counter Withdrawal Fee (Domestic)		1.50	%	$	4.95	$	4.95	$	4.95
Over-the-Counter Withdrawal Fee (Int’l)		1.50	%	$	4.95	$	4.95	$	4.95
Other Transaction Fees
Send Cash Fee (Card to Bank Account)	$	2.50 (250 max)		$	0.99	$	0.99	$	0.99
Send Cash Fee (Bank to Card)		0			0		0		0

Confidential 29

Execution Version

DESCRIPTION	Pre May 1st			Post May 1st & Web Enrolled Cards			Employee Card			HSBC
Send Cash Fee (Customer Initiated ACH)		N/A			N/A			N/A			N/A
Phone Service Fees
Automated Voice Response Fee (Per Call)	$	2.50 (5 free combined w/ Live Agent)			0			0			0
Live Agent Service Fee (Per Call)	$	2.50 (5 free combined w/ IVR)		$	2.00 (2 free per month)		$	1.50 (2 free per month)		$	2.00 (2 free per month)
Statement Fees
Paper Statement Fee (Mail)	$	0.95		$	0.95		$	2.95		$	2.95
Shipping Fees
Replacement Card Fee	$	4.95		$	4.95		$	4.95		$	4.95
Express Shipping Fee	$	55		$	55		$	55		$	55
Bill Pay Fees
Bill Pay Fee (Electronic)	$	2.50 (250 max)		$	0.45		$	0.45		$	0.45
Bill Pay Fee (Paper Check)	$	2.50 (250 max)		$	0.99		$	0.99		$	0.99
Bill Pay Fee (Check Cancellation)	$	9.95		$	9.95		$	9.95		$	9.95
Misc Fees
Foreign Exchange Mark Up		3	%		3	%		3	%		3	%

Confidential 30

Exhibit A-2

iPower Card with iAdvance Program

This Exhibit A-2 is attached to, and is part of, a Second Amended and Restated Marketing Agreement between Jackson Hewitt Inc. (“Company”) and MetaBank d/b/a Meta Payment Systems (“Bank”) dated, 2009 (the “Agreement”).

1. iPower Cards with iAdvance Program Description.

(a) Conversion of Non-Personalized Cards. If the Cardholder of a non-personalized Card loads value to his/her Card from a source other than proceeds of a Tax Related Financial Product or a Tax Refund, such action shall be deemed to be a request for a personalized Card pursuant to Paragraph (b) below, which Card shall be referred to as an “iPower Card with iAdvance”. Upon conversion of a non-personalized Card to a personalized Card, the personalized Card may become eligible for enrollment in the iAdvance Credit Product Program (as described in Exhibit A-3), subject to certain eligibility requirements outlined in Exhibit A-3. Each iPower Card with iAdvance is a Card, as that term is defined in this Agreement.

(b) Request for Personalized Cards. Any Cardholder who initially received a non-personalized Card, including, without limitation, any Customer, may, at any time, directly request from Bank that Bank issue such Cardholder a personalized Card. Bank shall deliver such personalized Card to such Cardholder via first class mail not later than 10 Business Days after receipt of the request. Any Applicant who did not initially receive a non-personalized Card pursuant to Paragraph 3(a) of this Exhibit A-1 shall apply for an iPower Card with iAdvance directly from Bank. Upon Bank’s approval of the application, Bank shall issue an iPower Card with iAdvance with the Applicant’s name, expiration date and unique account number embossed on the Card and establish a Cardholder’s Card account for such Cardholder that is ready for immediate use. Bank shall deliver the iPower Card with iAdvance and a Card Packet to such Cardholder via first class mail within 10 Business Days after approval of the Card application.

(c) Expiration. Each iPower Card with iAdvance shall carry an expiration date on its face of the month and year 36 months after the issuance of the Card. Cardholder’s access to his or her Cardholder Funds will cease on the expiration date and any remaining funds shall be disbursed as provided in the Cardholder Agreement.

