UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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 October 31, 1997

                                       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 0-22324


                               JACKSON HEWITT INC.
             (Exact name of registrant as specified in its charter)


        Virginia                                            54-1349705
(State of organization)                   (IRS Employer Identification No.)

                        4575 Bonney Road, Virginia Beach,
                           Virginia 23462 (Address of
                           principal executive office)

                                 (757) 473-3300
              (Registrant's telephone number, including area code)

         Indicate  by check mark  whether the  registrant  (1) 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. [X] Yes [ ] No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the last practicable
date:  6,665,022





                               JACKSON HEWITT INC.
                          Quarterly Report on Form 10-Q



                                Table of Contents
<TABLE>
<CAPTION>



PART I       FINANCIAL INFORMATION                                                                           PAGE
<S><C>

   Item 1.   Unaudited Condensed Consolidated Financial Statements

                  Condensed Consolidated Balance Sheets as of April 30, 1997 and
                  October 31, 1997  (unaudited)..............................................................3

                  Unaudited Condensed Consolidated Statements of Operations for the Three Months
                  Ended October 31, 1996 and 1997 and the Six Months Ended October 31, 1996 and 1997 ........5


                  Unaudited Condensed Consolidated Statement of Shareholders' Equity for the Six
                            Months Ended October 31, 1997....................................................6

                  Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months  Ended
                  October 31, 1996 and 1997..................................................................7

                  Notes to Unaudited Condensed Consolidated Financial Statements.............................9

   Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations..........13

PART II      OTHER INFORMATION

    Item 4.  Submission of Matters to a Vote of Security Holders                                            15

    Item 6.  Exhibits




</TABLE>









<PAGE>

Condensed Consolidated Balance Sheets
--------------------------------------------------------------------------------
Jackson Hewitt Inc.

<TABLE>
<CAPTION>


                                                                  April 30, 1997                  October 31, 1997
                                                                -----------------------       -------------------------
                                               Assets                                               (unaudited)
<S> <C>
Current assets:
      Cash and cash equivalents                                             $6,323,586                     $25,498,062
      Receivables (notes 2 and 7):
           Trade accounts                                                    2,861,567                       1,199,012
           Notes receivable, current portion                                 4,588,006                       4,264,759
           Interest                                                            412,064                         747,185
           Allowance for doubtful accounts                                  (1,203,599)                     (1,592,389)
                                                                -----------------------       -------------------------
                          Total receivables, net                             6,658,038                       4,618,567
                                                                -----------------------       -------------------------

      Prepaid expenses and supplies                                            247,778                         305,041
      Deferred income taxes                                                    644,000                       1,561,000
                                                                -----------------------       -------------------------

                          Total current assets                              13,873,402                      31,982,670
                                                                -----------------------       -------------------------

Property and equipment, at cost:
      Property and equipment                                                 4,330,470                       4,576,435
      Computer software                                                        917,119                       1,056,521
                                                                -----------------------       -------------------------
                                                                             5,247,589                       5,632,956

      Less accumulated depreciation and amortization                         2,572,084                       2,019,844
                                                                -----------------------       -------------------------
                                                                             2,675,505                       3,613,112
                                                                -----------------------       -------------------------

Intangible assets, net (note 4):
      Customer lists, net                                                    2,006,820                       2,217,265
      Other, net                                                               444,102                         467,372
                                                                -----------------------       -------------------------
                                                                             2,450,922                       2,684,637
                                                                -----------------------       -------------------------

Notes receivable, less current portion (notes 2 and 7)                       8,759,779                      10,599,304
Assets held for sale                                                            54,408                               -
Assets held under contractual agreements                                       313,849                         278,092
Other assets                                                                    31,912                          55,302
                                                                -----------------------       -------------------------


                                                                           $28,159,777                     $49,213,116
                                                                =======================       =========================
</TABLE>


<PAGE>



Condensed Consolidated Balance Sheets (continued)
--------------------------------------------------------------------------------
Jackson Hewitt Inc.
<TABLE>
<CAPTION>



                                                                             April 30, 1997                  October 31, 1997
                                                                            ----------------------       -------------------------
<S> <C>
Liabilities, Redeemable Convertible Preferred Stock                                                            (unaudited)
      and Shareholders' Equity
Current liabilities:
      Current installments of notes payable                                              $606,465                        $215,002
      Convertible notes                                                                   762,750                          62,200
      Current installments of capital lease obligations                                   618,385                         164,138
      Accounts payable and other liabilities                                            1,924,580                         735,066
      Accrued payroll and related liabilities                                             879,996                         891,038
      Income taxes payable                                                              2,793,027                         383,278
      Deferred franchise fees                                                             305,370                       1,026,597
                                                                                    --------------       -------------------------
                          Total current liabilities                                     7,890,573                       3,477,320

Notes payable, excluding current installments                                           1,028,106                         122,500
Capital lease obligations, excluding current installments                                 233,819                          76,405
                                                                                    --------------       -------------------------
                                                                                        1,261,925                         198,905

Deferred credits:
      Income taxes                                                                        893,000                         693,000
      Minority interest                                                                   137,690                          44,388
                                                                                    --------------       -------------------------
                          Total liabilities                                            10,183,188                       4,413,613
                                                                                    --------------       -------------------------


SeriesA redeemable  convertible preferred stock, no par value;  1,000,000 shares
      authorized; 504,950 shares issued and outstanding as of April 30, 1997, no
      shares issued and
      oustanding at October 31, 1997 (note 6)                                           3,236,443                               -

Shareholders' equity (notes 5, 6 and 8):
      Common stock,  $.02 par value;  30,000,000  shares  authorized;  6,655,505
        shares as of October 31, 1997 and 4,589,647 shares
        as of April 30, 1997  issued and outstanding                                       91,793                         133,110
      Additional capital                                                                7,798,996                      38,733,074
      Retained earnings                                                                 8,125,414                       5,933,319
      Stock subscription receivable                                                    (1,276,057)                              -
                                                                                    --------------       -------------------------

                          Shareholders' equity                                         14,740,146                      44,799,503

Commitments, contingencies and subsequent                                                       -                               -
      event (note 9)
                                                                                    --------------       -------------------------


                                                                                      $28,159,777                     $49,213,116
                                                                                    ==============       =========================

See accompanying notes to unaudited condensed consolidated financial statements.

</TABLE>



<PAGE>




Unaudited Condensed Consolidated Statements of Operations
-------------------------------------------------------------------------------
Jackson Hewitt Inc.

<TABLE>
<CAPTION>

                                                            Three months ended October 31        Six months ended October 31
                                                         -------------------------------------- ------------------------------

                                                                  1996             1997             1996           1997
                                                                 ---------------------------   -----------------------------

<S> <C>
Revenue                                                            $1,216,140    $3,391,088      $2,196,081      $5,553,055
Selling, general and administrative expenses                        3,105,800     4,344,401       6,161,593       7,815,617
                                                                 -------------  ------------   -------------    ------------

                 Loss from operations                              (1,889,660)     (953,313)     (3,965,512)     (2,262,562)
                                                                 -------------  ------------   -------------    ------------

Other income (expenses):
      Interest income                                                 391,428       665,688         850,330       1,170,492
      Interest expense                                               (239,961)      (36,361)       (560,555)       (114,058)
      Gain (loss) on disposals of intangible assets
           and property and equipment, net                            (64,367)      512,650         (79,578)        753,105
      Minority interest                                               (14,852)        3,826         (29,789)        (14,190)
                                                                 -------------  ------------   -------------    ------------
                                                                       72,248     1,145,803         180,408       1,795,349
                                                                 -------------  ------------   -------------    ------------

                 Income (loss) before income taxes
                       and extraordinary item                      (1,817,412)      192,490      (3,785,104)       (467,214)

Income tax expense (benefit)                                         (808,976)       62,892      (1,454,791)       (174,000)
                                                                 -------------  ------------   -------------    ------------

                 Net income (loss) before extraordinary item       (1,008,436)      129,598      (2,330,313)       (293,214)

Extraordinary item                                                      -             -          (1,248,388)          -
                                                                 -------------  ------------   -------------    ------------

                 Net income (loss)                                 (1,008,436)      129,598      (3,578,701)       (293,214)

Dividends and accretion accrued on Series A redeemable
   convertible preferred stock                                       (103,970)        -            (207,036)          -
Charge for induced conversion of Series A redeemable
   convertible preferred stock (note 6)                                 -             -               -          (1,898,881)
                                                                 -------------  ------------   -------------    ------------

                 Net income (loss) attributable to common 
                    shareholders                                  ($1,112,406)     $129,598     ($3,785,737)    ($2,192,095)
                                                                 =============  ============   =============    ============


Net income (loss) per common share:

                 Net income (loss) before extraordinary item           ($0.24)        $0.02          ($0.56)         ($0.36)
                                                                 =============  ============   =============    ============
                 Net income (loss)                                     ($0.24)        $0.02          ($0.83)         ($0.36)
                                                                 =============  ============   =============    ============

Weighted average shares outstanding                                 4,545,060     6,633,263       4,476,558       5,733,109
                                                                 =============  ============   =============    ============
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.



<PAGE>


Consolidated Statements of Shareholders' Equity (Unaudited)
--------------------------------------------------------------------------------
Jackson Hewitt Inc.
Six months ended October 31, 1997


<TABLE>
<CAPTION>

                                                                                             Common Stock
                                                                             ----------------------------------------
                                                                                          Shares              Amount
                                                                             ---------------------------------------------------
<S> <C>

Balance at April 30, 1997                                                                 4,589,647          $91,793
                                                                             ---------------------------------------------------

Exercise of stock options, including tax benefit
     of $266,684                                                                             86,396            1,728

Conversion of Series A Redeemable Convertible
     preferred stock  (note 6)                                                              699,707           13,994

Prepayment of stock subscription receivable (note 5)                                        (82,327)          (1,647)

Shares issued through public offering (note 8)                                            1,322,500           26,450

Shares issued upon conversion of convertible notes                                           39,582              792

Net loss                                                                                   -                   -
                                                                             ---------------------------------------------------

Balance at October 31, 1997                                                               6,655,505         $133,110
                                                                             ===================================================

</TABLE>





<TABLE>
<CAPTION>
                                                                                              Stock             Total
                                                              Additional     Retained      Subscription     Shareholders'
                                                               Capital       Earnings       Receivable          Equity

                                                         ------------------------------------------------------------------
<S> <C>

Balance at April 30, 1997                                      $7,798,996     $8,125,414      ($1,276,057)     $14,740,146
                                                         ------------------------------------------------------------------

Exercise of stock options, including tax benefit
     of $266,684                                                  674,933       -                -                 676,661

Conversion of Series A Redeemable Convertible
     preferred stock  (note 6)                                  5,121,330     (1,898,881)        -               3,236,443

Prepayment of stock subscription receivable (note 5)           (1,274,410)                      1,276,057         -

Shares issued through public offering (note 8)                 25,779,705       -                -              25,806,155

Shares issued upon conversion of convertible notes                632,520       -                -                 633,312

Net loss                                                          -             (293,214)        -                (293,214)
                                                         ------------------------------------------------------------------

Balance at October 31, 1997                                   $38,733,074     $5,933,319         -             $44,799,503
                                                         ==================================================================

</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.

<PAGE>


Unaudited Condensed Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------
Jackson Hewitt Inc.


<TABLE>
<CAPTION>



                                                                                         Six months ended

                                                                              1996                          1997
                                                                      ----------------------------------------------

<S> <C>
Net Cash used in Operating Activities                                     ($7,176,099)                  ($7,167,254)

Cash Flows from Investing Activities:
Notes receivable financing of franchisees                                      (7,000)                      (68,600)
Payments received from franchisees                                             52,404                       477,213
Purchases of customer lists and other assets                                  (74,495)                     (997,704)
Proceeds from sales of customer lists and other assets                        128,378                       559,129
Purchases of property and equipment                                           (35,980)                   (1,688,546)
                                                                      ----------------------------------------------

                          Net cash provided by investing activities            63,307                    (1,718,508)
                                                                      ----------------------------------------------

Cash Flows from Financing Activities:
Net borrowings under lines of credit                                        5,798,870                             -
Repayments of long-term debt                                                  (60,549)                   (1,387,069)
Redemptions of convertible notes                                                    -                       (67,238)
Proceeds from long-term debt                                                  452,500                             -
Repayments of obligations under capital leases                               (298,633)                     (611,661)
Exercise of stock options, including tax benefit                               66,001                       676,661
Proceeds from public offering                                                       -                    25,806,155
Retirement of stock purchase warrant obligation                            (1,875,967)                            -
Repayments of notes sold to a commercial bank                                       -                      (286,000)
Proceeds from sale of notes receivable                                              -                     3,929,390
                                                                      ----------------------------------------------

                          Net cash provided by financing activities         4,082,222                    28,060,238
                                                                      ----------------------------------------------

Net increase (decrease) in cash and cash equivalents                       (3,030,570)                   19,174,476
Cash and cash equivalents at beginning of period                            3,557,861                     6,323,586
                                                                      ----------------     -------------------------

Cash and cash equivalents at end of period                                   $527,291                   $25,498,062
                                                                      ================     =========================
</TABLE>

                                                                     (continued)



Unaudited Condensed Consolidated Statements of Cash Flows (continued)
--------------------------------------------------------------------------------
Jackson Hewitt Inc.

Supplemental Information Regarding Noncash Investing and Financing Activities:

During the six months  ended  October  31, 1996 and 1997,  the Company  acquired
certain assets from franchisees as follows:

<TABLE>
<CAPTION>


                                                      1996                          1997
                                                 --------------------------------------------------
<S> <C>

Fair value of assets purchased                            $1,649,690                    $1,828,274
Receivables forgiven                                      (1,458,892)                     (734,068)
Notes payable issued                                         (90,335)                      (90,000)
Lease obligations assumed                                    (25,968)                       (6,503)
                                                 --------------------     -------------------------

Cash paid to seller                                          $74,495                      $997,704
                                                 ====================     =========================

During the six months ended October 31, 
1996 and 1997,  the Company sold certain
assets to franchisees as follows:



                                                      1996                          1997
                                                 --------------------------------------------------


Book value of assets sold                                   $638,551                    $1,303,632
Franchise fee revenue                                        158,000                       351,000
Gain on sale                                                (204,569)                      390,424
Deferred gain on sale                                        120,000                        79,091
Notes receivable accepted                                   (583,603)                   (1,565,017)
                                                 --------------------     -------------------------

Cash received                                               $128,378                      $559,129
                                                 ====================     =========================

</TABLE>

During the six months ended  October 31, 1996 and 1997,  the stock  subscription
receivable  increased  $58,104  and  $18,240  respectively,  for the  accrual of
interest.

On July 31, 1996,  the Company  acquired all of the  outstanding  stock of Oden,
Inc., a franchisee,  in exchange for 106,501 shares,  net of shares retired,  of
Jackson Hewitt common stock.

During the six months  ended  October 31,  1997,  the  holders of the  Company's
Series A Convertible  Preferred Stock exchanged all of their preferred stock for
699,707 shares of the Company's common stock.

During the six months ended October 31, 1997, the stock subscription  receivable
was repaid with 82,327  shares of the Company's  common  stock.  The shares were
subsequently canceled by the Company.

During the six months  ended  October 31, 1997,  the holders of the  convertible
notes  converted  $633,312  of  convertible  notes  into  39,582  shares  of the
Company's common stock.

See accompanying notes to unaudited condensed consolidated financial statements.



<PAGE>



                               Jackson Hewitt Inc.

         Notes to Unaudited Condensed Consolidated Financial Statements

                                October 31, 1997

1.  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the instructions to Form 10-Q and Article 310 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of adjustments of a normal  recurring  nature)  considered  necessary for a fair
presentation  have been included.  Operating results for the three month and six
month  periods  ended  October 31, 1997 are not  necessarily  indicative  of the
results  that may be  expected  for the year ended April 30,  1998.  For further
information,  refer  to the  consolidated  financial  statements  and  footnotes
thereto  included in the Jackson Hewitt Inc.  annual report on Form 10-K for the
year ended April 30, 1997.

