**Exhibit 10.13**

 

 

 

Jackson Hewitt Tax Service Inc.

 

and

 

Jackson Hewitt Inc.

 

 

$175,000,000 Floating Rate SeniorNotes due June 25, 2009

 

 

----

 

Note Purchase Agreement

 

----

 

 

Dated as of June 21, 2004

 

 

 

----

 

**Table of Contents**

 
| **Section**        |   | **Heading**                                                   |   |
|--------------------|--------|---------------------------------------------------------------|--------|
|               |   |                                                          |   |
| Section 1.    |   | Authorization of Notes                                        |   |
|               |   |                                                          |   |
| Section 1.1.  |   | Description of Notes                                          |   |
| Section 1.2.  |   | Note Interest Rate                                            |   |
|               |   |                                                          |   |
| Section 2.    |   | Sale and Purchase of Notes                                    |   |
|               |   |                                                          |   |
| Section 2.1.  |   | Notes                                                         |   |
| Section 2.2.  |   | Guaranty                                                      |   |
|               |   |                                                          |   |
| Section 3.    |   | Closing                                                       |   |
|               |   |                                                          |   |
| Section 4.    |   | Conditions to Closing                                         |   |
|               |   |                                                          |   |
| Section 4.1.  |   | Representations  and Warranties                               |   |
| Section 4.2.  |   | Performance;  No Default                                      |   |
| Section 4.3.  |   | Compliance Certificates                                       |   |
| Section 4.4.  |   | Opinions  of Counsel                                          |   |
| Section 4.5.  |   | Purchase  Permitted by Applicable Law, Etc                    |   |
| Section 4.6.  |   | Related  Transactions                                         |   |
| Section 4.7.  |   | Payment  of Special Counsel Fees                              |   |
| Section 4.8.  |   | Private  Placement Number                                     |   |
| Section 4.9.  |   | Changes  in Corporate Structure                               |   |
| Section 4.10. |   | Subsidiary  Guaranty                                          |   |
| Section 4.11. |   | Proceedings and Documents                                     |   |
|               |   |                                                          |   |
| Section 5.    |   | Representations and Warranties of the Company  and the Issuer |   |
|               |   |                                                          |   |
| Section 5.1.  |   | Organization; Power and Authority                             |   |
| Section 5.2.  |   | Authorization,  Etc                                           |   |
| Section 5.3.  |   | Disclosure                                                    |   |
| Section 5.4.  |   | Organization  and Ownership of Shares of Subsidiaries         |   |
| Section 5.5.  |   | Financial  Statements                                         |   |
| Section 5.6.  |   | Compliance  with Laws, Other Instruments, Etc                 |   |
| Section 5.7.  |   | Governmental  Authorizations, Etc                             |   |
| Section 5.8.  |   | Litigation;  Observance of Statutes and Orders                |   |
| Section 5.9.  |   | Taxes                                                         |   |
| Section 5.10. |   | Title  to Property; Leases                                    |   |
| Section 5.11. |   | Licenses,  Permits, Etc                                       |   |
| Section 5.12. |   | Compliance  with ERISA                                        |   |
| Section 5.13. |   | Private Offering by the Company                               |   |
| Section 5.14. |   | Use of Proceeds; Margin Regulations                           |   |
| Section 5.15. |   | Existing Debt; Future Liens                                   |   |

 

2

----

 
| Section 5.16. |   | Foreign Assets Control Regulations, Etc                      |   |
|--------------------|--------|--------------------------------------------------------------|--------|
| Section 5.17. |   | Status under Certain Statutes                                |   |
| Section 5.18. |   | Environmental  Matters                                       |   |
| Section 5.19. |   | Solvency                                                     |   |
|               |   |                                                         |   |
| Section 6.    |   | Representations of the Purchaser                             |   |
|               |   |                                                         |   |
| Section 6.1.  |   | Purchase  for Investment                                     |   |
| Section 6.2.  |   | Source  of Funds                                             |   |
|               |   |                                                         |   |
| Section 7.    |   | Information as to Company                                    |   |
|               |   |                                                         |   |
| Section 7.1.  |   | Financial  and Business Information                          |   |
| Section 7.2.  |   | Officer’s  Certificate                                  |   |
| Section 7.3.  |   | Inspection                                                   |   |
|               |   |                                                         |   |
| Section 8.    |   | Payment of the Notes                                         |   |
|               |   |                                                         |   |
| Section 8.1.  |   | Required  Payments                                           |   |
| Section 8.2.  |   | Optional  Prepayment of the Notes with LIBOR Breakage Amount |   |
| Section 8.3.  |   | Maturity;  Surrender, Etc.                                   |   |
| Section 8.4.  |   | Purchase  of Notes                                           |   |
| Section 8.5.  |   | Change in Control                                            |   |
|               |   |                                                         |   |
| Section 9.    |   | Affirmative Covenants                                        |   |
|               |   |                                                         |   |
| Section 9.1.  |   | Compliance  with Law                                         |   |
| Section 9.2.  |   | Insurance                                                    |   |
| Section 9.3.  |   | Maintenance  of Properties                                   |   |
| Section 9.4.  |   | Payment  of Taxes and Claims                                 |   |
| Section 9.5.  |   | Corporate  Existence, Etc                                    |   |
| Section 9.6.  |   | Additional  Subsidiary Guarantors                            |   |
|               |   |                                                         |   |
| Section 10.   |   | Negative Covenants                                           |   |
|               |   |                                                         |   |
| Section 10.1. |   | Consolidated  Leverage Ration                                |   |
| Section 10.2. |   | Consolidated  Fixed Charge Coverage Ratio                    |   |
| Section 10.3. |   | Limitation  on Liens                                         |   |
| Section 10.4  |   | Restricted  Payments                                         |   |
| Section 10.5. |   | Sales  of Assets                                             |   |
| Section 10.6. |   | Merger,  Consolidation                                       |   |
| Section 10.7. |   | Nature of Business                                           |   |
| Section 10.8. |   | Transactions  with Affiliates                                |   |
| Section 10.9. |   | Subsidiaries                                                 |   |
|               |   |                                                         |   |
| Section 11.   |   | Guaranty by the Company                                      |   |
|               |   |                                                         |   |
| Section 11.1. |   | Guaranty  by the Company                                     |   |

 

3

----

 
| Section 11.2. |   | Guaranty of Payment and Performance                                                                                    |   |
|--------------------|--------|------------------------------------------------------------------------------------------------------------------------|--------|
| Section 11.3. |   | General Provisions Relating to Guaranty by  the Company of Issuer’s Obligations under this Agreement and the Note |   |
|               |   |                                                                                                                   |   |
| Section 12.   |   | Events of Default                                                                                                      |   |
|               |   |                                                                                                                   |   |
| Section 13.   |   | Remedies  on Default, Etc                                                                                              |   |
|               |   |                                                                                                                   |   |
| Section 13.1. |   | Acceleration                                                                                                           |   |
| Section 13.2. |   | Other  Remedies                                                                                                        |   |
| Section 13.3. |   | Rescission                                                                                                             |   |
| Section 13.4. |   | No Waivers or Election of Remedies, Expenses, Etc.                                                                     |   |
|               |   |                                                                                                                   |   |
| Section 14.   |   | Registration; Exchange; Substitution of  Notes                                                                         |   |
|               |   |                                                                                                                   |   |
| Section 14.1. |   | Registration  of Notes                                                                                                 |   |
| Section 14.2. |   | Transfer  and Exchange of Notes                                                                                        |   |
| Section 14.3. |   | Replacement  of Notes                                                                                                  |   |
|               |   |                                                                                                                   |   |
| Section 15.   |   | Payments on Notes                                                                                                      |   |
|               |   |                                                                                                                   |   |
| Section 15.1. |   | Place  of Payment                                                                                                      |   |
| Section 15.2. |   | Home  Office Payment                                                                                                   |   |
|               |   |                                                                                                                   |   |
| Section 16.   |   | Expenses,  Etc                                                                                                         |   |
|               |   |                                                                                                                   |   |
| Section 16.1. |   | Transaction  Expenses                                                                                                  |   |
| Section 16.2. |   | Survival                                                                                                               |   |
|               |   |                                                                                                                   |   |
| Section 17.   |   | Survival of Representations and Warranties;  Entire Agreement                                                          |   |
|               |   |                                                                                                                   |   |
| Section 18.   |   | Amendment and Waiver                                                                                                   |   |
|               |   |                                                                                                                   |   |
| Section 18.1. |   | Requirements                                                                                                           |   |
| Section 18.2. |   | Solicitation  of Holders of Notes                                                                                      |   |
| Section 18.3. |   | Binding  Effect, Etc                                                                                                   |   |
| Section 18.4. |   | Notes  Held by Company, Issuer, Etc                                                                                    |   |
|               |   |                                                                                                                   |   |
| Section 19.   |   | Notices                                                                                                                |   |
|               |   |                                                                                                                   |   |
| Section 20.   |   | Reproduction of Documents                                                                                              |   |
|               |   |                                                                                                                   |   |
| Section 21.   |   | Confidential Information                                                                                               |   |

 

4

----

 
| Section 22.   |   | Substitution of Purchaser          |   |
|--------------------|--------|------------------------------------|--------|
|               |   |                               |   |
| Section 23.   |   | Miscellaneous                      |   |
|               |   |                               |   |
| Section 23.1. |   | Successors  and Assigns            |   |
| Section 23.2. |   | Payments  Due on Non-Business Days |   |
| Section 23.3. |   | Severability                       |   |
| Section 23.4. |   | Construction                       |   |
| Section 23.5. |   | Counterparts                       |   |
| Section 23.6. |   | Governing  Law                     |   |

 

5

----

 
| Schedule A     | — | Information Relating To Purchasers                                                                              |   |
|---------------------|--------|-----------------------------------------------------------------------------------------------------------------|--------|
|                |   |                                                                                                            |   |
| Schedule B     | — | Defined  Terms                                                                                                  |   |
|                |   |                                                                                                            |   |
| Schedule 5.4   | — | Subsidiaries of the Company, Ownership of  Subsidiary Stock                                                     |   |
|                |   |                                                                                                            |   |
| Schedule 10.3  | — | Existing  Liens                                                                                                 |   |
|                |   |                                                                                                            |   |
| Exhibit 1      | — | Form  of Floating Rate Senior Note due June 25, 2009                                                       |   |
|                |   |                                                                                                            |   |
| Exhibit 2.2    | — | Subsidiary Guaranty                                                                                             |   |
|                |   |                                                                                                            |   |
| Exhibit 4.4(a) | — | Form of Opinion of Skadden,  Arps, Slate, Meagher & Flom LLP, Special Counsel to the Company and the Issuer |   |
|                |   |                                                                                                            |   |
| Exhibit 4.4(b) | — | Form of Opinion of Piper Rudnick, LLP,  Special Counsel to the Issuer                                           |   |
|                |   |                                                                                                            |   |
| Exhibit 4.4(c) | — | Form of Opinion of Chapman and Cutler LLP, Special Counsel for the  Purchasers                                  |   |

 

6

----

 

**Jackson Hewitt Tax Service Inc.**

**7 Sylvan WayParsippany, New Jersey 07054**

 

**and**

 

**Jackson Hewitt Inc.**

**c/o Jackson Hewitt Tax Service Inc.**

**7 Sylvan WayParsippany, New Jersey 07054**

 

$175,000,000 Floating Rate SeniorNotes due June 25, 2009

 

Dated as ofJune 21, 2004

 

To the Purchasers listed inthe attached Schedule A:

 

Ladies and Gentlemen:

 

Jackson Hewitt Tax Service Inc., a Delaware corporation (the *“Company”*),and Jackson Hewitt Inc., a Virginia corporation (the *“Issuer”*), hereby jointlyand severally agree with the Purchasers listed in the attached Schedule A(the *“Purchasers”*)to this Note Purchase Agreement (this *“Agreement”*) as follows:

 

Section 1.                                            Authorizationof Notes.

 

*Section 1.1.**                                          Descriptionof**Notes*.  The Issuerwill authorize the issue and sale of $175,000,000 aggregate principal amount ofits Floating Rate Senior Notes due June 25, 2009 (the *“Notes”*).  The term *“Notes”* shall also include any such notesissued in substitution therefor pursuant to Section 14 of thisAgreement.  The Notes shall besubstantially in the form set out in Exhibit 1 with such changestherefrom, if any, as may be approved by the Purchasers and the Issuer.  Certain capitalized terms used in thisAgreement are defined in Schedule B; references to a “Schedule” or an“Exhibit” are, unless otherwise specified, to a Schedule or an Exhibitattached to this Agreement.

 

*Section 1.2.**                                          NoteInterest Rate*.

 

(i)                                     TheNotes shall bear interest (computed on the basis of a 360-day year and actualdays elapsed) on the unpaid principal thereof from the date of issuance at afloating rate equal to the Adjusted LIBOR Rate from time to time, payablequarterly on the twenty fifth day of March, June, September and December,commencing on September 25, 2004, until such principal sum shall havebecome due and payable (whether at maturity, upon notice of prepayment or

 

7

----

 

otherwise) (each such date being referred to herein as an *“InterestPayment Date”*) and interest (so computed) on any overdue principaland LIBOR Breakage Amount, if any, and, to the extent permitted by applicablelaw, on any overdue interest, from the due date thereof (whether byacceleration or otherwise) at the Default Rate until paid.

 

(ii)                                  TheAdjusted LIBOR Rate shall be determined by the Issuer, and notice thereof shallbe given to the holders of the Notes, within three Business Days after thebeginning of each Interest Period, together with a copy of the relevant screenused for the determination of LIBOR, a calculation of Adjusted LIBOR Rate forsuch Interest Period, the number of days in such Interest Period, the date onwhich interest for such Interest Period will be paid and the amount of interestto be paid to each holder of Notes on such date.  In the event that the holders of more than 50% in aggregateprincipal amount of the outstanding Notes do not concur with such determinationby the Issuer, within ten Business Days after receipt by such holders of thenotice delivered by the Issuer pursuant to the immediately preceding sentence,such holders of the Notes shall provide notice to the Issuer, together with acopy of the relevant screen used for the determination of LIBOR, a calculationof Adjusted LIBOR Rate for such Interest Period, the number of days in suchInterest Period, the date on which interest for such Interest Period will bepaid and the amount of interest to be paid to each holder of Notes on such date,and any such determination made by the holders of the Notes in accordance withthe provisions of this Agreement, shall be presumptively correct absentmanifest error.

 

Section 2.                                            Sale andPurchase of Notes.

 

*Section 2.1.**                                          Notes**.*  Subject to the terms and conditions of thisAgreement, the Issuer will issue and sell to each Purchaser and each Purchaserwill purchase from the Issuer, at the Closing provided for in Section 3,Notes in the principal amount specified opposite such Purchaser’s name in Schedule Aat the purchase price of 100% of the principal amount thereof.  The obligations of each Purchaser hereunderare several and not joint obligations and each Purchaser shall have noobligation and no liability to any Person for the performance or nonperformanceby any other Purchaser hereunder.

 

*Section 2.2.**                                          Guaranty. *The payment by the Issuer of all amountsdue with respect to the Notes and the performance by the Issuer of itsobligations under this Agreement will be absolutely and unconditionallyguaranteed by the Company pursuant to the terms of this Agreement and theSubsidiary Guarantors pursuant to the Subsidiary Guaranty, which shall besubstantially in the form of Exhibit 2.2 attached hereto, and otherwise inaccordance with Section 9.6 hereof.

 

Section 3.                                            Closing.

 

The sale and purchase of the Notes to be purchased by each Purchasershall occur at the offices of Skadden, Arps, Slate, Meagher & Flom LLP,Four Times Square, New York, New York 10019 at 10:00 a.m. New York time,at a closing (the *“Closing”*) on the fourth Business Day followingthe execution of the underwriting agreement to be entered into in connectionwith the initial public offering (*“IPO”*) of the Company’s common stock, parvalue $0.01 per share

 

8

----

 

(the *“Common Stock”*), or on such other Business Day thereafter onor prior to July 7, 2004 as may be agreed upon by the Issuer, the Company andthe Purchasers.  At the Closing, theIssuer will deliver to each Purchaser the Notes to be purchased by suchPurchaser in the form of a single Note (or such greater number of Notes indenominations of at least $100,000 as such Purchaser may reasonably request)dated the date of the Closing and registered in such Purchaser’s name (or inthe name of a nominee of such Purchaser), against delivery by such Purchaser tothe Issuer or its order of immediately available funds in the amount of thepurchase price therefor by wire transfer of immediately available funds for theaccount of the Issuer to Account Number 304 192 813, Account Name JacksonHewitt Inc., at JPMorgan Chase, ABA Number 021 000 021.  If at the Closing the Issuer shall fail totender such Notes to any Purchaser as provided above in this Section 3, or anyof the conditions specified in Section 4 shall not have been fulfilled to anyPurchaser’s satisfaction, such Purchaser shall, at such Purchaser’s election,be relieved of all further obligations under this Agreement, without therebywaiving any rights such Purchaser may have by reason of such failure or suchnonfulfillment.

 

Section 4.                                            Conditionsto Closing.

 

The obligation of each Purchaser to purchase and pay for the Notes tobe sold to such Purchaser at the Closing is subject to the fulfillment to suchPurchaser’s satisfaction, prior to or at the Closing, of the followingconditions:

 

*Section 4.1.**                                          Representationsand Warrantie*s*of the Company*.** **(a)The representations and warranties of the Company and the Issuer in thisAgreement shall be correct when made and at the time of Closing.

 

(b)                                 *Representationsand Warranties of the Subsidiary Guarantors.*The representations andwarranties of the Subsidiary Guarantors in the Subsidiary Guaranty shall becorrect when made and at the time of Closing.

 

*Section 4.2.**                                          Performance;No Default*.**** The Company and theIssuer shall have performed and complied with all agreements and conditionscontained in this Agreement required to be performed or complied with by theCompany and the Issuer prior to or at the Closing, and after giving effect tothe issue and sale of the Notes (and the application of the proceeds thereof ascontemplated by Section 5.14), no Default or Event of Default shall haveoccurred and be continuing.  Neither theCompany nor any Subsidiary shall have entered into any transaction since thedate of the Memorandum that would have been prohibited by Section 10, other than transactions disclosed inthe Memorandum.

 

*Section 4.3.**                                          ComplianceCertificates*.

 

(a)                                  *Officer’sCertificate of the Company.* The Company shall have delivered to such Purchaser an Officer’sCertificate, dated the date of the Closing, certifying that the conditionsspecified in Sections 4.1(a), 4.2 and 4.9 have been fulfilled.

 

(b)                                 *Secretary’sCertificate of the Company.* The Company shall have delivered to such Purchaser a certificatecertifying as to the resolutions attached thereto and other corporate

 

9

----

 

proceedings relating to the authorization, execution and delivery ofthis Agreement.

 

(c)                                  *Officer’sCertificate of the Issuer.* The Issuer shall have delivered to such Purchaser an Officer’sCertificate, dated the date of Closing, certifying that the conditionsspecified in Sections 4.1(a), 4.2 and 4.9 have been fulfilled.

 

(d)                                 *Secretary’sCertificate of the Issuer.* The Issuer shall have delivered to such Purchaser a certificatecertifying as to the resolutions attached thereto and other corporateproceedings relating to the authorization, execution and delivery of the Notesand this Agreement.

 

(e)                                  *Officer’sCertificate of the Subsidiary Guarantors. *Each Subsidiary Guarantor shall have delivered to suchPurchaser an Officer’s Certificate, dated the date of the Closing, certifyingthat the conditions specified in Section 4.1(b) and 4.2 have beenfulfilled.

 

(f)                                    *Secretary’sCertificate of the Subsidiary Guarantors. *Each Subsidiary Guarantor shall have delivered to suchPurchaser a certificate certifying as to the resolutions attached thereto andother corporate proceedings relating to the authorization, execution anddelivery of the Subsidiary Guaranty.

 

*Section 4.4.**                                          Opinionsof Counsel*.** **Such Purchaser shallhave received opinions addressed to such Purchaser, dated the date of theClosing from (a) Skadden, Arps, Slate, Meagher & Flom LLP, specialcounsel to the Company and the Issuer, substantially in the form attached as Exhibit 4.4(a) (andthe Company and the Issuer hereby instruct their counsel to deliver suchopinion to such Purchaser), (b) PiperRudnick, LLP, special counsel to the Issuer, substantially in the form attachedas Exhibit 4.4(b) (and the Issuer hereby instructs its counsel todeliver such opinion to such Purchaser), and (c) Chapman and Cutler LLP, the Purchasers’ specialcounsel in connection with such transactions, substantially in the form setforth in Exhibit 4.4(c).

 

*Section 4.5**.**                                          PurchasePermitted by Applicable Law, Etc*.** **Onthe date of Closing, each purchase of Notes shall (a) be permitted by thelaws and regulations of each jurisdiction to which each Purchaser is subject,without recourse to provisions (such as Section 1405(a)(8) of the New YorkInsurance Law) permitting limited investments by insurance companies withoutrestriction as to the character of the particular investment, (b) notviolate any applicable law or regulation (including, without limitation, Regulation T,U or X of the Board of Governors of the Federal Reserve System) and(c) not subject any Purchaser to any tax, penalty or liability under orpursuant to any applicable law or regulation, which law or regulation was notin effect on the date hereof.  Ifrequested by any Purchaser, such Purchaser shall have received an Officer’sCertificate certifying as to such matters of fact as such Purchaser mayreasonably specify to enable such Purchaser to determine whether such purchaseis so permitted.

 

*Section 4.6.**                                          RelatedTransactions*.**** The Company and theIssuer, as the case may be, shall have (a) consummated the sale of the entireprincipal amount of the Notes scheduled to be sold on the date of Closingpursuant to this Agreement, (b) consummated the IPO via the sale by Cendant Finance Holding Corporation ofsubstantially all of the Common Stock owned by

 

10

----

 

Cendant Corporation and its affiliates (collectively, excluding the Company and itsSubsidiaries, “*Cendant*”), and (c) executed and delivered the BankCredit Agreement and such Bank Credit Agreement shall provide for a revolvingcredit commitment of not less than $100,000,000.

 

*Section 4.7**.**                                          Paymentof Special Counsel Fees*.  Withoutlimiting the provisions of Section 15.1, the Company and the Issuer shallpay on the Closing, the reasonable fees, reasonable charges and reasonabledisbursements of the Purchasers’ special counsel referred to inSection 4.4 to the extent reflected in a reasonably detailed statement ofsuch counsel rendered to the Company or the Issuer at least one Business Dayprior to the Closing.

 

*Section 4.8.**                                          PrivatePlacement Number*.** **Specialcounsel to the Purchasers shall have obtained Private Placement Number issuedby Standard & Poor’s CUSIP Service Bureau (in cooperation with theSecurities Valuation Office of the National Association of InsuranceCommissioners) for the Notes.

 

*Section 4.9**.**                                          Changesin Corporate Structure*.** **Neitherthe Company nor the Issuer shall have changed its jurisdiction of incorporationor been a party to any merger or consolidation and shall have succeeded to allor any substantial part of the liabilities of any other entity, at any timefollowing the date of the most recent financial statements referred to in Schedule 5.5.

 

*Section 4.10.**                                   SubsidiaryGuaranty. *The Subsidiary Guarantyshall have been duly authorized, executed and delivered by each SubsidiaryGuarantor, shall constitute the legal, valid and binding contract and agreementof each Subsidiary Guarantor exceptas such enforceability may be limited by (i) applicable bankruptcy, insolvency,reorganization, moratorium or other similar laws affecting the enforcement ofcreditors’ rights generally and (ii) general principles of equity(regardless of whether such enforceability is considered in a proceeding inequity or at law) and such Purchaser shall have received a true, correctand complete copy thereof.

 

*Section 4.11.**                                   Proceedingsand Documents*.** **Allcorporate and other proceedings in connection with the transactionscontemplated by this Agreement and all documents and instruments incident tosuch transactions shall be reasonably satisfactory to such Purchaser and suchPurchaser’s special counsel, and such Purchaser and such Purchaser’s specialcounsel shall have received all such counterpart originals or certified orother copies of such documents as such Purchaser or such Purchaser’s specialcounsel may reasonably request.

 

The obligation of the Issuer toissue and sell the Notes to the Purchasers at Closing is subject to thefulfillment to the Issuer’s satisfaction, prior to or at the Closing, of thecondition referred to in clause (b) of Section 4.6 hereof.

 

Section 5.                                            Representationsand Warranties of the Company and the Issuer.

 

The Company and the Issuer jointly and severally represent and warrantto each Purchaser that:

 

*Section 5.1.**                                         **Organization;Power and Authority*.  Each ofthe Company and the Issuer is a corporation duly organized, validly existingand in good standing under the laws of its

 

11

----

 

jurisdiction of incorporation, and is duly qualified as a foreigncorporation and is in good standing in each jurisdiction in which suchqualification is required by law, other than those jurisdictions as to whichthe failure to be so qualified or in good standing could not, individually orin the aggregate, reasonably be expected to have a Material AdverseEffect.  Each of the Company and theIssuer has the corporate power and authority to own or hold under lease theproperties it purports to own or hold under lease, to transact the business ittransacts and proposes to transact, to execute and deliver this Agreement andthe Notes, as the case may be, and to perform the provisions hereof andthereof.

 

*Section 5.2.**                                          Authorization,Etc*.** **This Agreement and the Notes havebeen duly authorized by all necessary corporate action on the part of theCompany and the Issuer, as the case may be, and this Agreement constitutes, andupon execution and delivery thereof each Note will constitute, a legal, validand binding obligation of the Company enforceable against the Company and ofthe Issuer enforceable against the Issuer, as the case may be, in accordancewith its terms, except as such enforceability may be limited by (i) applicablebankruptcy, insolvency, reorganization, moratorium or other similar lawsaffecting the enforcement of creditors’ rights generally and (ii) generalprinciples of equity (regardless of whether such enforceability is consideredin a proceeding in equity or at law).

 

*Section 5.3**.**                                          Disclosure*.** **The Company, has authorized itsagent, J.P. Morgan Securities Inc., to deliver to each Purchaser a copy of(i) a Private Placement Memorandum, dated April 23, 2004, together with the Appendices thereto,including Amendment No. 2 to the Company’s Registration Statement on Form S-1 (the*“PlacementMemorandum”*) and(ii) a supplement to such Placement Memorandum, dated June 18, 2004including the Appendix thereto consisting of Amendment No. 5 to theCompany’s Registration Statement on Form S-1 (the Placement Memorandum as sosupplemented is herein referred to as the *“Memorandum”*) which relate to thetransactions contemplated hereby.  TheMemorandum fairly describes, in all material respects, the general nature ofthe business and principal properties of the Company and its Subsidiaries.  This Agreement and the Memorandum, taken asa whole, do not contain any untrue statement of a material fact or omit tostate any material fact necessary to make the statements therein not misleadingin light of the circumstances under which they were made.  Exceptas disclosed in the Memorandum, since April 30, 2004, there hasbeen no change in the financial condition, operations, business or propertiesof the Company or any of its Subsidiaries except changes that individually orin the aggregate could not reasonably be expected to have a Material AdverseEffect.  There is no fact known to theCompany or the Issuer that could reasonably be expected to have a MaterialAdverse Effect that has not been set forth herein or in the Memorandum.  TheCompany was incorporated on February 27, 2004, it issued and sold for$1.00 100 shares of Common Stock to Cendant in connection with its organizationand on March 1, 2004, all of the issued and outstanding shares of capitalstock of the Issuer were transferred by Cendant to the Company.  On May 12, 2004, the Companydistributed a stock dividend of 37,499,900 shares of Common Stock to CendantFinance Holding Corporation, which increased the aggregate number of shares ofCommon Stock of the Company outstanding to 37,500,000 shares.  Asof the date hereof, the Company does not have any Material amount of assets orliabilities other than such capital stock of the Issuer and, except asdisclosed in the Memorandum, immediately prior to the date of the Closing, theCompany will not have any Material amount of assets or liabilities other thansuch capital stock.

 

12

----

 

*Section 5.4.**                                          Organizationand Ownership of Shares of Subsidiaries.*** **(a) Schedule 5.4 contains (except as noted therein)complete and correct lists of the Company’s Material Subsidiaries, showing, asto each such Subsidiary, the correct name thereof, the jurisdiction of itsorganization, and the percentage of shares of each class of its capital stockoutstanding owned by the Company and each other Subsidiary.  The Company’s directors and executiveofficers are listed in theMemorandum.

 

(b)                                 Allof the outstanding shares of capital stock of each Subsidiary shown inSchedule 5.4 as being owned by the Company and its Subsidiaries have beenvalidly issued, are fully paid and nonassessable and are owned by the Companyor another Subsidiary free and clear of any Lien (except Permitted Liens).

 

(c)                                  EachSubsidiary identified in Schedule 5.4 is a corporation duly organized,validly existing and in good standing under the laws of its jurisdiction oforganization, and is duly qualified as a foreign corporation or other legalentity and is in good standing in each jurisdiction in which such qualificationis required by law, other than those jurisdictions as to which the failure tobe so qualified or in good standing could not, individually or in theaggregate, reasonably be expected to have a Material Adverse Effect.  Each such Subsidiary has the corporate orother power and authority to own or hold under lease the properties it purportsto own or hold under lease and to transact the business it transacts andproposes to transact.

 

(d)                                 NoMaterial Subsidiary is a party to, or otherwise subject to, any legalrestriction or any agreement (other than this Agreement, and customarylimitations imposed by corporate law statutes) restricting the ability of suchSubsidiary to pay dividends out of profits or make any other similardistributions of profits to the Company or any of its Subsidiaries that ownsoutstanding shares of capital stock or similar equity interests of suchSubsidiary.

 

*Section 5.5.**                                          FinancialStatements.*** **The consolidatedfinancial statements of theCompany and its Subsidiaries andfor the three years ended April 30, 2004 are included in the Memorandum.  All of said financial statements (includingin each case the related notes thereto) fairly present in all material respectsthe consolidated financial position of the Company and its Subsidiaries as ofthe respective dates specified in such financial statements and theconsolidated results of their operations and cash flows for the respectiveperiods so specified and have been prepared in accordance with GAAP consistentlyapplied throughout the periods involved except as set forth in the notesthereto.

 

*Section 5.6**.**                                          Compliancewith Laws, Other Instruments, Etc*.** **Theexecution, delivery and performance by the Company and the Issuer, as the casemay be, of this Agreement and the Notes will not (a) contravene, result inany breach of, or constitute a default under, or result in the creation of anyLien in respect of any property of the Company or any Subsidiary under, anyindenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,corporate charter or by-laws, or any other material agreement or instrument towhich the Company or any Subsidiary is bound or by which the Company or anySubsidiary or any of their respective properties may be bound or affected,(b) conflict with or result in a breach of any of the terms, conditions orprovisions of any order, judgment, decree, or ruling of any court, arbitratoror Governmental

 

13

----

 

Authority applicable to the Company or any Subsidiary, or(c) violate any provision of any statute or other rule or regulationof any Governmental Authority applicable to the Company or any Subsidiary.  The offer and sale of the Notes in themanner provided in this Agreement will not have a Material Adverse Effect onthe licenses and permits required by the Company and its Subsidiaries toconduct business in the jurisdictions in which they currently conduct theirbusiness.

 

*Section 5.7**.**                                          GovernmentalAuthorizations, Etc*.** **Assuming the accuracy of therepresentations and warranties of the Purchasers set forth herein and of J.P.Morgan Securities Inc. regarding the manner in which the Notes wereoffered and the status of the offerees of the Notes under the Securities Act, no consent, approval orauthorization of, or registration, filing or declaration with, any GovernmentalAuthority is required in connection with the execution, delivery or performanceby the Company and the Issuer, as the case may be, of this Agreement or theNotes.

 

*Section 5.8**.**                                          Litigation;Observance of Statutes and Orders*.** **(a) Thereare no actions, suits or proceedings pending or, to the knowledge of theCompany or the Issuer, threatened against or affecting the Company or anySubsidiary or any property of the Company or any Subsidiary in any court orbefore any arbitrator of any kind or before or by any Governmental Authoritythat, individually or in the aggregate, could reasonably be expected to have aMaterial Adverse Effect.

 

(b)                                 Neitherthe Company nor any Subsidiary is in default under any term of any agreement orinstrument to which it is a party or by which it is bound, or any order,judgment, decree or ruling of any court, arbitrator or Governmental Authorityor is in violation of any applicable law, ordinance, rule or regulation(including without limitation Environmental Laws) of any GovernmentalAuthority, which default or violation, individually or in the aggregate, couldreasonably be expected to have a Material Adverse Effect.

