**Exhibit10.1**

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement dated as of June      , 2004, but effective as of and contingent uponthe consummation of the initial public offering by Cendant Corporation of allof the stock of Jackson Hewitt Tax Service Inc. (the “Transaction”), is herebymade by and among Cendant Corporation (“Cendant”), Jackson Hewitt Tax ServiceInc. (“JTAX”) and Michael Lister (the “Executive”).

 

WHEREAS, JTAX desires to employ the Executive as itsPresident and Chief Executive Officer, and the Executive desires to serve JTAXin such capacity.

 

NOW THEREFORE, in consideration of the foregoing andother good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the parties hereby agree as follows:

 

# SECTION I

EMPLOYMENT

 

Subject to theconsummation of the Transaction, JTAX agrees to employ the Executive and theExecutive agrees to be employed by JTAX for the Period of Employment asprovided in Section III below and upon the terms and conditions provided inthis Agreement.  Subject to andeffective upon the consummation of the Transaction, the Executive will nolonger be an employee, officer or director of Cendant or any of itssubsidiaries or affiliates, and agrees to provide Cendant, upon request, withwritten resignations from such positions.

 

# SECTION II

POSITION ANDRESPONSIBILITIES

 

During the Period ofEmployment, the Executive will serve as President and Chief Executive Officerof of JTAX and, subject to the direction of the Board of Directors of JTAX (the“Supervising Officer”), will perform such duties and exercise such supervisionwith regard to the business of JTAX as are associated with such position, aswell as such additional duties as may be prescribed from time to time by theSupervising Officer.  Further, effectiveupon the consummation of the Transaction, the Executive will serve as a memberof the Board of Directors of JTAX (the “Board”); provided, however,that nothing contained in this Agreement shall require JTAX to maintain theExecutive’s status as a member of

 

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the Board or tore-nominate him for election for additional terms of service on the Board.

 

The Executive will,during the Period of Employment, devote substantially all of his time andattention during normal business hours to the performance of services forJTAX.  The Executive will maintain aprimary office and conduct his business in Parsippany, New Jersey, except fornormal and reasonable business travel in connection with his dutieshereunder.  Nothing contained in this Agreementwill prevent the Executive from serving on civic and charitable boards or fromconducting his personal affairs.

 

The Executive will, inaccordance with JTAX policy and procedures and applicable law, certify to theaccuracy of JTAX’s publicly filed financial statements.

 

# SECTION III

PERIOD OF EMPLOYMENT

 

The period of the Executive’s employment under thisAgreement (the “Period of Employment”) will begin contingent upon and effectiveas of the consummation of the Transaction, and end on the third anniversary ofsuch date, subject to earlier termination as provided in this Agreement.

 

SECTION IV

COMPENSATION AND BENEFITS

 

Compensation.  For all services rendered by the Executivepursuant to this Agreement during the Period of Employment, including servicesas an executive, officer, director or committee member of JTAX or anysubsidiary or affiliate of thereof, the Executive will be compensated asfollows:

 

i.              BaseSalary.

 

JTAX will pay the Executive a fixed base salary (“BaseSalary”) of not less than $330,000, per year. From time to time, the Executive may be eligible to receive annualincreases as JTAX deems appropriate, in accordance with JTAX’s customarypolicies and procedures regarding the salaries of senior officers, includingpursuant to annual compensation reviews to occur no less than once per year,and with due consideration given to the published Consumer Price Indexapplicable to

 

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the New York/New Jerseygreater metropolitan area.  Base Salarywill be payable according to the customary payroll practices of JTAX, but in noevent less frequently than once each month.

 

ii.             AnnualIncentive Awards.