2.  Notes Receivable

At October 31, 1997, the Company had an investment in notes and related interest
receivable of  approximately  $1,928,000 which had recorded values that exceeded
the fair  value of the  underlying  collateral  by  approximately  $166,000.  In
addition,  the Company had trade accounts  receivable due from these franchisees
of  approximately  $120,000 at October 31,  1997.  The Company has  reflected an
allowance  of $286,000  for this  impairment  in the  accompanying  consolidated
balance  sheet.  Activity in the allowance  for doubtful  accounts for the three
months ended October 31, 1997 is summarized as follows:

                                                                  Year to Date
                                                              -----------------
                 Beginning balance                                   $1,203,599
                Additions charged to expense                           865,322
                Write-offs                                           (476,531)
                                                              =================
                Ending balance                                      $1,592,389
                                                              =================

The Company's  average  investment in impaired notes  receivable  during the six
months ended  October 31, 1997 was  approximately  $1,416,000.  Interest  income
related  to these  notes of  approximately  $41,000  has  been  included  in the
accompanying consolidated statements of operations.

3.  Net Income (Loss) Per Common Share

Net income  (loss) per common share is based on the weighted  average  number of
shares of common stock  outstanding  during the period,  including  the dilutive
effects of stock  options and  warrants.  The  Company's  convertible  notes and
Series  A  Redeemable   Convertible   Preferred  Stock  are  excluded  from  the
calculation  of net income  (loss) per common share because they do not meet the
definition of common stock equivalents.


<PAGE>



                               Jackson Hewitt Inc.

   Notes to Unaudited Condensed Consolidated Financial Statements (continued)

4.  Acquisition of Franchise Assets

During the six months ended October 31, 1997, the Company  acquired the customer
lists and other  assets of 14 Jackson  Hewitt  franchises  for a total  purchase
price of  $1,828,274.  The Company gave the  franchise  owners cash of $997,704,
canceled  notes and accounts  receivable of $734,068,  gave the previous  owners
notes  totaling  $90,000,  and  assumed  lease  obligations  totaling  $6,502 to
complete these transactions.

The purchase price is allocated  among the assets acquired based on the relative
fair value of the underlying  assets. The portion allocated to customer lists is
generally  based on a percentage  of gross revenue  generated by the  respective
franchises.  The  purchase  price was  allocated  among the assets  purchased as
follows:

                                                   2nd Quarter      Year to Date
                                               ---------------- ----------------
Customer lists                                        $330,599        $1,601,602
Other intangible assets, primarily goodwill             59,740           176,582
Property and equipment                                  15,090            42,090
Amounts charged against allowance
        for doubtful accounts                                -             8,000
                                               ================ ================

Total                                                 $405,429        $1,828,274
                                               ================ ================

5.  Stock Subscription Receivable

The  stock  subscription  receivable  reflected  in the  Company's  Consolidated
Financial  Statements  at April  30,  1997 was due  from  the  Company's  former
Chairman  of the Board of  Directors,  John T.  Hewitt.  Mr.  Hewitt had pledged
145,050 shares of the Company's common stock as collateral for the note. On July
14, 1997, Mr. Hewitt prepaid this obligation in full by delivering 82,327 of the
pledged  shares to the Company.  The closing sale price of the Company's  Common
Stock on July 14, 1997 was $15.50 per share.  The Company released the remaining
62,723 pledged shares to Mr. Hewitt and canceled the 82,327 shares.

6.  Redeemable Convertible Preferred Stock

On July 3, 1997, the Company completed a tax-free  recapitalization  transaction
with the holders ("Preferred Shareholders") of the 504,950 outstanding shares of
the  Company's  Series A Convertible  Preferred  Stock  ("Series A Stock").  The
effective  date of this  transaction  was June 18,  1997,  the date the  parties
substantially  agreed  to  the  terms  of  the  transaction.  In  this  tax-free
recapitalization  transaction, the Preferred Shareholders exchanged all of their
Series A Stock for 699,707  shares of common stock.  The Preferred  Shareholders
include   Geocapital  II,  L.P.  and   Geocapital   III,  L.P.,  two  affiliated
partnerships  which collectively own in excess of 5% of the Company's issued and
outstanding  stock, and JMI Equity Fund, L.P., of which Harry Gruner, a director
of the Company, is a general partner.





<PAGE>




                               Jackson Hewitt Inc.

   Notes to Unaudited Condensed Consolidated Financial Statements (continued)

7.  Sale of Notes Receivable

On July 15, 1997,  the Company  sold  approximately  $3.9 million of  franchisee
notes  receivable to a commercial  bank at face value for cash. The Company will
continue to collect all payments on the notes in  accordance  with the terms and
provisions  on the face of the notes  and  forward  all funds to the  commercial
bank. The Company will receive a servicing fee of 2% of all amounts collected on
the notes on April 15 of each year. The Company assumes limited  recourse on the
notes in the event that a franchisee fails to make payment within 30 days of the
due date of such payment, files bankruptcy or ceases to exist as a franchisee.

8.  Public Offering

On August 5, 1997, the Company sold  1,322,500  shares of stock through a public
offering for net proceeds of approximately $26 million.  The net proceeds of the
offering eliminated the Company's  dependence on its credit facility,  which was
canceled in August 1997.  The net proceeds will be used for working  capital and
general  corporate  purposes,  including  possible  expansion  of  Company-owned
offices and possible acquisitions of complementary businesses or product lines.

9.  Subsequent Event

On November  19, 1997,  the Company  executed a  definitive  agreement  with HFS
Incorporated  under  which HFS would  acquire all of the  Company's  outstanding
stock for $480  million,  or $68.00 per common  share.  The  Company's  Board of
Directors and its  management  have  unanimously  agreed to support the proposed
transaction.  The closing of the transaction is subject to customary conditions,
including  regulatory  approval.  The  completion of this  transaction  is to be
effected via a tender offer for the  Company's  outstanding  common stock and is
expected to close on January 5, 1998.

10.  Effect of Unadopted Accounting Standard

In February 1997, the FASB issued SFAS No. 128,  "Earnings Per Share" (Statement
128).  Statement 128  supersedes  APB Opinion No. 15,  "Earnings Per Share," and
specifies  the  computation,   presentation,  and  disclosure  requirements  for
earnings  per share  ("EPS") for  entities  with  publicly  held common stock or
potential common stock.  Statement 128 was issued to simplify the computation of
EPS and to make the U.S.  standard  more  compatible  with the EPS  standards of
other countries and that of the  International  Accounting  Standards  Committee
(IASC).  It will  replace  Primary EPS and Fully  Diluted EPS on the face of the
income statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the Basic EPS computations to
the numerator and denominator of the Diluted EPS computation.

Basic EPS, unlike Primary EPS, excludes all dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares  outstanding for the period.  Diluted EPS,  similar to Fully Diluted EPS,
reflects  the  potential  dilution  that  could  occur  if  securities  or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity.







<PAGE>




                               Jackson Hewitt Inc.

   Notes to Unaudited Condensed Consolidated Financial Statements (continued)

10.  Effect of Unadopted Accounting Standard (continued)

Statement 128 is effective for financial  statements for both interim and annual
periods  ending after December 15, 1997.  Earlier  application is not permitted.
After adoption, all prior period EPS data presented shall be restated to conform
with Statement 128. The following table summarizes the pro forma EPS data of the
Company as if Statement 128 had been adopted for all periods presented.
<TABLE>
<CAPTION>

                                           Three Months Ended            Six Months Ended
                                                October 31,                 October 31,
                                             1996         1997           1996        1997
                                           ----------- ------------  ------------ ----------
<S> <C>
  Basic EPS
     Income before extraordinary item         ($0.25)        $0.02       ($0.57)    ($0.38)
     Extraordinary Item                             -            -       ($0.28)          -
                                           ----------- ------------  ------------ ----------
     Net income                               ($0.25)        $0.02       ($0.85)    ($0.38)
                                           =========== ============  ============ ==========

  Diluted EPS
      Income before extraordinary item        ($0.25)        $0.02       ($0.57)    ($0.38)
      Extraordinary Item                            -            -       ($0.28)          -
                                           ----------- ------------  ------------ ----------
      Net income                              ($0.25)        $0.02       ($0.85)    ($0.38)
                                           =========== ============  ============ ==========

</TABLE>

<PAGE>

                               JACKSON HEWITT INC.
            Management's Discussion & Analysis of Financial Condition
                             & Results of Operations

In addition to historical  information,  this report  contains  forward  looking
statements  that are  subject to risks and  uncertainties  that could  cause the
Company's  actual results to differ  materially from those  anticipated in these
forward looking statements as a result of certain factors. Readers are cautioned
not to place undue reliance on these forward looking  statements,  which reflect
management's analysis only as of the date hereof.

Recent Developments

         On November 19, 1997, the Company executed a definitive  agreement with
HFS Incorporated under which HFS would acquire all of the Company's  outstanding
stock for $480  million,  or $68.00 per common  share.  The  Company's  Board of
Directors and its  management  have  unanimously  agreed to support the proposed
transaction.  The closing of the transaction is subject to customary conditions,
including  regulatory  approval.  The  completion of this  transaction  is to be
effected via a tender offer for the  Company's  outstanding  common stock and is
expected to close on January 5, 1998.

Seasonality

         Historically,  the  Company  has  generated  substantially  all  of its
revenue  during  January  through April of each year.  During  fiscal 1997,  the
Company generated 89% of its revenue during this period.  Therefore, the Company
historically  operates at a loss during the first three  quarters of each fiscal
year,  during which it incurs costs  associated with preparing for the following
tax season.

Results of Operations

         Total revenues.  The Company's total revenues for the second quarter of
1998  increased  178.8% to $3.4 million  compared to $1.2 million for the second
quarter  of 1997.  Total  revenue  for the six months  ended  October  31,  1997
increased  152.9% to $5.5  million  compared  to $2.2  million for the first six
months of 1997 (all  references  in this  section of the  discussion  are to the
Company's  fiscal  years).  The increase in the total revenues for the first two
quarters of 1998 as compared to the corresponding  period in 1997 is primarily a
result of a $3.3 million  increase in total  franchise  fee revenue,  net of the
allowance  for refunds,  to $4.5  million for 1998 from $1.2 million  during the
same period in 1997. The Company recognized 187 franchise territory sales in the
second  quarter of 1998 as compared  to 54 during the same  period in 1997.  The
Company recognized 305 franchise territory sales in the first six months of 1998
compared with the 72 recognized in 1997. This increase  resulted  primarily from
management's  decision to begin the franchise  marketing earlier in the year and
to make refinements in its marketing  message.  The Company believes that demand
for  franchise  territories  has been  strengthened  in part as a result  of the
successful 1997 tax season.

         Selling,  general and  administrative  expenses.  Selling,  general and
administrative  ("SG&A") expenses increased 39.9% to $4.3 million for the second
quarter of 1998 compared to $3.1 million for the second quarter of 1997. For the
first six months of 1998 these expenses  increased 26.8% or $1.6 million to $7.8
million  from $6.2  million in 1997.  SG&A  expenses  increased  $1.2 million in
corporate  administrative  functions  primarily  due to  increased  payroll  and
franchise sales commissions. Field operations expenses increased $0.4 million in
the first six months of 1998 as a result of the  Company's  decision  to include
tax school advertising in its national advertising budget.







         Other income and expenses,  net. Other income and expense  increased to
$1.1 million in the second  quarter of 1998 from $0.1  million in 1997.  For the
six months ended  October 31,  1997,  other  income and expense  increased  $1.6
million to $1.8 million in 1998 from $0.2 million in 1997.  The increase year to
date is primarily  attributable  to a $0.3 million  increase in interest  income
earned on the proceeds  from the public  offering  completed in August 1998 (the
"Offering"),  decreased  interest  expense of $0.5 million  resulting from early
repayment of the Company's long term debt in 1998 and loan discount amortization
recorded in 1997 associated with warrants issued in fiscal 1996 to the Company's
primary lender,  and an $0.8 million increase in the gain on sales of intangible
assets and property and equipment in 1998 as compared to 1997.

         Net income (loss). The Company reported net income for the three months
ended  October 31,  1997 in the amount of $0.1  million,  or $.02 per share,  as
compared  to a net loss of $1.0  million.  or ($0.24)  per  share,  for the same
period in 1997.  This is the only time in the  Company's  five year history as a
public company that it has reported net income in its second  quarter.  Net loss
before  extraordinary  item for first six  months of 1998 was $0.3  million,  or
($0.36) per share, down from $2.3 million, or ($0.56) per share, in 1997. During
the first three months of 1998,  the Company  incurred a $1.9 million  charge to
net loss attributable to common  shareholders  related to a transaction in which
the Company  issued  194,754  shares of common stock to induce the conversion of
the Company's  Series A Preferred  Stock into common  stock.  The effect of this
non-recurring charge on the net loss per share was ($0.32). Net losses after the
non-recurring  charge and  extraordinary  item were $2.1  million or ($0.36) per
share, in 1998 and $3.8 million or ($0.83) per share, in 1997.

Liquidity and Capital Resources

         The Company's  revenues have been,  and are expected to continue to be,
highly seasonal.  Operations in the off-season are primarily focused on the sale
of franchises and  preparation  for the upcoming tax season.  On August 5, 1997,
the Company  completed a public offering of 1,322,500  shares of stock resulting
in net proceeds to the Company of approximately $26.0 million.  The proceeds are
adequate to fund the Company's off-season cash needs and will enable the Company
to expand its tax preparation  business.  In July 1997, the Company  completed a
sale of approximately  $3.9 million in notes receivables to a local bank at face
value.  Management  has used the  proceeds  from  these  transactions  to reduce
outstanding  indebtedness and has invested the remaining  proceeds in short term
investment grade securities.

         Cash flows  from the  Company's  operating,  investing,  and  financing
activities for the first six months of fiscal 1998 and 1997 are disclosed in the
accompanying  Unaudited  Condensed  Consolidated  Statements of Cash Flows. Cash
flows from the Company's  operating  activities was unchanged at $7.2 million as
compared to 1997.

         The Company used $1.7 million in its investing  activities in the first
six months of fiscal  1998 as  compared  to $0.1  million  provided  in the same
period in 1997. This  fluctuation  was primarily  attributable to an increase of
approximately $1.7 million in purchases of property and equipment and intangible
assets.

          The Company's  financing  activities  for the six months ended October
31, 1997 provided $28.0 million  compared with $4.1 million  provided in the six
months ended  October 31, 1996.  During the first six months of 1998 the Company
completed a public  offering  resulting in net proceeds of  approximately  $26.0
million,  sold $3.9 million of notes  receivable and repaid $1.5 million in long
term debt. During the first six months of 1997 the Company borrowed $5.8 million
from banks and repurchased  stock purchase  warrants from its primary lender for
$1.9 million.

         During the six months  ended  October 31,  1997,  the Company  acquired
customer lists and other assets from 14  franchisees  for a total purchase price
of $1.8 million. As consideration for these  acquisitions,  the Company paid the
franchisees  cash of $1.0 million and issued notes payable of $0.1 million while
canceling receivables of $0.7 million.

          Based on the Company's ability to generate working capital through its
operations and the $26.0 million in net proceeds generated by the Offering,  the
Company has sufficient liquidity and financial resources to meet its obligations
for fiscal 1998. Management estimates it will require approximately $8.0 million
to fund its fiscal 1998 off-season capital needs.


                                                                 



<PAGE>

Part II           Other Information

Item 4.           Submission of Matters to a Vote of Security Holders

                  The Annual Shareholders  Meeting of Jackson Hewitt was held on
October 30, 1997 to  consider  four  matters of  business.  The matters  brought
before the shareholders and the voting results are as follows:

         1. Approval of an amendment to the Company's  Articles of Incorporation
to create a classified Board of Directors:
<TABLE>
<S> <C>
                   For                     Against        Abstain          Broker Non-Votes

                  3,462,922               1,312,387       33,450           969,606
</TABLE>

                  This  amendment did not pass as it required  approval from 2/3
of all outstanding shares.

<TABLE>
<S> <C>
         2.       Election of Directors:
                                                              For               Withhold

                  Class A Director:

                           Harry S. Gruner                    5,677,986                   100,378

                  Class B Directors:

                           Keith E. Alessi                    5,673,386                   104,978
                           William P. Veillette               5,581,243                   197,121

                  Class C Directors:

                           Harry W. Buckley                   5,689,346                    89,018
                           Michael E. Julian, Jr.             5,596,703                   181,661
</TABLE>

         3. Approval of an amendment to the Company's  Articles of Incorporation
to increase the number of shares of Common Stock which the Company is authorized
to issue to thirty million:

                           For              Against           Abstain

                            5,255,398       503,987          18,979

         4. Ratification of KPMG Peat Marwick,  LLP as independent  auditors for
the fiscal year ending April 30, 1998:

                           For              Against           Abstain

                            5,762,348         9,325           6,691







                                        

                                    SIGNATURE


         In accordance with the  requirements of the Securities and Exchange Act
of 1934,  the  registrant  caused this  report to be signed by the  undersigned,
thereunto duly authorized.