 

*Section 5.9**.**                                          Taxes*.** **The Company and its Subsidiarieshave filed all tax returns that are required to have been filed in anyjurisdiction, except for tax returns the failure of which to file would nothave a Material Adverse Effect, and have paid all taxes shown to be due and payableon such returns and all other taxes and assessments levied upon them or theirproperties, assets, income or franchises, to the extent such taxes andassessments have become due and payable and before they have become delinquent,except for any taxes and assessments (a) the amount of which is notindividually or in the aggregate Material or (b) the amount, applicabilityor validity of which is currently being contested in good faith by appropriateproceedings and with respect to which the Company or a Subsidiary, as the casemay be, has established reserves in accordance with GAAP.  Neither the Company nor the Issuer knows ofany basis for any other tax or assessment that could reasonably be expected tohave a Material Adverse Effect.  Thecharges, accruals and reserves on the books of the Company and its Subsidiariesin respect of federal, state or other taxes for all fiscal periods areadequate.  The federal income taxliabilities of the Company and its Subsidiaries, or of the affiliated group of which the Company and its Subsidiariesare members, as the case may be, have been determined by the InternalRevenue Service and paid for all taxable years ended on or prior toDecember 31, 1997.

 

14

----

 

*Section 5.10**.**                                   Titleto Property; Leases*.** **TheCompany and its Subsidiaries have good and sufficient title to their respectiveproperties that individually or in the aggregate are Material, including allsuch properties reflected in the most recent audited balance sheet referred toin Section 5.5 or purported to have been acquired by the Company or anySubsidiary after said date (except as sold or otherwise disposed of in theordinary course of business), in each case free and clear of Liens, other than Permitted Liens.  All leases that individually or in theaggregate are Material are valid and subsisting and are in full force andeffect in all material respects.

 

*Section 5.11**.**                                   Licenses,Permits, Etc*.  (a) The Companyand its Subsidiaries own or possess all licenses, permits, franchises,authorizations, patents, copyrights, service marks, trademarks and trade names,or rights thereto, that individually or in the aggregate are Material, withoutknown conflict with the rights of others except for those conflicts, that, individuallyor in the aggregate, could not have a Material Adverse Effect;

 

(b)                                 Tothe best knowledge of the Company or the Issuer, no financial product orservice of the Company or any of its Subsidiaries infringes in any Materialrespect any license, permit, franchise, authorization, patent, copyright,service mark, trademark, trade name or other right owned by any other Person;and

 

(c)                                  Tothe best knowledge of the Company or the Issuer, there is no Material violationby any Person of any right of the Company or any of its Subsidiaries withrespect to any patent, copyright, service mark, trademark, trade name or otherright owned or used by the Company or any of its Subsidiaries.

 

*Section 5.12**.**                                   Compliancewith ERISA*.** **(a) The Companyand each ERISA Affiliate have operated and administered each Plan in compliancewith all applicable laws except for such instances of noncompliance as have notresulted in and could not reasonably be expected to result in a MaterialAdverse Effect.  Neither the Company norany ERISA Affiliate has incurred any liability pursuant to Title I or IVof ERISA or the penalty or excise tax provisions of the Code relating toemployee benefit plans (as defined in Section 3 of ERISA) that has not been satisfied in full,and no event, transaction or condition has occurred or exists that couldreasonably be expected to result in the incurrence of any such liability by theCompany or any ERISA Affiliate, or in the imposition of any Lien on any of therights, properties or assets of the Company or any ERISA Affiliate, in eithercase pursuant to Title I or IV of ERISA or to such penalty or excise taxprovisions or to Section 401(a)(29) or 412 of the Code, other than suchliabilities or Liens as would not be individually or in the aggregate Material.

 

(b)                                 Thepresent value of the aggregate benefit liabilities under each of the Plans(other than Multiemployer Plans) sponsoredor maintained by the Company or its Subsidiaries, determined as of theend of such Plan’s most recently ended plan year on the basis of the actuarialassumptions specified for funding purposes in such Plan’s most recent actuarialvaluation report, did not exceed the aggregate current value of the assets ofsuch Plan allocable to such benefit liabilities.  The term *“benefit liabilities”* has the meaningspecified in Section 4001 of ERISA and the terms *“current value”* and *“presentvalue”* have the meaning specified in Section 3 of ERISA.

 

15

----

 

(c)                                  TheCompany and its ERISA Affiliates have not incurred any withdrawal liabilities(and are not subject to contingent withdrawal liabilities) underSection 4201 or 4204 of ERISA in respect of Multiemployer Plans thatindividually or in the aggregate are Material.

 

(d)                                 Theexpected post-retirement benefit obligation (determined as of the last day ofthe Company’s most recently ended fiscal year in accordance with FinancialAccounting Standards Board Statement No. 106, without regard toliabilities attributable to continuation coverage mandated by Section 4980Bof the Code) of the Company and its Subsidiaries is not Material.

 

(e)                                  Theexecution and delivery of this Agreement and the issuance and sale of the Noteshereunder will not involve any transaction that is subject to the prohibitionsof Section 406 of ERISA or in connection with which a tax could be imposedpursuant to Section 4975(c)(1)(A)-(D) of the Code.  The representation by the Company and theIssuer, as the case may be, in the first sentence of this Section 5.12(e)is made in reliance upon and subject to the accuracy of each Purchaser’srepresentation in Section 6.2 as to the sources of the funds to be used topay the purchase price of the Notes to be purchased by such Purchaser.

 

*Section 5.13.**                                   PrivateOffering by the Company*.** **Neitherthe Company, the Issuer nor anyone acting on the their behalf has offered theNotes or any similar securities for sale to, or solicited any offer to buy anyof the same from, or otherwise approached or negotiated in respect thereofwith, any Person other than 75 *“QualifiedInstitutional Buyers,”*as defined in Rule 144A under the Securities Act and no more than two orthree other institutional accredited investors, as defined inRule 501(a)(1), (2), (3) or (7) under the Securities Act, each ofwhich has been offered the Notes in connection with a private sale forinvestment and not through any form of general solicitation or generaladvertising.  Neither the Company, theIssuer nor anyone acting on their behalf has taken, or will take, any actionthat would subject the issuance or sale of the Notes to the registrationrequirements of Section 5 of the Securities Act.  The representationsand warranties contained in this Section 5.13 are based in part onrepresentations and warranties received by the Company and the Issuer from J.P.Morgan Securities Inc. regarding the manner in which the Notes wereoffered and the status of the offerees of the Notes under the Securities Act and the representations and warrantiesof the Purchasers contained herein.

 

*Section 5.14.**                                  **Use ofProceeds; Margin Regulations*.** **TheIssuer will apply the proceeds of the sale of the Notes to pay a specialdividend to the Company which will apply such proceeds to pay the cash portionof the Special Dividend from the Company to Cendant.  No part of the proceeds from the sale of the Notes hereunder willbe used, directly or indirectly, for the purpose of buying or carrying anymargin stock within the meaning of Regulation U of the Board of Governorsof the Federal Reserve System (12 CFR 221), or for the purpose ofbuying or carrying or trading in any securities under such circumstances as toinvolve the Issuer in a violation of Regulation X of said Board(12 CFR 224) or to involve any broker or dealer in a violation ofRegulation T of said Board (12 CFR 220).  Margin stock does not constitute more than 1% of the value of theconsolidated assets of the Company and its Subsidiaries and the Company and theIssuer do not have any present intention that margin stock will constitute morethan 1% of the value of such assets.  Asused in this Section, the terms *“margin stock”* and *“purpose of buying or carrying”*shall have the meanings assigned to them in said Regulation U.

 

16

----

 

*Section 5.15.**                                   ExistingDebt; Future Liens*.  (a) Exceptas disclosed in the Memorandum, the Company and its Subsidiaries, on a consolidated basis, do not, and as of the date of theClosing will not, have any outstanding Debt.  Neither the Company nor any Subsidiary is in default and nowaiver of default is currently in effect, in the payment of any principal orinterest on any Debt of the Company or such Subsidiary, and no event orcondition exists with respect to any Debt of the Company or any Subsidiary,that would permit (or that with notice or the lapse of time, or both, wouldpermit) one or more Persons to cause such Debt to become due and payable beforeits stated maturity or before its regularly scheduled dates of payment.

 

(b)                                 Neitherthe Company nor any Subsidiary has agreed or consented to cause or permit inthe future (upon the happening of a contingency or otherwise) any of itsproperty, whether now owned or hereafter acquired, to be subject to a Lien notpermitted by Section 10.3.

 

*Section 5.16.**                                   ForeignAssets Control Regulations, Etc*.** **Neitherthe sale of the Notes by the Issuer hereunder nor its use of the proceedsthereof will violate the Trading with the Enemy Act, as amended, or any of theforeign assets control regulations of the United States Treasury Department(31 CFR, Subtitle B, Chapter V, as amended) or any enablinglegislation or executive order relating thereto or is in violation of anyfederal statute or Presidential Executive Order, including without limitationExecutive Order 13224 66 Fed. Reg. 49079 (September 25, 2001) (BlockingProperty and Prohibiting Transactions with Persons who Commit, Threaten toCommit or Support Terrorism), or The USA Patriot Act.

 

*Section 5.17.**                                   Statusunder Certain Statute*s.** **Neitherthe Company nor any Subsidiary is an “investment company” registered orrequired to be registered under the Investment Company Act of 1940, as amended,or is subject to regulation under the Public Utility Holding Company Act of1935, as amended, the ICC Termination Act of 1995, as amended, or the FederalPower Act, as amended.

 

*Section 5.18**.**                                   EnvironmentalMatters*.  Neither the Company norany Subsidiary has knowledge of any claim or has received any notice of anyclaim, and no proceeding has been instituted raising any claim against theCompany or any of its Subsidiaries or any of their respective real propertiesnow or formerly owned, leased or operated by any of them, or other assets,alleging damage to the environment or any violation of any Environmental Laws,except, in each case, such as could not reasonably be expected to result in aMaterial Adverse Effect.  Except asotherwise disclosed to each Purchaser in writing:

 

(a)                                  neither the Companynor any Subsidiary has knowledge of any facts which would give rise to anyclaim, public or private, for violation of Environmental Laws or damage to theenvironment emanating from, occurring on or in any way related to realproperties or to other assets now or formerly owned, leased or operated by anyof them or their use, except, in each case, such as could not reasonably beexpected to result in a Material Adverse Effect;

 

(b)                                 neither the Companynor any of its Subsidiaries has stored any Hazardous Materials on realproperties now or formerly owned, leased or operated by any of them or

 

17

----

 

has disposed of any Hazardous Materials in each case in a mannercontrary to any Environmental Laws and in any manner that could reasonably beexpected to result in a Material Adverse Effect; and

 

(c)                                  all buildings on allreal properties now owned, leased or operated by the Company or any of itsSubsidiaries are in compliance with applicable Environmental Laws, except wherefailure to comply could not reasonably be expected to result in a MaterialAdverse Effect.

 

*Section 5.19**.**                                   Solvency.*  After giving effect to the sale of the Notesand the application of the proceeds thereof, (a) the fair value of Company’sconsolidated assets, or the Issuer’s consolidated assets, as the case may be,will be in excess of the total amount of the Company’s liabilities, or theIssuer’s liabilities, as the case may be, including, without limitation,contingent obligations, (b) each of the Company and the Issuer will beable to pay its debts as they mature, and (c) each of the Company and theIssuer will not have unreasonably small capital to carry on its business.

 

Section 6.                                            Representationsof the Purchaser.

 

*Section 6.1.**                                          Purchasefor Investment*.** **EachPurchaser represents that it (i) is a “Qualified Institutional Buyer” asdefined in Rule 144A under the Securities Act, and (ii) is purchasing the Notesfor its own account or for one or more separate accounts maintained by it orfor the account of one or more pension or trust funds that also are Qualified Institutional Buyers and not with a viewto the distribution thereof, *provided* that the disposition of suchPurchaser’s or such pension or trust funds’ property shall at all times bewithin such Purchaser’s or such pension or trust funds’ control.  Each Purchaser understands that the Notes havenot been registered under the Securities Act and may be resold only ifregistered pursuant to the provisions of the Securities Act or if an exemptionfrom registration is available, except under circumstances where neither suchregistration nor such an exemption is required by law, and that the Issuer isnot required to register the Notes.  Each Purchaser further represents andwarrants that it (a) will not sell, transfer or otherwise dispose of theNotes or any interest therein except in a transaction exempt from or not subjectto the registration requirements of the Securities Act, (b) was given theopportunity to access such information regarding the Company, the Issuer andthe Subsidiary Guarantors as it has requested and (c) was provided withthe Memorandum.  Each Purchaseracknowledges that the Notes will bear a restrictive legend substantially in theform set forth in Exhibit 1.

 

*Section 6.2.**                                          Sourceof Funds*.  Each Purchaser representsthat at least one of the following statements is an accurate representation asto each source of funds (a *“Source”*) to be used by it to pay thepurchase price of the Notes to be purchased by it hereunder:

 

(a)                                  the Source is an“insurance company general account” within the meaning of Department of LaborProhibited Transaction Exemption (*“PTE”*) 95-60 (issued July 12, 1995)and there is no employee benefit plan, treating as a single plan all plansmaintained by the same employer or employee organization, with respect to whichthe amount of the general account reserves and liabilities for all contractsheld by or on

 

18

----

 

behalf of such plan, exceeds ten percent (10%) of the total reservesand liabilities of such general account (exclusive of separate accountliabilities) plus surplus, as set forth in the NAIC Annual Statement for suchPurchaser most recently filed with such Purchaser’s state of domicile; or

 

(b)                                 the Source is either(i) an insurance company pooled separate account, within the meaning ofPTE 90-1 (issued January 29, 1990), or (ii) a bank collectiveinvestment fund, within the meaning of the PTE 91-38 (issued July 12,1991) and, except as such Purchaser prior to the execution and delivery of thisAgreement has disclosed to the Issuer in writing pursuant to this paragraph (b),no employee benefit plan or group of plans maintained by the same employer oremployee organization beneficially owns more than 10% of all assets allocatedto such pooled separate account or collective investment fund; or

 

(c)                                  the Sourceconstitutes assets of an “investment fund” (within the meaning of Part V of theQPAM Exemption) managed by a “qualified professional asset manager” or “QPAM”(within the meaning of Part V of the QPAM Exemption), no employee benefitplan’s assets that are included in such investment fund, when combined with theassets of all other employee benefit plans established or maintained by thesame employer or by an affiliate (within the meaning of Section V(c)(1) ofthe QPAM Exemption) of such employer or by the same employee organization andmanaged by such QPAM, exceed 20% of the total client assets managed by suchQPAM, the conditions of Part I(c) and (g) of the QPAM Exemption aresatisfied, neither the QPAM nor a person controlling or controlled by the QPAM(applying the definition of “control” in Section V(e) of the QPAMExemption) owns a 5% or more interest in the Issuer and (i) the identityof such QPAM and (ii) the names of all employee benefit plans whose assetsare included in such investment fund have been disclosed to the Issuer inwriting pursuant to this paragraph (c) prior to the execution and delivery ofthis Agreement; or

 

(d)                                 the Source is agovernmental plan; or

 

(e)                                  the Source is one ormore employee benefit plans, or a separate account or trust fund comprised ofone or more employee benefit plans, each of which prior to the execution anddelivery of this Agreement has been identified to the Issuer in writingpursuant to this paragraph (e); or

 

(f)                                    the Source does notinclude assets of any employee benefit plan, other than a plan exempt from thecoverage of ERISA; or

 

(g)                                 the Source is aninsurance company separate account maintained solely in connection with thefixed contractual obligations of the insurance company under which the amountspayable, or credited, to any employee benefit plan (or its related trust) andto any participant or beneficiary of such plan (including any annuitant) arenot affected in any manner by the investment performance of the separateaccount.

 

If any Purchaser or any subsequent transferee of the Notes indicatesthat such Purchaser or such

 

19

----

 

transferee is relying on any representation contained inparagraph (b), (c) or (e) above, the Issuer shall deliver on the date ofissuance of such Notes and on the date of any applicable transfer acertificate, which shall either state that (i) it is neither a party ininterest nor a “disqualified person” (as defined in Section 4975(e)(2) ofthe Code), with respect to any plan identified pursuant to paragraphs (b)or (e) above, or (ii) with respect to any plan, identified pursuant toparagraph (c) above, neither it nor any “affiliate” (as defined inSection V(c) of the QPAM Exemption) has at such time, and during theimmediately preceding one year, exercised the authority to appoint or terminatesaid QPAM as manager of any plan identified in writing pursuant toparagraph (c) above or to negotiate the terms of said QPAM’s managementagreement on behalf of any such identified plan.  As used in this Section 6.2, the terms *“employee benefit plan”, “governmentalplan”, “party in interest”* and *“separate account”* shall have therespective meanings assigned to such terms in Section 3 of ERISA.

 

Section 7.                                            Informationas to Company.

 

*Section 7.1**.**                                          Financialand Business Information*.  TheCompany shall deliver to each holder of Notes that is an InstitutionalInvestor:

 

(a)                                  *Quarterly Statements* —within 45 days after the end of each quarterly fiscal period in each fiscalyear of the Company (other than the last quarterly fiscal period of each suchfiscal year), duplicate copies of,

 

(i)                                     an unauditedconsolidated balance sheet of the Company and its Subsidiaries as at the end ofsuch quarter, and

 

(ii)                                  unauditedconsolidated statements of operations of the Company and its Subsidiaries as ofthe end of and for such fiscal quarter and statements of cash flows of theCompany and its Subsidiaries for the then elapsed portion of the fiscal yearending with such quarter,

 

setting forth in each case in comparative form the figures for thecorresponding periods in the previous fiscal year, prepared in accordance withGAAP applicable to quarterly financial statements generally, and certified by aSenior Financial Officer as fairly presenting, in all material respects, thefinancial condition of the companies being reported on and their results ofoperations and cash flows, subject to changes resulting from normal, recurringyear-end adjustments, *provided* that delivery within the timeperiod specified above of copies of the Company’s Quarterly Report onForm 10-Q prepared in compliance with the requirements therefor and filedwith the Securities and Exchange Commission shall be deemed to satisfy therequirements of this Section 7.1(a);

 

(b)                                 *Annual Statements* — within90 days after the end of each fiscal year of the Company, duplicate copies of,

 

(i)                                     a consolidatedbalance sheet of the Company and its Subsidiaries, as at the end of such year,and

 

20

----

 

(ii)                                  consolidatedstatements of operations, stockholders’ equity and cash flows of the Companyand its Subsidiaries as of the end of and for such year,

 

setting forth in each case in comparative form the figures for theprevious fiscal year, prepared in accordance with GAAP, and accompanied by an opinionthereon of Deloitte & Touche LLP or other independent certified publicaccountants of recognized national standing, which opinion shall state thatsuch consolidated financial statements present fairly, in all materialrespects, the financial condition of the companies being reported upon andtheir results of operations and cash flows and have been prepared in conformitywith GAAP consistently applied, and that the examination of such accountants inconnection with such financial statements has been made in accordance withgenerally accepted auditing standards, and that such audit provides areasonable basis for such opinion in the circumstances, *provided* that the deliverywithin the time period specified above of the Company’s Annual Report on Form 10-Kfor such fiscal year (together with the Company’s annual report toshareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act)prepared in accordance with the requirements therefor and filed with theSecurities and Exchange Commission shall be deemed to satisfy the requirementsof this Section 7.1(b);

 

(c)                                  *SEC and Other Reports* —promptly upon their becoming available, one copy of (i) each financialstatement, report, notice or proxy statement sent by the Company or anySubsidiary to public securities holders generally, (ii) each regular orperiodic report, each registration statement (without exhibits except asexpressly requested by such holder), and each prospectus and all amendmentsthereto filed by the Company or any Subsidiary with the Securities and ExchangeCommission containing information of a financial nature, and (iii) all pressreleases and other statements made available generally by the Company or anySubsidiary to the public concerning developments that are reasonably likely tohave a Material Adverse Effect on the Company; *provided* that if any holderhas indicated in writing to the Company that notices under thisSection 7.1(c) may be delivered electronically, then such notices may beso delivered; *provided, further*,**that written copies of such electroniccopies shall be delivered concurrently with the financial statements referredto in Section 7.1(a) and (b);

 

(d)                                 *Notice of Default or Event of Default*— promptly, and in any event within five Business Days after a ResponsibleOfficer becomes aware of the existence of any Default or Event of Default orthat any Person has given any notice or taken any action with respect to aclaimed default hereunder or that any Person has given any notice or taken anyaction with respect to a claimed default of the type referred to inSection 12(f), a written notice specifying the nature and period ofexistence thereof and what action the Company is taking or proposes to takewith respect thereto and, in addition, so long as any such Default or Event of Default shall exist, the Companyshall provide prior written notice at least three Business Days before theCompany declares or makes any Restricted Payment;

 

(e)                                  *ERISA Matters* — promptly,and in any event within five days after a

 

21

----

 

Responsible Officer becomes aware of any of the following, a writtennotice setting forth the nature thereof and the action, if any, that theCompany, the Issuer or an ERISA Affiliate proposes to take with respectthereto:

 

(i)                                     with respect toany Plan, any reportable event, as defined in Section 4043(b) of ERISA andthe regulations thereunder, for which notice thereof has not been waivedpursuant to such regulations as in effect on the date thereof; or

 

(ii)                                  the taking by thePBGC of steps to institute, or the threatening by the PBGC of the institutionof, proceedings under Section 4042 of ERISA for the termination of, or theappointment of a trustee to administer, any Plan, or the receipt by theCompany, the Issuer or any ERISA Affiliate of a notice from a MultiemployerPlan that such action has been taken by the PBGC with respect to suchMultiemployer Plan; or

 

(iii)                               Any event, transactionor condition that could result in the incurrence of any liability by the Company,the Issuer or any ERISA Affiliate pursuant to Title I or IV of ERISA orthe imposition of a penalty or excise tax under the provisions of the Coderelating to employee benefit plans, or the imposition of any Lien on any of therights, properties or assets of the Company, the Issuer or any ERISA Affiliatepursuant to Title I or IV of ERISA or such penalty or excise taxprovisions, if such liability or Lien, taken together with any other suchliabilities or Liens then existing, could reasonably be expected to have aMaterial Adverse Effect;

 

(f)                                    *Notices fromGovernmental Authority*— promptly, and in any event within 30 daysof receipt thereof, copies of any notice to the Company or any Subsidiary fromany federal or state Governmental Authority relating to any order, ruling,statute or other law or regulation that could reasonably be expected to have aMaterial Adverse Effect;

 

(g)                                 *Auditor’s Letter* ––concurrently with any delivery of financial statements underSection 7.1(b), or promptly thereafter, a letter addressed to the board ofdirectors of the Company from the accounting firm that reported on suchfinancial statements stating that, in connection with the accounting firm’saudits, nothing came to the attention of such firm that caused it to believethat the Company failed to comply with Sections 10.1 or 10.2 insofar as suchSections relate to financial and accounting matters, and that such accountingfirm’s audit was not directed primarily toward obtaining knowledge ofnoncompliance with such Sections;

 

(h)                                 *Projections*–– following therequest of any Institutional Investor which is a holder of the Notes made priorto the commencement of any fiscal year, the Company shall provide such holderwith financial projections of the Company and its consolidated Subsidiaries forsuch fiscal year concurrently with the delivery of the financial statementsreferred to in Section 7.1(b) (it being understood that the Company mayobtain assurance

 

22

----

 

from such holder that such information is subject to theconfidentiality provisions set forth in Section 21 of this Agreement); and

 

(i)                                     *RequestedInformation* — with reasonable promptness, such other data andinformation relating to the business, operations, affairs, financial condition,assets or properties of the Company or any of its Subsidiaries or relating tothe ability of the Company to perform its obligations hereunder and under theNotes as from time to time may be reasonably requested in writing by any suchholder of Notes.

 

*Section 7.2.**                                          Officer’sCertificate*.  Each set of financialstatements delivered to a holder of Notes pursuant to Section 7.1(a) orSection 7.1(b) hereof shall be accompanied by a certificate of a SeniorFinancial Officer setting forth:

 

(a)                                  *Covenant Compliance* — theinformation (including reasonably detailed calculations) required in order toestablish whether the Company was in compliance with the requirements ofSection 10.1, Section 10.2, Section 10.3(m), Section 10.5and Section 10.9 hereof, inclusive, during the quarterly or annual periodcovered by the statements then being furnished (including with respect to eachsuch Section, where applicable, the calculations of the maximum or minimumamount, ratio or percentage, as the case may be, permissible under the terms ofsuch Sections, and the calculation of the amount, ratio or percentage then inexistence); and

 

(b)                                 *Event of Default* — astatement that such officer has reviewed the relevant terms hereof and hasmade, or caused to be made, under his or her supervision, a review of thetransactions and conditions of the Company and its Subsidiaries from thebeginning of the quarterly or annual period covered by the statements thenbeing furnished to the date of the certificate and that such review shall nothave disclosed the existence during such period of any condition or event thatconstitutes a Default or an Event of Default or, if any such condition or eventexisted or exists (including, without limitation, any such event or conditionresulting from the failure of the Company or any Subsidiary to comply with anyEnvironmental Law), specifying the nature and period of existence thereof andwhat action the Company shall have taken or proposes to take with respectthereto.

 

*Section 7.3**.**                                          Inspection*.  The Company shall permit the representativesof each holder of Notes that is an Institutional Investor:

 

(a)                                  *No Default* — if no Defaultor Event of Default then exists, at the expense of such holder and uponreasonable prior notice to the Company, to visit the principal executive officeof the Company, to discuss the affairs, finances and accounts of the Companyand its Subsidiaries with the Company’s officers, and (with the consent of theCompany, which consent will not be unreasonably withheld) its independentpublic accountants, and (with the consent of the Company, which consent willnot be unreasonably withheld) to visit the other offices and properties of theCompany and each Subsidiary, all at such reasonable times during normalbusiness hours and as often as may be reasonably requested in writing; and

 

23

----

 

(b)                                 *Default* — if a Default orEvent of Default then exists, at the expense of the Company, to visit andinspect any of the offices or properties of the Company or any Subsidiary, toexamine all their respective books of account, records, reports and otherpapers, to make copies and extracts therefrom, and to discuss their respectiveaffairs, finances and accounts with their respective officers and independentpublic accountants (and by this provision the Company authorizes saidaccountants to discuss the affairs, finances and accounts of the Company andits Subsidiaries), all at such times and as often as may be requested.

 

Section 8.                                            Payment ofthe Notes.

 

*Section 8.1**.**                                          RequiredPayments*.  The entire principalamount of the Notes shall become due and payable on June 25, 2009.

 

*Section 8.2**.**                                          OptionalPrepayment of the Notes with LIBOR Breakage Amount*.  (a) Subject to the last sentence ofthis paragraph, the Issuer may, at its option, upon notice as provided below,prepay at any time all, or from time to time any part of, the Notes, in anamount not less than $1,000,000 in the case of a partial prepayment, at 100% ofthe principal amount so prepaid, plus the LIBOR Breakage Amount (unless thedate specified for prepayment is a regularly scheduled Interest PaymentDate).  The Issuer will give each holderof Notes written notice of each optional prepayment under this Section 8.2not less than 20 Business Days and not more than 60 days prior to the datefixed for such prepayment.  Each suchnotice shall specify such date, the aggregate principal amount of the Notes tobe prepaid on such date, the principal amount of each such Note held by suchholder to be prepaid (determined in accordance with Section 8.2(b)), andthe interest to be paid on the prepayment date with respect to such principalamount being prepaid and shall state that the LIBOR Breakage Amount will bepayable if such prepayment is not on a regularly scheduled Interest PaymentDate and that such holder is required to calculate such amount and submit suchcalculation in reasonable detail to the Issuer not less than two Business Daysprior to the date of prepayment. Notwithstanding the foregoing, the Issuer may not prepay the Notes priorto June 25, 2005.

 

(b)                                 Inthe case of each partial prepayment of the Notes, the principal amount of theNotes to be prepaid shall be allocated among all of the Notes at the timeoutstanding in proportion, as nearly as practicable, to the respective unpaidprincipal amounts thereof.

 

(c)                                  Theterm *“LIBORBreakage Amount”* shall mean any loss reasonably incurred by anyholder of a Note in thereemployment of the funds released by any prepayment of any Note.  Each holder shall determine the LIBORBreakage Amount with respect to the principal amount of its Notes then beingpaid or prepaid by written notice to the Issuer setting forth suchdetermination in reasonable detail not less than two Business Days prior to thedate of prepayment in the case of any prepayment pursuant toSection 8.2(a)**and not less than one Business Day in thecase of any payment required by Section 13.1.  Each such determination shall be presumptively correct absentmanifest error.

 

*Section 8.3**.**                                          Maturity;Surrender, Etc.*  In the case of eachprepayment of Notes pursuant

 

24

----

 

to this Section 8, the principal amount of each Note to be prepaidshall mature and become due and payable on the date fixed for such prepayment,together with interest on such principal amount accrued to such date and theapplicable LIBOR Breakage Amount, if any. From and after such date, unless the Issuer shall fail to pay suchprincipal amount when so due and payable, together with the interest and LIBORBreakage Amount, if any, as aforesaid, interest on such principal amount shallcease to accrue.  Any Note paid orprepaid in full shall be surrendered to the Issuer and cancelled and shall notbe reissued, and no Note shall be issued in lieu of any prepaid principalamount of any Note.

 

*Section 8.4.**                                          Purchaseof Notes*.  The Company and theIssuer will not and will not permit any Subsidiary of the Company to purchase,redeem, prepay or otherwise acquire, directly or indirectly, any of theoutstanding Notes except upon the payment or prepayment of the Notes inaccordance with the terms of this Agreement and the Notes.  The Issuer will promptly cancel all Notesacquired by it or any Affiliate pursuant to any payment, prepayment or purchaseof Notes pursuant to any provision of this Agreement and no Notes may be issuedin substitution or exchange for any such Notes.

 

*Section 8.5.**                                          Changein Control*.

 

(a)                                  *Notice ofChange in Control or Control Event.* The Company will, within ten days after any Responsible Officerhas actual knowledge of the occurrence of any Change in Control or ControlEvent, give written notice of such Change in Control or Control Event to eachholder of Notes unless notice in respect of such Change in Control (or the Changein Control contemplated by such Control Event) shall have been given pursuantto subparagraph (b) of this Section 8.5.  If a Change in Control has occurred, such notice shall containand constitute an offer to prepay Notes as described in subparagraph (c)of this Section 8.5 and shall be accompanied by the certificate describedin subparagraph (g) of this Section 8.5.

 

(b)                                 *Condition toCompany Action.*  The Companywill not take any action that consummates or finalizes a Change in Controlunless (i) at least 20 days prior to such action it shall have given toeach holder of Notes written notice containing and constituting an offer toprepay Notes as described in subparagraph (c) of this Section 8.5,accompanied by the certificate described in subparagraph (g) of thisSection 8.5, and (ii) contemporaneously with such action, it prepaysall Notes required to be prepaid in accordance with this Section 8.5.

 

(c)                                  *Offer toPrepay Notes.*  The offer toprepay Notes contemplated by subparagraphs (a) and (b) of this Section 8.5shall be an offer to prepay, in accordance with and subject to thisSection 8.5, all, but not less than all, the Notes held by each holder (inthis case only, *“holder”* in respect of any Note registered in the name of anominee for a disclosed beneficial owner shall mean such beneficial owner) on adate specified in such offer (the *“Proposed Prepayment Date”*).  If such Proposed Prepayment Date is inconnection with an offer contemplated by subparagraph (a) of thisSection 8.5, such date shall be not less than 20 days and not more than 60days after the date of such offer (if the Proposed Prepayment Date shall not bespecified in such offer, the Proposed Prepayment Date shall be the 30th dayafter the date of such offer).

 

25

----

 

(d)                                 *Acceptance/Rejection.*  A holder of Notes may accept the offer toprepay made pursuant to this Section 8.5 by causing a notice of suchacceptance to be delivered to the Company at least 5 days prior to the ProposedPrepayment Date.  A failure by a holderof Notes to respond to an offer to prepay made pursuant to thisSection 8.5 shall be deemed to constitute a rejection of such offer bysuch holder.

 

(e)                                  *Prepayment.*  Prepayment of the Notes to be prepaidpursuant to this Section 8.5 shall be at 100% of the principal amount ofsuch Notes together with interest on such Notes accrued to the date ofprepayment.  On the Business Daypreceding the date of prepayment, the Company shall deliver to each holder ofNotes being prepaid a statement showing the amount due in connection with suchprepayment and setting forth the details of the computation of suchamount.  The prepayment shall be made onthe Proposed Prepayment Date except as provided in subparagraph (f) of thisSection 8.5.