 

The Executive will be eligible for discretionaryannual incentive compensation awards; provided, that the Executive willbe eligible to receive an annual bonus opportunity in respect of each fiscalyear of JTAX during the Period of Employment based upon a target bonus equal tono less than 100% of his earned Base Salary during such fiscal year; provided,however, that such bonus will be subject to the attainment by JTAX ofapplicable performance targets reasonably established and certified by theBoard or the Compensation Committee of the Board (the “Committee”).  The parties acknowledge that it is currentlycontemplated that such performance targets will be stated in terms of “earningsbefore interest and taxes” of JTAX, however such targets may relate to suchother financial and/or business criteria of JTAX, or any of their respectivesubsidiaries or business units, as determined by the Board and/or the Committeein its sole discretion (each such annual bonus, an “Incentive CompensationAward”).

 

iii.            Long-TermIncentive Awards

 

(a) Cendant Awards.  The Executive holds previously grantedCendant stock options and Cendant restricted stock units, all of which will besubject to that certain Exchange Offer, dated as of April 22, 2004, on the sameterms and conditions as applicable to other active employees of JTAX. TheExecutive, Cendant, and JTAX each hereby waive any and all of their respectiverights (including the Executive’s rights to acceleration of vesting and/orextension of exercise period) relating to any “Subsidiary Change of Control”provisions set forth in any outstanding Cendant stock option or Cendantrestricted stock unit award granted prior to the Transaction.

 

(b) Annual IncentiveAwards.  At such times as the Boardor the Committee determines to conduct annual or periodic grants of long termincentive awards to employees and officers of JTAX, the Executive will beeligible to receive such grants, subject to the sole and complete discretion ofthe Board or the Committee, and upon such terms and conditions as determined bythe Board or the Committee, but with due consideration given to the Executive’sposition with JTAX and the Executive’s historical performance and anticipatedfuture contributions to JTAX.

 

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(c) Founder’s Grant.  Within 30 days following the Transaction,subject to the approval of the Board or the Committee, the Executive will begranted a number of options to purchase JTAX common stock on such terms andconditions determined by the Board or the Committee in its sole discretion.

 

iv.                                   AdditionalBenefits

 

The Executive will be entitled to participate in allother compensation and employee benefit plans or programs offered generally toemployees of JTAX, and will receive all perquisites offered to senior executiveofficers of JTAX, in either case pursuant to any plan or program now in effect,or later established by JTAX.  The Executivewill participate to the extent permissible under the terms and provisions ofsuch plans or programs, and in accordance with the terms of such plans andprograms.

 

Effective upon the consummation of the Transaction,the Executive will no longer be eligible to participate (as an active employee)in any employee benefit plans, officer perquisite programs, or other benefit orperquisite policies or programs of Cendant and its subsidiaries and affiliates.

 

## SECTION V

BUSINESS EXPENSES

 

JTAX will reimburse the Executive for all reasonabletravel and other expenses incurred by the Executive in connection with theperformance of his duties and obligations under this Agreement.  The Executive will comply with suchlimitations and reporting requirements with respect to expenses as may beestablished by JTAX from time to time and will promptly provide all appropriateand requested documentation in connection with such expenses.

 

# SECTION VI

DISABILITY

 

If the Executive becomes Disabled, as defined below,during the Period of Employment, the Period of Employment may be terminated atthe option of the Executive upon notice of resignation to JTAX, or at theoption of JTAX upon 30 days’ advance notice of termination to theExecutive.  JTAX’s obligation to makepayments to the Executive under this Agreement will cease as of such date oftermination,

 

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except for Base Salaryand Incentive Compensation Awards earned but unpaid as of the date of suchtermination, and except for payment of a pro rata portion of his IncentiveCompensation Award in respect of the year in which such Disability occurs (paidat target level).  For purposes of thisAgreement, “Disabled” means the Executive’s inability to perform his dutieshereunder as a result of serious physical or mental illness or injury for aperiod of no less than 180 days, together with a determination by anindependent medical authority that the Executive is currently unable to performsuch duties.  Such medical authorityshall be mutually and reasonably agreed upon by JTAX and the Executive and suchopinion shall be binding on JTAX and the Executive.