                                     Jackson Hewitt Inc.


                                     By /s/ Christopher Drake
                                        -------------------------
                                       Christopher Drake
                                       Secretary, Treasurer &
                                       Chief Financial Officer




December 11, 1997





<PAGE>



                               JACKSON HEWITT INC.

                                Index to Exhibits

<TABLE>
<CAPTION>

    Exhibit
  Sequential
      No.        Description
<S> <C>
     10.1        County Bank Tax Funding Agreement, dated  September 29, 1997

     10.2        Santa Barbara Bank & Trust Tax Funding Agreement, dated November 26, 1997

     10.3        Santa Barbara Bank Outside Agreement, dated November 24, 1997

     10.4        Montgomery Ward Master License Agreement Renewal, dated July 17, 1997

</TABLE>







<PAGE>


TAX REFUND FUNDING AGREEMENT


                  This Tax Refund Funding  Agreement (the  "Agreement")  is made
this  29th  day of  September,  1997,  by  and  among  First  Republic  Bank,  a
Pennsylvania  banking corporation  ("First Republic"),  Hewfant Inc., a Virginia
corporation ("Hewfant"), and Jackson Hewitt Inc., a Virginia corporation (which,
together  with  its  affiliates  and  franchisees  (each  an  "Affiliate"),   as
applicable, is referred to as "JHTS").

         DEFINITIONS

                  "Addendum No. 1" means an addendum to this Agreement,  adopted
by the parties for any Tax Season while this Agreement remains in effect,  which
specifies the fees and charges for the Bank Products imposed on Taxpayers during
that Tax Season and the duties and  obligations  of the  parties  regarding  the
disbursement  thereof.  The  provisions  of the Addendum No. 1 applicable to the
current Tax Season are incorporated into this Agreement as if contained herein.

                  "Application"  means the document by which a Taxpayer  applies
 for an ACR and, at the election of the Taxpayer,  a RAL.

                  "ACR" or "Accelerated Check Refund" means a program offered by
Bank using  electronic  or other filing by which a Taxpayer  requests his or her
federal  income tax refund be deposited  directly  into the  Taxpayer's  Deposit
Account at Bank.

                  "ACR Application Fee" means the  nonrefundable  fee charged by
the local JHTS office for processing an ACR Application.

                  "ACR  Handling  Fee" means the fee charged by Bank for opening
the Deposit  Account,  processing and accounting for the refund to a Taxpayer by
the IRS,  disbursing the tax preparation and ACR Application  Fees due the local
JHTS office generating the ACR, and providing and processing the ACR check.

                  "Bank" means First Republic or any other financial institution
that First Republic  designates to offer the Bank Products in participation with
First Republic, as indicated in Addendum No. 1.

                  "Bank Fee" means the finance charge imposed by Bank for making
a Refund Anticipation Loan.

                  "Bank Products" include the ACRs and/or RALs.

                  "Business Day" means any day, other than a Saturday, Sunday or
legal holiday, on which the Bank is open for business.

                  "Delinquent  RAL" means an  outstanding  RAL that has not been
paid in full  within 23 days after the date the RAL check was issued.

                  "Deposit  Account"  means the deposit  account  established in
Bank for a Taxpayer by Bank,  and into which the IRS will deposit the Taxpayer's
refund.

                  "Electronic  Filing  Fee"  means the fee  charged by the local
JHTS office for  electronically  filing income tax returns prepared by preparers
other than Jackson Hewitt.

                  "IRS" means the Internal Revenue Service.

                  "Program" means the system  developed by First Republic,  JHTS
and Hewfant to provide ACRs and RALs to Taxpayers.

                  "RAL" or "Refund  Anticipation Loan" means a loan secured by a
Taxpayer's federal income tax refund.

                  "Reserve  Account" means an interest  bearing  account at Bank
into  which  Bank will  deposit  the Bank Fee  received  when the tax  refund is
deposited by the IRS for each RAL issued.

                  "Hewfant ACR  Account"  means an interest  bearing  account at
Bank into which Bank will  deposit a sum as  specified  in the Addendum for each
ACR when the  Taxpayer's  federal income tax refund is deposited by the IRS into
the Deposit Account.

                  "Hewfant RAL  Account"  means an interest  bearing  account at
Bank into which Bank will  deposit a sum as  specified  in the Addendum for each
RAL when the  Taxpayer's  federal income tax refund is deposited by the IRS into
the Deposit Account.

                  "Taxpayer"  means a JHTS customer for any of its services.  It
refers  both to  individual  taxpayers  filing  individual  returns and to joint
taxpayers filing joint returns.

                  "Tax  Season" in any  calendar  year means the period from the
first day in that year that the IRS permits electronic filing through April 30th
of that year.

                  "Tax  Preparation Fee" means the fee charged by the local JHTS
office for preparing and electronically filing a tax return.

         INTRODUCTION

                  WHEREAS,   JHTS  operates  a  tax  preparation  business  that
features  electronic  filing of federal and  selected  state income tax returns;
and,

                  WHEREAS,  First Republic,  Hewfant and JHTS have established a
Program  through  which  Taxpayers  are offered ACRs and RALs  through  selected
banks; and,

                  WHEREAS, Bank desires to be one of the banks to offer ACRs and
RALs to JHTS customers on the terms and conditions provided in this Agreement;

                  NOW,  THEREFORE,  in  consideration of the mutual promises and
agreements   contained   in  this   Agreement,   and  other  good  and  valuable
consideration,  the receipt of which is hereby acknowledged,  all of the parties
agree as follows:

         AGREEMENT

1.       DUTIES OF JHTS AND HEWFANT - ACR PROGRAM

         As to each  Taxpayer  electing  to apply for  participation  in the ACR
Program, Hewfant or JHTS, as applicable, shall have the following obligations:

         a. JHTS will complete and have the Taxpayer (and the Taxpayer's  spouse
if the return is a joint return) execute: (1) an ACR Application on a form which
Hewfant  will have  printed at its  expense  from  artwork  supplied by Bank and
approved  by  Hewfant  and (2) an IRS Form  8453  (U.S.  Individual  Income  Tax
Declaration   for   Electronic   Filing),   which  JHTS  will   execute  as  the
preparer/transmitter,  which Form 8453 JHTS will supply at its  expense.  Bank's
name and routing  transit number shall be preprinted in Part II of Form 8453 and
a depositor  account  number  consisting  of a prefix  specified by Bank,  and a
suffix  consisting of the  Taxpayer's  social  security  number,  which shall be
verified by JHTS (or the social security number of the primary Taxpayer,  in the
case of a joint return) shall be inserted by JHTS in Part II in Form 8453.

         b. JHTS will inspect one form of signed picture identification, and use
its best  efforts to inspect a second form of signed photo  identification  from
each  Taxpayer to verify the identity of the  Taxpayer.  If joint  Taxpayers are
both present,  JHTS will inspect one form of picture  identification  from each.
The identification shall be from among the following:

            i.       a clearly identifiable school picture ID card;

            ii.      a valid U.S. Passport;

            iii.     a valid resident alien card that contains a photograph;

            iv.      a valid driver's license containing a photo ID;

            v.       a current military ID card;

            vi.      a state ID card;

            vii.     an Indian Affairs card; or

            viii. a union membership ID.

         c.  Hewfant  will  cooperate  with JHTS in  submitting  the  Taxpayer's
federal  income  tax return to the IRS  electronically.  JHTS will file the hard
copy of IRS Form 8453 with the IRS in accordance with IRS regulations.

         d. After  electronically  transmitting or mailing the Taxpayer's income
tax  return  to  the  IRS  and  receiving  the  IRS  acknowledgment,  JHTS  will
electronically  transmit to Bank and Hewfant:  (1) the Taxpayer's  name; (2) the
Taxpayer's address; (3) the Taxpayer's social security number; (4) the amount of
the  Taxpayer's  federal income tax refund as computed by JHTS; (5) the location
code of the JHTS office at which the  Taxpayer  applied for an ACR;  and (6) the
amount of all fees owing to JHTS and Bank from the  Taxpayer  which the Taxpayer
authorized Bank to withhold from the Taxpayer's refund and pay to JHTS.

         e. Upon  receiving  notice from Bank that a Taxpayer's  refund has been
deposited  at  Bank,  Hewfant  shall  assist  JHTS to  prepare  an ACR  check by
completing a blank cashier's check form supplied by Bank at Bank's expense,  and
completing and affixing thereon a laser generated facsimile signature authorized
by Bank.  Such  check  shall be in the  amount  of the tax  refund  less the ACR
Handling Fee, the Tax  Preparation  Fee, the Electronic  Filing Fee, if any, the
ACR  Application  Fee,  and any other sum that the Taxpayer  authorized  Bank to
withhold from the ACR check and pay to third  parties.  This check shall be made
available  to the  Taxpayer  by JHTS at the JHTS  office at which  the  Taxpayer
applied for the ACR following JHTS's receipt of confirmation  from Bank that the
tax refund has been deposited into the Taxpayer's account at Bank.

         f. JHTs will retain  original ACR  Applications  for  twenty-five  (25)
months,  and send to Bank  copies of ACR  Applications  within  five (5) days of
Bank's request.  JHTS will retain copies of such records associated with the ACR
Program,  and the electronic filing of the Taxpayer's  federal income tax return
as the IRS may from time to time require or direct.

         g. JHTS will use its best  efforts  to  retain  copies of such  records
associated  with the ACR  Program  and the  electronic  and mail  filing  of the
Taxpayer's federal income tax return as the IRS may from time to time require or
direct.

2.       BANK'S DUTIES - ACR PROGRAM

         Bank will have the  following  duties with respect to each  Application
for an ACR transmitted to it by Hewfant or JHTS:

         a. At the time Hewfant or JHTS notifies Bank of an  application  for an
ACR,  Bank will  open a Deposit  Account  in the name of  Taxpayer  in which the
Taxpayer's  refund will be  deposited by the IRS.  Bank shall  provide a form to
JHTS to be executed by a taxpayer  granting Bank the right to offset such refund
from the Deposit Account when it is electronically  deposited by the IRS for all
JHTS fees and Bank's fees.

         b. Upon receipt of the Taxpayer's refund from the IRS, Bank shall remit
the Tax Preparation Fee, the Electronic  Filing Fee, if any, the ACR Application
Fee, and any other sum that Taxpayer has authorized  Bank to pay pursuant to the
ACR Application by: (a)  transferring the amount of the Tax Preparation Fee, the
Electronic  Filing Fee, if any,  and the ACR  Application  Fee,  via ACH, to the
account of the JHTS office that generated the ACR Application; and (b) notifying
Hewfant each day, either  electronically  or on magnetic  diskette,  of each tax
refund received for which an ACR check should be issued,  together with the name
and social  security  number of the Taxpayer,  the amount of the Tax Preparation
Fee, the Electronic  Filing Fee, if any, the ACR Application  Fee, and any other
sum  remitted  for  such  Taxpayer  to  a  third  party,  pursuant  to  the  ACR
Application,  and the location  code of the JHTS office at which the  particular
Taxpayer applied for an ACR.

         c.  While this  Agreement  is in effect,  subject  to the  approval  of
Hewfant and JHTS, Bank will  designate,  pursuant to the provisions of Paragraph
19.i,  the amount of the ACR  Handling  Fee,  which fee shall be provided in the
Addendum  and be in effect for one (1)  calendar  year.  Bank may change the ACR
Handling Fee for any subsequent  calendar year during the term of this Agreement
by November 1 of the prior  calendar  year only  according to the  provisions of
Paragraph 19.i of this Agreement.

3.       ALLOCATION OF ACR HANDLING FEES

         The ACR Handling Fees shall be allocated and remitted as provided in 
         Addendum No. 1.

4.       DUTIES OF HEWFANT AND JHTS - RAL PROGRAM

         As to each  Taxpayer  electing to apply for  participation  in the RALs
Program, Hewfant or JHTS, as applicable, will do the following:

         a. Perform those duties specified in Subparagraphs  1.a, 1.b and 1.c of
this Agreement.

         b. After  electronically  transmitting the Taxpayer's income tax return
to the IRS  and  receiving  the IRS  acknowledgment,  JHTS  will  electronically
transmit  to Bank and  Hewfant:  (1) the  Taxpayer's  name;  (2) the  Taxpayer's
address;  (3) the  Taxpayer's  social  security  number;  (4) the  amount of the
Taxpayer's  federal income tax refund as computed by JHTS; (5) the location code
of the JHTS office at which the Taxpayer  applied for a RAL; and, (6) the amount
of all fees owing to JHTS from the Taxpayer which the Taxpayer  authorized  Bank
to withhold  from the RAL  proceeds  and pay to JHTS.  JHTS shall  instruct  its
Affiliates  that,  in no  instance,  may a  separate  charge  be  imposed  by an
Affiliate related to the application for or processing and disbursement of a RAL
other than the ACR Application,  Electronic  Filing, if any, and Tax Preparation
Fees and that the ACR  Application Fee charged by an Affiliate shall be the same
whether the Taxpayer applies for an ACR alone or an ACR and RAL.

         c. On each Business Day during the term of this Agreement, Hewfant will
process each  Application  for a RAL transmitted to it on that day in accordance
with Bank's program eligibility and credit underwriting standards then in effect
for such  RALs and in  accordance  with an ASCII or other  acceptable  record of
uncreditworthy  persons  provided by Bank,  and will notify JHTS  electronically
within two (2) hours after it  receives  the  application  as to whether the RAL
should be made based on Bank's  eligibility and credit  underwriting  standards.
Bank shall independently evaluate each Application for a RAL.

         d. Unless  notice is received by JHTS from Bank  electronically  within
two (2) hours after Bank received the Application that a Taxpayer's  application
for a RAL has not been approved by Bank, upon receipt of electronic  notice from
Hewfant that a Taxpayer's  RAL should be made,  in  accordance  with an ASCII or
other acceptable file of ineligible customers to be supplied by Bank, JHTS shall
prepare a disbursement  check for the RAL by completing a blank  cashier's check
form supplied by Bank at Bank's expense,  and completing and affixing  thereon a
laser generated facsimile signature  authorized by Bank. Such ACR check shall be
for the amount of the RAL less the Bank Fee that the Taxpayer authorized Bank to
withhold from the RAL, and less the Tax Preparation,  Electronic Filing, if any,
ACR  Application,  and ACR Handling Fees, and any other applicable fees that the
Taxpayer authorized Bank to withhold from the RAL and pay to JHTS.

         e. JHTS will also complete a Proceeds  Disbursement  Authorization  and
Truth-in-Lending  Disclosure and Loan And Security  Agreement (the "Disclosure")
on a form which shall be a perforated stub of the blank ACR cashier's check form
supplied by Bank at Bank's expense.  JHTS shall then deliver such Disclosure and
check  promptly to the  Taxpayer  and provide  Bank with a listing of all checks
issued on a particular Business Day and, if not on that day, JHTS will use every
effort to provide  this  information  as soon as possible.  This  listing  shall
identify ACR checks issued by amount, date issued and check number.

         f. If a Taxpayer's RAL  Application  is denied for any reason,  Hewfant
will provide an ASCII or other acceptable  record of such Taxpayer,  and forward
it to Bank  on a  regular  basis.  Hewfant  will  also  complete  and  send  the
appropriate written Notice of Adverse Action in the form prepared or approved by
Bank to Bank,  which Bank will review and forward to the  Taxpayer.  Pursuant to
the  Taxpayer's  Application,  the  Taxpayer  will then receive an ACR check and
shall  have  deducted  from  the  refund  deposited  by the  IRS  all of the tax
preparation/filing fees of JHTS as well as the ACR Application Fee, ACR Handling
Fee, and sums paid to third parties, but not the Bank Fee.

         g. Upon  receiving  oral or written  notice  from a  Taxpayer  that the
Taxpayer no longer  desires to obtain a previously  approved RAL, JHTS shall not
deliver the Bank ACR check to the  Taxpayer  or, if the check has  already  been
delivered or mailed to the Taxpayer, shall advise the Taxpayer to return the ACR
check  to JHTS,  marked  "VOID"  as a result  of a  Taxpayer  cancellation.  The
Taxpayer shall then be deemed to have applied for an ACR and shall be liable for
the same fees as specified  in  Paragraph  4.(h) above when the new ACR check is
issued.

         h. JHTS will retain  original RAL  Applications,  copies of Disclosures
and  Notices of  Adverse  Action for 25  months,  and send  individual  original
Applications  so retained to Bank within five (5) days after Bank's  request for
them. JHTS will retain copies of such records  associated with the RALs and ACRs
and the electronic filing of Taxpayer's federal income tax return as the IRS may
from time to time require or direct.

         i. JHTS and Hewfant  will mail up to three  letters in the form adopted
by Bank and on Bank's  stationary to effect  collection of delinquent  RALs. All
RALs that are 90 or more days delinquent may be referred by Bank to a collection
agency.