(d) Pricing for iPower Cards with iAdvance Program. Attachment 1 to Exhibit A-2 sets forth the complete list of the Cardholder fees that a Cardholder may be charged in connection with such Cardholder’s receipt and use of an iPower Card with iAdvance after May 1 of the Tax Season in which such Cardholder received his or her iPower Card. Attachment 1 to Exhibit A-1 sets forth the complete list of Cardholder fees that a Cardholder may be charged in connection with such Cardholder’s receipt and use of an iPower Card with iAdvance issued prior to May 1 following the Tax Season in which such Cardholder received his or her iPower Card. Cardholder fees for the iPower Cards with iAdvance are subject to change by Bank with the prior written approval of Company. Cardholder fees that are charged to a Cardholder and assessed after a Cardholder has activated an iPower Card with iAdvance shall be deducted by Bank from such Cardholder’s Cardholder Funds and remitted as appropriate.

2. Other Terms; Miscellaneous. Paragraphs 2, 3, 4 and 5 of Exhibit A-1 shall also apply to the iPower Card with iAdvance Program provided, however, that whenever the term “iPower Card for Disbursements” is used, such word shall be replaced with “iPower Card with iAdvance”.

31

Attachment 1 to Exhibit A-2

iPower Card with iAdvance Program Fee Schedule

DESCRIPTION	Fee
Enrollment Fees
Activation Fee		0
Maintenance Fees
Monthly Fee	$	4.95
Dormancy Fee		0
Closure Fees
Cancellation Fee	$	10.00
Load Fees
Convenience Fee (Direct Deposit)		0
Convenience Fee (Retail Location)		0
Convenience Fee (MoneyGram)		0
Convenience Fee (Western Union)		0
Convenience Fee (PayXone)		0
Convenience Fee (PayPal)		0
Convenience Fee (Visa ReadyLink)	$	0.99
Signature Transaction Fees
Signature Transaction Fee (Domestic)		0
Signature Transaction Fee (Int’l)		0
Signature Transaction Decline Fee (Domestic)		0
Signature Transaction Decline Fee (Int’l)		0
PIN Transaction Fees
PIN Transaction Fee (Domestic)	$	0.25
PIN Transaction Fee (Int’l)	$	0.25
PIN Transaction Decline Fee (Domestic)		0
PIN Transaction Decline Fee (Int’l)		0
ATM Transaction Fees
ATM Withdrawal Fee (Domestic)	$	1.50 (2 free per month)
ATM Withdrawal Fee (Int’l)	$	2.95
ATM Balance Inquiry Fee (Domestic)	$	0.50
ATM Balance Inquiry Fee (Int’l)	$	1.50
ATM Decline Fee (Domestic)		0
ATM Decline Fee (Int’l)		0
Cash Advance Transaction Fees
Over-the-Counter Withdrawal Fee (Domestic)	$	4.95
Over-the-Counter Withdrawal Fee (Int’l)	$	4.95
Other Transaction Fees
Send Cash Fee (Card to Bank Account)	$	0.99
Send Cash Fee (Bank to Card)		0
Send Cash Fee (Customer Initiated ACH)		N/A
Phone Service Fees
Automated Voice Response Fee (Per Call)		0
Live Agent Service Fee (Per Call)	$	2.00 (2 free per month)
Statement Fees
Paper Statement Fee (Mail)	$	0.95
Shipping Fees
Replacement Card Fee	$	4.95

32

DESCRIPTION	Fee
Express Shipping Fee	$	55
Bill Pay Fees
Bill Pay Fee (Electronic)	$	0.45
Bill Pay Fee (Paper Check)	$	0.99
Bill Pay Fee (Check Cancellation)	$	9.95
Misc Fees
Foreign Exchange Mark Up		3	%

33

Exhibit A-3

iAdvance Credit Product Program

This Exhibit A-3 is attached to, and is part of, a Second Amended and Restated Marketing Agreement between Jackson Hewitt Inc. (“Company”) and MetaBank d/b/a Meta Payment Systems (“Bank”) dated, 2009 (the “Agreement”).