 

# SECTION VII

DEATH

 

In the event of the deathof the Executive during the Period of Employment, the Period of Employment willend and JTAX’s obligation to make payments under this Agreement will cease asof the date of death, except for Base Salary and Incentive Compensation Awardsearned but unpaid through the date of death, and except for payment of a prorata portion of his Incentive Compensation Award in respect of the year inwhich his death occurs (paid at target level), which will be paid to theExecutive’s surviving spouse, estate or personal representative, as applicable.

 

# SECTION VIII

EFFECT OF TERMINATION OFEMPLOYMENT

 

A.            WithoutCause Termination and Constructive Discharge.  If the Executive’s employment terminates due to either a WithoutCause Termination or a Constructive Discharge, as defined below, JTAX will paythe Executive (or his surviving spouse, estate or personal representative, asapplicable) upon such Without Cause Termination or Constructive Discharge (i) alump sum cash payment equal to the sum of the Executive’s then current BaseSalary plus his then current target Incentive Compensation Award, multiplied bythe Severance Multiplier (as defined below) and (ii) any and all Base Salaryand Incentive Compensation Awards earned but unpaid through the date of suchtermination.  In addition, upon suchevent, all of the Executive’s outstanding and unvested JTAX stock options andrestricted stock units will become immediately vested.  In addition, in the event that the Executiveelects to continue medical and dental benefits pursuant to COBRA, for the first12 months of such coverage, the Executive’s cost will be no greater than thecost applicable to active full time employees of JTAX.

 

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B.            Terminationfor Cause; Resignation.  If theExecutive’s employment terminates due to a Termination for Cause or aResignation, Base Salary and any Incentive Compensation Awards earned butunpaid as of the date of such termination will be paid to the Executive in alump sum. Except as provided in this paragraph, JTAX will have no furtherobligations to the Executive hereunder.

 

C.            Forpurposes of this Agreement, the following terms have the following meanings:

 

i.              “Terminationfor Cause” means (i) the Executive’s willful failure to substantially performhis duties as an employee of JTAX or any subsidiary thereof (other than anysuch failure resulting from incapacity due to physical or mental illness), (ii)any act of fraud, misappropriation, embezzlement, material dishonesty orsimilar conduct, in each case against JTAX or any subsidiary, (iii) theExecutive’s conviction of a felony or any crime involving moral turpitude(which conviction, due to the passage of time or otherwise, is not subject tofurther appeal), (iv) the Executive’s gross negligence in the performance ofhis duties or (v) the Executives makes (or has been found to have made) a falsecertification to JTAX pertaining to its financial statements. JTAX will providethe Executive a written notice which describes the circumstances being reliedon for the termination with respect to this paragraph. The Executive will havethirty (30) days after receipt of such notice to remedy the situation prior tothe effectiveness of the Termination for Cause, unless JTAX reasonably and ingood faith determines that such situation is incurable.  A Termination for Cause shall not beeffective hereunder unless the Executive is first given an opportunity toaddress the Board, with his counsel present if he so elects, upon reasonablenotice in advance of any action taken by the Board.

 

ii.             “Constructive Discharge” means (i)any material failure of JTAX to fulfill its obligations under this Agreement(including without limitation any reduction of the Base Salary, as the same maybe increased during the Period of Employment, or other element ofcompensation), (ii) a material and adverse change to the Executive’s titles,positions, duties and responsibilities to JTAX (but specifically excluding theExecutive no longer serving as a member of the Board for any reason or JTAXfailing to re-nominate to election, or re-appoint the Executive, to the Board),(iii) the relocation of the Executive’s primary business office to a locationmore than 50 miles from Parsippany, New Jersey or (iv) JTAX fails to cause thisAgreement to be assumed by any successor to the business of JTAX.  The Executive will provide JTAX a writtennotice which describes the circumstances being relied on for the termination

 

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with respect tothis Agreement within sixty (60) days after the event giving rise to thenotice.  JTAX will have sixty (60) daysafter receipt of such notice to remedy the situation prior to the terminationfor Constructive Discharge.