5.       BANK'S DUTIES - RALS PROGRAM

         Bank will have the  following  duties with respect to each  Application
for a RAL transmitted to it by Hewfant:

         a. On each  Business Day during the term of this  Agreement,  Bank will
evaluate each  Application for a RAL transmitted to it on that day in accordance
with its  underwriting  standards  then in effect for such RALs and will  notify
Hewfant electronically within two hours after it receives the application if the
Application is not approved.  Bank will not accept any  application  from a JHTS
Affiliate if Bank receives notification from the IRS that the Affiliate is under
investigation,  or Bank  reasonably  suspects  fraudulent  activity  originating
through the Affiliate, or if, for any reason,  delinquencies on RALs originating
through the Affiliate are considered unacceptable.

         b. On the Business Day Bank receives notification,  prior to a mutually
agreed upon cut-off time, that a disbursement check,  including check number and
amount,  has been issued,  Bank will remit, via ACH directly to the bank account
of the local JHTS office that generated the fees, the Tax  Preparation  Fee, the
Electronic Filing Fee, if any, the ACR Application Fee, and any other applicable
fees.

         c. To enable Hewfant and JHTS to identify the fees remitted by Bank, on
a daily basis, Bank will also supply to Hewfant  electronically  with respect to
each fee  remitted  that day:  (a) the name and social  security  number of each
Taxpayer for whom Bank remitted fees; (b) the amount of the Tax Preparation Fee,
Electronic Filing Fee, if any, ACR Application Fee, and any other applicable fee
remitted  for each  Taxpayer;  and (c) the  location  code of the JHTS office at
which the particular Taxpayer applied for a RAL.

         d.  All  loan  disbursement  checks  delivered  to  Taxpayers  shall be
cashier's ACR checks drawn on a loan disbursement  account  established by Bank,
and shall be paid promptly upon  presentment,  unless Bank  reasonably  believes
that it has a valid defense to the payment of such check.  On a daily basis Bank
will  supply to Hewfant  electronically  a listing  of all ACR checks  issued in
connection with RALs that have cleared.

         e. Bank will open a Deposit  Account for each  Taxpayer  at Bank.  Bank
shall have the right to offset such refund when it is  electronically  deposited
by the IRS against the total of the loan disbursement check previously delivered
to the Taxpayer,  plus the Tax Preparation Fee,  Electronic  Filing Fee, if any,
the RAL Application Fee, the Bank Fee, the ACR Application Fee, the ACR Handling
Fee, and any other applicable fees or deductions  authorized by the Taxpayer. If
the Taxpayer's refund exceeds the total of such amounts,  Bank will promptly pay
the excess amount to Taxpayer, provided that any such amount is at least $1.00.

         f. While this  Agreement  is in effect,  subject to approval of Hewfant
and JHTS,  Bank will designate,  pursuant to the provisions of Paragraph  19.i.,
the amount of the Bank Fees that are "Finance  Charges" (as this term is defined
in Federal  Reserve  Board  Regulation  Z), which Bank Fees shall be provided in
Addendum No. 1 and be in effect for one (1) calendar  year.  Bank may change the
Bank Fees  designated by Bank by November 1 of the year before the calendar year
in which the Bank Fees will be  effective.  Bank  agrees to  indemnify  JHTS and
Hewfant with regard to  compliance  with law as provided in the  Indemnification
Agreement appended hereto as Exhibit "B".

6.       BANK FEES AS LOAN LOSS RESERVE

         The Bank Fee for the RALs shall be reserved against losses on the RALs,
applied against such loan losses and disbursed as provided in Addendum No. 1.

7.       BLANK CHECK STOCK

         JHTS will use the blank cashiers' ACR check stock provided by Bank, and
will complete and affix laser  generated  facsimile  signatures  thereto only as
authorized by Bank for the purposes described in this Agreement.  JHTS shall use
reasonable  care to safeguard  the blank ACR check stock  supplied to it by Bank
until each ACR check form is given to the appropriate  Taxpayer,  but JHTS shall
not be  responsible  for any loss that  occurs in  connection  with an ACR check
after  it is  given  to the  Taxpayer.  If a blank  ACR  check  form  should  be
discovered to have been lost,  stolen or given to a person other than the proper
Taxpayer,  JHTS shall promptly report that fact to Bank. Upon termination of the
Agreement,  JHTS  shall  account to Bank for  unused  blank ACR check  stock and
return all unused ACR check stocks to Bank.  JHTS shall maintain and transmit to
Bank a record of ACR check stock or number issued to each Affiliate.  JHTS shall
also destroy all facsimile specimens.

8.       WARRANTIES OF HEWFANT AND JHTS

         Hewfant and, as  applicable,  JHTS,  warrant and continue to warrant to
Bank that:

         a. JHTS  will  maintain  such  computer  software  as is  necessary  to
facilitate the Program, including error checking and fraud detection routines.

         b.  Hewfant will use its best efforts to provide Bank with at least the
number of Bank  Products  for each Tax Season as  specified  in the Addendum for
that Tax Season,  which shall be about fifty  percent (50%) of the Bank Products
provided by JHTS to all of its participating RAL lenders in that Tax Season.

         c.  For  Application  data  transmitted  by JHTS to  Hewfant,  the data
originates from bona fide Program Applications  actually signed and submitted by
the named  applicants,  copies of which along with copies of the RAL  Disclosure
were provided to the Taxpayers at the time of application.

         d. With  respect to each  Application,  JHTS has  obtained the required
forms of identification,  signatures and  certifications  from each Taxpayer and
has no knowledge that any Taxpayer has provided inaccurate data.

         e.  Hewfant  and JHTS are not aware of any  reason  why any  Taxpayer's
income tax refund  would not be made in the amount  submitted by JHTS to Hewfant
and Bank.

         f. All charges and sums which Hewfant or JHTS authorizes Bank to deduct
from the  proceeds  of an ACR or RAL made under the  Program are owed to JHTS or
others by the appropriate  Taxpayer and the Taxpayer has authorized deduction of
the charges or others from the ACR or RAL proceeds.

         g. All ACR checks  completed by JHTS and other funds received from Bank
for payment to Taxpayers will be delivered or mailed by JHTS to the  appropriate
Taxpayer.

         h. JHTS has  complied and will  continue to comply with all  applicable
laws,  regulations,  procedures  and  interpretations  thereof  relating  to the
payment of federal income tax and the  preparation of federal income tax returns
and has  complied  and will  continue  to comply  with all  applicable  laws and
regulations relating to the arranging for RALs in anticipation of the receipt of
federal   income  tax  refunds  and  the  marketing  and   advertising  of  such
arrangements.  This warranty does not extend to those laws and regulations as to
which First Republic has given its warranty under Section 9.

         i. The blank loan  disbursement ACR check stock and facsimile  specimen
provided by Bank to JHTS will be used only as  authorized  by Bank for  purposes
described in this  Agreement and the blank ACR check stock will be returned,  if
unused, by September 1 of the calendar year for which those ACR checks have been
prepared for use.

         j. These warranties shall survive the termination of this Agreement.

9.       WARRANTIES OF FIRST REPUBLIC

         First Republic  warrants to Hewfant and, as applicable,  to JHTS,  that
(i) the  evaluation  and  processing  of  Program  Applications,  the making and
documentation  of RALs to  Taxpayers  under the Program and the fees  charged by
Bank for such RALs will comply with all  applicable  state and federal  laws and
regulations,  including without limitation, the federal Truth-In-Lending Act (15
U.S.C.  1601 et seq.), but excepting those laws and regulations as to which JHTS
has given its warranty under  Paragraph 8.h, and (ii) it has sufficient  capital
to fund the RALS provided by Hewfant to it in any Tax Season.  These  warranties
shall survive the termination of this Agreement.

10.      GUARANTY OF RALS

         To induce First Republic,  either itself or through a designee Bank, to
make RALs to Taxpayers  referred by JHTS and Hewfant pursuant to this Agreement,
Hewfant and JHTS,  jointly  and  severally,  agree to enter into the  Suretyship
Agreement appended hereto as Exhibit "A."

11.      TERM AND TERMINATION

         a. The term of this  Agreement  shall  begin on the date first  written
above and shall  terminate  on October  31,  1999,  unless  extended as provided
below.

         b. Any party may terminate  this  Agreement  upon written notice to the
others as provided in this  Agreement.  Such notice,  to be  effective,  must be
given  during the  period of April 1st to June 30th of any  calendar  year,  and
shall be  effective  to  terminate  this  Agreement  as of the  then  applicable
termination date as it may have been extended and reextended.  If this Agreement
is not  terminated  during the period of April 1st to June 30th in any  calendar
year, the termination date of this Agreement shall  automatically be extended by
one year. Otherwise,  this Agreement may be terminated by any party upon fifteen
(15) days written notice if: (a) applicable laws, regulations, or IRS procedures
governing  the making of RALs and ACRs make (or are  claimed  by an  enforcement
authority  to make) the  continued  operation  of the  Program  of  questionable
legality,  either generally or in any area; or (b) the IRS ceases to permit JHTS
to file income tax returns  electronically or the Treasury  Department ceases to
deposit  income tax  refunds  directly  into  accounts of  Taxpayers  with Bank.
However,  this  Agreement  may not be so  terminated  if either ACRs or RALs may
still lawfully be offered to Taxpayers by Bank.

         c. Performance of duties which by their terms  contemplate  performance
after  the date of  termination  shall be  completed  in  accordance  with  this
Agreement.   Such  duties  include,  but  are  not  limited  to,  collection  of
delinquencies, dispersal of proceeds, payments, and the like.

12.      OWNERSHIP OF LOANS

         Bank,  Hewfant  and JHTS agree that Bank will be sole owner of the RALs
made under the Program.  First Republic,  in consultation with Hewfant, will set
credit  underwriting  standards to evaluate  applications for Program loans from
time to time.  First Republic may supply Hewfant no later than December 31 prior
to any Tax Year, with an ASCII record of the names and social  security  numbers
of all  Taxpayers  for  which it will not  authorize  any RAL for that Tax Year,
provided  that this record is not  excessive in size as  determined  by JHTS and
Hewfant. 13. LOAN LIMITS

         The maximum and  minimum RAL loan  amounts  shall be as provided in the
Addendum.


14.      JHTS FRANCHISEES (AFFILIATES)

         a. JHTS may from time to time arrange for  independently  owned offices
franchised by or  affiliated  with JHTS  ("Affiliates")  to  participate  in the
Program without such Affiliates having a direct agreement with Bank.

         b. JHTS agrees that such Affiliates will execute  agreements  requiring
them to perform  the  duties  and make the  representations  and  warranties  of
Hewfant  and JHTS to Bank with  respect  to RAL and ACR  Applications  submitted
through and processed by them.

         c. Each  Affiliate  is  responsible  for any and all blank  check forms
which are provided to that Affiliate pursuant to this Program. In the event that
blank ACR check forms that have been  forwarded to an Affiliate have been or are
presumed  to have been lost,  stolen or given to a person  other than the proper
Taxpayer,  the Affiliate is responsible  for any and all resultant loss, and the
Affiliate  will indemnify the Bank against such loss. If the Affiliate is unable
or unwilling to  indemnify  Bank within 60 days of receipt of Bank's  demand for
indemnification,  JHTS  agrees that it shall be  responsible  for the actions of
such  Affiliates  with respect to this  Agreement and such  Affiliates  shall be
deemed to be offices owned by JHTS for all purposes  hereof,  including  without
limitation the  warranties of JHTS  hereunder and JHTS shall  indemnify the Bank
for such loss.

15.      PARTICIPATION

         First  Republic  may,  from time to time,  sell and  assign one or more
participation  interests in the ACRs and RALs generated  under the Program,  and
the   participants   to  whom   participation   interests   are  sold  may  sell
sub-participation  interests;  provided, however, that any financial institution
purchasing a  participation  interest of more than 25% in any Program RALs shall
act as a continuing  surety and  indemnitor of all of Bank's  obligations  under
this Agreement.

16.      MARKETING AND OTHER MATERIALS

         a. Hewfant  will develop  marketing  materials in  connection  with the
Program.  First Republic will have the right to review  promptly and approve all
marketing materials produced by Hewfant in connection with the Program, provided
that First Republic's approval is not unreasonably withheld. First Republic will
develop certain other written materials  (including  collection letters and loan
denial  letters) for use in connection  with the Program.  Hewfant and JHTS will
have the right to promptly  review and approve such  materials if they are meant
for  external  use,  provided  that  Hewfant's  and  JHTS's  approvals  are  not
unreasonably withheld.

         b. Each party  hereto owns and may use in  connection  with the Program
certain  trade and service  marks.  No party shall use the other's  marks in any
manner except to the extent and in the manner expressly authorized in writing by
the other.

17.      CONFIDENTIAL INFORMATION

         Each party hereto shall safeguard all data and other  information  made
available to it by the other parties which is of a confidential  nature,  taking
reasonable  precautions to withhold the same from  disclosure to the same extent
that it  would  safeguard  its  own  confidential  information  and  data.  Such
confidential  information  shall  not  include  information  which is  otherwise
generally  available  to the  public,  or  rightfully  obtained by or from third
parties.  Upon the termination of this  Agreement,  the parties shall return all
such  confidential  information  and  certify  in  writing  that no  copies  are
retained. The undertakings of this Paragraph 17 shall survive the termination of
this Agreement.

18.      INDEMNIFICATION

         Hewfant and Jackson Hewitt,  jointly and severally on the one part, and
First Republic individually on the other (herein,  each an "Indemnitor"),  shall
indemnify the other against any liabilities and expenses,  including legal fees,
incurred by the other in connection with any claims, disputes,  controversies or
litigation  arising  out of (a) the  failure of such  Indemnitor  to perform its
duties  and  responsibilities  under  this  Agreement,  as it may  be  extended,
renewed,  modified or amended or (b) any breach of the  Indemnitor's  warranties
made under this Agreement, as it may be extended,  renewed, modified or amended.
The  indemnifying  party  shall have the right to  control  any action for which
indemnity is required herein,  through  knowledgeable and experienced counsel of
its choice;  provided,  however, that at the indemnitee's option, the indemnitee
may  participate in and contribute to such action and appoint its own counsel at
any time,  all of which  shall be at such  indemnitee's  cost and  expense.  The
liability of Hewfant and Jackson  Hewitt  hereunder  shall jointly be limited to
65% of the liability and expenses for which such indemnification is being sought
hereunder.  This indemnity shall survive the  termination of this  Agreement.  A
copy of the form of Indemnification Agreement is appended hereto as Exhibit "B."