 

(f)                                    *DeferralPending Change in Control.* The obligation of the Company to prepay Notes pursuant to the offersrequired by subparagraph (c) and accepted in accordance withsubparagraph (d) of this Section 8.5 is subject to the occurrence ofthe Change in Control in respect of which such offers and acceptances shallhave been made.  In the event that suchChange in Control does not occur on the Proposed Prepayment Date in respectthereof, the prepayment shall be deferred until and shall be made on the dateon which such Change in Control occurs. The Company shall keep each holder of Notes reasonably and timelyinformed of (i) any such deferral of the date of prepayment, (ii) thedate on which such Change in Control and the prepayment are expected to occur,and (iii) any determination by the Company that efforts to effect suchChange in Control have ceased or been abandoned (in which case the offers andacceptances made pursuant to this Section 8.5 in respect of such Change inControl shall be deemed rescinded).

 

(g)                                 *Officer’sCertificate.*  Each offer toprepay the Notes pursuant to this Section 8.5 shall be accompanied by acertificate, executed by a Senior Financial Officer of the Company and datedthe date of such offer, specifying: (i) the Proposed Prepayment Date;(ii) that such offer is made pursuant to this Section 8.5;(iii) the principal amount of each Note offered to be prepaid;(iv) the interest that would be due on each Note offered to be prepaid,accrued to the Proposed Prepayment Date; (v) that the conditions of thisSection 8.5 have been fulfilled; (vi) in reasonable detail, thenature and date of the Change in Control; and (vii) that the failure torespond to such offer of prepayment shall constitute a rejection of such offer.

 

(h)                                 *“Change inControl” Defined.*  *“Change inControl”*means each and every issue, sale or other disposition ofshares of voting stock of the Company which results in any person (as such termis used in Section 13(d) and Section 14(d)(2) of the Exchange Act) orrelated persons constituting a group (as such term is used in Rule 13d-5under the Exchange Act), becoming the “beneficial owners” (as such term is usedin Rule 13d-3 under the Exchange Act as in effect on the date of theClosing), directly or indirectly, of more than 50% of the total voting power ofall classes then outstanding of the Company’s voting stock, or if such person acquires the rightto elect a majority of the board of directors of the Company.

 

26

----

 

(i)*                                     “ControlEvent” Defined.  “Control Event”*means:

 

(a)                                  the execution by theCompany or any of its Subsidiaries or Affiliates of any agreement or bindingletter of intent with respect to any proposed transaction or event or series oftransactions or events which, individually or in the aggregate, couldreasonably be expected to result in a Change in Control;

 

(b)                                 the execution of anywritten agreement which, when fully performed by the parties thereto, wouldresult in a Change in Control; or

 

(c)                                  the making of anywritten offer by any person (as such term is used in Section 13(d) andSection 14(d)(2) of the Exchange Act as in effect on the date of theClosing) or related persons constituting a group (as such term is used in Rule13d-5 under the Exchange Act as in effect on the date of the Closing) to theholders of the common stock of the Company, which offer, if accepted by therequisite number of holders, would result in a Change in Control unless suchoffer is rejected or expires pursuant to its terms prior to the date on whichnotice of such Change in Control is required to be delivered pursuant toSection 8.5(a).

 

Section 9.                                            AffirmativeCovenants.

 

The Company covenants that so long as any of the Notes are outstanding:

 

*Section 9.1.**                                          Compliancewith Law*.  The Company will, andwill cause each of its Subsidiaries to, comply with all laws, ordinances orgovernmental rules or regulations to which each of them is subject, including,without limitation, Environmental Laws, and will obtain and maintain in effectall licenses, certificates, permits, franchises and other governmentalauthorizations necessary to the ownership of their respective properties or tothe conduct of their respective businesses, in each case to the extentnecessary to ensure that non-compliance with such laws, ordinances orgovernmental rules or regulations or failures to obtain or maintain in effectsuch licenses, certificates, permits, franchises and other governmentalauthorizations could not, individually or in the aggregate, have a MaterialAdverse Effect.

 

*Section 9.2**.**                                          Insurance*.  The Company will, and will cause each of itsSubsidiaries to, maintain, with financially sound and reputable insurers,insurance with respect to their respective properties and businesses againstsuch casualties and contingencies, of such types, on such terms and in suchamounts (including deductibles, co-insurance and self-insurance, if adequatereserves are maintained with respect thereto) as is customary in the case ofentities of established reputations engaged in the same or a similar businessand similarly situated.

 

*Section 9.3.**                                          Maintenanceof Properties*.  The Company will,and will cause each of its Subsidiaries to, maintain and keep, or cause to bemaintained and kept, their respective properties Material to the conduct oftheir respective businesses in good repair, working order and condition (otherthan ordinary wear and tear), so that the business carried on in connectiontherewith may be properly conducted at all times, *provided* that thisSection shall not prevent the Company or

 

27

----

 

any Subsidiary from discontinuing the operation and the maintenance ofany of its properties if such discontinuance is desirable in the conduct of itsbusiness and the Company has concluded that such discontinuance could not,individually or in the aggregate, have a Material Adverse Effect.

 

*Section 9.4**.**                                          Paymentof Taxes and Claims*.  The Companywill, and will cause each of its Subsidiaries to, file all tax returns requiredto be filed in any jurisdiction and to pay and discharge all taxes shown to bedue and payable on such returns and all other taxes, assessments, governmentalcharges, or levies imposed on them or any of their properties, assets, incomeor franchises, to the extent such taxes and assessments have become due andpayable and before they have become delinquent and all claims for which sumshave become due and payable that have or might become a Lien on properties orassets of the Company or any Subsidiary, *provided* that neither the Company nor anySubsidiary need pay any such tax or assessment or claims if (i) theamount, applicability or validity thereof is contested by the Company or suchSubsidiary on a timely basis in good faith and in appropriate proceedings, andthe Company or such Subsidiary has established reserves therefor in accordancewith GAAP on the books of the Company or such Subsidiary or (ii) thenon-filing or nonpayment, as the case may be, of all such taxes and assessmentsin the aggregate could not have a Material Adverse Effect.

 

*Section 9.5.**                                          CorporateExistence, Etc*.  Subject toSections 10.5 and 10.6, the Company will at all times preserve and keep infull force and effect its corporate existence, and will at all times preserveand keep in full force and effect the corporate existence of each of itsSubsidiaries (unless merged into the Company or a Wholly-Owned Subsidiary) andall rights and franchises Material to the conduct of the business of theCompany and its Subsidiaries unless, in the good faith judgment of the Company,the termination of or failure to preserve and keep in full force and effectsuch corporate existence, right or franchise could not, individually or in theaggregate, have a Material Adverse Effect.

 

*Section 9.6.**                                          AdditionalSubsidiary Guarantors*. * *TheCompany will cause each Domestic Subsidiary which is required by the terms ofthe Bank Credit Agreement to become a party to, or otherwise guarantee, Debtoutstanding under such Bank Credit Agreement, to enter into the SubsidiaryGuaranty and deliver to each of the holders of the Notes (concurrently with theincurrence of any such obligation pursuant to such Bank Credit Agreement) thefollowing items:

 

(a)                                  a joinder agreementin respect of the Subsidiary Guaranty;

 

(b)                                 a certificate signedby the President, a Vice President or another authorized Responsible Officer ofthe Company making representations and warranties to the effect of thosecontained in Sections 5.4, 5.6 and 5.7, with respect to such Subsidiaryand the Subsidiary Guaranty, as applicable; and

 

(c)                                  an opinion of counsel(who may be in-house counsel for the Company) addressed to each of the holdersof the Notes reasonably satisfactory to the Required Holders, to the effectthat the Subsidiary Guaranty has been duly authorized, executed and deliveredby such Subsidiary Guarantor and that the Subsidiary Guaranty constitutes thelegal, valid and binding contract and agreement of such Subsidiary Guarantorenforceable

 

28

----

 

in accordance with its terms, except as an enforcement of such termsmay be limited by bankruptcy, insolvency, fraudulent conveyance and similarlaws affecting the enforcement of creditors’ rights generally and by generalequitable principles.

 

Section 10.                                      Negative Covenants.

 

The Company covenants that so long as any of the Notes are outstanding:

 

*Section 10.1**.**                                   ConsolidatedLeverage Ratio. *The Company willnot permit:

 

(a)                                  the ConsolidatedLeverage Ratio to exceed (i) 3.25 to 1.00 on or prior to April 30,2005, (ii) 3.00 to 1.00 on or after May 1, 2005 to and including April 30,2006, and (iii) 2.50 to 1.00 on or after May 1, 2006; and

 

(b)                                 Priority Debt toexceed 15% of Consolidated Net Tangible Assets as of any Calculation Date.

 

*Section 10.2**.**                                   ConsolidatedFixed Charge Coverage Ratio.*  TheCompany will not permit the Consolidated Fixed Charge Coverage Ratio to be lessthan (i) 3.00 to 1.00 on or prior to April 30, 2006, and (iii) 3.50 to1.00 on or after May 1, 2006.

 

*Section 10.3**.**                                   Limitationon Liens.    *The Company will not, and will not permitany of its Subsidiaries to, directly or indirectly create, incur, assume orpermit to exist (upon the happening of a contingency or otherwise) any Lien onor with respect to any property or asset (including, without limitation, anydocument or instrument in respect of goods or accounts receivable) of theCompany or any such Subsidiary, whether now owned or held or hereafteracquired, or any income or profits therefrom, or assign or otherwise convey anyright to receive income or profits, except:

 

(a)                                  Liens for taxes,assessments or other governmental charges that are not yet due and payable orthe payment of which is not at the time required by Section 9.4;

 

(b)                                 judgment liens inrespect of judgments that do not constitute an Event of Default underclause (i) of Section 12;

 

(c)                                  Liens incidental tothe conduct of business or the ownership of properties and assets (includinglandlords’, carriers’, warehousemen’s, mechanics’, materialmen’s and othersimilar Liens for sums not yet due and payable) and Liens to secure theperformance of bids, tenders, leases, or trade contracts, or to securestatutory obligations (including obligations under workers compensation,unemployment insurance and other social security legislation), surety or appealbonds or other Liens incurred in the ordinary course of business and not inconnection with the borrowing of money;

 

(d)                                 leases or subleasesgranted to others, easements, rights-of-way, minor survey exceptions,restrictions and other similar charges or encumbrances, in each case incidentalto the ownership of property or assets or the ordinary conduct of the business

 

29

----

 

of the Company or any of its Subsidiaries, *provided* that such Liens donot, in the aggregate, materially detract from the value of such property;

 

(e)                                  Liens securing Debtof a Subsidiary owed to the Company or to a Wholly-Owned Subsidiary;

 

(f)                                    Liens existing asof the date of Closing and reflected in Schedule 10.3;

 

(g)                                 Liens incurred afterthe date of Closing given to secure the payment of the purchase price incurredin connection with the acquisition, construction or improvement of property(other than accounts receivable or inventory) useful and intended to be used incarrying on the business of the Company or a Subsidiary, including Liensexisting on such property at the time of acquisition or construction thereof,or Liens incurred within 180 days of such acquisition or the completion of suchconstruction or improvement, *provided*that (i) the Lien shallattach solely to the property acquired, purchased, constructed or improved;(ii) at the time of acquisition, construction or improvement of suchproperty, the aggregate amount remaining unpaid on all Debt secured by Liens onsuch property, whether or not assumed by the Company or a Subsidiary, shall notexceed the greater of (y) the cost of such acquisition, construction orimprovement or (z) the Fair Market Value of such property (as determinedin good faith by one or more officers of the Company to whom authority to enterinto the transaction has been delegated by the board of directors of theCompany); and (iii) at the time of such incurrence and after giving effectthereto, no Event of Default would exist;

 

(h)                                 any Lien existing onproperty of a Person immediately prior to its being consolidated with or mergedinto the Company or a Subsidiary or its becoming a Subsidiary, or any Lienexisting on any property acquired by the Company or any Subsidiary at the timesuch property is so acquired (whether or not the Debt secured thereby shallhave been assumed), *provided* that (i) no such Lien shallhave been created or assumed in contemplation of such consolidation or mergeror such Person’s becoming a Subsidiary or such acquisition of property,(ii) each such Lien shall extend solely to the item or items of propertyso acquired and, if required by the terms of the instrument originally creatingsuch Lien, other property which is an improvement to or is acquired forspecific use in connection with such acquired property, and (iii) at thetime of such incurrence and after giving effect thereto, no Event of Defaultwould exist;

 

(i)                                     any extensions,renewals or replacements of any Lien permitted by the preceding subparagraphs(f), (g), and (h) of this Section 10.3, *provided* that (i) noadditional property shall be encumbered by such Liens, (ii) the unpaidprincipal amount of the Debt or other obligations secured thereby shall not beincreased on or after the date of any extension, renewal or replacement (exceptto the extent of any premiums and other refinancing costs incurred inconnection with such transaction);

 

(j)                                     customary rightsof set off upon deposit accounts and securities accounts of cash in favor ofbanks or other depository institutions and other securities intermediaries;

 

30

----

 

(k)                                  Liens in the natureof licenses that arise in the ordinary course of business of the Company or anyof its Subsidiaries;

 

(l)                                     any call orsimilar right in the nature of a right of first offer or a first refusal rightof a third party that is an investor in a joint venture or a Subsidiary of theCompany in the case of equity interests issued by such joint venture orqualifying shares or similar arrangements designed to satisfy requirements ofapplicable laws in the case of equity interests issued by a joint venture orSubsidiary so long as such call or similar right does not secure Debt of theCompany or any Subsidiary; and

 

(m)                               in addition to the Lienspermitted by the preceding subparagraphs (a) through (1), inclusive,of this Section 10.3, Liens securing obligations of the Company or anySubsidiary, *provided*that the aggregate principal amount of obligations secured by Liens pursuant tothis Section 10.3(m) shall not exceed the limitations set forth inSection 10.1(b).

 

*Section 10.4*                                      *RestrictedPayments.* The Company will not, and will not permit any of itsSubsidiaries to, declare or make, or agree to pay or make, directly orindirectly, any Restricted Payment, except (a) the Company may declare and paydividends with respect to its Capital Stock payable solely in additional sharesof its Common Stock or warrants, options or other rights entitling the holderthereof to purchase or acquire shares of its Common Stock, (b) Subsidiaries maydeclare and pay dividends ratably with respect to their Capital Stock, (c) theCompany may make Restricted Payments pursuant to and in accordance with stockoption plans or other benefit plans for management or employees of the Company,the Issuer and their respective Subsidiaries, (d) any Subsidiary may makeRestricted Payments to the Company and the Issuer or any of their Subsidiaries,(e) the Company may make Restricted Payments not otherwise permitted hereunderin an aggregate amount since the date of the Closing not to exceed 30% ofConsolidated Net Income for the period commencing on May 1, 2003 and ending onApril 30 of the fiscal year preceding the year in which such RestrictedPayment is made, on a cumulative basis, (f) the Company may use proceeds fromthe underwriters’ over-allotment option in the IPO for repurchases of CommonStock, and (g) the Company may declare and pay the Special Dividend.

 

*Section 10.5**.**                                   Salesof Assets. *The Company will not,and will not permit any Subsidiary to, sell, lease or otherwise dispose of anyassets of the Company and its Subsidiaries (including any such disposition ofthe equity interest of the Company or any Subsidiary in another Subsidiarywhich arises through a merger or consolidation between such Subsidiary and anyother Person) in excess of the Threshold Amount (as defined below); *provided,however,* that the Company or any Subsidiary may sell, lease orotherwise dispose of assets in excess of the Threshold Amount if such assetsare sold in an arms length transaction and, at such time and after givingeffect thereto, no Event of Default shall have occurred and be continuing andan amount equal to the Net Proceeds received from such sale, lease or otherdisposition shall be used within 365 days of such sale, lease or disposition,in any combination:

 

(1)                                  to acquire productiveassets (other than cash or cash equivalents) used or

 

31

----

 

useful in carrying on the business of the Company and its Subsidiaries(including equity interests in entities which will become Subsidiaries); or

 

(2)                                  to prepay or retireSenior Debt of the Company and/or its Subsidiaries.

As used in this Section 10.5, a sale, lease or other dispositionof assets shall be deemed to be in excess of the *“Threshold Amount”* of theassets of the Company and its Subsidiaries if the book value of such assets,when added to the book value of all other assets sold, leased or otherwisedisposed of by the Company and its Subsidiaries during the period of 12consecutive months ending on the date of such sale, lease or other disposition,exceeds 10% of the book value of Consolidated Total Assets, determined as ofthe end of the fiscal quarter immediately preceding such sale, lease or otherdisposition;*provided* that there shall be excluded from any determination ofThreshold Amount (i) any sale, lease or disposition of assets in theordinary course of business of the Company and its Subsidiaries, (ii) any sale,lease or disposition of assets from the Company to any Subsidiary or from anySubsidiary to the Company or a Subsidiary, and (iii) the Special Dividend.

 

*Section 10.6**.**                                   Merger,Consolidation.*  Neither the Companynor the Issuer will consolidate with or merge with any other corporation or convey,transfer or lease substantially all of its assets in a single transaction orseries of transactions to any Person; *provided* that the foregoing restrictiondoes not apply to the consolidation or merger of the Company or the Issuer, asthe case may be, with, or the conveyance, transfer or lease of substantiallyall of the assets of the Company or the Issuer, as the case may be, in a singletransaction or series of transactions to, any Person so long as:

 

(a)                                  the successor formedby such consolidation or the survivor of such merger or the Person thatacquires by conveyance, transfer or lease substantially all of the assets ofthe Company or the Issuer as an entirety, as the case may be (the *“SuccessorCorporation”*), shall be a solvent corporation organized and existingunder the laws of the United States of America, any State thereof or theDistrict of Columbia;

 

(b)                                 if the Company or theIssuer, as the case may be, is not the Successor Corporation, such corporationshall have executed and delivered to each holder of Notes its assumption of thedue and punctual performance and observance of each covenant and condition ofthis Agreement and, in the case of any successor to the Issuer, the Notes(pursuant to such agreements and instruments as shall be reasonablysatisfactory to the Required Holders), and the Company shall have caused to bedelivered to each holder of Notes an opinion of nationally recognized outsidecounsel, to the effect that all agreements or instruments effecting suchassumption are enforceable in accordance with their terms and comply with theterms hereof;

 

(c)                                  the Company or anysuch Successor Corporation would be in compliance with Sections 10.1 and 10.2on a *proforma*basis for the Four Quarter Period ending immediately prior tosuch merger or consolidation and after giving effect thereto; and

 

(d)                                 immediately aftergiving effect to such transaction no Default or Event of Default would exist.

 

32

----

 

*Section 10.7.**                                   Natureof Business*. * *The Company willnot, and will not permit any Subsidiary to, engage in any business, if, as aresult, the general nature of the business of the Company and its Subsidiaries,when taken as a whole, would be substantially changed from the general natureof the business of the Company and its Subsidiaries, when taken as a whole, onthe date of this Agreement.

 

*Section 10.8**.**                                   Transactionswith Affiliates*.  The Company willnot and will not permit any Subsidiary to enter into directly or indirectly anyMaterial transaction or Material group of related transactions (includingwithout limitation the purchase, lease, sale or exchange of properties of anykind or the rendering of any service) with any Affiliate (other than theCompany or another Subsidiary), except upon fair and reasonable terms notMaterially less favorable to the Company or such Subsidiary than would beobtainable in a comparable arm’s-length transaction with a Person not anAffiliate.  Notwithstanding the foregoing, the provisions set forth in the immediatelypreceding sentence will not apply to: (i) the Special Dividend,(ii) transactions with Affiliates solely in their capacity as holders ofDebt or Capital Stock of the Company or any of its Subsidiaries, where suchAffiliates are treated no more favorably than holders of such Debt or suchCapital Stock generally; and (iii) any agreement disclosed in theMemorandum as in effect as of the date of the Closing or any amendment theretoor any transaction contemplated thereby (including pursuant to any amendmentthereto) in any replacement agreement thereto so long as any such amendment orreplacement agreement is not more disadvantageous to the holders of the Notesin any material respect than the original agreement as in effect on the date ofthe Closing.

 

*Section 10.9**.**                                   Subsidiaries*.  The Company will not at any time permit morethan (i) 5% of Consolidated Total Assets, (ii) 5% of Consolidated Net Worth, or(iii) 5% of consolidated revenues of the Company and its Subsidiaries to beheld by, or attributable to, Subsidiaries which are not the Issuer and theSubsidiary Guarantors.  The Company willnot at any time, directly or indirectly, own less than 95% of the voting stockor other voting equity interest in the Issuer and each MaterialSubsidiary.  The Company will not permitany Subsidiary, other than a Domestic Subsidiary, to become a co-obligor or toguarantee Debt under the Bank Credit Agreement.

 

Section 11.                                      Guaranty by theCompany.

 

*Section 11.1**.**                                   Guarantyby the Company.* The Company doeshereby irrevocably, absolutely and unconditionally guarantee unto theholders:  (1) the full and promptpayment of the principal of, LIBOR Breakage Amount, if any, and interest on theNotes from time to time outstanding, as and when such payments shall become dueand payable, whether by lapse of time, upon redemption or prepayment, byextension or by acceleration or declaration or otherwise (including (to theextent legally enforceable) interest due on overdue payments of principal,LIBOR Breakage Amount, if any, and interest) in Federal or other immediatelyavailable funds of the United States of America which at the time of payment ordemand therefor shall be legal tender for the payment of public and privatedebts, (2) the full and prompt performance and observance by the Issuer of eachand all of the obligations, covenants and agreements required to be performedor owed by the Issuer under the terms of the Notes and this Agreement and(3) the full and prompt payment, upon demand by any holder, of allreasonable and documented costs and expenses, legal or otherwise (includingreasonable and documented attorneys’ fees), if any,

 

33

----

 

as shall have been expended or incurred in the protection orenforcement of any rights, privileges or liabilities in favor of the holdersunder or in respect of the Notes, this Agreement or in any action in connectiontherewith and in each and every case irrespective of the validity, regularity,or enforcement of any of the Notes or this Agreement or any of the termsthereof or any other like circumstance or circumstances.

 

*Section 11.2.**                                   Guarantyof Payment and Performance.*  This isa guarantee of payment and performance and the Company hereby waives, to thefullest extent permitted by law, any right to require that any action on or inrespect of any Note or this Agreement be brought against the Issuer or anyother Person or that resort be had to any direct or indirect security for theNotes or for this Agreement or any other remedy.  Any holder may, at its option, proceed hereunder against theCompany in the first instance to collect monies when due, the payment of whichis guaranteed hereby, without first proceeding against the Issuer or any otherPerson and without first resorting to any direct or indirect security for theNotes or for this Agreement or any other remedy.  The liability of the Company hereunder shall in no way beaffected or impaired by any acceptance by any holder of any direct or indirectsecurity for, or other guaranties of, any Debt, liability or obligation of theIssuer or any other Person to any holder or by any failure, delay, neglect oromission by any holder to realize upon or protect any such guarantees, Debt,liability or obligation or any notes or other instruments evidencing the sameor any direct or indirect security therefor or by any approval, consent,waiver, or other action taken, or omitted to be taken by any such holder.

 

*Section 11.3**.**                                   GeneralProvisions Relating to Guaranty by the Company of Issuer’s Obligations underthis Agreement and the Notes.* (a) The Company hereby consents and agrees that any holder orholders from time to time may, without in any manner affecting the liability ofthe Company under this Agreement, and upon such terms and conditions as anysuch holder or holders may deem advisable:

 

(1)                                  extend in whole or inpart (by renewal or otherwise), modify, increase, change, compromise, releaseor extend the duration of the time for the performance or payment of any Debt,liability or obligation of the Issuer or of any other Person secondarily orotherwise liable for any Debt, liability or obligations of the Issuer on theNotes, or waive any Default with respect thereto, or waive, modify, amend orchange any provision of any other agreement or this Agreement (to the extentpermitted by Section 18.1); or

 

(2)                                  sell, release,surrender, modify, impair, exchange or substitute any and all property, of anynature and from whomsoever received, held by, or for the benefit of, any suchholder as direct or indirect security for the payment or performance of anyDebt, liability or obligation of the Issuer or of any other Person secondarilyor otherwise liable for any Debt, liability or obligation of the Issuer on theNotes; or

 

(3)                                  settle, adjust orcompromise any claim of the Issuer against any other Person secondarily orotherwise liable for any Debt, liability or obligation of the Issuer on theNotes.

 

34

----

 

The Company hereby ratifies and confirms any such extension, renewal,change, sale, release, waiver, surrender, exchange, modification, amendment,impairment, substitution, settlement, adjustment or compromise and that thesame shall be binding upon it, and hereby waives, to the fullest extentpermitted by law, any and all defenses, counterclaims or offsets which it mightor could have by reason thereof, it being understood that the Company shall atall times be bound by this Agreement and remain liable hereunder.

 

(b)                                 TheCompany hereby waives, to the fullest extent permitted by law:

 

(1)                                  noticeof acceptance of this guarantee by the holders or of the creation, renewal oraccrual of any liability of the Issuer, present or future, or of the relianceof such holders upon this guarantee (it being understood that all Debt, liabilitiesand obligations described in Section 11.1 hereof shall conclusively bepresumed to have been created, contracted or incurred in reliance upon theexecution of this Agreement by the Company); and

 

(2)                                  demandof payment by any holder from the Issuer or any other Person indebted in anymanner on or for any of the Debt, liabilities or obligations hereby guaranteed;and

 

(3)                                  presentmentfor the payment by any holder or any other Person of the Notes or any otherinstrument, protest thereof and notice of its dishonor to any party thereto andto the Company.

 

The obligations of the Company under this guarantee and the rights ofany holder to enforce such obligations by any proceedings, whether by action atlaw, suit in equity or otherwise, shall not be subject to any reduction,limitation, impairment or termination, whether by reason of any claim of anycharacter whatsoever or otherwise and shall not be subject to any defense,set-off, counterclaim (other than any compulsory counterclaim), recoupment or terminationwhatsoever.

 

(c)                                  Theobligations of the Company hereunder shall be binding upon the Company and itssuccessors and assigns, and shall remain in full force and effect irrespectiveof:

 

(1)                                  thegenuineness, validity, regularity or enforceability of the Notes, thisAgreement or any other agreement or any of the terms of any thereof, thecontinuance of any obligation on the part of the Issuer, or any other Person onor in respect of the Notes or under the Agreement or any other agreement or thepower or authority or the lack of power or authority of the Issuer to issue theNotes or the Issuer to execute and deliver this Agreement or any otheragreement or to perform any of its obligations hereunder or the existence orcontinuance of the Issuer or any other Person as a legal entity; or

 

(2)                                  anydefault, failure or delay, willful or otherwise, in the performance by theIssuer or any other Person of any obligations of any kind or characterwhatsoever under the Notes, this Agreement or any other agreement; or

 

35

----

 

(3)                                  anycreditors’ rights, bankruptcy, receivership or other insolvency proceeding ofthe Issuer or any other Person or in respect of the property of the Issuer orany other Person or any merger, consolidation, reorganization, dissolution,liquidation, the sale of all or substantially all of the assets of or windingup of the Issuer or any other Person; or

 

(4)                                  impossibilityor illegality of performance on the part of the Issuer or any other Person ofits obligations under the Notes, this Agreement or any other agreements; or

 

(5)                                  inrespect of the Issuer, or any other Person, any change of circumstances,whether or not foreseen or foreseeable, whether or not imputable to the Issuer,or any other Person, or other impossibility of performance through fire,explosion, accident, labor disturbance, floods, droughts, embargoes, wars(whether or not declared), civil commotion, acts of God or the public enemy,delays or failure of suppliers or carriers, inability to obtain materials,action of any federal or state regulatory body or agency, change of law or anyother causes affecting performance, or any other *force majeure*, whether ornot beyond the control of the Issuer or any other Person and whether or not ofthe kind hereinbefore specified; or

 

(6)                                  anyattachment, claim, demand, charge, Lien, order, process, encumbrance or anyother happening or event or reason, similar or dissimilar to the foregoing, orany withholding or diminution at the source, by reason of any taxes,assessments, expenses, Debt, obligations or liabilities of any character,foreseen or unforeseen, and whether or not valid, incurred by or against theIssuer or any other Person or any claims, demands, charges or Liens of anynature, foreseen or unforeseen, incurred by any Person, or against any sumspayable in respect of the Notes or under this Agreement, so that such sumswould be rendered inadequate or would be unavailable to make the paymentsherein provided; or

 

(7)                                  anyorder, judgment, decree, ruling or regulation (whether or not valid) of anycourt of any nation or of any political subdivision thereof or any body,agency, department, official or administrative or regulatory agency of anythereof or any other action, happening, event or reason whatsoever which shalldelay, interfere with, hinder or prevent, or in any way adversely affect, theperformance by the Issuer or any other Person of its respective obligationsunder or in respect of the Notes, this Agreement or any other agreement; or

 

(8)                                  thefailure of the Company to receive any benefit from or as a result of itsexecution, delivery and performance of this Agreement; or

 

(9)                                  anyfailure or lack of diligence in collection or protection, failure inpresentment or demand for payment, protest, notice of protest, notice ofdefault and of nonpayment, any failure to give notice to the Company of failureof the Issuer, or any other Person to keep and perform any obligation, covenantor agreement under the terms

 

36

----

 

of the Notes, this Agreement or any other agreement or failure toresort for payment to the Issuer or to any other Person or to any otherguaranty or to any property, security, Liens or other rights or remedies; or

 

(10)                            theacceptance of any additional security or other guaranty, the advance ofadditional money to the Issuer or any other Person, the renewal or extension ofthe Notes or amendments, modifications, consents or waivers with respect to theNotes, this Agreement or any other agreement, or the sale, release,substitution or exchange of any security for the Notes; or

 

(11)                            anychange in the ownership of any shares of the Issuer, the Company or any otherPerson; or

 

(12)                            anydefense whatsoever that:  (i) the Issueror any other Person might have to the payment of the Notes (principal, LIBORBreakage Amount, if any, or interest), other than payment thereof in Federal orother immediately available funds, or (ii) the Issuer or any other Person mighthave to the performance or observance of any of the provisions of the Notes,this Agreement or any other agreement, whether through the satisfaction orpurported satisfaction by the Issuer, the Company or any other Person of itsdebts due to any cause such as bankruptcy, insolvency, receivership, merger,consolidation, reorganization, dissolution, liquidation, winding-up orotherwise; or

 

(13)                            anyact or failure to act with regard to the Notes, this Agreement or any otheragreement or anything which might vary the risk of the Company or any otherPerson; or

 

(14)                            anyother circumstance which might otherwise constitute a defense available to, ora discharge of, the Company or any other Person in respect of the obligationsof the Company or other Person under this Agreement or any other agreementother than the final and indefeasible payment in full of cash of the Notes;

 

*provided*thatthe specific enumeration of the above-mentioned acts, failures or omissionsshall not be deemed to exclude any other acts, failures or omissions, though notspecifically mentioned above, it being the purpose and intent of this Agreementthat the obligations of the Company shall be absolute, irrevocable andunconditional and shall not be discharged, impaired or varied except by thepayment of the principal of, premium, if any, and interest on the Notes inaccordance with their respective terms whenever the same shall become due andpayable as in the Notes provided and all other sums due and payable under thisAgreement, at the place specified in and all in the manner and with the effectprovided in the Notes and this Agreement, as each may be amended or modifiedfrom time to time.  Without limiting theforegoing, it is understood that repeated and successive demands may be madeand recoveries may be had hereunder as and when, from time to time, the Issuershall default under or in respect of the terms of the Notes or this Agreementand that notwithstanding recovery hereunder for or in respect of any givendefault or defaults by the Issuer under the Notes or this Agreement, theGuaranty hereunder shall remain in full force and effect and shall apply toeach and every subsequent default.

 

37

----

 

(d)                                 Allrights of any holder hereunder may be transferred or assigned at any time andshall be considered to be transferred or assigned at any time or from time totime upon the transfer of any Note whether with or without the consent of ornotice to the Company under this Agreement or to the Issuer (except as providedin Section 19 of this Agreement).

 

(e)                                  Tothe extent of any payments made under this Agreement, the Company shall besubrogated to the rights of the holder upon whose Notes such payment was made,but the Company covenants and agrees that such right of subrogation shall besubordinate in right of payment to the prior indefeasible final payment in cashin full of all amounts due and owing by the Issuer and the Company with respectto the Notes and this Agreement, and the Company shall not take any action toenforce such right of subrogation, and the Company shall not accept any paymentin respect of such right of subrogation, until all amounts due and owing by theIssuer under or in respect of the Notes and this Agreement and all amounts dueand owing by the Company hereunder have indefeasibly been finally paid in cashin full.  If any amount shall be paid tothe Company in violation of the preceding sentence at any time prior to thelater of the indefeasible payment in cash in full of the Notes and all otheramounts payable under the Notes and this Agreement, such amount shall be heldin trust for the benefit of the holders and shall forthwith be paid to theholders to be credited and applied to the amounts due or to become due withrespect to the Notes and all other amounts payable under this Agreement,whether matured or unmatured.  TheCompany acknowledges that it has received direct and indirect benefits from thefinancing arrangements contemplated by this Agreement and that the waiver setforth in this paragraph (e) is knowingly made as a result of the receipt ofsuch benefits.