 

iii.            “WithoutCause Termination” or “Terminated Without Cause” means termination of theExecutive’s employment by JTAX other than due to death, disability, orTermination for Cause.

 

iv.            “Resignation”means a termination of the Executive’s employment by the Executive, other thanin connection with a Constructive Discharge.

 

v.             “SeveranceMultiplier” means 200%; provided, however, that SeveranceMultiplier means 299% solely in the event that the applicable Without CauseTermination or Constructive Discharge occurs within one year of a Change in Control(as defined from time to time in the JTAX 2004 Equity and Incentive Plan).

 

D.            Conditionsto Payment and Acceleration.  Allpayments due to the Executive under this Section VIII shall be made as soon aspracticable; provided, however, that such payments, shall besubject to, and contingent upon, the execution by the Executive (or hisbeneficiary or estate) of a release of any and all claims against JTAX and itsaffiliates in such reasonable form agreed to by JTAX and the Executive (whichrelease will also require JTAX to execute a release of claims against theExecutive for any and all claims, but only including claims which JTAX is thenaware of, and specifically excluding claims relating to fraud, criminalmatters, and accounting irregularities). The payments due to the Executive under this Section VIII shall be inlieu of any other severance benefits otherwise payable to the Executive underany severance plan of JTAX or its affiliates and/or any other agreement orarrangement.  Nothing herein shall beconstrued as limiting the Executive’s entitlement to any other vested accruedbenefits to which he (or his estate if applicable) is then entitled underJTAX’s (and Cendant’s) applicable employee benefit plans, including withoutlimitation any disability or death benefits which may become payable.

 

# SECTION IX

OTHER DUTIES OF THEEXECUTIVEDURING AND AFTER THE PERIOD OF EMPLOYMENT

 

A.            TheExecutive will, with reasonable notice during or after the Period ofEmployment, furnish information as may be in his possession and fully

 

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cooperate with JTAX andits affiliates as may be requested in connection with any claims or legalaction in which JTAX or any of its affiliates is or may become a party.  The foregoing shall not unreasonably interferewith the Executive’s duties to any successor employer.

 

B.            TheExecutive recognizes and acknowledges that all information pertaining to thisAgreement or to the affairs; business; results of operations; accountingmethods, practices and procedures; members; acquisition candidates; financialcondition; clients; customers or other relationships of JTAX or any of its affiliates(“Information”) is confidential and is a unique and valuable asset of JTAX orany of its affiliates.  Access to andknowledge of certain of the Information is essential to the performance of theExecutive’s duties under this Agreement. The Executive will not during the Period of Employment or thereafter,except to the extent reasonably necessary in performance of his duties underthis Agreement, give to any person, firm, association, corporation, orgovernmental agency any Information, except as may be required by law.  The Executive will not make use of theInformation for his own purposes or for the benefit of any person or organizationother than JTAX or any of its affiliates. The Executive will also use his best efforts to prevent the disclosureof this Information by others.  Allrecords, memoranda, etc. relating to the business of JTAX or its affiliates,whether made by the Executive or otherwise coming into his possession, areconfidential and will remain the property of JTAX or its affiliates.

 

C.            i.              Duringthe Period of Employment and for the Post Termination Period thereafter(collectively, the “Restricted Period”), the Executive will not use his statuswith JTAX or any of its affiliates to obtain loans, goods or services fromanother organization on terms that would not be available to him in the absenceof his relationship to JTAX or any of its affiliates.  The Post Termination Period means a period of two (2) yearsfollowing the Executive’s termination of employment if, in connection with suchtermination, the Executive receives severance under Section VIII.A. of thisAgreement and the Severance Multiplier equals 299%, and the Post TerminationPeriod means a period of one (1) year following the Executive’s termination inall other cases, irrespective of the cause, manner or time of such termination.