19.      MISCELLANEOUS

         a.  This   Agreement  is  binding  on  the  parties  hereto  and  their
successors.  Each  party may assign its  rights  and  delegate  its  obligations
hereunder to any of its direct  corporate  parents,  to any of its  wholly-owned
subsidiaries  or to any  affiliate.  Other  than as  explicitly  stated  in this
paragraph,  this  Agreement  cannot be assigned to any party without the express
written  consent of all other parties,  except that First Republic may designate
another Bank to offer the Bank Products in participation with First Republic and
may  also  sell  and  assign  one or more  participation  interests  in the Bank
Products  at any time and  from  time to time  pursuant  to  Paragraph  15 above
without notice to or the consent of the other parties.

         b.  This  Agreement  shall be  governed  by and  interpreted  under the
internal laws of the State of Delaware and, to the extent applicable, the United
States of America.

         c.  Notice,  when  required  under  this  Agreement,  shall be given in
writing by first class U.S. Mail, postage prepaid, addressed as follows:
                           If to BANK:          First Republic Bank
                                                1608 Walnut Street
                                                10th Floor
                                                Philadelphia, PA  19102

                           If to JHTS:          Jackson Hewitt Inc.
                                                4575 Bonney Road
                                                Virginia Beach, VA  23462

                           If to Hewfant:       Hewfant Inc.
                                                4575 Bonney Road
                                                Virginia Beach, VA  23462

Notice  properly given under the  provisions of this  Paragraph  shall be deemed
given on the day following the day when placed in the mails.

         d. The failure of any party to insist upon another  party's  compliance
with or  performance  of any term or  condition of this  Agreement  shall not be
deemed a waiver of such term or  condition,  and no waiver shall be binding upon
any party unless in writing and signed by such party,  and shall then be binding
only for that particular instance.

         e. The parties agree that if any provision of this  Agreement  shall be
determined  to be void by any  court  of  competent  jurisdiction,  then  such a
determination  shall not affect any other  provision of this  Agreement,  all of
which  provisions  shall  remain in effect.  If any  provision is capable of two
constructions, one of which would render the provision valid, then the provision
shall have the meaning which renders it valid.

         f. This writing  constitutes  the entire  agreement  among the parties.
This Agreement may be amended or supplemented only by a writing duly executed by
authorized representatives of the parties.

         g. It is expressly  understood  and agreed that it is not the intention
or  purpose  of this  Agreement  to create  nor shall the same be  construed  as
creating any type of agency, partnership or joint venture.

         h. From time to time First Republic,  its designated Bank and/or its or
their banking  examiners or auditors may perform  physical  audits of blank Bank
ACR check stock, Program Application forms, copies of Taxpayers' 8453 Forms, and
delinquency  summaries by JHTS  Affiliates  in  Hewfant's or JHTS's  possession.
Hewfant and JHTS will permit First Republic,  its designated Bank, and/or its or
their banking examiners or auditors,  access to Hewfant's and/or JHTS's premises
and records  for the purpose of such  audits,  and will  cooperate  with Bank in
connection with such audits.

         i. This  Agreement  may not be modified or amended  without the written
consent of JHTS., Hewfant and Bank. Any changes in terms or fees must be decided
upon each year no later than  December 1 or shall  continue to remain in effect.
Fees  established on that date shall be as provided in the Addendum for the next
Tax Season and may not be changed at any other time without the express, written
consent of all parties.

         j.  To  facilitate  execution,   this  Agreement  may  be  executed  in
counterparts by the parties and shall be binding when duly authorized signatures
of each party appear on one or more counterparts delivered to the other parties.
All counterparts shall collectively constitute a single Agreement.

         IN WITNESS  WHEREOF,  and  intending to be legally  bound  hereby,  the
parties hereto have caused their duly authorized representatives to execute this
Agreement as of the day and year first written above.

Attest:                      FIRST REPUBLIC BANK
                          

                             BY:   /s/Rolf Stensrud
                             --------------------------------
                                             (SEAL)
                             Typed Name:  Rolf Stensrud

                             Title:  President

Attest:                      HEWFANT, INC.
                          
                             BY:   /s/ Keith  e. Alessi
                              ---------------------------------
                                              (SEAL)

                             Typed Name:  Keith E. Alessi


                             Title:  President


Attest:                      JACKSON HEWITT INC.


                             BY:     /s/ Keith E. Alessi
                             -----------------------------------

                                             (SEAL)

                             Typed Name:  Keith E. Alessi


                             Title:  President

<PAGE>




                                    TAX REFUND FUNDING AGREEMENT


         This Tax Refund Funding  Agreement (the  "Agreement") is made this 26th
day of November,  1997,  by and among Santa  Barbara Bank & Trust,  a California
banking  corporation  ("Santa  Barbara"),  Hewfant Inc., a Virginia  corporation
("Hewfant"),  and Jackson Hewitt Inc., a Virginia  corporation (which,  together
with its affiliates and franchisees  (each an  "Affiliate"),  as applicable,  is
referred to as "JHTS").

         DEFINITIONS

         "Addendum  No. 1" means an addendum to this  Agreement,  adopted by the
parties  for any Tax Season  while  this  Agreement  remains  in  effect,  which
specifies the fees and charges for the Bank Products imposed on Taxpayers during
that Tax Season and the duties and  obligations  of the  parties  regarding  the
disbursement  thereof.  The  provisions  of the Addendum No. 1 applicable to the
current Tax Season are incorporated into this Agreement as if contained herein.

         "Application" means the document by which a Taxpayer applies for an ACR
and, at the election of the Taxpayer, a RAL.

         "ACR" or  "Accelerated  Check Refund"  means a program  offered by Bank
using electronic or other filing by which a Taxpayer requests his or her federal
income tax refund be deposited  directly into the Taxpayer's  Deposit Account at
Bank.

         "ACR Application Fee" means the  nonrefundable fee charged by the local
JHTS office for processing an ACR Application.

         "ACR  Handling  Fee"  means the fee  charged  by Bank for  opening  the
Deposit  Account,  processing and accounting for the refund to a Taxpayer by the
IRS,  disbursing the tax preparation and ACR Application Fees due the local JHTS
office generating the ACR, and providing and processing the ACR check.

         "Bank"  means Santa  Barbara or any other  financial  institution  that
Santa Barbara  designates to offer the Bank Products in participation with Santa
Barbara, as indicated in Addendum No. 1.

         "Bank Fee" means the finance charge imposed by Bank for making a Refund
Anticipation Loan.

         "Bank Products" include the ACRs and/or RALs.

         "Business  Day" means any day,  other than a Saturday,  Sunday or legal
holiday, on which the Bank is open for business. "Delinquent RAL" means an
outstanding  RAL that has not been paid in full within 23 days after the date
the RAL check was issued.

         "Deposit  Account" means the deposit account  established in Bank for a
Taxpayer by Bank, and into which the IRS will deposit the Taxpayer's refund.

         "Electronic  Filing Fee" means the fee charged by the local JHTS office
for  electronically  filing income tax returns  prepared by preparers other than
Jackson Hewitt.

         "IRS" means the Internal Revenue Service.

         "Program" means the system developed by Santa Barbara, JHTS and Hewfant
to provide ACRs and RALs to Taxpayers.

         "RAL"  or  "Refund  Anticipation  Loan"  means  a  loan  secured  by  a
Taxpayer's federal income tax refund.

         "Reserve  Account" means an interest bearing account at Bank into which
Bank will deposit the Bank Fee received  when the tax refund is deposited by the
IRS for each RAL issued.

         "Hewfant ACR Account"  means an interest  bearing  account at Bank into
which Bank will deposit a sum as specified in the Addendum for each ACR when the
Taxpayer's  federal  income tax refund is  deposited by the IRS into the Deposit
Account.

         "Taxpayer"  means a JHTS  customer for any of its  services.  It refers
both to individual  taxpayers filing  individual  returns and to joint taxpayers
filing joint returns.

         "Tax Season" in any  calendar  year means the period from the first day
in that year that the IRS permits  electronic  filing through April 30th of that
year.

         "Tax  Preparation  Fee" means the fee  charged by the local JHTS office
for preparing and electronically filing a tax return.

         INTRODUCTION

         WHEREAS,  JHTS  operates  a  tax  preparation  business  that  features
electronic filing of federal and selected state income tax returns; and,

         WHEREAS,  Santa  Barbara,  Hewfant and JHTS have  established a Program
through which Taxpayers are offered ACRs and RALs through selected banks; and,

         WHEREAS,  Bank desires to be one of the banks to offer ACRs and RALs to
JHTS customers on the terms and conditions provided in this Agreement;

         NOW, THEREFORE,  in consideration of the mutual promises and agreements
contained  in this  Agreement,  and other good and valuable  consideration,  the
receipt of which is hereby acknowledged, all of the parties agree as follows:

         AGREEMENT

1.       DUTIES OF JHTS AND HEWFANT - ACR PROGRAM

         As to each  Taxpayer  electing  to apply for  participation  in the ACR
Program, Hewfant or JHTS, as applicable, shall have the following obligations:

         a. JHTS will complete and have the Taxpayer (and the Taxpayer's  spouse
if the return is a joint return) execute: (1) an ACR Application on a form which
Hewfant  will have  printed at its  expense  from  artwork  supplied by Bank and
approved  by  Hewfant  and (2) an IRS Form  8453  (U.S.  Individual  Income  Tax
Declaration   for   Electronic   Filing),   which  JHTS  will   execute  as  the
preparer/transmitter,  which Form 8453 JHTS will supply at its  expense.  Bank's
name and routing  transit number shall be preprinted in Part II of Form 8453 and
a depositor  account  number  consisting  of a prefix  specified by Bank,  and a
suffix  consisting of the  Taxpayer's  social  security  number,  which shall be
verified by JHTS (or the social security number of the primary Taxpayer,  in the
case of a joint return) shall be inserted by JHTS in Part II in Form 8453.

         b. JHTS will inspect one form of signed picture identification, and use
its best  efforts to inspect a second form of signed photo  identification  from
each  Taxpayer to verify the identity of the  Taxpayer.  If joint  Taxpayers are
both present,  JHTS will inspect one form of picture  identification  from each.
The identification shall be from among the following:

                  i.       a clearly identifiable school picture ID card;

                  ii.      a valid U.S. Passport;

                  iii.     a valid resident alien card that contains a 
                           photograph;

                  iv.      a valid driver's license containing a photo ID;

                  v.       a current military ID card;

                  vi.      a state ID card;

                  vii.     an Indian Affairs card; or

                  viii. a union membership ID.

         c.  Hewfant  will  cooperate  with JHTS in  submitting  the  Taxpayer's
federal  income  tax return to the IRS  electronically.  JHTS will file the hard
copy of IRS Form 8453 with the IRS in accordance with IRS regulations.

         d. After  electronically  transmitting or mailing the Taxpayer's income
tax  return  to  the  IRS  and  receiving  the  IRS  acknowledgment,  JHTS  will
electronically  transmit to Bank and Hewfant:  (1) the Taxpayer's  name; (2) the
Taxpayer's address; (3) the Taxpayer's social security number; (4) the amount of
the  Taxpayer's  federal income tax refund as computed by JHTS; (5) the location
code of the JHTS office at which the  Taxpayer  applied for an ACR;  and (6) the
amount of all fees owing to JHTS and Bank from the  Taxpayer  which the Taxpayer
authorized Bank to withhold from the Taxpayer's refund and pay to JHTS.

         e. Upon  receiving  notice from Bank that a Taxpayer's  refund has been
deposited  at  Bank,  Hewfant  shall  assist  JHTS to  prepare  an ACR  check by
completing a blank cashier's check form supplied by Bank at Bank's expense,  and
completing and affixing thereon a laser generated facsimile signature authorized
by Bank.  Such  check  shall be in the  amount  of the tax  refund  less the ACR
Handling Fee, the Tax  Preparation  Fee, the Electronic  Filing Fee, if any, the
ACR  Application  Fee,  and any other sum that the Taxpayer  authorized  Bank to
withhold from the ACR check and pay to third  parties.  This check shall be made
available  to the  Taxpayer  by JHTS at the JHTS  office at which  the  Taxpayer
applied for the ACR following JHTS's receipt of confirmation  from Bank that the
tax refund has been deposited into the Taxpayer's account at Bank.

         f. JHTs will retain  original ACR  Applications  for  twenty-five  (25)
months,  and send to Bank  copies of ACR  Applications  within  five (5) days of
Bank's request.  JHTS will retain copies of such records associated with the ACR
Program,  and the electronic filing of the Taxpayer's  federal income tax return
as the IRS may from time to time require or direct.

         g. JHTS will use its best  efforts  to  retain  copies of such  records
associated  with the ACR  Program  and the  electronic  and mail  filing  of the
Taxpayer's federal income tax return as the IRS may from time to time require or
direct.

2.       BANK'S DUTIES - ACR PROGRAM

         Bank will have the  following  duties with respect to each  Application
for an ACR transmitted to it by Hewfant or JHTS:

         a. At the time Hewfant or JHTS notifies Bank of an  application  for an
ACR,  Bank will  open a Deposit  Account  in the name of  Taxpayer  in which the
Taxpayer's refund will be deposited by the IRS. Bank shall provide artwork for a
form to be executed by a taxpayer  granting Bank the right to offset such refund
from the Deposit Account when it is electronically  deposited by the IRS for all
JHTS fees and Bank's fees.

         b. Upon receipt of the Taxpayer's refund from the IRS, Bank shall remit
the Tax Preparation Fee, the Electronic  Filing Fee, if any, the ACR Application
Fee, and any other sum that Taxpayer has authorized  Bank to pay pursuant to the
ACR Application by: (a)  transferring the amount of the Tax Preparation Fee, the
Electronic  Filing Fee, if any,  and the ACR  Application  Fee,  via ACH, to the
account of the JHTS office that generated the ACR Application; and (b) notifying
Hewfant each day, either  electronically  or on magnetic  diskette,  of each tax
refund received for which an ACR check should be issued,  together with the name
and social  security  number of the Taxpayer,  the amount of the Tax Preparation
Fee, the Electronic  Filing Fee, if any, the ACR Application  Fee, and any other
sum  remitted  for  such  Taxpayer  to  a  third  party,  pursuant  to  the  ACR
Application,  and the location  code of the JHTS office at which the  particular
Taxpayer applied for an ACR.

         c.  While this  Agreement  is in effect,  subject  to the  approval  of
Hewfant and JHTS, Bank will  designate,  pursuant to the provisions of Paragraph
19.i,  the amount of the ACR  Handling  Fee,  which fee shall be provided in the
Addendum  and be in effect for one (1)  calendar  year.  Bank may change the ACR
Handling Fee for any subsequent  calendar year during the term of this Agreement
by November 1 of the prior  calendar  year only  according to the  provisions of
Paragraph 19.i of this Agreement.

3.       ALLOCATION OF ACR HANDLING FEES

         The ACR Handling Fees shall be allocated and remitted as provided in
         Addendum No. 1.

4.       DUTIES OF HEWFANT AND JHTS - RAL PROGRAM

         As to each  Taxpayer  electing to apply for  participation  in the RALs
Program, Hewfant or JHTS, as applicable, will do the following:

         a. Perform those duties specified in Subparagraphs  1.a, 1.b and 1.c of
this Agreement.

         b. After  electronically  transmitting the Taxpayer's income tax return
to the IRS  and  receiving  the IRS  acknowledgment,  JHTS  will  electronically
transmit  to Bank and  Hewfant:  (1) the  Taxpayer's  name;  (2) the  Taxpayer's
address;  (3) the  Taxpayer's  social  security  number;  (4) the  amount of the
Taxpayer's  federal income tax refund as computed by JHTS; (5) the location code
of the JHTS office at which the Taxpayer  applied for a RAL; and, (6) the amount
of all fees owing to JHTS from the Taxpayer which the Taxpayer  authorized  Bank
to withhold  from the RAL  proceeds  and pay to JHTS.  JHTS shall  instruct  its
Affiliates  that,  in no  instance,  may a  separate  charge  be  imposed  by an
Affiliate related to the application for or processing and disbursement of a RAL
other than the ACR Application,  Electronic  Filing, if any, and Tax Preparation
Fees and that the ACR  Application Fee charged by an Affiliate shall be the same
whether the Taxpayer applies for an ACR alone or an ACR and RAL.

         c. On each Business Day during the term of this Agreement, Hewfant will
process each  Application  for a RAL transmitted to it on that day in accordance
with Bank's program eligibility and credit underwriting standards then in effect
for such  RALs and in  accordance  with an ASCII or other  acceptable  record of
uncreditworthy  persons  provided by Bank,  and will notify JHTS  electronically
within two (2) hours after it  receives  the  application  as to whether the RAL
should be made based on Bank's  eligibility and credit  underwriting  standards.
Bank shall independently evaluate each Application for a RAL.

         d. Unless  notice is received by JHTS from Bank  electronically  within
two (2) hours after Bank received the Application that a Taxpayer's  application
for a RAL has not been approved by Bank, upon receipt of electronic  notice from
Hewfant that a Taxpayer's  RAL should be made,  in  accordance  with an ASCII or
other acceptable file of ineligible customers to be supplied by Bank, JHTS shall
prepare a disbursement  check for the RAL by completing a blank  cashier's check
form supplied by Bank at Bank's expense,  and completing and affixing  thereon a
laser generated facsimile signature  authorized by Bank. Such ACR check shall be
for the amount of the RAL less the Bank Fee that the Taxpayer authorized Bank to
withhold from the RAL, and less the Tax Preparation,  Electronic Filing, if any,
ACR  Application,  and ACR Handling Fees, and any other applicable fees that the
Taxpayer authorized Bank to withhold from the RAL and pay to JHTS.

         e. JHTS will also complete a Proceeds  Disbursement  Authorization  and
Truth-in-Lending  Disclosure and Loan And Security  Agreement (the "Disclosure")
on a form which shall be a perforated stub of the blank ACR cashier's check form
supplied by Bank at Bank's expense.  JHTS shall then deliver such Disclosure and
check  promptly to the  Taxpayer  and provide  Bank with a listing of all checks
issued on a particular Business Day and, if not on that day, JHTS will use every
effort to provide  this  information  as soon as possible.  This  listing  shall
identify ACR checks issued by amount, date issued and check number.

         f. If a Taxpayer's RAL  Application  is denied for any reason,  Hewfant
will provide an ASCII or other acceptable  record of such Taxpayer,  and forward
it to Bank on a regular  basis.  Pursuant  to the  Taxpayer's  Application,  the
Taxpayer  will then receive an ACR check and shall have deducted from the refund
deposited by the IRS all of the tax  preparation/filing  fees of JHTS as well as
the ACR Application  Fee, ACR Handling Fee, and sums paid to third parties,  but
not the Bank Fee.

         g. Upon  receiving  oral or written  notice  from a  Taxpayer  that the
Taxpayer no longer  desires to obtain a previously  approved RAL, JHTS shall not
deliver the Bank ACR check to the  Taxpayer  or, if the check has  already  been
delivered or mailed to the Taxpayer, shall advise the Taxpayer to return the ACR
check  to JHTS,  marked  "VOID"  as a result  of a  Taxpayer  cancellation.  The
Taxpayer shall then be deemed to have applied for an ACR and shall be liable for
the same fees as specified  in  Paragraph  4.(f) above when the new ACR check is
issued.

         h. JHTS will retain  original RAL  Applications,  copies of Disclosures
and  Notices of  Adverse  Action for 25  months,  and send  individual  original
Applications  so retained to Bank within five (5) days after Bank's  request for
them. JHTS will retain copies of such records  associated with the RALs and ACRs
and the electronic filing of Taxpayer's federal income tax return as the IRS may
from time to time require or direct.

         i. JHTS and Hewfant  will mail up to three  letters in the form adopted
by Bank and on Bank's  stationary to effect  collection of delinquent  RALs. All
RALs that are 90 or more days delinquent may be referred by Bank to a collection
agency.