1. Availability of iAdvance Credit Product. Bank shall make the iAdvance Credit Product available to Personalized Cardholders who satisfy the eligibility requirements set forth below. The “iAdvance Credit Product” means Bank’s small dollar line of credit marketed under the “iAdvance^®” mark as of the date of this Agreement whereby a Cardholder may request and receive from Bank loan advances that will be loaded on such Cardholder’s Card pursuant to the iAdvance Credit Agreement (see below). For purposes of this Agreement, the term “iAdvance” shall also refer to any future features or graduations of the program developed and added by Bank in its sole discretion, including, but not limited to, a graduation feature currently known as iAdvance Choice. iAdvance Choice will be an extension of the iAdvance Credit Product and will provide longer repayment periods and higher credit limits for qualifying Personalized Cardholders. The terms and conditions for iAdvance Choice shall be appended as Attachment 2 to Exhibit A-3 (the “iAdvance Choice Credit Agreement”) after they are adopted by Bank.

2. Eligibility for iAdvance Credit Product

The iAdvance Credit Product shall be available to Personalized Cardholders who meet the eligibility criteria set forth in the iAdvance Credit Agreement, as may be amended from time to time. A Personalized Cardholder approved to receive the iAdvance Credit Product cannot have more than one iAdvance Credit Product account established at any time. Each Personalized Cardholder approved for the iAdvance Credit Product shall be a participant in the iAdvance Credit Product Program.

3. iAdvance Credit Product Terms. The terms and conditions applicable to the iAdvance Credit Product, including the fees charged to a Cardholder for advance requests, are appended as Attachment 1 to Exhibit A-3 (the “iAdvance Credit Agreement”).

4. Marketing Expectations for iAdvance Credit Product Program

(a) In conjunction with the iPower Card with iAdvance Program described in Exhibit A-2, Company agrees to actively promote, advertise and market the iAdvance Credit Product Program, at Company’s sole expense, through the use of Marketing Materials, to existing and prospective Cardholders at Company’s sole cost and expense, except as provided herein. Company will perform its obligations under this Agreement in accordance with Applicable Law and the Branding Standards. “Branding Standards” means the Branding and Messaging Standards and Minimum Advertising Requirements established by Bank for the advertising, promotion and marketing of the iAdvance Credit Product, as set forth on Attachment 3 to Exhibit A-3 attached hereto, which Branding Standards may be amended by Bank from time to time in its sole and absolute discretion. To the extent the Branding Standards conflict with any of the terms or requirements set forth in this Agreement, the terms of this Agreement shall prevail.

(b) To the extent permitted by Applicable Law, Company agrees to facilitate the distribution of Marketing Materials produced by Bank to existing Customers who are not Cardholders for the purpose of allowing Bank to market the iPower Card with iAdvance and the iAdvance Credit Product to such Customers. Such Marketing Materials shall be subject to approval by Company, which approval shall not be unreasonably withheld or delayed. Bank shall be responsible for paying for any external costs associated with Company’s performance of the duties described in the preceding sentence. The parties shall mutually agree upon the frequency and timing of such Marketing Materials distributions.

(c) Company agrees to exercise commercially reasonable efforts to market the iAdvance Credit Product Program at Operator locations and elsewhere both during and after Tax Season at its sole expense.

(d) Marketing Materials include, without limitation, the prominent display of signage communicating the availability and material terms of the iAdvance Credit Product Program at point of service and at other areas in its locations, and also includes counter cards, posters, FAQ inserts, and overhead signs (if available).

(e) Subject to Company’s rights under Section 8.3(f) of the Agreement, Bank may, from time to time, make changes to the iAdvance Credit Program or request changes to any Marketing Materials relating to the iAdvance Credit Program upon not less than sixty (60) days’ prior written notice to Company, unless (a) any such change is due to Applicable Law or directions or guidance received by Bank from a Regulatory Authority and (b) providing Company sixty (60) days’ advance written notice of such change would prevent Bank’s compliance with such Applicable Law or directions or guidance, in which case Bank shall provide Company notice of such change as soon as commercially reasonable. Bank shall take commercially reasonable steps to prevent undue expense for Company when changing any Marketing Materials that are already in production.

34

5. Definitions. All other capitalized terms not defined in the context of a provision of this Exhibit A-3 have the meanings set forth in the Agreement.