 

ii.             Duringthe Restricted Period, the Executive will not make any statements or performany acts intended to or which may have the effect of advancing the interest ofany existing or prospective competitors of JTAX or any of its affiliates or inany way injuring the interests of JTAX or any of its affiliates.  During the Restricted

 

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Period, the Executive,without prior express written approval by the Board, will not engage in, ordirectly or indirectly (whether for compensation or otherwise) own or holdproprietary interest in, manage, operate, or control, or join or participate inthe ownership, management, operation or control of, or furnish any capital toor be connected in any manner with, any party which competes in any way ormanner with the business of JTAX or any of its affiliates, as such business orbusinesses may be conducted from time to time, either as a general or limitedpartner, proprietor, common or preferred shareholder, officer, director, agent,employee, consultant, trustee, affiliate, or otherwise.  The Executive acknowledges that JTAX’s andits affiliates’ businesses are conducted nationally and internationally andagrees that the provisions in the foregoing sentence will operate throughoutthe United States and the world.

 

iii.            Duringthe Restricted Period, the Executive, without express prior written approvalfrom the Board, will not solicit any then-current clients of JTAX or any of itsaffiliates for any existing business of JTAX or any of its affiliates ordiscuss with any employee of JTAX or any of its affiliates information oroperation of any business intended to compete with JTAX or any of itsaffiliates.

 

iv.            Duringthe Restricted Period, the Executive will not interfere with the employees oraffairs of JTAX or any of its affiliates or solicit or induce any person who isan employee of JTAX or any of its affiliates to terminate any relationship suchperson may have with JTAX or any of its affiliates, nor will the Executiveduring such period directly or indirectly engage, employ or compensate, orcause or permit any person with which the Executive may be affiliated, toengage, employ or compensate, any employee of JTAX or any of itsaffiliates.  The Executive herebyrepresents and warrants that the Executive has not entered into any agreement,understanding or arrangement with any employee of JTAX or any of its affiliatespertaining to any business in which the Executive has participated or plans toparticipate, or to the employment, engagement or compensation of any suchemployee.

 

v.             Forthe purposes of this Agreement, proprietary interest means legal or equitableownership, whether through stock holding or otherwise, of an equity interest ina business, firm or entity or ownership of more than 5% of any class of equityinterest in a publicly-held company and the term “affiliate” will includewithout limitation all subsidiaries and licensees of JTAX.

 

D.            The Executive hereby acknowledges that damages at law maybe an insufficient remedy to JTAX if the Executive violates the terms of thisAgreement

 

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and that JTAX will be entitled, upon making the requisite showing, topreliminary and/or permanent injunctive relief in any court of competentjurisdiction to restrain the breach of or otherwise to specifically enforce anyof the covenants contained in this Section IX without the necessity of showingany actual damage or that monetary damages would not provide an adequateremedy.  Such right to an injunctionwill be in addition to, and not in limitation of, any other rights or remediesJTAX may have.  Without limiting thegenerality of the foregoing, neither party will oppose any motion the otherparty may make for any expedited discovery or hearing in connection with anyalleged breach of this Section IX.

 

E.             The period of time during which the provisions of thisSection IX will be in effect will be extended by the length of time duringwhich the Executive is in breach of the terms hereof as determined by any courtof competent jurisdiction on JTAX’s application for injunctive relief.

 

F.             The Executive agrees that the restrictions contained inthis Section IX are an essential element of the compensation the Executive isgranted hereunder and but for the Executive’s agreement to comply with suchrestrictions, JTAX would not have entered into this Agreement.

 

# SECTION X

INDEMNIFICATION; CENDANTRELEASE

 

JTAX will indemnify the Executive to the fullestextent permitted by the laws of the state of JTAX’s incorporation in effect atthat time, or the certificate of incorporation and by-laws of JTAX, whicheveraffords the greater protection to the Executive.  If applicable, JTAX will maintain D&O insurance for theExecutive on a basis no less favorable than it maintains for other officers ofJTAX.

 

Following the consummation of the Transaction, Cendantwill indemnify the Executive with respect to events occurring prior to theTransaction, in accordance with Cendant’s current policies relating toindemnification of former officers.