5.       BANK'S DUTIES - RALS PROGRAM

         Bank will have the  following  duties with respect to each  Application
for a RAL transmitted to it by Hewfant:

         a. On each  Business Day during the term of this  Agreement,  Bank will
evaluate each  Application for a RAL transmitted to it on that day in accordance
with its  underwriting  standards  then in effect for such RALs and will  notify
Hewfant electronically within two hours after it receives the application if the
Application is not approved.  Bank will not accept any  application  from a JHTS
Affiliate if Bank receives notification from the IRS that the Affiliate is under
investigation,  or Bank  reasonably  suspects  fraudulent  activity  originating
through the Affiliate, or if, for any reason,  delinquencies on RALs originating
through the Affiliate are considered unacceptable.

         b. On the Business Day Bank receives notification,  prior to a mutually
agreed upon cut-off time, that a disbursement check,  including check number and
amount,  has been issued,  Bank will remit, via ACH directly to the bank account
of the local JHTS office that generated the fees, the Tax  Preparation  Fee, the
Electronic Filing Fee, if any, the ACR Application Fee, and any other applicable
fees.

         c. To enable Hewfant and JHTS to identify the fees remitted by Bank, on
a daily basis, Bank will also supply to Hewfant  electronically  with respect to
each fee  remitted  that day:  (a) the name and social  security  number of each
Taxpayer for whom Bank remitted fees; (b) the amount of the Tax Preparation Fee,
Electronic Filing Fee, if any, ACR Application Fee, and any other applicable fee
remitted  for each  Taxpayer;  and (c) the  location  code of the JHTS office at
which the particular Taxpayer applied for a RAL.

         d.  All  loan  disbursement  checks  delivered  to  Taxpayers  shall be
cashier's ACR checks drawn on a loan disbursement  account  established by Bank,
and shall be paid promptly upon  presentment,  unless Bank  reasonably  believes
that it has a valid defense to the payment of such check.  On a daily basis Bank
will  supply to Hewfant  electronically  a listing  of all ACR checks  issued in
connection with RALs that have cleared.

         e. Bank will open a Deposit  Account for each  Taxpayer  at Bank.  Bank
shall have the right to offset such refund when it is  electronically  deposited
by the IRS against the total of the loan disbursement check previously delivered
to the Taxpayer,  plus the Tax Preparation Fee,  Electronic  Filing Fee, if any,
the RAL Application Fee, the Bank Fee, the ACR Application Fee, the ACR Handling
Fee, and any other applicable fees or deductions  authorized by the Taxpayer. If
the Taxpayer's refund exceeds the total of such amounts,  Bank will promptly pay
the excess amount to Taxpayer, provided that any such amount is at least $1.00.

         f. While this  Agreement  is in effect,  subject to approval of Hewfant
and JHTS,  Bank will designate,  pursuant to the provisions of Paragraph  19.i.,
the amount of the Bank Fees that are "Finance  Charges" (as this term is defined
in Federal  Reserve  Board  Regulation  Z), which Bank Fees shall be provided in
Addendum No. 1 and be in effect for one (1) calendar  year.  Bank may change the
Bank Fees  designated by Bank by November 1 of the year before the calendar year
in which the Bank Fees will be  effective.  Bank  agrees to  indemnify  JHTS and
Hewfant with regard to  compliance  with law as provided in the  Indemnification
Agreement appended hereto as Exhibit "B".

6.       BANK FEES AS LOAN LOSS RESERVE

         The Bank Fee for the RALs shall be reserved against losses on the RALs,
applied against such loan losses and disbursed as provided in Addendum No. 1.

7.       BLANK CHECK STOCK

         JHTS will use the blank cashiers' ACR check stock provided by Bank, and
will complete and affix laser  generated  facsimile  signatures  thereto only as
authorized by Bank for the purposes described in this Agreement.  JHTS shall use
reasonable  care to safeguard  the blank ACR check stock  supplied to it by Bank
until each ACR check form is given to the appropriate  Taxpayer,  but JHTS shall
not be  responsible  for any loss that  occurs in  connection  with an ACR check
after  it is  given  to the  Taxpayer.  If a blank  ACR  check  form  should  be
discovered to have been lost,  stolen or given to a person other than the proper
Taxpayer,  JHTS shall promptly report that fact to Bank. Upon termination of the
Agreement,  JHTS  shall  account to Bank for  unused  blank ACR check  stock and
return all unused ACR check stocks to Bank.  JHTS shall maintain and transmit to
Bank a record of ACR check stock or number issued to each Affiliate.  JHTS shall
also destroy all facsimile specimens.


<PAGE>

8.       WARRANTIES OF HEWFANT AND JHTS


Hewfant and, as applicable, JHTS, warrant and continue to warrant to Bank that:

         a. JHTS  will  maintain  such  computer  software  as is  necessary  to
facilitate the Program, including error checking and fraud detection routines.

         b.  Hewfant will use its best efforts to provide Bank with at least the
number of Bank  Products  for each Tax Season as  specified  in the Addendum for
that Tax Season.

         c.  For  Application  data  transmitted  by JHTS to  Hewfant,  the data
originates from bona fide Program Applications  actually signed and submitted by
the named  applicants,  copies of which along with copies of the RAL  Disclosure
were provided to the Taxpayers at the time of application.

         d. With  respect to each  Application,  JHTS has  obtained the required
forms of identification,  signatures and  certifications  from each Taxpayer and
has no knowledge that any Taxpayer has provided inaccurate data.

         e.  Hewfant  and JHTS are not aware of any  reason  why any  Taxpayer's
income tax refund  would not be made in the amount  submitted by JHTS to Hewfant
and Bank.

         f. All charges and sums which Hewfant or JHTS authorizes Bank to deduct
from the  proceeds  of an ACR or RAL made under the  Program are owed to JHTS or
others by the appropriate  Taxpayer and the Taxpayer has authorized deduction of
the charges or others from the ACR or RAL proceeds.

         g. All ACR checks  completed by JHTS and other funds received from Bank
for payment to Taxpayers will be delivered or mailed by JHTS to the  appropriate
Taxpayer.

         h. JHTS has  complied and will  continue to comply with all  applicable
laws,  regulations,  procedures  and  interpretations  thereof  relating  to the
payment of federal income tax and the  preparation of federal income tax returns
and has  complied  and will  continue  to comply  with all  applicable  laws and
regulations relating to the arranging for RALs in anticipation of the receipt of
federal   income  tax  refunds  and  the  marketing  and   advertising  of  such
arrangements.  This warranty does not extend to those laws and regulations as to
which Santa Barbara has given its warranty under Section 9.

         i. The blank loan  disbursement ACR check stock and facsimile  specimen
provided by Bank to JHTS will be used only as  authorized  by Bank for  purposes
described in this  Agreement and the blank ACR check stock will be returned,  if
unused, by September 1 of the calendar year for which those ACR checks have been
prepared for use.

         j. These warranties shall survive the termination of this Agreement.

9.       WARRANTIES OF SANTA BARBARA

         Santa Barbara warrants to Hewfant and, as applicable, to JHTS, that (i)
the  evaluation  and  processing  of  Program   Applications,   the  making  and
documentation  of RALs to  Taxpayers  under the Program and the fees  charged by
Bank for such RALs will comply with all  applicable  state and federal  laws and
regulations,  including without limitation, the federal Truth-In-Lending Act (15
U.S.C.  1601 et seq.), but excepting those laws and regulations as to which JHTS
has given its warranty under  Paragraph 8.h, and (ii) it has sufficient  capital
to fund the RALS provided by Hewfant to it in any Tax Season.  These  warranties
shall survive the termination of this Agreement.

10.      GUARANTY OF RALS

         To induce Santa Barbara to make RALs to Taxpayers  referred by JHTS and
Hewfant  pursuant to this  Agreement,  Hewfant and JHTS,  jointly and severally,
agree to enter into the Suretyship Agreement appended hereto as Exhibit "A."

11.      TERM AND TERMINATION

         a. The term of this  Agreement  shall  begin on the date first  written
above and shall terminate on November 30, 1998.

         b. This Agreement may be terminated by any party upon fifteen (15) days
written notice if: (a) applicable laws, regulations, or IRS procedures governing
the making of RALs and ACRs make (or are claimed by an enforcement  authority to
make) the continued  operation of the Program of questionable  legality,  either
generally  or in any area;  or (b) the IRS ceases to permit  JHTS to file income
tax returns  electronically or the Treasury  Department ceases to deposit income
tax  refunds  directly  into  accounts of  Taxpayers  with Bank.  However,  this
Agreement may not be so terminated if either ACRs or RALs may still  lawfully be
offered to Taxpayers by Bank.  (c) A breach of any material  provision by either
party not cured within ten days from issuance of a notice to cure such breach.

         c. Performance of duties which by their terms  contemplate  performance
after  the date of  termination  shall be  completed  in  accordance  with  this
Agreement.   Such  duties  include,  but  are  not  limited  to,  collection  of
delinquencies, dispersal of proceeds, payments, and the like.

12.      OWNERSHIP OF LOANS

         Bank,  Hewfant  and JHTS agree that Bank will be sole owner of the RALs
made under the Program.  Santa Barbara,  in consultation with Hewfant,  will set
credit  underwriting  standards to evaluate  applications for Program loans from
time to time.  Santa Barbara may supply  Hewfant no later than December 31 prior
to any Tax Year, with an ASCII record of the names and social  security  numbers
of all  Taxpayers  for  which it will not  authorize  any RAL for that Tax Year,
provided  that this record is not  excessive in size as  determined  by JHTS and
Hewfant.

13.      LOAN LIMITS

         The maximum and  minimum RAL loan  amounts  shall be as provided in the
Addendum.

14.      JHTS FRANCHISEES (AFFILIATES)

         a. JHTS may from time to time arrange for  independently  owned offices
franchised by or  affiliated  with JHTS  ("Affiliates")  to  participate  in the
Program without such Affiliates having a direct agreement with Bank.

         b. JHTS agrees that such Affiliates will execute  agreements  requiring
them to perform  the  duties  and make the  representations  and  warranties  of
Hewfant  and JHTS to Bank with  respect  to RAL and ACR  Applications  submitted
through and processed by them.

         c. Each  Affiliate  is  responsible  for any and all blank  check forms
which are provided to that Affiliate pursuant to this Program. In the event that
blank ACR check forms that have been  forwarded to an Affiliate have been or are
presumed  to have been lost,  stolen or given to a person  other than the proper
Taxpayer,  the Affiliate is responsible  for any and all resultant loss, and the
Affiliate  will indemnify the Bank against such loss. If the Affiliate is unable
or unwilling to  indemnify  Bank within 60 days of receipt of Bank's  demand for
indemnification,  JHTS  agrees that it shall be  responsible  for the actions of
such  Affiliates  with respect to this  Agreement and such  Affiliates  shall be
deemed to be offices owned by JHTS for all purposes  hereof,  including  without
limitation the  warranties of JHTS  hereunder and JHTS shall  indemnify the Bank
for such loss.

15.      PARTICIPATION

         Santa  Barbara  may,  from time to time,  sell and  assign  one or more
participation  interests in the ACRs and RALs generated  under the Program,  and
the   participants   to  whom   participation   interests   are  sold  may  sell
sub-participation  interests;  provided, however, that any financial institution
purchasing a  participation  interest of more than 25% in any Program RALs shall
act as a continuing  surety and  indemnitor of all of Bank's  obligations  under
this Agreement.

16.      MARKETING AND OTHER MATERIALS

         a. Hewfant  will develop  marketing  materials in  connection  with the
Program.  Santa  Barbara will have the right to review  promptly and approve all
marketing materials produced by Hewfant in connection with the Program, provided
that Santa Barbara's approval is not unreasonably  withheld.  Santa Barbara will
develop certain other written materials  (including  collection letters and loan
denial  letters) for use in connection  with the Program.  Hewfant and JHTS will
have the right to promptly  review and approve such  materials if they are meant
for  external  use,  provided  that  Hewfant's  and  JHTS's  approvals  are  not
unreasonably withheld.

         b. Each party  hereto owns and may use in  connection  with the Program
certain  trade and service  marks.  No party shall use the other's  marks in any
manner except to the extent and in the manner expressly authorized in writing by
the other.

17.      CONFIDENTIAL INFORMATION

         Each party hereto shall safeguard all data and other  information  made
available to it by the other parties which is of a confidential  nature,  taking
reasonable  precautions to withhold the same from  disclosure to the same extent
that it  would  safeguard  its  own  confidential  information  and  data.  Such
confidential  information  shall  not  include  information  which is  otherwise
generally  available  to the  public,  or  rightfully  obtained by or from third
parties.  Upon the termination of this  Agreement,  the parties shall return all
such  confidential  information  and  certify  in  writing  that no  copies  are
retained. The undertakings of this Paragraph 17 shall survive the termination of
this Agreement.

18.      INDEMNIFICATION

         Hewfant and Jackson Hewitt,  jointly and severally on the one part, and
Santa Barbara  individually on the other (herein,  each an "Indemnitor"),  shall
indemnify the other against any liabilities and expenses,  including legal fees,
incurred by the other in connection with any claims, disputes,  controversies or
litigation  arising  out of (a) the  failure of such  Indemnitor  to perform its
duties  and  responsibilities  under  this  Agreement,  as it may  be  extended,
renewed,  modified or amended or (b) any breach of the  Indemnitor's  warranties
made under this Agreement, as it may be extended,  renewed, modified or amended.
The  indemnifying  party  shall have the right to  control  any action for which
indemnity is required herein,  through  knowledgeable and experienced counsel of
its choice;  provided,  however, that at the indemnitee's option, the indemnitee
may  participate in and contribute to such action and appoint its own counsel at
any time,  all of which  shall be at such  indemnitee's  cost and  expense.  The
liability of Hewfant and Jackson  Hewitt  hereunder  shall jointly be limited to
65% of the liability and expenses for which such indemnification is being sought
hereunder.  This indemnity shall survive the  termination of this  Agreement.  A
copy of the form of Indemnification Agreement is appended hereto as Exhibit "B."

