**Exhibit 4.2**

 

 

 

**RIGHTS AGREEMENT**

 

**dated as of**

**June 24, 2004**

 

**between**

 

**Jackson Hewitt Tax Service Inc.**

 

**and**

 

**The Bank of New York**

**Rights Agent**

 

 

 

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**TABLE OF CONTENTS**

 
| Section 1.  | Certain Definitions                                                                                                             |   |
|------------------|---------------------------------------------------------------------------------------------------------------------------------|--------|
|             |                                                                                                                            |   |
| Section 2.  | Appointment of Rights  Agent                                                                                                    |   |
|             |                                                                                                                            |   |
| Section 3.  | Issuance of Rights  Certificates                                                                                                |   |
|             |                                                                                                                            |   |
| Section 4.  | Form of Rights  Certificates                                                                                                    |   |
|             |                                                                                                                            |   |
| Section 5.  | Countersignature and  Registration                                                                                              |   |
|             |                                                                                                                            |   |
| Section 6.  | Transfer, Split-Up,  Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost  or Stolen Rights Certificates |   |
|             |                                                                                                                            |   |
| Section 7.  | Exercise of Rights;  Purchase Price; Expiration Date of Rights                                                                  |   |
|             |                                                                                                                            |   |
| Section 8.  | Cancellation and  Destruction of Rights Certificates                                                                            |   |
|             |                                                                                                                            |   |
| Section 9.  | Reservation and  Availability of Capital Stock                                                                                  |   |
|             |                                                                                                                            |   |
| Section 10. | Preferred Stock  Record Date                                                                                                    |   |
|             |                                                                                                                            |   |
| Section 11. | Adjustment of  Purchase Price, Number and Kind of Shares or Number of Rights                                                    |   |
|             |                                                                                                                            |   |
| Section 12. | Certificate of  Adjusted Purchase Price or Number of Shares                                                                     |   |
|             |                                                                                                                            |   |
| Section 13. | Consolidation, Merger  or Sale or Transfer of Assets Cash Flow or Earning Power                                                 |   |
|             |                                                                                                                            |   |
| Section 14. | Fractional Rights and  Fractional Shares                                                                                        |   |
|             |                                                                                                                            |   |
| Section 15. | Rights of Action                                                                                                                |   |
|             |                                                                                                                            |   |
| Section 16. | Agreement of Rights  Holders                                                                                                    |   |
|             |                                                                                                                            |   |
| Section 17. | Rights Certificate  Holder Not Deemed a Stockholder                                                                             |   |
|             |                                                                                                                            |   |
| Section 18. | Concerning the Rights  Agent                                                                                                    |   |
|             |                                                                                                                            |   |
| Section 19. | Merger or  Consolidation or Change of Name of Rights Agent                                                                      |   |
|             |                                                                                                                            |   |
| Section 20. | Duties of Rights  Agent                                                                                                         |   |
|             |                                                                                                                            |   |
| Section 21. | Change of Rights  Agent                                                                                                         |   |
|             |                                                                                                                            |   |
| Section 22. | Issuance of New  Rights Certificates                                                                                            |   |
|             |                                                                                                                            |   |
| Section 23. | Redemption and  Termination                                                                                                     |   |
|             |                                                                                                                            |   |
| Section 24. | Exchange                                                                                                                        |   |
|             |                                                                                                                            |   |
| Section 25. | Notice of Certain  Events                                                                                                       |   |
|             |                                                                                                                            |   |
| Section 26. | Notices                                                                                                                         |   |
|             |                                                                                                                            |   |
| Section 27. | Supplements and  Amendments                                                                                                     |   |
|             |                                                                                                                            |   |
| Section 28. | Successors                                                                                                                      |   |

 

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| Section 29. | Determinations and  Actions by the Board of Directors, etc. |   |
|------------------|-------------------------------------------------------------|--------|
|             |                                                        |   |
| Section 30. | Benefits of this  Agreement                                 |   |
|             |                                                        |   |
| Section 31. | Severability                                                |   |
|             |                                                        |   |
| Section 32. | Governing Law                                               |   |
|             |                                                        |   |
| Section 33. | Counterparts                                                |   |
|             |                                                        |   |
| Section 34. | Descriptive Headings                                        |   |

 

EXHIBITS

 
| Exhibit A | Form of Certificate of  Designation, Preferences and Rights |
|-----------|-------------------------------------------------------------|
|      |                                                        |
| Exhibit B | Form of Rights Certificate                                  |
|      |                                                        |
| Exhibit C | Form of Summary of Rights                                   |

 

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RIGHTS AGREEMENT

 

RIGHTSAGREEMENT, dated as of June 24, 2004 (the “Agreement”), betweenJackson Hewitt Tax Service Inc., a Delaware corporation (the “Company”),and The Bank of New York, a New York banking corporation (the “Rights Agent”).