35

Attachment 1 to Exhibit A-3

iAdvance Credit Product Program

iAdvance Credit Agreement

Bank will provide to Company a copy of the iAdvance Credit Agreement in advance of each Tax Season, which agreement may be amended from time to time by Bank pursuant to Section 3.2(b)(i) of this Agreement.

36

Attachment 2 to Exhibit A-3

iAdvance Credit Product Program

iAdvance Choice Credit Agreement

[to be provided upon completion]

37

Attachment 3 to Exhibit A-3

iAdvance Credit Product Branding Standards

Bank will provide to Company a copy of the iAdvance Credit Product Branding Standards, together with any subsequent amendments thereto.

38

Exhibit A-4

iPower Plus Line of Credit Program

This Exhibit A-4 is attached to, and is part of, a Second Amended and Restated Marketing Agreement between Jackson Hewitt Inc. (“Company”) and MetaBank d/b/a Meta Payment Systems (“Bank”) dated, 2009 (the “Agreement”).

1. Product Description

The terms “iPower Plus Line of Credit” and “iPower Plus Line of Credit Program” means the small dollar line of credit program jointly developed by Bank and Company to be offered during the Pre-Tax Season to Cardholders, whereby a Cardholder may request and receive from Bank an advance of loan funds which will be loaded on such Cardholder’s Card. For purposes of this Agreement, the term shall also refer to any future features, graduations or rebranding of the program developed and added by the Parties from time to time. For avoidance of doubt, during the 2009/2010 Tax Season, the program shall be known as the “MoneyPower Line of Credit”. The iPower Plus Line of Credit Program includes the following characteristics:

(a) No later than November 16, 2009 and throughout the 2009/2010 Tax Season, Bank and Company will offer Customers the opportunity to apply for iPower Plus Line of Credit at participating Operator locations. Prior to September 1 of each subsequent Tax Season during the Term of this Agreement, Bank and Company shall negotiate in good faith to mutually agree on the terms and scope under which the iPower Plus Line of Credit Program will be offered for the upcoming Tax Season. Notwithstanding anything to the contrary set forth in this Agreement, if Bank can offer the iPower Plus Line of Credit Program on commercially reasonable terms, it will offer such Credit Program.

(b) Company will actively market, and require its participating Operators to actively market, the availability of iPower Plus Line of Credit to Customers at Operator locations and elsewhere, subject to the marketing requirements set forth in Sections 4.1(t) and 4.10 of the Agreement.

(c) Company will collect such information from Customers as the Parties agree is necessary for Customers to apply for the iPower Plus Line of Credit at participating Operator locations.

(d) Bank will underwrite Applicants using Bank’s underwriting criteria.

(e) Company and Bank will agree on Customers to market for iPower Plus Line of Credit.

(f) Bank will create terms and conditions for the iPower Plus Line of Credit Program (the “iPower Plus Line of Credit Credit Agreement”) to be appended as Attachment 1 to Exhibit A-4.

(g) [*]

(h) [*]

(i) [*]

2. Definitions. Capitalized terms not defined in this Exhibit A-4 have the meanings set forth for such terms in the Agreement.

39

Attachment 1 to Exhibit A-4

iPower Plus Line of Credit

Credit Agreement

Bank will provide to Company a copy of the iPower Plus Line of Credit Credit Agreement in advance of each Tax Season, which agreement may be amended from time to time by Bank pursuant to Section 3.2(b)(ii) of this Agreement.

40

Attachment 2 to Exhibit A-4

iPower Plus Line of Credit

Jackson Hewitt Requirements Document

Bank will provide to Company a copy of the Jackson Hewitt Requirements Document, together with any subsequent amendments thereto.

41

Exhibit A-5

iPower Card Savings Program

1. iPower Card Savings Program Description. The iPower Card Savings Program will offer Cardholders a way to manage their money by allowing Cardholders to set aside funds in a savings account tied to their Card. The Program requires a $10 minimum opening deposit. There will be no fees assessed to Cardholders in connection with this Program. Funds are easily moved between the savings account and Card account. Savings accounts can only be funded through transfers from the Card balance. Cardholders may access their savings account on the Cardholder website or via a live agent. There shall be only one savings account per reloadable Card. The savings account balance will be separate and distinct from the Card balance.