 

(f)                                    TheCompany agrees that to the extent the Issuer, or any other Person makes anypayment on any Note, which payment or any part thereof is subsequentlyinvalidated, voided, declared to be fraudulent or preferential, set aside,recovered, rescinded or is required to be retained by or repaid to a trustee,receiver, or any other Person under any bankruptcy code, common law, orequitable cause, then and to the extent of such payment, the obligation or thepart thereof intended to be satisfied shall be revived and continued in fullforce and effect with respect to the Company’s obligations hereunder, as ifsaid payment had not been made.  Theliability of the Company hereunder shall not be reduced or discharged, in wholeor in part, by any payment to any holder from any source that is thereafterpaid, returned or refunded in whole or in part by reason of the assertion of aclaim of any kind relating thereto, including, but not limited to, any claimfor breach of contract, breach of warranty, preference, illegality, invalidity,or fraud asserted by any account debtor or by any other Person.

 

(g)                                 Noholder shall be under any obligation: (1) to marshall any assets in favor of the Company or in payment of anyor all of the liabilities of the Issuer under or in respect of the Notes or theobligations of the Company hereunder or (2) to pursue any other remedy that theCompany may or may not be able to pursue and that may lighten the Company’sburden, any right to which the Company hereby expressly waives.

 

(h)                                 Theobligations of the Company under this Agreement rank *pari passu* in right ofpayment with all other Debt of the Company which is not secured or which is notexpressly subordinated in right of payment to any other Debt of the Company.

 

38

----

 

Section 12.                                      Events ofDefault.

 

An *“Eventof Default”* shall exist if any of the following conditions or eventsshall occur and be continuing:

 

(a)                                  the Issuer defaultsin the payment of any principal or LIBOR Breakage Amount, if any, on any Notewhen the same becomes due and payable, whether at maturity or at a date fixedfor prepayment or by declaration or otherwise; or

 

(b)                                 the Issuer defaults inthe payment of any interest on any Note for more than five Business Days afterthe same becomes due and payable; or

 

(c)                                  (i) the Companydefaults in the performance of or compliance with any term contained inSections 10.1, 10.2, 10.3(m) or 10.4, or (ii) the Company defaults in theperformance of or compliance with any other term contained in Section 10and such default is not remedied within 20 days after the earlier of (x) aResponsible Officer obtaining actual knowledge of such default and (y) theCompany receiving written notice of such default from any holder of a Note (anysuch written notice to be identified as a “notice of default” and to referspecifically to this paragraph (c) of Section 12); or

 

(d)                                 the Company or theIssuer defaults in the performance of or compliance with any term containedherein (other than those referred to in paragraphs (a), (b) and (c) of thisSection 12) and such default is not remedied within 30 days after theearlier of (i) a Responsible Officer obtaining actual knowledge of suchdefault and (ii) the Company receiving written notice of such default fromany holder of a Note (any such written notice to be identified as a “notice ofdefault” and to refer specifically to this paragraph (d) of Section 12);or

 

(e)                                  any representation orwarranty made in writing by or on behalf of the Company or the Issuer or by anyofficer of the Company or the Issuer in this Agreement or in any certificate ofthe Company or any Subsidiary delivered on the Closing Date or in anycertificate of the Company delivered pursuant to Section 7 proves to havebeen false or incorrect in any material respect on the date as of which made;or

 

(f)                                    (i) theCompany, the Issuer or any Material Subsidiary is in default (as principal oras guarantor or other surety) in the payment of any principal of or premium ormake-whole amount or interest on any Debt other than the Notes that isoutstanding in an aggregate principal amount of at least $3,000,000 beyond anyperiod of grace provided with respect thereto, or (ii) the Company, theIssuer or any Material Subsidiary is in default in the performance of orcompliance with any term of any instrument, mortgage, indenture or otheragreement relating to any Debt other than the Notes in an aggregate principalamount of at least $3,000,000 or any other condition exists, and as aconsequence of such default or condition such Debt has become, or has beendeclared (or one or more Persons are entitled to declare such Debt to be), dueand payable before its stated maturity or before its regularly scheduled datesof payment, or (iii) as a

 

39

----

 

consequence of the occurrence or continuation of any event or condition(other than the passage of time or the right of the holder of Debt to convertsuch Debt into equity interests or any purchase or repayment of Debt on account of the voluntary saleor transfer of the property or asset which secures such Debt and which ispermitted by the terms of the agreement pursuant to which such Debt isoutstanding), (x) the Company, the Issuer or any MaterialSubsidiary has become obligated to purchase or repay Debt other than the Notesbefore its regular maturity or before its regularly scheduled dates of paymentin an aggregate outstanding principal amount of at least $3,000,000, or (y) oneor more Persons have the right to require the Company or any Subsidiary so topurchase or repay such Debt; or

 

(g)                                 the Company, theIssuer or any Material Subsidiary (i) is generally not paying, or admitsin writing its inability to pay, its debts as they become due, (ii) files,or consents by answer or otherwise to the filing against it of, a petition forrelief or reorganization or arrangement or any other petition in bankruptcy,for liquidation or to take advantage of any bankruptcy, insolvency,reorganization, moratorium or other similar law of any jurisdiction,(iii) makes an assignment for the benefit of its creditors,(iv) consents to the appointment of a custodian, receiver, trustee orother officer with similar powers with respect to it or with respect to anysubstantial part of its property, (v) is adjudicated as insolvent or to beliquidated, or (vi) takes corporate action for the purpose of any of theforegoing; or

 

(h)                                 a court orgovernmental authority of competent jurisdiction enters an order appointing,without consent by the Company, the Issuer or any of its Material Subsidiaries,a custodian, receiver, trustee or other officer with similar powers withrespect to it or with respect to any substantial part of its property, orconstituting an order for relief or approving a petition for relief orreorganization or any other petition in bankruptcy or for liquidation or totake advantage of any bankruptcy or insolvency law of any jurisdiction, orordering the dissolution, winding-up or liquidation of the Company, the Issueror any of its Material Subsidiaries, or any such petition shall be filedagainst the Company, the Issuer or any of its Material Subsidiaries and suchpetition shall not be dismissed within 90 days; or

 

(i)                                     a final judgmentor judgments at any one time outstanding for the payment of money aggregatingin excess $5,000,000 (not paid or fully covered by insurance) are renderedagainst one or more of the Company and its Subsidiaries and which judgments arenot, within 90 days after entry thereof, bonded, discharged or stayed pendingappeal, or are not discharged within 90 days after the expiration of such stay;or

 

(j)                                     if (i) anyPlan shall fail to satisfy the minimum funding standards of ERISA or the Codefor any plan year or part thereof or a waiver of such standards or extension ofany amortization period is sought or granted under Section 412 of theCode, (ii) a notice of intent to terminate any Plan shall have been or isreasonably expected to be filed with the PBGC or the PBGC shall have institutedproceedings under Section 4042 of ERISA to terminate or appoint a trusteeto administer any Plan or the PBGC shall have notified the Company, the Issueror any ERISA Affiliate that a Plan may become a

 

40

----

 

subject of any such proceedings, (iii) the aggregate “amount ofunfunded benefit liabilities” (within the meaning of Section 4001(a)(18)of ERISA) under all Plans, determined in accordance with Title IV ofERISA, shall exceed $10,000,000, (iv) the Company, the Issuer or any ERISAAffiliate shall have incurred or is reasonably expected to incur any liabilitypursuant to Title I or IV of ERISA or the penalty or excise tax provisions ofthe Code relating to employee benefit plans, (v) the Company, the Issueror any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) theCompany, the Issuer or any Subsidiary establishes or amends any employeewelfare benefit plan that provides post-employment welfare benefits in a mannerthat could increase the liability of the Company or any Subsidiary thereunder;and any such event or events described in clauses (i) through (vi) above,either individually or together with any other such event or events, couldreasonably be expected to have a Material Adverse Effect; or

 

(k)                                  for any reason anyprovision of the Subsidiary Guaranty of any Material Subsidiary orSection 11 of this Agreement ceases to be in full force and effect,including, without limitation, a determination by any Governmental Authoritythat any such Subsidiary Guaranty or such Guaranty by the Company in thisAgreement is invalid, void or unenforceable, or any Material Subsidiary shallcontest or deny in writing the enforceability of any its obligations under theSubsidiary Guaranty, or the Company shall contest or deny in writing theenforceability of its guaranty obligations set forth in Section 11 of thisAgreement.

 

As used in Section 12(j), the terms *“employee benefit plan”* and *“employeewelfare benefit plan”* shall have the respective meanings assigned tosuch terms in Section 3 of ERISA.

 

Section 13.                                      Remedieson Default, Etc.

 

*Section 13.1**.**                                   Acceleration*.  (a) If an Event of Default with respectto the Company described in paragraph (g) or (h) of Section 12 (otherthan an Event of Default described in clause (i) of paragraph (g) ordescribed in clause (vi) of paragraph (g) by virtue of the fact thatsuch clause encompasses clause (i) of paragraph (g)) has occurred,all the Notes then outstanding shall automatically become immediately due andpayable.

 

(b)                                 Ifany other Event of Default has occurred and is continuing, any holder orholders of more than 50% in aggregate principal amount of the Notes at the timeoutstanding may at any time at its or their option, by notice or notices to theCompany and the Issuer, declare all the Notes then outstanding to beimmediately due and payable.

 

(c)                                  Ifany Event of Default described in paragraph (a) or (b) of Section 12 hasoccurred and is continuing, any holder of Notes at the time outstandingaffected by such Event of Default may at any time, at its option, by notice ornotices to the Company and the Issuer, declare all the Notes held by it to beimmediately due and payable.

 

Upon any Note becoming due and payable under this Section 13.1,whether automatically or by declaration, such Note will forthwith mature andthe entire unpaid principal amount of such Note, plus (i) all accrued andunpaid interest thereon, and (ii) the LIBOR Breakage Amount if

 

41

----

 

any,in respect of such principal amount (to the full extent permitted by applicablelaw) shall all be immediately due and payable, in each and every case withoutpresentment, demand, protest or further notice, all of which are herebywaived.  The Company and the Issueracknowledge, and the parties hereto agree, that each holder of a Note has theright to maintain its investment in the Notes free from repayment by the Issuer(except as herein specifically provided for), and that the provision forpayment of a LIBOR Breakage Amount, if any, by the Issuer in the event that theNotes are prepaid or are accelerated as a result of an Event of Default, isintended to provide compensation for the deprivation of such right under suchcircumstances.

 

*Section 13.2**.**                                   OtherRemedies*.  If any Default or Eventof Default has occurred and is continuing, and irrespective of whether anyNotes have become or have been declared immediately due and payable underSection 13.1, the holder of any Note at the time outstanding may proceedto protect and enforce the rights of such holder by an action at law, suit inequity or other appropriate proceeding, whether for the specific performance ofany agreement contained herein or in any Note, or for an injunction against aviolation of any of the terms hereof or thereof, or in aid of the exercise ofany power granted hereby or thereby or by law or otherwise.

 

*Section 13.3**.**                                   Rescission*.  At any time after any Notes have beendeclared due and payable pursuant to clause (b) (other than pursuant to an Event of Default described inparagraphs (g) or (h) of Section 12) or (c) ofSection 13.1, the holders of more than 50% in aggregate principal amountof the Notes then outstanding, by written notice to the Company and the Issuer,may rescind and annul any such declaration and its consequences if (a) theIssuer has paid all overdue interest on the Notes, all principal of, or LIBORBreakage Amount, if any, on any Notes that are due and payable and are unpaidother than by reason of such declaration, and all interest on such overdueprincipal, or LIBOR Breakage Amount, if any, and (to the extent permitted byapplicable law) any overdue interest in respect of the Notes, at the DefaultRate, (b) all Events of Default and Defaults, other than non-payment ofamounts that have become due solely by reason of such declaration, have beencured or have been waived pursuant to Section 18, and (c) no judgmentor decree has been entered for the payment of any monies due pursuant hereto orto any Notes.  No rescission andannulment under this Section 13.3 will extend to or affect any subsequentEvent of Default or Default or impair any right consequent thereon.

 

*Section 13.4.**                                   NoWaivers or Election of Remedies, Expenses, Et*c.  No course of dealing and no delay on the part of any holder ofany Note in exercising any right, power or remedy shall operate as a waiverthereof or otherwise prejudice such holder’s rights, powers or remedies.  No right, power or remedy conferred by thisAgreement or by any Note upon any holder thereof shall be exclusive of anyother right, power or remedy referred to herein or therein or now or hereafteravailable at law, in equity, by statute or otherwise.  Without limiting the obligations of the Company underSection 16, the Company will pay to the holder of each Note on demand suchfurther amount as shall be sufficient to cover all costs and expenses of suchholder incurred in any enforcement or collection under this Section 13,including, without limitation, the reasonable attorneys’ fees, expenses anddisbursements for the holders as set forth in Section 16.

 

Section 14.                                                                          Registration;Exchange; Substitution of Notes.

 

*Section 14.1**.**                                   Registrationof Notes*.  The Issuer shall keep atits principal executive office

 

42

----

 

a register for the registration and registration of transfers ofNotes.  The name and address of eachholder of one or more Notes, each transfer thereof and the name and address ofeach transferee of one or more Notes shall be registered in such register.  Prior to due presentment for registration oftransfer, the Person in whose name any Note shall be registered shall be deemedand treated as the owner and holder thereof for all purposes hereof, and theIssuer shall not be affected by any notice or knowledge to the contrary.  The Issuer shall give to any holder of aNote that is an Institutional Investor promptly upon request therefor, acomplete and correct copy of the names and addresses of all registered holdersof Notes.

 

*Section 14.2**.**                                   Transferand Exchange of Notes*.  Uponsurrender of any Note at the principal executive office of the Issuer forregistration of transfer or exchange (and in the case of a surrender forregistration of transfer, duly endorsed or accompanied by a written instrumentof transfer duly executed by the registered holder of such Note or its attorneyduly authorized in writing and accompanied by the address for notices of eachtransferee of such Note or part thereof), the Issuer shall execute and delivernot more than 10 Business Days following surrender of such Note, at theIssuer’s expense (except as provided below), one or more new Notes (asrequested by the holder thereof) in exchange therefor, in an aggregateprincipal amount equal to the unpaid principal amount of the surrenderedNote.  Each such new Note shall bepayable to such Person as such holder may request and shall be substantially inthe form of the Note originally issued hereunder.  Each such new Note shall be dated and bear interest from the dateto which interest shall have been paid on the surrendered Note or dated thedate of the surrendered Note if no interest shall have been paid thereon.  The Company may require payment of a sumsufficient to cover any stamp tax or governmental charge imposed in respect ofany such transfer of Notes.  Notes shallnot be transferred in denominations of less than $100,000, *provided* that if necessaryto enable the registration of transfer by a holder of its entire holding ofNotes, one Note may be in a denomination of less than $100,000.  Any transferee, by its acceptance of a Noteregistered in its name (or the name of its nominee), shall be deemed to havemade the representation set forth in Section 6.1 (other than clause (b) ofthe second to the last sentence of Section 6.1) and Section 6.2, *provided*that such holder may (in reliance upon information provided by the Issuer,which shall not be unreasonably withheld) make a representation to the effectthat the purchase by such holder of any Note will not constitute a non-exemptprohibited transaction under Section 406(a) of ERISA.  Prior to the registration of the transfer ofany Note, the Issuer may require a proposed transferee to confirm that therepresentations and warranties set forth in Section 6.1 (other than clause(b) of the second to the last sentence of Section 6.1) are applicable tosuch transferree, and in the case of any transfer in which the registered ownerwill be registered in the name of a nominee, the name of the beneficial ownerof the Note and confirmation that such nominee is not permitted to transfersuch Note without the consent of the beneficial owner.

 

The Notes have not been registered under the Securities Act or underthe securities laws of any state and may not be transferred or resold unlessregistered under the Securities Act and all applicable state securities laws orunless an exemption from the requirement for such registration is available.

 

*Section 14.3**.**                                   Replacementof Notes*.  Upon receipt by theIssuer of evidence reasonably satisfactory to it of the ownership of and theloss, theft, destruction or mutilation of any Note

 

43

----

 

(which evidence shall be, in the case of an Institutional Investor,notice from such Institutional Investor of such ownership and such loss, theft,destruction or mutilation), and

 

(a)                                  in the case of loss,theft or destruction, of indemnity reasonably satisfactory to it (*provided*that if the holder of such Note is, or is a nominee for, an original Purchaseror another holder of a Note with a minimum net worth of at least $50,000,000,such Person’s own unsecured agreement of indemnity shall be deemed to besatisfactory), or

 

(b)                                 in the case ofmutilation, upon surrender and cancellation thereof,

 

the Issuer at its own expense shall execute and deliver not more thanfive Business Days following satisfaction of such conditions, in lieu thereof,a new Note, dated and bearing interest from the date to which interest shallhave been paid on such lost, stolen, destroyed or mutilated Note or dated thedate of such lost, stolen, destroyed or mutilated Note if no interest shallhave been paid thereon.

 

Section 15.                                      Payments onNotes.

 

*Section 15.1**.**                                   Placeof Payment*.  Subject toSection 15.2, payments of principal, LIBOR Breakage Amount, if any, andinterest becoming due and payable on the Notes shall be made in New York,New York at the principal office of JPMorgan Chase Bank in suchjurisdiction.  The Issuer may at anytime, by notice to each holder of a Note, change the place of payment of theNotes so long as such place of payment shall be either the principal office ofthe Issuer in such jurisdiction or the principal office of a bank or trustcompany in such jurisdiction.

 

*Section 15.2**.**                                   HomeOffice Payment*.  So long as anyPurchaser or such Purchaser’s nominee shall be the holder of any Note, andnotwithstanding anything contained in Section 15.1 or in such Note to thecontrary, the Issuer will pay all sums becoming due on such Note for principal,LIBOR Breakage Amount, if any, and interest by the method and at the addressspecified for such purpose for such Purchaser on Schedule A hereto, or bysuch other method or at such other address as such Purchaser shall have fromtime to time specified to the Issuer in writing for such purpose, without thepresentation or surrender of such Note or the making of any notation thereon,except that upon written request of the Issuer made concurrently with orreasonably promptly after payment or prepayment in full of any Note, suchPurchaser shall surrender such Note for cancellation, reasonably promptly afterany such request, to the Issuer at its principal executive office or at theplace of payment most recently designated by the Issuer pursuant toSection 15.1.  Prior to any sale orother disposition of any Note held by any Purchaser or such Person’s nominee,such Person will, at its election, either endorse thereon the amount ofprincipal paid thereon and the last date to which interest has been paidthereon or surrender such Note to the Issuer in exchange for a new Note orNotes pursuant to Section 14.2. The Issuer will afford the benefits of this Section 15.2 to anyInstitutional Investor that is the direct or indirect transferee of any Note.

 

44

----

 

Section 16.                                      Expenses,Etc.

 

*Section 16.1**.**                                   TransactionExpenses*.  Whether or not thetransactions contemplated hereby are consummated, the Company and the Issuerjointly and severally agree to pay all reasonable and documented costs andexpenses (including reasonable attorneys’ fees of one special counsel for thePurchasers, which such counsel shall be Chapman and Cutler LLP, in connectionwith the initial sale of the Notes and, if reasonably required, local or othercounsel) incurred by the Purchasers and the holders of Notes in connection withsuch transactions and in connection with any amendments, waivers or consentsunder or in respect of this Agreement or the Notes (whether or not suchamendment, waiver or consent becomes effective), including, without limitation:(a) the reasonable and documented costs and expenses incurred in enforcingor defending (or determining whether or how to enforce or defend) any rightsunder this Agreement or the Notes or in responding to any subpoena or otherlegal process or informal investigative demand by any Governmental Authorityissued in connection with this Agreement or the Notes, or by reason of being aholder of any Note, and (b) to the extent reasonably documented, the reasonablecosts and expenses, including financial advisors’ fees, incurred in connectionwith the insolvency or bankruptcy of the Company or any Subsidiary or inconnection with any work-out or restructuring of the transactions contemplatedhereby and by the Notes.  The Companyand the Issuer jointly and severally agree that they will pay, and will saveeach Purchaser and each other holder of a Note harmless from, all claims inrespect of any reasonable fees, costs or expenses if any, of brokers andfinders (other than those retained by the Purchasers).

 

*Section 16.2**.**                                   Survival*.  The obligations of the Company and theIssuer under this Section 16 will survive the payment or transfer of anyNote, the enforcement, amendment or waiver of any provision of this Agreementor the Notes, and the termination of this Agreement.

 

Section 17.                                      Survival ofRepresentations and Warranties; Entire Agreement.

 

All representations and warranties contained herein shall survive theexecution and delivery of this Agreement and the related Notes, the purchase ortransfer by any Purchaser of any such Note or portion thereof or interesttherein and the payment of any Note may be relied upon by any subsequent holderof any such Note, regardless of any investigation made at any time by or on behalfof any Purchaser or any other holder of any such Note.  All statements contained in any certificateor other instrument delivered by or on behalf of the Company or the Issuerpursuant to this Agreement shall be deemed representations and warranties of theCompany or the Issuer under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embodythe entire agreement and understanding between the Purchasers, the Company andthe Issuer and supersede all prior agreements and understandings relating tothe subject matter hereof.

 

Section 18.                                      Amendment andWaiver.

 

*Section 18.1**.**                                   Requirements*.  This Agreement and the Notes may be amended,and the observance of any term hereof or of the Notes may be waived (eitherretroactively or prospectively), with (and only with) the written consent ofthe Company, the Issuer and the Required Holders, except that (a) noamendment or waiver of any of the provisions of Section 1,

 

45

----

 

2, 3, 4, 5, 6 or 22 hereof, or any defined term (as it is used in anysuch Section), will be effective as to any holder of Notes unless consented toby such holder of Notes in writing, and (b) no such amendment or waivermay, without the written consent of all of the holders of Notes at the timeoutstanding affected thereby, (i) subject to the provisions ofSection 13 relating to acceleration or rescission, change the amount ortime of any prepayment or payment of principal of, or reduce the rate or changethe time of payment or method of computation of interest or of the LIBORBreakage Amount on, the Notes, (ii) change the percentage of the principalamount of the Notes the holders of which are required to consent to any suchamendment or waiver, (iii) amend any of Sections 8, 12(a), 12(b), 13,18 or 21, or (iv) reduce or alter the scope of the guarantee by the Company ofthe obligations of the Issuer in respect of this Agreement and the Notes.

 

*Section 18.2**.**                                   Solicitationof Holders of Notes*.

 

(a)                                  *Solicitation.*  The Company and the Issuer will provide eachholder of the Notes (irrespective of the amount of Notes then owned by it) withsufficient information, sufficiently far in advance of the date a decision isrequired, to enable such holder to make an informed and considered decisionwith respect to any proposed amendment, waiver or consent in respect of any ofthe provisions hereof or of the Notes. The Company and the Issuer will deliver executed or true and correctcopies of each amendment, waiver or consent effected pursuant to the provisionsof this Section 18 to each holder of outstanding Notes promptly followingthe date on which it is executed and delivered by, or receives the consent orapproval of, the requisite holders of Notes.

 

(b)                                 *Payment.*  Neither the Company nor the Issuer willdirectly or indirectly pay or cause to be paid any remuneration, whether by wayof supplemental or additional interest, fee or otherwise, or grant anysecurity, to any holder of Notes as consideration for or as an inducement tothe entering into by such holder of Notes of any waiver or amendment of any ofthe terms and provisions hereof unless such remuneration is concurrently paid,or security is concurrently granted, on the same terms, ratably to each holderof Notes then outstanding even if such holder did not consent to such waiver oramendment.

 

*Section 18.3**.**                                   BindingEffect, Etc*.  Any amendment orwaiver consented to as provided in this Section 18 applies equally to allholders of Notes and is binding upon them and upon each future holder of anyNote and upon the Company and the Issuer without regard to whether such Notehas been marked to indicate such amendment or waiver.  No such amendment or waiver will extend to or affect anyobligation, covenant, agreement, Default or Event of Default not expresslyamended or waived or impair any right consequent thereon.  No course of dealing between the Company,the Issuer and the holder of any Note nor any delay in exercising any rightshereunder or under any Note shall operate as a waiver of any rights of anyholder of such Note.  As used herein,the term “this Agreement” and references thereto shall mean this Agreement asit may from time to time be amended or supplemented.

 

*Section 18.4**.**                                   NotesHeld by Company, Issuer, Etc*. Solely for the purpose of determining whether the holders of therequisite percentage of the aggregate principal amount of Notes thenoutstanding approved or consented to any amendment, waiver or consent to begiven under this Agreement or the Notes, or have directed the taking of anyaction provided herein or in the Notes to be taken upon the direction of theholders of a specified percentage of the aggregate principal

 

46

----

 

amount of Notes then outstanding, Notes directly or indirectly owned bythe Company, the Issuer or any of their respective Affiliates shall be deemednot to be outstanding.

 

Section 19.                                      Notices.

 

All notices and communications provided for hereunder shall be inwriting and sent (a) by telefacsimile if the sender on the same day sendsa confirming copy of such notice by a recognized overnight delivery service(charges prepaid), or (b) by a recognized overnight delivery service (withcharges prepaid).  Any such notice mustbe sent:

 

(i)                                     if to a Purchaseror such Purchaser’s nominee, to such Purchaser or such Purchaser’s nominee atthe address specified for such communications in Schedule A to thisAgreement, or at such other address as such Purchaser or such Purchaser’snominee shall have specified to the Company or the Issuer in writing pursuantto this Section 19;

 

(ii)                                  if to any otherholder of any Note, to such holder at such address as such other holder shallhave specified to the Company or the Issuer in writing pursuant to thisSection 19; or

 

(iii)                               if to the Company or theIssuer, to the Company or the Issuer at its address set forth at the beginninghereof to the attention of Chief Financial Officer, or at such other address asthe Issuer shall have specified to the holder of each Note in writing.

 

Notices under this Section 19 will be deemed given only whenactually received.

 

Section 20.                                      Reproduction ofDocuments.

 

This Agreement and all documents relating thereto, including, withoutlimitation, (a) consents, waivers and modifications that may hereafter beexecuted, (b) documents received by each Purchaser at the Closing (exceptthe Notes themselves), and (c) financial statements, certificates andother information previously or hereafter furnished to each Purchaser, may bereproduced by such Purchaser by any photographic, photostatic, microfilm,microcard, miniature photographic or other similar process and such Purchasermay destroy any original document so reproduced.  The Company and the Issuer agree and stipulate that, to theextent permitted by applicable law, any such reproduction shall be admissiblein evidence as the original itself in any judicial or administrative proceeding(whether or not the original is in existence and whether or not suchreproduction was made by such Purchaser in the regular course of business) andany enlargement, facsimile or further reproduction of such reproduction shalllikewise be admissible in evidence. This Section 20 shall not prohibit the Company, the Issuer or anyother holder of Notes from contesting any such reproduction to the same extentthat it could contest the original, or from introducing evidence to demonstratethe inaccuracy of any such reproduction.

 

Section 21.                                      ConfidentialInformation.

 

For the purposes of this Section 21, *“Confidential Information*”means information

 

47

----

 

delivered to any Purchaser by or on behalf of the Company or anySubsidiary in connection with the transactions contemplated by or otherwisepursuant to this Agreement, *provided* that such term does not includeinformation that (a) was publicly known or otherwise known to suchPurchaser prior to the time of such disclosure, (b) subsequently becomespublicly known through no act or omission by such Purchaser or any Personacting on such Purchaser’s behalf, (c) otherwise becomes known to suchPurchaser other than through disclosure by the Company or any Subsidiary or(d) constitutes financial statements delivered to such Purchaser underSection 7.1 that are otherwise publicly available.  Each Purchaser will maintain theconfidentiality of such Confidential Information in accordance with proceduresadopted by such Purchaser in good faith to protect confidential information ofthird parties delivered to such Purchaser, *provided* that such Purchaser may deliveror disclose Confidential Information to (i) such Purchaser’s directors,trustees, officers, employees, agents, attorneys and Affiliates (to the extentsuch disclosure reasonably relates to the administration of the investmentrepresented by such Purchaser’s Notes), (ii) such Purchaser’s financialadvisors and other professional advisors who agree to hold confidential theConfidential Information substantially in accordance with the terms of thisSection 21, (iii) any other holder of any Note, (iv) anyInstitutional Investor to which such Purchaser sells or offers to sell suchNote or any part thereof or any participation therein (if such Person hasagreed in writing prior to its receipt of such Confidential Information to bebound by the provisions of this Section 21), (v) any Person fromwhich such Purchaser offers to purchase any security of the Company (if suchPerson has agreed in writing prior to its receipt of such ConfidentialInformation to be bound by the provisions of this Section 21), (vi) anyfederal or state regulatory authority having jurisdiction over such Purchaser,(vii) the National Association of Insurance Commissioners or any similarorganization, or any nationally recognized rating agency that requires accessto information about such Purchaser’s investment portfolio, or (viii) anyother Person to which such delivery or disclosure may be necessary orappropriate (w) to effect compliance with any law, rule, regulation ororder applicable to such Purchaser, (x) in response to any subpoena orother legal process, (y) in connection with any litigation to which suchPurchaser is a party or (z) if an Event of Default has occurred and iscontinuing, to the extent such Purchaser may reasonably determine such deliveryand disclosure to be necessary or appropriate in the enforcement or for theprotection of the rights and remedies under such Purchaser’s Notes and thisAgreement.  Each holder of a Note, byits acceptance of a Note, will be deemed to have agreed to be bound by and tobe entitled to the benefits of this Section 21 as though it were a partyto this Agreement.  On reasonablerequest by the Company or the Issuer in connection with the delivery to anyholder of a Note of information required to be delivered to such holder underthis Agreement or requested by such holder (other than a holder that is a partyto this Agreement or its nominee), such holder will enter into an agreementwith the Company and the Issuer embodying the provisions of thisSection 21.

 

Section 22.                                      Substitution ofPurchaser.

 

Each Purchaser shall have the right to substitute any one of suchPurchaser’s Affiliates as the purchaser of the Notes that such Purchaser hasagreed to purchase hereunder, by written notice to the Company and the Issuer,which notice shall be signed by both such Purchaser and such Purchaser’sAffiliate, shall contain such Affiliate’s agreement to be bound by thisAgreement and shall contain a confirmation by such Affiliate of the accuracywith respect to it of the representations set forth in Section 6, *provided, however,* that nosuch substitution shall

 

48

----

 

relieve the original Purchaser from its obligation to purchase Noteshereunder.  Upon receipt of such notice,wherever the word “Purchaser” is used in this Agreement (other than in thisSection 22), such word shall be deemed to refer to such Affiliate in lieuof such Purchaser.  In the event thatsuch Affiliate is so substituted as a purchaser hereunder and such Affiliatethereafter transfers to such Purchaser all of the Notes then held by suchAffiliate, upon receipt by the Company and the Issuer of notice of suchtransfer, wherever the word “Purchaser” is used in this Agreement (other thanin this Section 22), such word shall no longer be deemed to refer to suchAffiliate, but shall refer to such Purchaser, and such Purchaser shall have allthe rights of an original holder of the Notes under this Agreement.

 

Section 23.                                      Miscellaneous.

 

*Section 23.1**.**                                   Successorsand Assigns*.  All covenants and otheragreements contained in this Agreement by or on behalf of any of the partieshereto bind and inure to the benefit of their respective successors and assigns(including, without limitation, any subsequent holder of a Note) whether soexpressed or not.

 

*Section 23.2**.**                                   PaymentsDue on Non-Business Days*.  Anythingin this Agreement or the Notes to the contrary notwithstanding, any payment ofprincipal of LIBOR Breakage Amount or interest on any Note that is due on adate other than a Business Day shall be made on the next succeeding BusinessDay without including the additional days elapsed in the computation of theinterest payable on such next succeeding Business Day.

 

*Section 23.3**.**                                   Severability*.  Any provision of this Agreement that isprohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,be ineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions hereof, and any such prohibition orunenforceability in any jurisdiction shall (to the full extent permitted bylaw) not invalidate or render unenforceable such provision in any otherjurisdiction.

 

*Section 23.4**.**                                   Construction*.  Each covenant contained herein shall beconstrued (absent express provision to the contrary) as being independent ofeach other covenant contained herein, so that compliance with any one covenantshall not (absent such an express contrary provision) be deemed to excusecompliance with any other covenant. Where any provision herein refers to action to be taken by any Person,or which such Person is prohibited from taking, such provision shall beapplicable whether such action is taken directly or indirectly by such Person.