 

The Executive hereby represents and agrees that, as ofthe effective date of the Transaction, all financial and monetary obligationsowing to the Executive from Cendant and its subsidiaries and affiliates(including without limitation any and all bonus and potential bonusentitlements under each and every bonus, incentive, retention and similarcompensation schemes sponsored by Cendant and each of

 

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its subsidiaries andaffiliates, and under each and every other actual or purported compensationentitlement pursuant to any agreement or otherwise) have been paid to theExecutive in full, and that the Executive has no further financial claimsagainst Cendant or its subsidiaries and affiliates (other than accrued benefitsunder any tax qualified employee pension plan and other than equity awards tothe extent described in this Agreement). The Executive agrees that he has no legal claim or cause of actionagainst Cendant and its subsidiaries and affiliates, and hereby releasesCendant and its subsidiaries, affiliates, officers, directors, agents andemployee benefit, equity and compensation plans (and the administrators andfiduciaries of such plans) from and against any such actual or purported claimsand causes of action.  The Executiveacknowledges that Cendant entered into this Agreement in reliance of theaccuracy of the foregoing representation.

 

# SECTION XI

MITIGATION

 

The Executive will not be required to mitigate theamount of any payment provided for hereunder by seeking other employment orotherwise, nor will the amount of any such payment be reduced by anycompensation earned by the Executive as the result of employment by anotheremployer after the date the Executive’s employment hereunder terminates or byoffset against any amount claimed to be owed by the Executive to JTAX, orotherwise.

 

# SECTION XII

WITHHOLDING TAXES; EXCISETAXES

 

The Executive acknowledges and agrees that JTAX maydirectly or indirectly withhold from any payments under this Agreement allfederal, state, city or other taxes that will be required pursuant to any lawor governmental regulation.

 

If the Executive becomes entitled to the severancepayments described in Section VIII.A. above, and if any of the payments orbenefits received or to be received by the Executive with respect to equity orequity-type awards of the Company (including but not limited to options toacquire common stock of the Company) pursuant to the terms of this Agreement orany other plan, arrangement or agreement with the Company, any person whoseactions result in a Change in Control or any person affiliated with the Companyor such person) (all such payments and benefits, excluding the Gross-Up Payment(as defined below), being hereinafter referred to as the “Relevant Payments”)will be subject to the excise tax (the “Excise

 

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Tax”) imposed undersection 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), theCompany shall pay to the Executive an additional amount (the “Gross-UpPayment”) such that the net amount retained by the Executive, after deductionof any Excise Tax on the Relevant Payments and any federal, state and localincome and employment taxes and Excise Tax upon the Gross-Up Payment, shall beequal to the Relevant Payments.

 

A.            Forpurposes of determining whether any of the Relevant Payments will be subject tothe Excise Tax and the amount of such Excise Tax, (i) all payments or benefitsreceived or to be received by the Executive in connection with a Change inControl or the Executive’s termination of employment (whether pursuant to theterms of this Agreement or any other plan, arrangement or agreement with theCompany, any person whose actions result in a Change in Control or any personaffiliated with the Company or such person) (all such payments and benefits,excluding the Gross-Up Payment, being hereinafter referred to as the “TotalPayments”) shall be treated as “parachute payments” (within the meaning ofsection 280G(b)(2) of the Code) unless, in the opinion of tax counsel (“TaxCounsel”) reasonably acceptable to the Executive and selected by the accountingfirm which was, immediately prior to the Change in Control, the Company’sindependent auditor (the “Auditor”), such payments or benefits (in whole or inpart) do not constitute parachute payments, including by reason of section280G(b)(4)(A) of the Code, (ii) all “excess parachute payments” within themeaning of section 280G(b)(l) of the Code shall be treated as subject to theExcise Tax unless, in the opinion of Tax Counsel, such excess parachutepayments (in whole or in part) represent reasonable compensation for servicesactually rendered (within the meaning of section 280G(b)(4)(B) of the Code) inexcess of the Base Amount (within the meaning of section 280G(b)(3) of theCode) allocable to such reasonable compensation, or are otherwise not subjectto the Excise Tax, and (iii) the value of any noncash benefits or any deferredpayment or benefit shall be determined by the Auditor in accordance with theprinciples of sections 280G(d)(3) and (4) of the Code.  For purposes of determining the amount ofthe Gross-Up Payment, the Executive shall be deemed to pay federal income taxat the highest marginal rate of federal income taxation in the calendar year inwhich the Gross-Up Payment is to be made and state and local income taxes atthe highest marginal rate of taxation in the state and locality of theExecutive’s residence on the date of termination of his employment, net of themaximum reduction in federal income taxes which could be obtained fromdeduction of such state and local taxes.