2. Eligibility for iPower Card Savings Program. Only eligible Cardholders can open a savings account. To be eligible the Cardholder must:

• Have an active reloadable Card with direct deposit

• Have a valid SSN/TIN

• Be the primary account owner

3. iPower Card Savings Program Terms and Conditions. The terms and conditions applicable to the iPower Card Savings Program are appended as Attachment 1 to Exhibit A-5 (the “iPower Card Savings Agreement”).

42

Attachment 1 to Exhibit A-5

iPower Card Savings Program

iPower Card Savings Agreement

Bank will provide to Company a copy of the iPower Card Savings Agreement in advance of each Tax Season, which agreement may be amended from time to time by Bank pursuant to Section 3.2(b)(i) of this Agreement.

43

Exhibit B

SLAs of Card Processor and Credit Processors

1. Card Processor, on Bank’s behalf, shall provide the following customer support services:

a. Processing of all authorization and settlement transactions made with or on a Card and providing authorization availability (90-day average) meeting or exceeding 98% less scheduled maintenance;

b. Processing of all payments and adjustments made to a Card. Real time payments will be posted within one hour of receipt by Card Processor. All transactions will be posted within 24 hours of receipt;

c. Maintaining and updating Cardholder information;

d. Providing customer service with customer service personnel capable of serving English and Spanish-speaking Cardholders to assist Cardholders contacting customer service via phone, fax or in writing with issues or problems related to Cards. Card Processor will provide call center services meeting an average speed of answer (30-day average) of 45 seconds on 85% of the calls;

e. Providing Web services for Cardholder to view Card transactions; the Website will meet or exceed 98% availability (30-day average) less scheduled maintenance;

f. Providing Cardholders with a, 24-hours per day, 7 days per week mechanism for obtaining and /or hearing Card information in English and Spanish over the telephone, including through an interactive voice response (IVR) unit; the IVR will meet or exceed 98% availability (30-day average) less scheduled maintenance;

g. Cooperating and working with all parties involved in the sales, issuance, loading, acceptance of the Cards, and merchants accepting the Card for purchases or cash withdrawals;

h. Providing reasonable assistance, on an on-going basis, to Bank in resolving Cardholder or vendor problems related to the Cards or the use, issuance, sale or reloading thereof; and respond within 48-hours; and

i. Providing a mechanism for Cardholder dispute resolution ensuring compliance with appropriate regulatory requirements.

2. The Credit Processor for the iAdvance Credit Product Program, on Bank’s behalf, shall provide the following customer support services:

Category	Description	SLA Standards
Cardholder Support
Average Speed of Answer-IVR	A call that terminates in IVR tree after success market. Measures the utility of IVR response to tree to provide self service answer.	85% of calls answered within 45 seconds as of connection; 100% calls within 1 minute as of connection.
Abandon Rate	Rate at which IVR calls are abandoned while in queue due to delay waiting for service longer than 45 seconds	Monthly abandon rate of 4 percent or less for all programs combined.

System Availability
IVR:	98% daily availability (30 day average)
Web:	98% daily availability (30 day average)

44

Transactional Data Website Data Records-Reporting
Availability	By 6 am Central Time daily
Data Variance	Accurate & complete data file-allowing reconciliation of transactions to account balance and authorizations.
Problem Management
Helpdesk/Technical Support	Credit Processor will provide a support group and the telephone number to Bank that will be available Monday through Friday during the hours of 8:00 a.m. to 6:00 p.m. (CT) to take incoming calls from Bank for assistance requests and to address technical questions and issues with respect to the provision of the credit processing services.