 

*Section 23.5.**                                   Counterparts*.  This Agreement may be executed in any numberof counterparts, each of which shall be an original but all of which togethershall constitute one instrument.  Eachcounterpart may consist of a number of copies hereof, each signed by less thanall, but together signed by all, of the parties hereto.

 

*Section 23.6**.**                                   GoverningLaw*.  This Agreement shall beconstrued and enforced in accordance with, and the rights of the parties shallbe governed by, the law of the State of New York excluding choice-of-lawprinciples of the law of such State that would require the application of thelaws of a jurisdiction other than such State.

 

49

----

 

*  *   *   *   *

 

50

----

The executionhereof by the Purchasers shall constitute a contract among the Company, theIssuer and the Purchasers for the uses and purposes hereinabove set forth.  This Agreement may be executed in any numberof counterparts, each executed counterpart constituting an original but alltogether only one agreement.

 
|   | Very truly  yours,               |
|--------|----------------------------------|
|   |                             |
|   | Jackson Hewitt  Tax Service Inc. |
|   |                             |   |
|   |                             |   |
|   | By:                              | /s/ Michael D. Lister |
|   |                             | Name:  | Michael D.  Lister |
|   |                             | Title: | President and  Chief Executive  Officer |
|   |                             |   |
|   |                             |   |
|   | Jackson Hewitt Inc.              |
|   |                             |   |
|   |                             |   |
|   | By:                              | /s/ Michael D. Lister |
|   |                             | Name:  | Michael D.  Lister |
|   |                             | Title: | President and  Chief Executive |
|   |                             | Officer |

 

51

----

 

Accepted as of the first datewritten above.

 
|   | SunAmerica Life  Insurance Company |
|--------|------------------------------------|
|   |                               |   |
|   | By:                                | AIG Global  Investment Corp.,  Investment Adviser |
|   |                               |
|   |                               |
|   | By:                                | /s/ Lori J. White |
|   |                               | Name:  | Lori J. White |
|   |                               | Title: | Vice President |

 

 

Jackson Hewitt Tax Service Inc.

Note Purchase Agreement

 

52

----

 

Accepted as of the first datewritten above.

 
|   | Monumental Life  Insurance Company |
|--------|------------------------------------|
|   |                               |   |
|   |                               |   |
|   | By:                                | /s/ Mary T. Pech |
|   |                               | Name:  | Mary T. Pech |
|   |                               | Title: | Vice President |

 

53

----

 

Accepted as of the first datewritten above.

 

 
|   | ING USA Annuity  and Life Insurance Company |
|--------|---------------------------------------------|
|   | ING Life  Insurance and Annuity Company     |
|   |                                        |   |
|   | By:                                         | ING Investment  Management LLC, as Agent |
|   |                                        |   |
|   |                                        |   |   |
|   | By:                                         | /s/ Christopher P. Lyons |   |
|   |                                        | Name: | Christopher P.  Lyons |
|   |                                        | Title: | Senior Vice  President |
|        |                                             |  |  |  |  |

 

54

----

 

Accepted as of the first datewritten above.

 
|   | Connecticut  General Life Insurance Company |
|--------|---------------------------------------------|
|   |                                        |   |
|   | By:                                         | CIGNA  Investments, Inc. (authorized agent) |
|   |                                        |   |
|   |                                        |   |   |
|   | By:                                         | /s/ Deborah B. Wiacek |
|   |                                        | Name:  | Deborah B.  Wiacek |
|   |                                        | Title: | Managing  Director |

 

55

----

 

Accepted as of the first datewritten above.

 

 
|   | Principal Life  Insurance Company |
|--------|-----------------------------------|
|   |                              |   |
|   | By:                               | Principal Global  Investors, LLC  a Delaware limited liability company, its  authorized signatory |
|   |                              |   |
|   |                              |   |   |
|   | By:                               | /s/ Christopher J. Henderson |
|   |                              | Name:  | Christopher J.  Henderson |
|   |                              | Title: | Counsel |
|   |                              |   |   |
|   | By:                               | /s/ Elizabeth D. Swanson |
|   |                              | Name:  | Elizabeth D.  Swanson |
|   |                              | Title: | Counsel |

 

56

----

 

Accepted as of the first datewritten above.

 
|   |   | The Travelers  Insurance Company |
|--------|--------|----------------------------------|
|   |   |                             |
|   |   |                             |   |
|   | By:    | /s/ John A. Wills                |
|   |   | Name:                       | John A. Wills |
|   |   | Title:                           | Investment  Officer |

 

57

----

 

**InformationRelating to Purchasers**

** **

** **
| **Name and Address of Purchaser**                                                                                                                                                                                             |   | **Principal  Amount  of Notes to be Purchased** |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                                                                                                                                                                                          |   |                                            |       |
| **SunAmerica Life Insurance Company**c/o AIG Global Investment Group  2929 Allen Parkway, A36-01  Houston, Texas  77019-2155  Attention:  Legal Department –  Investment Management  Fax:  (713) 831-2328 |   | $                                               | 65,000,000 |   |
|                                                                                                                                                                                                                               |        |                                                 |            |  |

 

Payments

 

All payments on or inrespect of the Notes to be made by bank wire transfer of Federal or otherimmediately available funds (identifying each payment as “Jackson Hewitt Inc.,Floating Rate Senior Notes due June 25, 2009, PPN 468201 A* 9, principal, premium or interest”) to:

 

The Bank of New York

ABA #021-000-018

BNF Account #: IOC 566

Credit to: SunAmerica Life Insurance Company / GIC

OBI=PPN# and Prin:$            Int: $

 

Notices

 

All notices of payment onor in respect of the Notes and written confirmation of each such payment, to beaddressed to:

 

AIG Global Investment Group

c/o The Bank of New York

Attention: P&I Department

P.O. Box 19266

Newark, NJ 07195

Phone:  (212)437-6557

Fax:  (212)437-6467

 

Duplicate payment noticesand compliance information to:

 

SunAmerica Life Insurance Company / GIC

c/o AIG Global Investment Group

2929 Allen Parkway, Suite A36-04

 

SCHEDULE A

(to Note Purchase Agreement)

 

A-58

----

 

Houston, Texas 77019-2155

Attn:  PrivatePlacement Department

Fax Number: (713) 831-1072

 

All other correspondenceto:

 

AIG Global Investment Group

2929 Allen Parkway, A36-01

Houston, Texas 77019-2155

Attention: Legal Department – Investment Management

Fax:  (713)831-2328

 

Name of Nominee in whichNotes are to be issued:  HARE & Co.

 

Taxpayer I.D. Number forHARE & Co.:  13-6062916

 

**Taxpayer I.D. Number for SunAmerica Life InsuranceCompany:  52-0502540**

 

A-59

----

 
| **Name and Address of Purchaser**                                                                                                                                                                                                                     |   | **Principal  Amount  of Notes to be Purchased** |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                                                                                                                                                                                                                  |   |                                            |       |
| **Monumental Life Insurance Company**c/o AEGON USA Investment Management, LLC  Attention:  Director of Private  Placements  4333 Edgewood Road N.E.  Cedar Rapids, Iowa  52499-5335  Phone:  (319) 369-2432  Fax:  (319) 369-2666 |   | $                                               | 35,000,000 |   |
|                                                                                                                                                                                                                                                       |        |                                                 |            |  |

 

Payments

 

All payments on or inrespect of the Notes to be by bank wire transfer of Federal or otherimmediately available funds (identifying each payment as “Jackson Hewitt Inc.,Floating Rate Senior Notes due June 25, 2009, PPN 468201 A* 9, principal,premium or interest”) to:

 

Citibank, N.A.

111 Wall Street

New York, New York 10043

ABA #021000089

DDA #36218394

FBO MONLIFE 847785

 

Notices

 

All notices andconfirmation of Payment information with respect to the Notes should besent to:

 

AEGON USA Investment Management, LLC

Attention: Custody Operations-Privates

4333 Edgewood Road N.E.

Cedar Rapids, Iowa 52499-7013

 

All other notices andcommunications (including financial statement and reporting), to be addressedas first provided above, with copies to:

 

AEGON USA Investment Management, LLC

Attention: Lizz Taylor – Private Placements

400 West Market Street, 10th Floor

Louisville, Kentucky 40202

Phone:  (502)560-2639

Fax:  (502)560-2030

 

A-60

----

 

Name of Nominee in whichNotes are to be issued:  None

 

**Taxpayer I.D. Number: 52-0419790**

 

A-61

----

 
| **Name and Address of Purchaser**                                                                                                                                                                                               |   | **Principal  Amount  of Notes to be Purchased** |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                                                                                                                                                                                            |   |                                            |       |
| **ING USA Annuity and Life Insurance Company**c/o ING Investment Management LLC  5780 Powers Ferry Road NW, Suite 300  Atlanta, Georgia  30327-4349  Attention:  Private Placements  Fax Number:  (770) 690-5057 |   | $                                               | 20,000,000 |   |
|                                                                                                                                                                                                                                 |        |                                                 |            |  |

 

Payments

 

All payments on or inrespect of the Notes to be made by bank wire transfer of Federal or otherimmediately available funds (identifying each payment as “Jackson Hewitt Inc.,Floating Rate Senior Notes due June 25, 2009, PPN 468201 A* 9, principal,premium or interest”) to:

 

The Bank of New York

ABA #021000018

BFN:  IOC566/INST’L CUSTODY (for scheduled principal and interest payments) *or*

BFN:  IOC565/INST’L CUSTODY (for all payments other than scheduled principal andinterest)

Reference:          ING USA IMKT, Account No. 108473 and PPN 468201 A* 9

 

Notices

 

All notices andcommunications with respect to payments and written confirmation of each suchpayment, to be addressed:

 

ING Investment Management LLC

5780 Powers Ferry Road, NW, Suite 300

Atlanta, Georgia 30327-4349

Attention: Operations/Settlements

Fax Number: (770) 690-4886

 

All other notices andcommunications to be addressed as follows with a copy to address first providedabove:

 

ING Investment Management LLC

100 Washington Avenue South, Suite 1635

Minneapolis, MN 55401-2121

Attention: Martin Rosacker

Phone:  (612)342-7138

Fax Number: (612) 372-5368

 

Name of Nominee in whichNotes are to be issued:  None

 

**Taxpayer I.D. Number: 41-0991508**

 

A-62

----

 
| **Name and Address of Purchaser**                                                                                                                                                                                               |   | **Principal  Amount  of Notes to be Purchased** |      |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|-----------|
|                                                                                                                                                                                                                            |   |                                            |      |
| **ING USA Annuity and Life Insurance Company**c/o ING Investment Management LLC  5780 Powers Ferry Road NW, Suite 300  Atlanta, Georgia  30327-4349  Attention:  Private Placements  Fax Number:  (770) 690-5057 |   | $                                               | 3,000,000 |   |
|                                                                                                                                                                                                                                 |        |                                                 |           |  |

 

Payments

 

All payments on or in respectof the Notes to be made by bank wire transfer of Federal or other immediatelyavailable funds (identifying each payment as “Jackson Hewitt Inc., FloatingRate Senior Notes due June 25, 2009, PPN 468201 A* 9, principal, premiumor interest”) to:

 

The Bank of New York

ABA #021000018

BFN:  IOC566/INST’L CUSTODY (for scheduled principal and interest payments) *or*

BFN:  IOC565/INST’L CUSTODY (for all payments other than scheduled principal andinterest)

Reference:   ING USA Annuity and Life Insurance Co.,Account No. 136373 and PPN 468201 A* 9

 

Notices

 

All notices andcommunications with respect to payments and written confirmation of each suchpayment, to be addressed:

 

ING Investment Management LLC

5780 Powers Ferry Road, NW, Suite 300

Atlanta, Georgia 30327-4349

Attention: Operations/Settlements

Fax Number: (770) 690-4886

 

All other notices andcommunications to be addressed as follows with a copy to address first providedabove:

 

ING Investment Management LLC

100 Washington Avenue South, Suite 1635

Minneapolis, MN 55401-2121

Attention: Martin Rosacker

Phone:  (612)342-7138

Fax Number: (612) 372-5368

 

Name of Nominee in whichNotes are to be issued:  None

 

Taxpayer I.D. Number: 41-0991508

 

A-63

----

 
| **Name and Address of Purchaser**                                                                                                                                                                                           |   | **Principal  Amount  of Notes to be Purchased** |      |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|-----------|
|                                                                                                                                                                                                                        |   |                                            |      |
| **ING Life Insurance and Annuity Company**c/o ING Investment Management LLC  5780 Powers Ferry Road NW, Suite 300  Atlanta, Georgia  30327-4349  Attention:  Private Placements  Fax Number:  (770) 690-5057 |   | $                                               | 2,000,000 |   |
|                                                                                                                                                                                                                             |        |                                                 |           |  |

 

Payments

 

All payments on or in respectof the Notes to be made by bank wire transfer of Federal or other immediatelyavailable funds (identifying each payment as “Jackson Hewitt Inc., FloatingRate Senior Notes due June 25, 2009, PPN 468201 A* 9, principal, premiumor interest”) to:

 

The Bank of New York

ABA #021000018

BFN:  IOC566/INST’L CUSTODY (for scheduled principal and interest payments) *or*

BFN:  IOC565/INST’L CUSTODY (for all payments other than scheduled principal andinterest)

Attention: P&I Department

Reference:  ING Life Insurance and Annuity Company,Account No. 216101 and PPN 468201 A* 9

 

Notices

 

All notices andcommunications with respect to payments and written confirmation of each suchpayment, to be addressed:

 

ING Investment Management LLC

5780 Powers Ferry Road, NW, Suite 300

Atlanta, Georgia 30327-4349

Attention: Operations/Settlements

Fax Number: (770) 690-4886

 

All other notices andcommunications to be addressed as follows with a copy to address first providedabove:

 

ING Investment Management LLC

100 Washington Avenue South, Suite 1635

Minneapolis, MN 55401-2121

Attention: Martin Rosacker

Phone:  (612)342-7138

Fax Number: (612) 372-5368

 

Name of Nominee in whichNotes are to be issued:  None

 

Taxpayer I.D.Number:  71-0294708

 

A-64

----

 
| **Name and Address of Purchaser**                                      |       | **Principal  Amount  of Notes to be Purchased** |       |
|------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
|                                                                   |       |                                            |       |
| **Connecticut General Life Insurance Company**                         | ** ** | $                                               | 10,000,000 | ** ** |
| c/o Cigna Retirement & Investment  Services                        |       | $                                               | 3,000,000  |   |
| 280 Trumbull Street                                                    |       | $                                               | 3,000,000  |   |
| Hartford, Connecticut  06103                                      |       | $                                               | 2,000,000  |   |
| Attention:   Private and  Alternative Investments, H16B |       | $                                               | 2,000,000  |   |
| Fax:   860-534-7203                                     |       |                                            |       |

 

Payments

 

All payments on or in respectof the Notes to be by bank wire transfer of Federal or other immediatelyavailable funds (identifying each payment as “Jackson Hewitt Inc., FloatingRate Senior Notes due June 25, 2009, PPN 468201 A* 9, principal, premiumor interest”) to:

 

J. P. Morgan Chase Bank

BNF=CIGNA Private Placements/AC=9009001802

ABA #021000021

OBI=[name of company; description of security;interest rate; maturity date; PPN; due date] and application (as amongprincipal, premium and interest of the payment being made); contact name andphone.

 

Address for NoticesRelated to Payments:

 

CIG & Co.

c/o Cigna Investments, Inc.

Attention: Private and Alternative Investments, H16B

280 Trumbull Street

Hartford, Connecticut 06103

Fax: 860-534-7203

 

with a copy to:

 

J. P. Morgan Chase Bank

14201 Dallas Parkway, 13th Floor

Dallas, Texas 75254

Attention: Heather Frisina, Mail Code 300-116

Fax: 469-477-1904

 

Address for All OtherNotices:

 

CIG & Co.

 

A-65

----

 

c/o Cigna Retirement & Investment Services

Attention: Private and Alternative Investments, H16B

280 Trumbull Street

Hartford, Connecticut 06103

Fax: 860-534-7203

 

Name of Nominee in which Notesare to be issued:  CIG & Co.

 

Taxpayer I.D. Number for CIG& Co.:  13-3574027

 

A-66

----

 
| **Name and Address of Purchaser**                                                                                                                                              |   | **Principal  Amount  of Notes to be Purchased** |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                                                                                                                                           |   |                                            |       |
| **Principal Life Insurance Company**c/o Principal Global Investors, LLC  Attn:  Fixed Income Private Placements  711 High Street, G-26  Des Moines, Iowa  50392-0800 |   | $                                               | 20,000,000 |   |
|                                                                                                                                                                                |        |                                                 |            |  |

 

Payments

 

All payments on or in respectof the Notes to be made by 12:00 noon (New York City time) by bank wiretransfer of Federal or other immediately available funds (identifying eachpayment as “Jackson Hewitt Inc., Floating Rate Senior Notes due June 25,2009, PPN 468201 A* 9, principal, premium or interest”) to:

 

ABA #121000248

Wells FargoBank, N.A.

San Francisco,CA

For credit toPrincipal Life Insurance Company

Account No.0000014752

OBI PFGSE (S)B00()67053 Jackson Hewitt Tax Service

Attn:  (cusip number – Issuer’s name)

 

Withsufficient information (including Cusip number, interest rate, maturity date,interest amount, principal amount and premium amount, if applicable) toidentify the source and application of such funds.

 

All Notices to:

 

PrincipalGlobal Investors, LLC

ATTN:  Fixed Income Private Placements

711 HighStreet, G26

Des Moines,IA  50392-0800

 

and via Email: Privateplacements2@exchange.principal.com

 

With a copy ofany notices related to scheduled payments, prepayments, rate reset notices to:

 

PrincipalGlobal Investors, LLC

Attention:  Investment Accounting  Fixed Income Securities

711 HighStreet

 

A-67

----

 

Des Moines,Iowa  50392-0960

 

Name of Nominee in which Notesare to be issued:  None

 

Taxpayer I.D. Number:  42-0127290

 

A-68

----

 
| **Name and Address of Purchaser**                                                                                                                                                                |   | **Principal  Amount  of Notes to be Purchased** |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                                                                                                                                                             |   |                                            |       |
| **The Travelers Insurance Company**242 Trumbull Street  P. O. Box 150449  Hartford, Connecticut  06115-0449  Attention:  Private Placements, 7th  Floor  Facsimile:  860-308-8545 |   | $                                               | 10,000,000 |   |
|                                                                                                                                                                                                  |        |                                                 |            |  |

 

Payments

 

All payments on or in respectof the Notes to be made by bank wire transfer of Federal or other immediatelyavailable funds (identifying each payment as “Jackson Hewitt Inc., FloatingRate Senior Notes due June 25, 2009, PPN 468201 A* 9, principal, premiumor interest”) to:

 

The Travelers Insurance Company

Consolidated Private Placement Account No.910-2-587434

JP Morgan Chase Bank

One Chase Manhattan Plaza

New York, New York 10081

ABA No. #021000021

 

Notices

 

All notices and communicationsto be addressed as first provided above, except notices with respect to paymentand written confirmation of each such payment, to be addressed:

 

The Travelers Insurance Company

242 Trumbull Street

P. O. Box 150449

Hartford, Connecticut  06115-0449

Attention: Cashier, 5th Floor

Facsimile: 869-308-8556

 

Name of Nominee in which Notesare to be issued:  TRAL & CO

 

Taxpayer I.D. Number:  06-0566090 (a Connecticut corporation)

 

A-69

----

 

**DefinedTerms**

 

As usedherein, the following terms have the respective meanings set forth below or setforth in the Section hereof following such term:

 

*“Acquisition”* means(a) an Investment (through the acquisition of Capital Stock or otherwise) bythe Company or any Subsidiary in any other Person pursuant to which such Personshall become a Subsidiary of the Company or shall be merged with or into theCompany or any Subsidiary of the Company, or (b) the acquisition (by purchase,merger, consolidation or otherwise) by the Company or any Subsidiary of theassets of any Person which constitute all or substantially all of the assets ofsuch Person, any division or line of business of such Person or any otherproperties or assets of such Person other than in the ordinary course ofbusiness.

 

*“Adjusted LIBOR Rate”*for each Interest Period shall be a rate per annum equal to LIBOR for suchInterest Period plus 1.5%.

 

*“Affiliate”* means,at any time, and with respect to any Person, (a) any other Person that atsuch time directly or indirectly through one or more intermediaries Controls,or is Controlled by, or is under common Control with, such first Person, and(b) any Person beneficially owning or holding, directly or indirectly, 10%or more of any class of voting or equity interests of the Company or anySubsidiary or any Person of which the Company and its Subsidiaries beneficiallyown or hold, in the aggregate, directly or indirectly, 10% or more of any classof voting or equity interests.  As usedin this definition, *“Control”* means the possession, directlyor indirectly, of the power to direct or cause the direction of the managementand policies of a Person, whether through the ownership of voting securities,by contract or otherwise and shall exclude any officer or director of theCompany or any Subsidiary in such capacity.  Unless the context otherwise clearly requires, any reference to an*“Affiliate”*is a reference to an Affiliate of the Company.

 

*“Bank Credit Agreement”* means the Credit Agreement dated as ofJune 25, 2004 among Jackson Hewitt Tax Service Inc., as Parent, JacksonHewitt, Inc., as Borrower, the lenders party thereto and, JPMorgan Chase Bank,as administrative agent, as amended from time to time, and any renewals,extensions or replacements thereof.

 

*“Business Day”* meansany day other than a Saturday, a Sunday or a day on which commercial banks inNew York, New York are required or authorized to be closed; *provided*thatwhen used in connection with any determination of LIBOR “Business Day” shallalso exclude any day on which banks are not open for dealings in dollardeposits in the London interbank market.

 

*“Calculation Date”*means the last day of each fiscal quarter of the Company.

 

*“Capital Lease”*means, at any time, a lease with respect to which the lessee is requiredconcurrently to recognize the acquisition of an asset and the incurrence of aliability in accordance with GAAP.

 

SCHEDULE B

(to Note Purchase Agreement)

 

B-70

----

 

*“Capital Lease Obligation”*means, with respect to any Person and a Capital Lease, the amount of theobligation of such Person as the lessee under such Capital Lease which would,in accordance with GAAP, appear as a liability on a balance sheet of suchPerson.

 

*“Capital Stock”*means shares of capital stock, partnership interests, membership interests in alimited liability company, beneficial interests in a trust or other equityownership interests in a Person and any warrants, options and other rightsentitling the holder thereof to purchase or acquire any such equity interest.

 

*“Cendant”* is definedin Section 4.6.

 

*“Change in Control”*is defined in Section 8.5(h).

 

*“Closing”* is definedin Section 3.

 

*“Code”* means theInternal Revenue Code of 1986, as amended from time to time, and the rules andregulations promulgated thereunder from time to time.

 

*“Common Stock”* isdefined in Section 3.

 

*“Company”* meansJackson Hewitt Tax Service Inc., a Delaware corporation.

 

*“Confidential Information”*is defined in Section 21.

 

*“Consolidated Debt”*means the total amount of all Debt of the Company and its Subsidiariesdetermined on a consolidated basis in accordance with GAAP.

 

*“Consolidated EBITDA”*means, for any period, Consolidated Net Income (excluding any Consolidated NetIncome resulting from any Office Acquisition or Franchisee Expansion occurring duringsuch period) after eliminating extraordinary gains and losses, and unusualitems, plus, without duplication, (a) taxes, (b) depreciation and amortization,(c) Consolidated Interest Expense, (d) other non-cash charges, (e) any amountattributable to any non-recurring item including the Litigation Settlement, butexcluding any cash payments made in such period with respect to anynon-recurring item, in the case of clauses (a) through (e) to the extentdeducted for the computation of Consolidated Net Income for such period, and(f) (1) if any Office Acquisition occurred during such period, the product of(A) the amount of the total revenues of such Office for the most recentlycompleted period of four consecutive calendar quarters prior to the date of suchOffice Acquisition, and (B) the average EBITDA Margin attributable to allOffice Acquisitions made by the Company during the fiscal year preceding theyear in which such Office Acquisition occurred; and  (2) if any Franchisee Expansion occurred during such period, theproduct of (A) the royalty rate currently in effect for such Franchisee underthe applicable franchise agreement and (B) the amount of the total revenues ofsuch Office for the most recently completed period of four consecutive calendarquarters prior to the date of such Franchisee Expansion; *provided* that the aggregateamount included in Consolidated EBITDA pursuant to clause (f) shall not exceed5% of Consolidated EBITDA calculated without giving

 

B-71

----

 

effect to clause (f).

 

In additionto, and, without limitation of the foregoing, for purposes of this definition,“Consolidated EBITDA” shall be calculated after giving effect on a pro formabasis for the period of such calculation to any EBITDA attributable to theassets which are the subject of an Acquisition during the Four Quarter Period,as if such Acquisition occurred on the first day of such Four Quarter Period.

 

*“Consolidated Fixed Charges”*means,for any period, the sum of (a) Consolidated Interest Expense for such periodand (b) regular quarterly dividends paid during such period in respect of theCompany’s common stock.  On anyCalculation Date, the Consolidated Fixed Charge Coverage Ratio will becalculated after giving effect on a pro forma basis for the applicable FourQuarter Period to the incurrence of any Debt in connection with an OfficeAcquisition, Franchisee Expansion or other Acquisition.  For purposes of determining *“ConsolidatedFixed Charges”*, (1) interest on outstanding Debt determined on afluctuating basis as of the Calculation Date and which will continue to be sodetermined thereafter shall be deemed to have accrued at a fixed rate per annumequal to the rate of interest on such Debt in effect on the Calculation Date;(2) if interest on Debt outstanding on the Calculation Date may optionally bedetermined at an interest rate based upon a factor of a prime or similar rate,a eurocurrency interbank offered rate, or other rates, then the interest ratein effect on the Calculation Date shall be deemed to have been in effect duringthe Four Quarter Period; and (3) notwithstanding clause (1) above,interest on Debt determined on a fluctuating basis, to the extent such interestis covered by interest rate protection agreements, shall be deemed to accrue atthe rate per annum resulting after giving effect to the operation of suchagreements.

 

*“Consolidated Fixed Charge Coverage Ratio”*means as of any Calculation Date, the ratio of Consolidated EBITDA for the FourQuarter Period ending on such Calculation Date to (b) Consolidated FixedCharges for the Four Quarter Period ending on such Calculation Date.

 

*“Consolidated Interest Expense”*means,for any period, the sum, for the Company and its Subsidiaries (determined inaccordance with GAAP), of all interest in respect of Debt (including,without limitation, the interest component of any payments in respect ofCapital Lease obligations but excluding any capitalized financing costs)accrued  during such period (whether ornot actually paid during such period).

 

*“Consolidated Leverage Ratio”*means, at any Calculation Date, the ratio of (a) Consolidated Debt at such dateto (b) Consolidated EBITDA for the Four Quarter Period ended as of suchCalculation Date.

 

*“Consolidated Net Income”*means, for any period, the net income (or loss) of the Company and itsSubsidiaries for such period, determined on a consolidated basis in accordancewith GAAP consistently applied.

 

*“Consolidated Net Tangible Assets”*means as of the date of any determination thereof Consolidated Total Assets after deducting “Goodwill” and “OtherIntangibles-Net” (or equivalent line item or items) as shown on theconsolidated balance sheet of the Company and its

 

B-72

----

 

Subsidiariesfor the most recently ended fiscal quarter.

 

*“Consolidated Net Worth”*means as of any date of determination the consolidated stockholders’ equity ofthe Company and its Subsidiaries, as determined in accordance with GAAP.

 

*“Consolidated Total Assets”*means, as of any date of determination, the total amount of all assets of theCompany and its Subsidiaries, determined on a consolidated basis in accordancewith GAAP.

 

*“Debt”* means, withrespect to any Person, without duplication,

 

(a)           its liabilities forborrowed money;

 

(b)           its liabilities forthe deferred purchase price of property acquired by such Person (excluding(a) accounts payable and other accrued liabilities arising in the ordinarycourse of business and (b) to the extent the payment thereof is contingent, thedeferred purchase price of property acquired by such Person) but including,without limitation, all liabilities created or arising under any conditionalsale or other title retention agreement with respect to any such property);

 

(c)           its Capital LeaseObligations;

 

(d)           all liabilities forborrowed money secured by any Lien with respect to any property owned by suchPerson (whether or not it has assumed or otherwise become liable for suchliabilities);

 

(e)           its redemptionobligations in respect of Disqualified Capital Stock to the extent payable withcash or other consideration (except common stock or other equity securities);and

 

(f)            Guarantees of suchPerson with respect to liabilities of a type described in any of clauses (a)through (e) hereof, excluding Franchisee Advance Payments made in connectionwith programs created by the Company or any Subsidiary for the general benefitof the franchisee system.

 

Debt of anyPerson shall include all obligations of such Person of the character describedin clauses (a) through (f) to the extent such Person remains legally liable inrespect thereof notwithstanding that any such obligation is deemed to beextinguished under GAAP.  Debt of anyPerson shall exclude all liabilities of such Person for the LitigationSettlement and the development advance notes (or other similar arrangements).

 

*“Default”* means anevent or condition the occurrence or existence of which would, with the lapseof time or the giving of notice or both, become an Event of Default.

 

*“Default Rate”* meanswith respect to the Notes that rate of interest that is the greater of

 

B-73

----

 

(i) 2% per annum above therate of interest referred to in clause (a) of the first paragraph of the Notesor (ii) 2% over the rate of interest publicly announced by JPMorgan ChaseBank in New York, New York as its “base” or “prime” rate.

 

*“Disqualified Capital Stock”*means mandatorily redeemable preferred stock with mandatory sinking fund orredemptions payments prior to the maturity date of the Notes.

 

*“Domestic Subsidiary”*meansany Subsidiary which is which isorganized under the laws of the United States of America or any State thereofor the District of Columbia.

 

*“EBITDA Margin”*means, with respect to any Office, for any period, the quotient of the OfficeAcquisition EBITDA with respect to such Office for such period divided by thetotal revenues (as determined in accordance with GAAP) of such Office for suchperiod.

 

*“Environmental Laws”*means any and all federal, state, local, and foreign statutes, laws,regulations, ordinances, rules, judgments, orders, decrees, permits,concessions, grants, franchises, licenses, agreements or governmentalrestrictions relating to pollution and the protection of the environment or therelease of any materials into the environment, including but not limited tothose related to hazardous substances or wastes, air emissions and dischargesto waste or public systems.

 

*“ERISA”* means theEmployee Retirement Income Security Act of 1974, as amended from time to time,and the rules and regulations promulgated thereunder from time to time ineffect.

 

*“ERISA Affiliate”*means any trade or business (whether or not incorporated) that is treated as asingle employer together with the Company or the Issuer, as the case may be,under Section 414 of the Code.

 

*“Event of Default”*is defined in Section 12.

 

*“Exchange Act”* meansthe Securities Exchange Act of 1934, as amended.

 

*“Fair Market Value”*means,at any time and with respect to any property, the sale value of such propertythat would be realized in an arm’s-length sale at such time between an informedand willing buyer and an informed and willing seller (neither being under acompulsion to buy or sell), as reasonably determined in the good faith opinionof the Company’s board of directors or one or more officers to whom authorityto determine such value has been delegated by the board of directors.

 

*“Four Quarter Period”*means as of any Calculation Date, the period of four complete, consecutivefiscal quarters ended on such Calculation Date.

 

*“Franchisee”* means aPerson (other than the Company or a Subsidiary) that owns and operates aCompany-licensed Office.

 

B-74

----

 

*“Franchisee Advance Payments”*means advances made from time to time by the Company or any Subsidiary to thirdparties on behalf of or for the benefit of Franchisees

 

*“Franchisee Expansion”*means the issuance of a development advance note or other similar financings toFranchisees by the Company or any Subsidiary.

 

*“GAAP”* meansgenerally accepted accounting principles as in effect from time to time in theUnited States of America; *provided* that if the Company notifies theholders of the Notes or the Required Holders notify the Company that such partywishes to amend any negative covenant to eliminate the effect of any change inGAAP on the operation of such covenant, then the Company’s compliance with suchnegative covenant shall be determined on the basis of GAAP in effect immediatelybefore the relevant change in GAAP became effective, until either such noticeis withdrawn or such covenant is amended in a manner satisfactory to theCompany and the Required Holders.

 

*“Governmental Authority”*means

 

(a)           the government of

 

(i)            the United Statesof America or any state or other political subdivision thereof, or

 

(ii)           any jurisdiction inwhich the Company or any Subsidiary conducts all or any part of its business,or which has jurisdiction over any properties of the Company or any Subsidiary,or

 

(b)           any entityexercising executive, legislative, judicial, regulatory or administrativefunctions of, or pertaining to, any such government.