 

WITNESSETH

 

WHEREAS,on June 21, 2004 (the “Rights Dividend Declaration Date”), theBoard of Directors of the Company authorized and declared a dividenddistribution of one Right (as hereinafter defined) for each share of commonstock, par value $0.01 per share, of the Company (the “Common Stock”)outstanding at the consummation of the Company’s initial public offering ofCommon Stock (the “Record Date”), and has authorized the issuance of oneRight (as such number may hereinafter be adjusted pursuant to the provisions ofSection 11(p) hereof) for each share of Common Stock of the Company issuedbetween the Record Date (whether originally issued or delivered from theCompany’s treasury) and the Distribution Date (as hereinafter defined), eachRight initially representing the right to purchase one one-thousandth of ashare of Series A Junior Participating Preferred Stock of the Company (the “PreferredStock”) having the rights, powers and preferences set forth in the form ofCertificate of Designation, Preferences and Rights attached hereto as ExhibitA, upon the terms and subject to the conditions hereinafter set forth (the “Rights”);

 

NOW,THEREFORE, in consideration of the premises and the mutual agreements hereinset forth, the parties hereby agree as follows:

 

Section 1.                         Certain Definitions.  For purposes of this Agreement, thefollowing terms have the meanings indicated:

 

(a)                                  “AcquiringPerson” shall mean any Person who or which, together with all Affiliatesand Associates of such Person, shall be the Beneficial Owner of 15% or more ofthe shares of Common Stock then outstanding, but shall not include (i) theCompany, (ii) any Subsidiary of the Company, (iii) any employee benefit plan ofthe Company, or of any Subsidiary of the Company, or any Person or entityorganized, appointed or established by the Company for or pursuant to the termsof any such plan, or (iv) any Person who becomes the Beneficial Owner offifteen percent (15%) or more of the shares of Common Stock then outstanding asa result of a reduction in the number of shares of Common Stock outstanding dueto the repurchase of shares of Common Stock by the Company unless and untilsuch Person, after becoming aware that such Person has become the BeneficialOwner of fifteen percent (15%) or more of the then outstanding shares of CommonStock, acquires beneficial ownership of additional shares of Common Stockrepresenting one percent (1%) or more of the shares of Common Stock then outstanding,or (v) any such Person who has reported or is required to report such ownership(but less than 20%) on Schedule 13G under the Exchange Act (or anycomparable or successor report) or on Schedule 13D under the Exchange Act(or any comparable or successor report) which Schedule 13D does not stateany intention to or reserve the right to control or influence the management orpolicies of the Company or

 

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engage in any of the actions specified inItem 4 of such schedule (other than the disposition of the Common Stock)and, within 10 Business Days of being requested by the Company to advise itregarding the same, certifies to the Company that such Person acquired sharesof Common Stock in excess of 14.9% inadvertently or without knowledge of theterms of the Rights and who or which, together with all Affiliates andAssociates, thereafter does not acquire additional shares of Common Stock whilethe Beneficial Owner of 15% or more of the shares of Common Stock thenoutstanding; provided, however, that if the Person requested toso certify fails to do so within 10 Business Days, then such Person shallbecome an Acquiring Person immediately after such 10-Business-Day period.

 

(b)                                 “Act” shallmean the Securities Act of 1933, as amended.

 

(c)                                  “AdjustmentShares” shall have the meaning set forth in Section 11(a)(ii) hereof.

 

(d)                                 “Affiliate”and “Associate” shall have the respective meanings ascribed to suchterms in Rule 12b-2 of the General Rules and Regulations under the ExchangeAct.

 

(e)                                  A Person shall bedeemed the “Beneficial Owner” of, and shall be deemed to “beneficiallyown,” any securities:

 

(i)                                     which such Personor any of such Person’s Affiliates or Associates, directly or indirectly, hasthe right to acquire (whether such right is exercisable immediately or onlyafter the passage of time) pursuant to any agreement, arrangement orunderstanding (whether or not in writing) or upon the exercise of conversionrights, exchange rights, other rights, warrants or options, or otherwise; provided,however, that a Person shall not be deemed the “Beneficial Owner” of, orto “beneficially own,” (A) securities tendered pursuant to a tender or exchangeoffer made by such Person or any of such Person’s Affiliates or Associatesuntil such tendered securities are accepted for purchase or exchange, (B)securities issuable upon exercise of Rights at any time prior to the occurrenceof a Triggering Event (as hereinafter defined), or (C) securities issuable uponexercise of Rights from and after the occurrence of a Triggering Event whichRights were acquired by such Person or any of such Person’s Affiliates orAssociates prior to the Distribution Date (as hereinafter defined) or pursuantto Section 3(a) or Section 22 hereof (the “Original Rights”)or pursuant to Section 11(i) hereof in connection with an adjustment madewith respect to any Original Rights;