3. The Credit Processors for the iPower Plus Line of Credit Program, on Bank’s behalf, shall provide the following customer support services:

Call Center Support Services

a. Provide Cardholders with 24-hours per day, 7 days per week customer service;

b. Provide a single-point-of-contact account manager to oversee the entire program;

c. Allow for shared agents to manage call activity (call allocation process 75/25 split, adjustable based on need)

d. Credit Processor will provide call center services meeting an average speed of answer of 45 seconds on 80% of the calls answered, with the following exceptions:

• Average speed of answer of 30 seconds on 85% of calls answered from November 16^th to November 25^th, 2009

• Average speed of answer of 90 seconds on 85% of calls answered from January 2^nd to January 15^th, 2010

• Average speed of answer of 45 seconds on 85% of calls answered prior to November 16, 2009, from November 25, 2009 to January 2, 2009, and after January 15, 2010 through the end of the Tax Season

e. Abandonment rate shall not exceed 3% with the exception of abandons within 5 seconds or less and the following exception:

• abandon rate for live agent calls shall not exceed 5% with the exception of abandons within 5 seconds or less

f. Quality assurance measurement of customer service associates’ call quality shall be at least 80% on a monthly average based on Bank monitoring using agreed upon industry practices and standards.

g. Reporting will be provided on a daily basis and daily call statistics, including total number calls offered, answered, abandoned, average speed of answer, total talk time, percent of calls in the specific service level and a project-end recap of cumulative statistics. Specific reporting agreed upon as follows:

• Report #1 – Call Interval Report: Report details the call interval data and will be provided on daily, weekly and monthly intervals.

• Report #2 – Blast Report; Interval data sent on the half hour for monitoring of service levels and call allocation adjustments.

• Report #3 – IVR Drop Point Report - Report captures at what point each call disconnects from the IVR.

45

• Report #4 – Call Allocation Report - Report captures number of calls, allocation percentage and call forwarded to each call center per interval.

• Report #5 – Franchisee Call Volume Report - Report captures number of Franchisee calls and average handle time.

• Report #6 – Remote Quality/Monitoring Services - Report provides average call quality (call recordings available within 2 business days of request)

Credit Processor Availability:

Measurement Criteria	Measurement Window
Critical Processing Time Uptime Percentage	Monthly
>99.5% - On-Line Availability 8:00AM – 1:00AM EST Monday thru Sunday – Excluding Maintenance Window
> 98.5 < 99.5% - On-Line Availability 8:00AM – 1:00AM EST Monday thru Sunday– Excluding Maintenance Window
< 98.5% - On-Line Availability 8:00AM – 1:00AM EST Monday thru Sunday– Excluding Maintenance Window
Average Response Time	Monthly
<.499 seconds (not including Authorization transactions)
>.500 seconds (not including Authorization transactions)
<.99 seconds (Authorizations transactions only)
>.100 seconds (Authorization transactions only)
Problem Management
Helpdesk/Technical Support	24/7 Availability
Cardholder/Client Impact	Acknowledgement within 1 hour
Non-Cardholder Impact/Business Issue	Acknowledgment within 1 Business Day

46

EXHIBIT C

Additional Credit Processor Service Requirements

1. Credit Processors shall perform the following actions if actual daily call volume exceeds forecasted daily call volume by more than 10% or if the SLAs set forth in Section 3(d) of Exhibit B are not met:

If the percentage of customer service calls being answered by Credit Processor within the response time required under Section 3(d) of Exhibit B (“Required Response Time”) falls below 80% for 15 minutes or the actual daily call volume exceed exceeds forecasted daily call volume by more than 10%, Credit Processor will:

• Cancel all planned meetings, trainings and side by sides etc.

• Check additional trained staff from the frontline for associates that can be put on the Company line (all staff will be up trained on Company-provided bank products training material, but this call queue will contain only dedicated associates)

• If additional trained staff on the front line are not sufficient to cover the volume we will add the Credit Processor’s Activation Team (one at a time) until recovery

• Meetings are rescheduled once the percentage of customer service calls answered within the Required Response Time reaches 85%

If the percentage of customer service calls answered within the Required Response Time falls below 80% for 30 minutes with more than fifty percent (50%) of the forecasted daily call volume already handled by Credit Processor or if the response time for any Cardholder waiting for customer service reaches 10 minutes, Credit Processor will:

• Add the Quality Assurance associates that are available until the SL reaches 80% or 2 agent availability is maintained for 10 minutes

• If the Quality Assurance associates do not cover the amount of staff needed, Credit Processor will add Escalation associates one by one until 80% of customer service calls are answered within the Required Response Time or there are 2 associates in the Available phone state for 10 minutes