19.      MISCELLANEOUS

         a.  This   Agreement  is  binding  on  the  parties  hereto  and  their
successors.  Each  party may assign its  rights  and  delegate  its  obligations
hereunder to any of its direct  corporate  parents,  to any of its  wholly-owned
subsidiaries  or to any  affiliate.  Other  than as  explicitly  stated  in this
paragraph,  this  Agreement  cannot be assigned to any party without the express
written  consent of all other  parties,  except that Santa  Barbara may sell and
assign one or more participation  interests in the Bank Products at any time and
from  time to time  pursuant  to  Paragraph  15 above  without  notice to or the
consent of the other parties.

         b.  This  Agreement  shall be  governed  by and  interpreted  under the
internal  laws of the State of  California  and, to the extent  applicable,  the
United States of America.

         c.  Notice,  when  required  under  this  Agreement,  shall be given in
writing by first class U.S. Mail, postage prepaid, addressed as follows:

                           If to BANK:           Santa Barbara Bank
                                                 P.O. Box 1390
                                                 Solana Beach, CA  92075


                           If to JHTS:           Jackson Hewitt Inc.
                                                 4575 Bonney Road
                                                 Virginia Beach, VA  23462

                           If to Hewfant:        Hewfant Inc.
                                                 4575 Bonney Road
                                                 Virginia Beach, VA  23462

Notice  properly given under the  provisions of this  Paragraph  shall be deemed
given on the day following the day when placed in the mails.

         d. The failure of any party to insist upon another  party's  compliance
with or  performance  of any term or  condition of this  Agreement  shall not be
deemed a waiver of such term or  condition,  and no waiver shall be binding upon
any party unless in writing and signed by such party,  and shall then be binding
only for that particular instance.

         e. The parties agree that if any provision of this  Agreement  shall be
determined  to be void by any  court  of  competent  jurisdiction,  then  such a
determination  shall not affect any other  provision of this  Agreement,  all of
which  provisions  shall  remain in effect.  If any  provision is capable of two
constructions, one of which would render the provision valid, then the provision
shall have the meaning which renders it valid.

         f. This writing  constitutes  the entire  agreement  among the parties.
This Agreement may be amended or supplemented only by a writing duly executed by
authorized representatives of the parties.

         g. It is expressly  understood  and agreed that it is not the intention
or  purpose  of this  Agreement  to create  nor shall the same be  construed  as
creating any type of agency, partnership or joint venture.

         h. From time to time Santa Barbara,  its designated  Bank and/or its or
their banking  examiners or auditors may perform  physical  audits of blank Bank
ACR check stock, Program Application forms, copies of Taxpayers' 8453 Forms, and
delinquency  summaries by JHTS  Affiliates  in  Hewfant's or JHTS's  possession.
Hewfant and JHTS will permit Santa Barbara, or its or their banking examiners or
auditors, access to Hewfant's and/or JHTS's premises and records for the purpose
of such audits, and will cooperate with Bank in connection with such audits.

         i. This  Agreement  may not be modified or amended  without the written
consent of JHTS., Hewfant and Bank. Any changes in terms or fees must be decided
upon each year no later than  December 1 or shall  continue to remain in effect.
Fees  established on that date shall be as provided in the Addendum for the next
Tax Season and may not be changed at any other time without the express, written
consent of all parties.

         j.  To  facilitate  execution,   this  Agreement  may  be  executed  in
counterparts by the parties and shall be binding when duly authorized signatures
of each party appear on one or more counterparts delivered to the other parties.
All counterparts shall collectively constitute a single Agreement.




     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties 
hereto have caused their duly authorized representatives to execute this 
Agreement as of the day and year first written above.


Attest:                         SANTA BARBARA BANK & TRUST

                               

                                BY:/s/ Richard H. Turner
                                   ----------------------------------
                                                 (SEAL)
                                Typed Name:  Richard H. Turner

                                Title:  Vice President

Attest:                         HEWFANT, INC.

                                

                                BY: /s/ Keith E. Alessi
                                   ----------------------------------
                                                 (SEAL)

                                Typed Name:  Keith E. Alessi

                                Title:  President

Attest:                         JACKSON HEWITT INC.

                                BY:: /s/ Keith E. Alessi
                               ---------------------------------------
                                                 (SEAL)

                                Typed Name:  Keith E. Alessi

                                Title:  President



<PAGE>




                            REFUND ANTICIPATION LOAN
                              TRANSMITTER AGREEMENT


THIS REFUND  ANTICIPATION LOAN AGREEMENT  ("Agreement") is made as of this first
day of , 1998, by and between  Santa Barbara Bank & Trust  ("SBBT") a California
Company with its principal office at 1021 Anacapa Street,  Santa Barbara, CA and
Hewfant,  Inc., a sudsidiary of Jackson Hewitt, Inc. ("JHI"), a corporation with
its principal office at , .

                                    Recitals

         WHEREAS,  JHI is a  company  which  transmits  electronic  tax  returns
directly to the Internal Revenue Service ("IRS").

         WHEREAS,  for Federal individual income tax returns which qualify,  JHI
desires to offer  through  JHI  franchise  locations,  (referred  to as business
partners or "BPs") and company  owned stores  ("Stores")  a refund  anticipation
loan  ("RAL")  and refund  transfer  ("RT")  program  under which SBBT will make
refund  anticipation  loans as well as providing  additional  financial services
enumerated  herein to taxpayers who are clients of EROs  ("Clients")  based upon
the amount of their expected Federal income tax refund (the "JHI RAL Program" or
the "Program").  An additional reference of Electronic Return Originator ("ERO")
will be used when referring to the combined group of BPs and Stores.

         WHEREAS, SBBT desires to make RALs and RTs pursuant to this Program.

NOW,  THEREFORE,  in  consideration  of  the  mutual  covenants  and  agreements
contained herein and other valuable considerations,  the parties hereto agree as
follows:

                              TERMS AND CONDITIONS

                                  1. Locations.
-
SBBT has no territorial or contractual  exclusions in the United States and will
offer  the  Program  nationally.  Specifically,  SBBT and JHI agree to offer the
Program  through  BPs in the  State of South  Carolina,  the  metropolitan  area
surrounding Birmingham, Alabama and Stores located throughout the United States.
Additional EROs may be added without amendment to this agreement.

                                 2. Exclusivity.
         JHI agrees that no EROs who are  accepted to and  participating  in the
SBBT Program will be permitted to submit, through the JHI Program,  applications
for  RALs,  RTs or  substantially  similar  bank  products  to any bank  product
provider other than SBBT without prior written  approval by SBBT.  EROs found to
be  participating  in both  SBBT's  Program  and  other  bank  programs  will be
terminated from SBBT's program.

                            3. Products and Pricing.

         SBBT will offer the following financial products and services to JHI :

         a.       Description:
         (i.) Refund  Anticipation  Loan:  SBBT will Provide  loans based on the
expected  Federal tax return refund  amount as listed on IRS Form 8453,  Part I,
line 4. Loan amounts will be calculated to be the total of all non-EITC  related
refund  plus up to $1,500 of EITC not to be less than the sum of all  authorized
fees plus $1 or greater than $4,000 including all authorized fees.  Pricing will
be  separated  into  tiers  based on loan  amount as set  forth in the  attached
exhibit "Pricing and Loan Ranges",  incorporated herein by reference as "Exhibit
A". SBBT will establish an account in the name of the taxpayer(s)  claiming such
refund for  receipt of a direct  deposit of the refund due as  requested  on the
taxpayers' Form 8453,  Part II, "Direct  Deposit of Refund".  All funds received
will be used to offset the amount of the loan granted the  taxpayer.  All excess
amounts will be  disbursed  to the taxpayer in a manner  described in Sections 5
and 6 of this document.

         (ii.) Refund Transfer  Check.  SBBT will establish a deposit account in
the name of the taxpayer(s)  for receipt of the taxpayers  Federal tax refund as
described  in IRS Form 8453.  Upon receipt of the  expected  deposit,  SBBT will
deduct and pay all  authorized  fees and charges,  including the bank's fee, and
authorize  a  disbursement  to be  made by the ERO to the  taxpayer  via  SBBT's
cashiers check for the remaining balance.

         (v.) State Refund  Transfer.  SBBT will,  upon the receipt of a Federal
RAL or RT record, also disburse to the Client,  refund amounts received from any
state taxation entity which both accepts state income tax returns electronically
and disburses  refund amounts to the Client via direct deposit.  Upon receipt of
the expected  deposit,  SBBT will deduct and pay all additional  authorized fees
and charges,  including the bank's fee, and authorize a disbursement  to be made
by the  Client to the  taxpayer  using  the  cashiers  check  for the  remaining
balance.

         b. Retail Pricing Pricing and product tiering are set forth Exhibit A.

                        4. Incentive and Rebate Program.

         The SBBT  Transmitter  and ERO  Incentive  and Rebate  programs are set
forth in the attached exhibit "Transmitter Incentives and Rebates", incorporated
herein by reference as "Exhibit B". All incentives  and rebates for  Transmitter
will be held by SBBT in an account specifically  designated for JHI rebates, and
will be disbursed  directly to JHI,  initially on or around April 30, 1998,  and
monthly  thereafter,  the last  calculation and payment  occurring on August 30,
1998.

                                 5. Eligibility.

         Only Clients  whose 1997 Federal  income tax returns are filed with the
IRS  electronically  through  JHI and who are  entitled  to a refund of  Federal
income  taxes  paid for tax year  1997 of at least  the sum of all fees  plus $1
shall  be  eligible  to  receive  a  RAL.  A  Client  who  meets  the  foregoing
requirements  shall  nevertheless be ineligible for a RAL if the Client does not
certify to all the following:

         a.       The Client does not owe any tax due and is not subject to any 
tax liens from prior tax years;

         b. The Client does not owe any delinquent  child support and/or alimony
payments;

         c. The Client does not owe any delinquent student loans, V.A. loans, or
other Federally sponsored loans;

         d.       The Client has not previously filed a 1997 Federal income tax
return;

         e. The  Client  does not have a petition  presently  filed and does not
anticipate filing a petition under any state or Federal bankruptcy or insolvency
laws;

         f.       The Client is at least 18 years of age;

         g.       The Client has not paid any  estimated  tax and/or did not 
have any amount of their 1996  refund  applied to their 1997 tax return;

         h. The Client is not a first-time filer.

In  addition,  SBBT may  decline to grant a RAL,  notwithstanding  the  Client's
certification to the foregoing  matters,  if SBBT receives  current  information
from a reliable credit reporting agency or other reliable source indicating that
the Client's income tax refund may be subject to attachment, delay or offset.

                              6. 'JHIs Procedures.

         a. After JHI has transmitted the Client's income tax return to the IRS,
JHI shall transmit to SBBT  electronically  all information  contained in SBBT's
"1998 Refund Anticipation Loan File Layouts and Specifications"  provided to JHI
, incorporated herein by reference as "Exhibit D".

         The IRS has  agreed to advise  JHI,  as to each  client,  whether  such
Client's tax return has been accepted for  Electronic  Filing.  Provided the IRS
follows the  practice of advising JHI in  accordance  with such  agreement,  JHI
shall not transmit to SBBT the  information  listed in the  preceding  paragraph
concerning a Client until JHI has received the promised  advice from the IRS, in
which case JHI will transmit to SBBT the information  specified in the preceding
paragraph plus the information  JHI received from the IRS concerning  whether or
not the Client's return has been accepted.

         b. Upon receiving  notice from SBBT that a Client's RAL application has
been  approved  or that an RT has been  funded  by the  IRS,  and if SBBT is not
providing  check  printing  services  pursuant to Section 3(a) herein,  JHI will
transmit  information  to ERO  enabling ERO to prepare a  disbursement  check by
completing a blank check form supplied directly by SBBT. Such check shall be for
the amount of the RAL or RT less, if ERO and Client elect, the total of all fees
the Client has authorized SBBT to withhold from the RAL or RT and pay to ERO and
ERO's  customers that are in  consideration  for the preparation and filing of a
Client's tax return ("ERO's Fee") less applicable ("Finance Charges").

         c. JHI shall distribute to each participating ERO its electronic filing
software,  which will enable ERO to file returns  electronically  through JHI to
IRS, and will also permit ERO to send to SBBT via JHI the  required  information
to process the RAL or RT. In addition,  JHI will provide a check writing program
to each ERO  printing  loan  disbursement  checks on site.  This  check  writing
program will be designed to permit  checks to be written only in the name of the
proper Client and only in the amount approved by SBBT as well as controlling the
preparation of a truth-in-lending  disclosure statement on a form which shall be
a  perforated  stub of the blank  check form.  It will,  in  addition,  have the
capability of printing a second  disbursement  check when  additional  funds are
received causing an additional amount due the Client.  SBBT shall have the right
to review and approve any software  developed  by JHI during the testing  period
referred to in Section 8 (b).

         d.  After JHI has sent ERO a record  authorizing  the  printing  of the
disbursement  check,  using the check writing software  supplied by JHI, only in
the  amount  of the net  proceeds  and only to the  proper  Client,  and JHI has
received the appropriate information from the ERO,JHI shall immediately transmit
to SBBT a check  reconciliation  file,  the  content  and  layout  of  which  is
described in Exhibit D.

         e. At the  reasonable  request of SBBT, JHI or its Clients will deliver
to SBBT a copy of any original  application for a RAL or RT.  Otherwise,  JHI or
its EROs will retain  copies of such records  associated  with the Program for a
twenty five month time period and the electronic  filing of the Client's Federal
income tax returns as the IRS requires.

         f. JHI shall comply at all times during the term of this agreement with
the SBBT tax year Refund Anticipation Loan Program File Specifications for JHI.

         g. At the reasonable  request of SBBT, JHI shall provide  assistance to
SBBT,  recognizing  contractual and confidentiality  limitations,  which may aid
SBBT in the collection of Past Due RALs. This assistance may include, but not be
limited  to,  providing  updated  addresses  and phone  numbers  for Clients and
taxpayers.



<PAGE>




                              7. SBBT's Procedures.

         a. On each day during the term of this agreement,  including Saturdays,
Sundays and holidays,  SBBT will evaluate each application for a RAL transmitted
to it on that day, in accordance  with SBBT's normal loan  underwiting  criteria
then in effect,  and will make a reasonable effort to notify JHI  electronically
within two hours after it receives the  application  whether or not the RAL will
be made.  SBBT will not  accept  any  applications  from JHI at any time if SBBT
receives  notification from the IRS that the ERO is under  investigation or SBBT
reasonably suspects fraudulent activity  originating through the ERO, or, if for
any  reason,  loan  delinquencies  on  RALs  originating  through  the  ERO  are
considered  unacceptable.  If SBBT  employs a Credit  Bureau,  or other means of
evaluating  the  credit  worthiness  of the loan  request,  in  evaluating  said
application,  and if a Credit Bureau report, or other information is unavailable
at any given  time,  then SBBT shall make a best  efforts  attempt to notify JHI
electronically  whether or not the RAL will be made within eight hours after the
opportunity  for  obtaining  this  information  commences.  SBBT  shall  not  be
considered in breach of this agreement,  nor shall it be an event of default, if
SBBT, after a good faith effort, is not able to notify JHI within eight hours.

         b. With respect to loan approval for RAL applications  filed in certain
specified  Jackson Hewitt franchises or company-owned  stores  (applicable sites
listed  in  Exhibit C  "Applicable  Sites"),  Bank's  normal  loan  underwriting
criteria will apply subject to the following modification: Bank will suspend the
requirement  of prior year filing  history when Bank can establish  (identify) a
credit history of one year or more for the  applicant.  Said credit history will
be established  by the existence for said  applicant of a trade line  originated
more than 12 months  prior to the receipt of the RAL  application.  Bank further
warrants  that  this  modification  to normal  loan  underwriting  criteria  for
Applcable  Sites will not be altered during the term of this  agreement  without
the express, written consent of JHI.

         c. At the time SBBT  notifies  JHI that a RAL will be made or an RT has
been  funded,  SBBT will  transfer  the  amount of the  disbursement  check to a
segregated  disbursement account at SBBT. All such disbursement checks delivered
to Clients  shall be drawn on such loan  disbursement  account and shall be paid
promptly upon presentment.

         d. If the Client's  refund  received  from the IRS exceeds the total of
such amounts  owed,  or if, after the loan is denied,  the return is accepted by
the IRS and  Direct  Deposit is made to the  account  at SBBT,  SBBT will send a
check  authorization  record  in  the  amount  of  the  excess  or  the  deposit
respectively,  (after  adjusting for and posting fees) to JHI the NET deposit of
the refund. If the refund is less than the expected amount, SBBT will notify the
ERO and  Client.  In the event a RAL  application  is denied  and the IRS Direct
Deposit is made by the IRS,  SBBT's fee will be changed from the appropriate RAL
fee as indicated on the  application,  to SBBT's  prevailing  RT fee,  listed in
Exhibit A.

         e. SBBT shall make available weekly to JHI a file which shall include a
list of ACH transmissions from the IRS to SBBT and a list of all paid items.

         f. SBBT will send a proper loan denial  notice  under  Truth-In-Lending
and other  applicable  laws to each Client who requested a RAL, whose return was
accepted by IRS but whose application had been declined by SBBT.