 

B.            Inthe event that the Excise Tax is finally determined to be less than the amounttaken into account hereunder in calculating the Gross-Up Payment,

 

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the Executive shall repayto the Company, within five (5) business days following the time that theamount of such reduction in the Excise Tax is finally determined, the portionof the Gross-Up Payment attributable to such reduction (plus that portion ofthe Gross-Up Payment attributable to the Excise Tax and federal, state andlocal income and employment taxes imposed on the Gross-Up Payment being repaidby the Executive), to the extent that such repayment results in a reduction inthe Excise Tax and a dollar-for-dollar reduction in the Executive’s taxableincome and wages for purposes of federal, state and local income and employmenttaxes, plus interest on the amount of such repayment at 120% of the rateprovided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amounttaken into account hereunder in calculating the Gross-Up Payment (including byreason of any payment the existence or amount of which cannot be determined atthe time of the Gross-Up Payment), the Company shall make an additionalGross-Up Payment in respect of such excess (plus any interest, penalties oradditions payable by the Executive with respect to such excess) within five (5)business days following the time that the amount of such excess is finallydetermined.  The Executive and theCompany shall each reasonably cooperate with the other in connection with anyadministrative or judicial proceedings concerning the existence or amount ofliability for Excise Tax with respect to the Total Payments.

 

# SECTION XIII

EFFECT OF PRIORAGREEMENTS

 

This Agreement will supersede any prior employmentagreement between the Executive on the one hand, and JTAX on the other hand,and any such prior employment agreement will be deemed terminated without anyremaining obligations of either party thereunder.

 

# SECTION XIV

CONSOLIDATION, MERGER ORSALE OF ASSETS

 

Nothing in this Agreement will preclude JTAX fromconsolidating or merging into or with, or transferring all or substantially allof its assets to, another corporation which assumes this Agreement and allobligations and undertakings of JTAX hereunder.  Upon such a consolidation, merger or sale of assets the term“JTAX” will mean the other corporation and this Agreement will continue in fullforce and effect.  In addition to theobligations imposed by law upon any successor to JTAX will require anysuccessor (by purchase, merger, consolidation or otherwise) to all orsubstantially all of the business and/or assets of JTAX, by agreement

 

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in form and substancereasonably satisfactory to the Executive, to expressly assume and agree toperform this Agreement in the same manner and to the same extent that JTAXwould be required to perform it if no such succession had taken place.  Failure of JTAX to obtain such agreementprior to the effectiveness of such succession shall be a breach of thisAgreement and shall entitle the Executive to compensation from JTAX in the sameamount and on the same terms as the Executive would be entitled to hereunder ifthe Executive’s employment were to terminate in a Without Cause Terminationprovided in Section VIII.A. hereof, except that the date on which any suchsuccession becomes effective shall be deemed the date of the Executive’s terminationof employment.

 

# SECTION XV

MODIFICATION; WAIVER

 

This Agreement may not be modified or amended exceptin writing signed by the parties.  Noterm or condition of this Agreement will be deemed to have been waived exceptin writing by the party charged with waiver. A waiver will operate only as to the specific term or condition waivedand will not constitute a waiver for the future or act on anything other thanthat which is specifically waived.

 

# SECTION XVI

GOVERNING LAW

 

This Agreement has been executed and delivered in theState of New Jersey and its validity, interpretation, performance andenforcement will be governed by the internal laws of that state.