 

(ii)                                  which such Personor any of such Person’s Affiliates or Associates, directly or indirectly, hasthe right to vote or dispose of or has “beneficial ownership” of (as determinedpursuant to Rule 13d-3 of the General Rules and Regulations under the ExchangeAct), including pursuant to any agreement, arrangement or understanding,whether or not in writing; provided, however, that a Person shallnot be deemed the “Beneficial Owner” of, or to

 

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“beneficiallyown,” any security under this subparagraph (ii) as a result of an agreement,arrangement or understanding to vote such security if such agreement,arrangement or understanding:  (A)arises solely from a revocable proxy given in response to a public proxy orconsent solicitation made pursuant to, and in accordance with, the applicableprovisions of the General Rules and Regulations under the Exchange Act, and (B)is not reportable by such Person on Schedule 13D under the Exchange Act(or any comparable or successor report); or

 

(iii)                               which arebeneficially owned, directly or indirectly, by any other Person (or anyAffiliate or Associate thereof) with which such Person (or any of such Person’sAffiliates or Associates) has any agreement, arrangement or understanding(whether or not in writing), for the purpose of acquiring, holding, voting(except pursuant to a revocable proxy as described in the proviso tosubparagraph (ii) of this paragraph (d)) or disposing of any voting securitiesof the Company; provided, however, that nothing in this paragraph(d) shall cause a Person engaged in business as an underwriter of securities tobe the “Beneficial Owner” of, or to “beneficially own,” any securities acquiredthrough such Person’s participation in good faith in a firm commitmentunderwriting until the expiration of forty days after the date of suchacquisition, and then only if such securities continue to be owned by suchPerson at such expiration of forty days.

 

(f)                                    “Business Day”shall mean any day other than a Saturday, Sunday or a day on which bankinginstitutions in the State of New York are authorized or obligated by law orexecutive order to close.

 

(g)                                 “Close ofbusiness” on any given date shall mean 5:00 P.M., New York City time, onsuch date; provided, however, that if such date is not a BusinessDay, it shall mean 5:00 P.M., New York City time, on the next succeedingBusiness Day.

 

(h)                                 “Common Stock”shall mean the common stock, par value $0.01 per share, of the Company, exceptthat “Common Stock” when used with reference to any Person other than theCompany shall mean the capital stock of such Person with the greatest votingpower, or the equity securities or other equity interest having power tocontrol or direct the management, of such Person.

 

(i)                                     “Common StockEquivalents” shall have the meaning set forth in Section 11(a)(iii)hereof.

 

(j)                                     “Current MarketPrice” shall have the meaning set forth in Section 11(d)(i) hereof.

 

(k)                                  “Current Value”shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(l)                                     “DistributionDate” shall have the meaning set forth in Section 3(a) hereof.

 

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(m)                               “EquivalentPreferred Stock” shall have the meaning set forth in Section 11(b)hereof.

 

(n)                                 “Exchange Act”shall mean the Securities Exchange Act of 1934, as amended.

 

(o)                                 “Exchange Ratio”shall have the meaning set forth in Section 24(a) hereof.

 

(p)                                 “ExpirationDate” shall have the meaning set forth in Section 7(a) hereof.

 

(q)                                 “FinalExpiration Date” shall have the meaning set forth in Section 7(a)hereof.

 

(r)                                    “Person”shall mean any individual, firm, corporation, partnership, limited liabilitycompany, limited liability partnership, trust, syndicate or other entity andincludes, without limitation, an unincorporated group of persons who, by formalor informal agreement or arrangement (whether or not in writing), have embarkedon a common purpose or act.

 

(s)                                  “PreferredStock” shall mean shares of Series A Junior Participating Preferred Stock,par value $0.01 per share, of the Company, and, to the extent that there arenot a sufficient number of shares of Series A Junior Participating PreferredStock authorized to permit the full exercise of the Rights, any other series ofpreferred stock of the Company designated for such purpose containing termssubstantially similar to the terms of the Series A Junior ParticipatingPreferred Stock.