                                  8. Timetable

         In order to have the Program fully operational by the date on which the
IRS will permit tax returns to be filed electronically, the parties shall adhere
to the following timetable:

         a. SBBT shall provide file layouts and developer  specifications  on or
before November 1, 1997.

         b. SBBT and JHI shall be  prepared  to test the  integrity  of software
communications  using a test  transmission of no less than 30 test returns on or
before by December 31, 1997. Test returns used may be the same test returns used
in testing with the Internal Revenue Service.

                              9. Warranties of SBBT

SBBT warrants to JHI that its  evaluation  and processing of the JHI RAL Program
application,  its making and documentation of loans to Clients under the JHI RAL
Program,  and the  fees  charged  by it for such  loans,  will  comply  with all
applicable   state  and  Federal  laws  and  regulations,   including,   without
limitation,  the  Truth-In-Lending  Act (15 U.S.C.  Sec 1601-1667) and the Equal
Credit  Opportunity Act (15 U.S.C.  Sec.  1691-1691f).  These  warranties  shall
survive the termination of this agreement.

                             10. Warranties of JHI.

         JHI warrants to SBBT in connection with each RAL or RT that:

         a. All Data transmitted to SBBT in connection with an application for a
RAL or RT will be based upon a bona fide Program  application and such data will
be complete and will have been validated through JHI's system;

         b. JHI is  unaware  of any  reason  why any  Client's  Federal or State
income tax refund would not be made in the amount submitted by JHI to SBBT;

         c. JHI has  complied  with and will  comply with all  applicable  laws,
regulations,  procedures and interpretations thereof relating to the preparation
of Federal or State income tax returns and the marketing and advertising of such
arrangements  applicable to third-party  transmitters  of  electronically  filed
returns.

         d. Each ERO has completed a joinder supplied to ERO by JHI and SBBT has
approved such  application  prior to JHI  transmitting RAL requests to SBBT from
that  ERO.  In  addition,  each  ERO  which  has  completed  an  application  to
participate  in the  program is a firm,  organization  or  individual  who deals
directly  with the  taxpayer and who i) prepares a tax return for the purpose of
having an electronic  return produced;  ii) obtains the taxpayer's  signature on
Federal and State Forms 8453,  Individual  Income Tax Declaration for Electronic
Filing;  and iii)  completes  Part IV of Federal Form 8453,  and for  applicable
State Form 8453  section,  as the paid  preparer  and/or the  electronic  return
originator.

         e. JHI will not transmit any Client  applications  for RALs to SBBT for
approval from any particular ERO if SBBT has notified JHI that SBBT is no longer
accepting RAL requests from that ERO.

         f.       JHI has complied and will comply with the SBBT's 1998 Refund  
Anticipation Loan File Layouts and Specifications in all material respects.

         These warranties shall survive the termination of this agreement.

                            11. Term and Termination

         a. The term of this  agreement  shall  begin on the date first  written
above  and  shall  end  December  1,  1998.  SBBT  reserves  the right to modify
components of the Program at its discretion during the term of this agreement.

         b. Each party may terminate this agreement upon the material  breach by
the  other  party of the  terms  hereof if that  non-breaching  party  gives the
breaching  party written  notice of the breach and the breaching  party fails to
cure such breach within ten days after the notice is sent.

         c. Either party may terminate this agreement immediately upon notice if
there is a change in any  applicable  law or regulation  governing the making of
RALs or in tax return and refund  processing by the Internal  Revenue Service or
in features of the Program by either party which makes the  continued  operation
of  the  Program  impractical,  potentially  unprofitable,  or  of  questionable
legality.

                             12. Ownership of Loans

The  parties  agree that SBBT will be the sole owner of the loans made under the
Program.  In addition,  SBBT shall have the authority to transfer or assign such
loans to any affiliate of Santa Barbara Bank & Trust at any time.




                        13. Marketing and Other Materials

         a. SBBT and JHI will have the right to review and approve all marketing
materials  used to promote  the program  which  refer to the other party  either
directly or  indirectly,  provided  that such review is  conducted  promptly and
approval is not unreasonably withheld.

         b. Each party hereto owns and may use certain names, trademarks,  logos
and service marks in connection  with the Program.  No party shall use any other
party's  names,  logos or marks in any  manner  except to the  extent and in the
manner expressly authorized in writing by that party, and no party shall acquire
any  proprietary  rights in or to  another  party's  names,  logos or marks as a
result of such limited use.

                            14. No Use of SBBT's Name

         If JHI wishes to use SBBT's  name in its  advertising  and  promotional
literature  describing  RALs and how the Program works, it must first submit the
purposed copy to SBBT and obtain SBBT's specific permission. This requirement is
not applicable to communication with existing ERO customers of JHI.

                          15. Confidential Information

         Both parties hereto shall safeguard all data and other information made
available  to it by the  other  party  which  such  other  party  has  marked or
otherwise  affirmatively  identified  as being  confidential  in nature,  taking
reasonable  precautions to withhold the same from  disclosure to the same extent
that it  would  safeguard  its  own  confidential  information  and  data.  Such
confidential  information  shall not include  information which otherwise may be
generally  available  to the  public,  or  rightfully  obtained by or from third
parties.  In addition to the  foregoing,  SBBT  specifically  agrees not to make
copies of or disclose to any other person or firm,  other than to Santa  Barbara
Bank and Trust employees,  the names of EROs or Clients or any other identifying
information  obtained exclusively through its relationship with JHI as set forth
in this  agreement for any purpose other than in making loans under the Program,
without the consent of the JHI. The foregoing  sentence  shall not preclude SBBT
from using its own  records of loans  which were  declined  under the Program as
reference  material  in the event any  Client  whose  application  was  declined
subsequently  applies  directly  to SBBT  for a loan.  The  undertaking  of this
Section shall survive the termination of this agreement.

                              16. Indemnification.

         Each party hereto (herein,  an  "indemnifier")  shall  indemnify,  hold
harmless and reimburse the other party for any  expenses,  including  attorney's
fees,  incurred by the other party in the payment and  settlement of any claims,
disputes,  controversies  or  litigation  arising  out of the  failure  of  such
indemnifier  to perform its duties and  responsibilities  hereunder.  JHI hereby
agrees  to hold  SBBT  harmless  against  any  claim  that the use of any of the
software or hardware,  or procedures  employed by SBBT for the creation of RALs,
or any part thereof,  infringes upon any United States patent, copyright,  trade
secret or other  proprietary  right.  Each party may retain attorneys of its own
selection and direct its own defense.

                          17. Limitation of Liability.

         a. No party will be liable to the other party for incidental,  special,
indirect  or  consequential  damage,  or loss of profits,  income,  use or other
benefits, arising out of or in connection with the performance of its obligation
under this  agreement or any failure of such  performance  unless such damage or
loss arises from that  party's  gross  negligence  or from  willful or malicious
conduct.
         b.  Notwithstanding  any other  provision  herein to the contrary,  but
without  limiting the  obligation of the parties under Section 15, no party will
be  liable  to  any  other  party  for  delay  or  nonperformance  of any of its
obligations under this agreement where such delay or nonperformance is caused by
circumstances or acts beyond its control, including without limitation,  failure
of the communications lines,  equipment or systems of third parties,  failure of
its equipment not caused by it, other disruptions  caused by other parties,  all
Acts of God, civil disturbances, strikes, or labor disputes.

                        18. No Joint Venture; Amendment.


This agreement or any acts pursuant  hereto shall not constitute a joint venture
or create a partnership  between the parties.  This agreement may not be changed
except upon written  amendment duly executed by an authorized  representative of
each party.
                                   19. Waiver

         The failure of any party to insist upon another party's compliance with
or performance  with any term or condition of this  agreement  shall be deemed a
waiver of such term or condition;  and no waiver shall be binding upon any party
unless in writing and signed by such party,  and shall then be binding  only for
that particular instance.

                                   20. Audit.

         From time to time,  SBBT may  perform  physical  audits  of blank  SBBT
checks,  Program  application  forms,  copies  of  Clients'  Form  8453 in JHI's
possession,  and any other operation,  procedure, or record, without limitation,
which has a direct or indirect relationship to the RAL Program described in this
agreement.  JHI will  permit  SBBT  access to its  premises  and records for the
purpose of such audits and will  cooperate  with SBBT in connection  with audits
with proper advance notice as agreed upon by JHI.

                               21. Miscellaneous.

         a.       Assignment. This  agreement is binding on the parties hereto 
and their  successors,  and no party may assign its rights or obligations under 
this agreement without the prior written consent of the other party.

         b.  Applicable Law. This agreement shall be governed by and interpreted
under the laws of the State of  California  and to the  extent  applicable,  the
United States of America.

         c.  Notices.  Any notice  permitted or required  hereunder  shall be in
writing  and shall be deemed to have been given (a) on the date of  delivery  if
delivery of a legible copy was made  personally or by facsimile  transmission or
(b) on the  second  business  day after the date on which  mailed by  registered
mail, certified mail, return receipt requested,  addressed to the party for whom
intended at the address set forth on the  signature  page of this  agreement  or
such other address, notice of which is given herein.


                                   If to SBBT:

                           Santa Barbara Bank & Trust
                               1021 Anacapa Street
                               Post Office Box JJ
                             Santa Barbara, CA 93102

                                   If to JHI:

                                  Hewfant Inc.
                                4575 Bonney Road
                            Virginia Beach, VA 23462
                             attn.: Keith E. Alessi


         d. Severability:  Construction. The parties agree that if any provision
of this agreement shall be determined by any court of competent  jurisdiction to
be void or  otherwise  unenforceable,  such  determination  shall not effect any
other provision of this agreement, all of which other provisions shall remain in
effect.  If any  provision is capable of two  constructions,  one of which would
render the provision  valid and the other invalid,  the provision shall have the
meaning which renders it valid.

         e. Integration and Amendment.This  agreement and the SBBT Tax Year 1997
Refund Anticipation Loan Program File Layouts and Specifications attached hereto
in Exhibit D express fully the entire understanding and agreement of the parties
concerning  the  subject  matter  hereof,   and  all  prior   understandings  or
commitments of any kind, whether oral or written, concerning such subject matter
are  hereby  superseded  and  canceled.  This  agreement  may not be  amended or
modified other than by a written agreement executed by all parties.

IN WITNESS  WHEREOF,  this  agreement  has been executed and delivered by a duly
authorized  officer of SBBT and by a duly  authorized  officer of JHI, all as of
the date first written above.


Santa Barbara Bank & Trust                           Hewfant, Inc.

By:      /s/ Richard H. Turner                By:      /s/ Keith E. Alessi 
     ----------------------                          ---------------------------

         Richard H. Turner                                    Keith E. Alessi
         Vice President, RAL Program Director                          President


Date:    November 20, 1997                Date:    November 24, 1997
     ---------------------                     ---------------------------




<PAGE>



                                    EXHIBIT A

--------------------------------------------------------------------------------
                             Pricing and Loan Ranges
--------------------------------------------------------------------------------

                           Santa Barbara Bank & Trust


                           Effective December 1, 1997

                          I. Refund Anticipation Loans

-------------------------------------------------------------------------------
                           LOAN AMOUNT RANGES*                         SBBT FEE
                          Loan Amount Between:
-------------------------------------------------------------------------------

                       Sum of All Fees + $1 - $500                        $47
                              $501 - $1,000                               $57
                             $1,001 - $1,500                              $67
                             $1,501 - $2,000                              $87
                             $2,001 - $4,000                             $102
-------------------------------------------------------------------------------
*  Loan amount includes up to $1,500 of Earned Income Tax Credit.

                            II. Refund Transfer Check

------------------------------------ -------------------------------

                    All Amounts:       $24

------------------------------------ -------------------------------

                           III. State Refund Transfer

------------------------------------- ------------------------------

           All Amounts                    $10

------------------------------------- ------------------------------

                                       IV. Federal Tax Refund Limit

----------------------------------------- -------------------------------

               Minimum Refund Amount:            Sum of All Fees + $1
               Maximum Refund Amount:                   $9,999

-------------------------------------------------------------------------

Product  features and pricing are subject to change at the  discretion  of Santa
Barbara Bank & Trust.


<PAGE>



                                    EXHIBIT B

-----------------------------------------------------------------------------
                      Hewfant, Inc. Incentives and Rebates
-----------------------------------------------------------------------------

                           Santa Barbara Bank & Trust

                              Terms and Conditions

                           Effective December 1, 1997


               I. Refund Anticipation Loan Performance Incentives

Transmitter performance incentives for Refund Anticipation Loans will be paid by
Santa Barbara Bank & Trust according to the following conditions:

      Loan  loss  will  be  calculated  by  dividing   total  loans  in  dollars
     outstanding  as of the end of business,  August 1, 1998, by the total loans
     in dollars made to the Transmitter's clients during the 1998 RAL season.

      Loan amount  shall be defined as the total  disbursement  to the  taxpayer
     plus the sum of all fees.

      RAL Performance Incentives listed below will be paid per qualified loan. A
     qualified loan shall be defined as a loan which has been paid in full prior
     to August 1, 1998.

      Initial loan loss calculation will occur on April 18, 1998.  Any rebates 
      due will be paid within 10 business days of that calculation via ACH

      Final loan loss calculation will occur on August 1, 1998.  Any incentive 
      due will be paid within 10 business days of that evaluation via ACH.

      The bank reserves the right to employ third party loan collection services
     at its  discretion.  Costs  incurred in this process will not be considered
     "paid" amounts in calculating loan loss ratios.  Use of these services will
     be disclosed to the transmitter prior to implementation.



<PAGE>





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                        RAL Performance Incentive Summary
                             Loan Loss Incentive to
                           Less Than ___ Hewfant, Inc.
                                   4.00% $3.00
                                   3.50% $3.00
                                   3.00% $6.00
                                   2.50% $8.00
                                  2.00% $10.00
                                  1.50% $12.00
                                  1.00% $14.00
                                  0.50% $16.00
                                  0.00% $16.00

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                   II. Refund Anticipation Loan Volume Rebate

      Each qualified Refund Anticipation Loan (RAL) shall earn a rebate based on
     the  schedule  listed  below.  A qualified  loan shall be defined as a loan
     which has been approved for disbursement.

      Initial volume rebate  calculation will occur on May 15, 1998. Any rebates
     due will be paid within ten business days of that calculation via ACH.

      The second volume  rebate  calculation  will occur on August 1, 1998.  Any
     incentive due will be paid within 10 business days of that  evaluation  via
     ACH. All rebates  earned after August 1, 1998,  will be paid weekly via ACH
     as funding occurs.

--------------------------------------------------------------------------------

                            RAL Volume Rebate Summary
                            $20.00 per Qualified RAL

--------------------------------------------------------------------------------

                           III. Refund Transfer Check

      Each qualified  Refund  Transfer shall earn a rebate based on the schedule
     listed below.  A qualified  Refund  Transfer shall be defined as any Refund
     Transfer  request or denied RAL which is fully funded prior to November 14,
     1998.


                                EXHIBIT B (cont.)


      Initial volume rebate  calculation will occur on May 15, 1998. Any rebates
     due will be paid within ten business days of that calculation via ACH.

      The second volume  rebate  calculation  will occur on August 1, 1998.  Any
     incentive due will be paid within 10 business days of that  evaluation  via
     ACH. All rebates earned after August 1, 1998 will be paid weekly via ACH as
     funding occurs.




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                   Refund Transfer Check Volume Rebate Summary
                      $13.00 per Qualified Refund Transfer

-------------------------------------------------------------------------



<PAGE>



July 2, 1997


Keith E. Alessi
Jackson Hewitt Inc.
4575 Bonney Road
Virginia Beach, VA 23462

Re: Master License Agreement Renewal

Dear Keith:

Under the terms of the Master License Agreement dated October 15, 1988,  between
Montgomery Ward & Co.,  Incorporated  and Jackson Hewitt,  Inc., we are advising
you bu written  notice that we are offering to extend the  Agreement for another
year to October 15, 1998.

If you accept the extension of the  Agreement,  please sign and date both copies
of this letter and retain one copy of the letter and return the other copy to:

Montgomery Ward Plaza
Business Ventures, 5-3
844 N. Larrabee
Chicago, IL 60671
Attn: Gladys Santos

Sincerely,

/s/Jerry Langer
--------------------------
Jerry Langer
Manager, Business Ventures

ACCEPTED AND AGREED TO THIS 17thDAY OF July  , 1997

JACKSON HEWITT, INC.

BY\:      /s/Keith E. Alessi
          --------------------------------
                 Keith E. Alessi

TITLE:  President/CEO