 

*“Guaranty”* means,with respect to any Person, any obligation (except the endorsement in theordinary course of business of negotiable instruments for deposit orcollection) of such Person guaranteeing or in effect guaranteeing any Debt,dividend or other obligation of any other Person in any manner, whetherdirectly or indirectly, including (without limitation) obligations incurredthrough an agreement, contingent or otherwise, by such Person:

 

(a)           to purchase suchDebt or obligation or any property constituting security therefor primarily forthe purpose of assuring the owner of such Debt or obligation of the ability ofany other Person to make payment of the Debt or obligation;

 

(b)           to advance or supplyfunds (i) for the purchase or payment of such Debt or obligation, or(ii) to maintain any working capital or other balance sheet condition orany income statement condition of any other Person or otherwise to advance ormake available funds for the purchase or payment of such Debt or obligation;

 

(c)           to lease propertiesor to purchase properties or services primarily for the

 

B-75

----

 

purpose ofassuring the owner of such Debt or obligation of the ability of any otherPerson to make payment of the Debt or obligation; or

 

(d)           otherwise to assurethe owner of such Debt or obligation against loss in respect thereof.

 

In anycomputation of the Debt or other liabilities of the obligor under any Guaranty,the Debt or other obligations that are the subject of such Guaranty shall beassumed to be direct obligations of such obligor, *provided* that the amount ofsuch Debt outstanding for purposes of this Agreement shall not exceed themaximum amount of Debt that is the subject of such Guaranty.

 

*“Hazardous Material”*means any and all pollutants, toxic or hazardous wastes or any other substancesthat might pose a hazard to health or safety, the removal of which may berequired or the generation, manufacture, refining, production, processing,treatment, storage, handling, transportation, transfer, use, disposal, release,discharge, spillage, seepage, or filtration of which is or shall be restricted,prohibited or penalized by any applicable law (including, without limitation,asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls).

 

*“holder”* means, withrespect to any Note, the Person in whose name such Note is registered in theregister maintained by the Issuer pursuant to Section 14.1.

 

*“Institutional Investor”*means (a) any original purchaser of a Note, (b) any holder of morethan $5,000,000 of the aggregate principal amount of the Notes thenoutstanding, and (c) any bank, trust company, savings and loan associationor other financial institution, any pension plan, any investment company, anyinsurance company, any broker or dealer, or any other similar financialinstitution or entity, regardless of legal form.

 

*“Interest Payment Date”*shall have the meaning assigned thereto in Section 1.2 of this Agreement.

 

*“Interest Period”*shall mean the period commencing on the Closing Date up to, but not including,the first Interest Payment Date and, thereafter, the period commencing on thenext succeeding Interest Payment Date and continuing up to, but not including,the next Interest Payment Date.

 

*“Interest Rate Protection Agreement”*means any interest rate swap agreement, interest rate cap agreement or othersimilar financial agreement or arrangement.

 

*“Investments”* shallmean all investments, in cash or by delivery of property made, directly orindirectly in any Person, whether by acquisition of shares of Capital Stock,Debt or other obligations or securities or by loan, advance, capitalcontribution or otherwise.

 

*“IPO”* is defined inSection 3.

 

*“Issuer”*meansJackson Hewitt Inc., a Virginia corporation.

 

B-76

----

 

*“knowledge”* whenused with respect to the Company or any Responsible Officer to qualify arepresentation or warranty of the Company or such Responsible Officer, shall bedeemed to be, the actual knowledge of such Responsible Officer.

 

*“LIBOR”* shall mean,for any Interest Period, the rate per annum (rounded upwards, if necessary, tothe next higher one hundred-thousandth of a percentage point) for deposits inU.S. Dollars for a 90-day period which appears on the Bloomberg FinancialMarkets Service Page BBAM-1 (or if such page is not available, the ReutersScreen LIBO Page) as of 11:00 a.m. (London, England time) on the date 2Business Days before the commencement of such Interest Period (orthree (3) Business Days prior to the beginning of the first InterestPeriod).  *“Reuters Screen LIBO Page”*means the display designated as the “LIBO” page on the Reuters Monitory MoneyRates Service (or such other page as may replace the LIBO page on that serviceor such other service as may be nominated by the British Bankers’ Associationas the information vendor for the purpose of displaying British Banker’sAssociation Interest Settlement Rates for U.S. Dollar deposits).

 

*“LIBOR Breakage Amount”*isdefined in Section 8.2.

 

*“Lien”* means, withrespect to any Person, any mortgage, lien, pledge, charge, security interest orother encumbrance, or any interest or title of any vendor, lessor, lender orother secured party to or of such Person under any conditional sale or othertitle retention agreement (other than an operating lease) or Capital Lease,upon or with respect to any property or asset of such Person (including, in thecase of stock, shareholder agreements, voting trust agreements and all similararrangements).

 

*“Litigation Settlement”*means the settlement with franchisees in July 2003 arising out of the lawsuitfiled against the Company by 154 of its franchisees on August 27, 2002.

 

*“Material”* meansmaterial in relation to the business, operations, affairs, financial condition,assets or properties of the Company and its Subsidiaries taken as a whole.

 

*“Material Adverse Effect”*means a material adverse effect on (a) the business, operations, affairs,financial condition, assets or properties of the Company and its Subsidiariestaken as a whole, or (b) the ability of the Company, the Issuer and theirSubsidiaries, taken as a whole, to perform their obligations under thisAgreement and the Notes, or (c) the validity or enforceability of thisAgreement, the Notes or the Subsidiary Guaranty.

 

*“Material Subsidiary”*means each Subsidiary of the Company other than Subsidiaries that, in theaggregate, account for no more than 5% of Consolidated Total Assets, 5% ofConsolidated Net Worth or 5% of the consolidated revenues of the Company.

 

*“Memorandum”* isdefined in Section 5.3.

 

*“Multiemployer Plan”*means any Plan that is a “multiemployer plan” (as such term is defined inSection 4001(a)(3) of ERISA).

 

B-77

----

 

*“Net Proceeds”*****meanswith respect to any sale of property by any Person an amount equal to(a) the aggregate amount of the consideration received by such Person inrespect of such sale (valued at the Fair Market Value of such consideration atthe time of such sale), *minus*(b) the sum of (i) allout-of-pocket costs and expenses actually incurred by such Person in connectionwith such sale, and (ii) all state, federal and foreign taxes incurred, orto be incurred, by such Person in connection with such sale.

 

*“Notes”* is definedin Section 1.

 

*“Office”*means abusiness that provides tax return preparation and other related services.

 

*“Office Acquisition”*means the purchase (whether through the purchase of an Office or anAcquisition) by the Company or a Subsidiary of an operating Office from a thirdparty.

 

*“Office Acquisition EBITDA”*means, for any Office Acquisition for any period, consolidated net income(determined in accordance with GAAP) of such Office for such period aftereliminating extraordinary gains and losses, and unusual items, plus, withoutduplication, (a) taxes, (b) depreciation and amortization, (c) interestexpense, (d) other non-cash charges and (e) any amount attributable to anynon-recurring item, but excluding any cash payments made in such period withrespect to any non-recurring item, in the case of clauses (a) through (e) tothe extent deducted for the computation of consolidated net income for suchperiod.

 

*“Officer’s Certificate”*means a certificate of a Senior Financial Officer or of any other officer ofthe Company, the Issuer or any Subsidiary Guarantor, as the context mayrequire, whose responsibilities extend to the subject matter of suchcertificate.

 

*“PBGC”* means thePension Benefit Guaranty Corporation referred to and defined in ERISA or anysuccessor thereto.

 

*“PermittedLiens”*means any Liens of the type described in clauses (a) through (m) of Section10.3.

 

*“Person”* means anindividual, partnership, corporation, limited liability company, association,trust, unincorporated organization, or a government or agency or politicalsubdivision thereof.

 

*“Plan”* means an“employee benefit plan” (as defined in Section 3(3) of ERISA) that is or,within the preceding five years, has been established or maintained, or towhich contributions are or, within the preceding five years, have been made orrequired to be made, by the Company, the Issuer or any ERISA Affiliate or withrespect to which the Company, the Issuer or any ERISA Affiliate may have anyliability.

 

*“Priority Debt”*means (without duplication), as of the date of any determination thereof,(i) all unsecured Debt of Subsidiaries of the Company (but excluding (x)Debt of the Issuer, (y) Debt owing to the Company, the Issuer or a Wholly-OwnedSubsidiary and (z) Debt of

 

B-78

----

 

Subsidiary Guarantors under theSubsidiary Guaranty and the guaranty of obligations under the Bank CreditAgreement), and (ii) all Debt of the Company or its Subsidiaries securedby Liens other than Debt secured by Liens permitted by subparagraphs (a)through (l), inclusive, of Section 10.3.

 

*“property”* or *“properties”*means, unless otherwise specifically limited, real or personal property of anykind, tangible or intangible, choate or inchoate.

 

*“Purchasers”* meansthe purchasers of the Notes named in Schedule A hereto.

 

*“QPAM Exemption”*means Prohibited Transaction Class Exemption 84-14 issued by the United StatesDepartment of Labor.

 

*“Required Holders”*means, at any time, the holders of more than 50% in principal amount of theNotes at the time outstanding (exclusive of Notes then owned by the Company,the Issuer or any of their Affiliates).

 

*“Responsible Officer”*means any Senior Financial Officer and any other officer of the Company withresponsibility for the administration of the relevant portion of thisAgreement.

 

*“Restricted Payment”*means any dividend or other distribution (whether in cash, securities or otherproperty) with respect to any Capital Stock in the Company or any Subsidiary,or any payment (whether in cash, securities or other property), including anysinking fund or similar deposit, on account of the purchase, redemption,retirement, acquisition, cancellation or termination of any such Capital Stockin the Company or any Subsidiary or any option, warrant or other right toacquire any such Capital Stock in the Company or any Subsidiary.

 

*“Securities Act”*means the Securities Act of 1933, as amended from time to time.

 

*“Senior Debt”* means,as of the date of any determination thereof, all Consolidated Debt, other thanSubordinated Debt.

 

*“Senior Financial Officer”*means the chief financial officer, principal accounting officer, treasurer orcomptroller of the Company.

 

*“Special Dividend”*meansthe special dividend to be paid to Cendant described in the Memorandum assupplemented by Amendment No. 6 to the Company’s Registration Statement on FormS-1 as it relates to such special dividend.

 

*“Subordinated Debt”*means all unsecured Debt of the Issuer which shall contain or have applicablethereto subordination provisions providing for the subordination thereof toother Debt of the Issuer (including, without limitation, the obligations of theIssuer under this Agreement and the Notes).

 

*“Subsidiary”* means,as to any Person, any corporation, association or other business entity inwhich such Person or one or more of its Subsidiaries or such Person and one ormore of

 

B-79

----

 

its Subsidiaries ownssufficient equity or voting interests to enable it or them (as a group)ordinarily, in the absence of contingencies, to elect a majority of thedirectors (or Persons performing similar functions) of such entity, and anypartnership or joint venture if more than a 50% interest in the profits orcapital thereof is owned by such Person or one or more of its Subsidiaries orsuch Person and one or more of its Subsidiaries (unless such partnership canand does ordinarily take major business actions without the prior approval ofsuch Person or one or more of its Subsidiaries).  Unless the context otherwise clearly requires, any reference to a“Subsidiary” is a reference to a Subsidiary of the Company or the Issuer.

 

*“Subsidiary Guarantor”*meanseach Material Subsidiary which is a Domestic Subsidiary and any otherSubsidiary which has become a party to the Subsidiary Guaranty.

 

*“Subsidiary Guaranty”*shallmean the Subsidiary Guaranty delivered pursuant to Section 2.2 and eachother Subsidiary Guaranty hereafter executed and delivered by a Subsidiary ofthe Company for the benefit of the holders of the Notes in accordance withSection 9.6.

 

*“Wholly-Owned Subsidiary”*means, at any time, any Subsidiary one hundred percent (100%) of all of theequity interests (except directors’ qualifying shares) and voting interests ofwhich are owned by any one or more of the Company and the Company’s otherWholly-Owned Subsidiaries at such time.

 

B-80

----

 

**Subsidiaries of the Company, Ownership ofSubsidiary Stock**

 
| **Subsidiary**                |   | **State of  Incorporation** |   | **Stockholder**           |
|-------------------------------|--------|-----------------------------|--------|---------------------------|
| Jackson Hewitt Inc.           |   | Virginia                    |   | 100% owned by the Company |
| Tax Services of America, Inc. |   | Delaware                    |   | 100% owned by the Issuer  |
| Hewfant, Inc.                 |   | Virginia                    |   | 100% owned by the Issuer  |

 

 

SCHEDULE 5.4

(to Note Purchase Agreement)

 

E-1-81

----

 

**ExistingLiens**

 

None

 

SCHEDULE 10.3

(to Note Purchase Agreement)

 

E-1-82

----

 

[Form of Note]

 

This Note has been acquired forinvestment and has not been registered under the Securities Act of 1933, asamended (the *“Act”*), or under state securities laws.  No transfer, sale, assignment, pledge,hypothecation or other disposition of this Note may be made unless registeredor exempt from registration under the Act and applicable state securities lawsand unless the transfer restrictions imposed by the Note Purchase Agreementreferred to below are complied with.

 

**Jackson Hewitt Inc.**

** **

**Floating Rate Senior Note due June 25,2009**

** **
| No.   [              ]                           |   | [Date]          |
|-----------------------------------------------------------------------------------------------------------------------------|--------|-----------------|
| $[                    ] |   | PPN 468201 A* 9 |

 

For ValueReceived, the undersigned, Jackson Hewitt Inc. (herein called the *“Issuer”*),a Virginia corporation, hereby promises to pay to[                                     ],or registered assigns, the principal sum of[                           ]Dollars on June 25, 2009, with interest (computed on the basis of a 360 dayyear and actual days elapsed) (a) on the principal amount from time to timeremaining unpaid hereon at a floating rate equal to the Adjusted LIBOR Rate (asdefined in the Note Purchase Agreement referred to below) from the date thereofuntil maturity, payable quarterly on the twenty-fifth day of each March, June,September and December in each year commencing on September 25, 2004 untilthe principal hereof shall have become due and payable, and (b) to theextent permitted by law on any overdue payment (including any overdueprepayment) of principal, any overdue payment of interest and any overduepayment of any LIBOR Breakage Amount (as defined in the Note Purchase Agreementreferred to below), payable quarterly as aforesaid (or, at the option of theregistered holder hereof, on demand), at a rate per annum from time to timeequal to the Default Rate (as defined in the Note Purchase Agreement).

 

Payments ofprincipal of, interest on and any LIBOR Breakage Amount with respect to thisNote are to be made in lawful money of the United States of America at the principaloffice of JP Morgan Chase Bank in New York, New York or at such other place asthe Issuer shall have designated by written notice to the holder of this Noteas provided in the Note Purchase Agreement referred to below.

 

This Note isone of a series of Senior Notes (herein called the *“Notes”*) issued pursuant tothe Note Purchase Agreement, dated as of June 21, 2004 (as from time totime amended, supplemented or modified, the *“Note Purchase Agreement”*), among JacksonHewitt Tax Service Inc., a Delaware corporation (the *“Company”*), the Issuer andthe respective Purchasers named therein and is entitled to the benefitsthereof.  Each holder of this Note willbe deemed, by its acceptance hereof, (i) to have agreed to theconfidentiality provisions set forth in Section 21 of the Note PurchaseAgreement and (ii) to have made the representation set forth inSection 6.2 of the Note Purchase Agreement.

 

This Note is aregistered Note and, as provided in the Note Purchase Agreement, upon

 

EXHIBIT 1

(to Note Purchase Agreement)

 

E-1-83

----

 

surrender of this Note forregistration of transfer, duly endorsed, or accompanied by a written instrumentof transfer duly executed, by the registered holder hereof or such holder’s attorneyduly authorized in writing, a new Note for a like principal amount will beissued to, and registered in the name of, the transferee.  Prior to due presentment for registration oftransfer, the Issuer may treat the person in whose name this Note is registeredas the owner hereof for the purpose of receiving payment and for all otherpurposes, and the Issuer will not be affected by any notice to the contrary.

 

This Note isalso subject to optional prepayment, in whole or from time to time in part, at thetimes and on the terms specified in the Note Purchase Agreement, but nototherwise.

 

Pursuant tothe Note Purchase Agreement and the Subsidiary Guaranty dated as ofJune 21, 2004, respectively, the Company and certain Subsidiaries of theCompany have absolutely and unconditionally guaranteed payment in full of theprincipal of, LIBOR Breakage Amount, if any, and interest on this Note and theperformance by the Issuer of all of its obligations contained in the NotePurchase Agreement all as more fully set forth in said Note Purchase Agreementand said Subsidiary Guaranty.

 

If an Event ofDefault, as defined in the Note Purchase Agreement, occurs and is continuing,the principal of this Note may be declared or otherwise become due and payablein the manner, at the price (including any applicable LIBOR Breakage Amount)and with the effect provided in the Note Purchase Agreement.

 

This Noteshall be construed and enforced in accordance with, and the rights of theissuer and holder hereof shall be governed by, the law of the State of New Yorkexcluding choice-of-law principles of the law of such State that would requirethe application of the laws of a jurisdiction other than such State.

 
|   | Jackson  Hewitt Inc. |
|--------|----------------------|
|   |                 |
|   |                 |
|   | By                   |
|   |                 | Name: |
|   |                 | Title: |

 

E-1-84

----

 

Subsidiary Guaranty

 

 

dated as of June 21, 2004

 

 

Re:    $175,000,000Floating Rate Senior Notesdue June 25, 2009

of

Jackson Hewitt Inc.

 

 

Exhibit 2.2

(to Note PurchaseAgreement)

 

85

----

 

**TABLEOF CONTENTS**

** **

(Not a part of theAgreement)

 
| **Section**                                                                                   |   | **Heading**                                        |   |
|-----------------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                                                          |   |                                               |   |
| Parties                                                                                       |   |                                               |   |
|                                                                                          |   |                                               |   |
| Recitals                                                                                      |   |                                               |   |
|                                                                                          |   |                                               |   |
| Section 1.                                                                               |   | Definitions                                        |   |
|                                                                                          |   |                                               |   |
| Section 2.                                                                               |   | Guaranty  of Notes and Note Purchase Agreement     |   |
|                                                                                          |   |                                               |   |
| Section 3.                                                                               |   | Guaranty  of Payment and Performance.              |   |
|                                                                                          |   |                                               |   |
| Section 4.                                                                               |   | General  Provisions Relating to the Guaranty       |   |
|                                                                                          |   |                                               |   |
| Section 5.                                                                               |   | Representations  and Warranties of the Guarantors. |   |
|                                                                                          |   |                                               |   |
| Section 6.                                                                               |   | Amendments,  Waivers, Consents and Termination     |   |
|                                                                                          |   |                                               |   |
| Section 7.                                                                               |   | Notices                                            |   |
|                                                                                          |   |                                               |   |
| Section 8.                                                                               |   | Miscellaneous                                      |   |
|                                                                                          |   |                                               |   |
| Signature                                                                                     |   |                                               |   |
|                                                                                          |   |                                               |   |
|                                                                                          |   |                                               |   |
| Attachments to Subsidiary Guaranty:                                                           |   |                                               |
|                                                                                          |   |                                               |   |
| Exhibit A       —     Guaranty Joinder |   |                                               |
|                                                                                               |        |                                                    |        |  |  |  |  |

 

----

 

**Subsidiary Guaranty**

 

Re:          $175,000,000 Floating Rate Senior Notes

due June 25, 2009

of

Jackson Hewitt Inc.

 

This SubsidiaryGuaranty dated as of June 21, 2004 (the *“Guaranty”*) is entered intoon a joint and several basis by each of the undersigned (which parties arehereinafter referred to individually as a *“Guarantor”* and collectively as the *“Guarantors”*).

 

**Recitals**

 

A.            EachGuarantor and Jackson Hewitt Inc., a Virginia corporation, (the *“Issuer”*)is presently a direct or indirect Subsidiary of Jackson Hewitt Tax ServiceInc., a Delaware corporation (the *“Company”*).

 

B.            Inorder to raise funds to pay a special dividend to Cendant and for generalcorporate purposes, the Company and the Issuer have entered into the NotePurchase Agreement dated as of June 21, 2004 (as amended, restated,supplemented or otherwise modified from time to time, the *“Note Purchase Agreement”*)among the Company, the Issuer and each of the institutional investors named inSchedule A attached thereto (the *“Note Purchasers”*) providing for, amongother things, the issue and sale by the Issuer to the Note Purchasers of theIssuer’s Floating Rate Senior Notes due June 25, 2009 in theaggregate principal amount of $175,000,000 (the *“Notes”*).  The Note Purchasers, together with theirsuccessors and assigns and any subsequent transferees of the Notes in accordancewith the terms of the Note Purchase Agreement, are hereinafter collectivelyreferred to as the *“Holders”*.

 

C.            TheNote Purchasers have required as a condition to their purchase of the Notesthat the Company cause each of the undersigned to enter into this Guaranty andto cause each Domestic Subsidiary which is required by the terms of any BankCredit Agreement to become a party to, or otherwise guarantee, Debt outstandingunder any such Bank Credit Agreement, to enter into this Guaranty by executingand delivering a Guaranty Joinder in substantially the form set forth asExhibit A hereto (a *“Guaranty Joinder”*), in each case assecurity for the Notes, and the Company has agreed to cause each of theundersigned to execute this Guaranty and to cause each other DomesticSubsidiary to execute a Guaranty Joinder, in each case in order to induce theNote Purchasers to purchase the Notes and thereby benefit the Company and itsSubsidiaries by providing funds to enable the Company to raise funds to pay a specialdividend to Cendant and to enable the Company and its Subsidiaries to havefunds available for general corporate purposes.

 

Now, Therefore, asrequired by the Note Purchase Agreement and in consideration of the premisesand other good and valuable consideration, the receipt and sufficiency whereofare hereby acknowledged, each Guarantor does hereby covenant and agree, jointlyand severally, as

 

87

----

 

follows:

 

Section 1.               Definitions.

 

Capitalized termsused herein shall have the meanings set forth in the Note Purchase Agreementunless herein defined or the context shall otherwise require.

 

Section 2.               Guarantyof Notes and Note Purchase Agreement.

 

(a)   Each Guarantor jointly and severally doeshereby irrevocably, absolutely and unconditionally guarantee unto theHolders:  (1) the full and promptpayment of the principal of, LIBOR Breakage Amount, if any, and interest on theNotes from time to time outstanding, as and when such payments shall become dueand payable, whether by lapse of time, upon redemption or prepayment, byextension or by acceleration or declaration or otherwise (including (to theextent legally enforceable) interest due on overdue payments of principal,LIBOR Breakage Amount, if any, and interest) in Federal or other immediatelyavailable funds of the United States of America which at the time of payment ordemand therefor shall be legal tender for the payment of public and privatedebts, (2) the full and prompt performance and observance by the Company andthe Issuer of each and all of the respective obligations, covenants andagreements required to be performed or owed by each the Company and the Issuerunder the terms of the Notes and the Note Purchase Agreement and (3) thefull and prompt payment, upon demand by any Holder, of all reasonable anddocumented costs and expenses, legal or otherwise (including reasonable anddocumented attorneys’ fees), if any, as shall have been expended or incurred inthe protection or enforcement of any rights, privileges or liabilities in favorof the Holders under or in respect of the Notes, the Note Purchase Agreement orunder this Guaranty or in any action in connection therewith or herewith and ineach and every case irrespective of the validity, regularity, or enforcement ofany of the Notes or Note Purchase Agreement or any of the terms thereof or anyother like circumstance or circumstances.

 

(b)   The liability of each Guarantor under thisGuaranty shall not exceed an amount equal to a maximum amount as will, aftergiving effect to such maximum amount and all other liabilities of suchGuarantor, contingent or otherwise, result in the performance of theobligations of such Guarantor hereunder not constituting a fraudulent transfer,obligation or conveyance and will in no event exceed an amount which can beguaranteed by such Guarantor under applicable Federal and state law relating toinsolvency of debtors.

 

Section 3.               Guarantyof Payment and Performance.

 

This is aguarantee of payment and performance and each Guarantor hereby waives, to thefullest extent permitted by law, any right to require that any action on or inrespect of any Note or the Note Purchase Agreement be brought against theCompany, the Issuer or any other Person or that resort be had to any direct orindirect security for the Notes or for this Guaranty or any other remedy.  Any Holder may, at its option, proceedhereunder against any Guarantor in the first instance to collect monies whendue, the payment of which is guaranteed hereby, without first proceedingagainst the Company, the Issuer or any other Person and without first

 

88

----

 

resorting to any direct or indirect security for the Notes or for thisGuaranty or any other remedy.  The liabilityof each Guarantor hereunder shall in no way be affected or impaired by anyacceptance by any Holder of any direct or indirect security for, or otherguaranties of, any Debt, liability or obligation of the Company, the Issuer orany other Person to any Holder or by any failure, delay, neglect or omission byany Holder to realize upon or protect any such guarantees, Debt, liability orobligation or any notes or other instruments evidencing the same or any director indirect security therefor or by any approval, consent, waiver, or otheraction taken, or omitted to be taken by any such Holder.

 

The covenants andagreements on the part of the Guarantors herein contained shall be joint andseveral covenants and agreements, and references to the Guarantors shall bedeemed references to each of them and none of them shall be released fromliability hereunder by reason of the Guaranty ceasing to be binding as acontinuing security on any other of them.

 

Section 4.               GeneralProvisions Relating to the Guaranty.

 

(a)   Each Guarantor hereby consents and agreesthat any Holder or Holders from time to time, with or without any furthernotice to or assent from any other Guarantor may, without in any manneraffecting the liability of any Guarantor under this Guaranty, and upon suchterms and conditions as any such Holder or Holders may deem advisable:

 

(1)           extend in whole or in part (byrenewal or otherwise), modify, increase, change, compromise, release or extendthe duration of the time for the performance or payment of any Debt, liabilityor obligation of the Company, the Issuer or of any other Person secondarily orotherwise liable for any Debt, liability or obligations of the Issuer or theCompany on the Notes, or waive any Default with respect thereto, or waive, modify,amend or change any provision of any other agreement or this Guaranty (to theextent permitted by Section 6); or

 

(2)           sell, release, surrender, modify,impair, exchange or substitute any and all property, of any nature and fromwhomsoever received, held by, or for the benefit of, any such Holder as director indirect security for the payment or performance of any Debt, liability orobligation of the Company, the Issuer or of any other Person secondarily orotherwise liable for any Debt, liability or obligation of the Issuer on theNotes; or

 

(3)           settle, adjust or compromise anyclaim of the Issuer against any other Person secondarily or otherwise liablefor any Debt, liability or obligation of the Issuer on the Notes.

 

Each Guarantorhereby ratifies and confirms any such extension, renewal, change, sale,release, waiver, surrender, exchange, modification, amendment, impairment,substitution, settlement, adjustment or compromise and that the same shall bebinding upon it, and hereby waives, to the fullest extent permitted by law, anyand all defenses, counterclaims or offsets which it might or could have byreason thereof, it being understood that such Guarantor shall at all times bebound by this Guaranty and remain liable hereunder until the payment in full ineach of the principal, LIBOR Breakage Amount, if any, or interest on the Notes.

 

89

----

 

(b)   Each Guarantor hereby waives, to the fullestextent permitted by law:

 

(1)           notice of acceptance of this Guarantyby the Holders or of the creation, renewal or accrual of any liability of theCompany or the Issuer, present or future, or of the reliance of such Holdersupon this Guaranty (it being understood that all Debt, liabilities andobligations described in Section 2 hereof shall conclusively be presumedto have been created, contracted or incurred in reliance upon the execution ofthis Guaranty); and

 

(2)           demand of payment by any Holder fromthe Company, the Issuer or any other Person indebted in any manner on or forany of the Debt, liabilities or obligations hereby guaranteed; and

 

(3)           presentment for the payment by anyHolder or any other Person of the Notes or any other instrument, protestthereof and notice of its dishonor to any party thereto and to such Guarantor.

 

The obligations ofeach Guarantor under this Guaranty and the rights of any Holder to enforce suchobligations by any proceedings, whether by action at law, suit in equity orotherwise, shall not be subject to any reduction, limitation, impairment ortermination, whether by reason of any claim of any character whatsoever orotherwise and shall not be subject to any defense, set-off, counterclaim (otherthan any compulsory counterclaim), recoupment or termination whatsoever.

 

(c)   The obligations of each Guarantor hereundershall be binding upon such Guarantor and its successors and assigns, and shallremain in full force and effect irrespective of:

 

(1)           the genuineness, validity, regularityor enforceability of the Notes, the Note Purchase Agreement or any otheragreement or any of the terms of any thereof, the continuance of any obligationon the part of the Issuer, any other Guarantor or any other Person on or inrespect of the Notes or under the Note Purchase Agreement or any otheragreement or the power or authority or the lack of power or authority of theIssuer to issue the Notes or the Company or the Issuer to execute and deliverthe Note Purchase Agreement or any other agreement or of any other Guarantor toexecute and deliver this Guaranty or to perform any of its obligationshereunder or the existence or continuance of the Company, the Issuer, any otherGuarantor or any other Person as a legal entity; or

 

(2)           any default, failure or delay,willful or otherwise, in the performance by the Company, the Issuer, any otherGuarantor or any other Person of any obligations of any kind or characterwhatsoever under the Notes, the Note Purchase Agreement, this Guaranty or anyother agreement; or

 

(3)           any creditors’ rights, bankruptcy,receivership or other insolvency proceeding of the Company, the Issuer, anyother Guarantor or any other Person or in respect of the property of theCompany, the Issuer, any other Guarantor or any other

 

90

----

 

Person or any merger, consolidation, reorganization,dissolution, liquidation, the sale of all or substantially all of the assets ofor winding up of the Company, the Issuer, any other Guarantor or any otherPerson; or

 

(4)           impossibility or illegality ofperformance on the part of the Company, the Issuer, any other Guarantor or anyother Person of its obligations under the Notes, the Note Purchase Agreement,this Guaranty or any other agreements; or

 

(5)           in respect of the Company, theIssuer, any other Guarantor or any other Person, any change of circumstances,whether or not foreseen or foreseeable, whether or not imputable to theCompany, the Issuer, any other Guarantor or any other Person, or otherimpossibility of performance through fire, explosion, accident, labor disturbance,floods, droughts, embargoes, wars (whether or not declared), civil commotion,acts of God or the public enemy, delays or failure of suppliers or carriers,inability to obtain materials, action of any federal or state regulatory bodyor agency, change of law or any other causes affecting performance, or anyother *forcemajeure*, whether or not beyond the control of the Company, theIssuer, any other Guarantor or any other Person and whether or not of the kindhereinbefore specified; or

 

(6)           any attachment, claim, demand,charge, Lien, order, process, encumbrance or any other happening or event orreason, similar or dissimilar to the foregoing, or any withholding ordiminution at the source, by reason of any taxes, assessments, expenses, Debt,obligations or liabilities of any character, foreseen or unforeseen, andwhether or not valid, incurred by or against the Company, the Issuer, anyGuarantor or any other Person or any claims, demands, charges or Liens of anynature, foreseen or unforeseen, incurred by any Person, or against any sumspayable in respect of the Notes or under the Note Purchase Agreement or thisGuaranty, so that such sums would be rendered inadequate or would beunavailable to make the payments herein provided; or

 

(7)           any order, judgment, decree, rulingor regulation (whether or not valid) of any court of any nation or of anypolitical subdivision thereof or any body, agency, department, official oradministrative or regulatory agency of any thereof or any other action,happening, event or reason whatsoever which shall delay, interfere with, hinderor prevent, or in any way adversely affect, the performance by the Company, theIssuer, any Guarantor or any other Person of its respective obligations underor in respect of the Notes, the Note Purchase Agreement, this Guaranty or anyother agreement; or

 

(8)           the failure of any Guarantor toreceive any benefit from or as a result of its execution, delivery andperformance of this Guaranty; or

 

(9)           any failure or lack of diligence incollection or protection, failure in presentment or demand for payment,protest, notice of protest, notice of default and of nonpayment, any failure togive notice to any Guarantor of failure of the Company, the Issuer, any otherGuarantor or any other Person to keep and perform any obligation, covenant oragreement under the terms of the Notes, the Note Purchase Agreement, thisGuaranty or any other agreement or failure to resort for payment to theCompany, the

 

91

----

 

Issuer, any other Guarantor or to any other Person orto any other guaranty or to any property, security, Liens or other rights orremedies; or

 

(10)         the acceptance of any additionalsecurity or other guaranty, the advance of additional money to the Company, theIssuer or any other Person, the renewal or extension of the Notes oramendments, modifications, consents or waivers with respect to the Notes, theNote Purchase Agreement or any other agreement, or the sale, release,substitution or exchange of any security for the Notes; or

 

(11)         any change in the ownership of anyshares of the Company, the Issuer, any Guarantor or any other Person; or

 

(12)         any defense whatsoever that:  (i) the Company, the Issuer or any otherPerson might have to the payment of the Notes (principal, LIBOR BreakageAmount, if any, or interest), other than payment thereof in Federal or otherimmediately available funds, or (ii) the Company, the Issuer or any otherPerson might have to the performance or observance of any of the provisions ofthe Notes, the Note Purchase Agreement or any other agreement, whether throughthe satisfaction or purported satisfaction by the Company, the Issuer, anyother Guarantor or any other Person of its debts due to any cause such asbankruptcy, insolvency, receivership, merger, consolidation, reorganization,dissolution, liquidation, winding-up or otherwise; or

 

(13)         any act or failure to act with regardto the Notes, the Note Purchase Agreement, this Guaranty or any other agreementor anything which might vary the risk of any Guarantor or any other Person; or

 

(14)         any other circumstance which mightotherwise constitute a defense available to, or a discharge of, any Guarantoror any other Person in respect of the obligations of any Guarantor or otherPerson under this Guaranty or any other agreement other than the final andindefeasible payment in full in cash of the Notes;

 

*provided*that the specific enumeration of the above-mentioned acts,failures or omissions shall not be deemed to exclude any other acts, failuresor omissions, though not specifically mentioned above, it being the purpose andintent of this Guaranty that the obligations of each Guarantor shall beabsolute, irrevocable and unconditional and shall not be discharged, impairedor varied except by the payment of the principal of, LIBOR Breakage Amount, ifany, and interest on the Notes in accordance with their respective termswhenever the same shall become due and payable as in the Notes provided and allother sums due and payable under the Note Purchase Agreement, at the placespecified in and all in the manner and with the effect provided in the Notesand the Note Purchase Agreement, as each may be amended or modified from timeto time.  Without limiting theforegoing, it is understood that repeated and successive demands may be madeand recoveries may be had hereunder as and when, from time to time, the Companyor the Issuer shall default under or in respect of the terms of the Notes orthe Note Purchase Agreement and that notwithstanding recovery hereunder for orin respect of any given default or defaults by the Company or the Issuer underthe Notes or the Note Purchase Agreement, this Guaranty shall remain in fullforce and effect and shall apply to each and every subsequent

 

92

----

 

default.