If the percentage of customer service calls answered within the Required Response Time falls below 70% with more than forty percent (40%) of the forecasted daily call volume already handled by Credit Processor, or if the response time for any Cardholder waiting for customer service reaches 20 minutes, Credit Processor will:

• Add all Customer Service Managers to the Company call queue. If all Customer Service Managers available to do not cover the staff needed to handle the call volume the command center will be added to calls with the Workforce Analyst taking the lead at the command center

• Maintain staffing until 75% of customer service calls are answered within the Required Response Time or until there are 5 associates that have a wait time of 10 minutes

If the percentage of customer service calls answered within the Required Response Time falls below 60% with more than 40% of the forecasted daily call volume already handled, or if the response time for any Cardholder waiting for customer service reaches 20 minutes, Credit Processor will:

• Add Customer Service Directors to the Company call queue. If the Customer Service Directors to not cover what is needed to handle the call volume then add the Disputes team one by one until the sufficient staff is added

• Maintain staffing until 70% of customer service calls are answered within the Required Response Time or until there are 10 associates that have a wait time of 10 minutes

2. In addition to the actions described in Section 1 of this Exhibit, Credit Processors shall perform the following actions if the SLAs set forth in Section 3(d) of Exhibit B are not met or if queue size of Cardholders on hold waiting for customer service meets the criteria noted below:

Phase I – if queue size of Cardholders waiting on hold for customer service (“Cardholder Queue Size”) is 10 or more, sustained for over 15 minutes, or SLAs set forth in Section 3(d) of Exhibit B are not met for that day, Credit Processor will:

• Direct all phone representatives trained to handle Company calls to get on the phones; cancel phone agent training and meetings. Credit Processor will also start calling non-scheduled phone Representatives trained to handle Company calls to see if they can come in to assist with traffic.

1. Money Power LOC I – 30 agents

2. Money Power LOC II – additional 25 agents

• Train a total of 55 agents on the Company program by January 1, 2010

47

Phase II – if Cardholder Queue Size is 10 or more, sustained for over 30 minutes, or SLAs set forth in Section 3(d) of Exhibit B are not met for that day, Credit Processor will in addition to actions taken in Phase I:

• Direct Quality monitoring reps and Company Product-specific Supervisors and Team Leads to take phone calls

• Size of this group is approximately - 10

Phase III – if Cardholder Queue Size is 10 or more, sustained for over 60 minutes or SLAs set forth in Section 3(d) of Exhibit B are not met for that day, Credit Processor will in addition to actions taken in Phase II :

• Direct All Credit Processor supervisors, Customer Support Managers, Administrative personnel and representatives from other programs as deemed appropriate by the Credit Processor capable of handling Company calls to assist with Company calls.

• Size of this group is approximately - 15

Phase IV – if Cardholder Queue Size is 20 or more, sustained for over 90 minutes, or SLAs set forth in Section 3(d) of Exhibit B are not met for that day Credit Processor, will addition to actions taken in Phase III:

• Direct Sr. Management, Director Team, Human Resource Group and Sales on the phones to help facilitate traffic.

• Size of this group is approximately – 9

In the event of a Phase IV situation, Credit Processor could potentially have an additional 34 individuals available to get on the phones to support traffic.

48

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Harry W. Buckley, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Jackson Hewitt Tax Service Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 17, 2010

/s/ HARRY W. BUCKLEY

Harry W. Buckley

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Daniel P. O’Brien, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Jackson Hewitt Tax Service Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 17, 2010

/s/ DANIEL P. O’BRIEN

Daniel P. O’Brien

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Jackson Hewitt Tax Service Inc. (the “Company”) on Form 10-Q for the period ended January 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Harry W. Buckley, as Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ HARRY W. BUCKLEY

HARRY W. BUCKLEY

President and Chief Executive Officer

March 17, 2010

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Jackson Hewitt Tax Service Inc. (the “Company”) on Form 10-Q for the period ended January 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel P. O’Brien, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ DANIEL P. O’BRIEN

Daniel P. O’Brien

Executive Vice President and Chief Financial Officer

March 17, 2010