 

(t)                                    “PrincipalParty” shall have the meaning set forth in Section 13(b) hereof.

 

(u)                                 “Purchase Price”shall have the meaning set forth in Section 4(a) hereof.

 

(v)                                 “Record Date”shall have the meaning set forth in the preamble of this Agreement.

 

(w)                               “Rights”shall have the meaning set forth in the preamble of this Agreement.

 

(x)                                   “Rights Agent”shall have the meaning set forth in the preamble of this Agreement.

 

(y)                                 “RightsCertificates” shall have the meaning set forth in Section 3(a) hereof.

 

(z)                                   “RightsDividend Declaration Date” shall have the meaning set forth in the preambleof this Agreement.

 

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(aa)                            “Section 11(a)(ii)Event” shall mean any event described in Section 11(a)(ii) hereof.

 

(bb)                          “Section 13Event” shall mean any event described in clauses (x), (y) or (z) ofSection 13(a) hereof.

 

(cc)                            “Spread”shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(dd)                          “StockAcquisition Date” shall mean the first date of public announcement (which,for purposes of this definition, shall include, without limitation, a reportfiled or amended pursuant to Section 13(d) under the Exchange Act) by theCompany or an Acquiring Person that an Acquiring Person has become such.

 

(ee)                            “Subsidiary”shall mean, with reference to any Person, any corporation of which an amount ofvoting securities sufficient to elect at least a majority of the directors ofsuch corporation is beneficially owned, directly or indirectly, by such Person,or otherwise controlled by such Person.

 

(ff)                                “SubstitutionPeriod” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(gg)                          “Summary ofRights” shall have the meaning set forth in Section 3(b) hereof.

 

(hh)                          “Trading Day”shall have the meaning set forth in Section 11(d)(i) hereof.

 

(ii)                                  “TriggeringEvent” shall mean any Section 11(a)(ii) Event or any Section 13Event.

 

Section 2.                         Appointment ofRights Agent.  The Company hereby appointsthe Rights Agent to act as agent for the Company and the holders of the Rights(who, in accordance with Section 3 hereof, shall prior to the DistributionDate also be the holders of the Common Stock) in accordance with the terms andconditions hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint suchco-rights agents as it may deem necessary or desirable.

 

Section 3.                         Issuance of RightsCertificates.

 

(a)                                  Until the earlierof (i) the close of business on the tenth Business Day after the StockAcquisition Date (or, if the tenth Business Day after the Stock AcquisitionDate occurs before the Record Date, the close of business on the Record Date),or (ii) the close of business on the tenth Business Day (or such later date asthe Board shall determine) after the date that a tender or exchange offer byany Person (other than the Company, any Subsidiary of the Company, any employeebenefit plan of the Company or of any Subsidiary of the Company, or any Personor entity organized, appointed or established by the Company for or pursuant tothe terms of any such plan) is

 

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first published or sent or given within themeaning of Rule 14d-2(a) of the General Rules and Regulations under theExchange Act, if upon consummation thereof, such Person would become anAcquiring Person (the earlier of (i) and (ii) being herein referred to as the “DistributionDate”), (x) the Rights will be evidenced (subject to the provisions ofparagraph (b) of this Section 3) by the certificates for the Common Stockregistered in the names of the holders of the Common Stock (which certificatesfor Common Stock shall be deemed also to be certificates for Rights) and not byseparate certificates, and (y) the Rights will be transferable only inconnection with the transfer of the underlying shares of Common Stock(including a transfer to the Company). As soon as practicable after the Distribution Date, the Rights Agentwill send by first-class, insured, postage-prepaid mail, to each record holderof the Common Stock as of the close of business on the Distribution Date, atthe address of such holder shown on the records of the Company, one or morerights certificates, in substantially the form of Exhibit B hereto (the “RightsCertificates”), evidencing one Right for each share of Common Stock soheld, subject to adjustment as provided herein.  In the event that an adjustment in the number of Rights per shareof Common Stock has been made pursuant to Section 11(p) hereof, at thetime of distribution of the Rights Certificates, the Company shall make thenecessary and appropriate rounding adjustments (in accordance withSection 14(a) hereof) so that Rights Certificates representing only wholenumbers of Rights are distributed and cash is paid in lieu of any fractionalRights.  As of and after theDistribution Date, the Rights will be evidenced solely by such RightsCertificates.