 

(d)   All rights of any Holder hereunder may betransferred or assigned at any time and shall be considered to be transferredor assigned at any time or from time to time upon the transfer of any Note whetherwith or without the consent of or notice to the Guarantors under this Guarantyor to the Company or the Issuer (except as provided in Section 14 of theNote Purchase Agreement).

 

(e)   To the extent of any payments made under thisGuaranty, each Guarantor shall be subrogated to the rights of the Holder uponwhose Notes such payment was made, but such Guarantor covenants and agrees thatsuch right of subrogation shall be subordinate in right of payment to the priorindefeasible final payment in cash in full of all amounts due and owing by theCompany and the Issuer with respect to the Notes and the Note PurchaseAgreement and by the Guarantors under this Guaranty, and the Guarantors shallnot take any action to enforce such right of subrogation, and the Guarantorsshall not accept any payment in respect of such right of subrogation, until allamounts due and owing by the Company and the Issuer under or in respect of theNotes and the Note Purchase Agreement and all amounts due and owing by theGuarantors hereunder have indefeasibly been finally paid in cash in full.  If any amount shall be paid to any Guarantorin violation of the preceding sentence at any time prior to the later of theindefeasible payment in cash in full of the Notes and all other amounts payableunder the Notes, the Note Purchase Agreement and this Guaranty, such amountshall be held in trust for the benefit of the Holders and shall forthwith bepaid to the Holders to be credited and applied to the amounts due or to becomedue with respect to the Notes and all other amounts payable under the NotePurchase Agreement and this Guaranty, whether matured or unmatured.  Each Guarantor acknowledges that it hasreceived direct and indirect benefits from the financing arrangementscontemplated by the Note Purchase Agreement and that the waiver set forth inthis paragraph (e) is knowingly made as a result of the receipt of suchbenefits.

 

(f)    Each Guarantor agrees that to the extent theCompany, the Issuer, any other Guarantor or any other Person makes any paymenton any Note, which payment or any part thereof is subsequently invalidated,voided, declared to be fraudulent or preferential, set aside, recovered,rescinded or is required to be retained by or repaid to a trustee, receiver, orany other Person under any bankruptcy code, common law, or equitable cause,then and to the extent of such payment, the obligation or the part thereofintended to be satisfied shall be revived and continued in full force andeffect with respect to the Guarantors’ obligations hereunder, as if saidpayment had not been made.  Theliability of the Guarantors hereunder shall not be reduced or discharged, inwhole or in part, by any payment to any Holder from any source that is thereafterpaid, returned or refunded in whole or in part by reason of the assertion of aclaim of any kind relating thereto, including, but not limited to, any claimfor breach of contract, breach of warranty, preference, illegality, invalidity,or fraud asserted by any account debtor or by any other Person.

 

(g)   No Holder shall be under any obligation:  (1) to marshall any assets in favor of theGuarantors or in payment of any or all of the liabilities of the Issuer or theCompany under or in respect of the Notes or the obligations of the Guarantorshereunder or (2) to pursue any other remedy that the Guarantors may or may notbe able to pursue themselves and that may lighten the

 

93

----

 

Guarantors’ burden, any right to which each Guarantor hereby expresslywaives.

 

(h)   The obligations of each Guarantor under thisGuaranty rank *pari passu* in right of payment with all other Debt of suchGuarantor which is not secured or which is not expressly subordinated in rightof payment to any other Debt of such Guarantor.

 

Section 5.               Representationsand Warranties of the Guarantors.

 

Each Guarantorrepresents and warrants to each Holder that:

 

(a)*  *Such Guarantor is a corporation orother legal entity duly organized, validly existing and in good standing underthe laws of its jurisdiction of organization, and is duly qualified as aforeign corporation or other legal entity and is in good standing in eachjurisdiction in which such qualification is required by law, other than thosejurisdictions as to which the failure to be so qualified or in good standingcould not, individually or in the aggregate, reasonably be expected to have amaterial adverse effect on (1) the ability of such Guarantor to performits obligations under this Guaranty, or (2) the validity or enforceabilityof this Guaranty (herein in this Section 5, a *“Material Adverse Effect”*).  Such Guarantor has the power and authorityto own or hold under lease the properties it purports to own or hold underlease, to transact the business it transacts, to execute and deliver thisGuaranty and to perform the provisions hereof.

 

(b)   This Guaranty has been dulyauthorized by all necessary corporate action on the part of such Guarantor, andthis Guaranty constitutes a legal, valid and binding obligation of such Guarantorenforceable against such Guarantor in accordance with its terms, except as suchenforceability may be limited by (1) applicable bankruptcy, insolvency,reorganization, moratorium, fraudulent transfer or conveyance or other similarlaws affecting the enforcement of creditors’ rights generally and(2) general principles of equity (regardless of whether suchenforceability is considered in a proceeding in equity or at law).

 

(c)**  **Theexecution, delivery and performance by such Guarantor of this Guaranty will not(1) contravene, result in any breach of, or constitute a default under, orresult in the creation of any Lien in respect of any property of such Guarantorunder its corporate charter or by-laws, or other equivalent formation orgoverning document, or except for contraventions, breaches or defaults whichcould not, individually or in the aggregate, reasonably be expected to have aMaterial Adverse Effect, under any indenture, mortgage, deed of trust, loan,purchase or credit agreement, lease, or any other agreement or instrument towhich such Guarantor or any of its subsidiaries is bound or by which suchGuarantor or any of its subsidiaries or any of their respective properties maybe bound or affected, (2) conflict with or result in a breach of any of theterms, conditions or provisions of any order, judgment, decree, or ruling ofany court, arbitrator or Governmental Authority applicable to such Guarantor or(3) violate any provision of any statute or other rule or regulationof any Governmental Authority applicable to such Guarantor.

 

(d)**  **Noconsent, approval or authorization of, or registration, filing or declarationwith, any Governmental Authority is required in connection with the execution,delivery or

 

94

----

 

performance by such Guarantor of this Guaranty.

 

(e)   Subject to the limitationset forth in Section 2(f) of this Guaranty, such Guarantor is solvent, hascapital not unreasonably small in relation to its business or any contemplatedor undertaken transaction and has assets having a value both at fair valuationand at present fair salable value greater than the amount required to pay itsliabilities (including contingent and unliquidated liabilities) as they becomedue and greater than the amount that will be required to pay its probableliability on its existing liabilities as they become absolute and matured.  Such Guarantor does not intend to incur, orbelieve that it will incur, debts beyond its ability to pay such debts as theybecome due.  Subject to the limitationset forth in Section 2(b) of this Guaranty, such Guarantor will not be renderedinsolvent by the execution and delivery of, and performance of its obligationsunder, this Guaranty.  Such Guarantordoes not intend to hinder, delay or defraud its creditors by or through theexecution and delivery of, or performance of its obligations under, thisGuaranty.

 

Section 6.               Amendments,Waivers, Consents and Termination.

 

(a)   This Guaranty may beamended, and the observance of any term hereof may be waived (eitherretroactively or prospectively), with (and only with) the written consent ofeach Guarantor and the Required Holders, except that (1) no amendment orwaiver of any of the provisions of Section 2, 3 or 4, or any defined term(as it is used therein), will be effective as to any Holder unless consented toby such Holder in writing, (2) no such amendment or waiver may, withoutthe written consent of each Holder, (i) change the percentage of theprincipal amount of the Notes the Holders of which are required to consent toany such amendment or waiver, or (ii) amend this Section 6, and(3) this Guaranty may be amended by the addition of additional Guarantorspursuant to a Guaranty Joinder.

 

(b)   The Guarantors will provideeach Holder (irrespective of the amount of Notes then owned by it) withsufficient information, sufficiently far in advance of the date a decision isrequired, to enable such Holder to make an informed decision with respect toany proposed amendment, waiver or consent in respect of any of the provisionshereof.  The Guarantors will deliverexecuted or true and correct copies of each amendment, waiver or consenteffected pursuant to the provisions of this Section 6 to each Holder promptlyfollowing the date on which it is executed and delivered by, or receives theconsent or approval of, the requisite Holders.

 

(c)   Each Guarantor agrees itwill not directly or indirectly pay or cause to be paid any remuneration,whether by way of fee or otherwise, or grant any security, to any Holder asconsideration for or as an inducement to the entering into by any Holder of anywaiver or amendment of any of the terms and provisions hereof unless suchremuneration is concurrently paid, or security is concurrently granted, on thesame terms, ratably to each Holder even if such Holder did not consent to suchwaiver or amendment.

 

(d)   Any amendment or waiverconsented to as provided in this Section 6 applies equally to all Holdersand is binding upon them and upon each future holder and upon the Guarantors.  No such amendment or waiver will extend toor affect any obligation, covenant or agreement not expressly amended or waivedor impair any right consequent thereon. No course

 

95

----

 

of dealing between the Guarantors and any Holder nor any delay inexercising any rights hereunder shall operate as a waiver of any rights of anyHolder.  As used herein, the term “thisGuaranty” and references thereto shall mean this Guaranty as it may from timeto time be amended or supplemented.

 

(e)   Subject to Section 4(f),this Guaranty shall automatically terminate and the Guarantors shall cease tohave any obligations hereunder when all amounts due by the Issuer in respect ofthe Notes have been paid in full in cash.

 

Section 7.               Notices.

 

All notices andcommunications provided for hereunder shall be in writing and sent (a) bytelefacsimile if the sender on the same day sends a confirming copy of suchnotice by a recognized overnight delivery service (charges prepaid), or(b) by a recognized overnight delivery service (with chargesprepaid).  Any such notice must be sent:

 

(1)           if to a Note Purchaser, to such NotePurchaser at the address specified for such communications on Schedule A to theNote Purchase Agreement, or at such other address as such Note Purchaser shallhave specified to any Guarantor or the Company in writing,

 

(2)           if to any other Holder, to suchHolder at such address as such Holder shall have specified to any Guarantor orthe Company in writing, or

 

(3)           if to a Guarantor, to such Guarantorc/o Jackson Hewitt Tax Service Inc., 7 Sylvan Way, Parsippany, New Jersey07054 to the attention of the Chief Financial Officer, or at such other addressas such Guarantor shall have specified to the Holders in writing.

 

Notices under this Section 7 will be deemed given only whenactually received (whether or not accepted).

 

Section 8.               Miscellaneous.

 

(a)   No remedy herein conferred upon or reservedto any Holder is intended to be exclusive of any other available remedy orremedies, but each and every such remedy shall be cumulative and shall be inaddition to every other remedy given under this Guaranty now or hereafterexisting at law or in equity.  No delayor omission to exercise any right or power accruing upon any default, omissionor failure of performance hereunder shall impair any such right or power orshall be construed to be a waiver thereof but any such right or power may beexercised from time to time and as often as may be deemed expedient.  In order to entitle any Holder to exerciseany remedy reserved to it under the Guaranty, it shall not be necessary forsuch Holder to physically produce its Note in any proceedings instituted by itor to give any notice, other than such notice as may be herein expressly required.

 

96

----

 

(b)   The Guarantors will pay all sums becoming dueunder this Guaranty by the method and at the address specified for such purposein the Note Purchase Agreement, or by such other reasonable method or at suchother address as any Holder shall have from time to time specified to theGuarantors in writing for such purpose, without the presentation or surrenderof this Guaranty or any Note.

 

(c)   Any provision of this Guaranty that isprohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,be ineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions hereof, and any such prohibition orunenforceability in any jurisdiction shall (to the full extent permitted bylaw) not invalidate or render unenforceable such provision in any otherjurisdiction.

 

(d)   If the whole or any part of this Guarantyshall be now or hereafter become unenforceable against any one or more of theGuarantors for any reason whatsoever or if it is not executed by any one ormore of the Guarantors, this Guaranty shall nevertheless be and remain fullybinding upon and enforceable against each other Guarantor as if it had beenmade and delivered only by such other Guarantors.

 

(e)   This Guaranty shall be binding upon eachGuarantor and its successors and assigns and shall inure to the benefit of eachHolder and its successors and assigns (including, without limitation, anysubsequent holder of a Note) whether so expressed or not, so long as its Notesremain outstanding and unpaid.

 

(f)    This Guaranty may be executed in any numberof counterparts, each of which shall be an original but all of which togethershall constitute one instrument.  Eachcounterpart may consist of a number of copies hereof, each signed by less thanall, but together signed by all, of the parties hereto.

 

(g)   This Guaranty shall beconstrued and enforced in accordance with, and the rights of the parties shallbe governed by the law of the State of New York.

 

In WitnessWhereof, each of the undersigned has caused this Guaranty to be duly executedby an authorized representative as of date first written above.

 

 
|   | Tax Services of America, Inc. |
|--------|-------------------------------|
|   |                          |
|   |                          |
|   | By:                           |
|   |                          | Name |
|   |                          | Title |

 

97

----

 
|   |          |
|--------|---------------|
|   | Hewfant, Inc. |
|   |          |
|   | By:           |
|   |          | Name: |
|   |          | Title: |

 

98

----

 

**GuarantyJoinder**

 

Re:    $175,000,000Floating Rate Senior Notesdue June 25, 2009

of

Jackson Hewitt Inc.

 

This GuarantyJoinder dated as of                        ,            (the or this*“GuarantyJoinder”*) is entered into [on a joint and several basis by each ofthe undersigned                        ,a            corporation [and                        ,a                         corporation] ([which parties are hereinafter referred to individually as] an *“AdditionalGuarantor”* [and collectively as the *“Additional Guarantors”*]).  Terms not otherwise defined herein shallhave the meaning set forth in the Note Purchase Agreement hereinafter referredto.

 

**Recitals**

 

A.            [Each]Additional Guarantor, is presently a direct or indirect Subsidiary of JacksonHewitt Tax Service Inc., a Delaware corporation (the *“Company”*).

 

B.            TheCompany and Jackson Hewitt Inc., a Virginia corporation (the *“Issuer”*)entered into the Note Purchase Agreement dated as of June 21, 2004 (asamended, restated, supplemented or otherwise modified from time to time, the *“NotePurchase Agreement”*) among the Company, the Issuer and each of theinstitutional investors named in Schedule A attached thereto (the *“NotePurchasers”*) providing for, among other things, the issue and saleby the Issuer to the Note Purchasers of the Issuer’s Floating Rate Senior Notesdue June 25, 2009 in the aggregate principal amount of $175,000,000 (the *“Notes”*).  The Note Purchasers, together with theirsuccessors and assigns, are hereinafter collectively referred to as the *“Holders”*.  Capitalized terms not defined herein shallhave the meaning ascribed to them in the Note Purchase Agreement.

 

C.            As a condition precedent to theirpurchase of the Notes, the Note Purchasers required that certain Subsidiariesof the Company enter into the Subsidiary Guaranty dated as of June 21, 2004(the “*Guaranty*”) as security forthe Notes.

 

Now, Therefore, asrequired by the Note Purchase Agreement and in consideration of the premisesand other good and valuable consideration, the receipt and sufficiency whereofare hereby acknowledged, [each/the] Additional Guarantor does hereby covenantand agree, [jointly and severally], as follows:

 

In accordance withthe requirements of the Guaranty, the Additional Guarantor[s] desire to amendthe definition of Guarantor (as the same may have been heretofore amended) setforth in the Guaranty attached hereto so that at all times from and after thedate hereof, the Additional Guarantor[s] shall be [jointly and severally]liable as set forth in the Guaranty for the obligations of the Company and theIssuer under the Note Purchase Agreement and Notes to the extent and

 

Exhibit A

(to Subsidiary Guarnaty)

 

99

----

 

in the manner set forth in the Guaranty.

 

The undersigned isthe duly elected                        of the Additional Guarantor[s] and is duly authorized to execute and deliverthis Guaranty Joinder for the benefit of all Holders of the Notes.  The execution by the undersigned of thisGuaranty Joinder shall evidence its consent to, and acknowledgment and approvalof, the terms set forth herein and in the Guaranty and by such execution theAdditional Guarantor[s] shall be deemed to have made the representations andwarranties set forth in Section 5 of the Guaranty in favor of the Holdersas of the date of this Guaranty Joinder].

 

Upon execution ofthis Guaranty Joinder, the Guaranty shall be deemed to be amended as set forthabove.  Except as amended herein, theterms and provisions of the Guaranty are hereby ratified, confirmed andapproved in all respects.

 

Any and allnotices, requests, certificates and other instruments (including the Notes) mayrefer to the Guaranty without making specific reference to this GuarantyJoinder, but nevertheless all such references shall be deemed to include thisGuaranty Joinder unless the context shall otherwise require.

 
|   | [Name of Additional Guarantor] |
|--------|--------------------------------|
|   |                           |
|   |                           |
|   | By                             |
|   |                           | Its |

 

100

----

 

The Purchasers Listed on Schedule A

to the Note Purchase Agreement

June    , 2004

 

**Form ofOpinion of Special Counsel**

**tothe Company and the Issuer**

 

DRAFT SUBJECT TO REVISIONBY OPINION COMMITTEE

 

**Exhibit 4.4(a)**

 

June 25, 2004

 

The Purchasers Listed on

Schedule A to the

Note Purchase Agreement referred to below

 

Re:    JacksonHewitt Inc. Floating Rate Senior Notes 

 

Ladies and Gentlemen:

 

We have acted as special counsel to Jackson Hewitt TaxService Inc., a Delaware corporation (the “Company”), in connection with theNote Purchase Agreement, dated June   ,2004 (the “Purchase Agreement”), by and among the Company, Jackson Hewitt Inc.,a Virginia corporation (the “Issuer”), and each of the Purchasers named inSchedule A thereto (the “Purchasers”), relating to the issuance and sale by theIssuer of $175 million aggregate principal amount of its Floating Rate SeniorNotes due 2009 (the “Securities”).

 

This opinion is being furnished pursuant to Section4.4(a) of the Purchase Agreement.

 

In rendering the opinions set forth herein, we haveexamined and relied on originals or copies of the following:

 

(a)                                  an executed copy of the PurchaseAgreement;

 

Exhibit 4.4(a)

(to  Note Purchase Agreement)

 

101

----

 

(b)                                 Amendment No. 6 to registrationstatement on Form S-1 (File No. 333-133593) of the Company, as filed with theSecurities and Exchange Commission on June 21, 2004 (the “RegistrationStatement”), a copy of which is included as an appendix to the supplement,dated June   , 2004, to the PrivatePlacement Memorandum (the “Private Placement Memorandum”) relating to theSecurities;

 

(c)                                  executed copies of the guaranteeagreements, dated June  , 2004,(collectively, the “Subsidiary Guaranties”) entered into by each of TaxServices of America, Inc., a Delaware corporation (“TSA”), and Hewfant, Inc.(“Hewfant”), a Virginia corporation (each, a “Subsidiary Guarantor”);

 

(d)                                 the executed certificates evidencingSecurities registered in the names of the Purchasers;

 

(e)                                  the Amended and Restated Certificateof Incorporation of the Company, as certified by the Secretary of State of theState of Delaware (the “Company Certificate of Incorporation”);

 

(f)                                    the By-Laws of the Company, ascertified by Steven L. Barnett, Secretary of the Company (the “CompanyBy-Laws”);

 

(g)                                 resolutions of the Board ofDirectors of the Company, adopted June , 2004, as certified by Steven L. Barnett, Secretary of the Company;

 

(h)                                 the certificate of Michael D.Lister, Chairman, Chief Executive Officer and President of the Company, andMark L. Heimbouch, Chief Financial Officer, dated the date hereof, a copy ofwhich is attached as Exhibit A hereto (the “Company’s Certificate”);

 

(i)                                     the certificate of Steven L.Barnett, Secretary of the Company, dated the date hereof , pursuant to Section4.3(b) of the Purchase Agreement;

 

(j)                                     copies of each of the ApplicableContracts (as defined below);

 

102

----

 

(k)                                  a certificate, dated June 8, 2004,and a facsimile bringdown thereof, dated June  , 2004, from the Secretary of State of the State of Delaware as to theCompany’s existence and good standing in such jurisdiction (collectively, the“Delaware Certificates”);

 

(l)                                     certificates from the publicofficials in the States listed on Schedule I hereto as to the status of theCompany in each such jurisdiction (the “State Certificates”);

 

(m)                               the Restated Certificate ofIncorporation of TSA, as certified by the Secretary of State of the State ofDelaware (the “TSA Certificate of Incorporation”);

 

(n)                                 the By-Laws of TSA, as certified bySteven L. Barnett, Secretary of TSA (“TSA By-Laws”);

 

(o)                                 a certificate, dated  June 14, 2004, and a facsimile bringdownthereof, dated June   , 2004, from theSecretary of State of the State of Delaware as to TSA’s existence and goodstanding in such jurisdiction (collectively, the “TSA Delaware Certificates”);and

 

(p)                                 a certificate of Steven L. Barnett,Secretary of TSA, dated the date hereof.

 

We have also examined originals or copies, certifiedor otherwise identified to our satisfaction, of such records of the Company andsuch agreements, certificates and receipts of public officials, certificates ofofficers or other representatives of the Company and others, and such otherdocuments as we have deemed necessary or appropriate as a basis for theopinions set forth below.

 

In our examination, we have assumed the legal capacityof all natural persons, the genuineness of all signatures, the authenticity ofall documents submitted to us as originals, the conformity to originaldocuments of all documents submitted to us as facsimile, electronic, certifiedor photostatic copies, and the authenticity of the originals of such copies. ** **In making our examination ofexecuted documents, we have assumed that the parties thereto, other than theCompany and TSA, had the power, corporate or other, to enter into and performall obligations

 

103

----

 

thereunder and have also assumed the due authorization by all requisiteaction, corporate or other, and the execution and delivery by such parties ofsuch documents and the validity and binding effect thereof on such parties.  We have also assumed that the Issuer andHewfant have been duly organized and are validly existing in good standingunder the laws of the Commonwealth of Virginia and that the Issuer and Hewfanthave complied with all aspects of the laws of the Commonwealth of Virginia inconnection with the transactions contemplated by the Purchase Agreement.  As to any facts material to the opinionsexpressed herein that we did not independently establish or verify, we haverelied upon statements and representations of officers and otherrepresentatives of the Company and others and of public officials, includingthe facts set forth in the Company’s Certificate.

 

As used herein, (i) “Applicable Contracts” means thoseagreements and instruments identified in Schedule II hereto; (ii) “ApplicableLaws” means the General Corporation Law of the State of Delaware (the “DGCL”)and those laws, rules and regulations of the State of New York and the federallaws, rules and regulations of the United States of America, in each case that,in our experience, are normally applicable to transactions of the typecontemplated by the Purchase Agreement (other than the United States federalsecurities laws, state securities or blue sky laws, antifraud laws and therules and regulations of the National Association of Securities Dealers, Inc.),but without our having made any special investigation as to the applicabilityof any specific law, rule or regulation; (iii) “Governmental Authorities” meansany court, regulatory body, administrative agency or governmental body of theState of Delaware, the State of New York or the United States of America havingjurisdiction over the Company, the Issuer and the Subsidiary Guarantors underApplicable Laws; (iv) “Governmental Approval” means any consent, approval, license,authorization or validation of, or filing, qualification or registration with,any Governmental Authority required to be made or obtained by the Company, theIssuer and the Subsidiary Guarantors pursuant to Applicable Laws, other thanany consent, approval, license, authorization, validation, filing,qualification or registration that may have become applicable as a result ofthe involvement of any party (other than the Company, the Issuer and theSubsidiary Guarantors) in the transactions contemplated by the PurchaseAgreement or because of such parties’ legal or regulatory status or because ofany other facts specifically pertaining to such parties; and (v) “ApplicableOrders” means those judgments,

 

104

----

 

orders or decrees of Governmental Authorities identified on ScheduleIII hereto (no such judgments, orders or decrees have been so identified).  The Purchase Agreement, the Securities andthe Subsidiary Guaranties are referred to herein collectively as the“Transaction Documents.”

 

The opinions set forth below are subject to thefollowing further qualifications, assumptions and limitations:

 

(a)           theopinion set forth in paragraph 1 below with respect to the valid existence andgood standing of the Company is based solely upon the Delaware Certificates;

 

(b)           theopinion set forth in paragraph 2 below with respect to the status of theCompany in the jurisdictions listed in Schedule I hereto is based solely uponthe State Certificates;

 

(c)           we do notexpress any opinion as to the effect on the opinions expressed herein of (i)the compliance or noncompliance of any party to each of the TransactionDocuments (other than with respect to the Company, the Issuer and theSubsidiary Guarantors to the extent necessary to render the opinions set forthherein) with any state, federal or other laws or regulations applicable to itor them or (ii) the legal or regulatory status or the nature of the business ofany party (other than with respect to the Company, the Issuer and theSubsidiary Guarantors to the extent necessary to render the opinions set forthherein);

 

(d)           theopinion set forth in paragraph 9 below is based solely on our discussions withthe officers or other representatives of the Company responsible for thematters discussed therein, our review of documents furnished to us by theCompany and our reliance on the representations and warranties of the Companycontained in the Purchase Agreement and the Company’s Certificate; we have notmade any other inquiries or investigations or any search of the public docketrecords of any court, governmental agency or body or administrative agency;

 

(e)           theopinion set forth in paragraph 3 below is based solely upon the TSA DelawareCertificates;

 

(f)            inrendering the opinion set forth in paragraph 4 below, we have relied solely

 

105

----

 

on the stock record books of TSA in determining the number of issuedand outstanding shares of common stock of TSA and have assumed that the considerationrecited in the resolutions of the Board of Directors of TSA approving theissuance of all such shares has been received in full by TSA;

 

(g)           we notethat certain of the Applicable Contracts are governed by laws other than theApplicable Laws; our opinions expressed herein are based solely upon ourunderstanding of the plain language of such agreement or instrument, and we donot express any such opinion with respect to the validity, binding nature orenforceability of any such agreement or instrument, and we do not assume anyresponsibility with respect to the effect on the opinions or statement setforth herein of any interpretation thereof inconsistent with suchunderstanding;

 

(h)           we haveassumed that the execution and delivery by the Company, the Issuer and theSubsidiary Guarantors of each of the Transaction Documents to which they are aparty and the performance by the Company, the Issuer and the SubsidiaryGuarantors of their respective obligations thereunder do not and will notviolate, conflict with or constitute a default under (i) any agreement orinstrument to which the Company, the Issuer, the Subsidiary Guarantors or anyof their properties is subject (except that we do not make the assumption setforth in this clause (i) with respect to the Company Certificate ofIncorporation, the Company By-Laws, the TSA Certificate of Incorporation, theTSA By-Laws or the Applicable Contracts), (ii) any law, rule, or regulation towhich the Company, the Issuer, the Subsidiary Guarantors or any of theirproperties is subject (except that we do not make the assumption set forth inthis clause (ii) with respect to the DGCL and those laws, rules and regulationsof the State of New York and the federal laws, rules and regulations of theUnited States of America, in each case, that, in our experience, are normallyapplicable to the transactions of the type contemplated by the PurchaseAgreement, but without our having made any special investigation as to theapplicability of any specific law, rule or regulation), (iii) any judicial orregulatory order or decree of any Governmental Authority (except that we do notmake the assumption set forth in this clause (iii) with respect to ApplicableOrders) or (iv) any consent, approval, license, authorization or validation of,or filing, recording or registration with any Governmental Authority (exceptthat we do not make the assumption set forth in this clause (iv) to the extentset forth in our opinion in paragraph 12 below);

 

106

----

 

(i)            thevalidity or enforcement of any agreements or instruments may be limited byapplicable bankruptcy, insolvency, reorganization, moratorium or other similarlaws affecting creditors’ rights generally and by general principles of equity(regardless of whether enforceability is considered in a proceeding of equityor at law);

 

(j)            we do notexpress any opinion as to the applicability or effect of any fraudulenttransfer, preference or similar law on the Transaction Documents or any transactioncontemplated thereby;

 

(k)           to theextent any opinion relates to the enforceability of the choice of New York lawprovision of the Transaction Documents, our opinion is rendered in reliance onN.Y. Gen. Oblig. Law §§ 5-1401, 5-1402 (McKinney 2001) and N.Y. C.P.L.R. 327(b)(McKinney 2001) and is subject to the qualification that such enforceabilitymay be limited by public policy considerations of any jurisdiction, other thanthe courts of the State of New York, in which enforcement of such provisions,or of a judgment upon an agreement containing such provisions, is sought;

 

(l)            we do notexpress any opinion with respect to the enforceability of the TransactionDocuments to the extent they provide for interest on interest;

 

(m)          in the caseof the Subsidiary Guaranties, certain of the provisions, including waivers,with respect to the Subsidiary Guaranties, are or may be unenforceable in wholeor in part, but the inclusion of such provisions does not affect the validityof the Subsidiary Guaranties, taken as a whole;

 

(n)           we expressno opinion as to the enforceability of Section 11 of the Purchase Agreement tothe extent that the same provides that the obligations of the Company underSection 11 are absolute and unconditional irrespective of the value, genuineness,regularity or enforceability of the Securities; and

 

(o)           we haveassumed that none of the Purchasers of the Securities are a “creditor” asdefined in Regulation T of the Board of Governors of the Federal ReserveSystem.

 

We do not express any opinion as to any laws otherthan Applicable

 

107

----

 

Laws and the federal laws of the United States of America to the extentreferred to specifically herein. ** **Insofaras the opinions expressed herein relate to matters governed by laws other thanthose set forth in the preceding sentence, we have assumed, without having madeany independent investigation, that such laws do not affect any of the opinionsset forth herein.  The opinionsexpressed herein are based on laws in effect on the date hereof, which laws aresubject to change with possible retroactive effect.

 

Based upon the foregoing and subject to thelimitations, qualifications, exceptions and assumptions set forth herein, weare of the opinion that:

 

1.                                       TheCompany has been duly incorporated and is validly existing in good standingunder the laws of the State of Delaware and has the corporate power andcorporate authority to execute and deliver the Purchase Agreement and toconsummate the transactions contemplated thereby and to own, lease and operateits properties and conduct its business, in each case as described in theRegistration Statement.

 

2.                                       TheCompany has the status set forth in Schedule I hereto set forth opposite thejurisdictions listed in Schedule I hereto.

 

3.                                       TSAhas been duly incorporated and is validly existing in good standing under thelaws of the State of Delaware.