 

# SECTION XVII

ARBITRATION

 

A.            Anycontroversy, dispute or claim arising out of or relating to this Agreement orthe breach hereof which cannot be settled by mutual agreement (other than withrespect to the matters covered by Section IX for which JTAX may, but will notbe required to, seek injunctive relief) will be finally settled by bindingarbitration in accordance with the Federal Arbitration Act (or if notapplicable, the applicable state arbitration law) as follows:  Any party who is aggrieved will deliver anotice to the other party setting forth the specific points in dispute.  Any points remaining in dispute twenty (20)days after the giving of such notice may be submitted to arbitration inParsippany, New Jersey, to the American Arbitration Association,

 

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before a singlearbitrator appointed in accordance with the arbitration rules of the AmericanArbitration Association, modified only as herein expressly provided.  After the aforesaid twenty (20) days, eitherparty, upon ten (10) days notice to the other, may so submit the points indispute to arbitration.  The arbitratormay enter a default decision against any party who fails to participate in thearbitration proceedings.

 

B.            Thedecision of the arbitrator on the points in dispute will be final, unappealableand binding, and judgment on the award may be entered in any court havingjurisdiction thereof.

 

C.            Exceptas otherwise provided in this Agreement, the arbitrator will be authorized toapportion its fees and expenses and the reasonable attorneys’ fees and expensesof any such party as the arbitrator deems appropriate.  In the absence of any such apportionment,the fees and expenses of the arbitrator will be borne equally by each party,and each party will bear the fees and expenses of its own attorney.

 

D.            Theparties agree that this Section XVII has been included to rapidly andinexpensively resolve any disputes between them with respect to this Agreement,and that this Section XVII will be grounds for dismissal of any court actioncommenced by either party with respect to this Agreement, other thanpost-arbitration actions seeking to enforce an arbitration award.  In the event that any court determines thatthis arbitration procedure is not binding, or otherwise allows any litigationregarding a dispute, claim, or controversy covered by this Agreement toproceed, the parties hereto hereby waive any and all right to a trial by juryin or with respect to such litigation.

 

E.             Theparties will keep confidential, and will not disclose to any person, except asmay be required by law, the existence of any controversy hereunder, thereferral of any such controversy to arbitration or the status or resolutionthereof.

 

# SECTION XVIII

SURVIVAL

 

Sections IX, X, XI, XII, XIV and XVII will continue infull force in accordance with their respective terms notwithstanding anytermination of the Period of Employment.

 

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# SECTION XIX

SEPARABILITY

 

All provisions of this Agreement are intended to beseverable.  In the event any provisionor restriction contained herein is held to be invalid or unenforceable in anyrespect, in whole or in part, such finding will in no way affect the validityor enforceability of any other provision of this Agreement.  The parties hereto further agree that anysuch invalid or unenforceable provision will be deemed modified so that it willbe enforced to the greatest extent permissible under law, and to the extentthat any court of competent jurisdiction determines any restriction herein tobe unreasonable in any respect, such court may limit this Agreement to renderit reasonable in the light of the circumstances in which it was entered intoand specifically enforce this Agreement as limited.

 

IN WITNESS WHEREOF, the undersigned have executed thisAgreement as of the date first above written.

 
|   | JACKSON HEWITT TAX SERVICES INC. |
|--------|----------------------------------|
|   |                             |   |
|   | /s/ Peter Karpiak                |   |
|   | By:                              | Peter Karpiak |
|   | Title:                           | Senior Vice President |
|   |                             |   |
|   |                             |   |
|   | CENDANT CORPORATION              |
|   |                             |   |
|   | /s/ Terry Connelly               |   |
|   | By:                              | Terry Connelly |
|   | Title:                           | Executive Vice President |
|   |                             |   |
|   |                             |   |
|   | MICHAEL LISTER                   |
|   |                             |   |
|   | /s/ Michael Lister               |   |
|        |                                  |  |  |  |  |

 

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