 

4.                                       The3,301 shares of TSA’s common stock shown by TSA’s stock record books as beingissued and outstanding and held of record by the Issuer immediately prior tothe date hereof have been duly authorized and have been validly issued and arefully paid and nonassessable.

 

5.                                       ThePurchase Agreement has been duly authorized, executed and delivered by theCompany and is a valid and binding agreement of the Company, enforceableagainst the Company in accordance with its terms.

 

6.                                       ThePurchase Agreement is a valid and binding agreement of the Issuer, enforceableagainst the Issuer in accordance with its terms.

 

108

----

 

7.                                       Whenissued and delivered by the Issuer against payment therefor in accordance withthe terms of the Purchase Agreement, the Securities will constitute valid andbinding obligations of the Issuer, enforceable against the Issuer in accordancewith their terms.

 

8.                                       TheSubsidiary Guaranty of TSA has been duly authorized, executed and delivered byTSA and, when the Securities are issued and delivered against payment thereforin accordance with the terms of the Purchase Agreement, each SubsidiaryGuaranty will be a valid and binding agreement of each Subsidiary Guarantor,enforceable against each Subsidiary Guarantor in accordance with its terms.

 

9.                                       Toour knowledge, there are no legal or governmental proceedings pending to whichthe Company is a party or to which any property of the Company is subject thatwould have been required to be disclosed pursuant to Item 103 of Regulation S-Kof the General Rules and Regulations under the Securities Act of 1933 (the“Securities Act”) that are not so disclosed in the Registration Statement as ofits date, except that we do not express any opinion in this paragraph 9 withrespect to legal or governmental proceedings relating to regulatory matters ofthe type referred to in the Registration Statement under the captions entitled“Risk Factors—States have increasingly taken an active role in regulatingrefund anticipation loans and the continuation of such trend could impede ourability to facilitate the sale of these loans and reduce our profitability,”“Risk Factors—Our failure to comply with legal and regulatory requirements,particularly those applicable to the facilitation of tax refund relatedfinancial products, could result in substantial sanctions against us whichwould harm our profitability and reputation” and “Business—BusinessDescription—Regulation.”

 

10.                                 Theexecution and delivery by the Company of the Purchase Agreement and theconsummation by the Company of the transactions contemplated thereby will not(i) conflict with or result in any breach of any provisions of or constitute adefault under or result in the creation or imposition of any Lien (as definedin the Purchase Agreement) upon any of the property of the Company pursuant tothe Company Certificate of Incorporation, the Company By-Laws or any

 

109

----

 

Applicable Contract or (ii) violate or conflict with,or result in any contravention of, any Applicable Law or any ApplicableOrder.  We do not express any opinion,however, as to whether the execution, delivery or performance by the Company ofthe Purchase Agreement and the consummation of any of the transactionscontemplated thereby will constitute a violation of, or a default under, anycovenant, restriction or provision with respect to financial ratios or tests orany aspect of the financial condition or results of operations of the Companyor any of its subsidiaries.

 

11.                                 Theexecution and delivery by the Issuer of the Purchase Agreement and theSecurities and the consummation by the Issuer of the transactions contemplatedthereby will not constitute a violation of, or a breach or default under, theterms of any Applicable Contract.  We donot express any opinion, however, as to whether the execution, delivery orperformance by the Issuer of the Purchase Agreement and the consummation of anyof the transactions contemplated thereby will constitute a violation of, or adefault under, any covenant, restriction or provision with respect to financialratios or tests or any aspect of the financial condition or results ofoperations of the Issuer or any of its subsidiaries.

 

12.                                 NoGovernmental Approval, which has not been obtained or taken and is not in fullforce and effect, is required to authorize, or is required as a condition to,the execution or delivery of each of the Transaction Documents by the Company,the Issuer and the Subsidiary Guarantors or the consummation by the Company,the Issuer or the Subsidiary Guarantors of the transactions contemplatedthereby, including the sale and issuance of the Securities by the Issuer.

 

13.                                 Theexecution and delivery by the Company and the Issuer of the Purchase Agreementand the execution and delivery by the Issuer of the Securities and theconsummation by the Company and the Issuer of the transactions contemplatedthereby, will not contravene Regulations T, U or X of the Board of Governors ofthe Federal Reserve System.

 

14.                                 TheCompany and the Issuer are not and, solely after giving effect to the offeringand

 

110

----

 

sale of the Securities and the application of theproceeds thereof as described in the Private Placement Memorandum andRegistration Statement, will not be an “investment company,” as such term isdefined in the Investment Company Act of 1940.

 

This letter is furnished only to each of thePurchasers and is solely for the Purchasers’ benefit in connection with theclosing under the Purchase Agreement occurring today pursuant to the PurchaseAgreement.  Without our prior writtenconsent, this letter may not be used, circulated, quoted or otherwise referredto for any other purpose or relied upon by, or assigned to, any other personfor any purpose, including any other person that acquires Securities or thatseeks to assert the Purchasers’ rights in respect of this letter (other thanthe Purchasers’ successor in interest by means of merger, consolidation,transfer of a business or other similar transaction); provided, however,that any Qualified Institutional Buyer, as that term is defined in Rule 144Aunder the Securities Act (“QIB”), that purchases Securities from any of thePurchasers (or any such QIB) from time to time may rely on this opinion subjectto all assumptions, qualifications, limitations and exceptions stated herein, asif addressed to such person and dated as of the date hereof, it beingunderstood that we do not express any opinion as to any such sales to a QIB andthat we do not assume any obligation to update or otherwise confirm thisopinion following the sale of the Securities to the Purchasers on the datehereof for any reason or to opine on the effect of any such sales, and providedfurther that this opinion may be furnished to any governmental authorityhaving jurisdiction over the Purchasers to the extent required by applicablelaw or regulation, to the National Association of Insurance Commissioners ofthe United States and rating agencies.

 

 
|   | Very truly yours, |
|--------|-------------------|

 

111

----

 

**Schedule I**

**Foreign Qualification**

 

 
| **Jurisdiction** |   | **Certificate**                                                                                              |   | **Status** |
|------------------|--------|--------------------------------------------------------------------------------------------------------------|--------|------------|
| New York         |   | Certificate, dated June    ,  2004, of the Secretary of State of the State of New York   |   |       |
| New Jersey       |   | Certificate, dated June    ,  2004, of the Secretary of State of the State of New Jersey |   |       |

 

Exhibit 4.4(a)

(to Note PurchaseAgreement)

 

112

----

 

**Schedule II**

**Applicable Contracts**

 

1.               TransitionalAgreement by and among Jackson Hewitt Tax Service Inc., Cendant Corporation andCendant Operations, Inc., dated     ,2004.

 

2.               EmploymentAgreement between Jackson Hewitt Tax Service Inc. and Michael D. Lister,dated       , 2004.

 

3.               EmploymentAgreement between Jackson Hewitt Tax Service Inc. and Mark L. Heimbouch,dated       , 2004.

 

4.               CreditAgreement by and among Jackson Hewitt Tax Service Inc., as Parent, JacksonHewitt Inc., as Borrower, the Lenders named therein and JPMorgan Chase Bank, asAdministrative Agent, dated       ,2004.

 

5.               UnderwritingAgreement by and among Jackson Hewitt Tax Service Inc., Cendant Finance HoldingCorporation and Goldman, Sachs & Co. and J.P. Morgan Securities Inc. asrepresentatives of the underwriters, dated       , 2004.

 

6.               JacksonHewitt Tax Service Inc. 2004 Equity and Incentive Plan.

 

7.               JacksonHewitt Tax Service Inc. Employee Stock Purchase Plan.

 

8.               LetterAgreement for Steven L. Barnett.

 

9.               LetterAgreement for Richard P. Enchura.

 

10.         LetterAgreement for Perb B. Fortner.

 

11.         LetterAgreement for William A. Scavone.

 

12.         LetterAgreement for Jeanmarie Cooney.

 

13.         JacksonHewitt Tax Service Inc. Non-Employee Directors Deferred Compensation Plan.

 

14.         RefundAnticipation Loan Program Agreement between Jackson Hewitt Inc. and SantaBarbara Bank & Trust, dated May 5, 2004.

 

15.         Amendedand Restated Program Agreement between Jackson Hewitt Inc., Household TaxMasters Inc. and Beneficial Franchise Company Inc., dated as of January 1,2003.

 

----

 

16.         LeasingOperations Supplier Agreement (Products and/or Services) between Jackson HewittInc. and Wal-Mart Stores, Inc., dated April 8, 2004.

 

17.         Formof Franchise Agreement.

 

18.         Formof Settlement Agreement between Jackson Hewitt Inc. and the Settling Plaintiff.

 

19.         Formof Settlement Agreement between Jackson Hewitt Inc. and the SettlingFranchisee.

 

----

 

**Schedule III**

**Applicable Orders**

 

None.

 

----

 

The Purchasers Listed on Schedule A

to the Note Purchase Agreement

June    , 2004

 

**Form of Opinion of Special Counsel**

**to theIssuer**

 

**Exhibit 4.4(b)**

 

June   , 2004

 

The Purchasers Listed on

Schedule A to the

Note Purchase Agreement referred to below

 

Re:    Jackson Hewitt, Inc. Floating Rate SeniorNotes 

 

Ladies and Gentlemen:

 

We have acted as special Virginia counsel to JacksonHewitt, Inc., a Virginia corporation (“JHI”), and Hewfant, Inc., a Virginiacorporation (“HFI”) and a wholly owned subsidiary of Jackson Hewitt TaxServices, Inc. (“JHTS”), in connection with the Note Purchase Agreement, datedJune   , 2004 (the “PurchaseAgreement”), by and among JHI, JHTS and each of the Purchasers named inSchedule A thereto (the “Purchasers”), relating to the sale by JHI of $175million aggregate principal amount of its Floating Rate Senior Notes due 2009(the “Securities”).

 

This opinion is being furnished pursuant to Section4.4(b) of the Purchase Agreement.

 

In rendering the opinions set forth herein, we have examinedand relied on originals or copies of the following:

 

(a)                                  an executed copy of the PurchaseAgreement;

 

(b)                                 Amendment No. 5 to registrationstatement on Form S-1 (File No. 333-133593) of JHTS**,** as filed with theSecurities and Exchange

 

Exhibit 4.4(b)

(to Note PurchaseAgreement)

 

116

----

 

Commission on June   ,2004 (the “Registration Statement”), a copy of which is included as an appendixto the supplement, dated June   , 2004,to the Private Placement Memorandum relating to the Securities;

 

(c)                                  an executed copy of the guaranteeagreement, dated June  , 2004, (the “HFISubsidiary Guaranty”) entered into by HFI;

 

(d)                                 the executed certificates evidencingSecurities registered in the names of the Purchasers;

 

(e)                                  resolutions of the Board ofDirectors of JHI, adopted June  , 2004and resolutions of the Board of Directors of HFI, adopted June  , 2004, in each case as certified by therespective Secretary of JHI or HFI;

 

(f)                                    thecertificate of                                   ,President of JHI, and                                   ,Chief Financial Officer of JHI, dated the date hereof, a copy of which isattached as Exhibit A hereto (the “JHI Certificate”);

 

(g)                                 thecertificate of                                   ,President of HFI, and                                   ,Chief Financial Officer of HFI, dated the date hereof, a copy of which isattached as Exhibit B hereto (the “HFI Certificate”);

 

(h)           certificatesfrom the public officials in the States listed on Schedule I hereto as to thestatus of JHI in each such jurisdiction (the “JHI State Certificates”);

 

(i)            certificatesfrom the public officials in the States listed on Schedule II hereto as to thestatus of HFI in each such jurisdiction (the “HFI State Certificates,” andtogether with the JHI State Certificates, the “State Certificates”);

 

(j)            theAmended and Restated Certificate of Incorporation of JHI, as certified by theSecretary of State of the Commonwealth of Virginia (the “JHI Certificate ofIncorporation”);

 

(k)           theAmended and Restated Certificate of Incorporation of HFI, as certified by theSecretary of State of the Commonwealth of Virginia (the “HFI Certificate ofIncorporation”);

 

117

----

 

(l)            theBy-Laws of JHI, as certified by[                     ],Secretary of JHI (“JHI By-Laws”);

 

(m)          the By-Lawsof HFI, as certified by[                     ],Secretary of HFI (“HFI By-Laws”);

 

(n)           acertificate, dated                     2004 from the Secretary of State of the Commonwealth of Virginia as to JHI’sexistence and good standing in such jurisdiction (the “JHI VirginiaCertificate”) and a certificate, dated                      2004 from the Secretary of State of the Commonwealth of Virginia as to HFI’sexistence and good standing in such jurisdiction (the “HFI VirginiaCertificate,” and together with the JHI Virginia Certificate, the “VirginiaCertificates”);

 

(o)           acertificate of                     ,Secretary of JHI, dated the date hereof; and a certificate of                     ,Secretary of HFI, dated the date hereof; and

 

(p)           theunaudited financial statements of JHI as of                       ,2004, as certified in the JHI Certificate by                              ,President of JHI, and                             ,Chief Financial Officer of JHI (the “JHI Financial Statements”).

 

We have also examined originals or copies, certifiedor otherwise identified to our satisfaction, of such records of JHI and HFI andsuch agreements, certificates and receipts of public officials, certificates ofofficers or other representatives of JHI and HFI and others, and such otherdocuments as we have deemed necessary or appropriate as a basis for theopinions set forth below.

 

In our examination, we have assumed the legal capacityof all natural persons, the genuineness of all signatures (other than  signatures of officers of JHI and HFI to theTransaction Documents), the authenticity of all documents submitted to us asoriginals, the conformity to original documents of all documents submitted tous as facsimile, electronic, certified or photostatic copies, and theauthenticity of the originals of such copies. ** **Inmaking our examination of executed documents, we have assumed that the partiesthereto, other than JHI and HFI, had the power, corporate or other, to enterinto and perform all obligations thereunder and have also assumed the dueauthorization by all requisite action, corporate or other, and the

 

118

----

 

execution and delivery by such parties of such documents and thevalidity and binding effect thereof on such parties.  We have also assumed that the other guarantors of the Securities,JHTS and Tax Services of America, Inc., a Delaware corporation (“TSA”), (i)have been duly organized and are validly existing in good standing under thelaws of the State of Delaware, (ii) have complied with all aspects of the lawsof the State of Delaware, and (iii) have the corporate power and authority toexecute their respective guaranties of the Securities and any other documentsin connection with the transactions contemplated by the PurchaseAgreement.  As to any facts material tothe opinions expressed herein that we did not independently establish orverify, we have relied upon statements and representations of officers andother representatives of JHI, HFI, JHTS and others and of public officials,including the facts set forth in the JHI Certificate and the HFI Certificate.

 

As used herein, (i) “Applicable Laws” means the lawsof the Commonwealth of Virginia that, in our experience, are normallyapplicable to transactions of the type contemplated by the Purchase Agreement(other than state securities or blue sky laws and antifraud laws), but withoutour having made any special investigation as to the applicability of anyspecific law, rule or regulation; (ii) “Governmental Authorities” means anycourt, regulatory body, administrative agency or governmental body of theCommonwealth of Virginia having jurisdiction over JHI and HFI under theApplicable Laws; (iii) “Governmental Approval” means any consent, approval,license, authorization or validation of, or filing, qualification orregistration with, any Governmental Authority required to be made or obtainedby JHI and HFI pursuant to the Applicable Laws, other than any consent,approval, license, authorization, validation, filing, qualification orregistration that may have become applicable as a result of the involvement ofany party (other than JHI and HFI) in the transactions contemplated by thePurchase Agreement or because of such parties’ legal or regulatory status orbecause of any other facts specifically pertaining to such parties; and (iv)“Applicable Orders” means those judgments, orders or decrees of GovernmentalAuthorities identified on Schedule II hereto (no such judgments, orders ordecrees have been so identified).  ThePurchase Agreement, the Securities, and the HFI Subsidiary Guaranty are referredto herein collectively as the “Transaction Documents.”

 

The opinions set forth below are subject to thefollowing further qualifications, assumptions and limitations:

 

119

----

 

(a)                                  the opinion set forth in paragraph 1below with respect to the valid existence and good standing of JHI and HFI isbased solely upon the Virginia Certificates;

 

(b)                                 the opinion set forth in paragraph 2below with respect to the status of JHI and HFI in the jurisdictions listed inSchedules I and II, respectively, is based solely upon the State Certificates;

 

(c)                                  we do not express any opinion as tothe effect on the opinions expressed herein of (i) the compliance ornoncompliance of any party to each of the Transaction Documents (other thanwith respect to JHI and HFI to the extent necessary to render the opinions setforth herein) with any state, federal or other laws or regulations applicableto it or them or (ii) the legal or regulatory status or the nature of thebusiness of any party (other than with respect to JHI and HFI to the extentnecessary to render the opinions set forth herein);

 

(d)                                 in rendering the opinion set forthin paragraph 3 below, we have relied solely on an officer’s certificate fromofficers of JHI and HFI, respectively with respect to the number of issued andoutstanding shares of common stock of JHI and HFI, respectively, and haveassumed that the consideration recited in such certificates, has been receivedin full by JHI and HFI, respectively;

 

(e)                                  we have assumed that the executionand delivery by JHI of the Purchase Agreement and HFI of the SubsidiaryGuaranty and the performance by them of their respective obligations thereunderdo not and will not violate, conflict with or constitute a default under (i)any agreement or instrument to which JHI and HFI or any of their properties issubject (except that we do not make the assumption set forth in this clause (i)with respect to the JHI and HFI Certificates of Incorporation or the JHI andHFI  By-Laws), (ii) any law, rule, orregulation to which JHI and HFI or any of their properties is subject (exceptthat we do not make the assumption set forth in this clause (ii) with respectto Applicable Laws, but (except as set forth in our opinion in Paragraph 7)without our having made any special investigation as to the applicability ofany specific law, rule or regulation), (iii) any judicial or regulatory orderor decree of any Governmental Authority (except that we do not make theassumption set forth in this clause (iii) with respect to Applicable Orders) or(iv) any consent, approval, license, authorization or validation of, or filing,recording or registration with any Governmental Authority (except that we donot make the assumption set forth in this clause (iv) to the extent set forthin our opinion in

 

120

----

 

paragraph 5 below);

 

(f)            inrendering the opinion in Paragraph 7 below, we have relied, without anyindependent investigation, on the JHI Financial Statements and, based solelyupon the officer’s certificate signed by the CFO of JHI accompanying the JHIFinancial Statements, we have assumed and relied upon the accuracy of allmatters reflected therein;  our opinionin Paragraph 7 below also assumes that the dividend referenced therein iseither the only dividend being paid by JHI to JHTS, or in the situation ofmultiple dividends being paid, the dividend referenced in Paragraph 7 is paidfirst to JHTS and prior to the authorization of any other dividend paid by JHIto JHTS, and we express no opinion with respect to such additional andsubsequent dividends;

 

(g)           our opinion in Paragraph 8 is limitedto state regulatory matters or state governmental proceedings of the typereferred to in the Registration Statement under the captions entitled “RiskFactors — States have increasingly taken an active role in regulating refundanticipation loans and the continuation of such trend could impede our abilityto facilitate the sale of these loans and reduce our profitability,”  “Risk Factors - Our failure to comply withlegal and regulatory requirements, particularly those applicable to thefacilitation of tax refund related financial products, could result insubstantial sanctions against us which would harm our profitability andreputation,” and “Business - Business Description - Regulation”; and

 

Insofar as the opinions expressed herein relate tomatters governed by laws other than those set forth in the preceding sentence,we have assumed, without having made any independent investigation, that suchlaws do not affect any of the opinions set forth herein.  The opinions expressed herein are based onlaws in effect on the date hereof, which laws are subject to change withpossible retroactive effect.

 

Based upon the foregoing and subject to thelimitations, qualifications, exceptions and assumptions set forth herein, weare of the opinion that:

 

1.                                       Eachof JHI and HFI has been duly incorporated and is validly existing in goodstanding under the laws of the Commonwealth of Virginia and has the corporatepower and corporate authority to execute and deliver the Purchase Agreement, inthe case of JHI, and the HFI Subsidiary Guaranty, in the case

 

121

----

 

of HFI, and to consummate the transactionscontemplated thereby and to own, lease and operate its respective propertiesand conduct their respective businesses, in each case as described in theRegistration Statement.

 

2.                                       JHIhas the status set forth in Schedule I hereto set forth opposite thejurisdictions listed in Schedule I hereto.

 

3.                                       The[       ] shares of JHI’s common stock shownby JHI’s stock record books as being issued and outstanding and held of recordby JHTS immediately prior to the date hereof have been duly authorized and havebeen validly issued and are fully paid and nonassessable. The[       ] shares of HFI’s common stock shownby HFI’s stock record books as being issued and outstanding and held of recordby JHTS immediately prior to the date hereof have been duly authorized and havebeen validly issued and are fully paid and nonassessable.

 

4.                                       ThePurchase Agreement has been duly authorized, executed and delivered byJHI.  The HFI Subsidiary Guaranty hasbeen duly authorized, executed and delivered by HFI.

 

5.                                       Theexecution and delivery by JHI of the Purchase Agreement and HFI of the HFISubsidiary Guaranty will not (i) conflict with or result in any breach of anyprovisions of or constitute a default under****JHI or HFI pursuant to the JHI and HFICertificates of Incorporation or the JHI and HFI By-Laws, or (ii) violate orconflict with, or result in any contravention of, any Applicable Law or anyApplicable Order.  We do not express anyopinion, however, as to whether the execution, delivery or performance by JHIof the Purchase Agreement and HFI of the HFI Subsidiary Guaranty willconstitute a violation of, or a default under, any covenant, restriction orprovision with respect to financial ratios or tests or any aspect of thefinancial condition or results of operations of JHI or HFI.

 

6.                                       NoGovernmental Approval, which has not been obtained or taken and is not in fullforce and effect, is required to authorize, or is required as a condition to,the execution or delivery by JHI of the Purchase Agreement or HFI of the HFISubsidiary Guaranty.

 

7.                                       Thepayment by JHI of a dividend to JHTS in the amount of $175,000,000 in cash hasbeen duly authorized by the Board of Directors of JHI and will not

 

122

----

 

violate any provision of Applicable Law.

 

8.                                       To our knowledge, there are no regulatory mattersor governmental proceedings pending to which JHI is a party or to which anyproperty of the JHI is subject that would have been required to be disclosedpursuant to Item 103 of Regulation S-K of the General Rules and Regulationsunder the Securities Act of 1933 that are not so disclosed in the RegistrationStatement as of its date.

 

This letter is furnished only to each of thePurchasers and is solely for the Purchasers’ benefit in connection with theclosing under the Purchase Agreement occurring today pursuant to the PurchaseAgreement.  Without our prior writtenconsent, this letter may not be used, circulated, quoted or otherwise referredto for any other purpose or relied upon by, or assigned to, any other personfor any purpose, including any other person that acquires Securities or thatseeks to assert the Purchasers’ rights in respect of this letter (other thanthe Purchasers’ successor in interest by means of merger, consolidation,transfer of a business or other similar transaction); provided, however,that any Qualified Institutional Buyer, as that term is defined in Rule 144Aunder the Securities Act (“QIB”), that purchases Securities from any of thePurchasers (or any such QIB) from time to time may rely on this opinion subjectto all assumptions, qualifications, limitations and exceptions stated herein,as if addressed to such person and dated as of the date hereof, it beingunderstood that we do not express any opinion as to any such sales to a QIB andthat we do not assume any obligation to update or otherwise confirm thisopinion following the sale of the Securities to the Purchasers on the datehereof for any reason or to opine on the effect of any such sales, and providedfurther that this opinion may be furnished to any governmental authorityhaving jurisdiction over the Purchasers to the extent required by applicablelaw or regulation, to the National Association of Insurance Commissioners ofthe United States and rating agencies.

 
|   | Very truly yours, |
|--------|-------------------|

 

123

----

 

**Schedule I**

**Foreign Qualification of JHI**

 
| **Jurisdiction** |   | **Certificate** |   | **Status** |
|------------------|--------|-----------------|--------|------------|
| Texas            |   |            |   |       |
| Illinois         |   |            |   |       |
| Florida          |   |            |   |       |
| New York         |   |            |   |       |
| Maryland         |   |            |   |       |

 

124

----

 

**Schedule II**

**Applicable Orders**

 

None.

 

125

----

 

**Form of Opinion of Special****Counsel**

**to thePurchasers**

 

June 25, 2004

 

To the Purchasers named on

  Schedule I attached hereto

 
| Re:    | $175,000,000  Floating Rate Senior Notes due June 25, 2009 |   |
|--------|-----------------------------------------------------------------|--------|
|   | of                                                              |   |
|   | Jackson  Hewitt Inc.                                            |   |

 

Ladies and Gentlemen:

 

We have acted asyour special counsel in connection with your separate purchases on the datehereof of $175,000,000 aggregate principal amount of the Floating Rate SeniorNotes due June 25, 2009, (the *“Notes”*) of Jackson Hewitt Inc., aVirginia corporation (the *“Issuer”*), issued under and pursuant tothe Note Purchase Agreement dated as of June 21, 2004 (the *“Note Purchase Agreement”*),among Jackson Hewitt Tax Service Inc., a Delaware corporation, (the *“Company”*),the Issuer and each of you.  Terms usedand not otherwise defined herein shall have the respective meanings set forthin the Note Purchase Agreement.

 

In thatconnection, we have examined the following:

 

(a)           The Note Purchase Agreement;

 

(b)           The Subsidiary Guaranty;

 

(c)           A copy of the Amended and RestatedCertificate of Incorporation of the Issuer and all amendments thereto certifiedby the State Corporate Commission of the Commonwealth of Virginia and theCertificate of the State Corporate Commission of the Commonwealth of Virginiaevidencing that the Issuer is in good standing in such Commonwealth (the *“GoodStanding Certificate”*);

 

(d)           A copy of the By-laws of the Issuer,as amended to the date hereof, and a copy of the resolutions adopted by theBoard of Directors of the Issuer with respect to the authorization of the NotePurchase Agreement, the issuance, sale and delivery of the

 

Exhibit 4.4(c)

(to Note PurchaseAgreement)

 

126

----

 

Notes and related matters, each as certified by theSecretary of the Issuer;

 

(e)           A copy of the Certificate ofIncorporation of the Company and all amendments thereto certified by theSecretary of the State of Delaware and the Certificate of the Secretary of Stateof the State of Delaware evidencing that the Company is in good standing insuch state (the *“Company Good Standing Certificate”*);

 

(f)            A copy of the By-laws of theCompany, as amended to the date hereof, and a copy of the resolutions adoptedby the Board of Directors of the Company with respect to the authorization ofthe Note Purchase Agreement and related matters, each as certified by theSecretary of the Company;

 

(g)           A copy of the Certificate ofIncorporation of Tax Services of America, Inc., a Delaware corporation, and acopy of the Amended and Restated Certificate of Incorporation of Hewfant, Inc.,a Virginia corporation, each a party to the Subsidiary Guaranty, (the *“SubsidiaryGuarantors”*) and all amendments thereto certified by the Secretaryof State, or the equivalent thereof, for the respective Subsidiary Guarantorand the Certificates of the Secretary of State of the State, or the equivalentthereof, evidencing that the Subsidiary Guarantors are in good standing intheir respective jurisdictions (the *“Subsidiary Guarantors Good Standing Certificates”*);

 

(h)           A copy of the By-laws of eachSubsidiary Guarantor as amended to the date hereof, and a copy of theresolutions adopted by the Board of Directors of each Subsidiary Guarantor withrespect to the authorization of the Subsidiary Guaranty and related matters,each as certified by the Secretary of the Subsidiary Guarantors;

 

(i)            The opinion of Skadden, Arps, Slate,Meagher & Flom LLP, special counsel for the Company and the Issuer, datedthe date hereof and delivered responsive to Section 4.4(a) of the NotePurchase Agreement;

 

(j)            The opinion of Piper Rudnick, LLP,special counsel to the Company and the Issuer, dated the date hereof anddelivered responsive to Section 4.4(b) of the Note Purchase Agreement;

 

(k)           The Notes delivered on the datehereof;

 

(l)            Such certificates of officers of theCompany, the Issuer and of public officials as we have deemed necessary to givethe opinions hereinafter expressed; and

 

(m)          Such other documents and matters oflaw as we have deemed necessary to give the opinions hereinafter expressed.

 

127

----

 

We believe that the opinions referred to in clauses (i) and (j) aboveare satisfactory in scope and form and that you are justified in relyingthereon.  Our opinion as to mattersreferred to in paragraph 1 below is based solely upon an examination ofthe Articles of Incorporation of the Issuer, the Good Standing Certificate andthe general business corporation law of the Commonwealth of Virginia.  Our opinion as to matters referred to inparagraph 2 below is based solely upon an examination of the Certificateof Incorporation of the Company, the Company Good Standing Certificate and thegeneral business corporation law of the State of Delaware.  Our opinion as to matters referred to inparagraph 3 below is based solely upon an examination of the Certificateof Incorporation, or the equivalent thereof, of each Subsidiary Guarantor, eachSubsidiary Guarantor Good Standing Certificate and the general businesscorporation law of the State of Delaware and the Commonwealth of Virginia.  We have also relied, as to certain factualmatters, upon appropriate certificates of public officials and officers of theIssuer, the Company and the Subsidiary Guarantors and upon representations ofthe Company, the Issuer and you delivered in connection with the issuance andsale of the Notes.

 

Based upon theforegoing, we are of the opinion that:

 

1.             The Issuer is a corporation, validly existing and ingood standing under the laws of the Commonwealth of Virginia and has thecorporate power and the corporate authority to execute and deliver the NotePurchase Agreement and to issue the Notes.

 

2.             The Company is a corporation, validly existing and ingood standing under the laws of the State of Delaware and has the corporatepower and the corporate authority to execute and deliver the Note PurchaseAgreement.

 

3.             Tax Services of America, Inc., is a corporation, validlyexisting and in good standing under the laws of the State of Delaware andHewfant, Inc., is a corporation validly existing and in good standing under thelaws of the Commonwealth of Virginia,****and each, as Subsidiary Guarantor, has thecorporate power and the corporate authority to execute and deliver theSubsidiary Guaranty Agreement.

 

4.             The Note Purchase Agreement has been duly authorized byall necessary corporate action on the part of the Issuer and the Company, hasbeen duly executed and delivered by the Issuer and the Company and constitutesthe legal, valid and binding contract of both the Issuer and the Companyenforceable in accordance with its terms, subject to bankruptcy, insolvency,fraudulent conveyance and similar laws affecting creditors’ rights generally,and general principles of equity (regardless of whether the application of suchprinciples is considered in a proceeding in equity or at law).

 

5.             The Subsidiary Guaranty has been duly authorized by allnecessary

 

128

----

 

corporate action on the part of each SubsidiaryGuarantor, has been duly executed and delivered by each Subsidiary Guarantorand constitutes the legal, valid and binding contract of each SubsidiaryGuarantor enforceable in accordance with its terms, subject to bankruptcy,insolvency, fraudulent conveyance and similar laws affecting creditors’ rightsgenerally, and general principles of equity (regardless of whether theapplication of such principles is considered in a proceeding in equity or atlaw).

 

6.             The Notes have been duly authorized by all necessarycorporate action on the part of the Issuer, and the Notes being delivered onthe date hereof have been duly executed and delivered by the Issuer andconstitute the legal, valid and binding obligations of the Issuer enforceablein accordance with their terms, subject to bankruptcy, insolvency, fraudulentconveyance and similar laws affecting creditors’ rights generally, and generalprinciples of equity (regardless of whether the application of such principlesis considered in a proceeding in equity or at law).

 

Our opinion islimited to the laws of the State of New York, the general business corporationlaw of the State of Delaware and the Commonwealth of Virginia and the Federallaws of the United States and we express no opinion on the laws of any otherjurisdiction.  This opinion may berelied upon by the successors and assigns of the Purchasers, includingsubsequent transferees of the Notes.

 
|            | Respectfully submitted, |
|-----------------|-------------------------|
|            |
|            |
| JRFisher:SLeist |

 

129

----

 

**ScheduleI**

 

SunAmerica Life Insurance Company

c/o AIG Global Investment Group

Houston, Texas

 

Monumental Life Insurance Company

c/o AEGON USA Investment Management, LLC

Cedar Rapids, Iowa

 

ING USA Annuity and Life Insurance Company

c/o ING Investment Management LLC

Atlanta, Georgia

 

ING Life Insurance and Annuity Company

c/o ING Investment Management LLC

Atlanta, Georgia

 

Connecticut General Life Insurance Company

c/o CIGNA Retirement & Investment Services

Hartford, Connecticut

 

Principal Life Insurance Company

c/o Principal Global Investors, LLC

Des Moines, Iowa

 

The Travelers Insurance Company

Hartford, Connecticut

 

----