 

(b)                                 The Company willmake available, as promptly as practicable following the Record Date, a copy ofa Summary of Rights, in substantially the form attached hereto as Exhibit C(the “Summary of Rights”) to any holder of Rights who may so requestfrom time to time prior to the Expiration Date. With respect to certificatesfor the Common Stock outstanding as of the Record Date, or issued subsequent tothe Record Date, unless and until the Distribution Date shall occur, the Rightswill be evidenced by such certificates for the Common Stock and the registeredholders of the Common Stock shall also be the registered holders of theassociated Rights.  Until the earlier ofthe Distribution Date or the Expiration Date (as such term is defined inSection 7(a) hereof), the transfer of any certificates representing sharesof Common Stock in respect of which Rights have been issued shall alsoconstitute the transfer of the Rights associated with such shares of CommonStock.

 

(c)                                  Rights shall beissued in respect of all shares of Common Stock which are issued (whetheroriginally issued or from the Company’s treasury) after the Record Date butprior to the earlier of the Distribution Date or the Expiration Date.  Certificates representing such shares ofCommon Stock shall also be deemed to be certificates for Rights, and shall bearthe following legend:

 

Thiscertificate also evidences and entitles the holder hereof to certain Rights asset forth in the Rights Agreement between Jackson Hewitt Tax Service Inc. (the“Company”) and the Rights Agent thereunder (the “Rights Agent”) dated as ofJune 24, 2004 (the “Rights Agreement”), the terms of which are herebyincorporated herein by reference and a copy of which is on file at

 

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theprincipal offices of the Company.  Undercertain circumstances, as set forth in the Rights Agreement, such Rights willbe evidenced by separate certificates and will no longer be evidenced by thiscertificate.  The Company will mail tothe holder of this certificate a copy of the Rights Agreement, as in effect onthe date of mailing,  without charge,promptly after receipt of a written request therefor.  Under certain circumstances set forth in the Rights Agreement,Rights issued to, or held by, any Person who is, was or becomes an AcquiringPerson or any Affiliate or Associate thereof (as such terms are defined in theRights Agreement), whether currently held by or on behalf of such Person or byany subsequent holder, may become null and void.

 

Withrespect to such certificates containing the foregoing legend, until the earlierof (i) the Distribution Date or (ii) the Expiration Date, the Rights associatedwith the Common Stock represented by such certificates shall be evidenced bysuch certificates alone and registered holders of Common Stock shall also bethe registered holders of the associated Rights, and the transfer of any ofsuch certificates shall also constitute the transfer of the Rights associatedwith the Common Stock represented by such certificates.

 

Section 4.                         Form of RightsCertificates.

 

(a)                                  The RightsCertificates (and the forms of election to purchase and of assignment to beprinted on the reverse thereof) shall each be substantially in the form setforth in Exhibit B hereto and may have such marks of identification ordesignation and such legends, summaries or endorsements printed thereon as theCompany may deem appropriate and as are not inconsistent with the provisions ofthis Agreement, or as may be required to comply with any applicable law or withany rule or regulation made pursuant thereto or with any rule or regulation ofany stock exchange on which the Rights may from time to time be listed, or toconform to usage.  Subject to theprovisions of Section 11 and Section 22 hereof, the RightsCertificates, whenever distributed, shall be dated as of the Record Date and ontheir face shall entitle the holders thereof to purchase such number of oneone-thousandths of a share of Preferred Stock as shall be set forth therein atthe price set forth therein (such exercise price per one one-thousandth of ashare, the “Purchase Price”), but the amount and type of securitiespurchasable upon the exercise of each Right and the Purchase Price thereofshall be subject to adjustment as provided herein.

 

(b)                                 Any RightsCertificate issued pursuant to Section 3(a), Section 11(i) orSection 22 hereof that represents Rights beneficially owned by:  (i) an Acquiring Person or any Associate orAffiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (orof any such Associate or Affiliate) who becomes a transferee after theAcquiring Person becomes such, or (iii) a transferee of an Acquiring Person (orof any such Associate or Affiliate) who becomes a transferee prior to orconcurrently with the Acquiring Person becoming such and receives such Rightspursuant to either (A) a transfer (whether or not for consideration) from theAcquiring Person to holders of equity interests in such Acquiring Person or toany Person with whom such Acquiring Person

 

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has any continuing agreement, arrangement orunderstanding regarding the transferred Rights or (B) a transfer which theBoard of Directors of the Company has determined is part of a plan, arrangementor understanding which has as a primary purpose or effect the avoidance ofSection 7(e) hereof, and any Rights Certificate issued pursuant toSection 6 or Section 11 hereof upon transfer, exchange, replacementor adjustment of any other Rights Certificate referred to in this sentence,shall contain (to the extent feasible) the following legend:

 

TheRights represented by this Rights Certificate are or were beneficially owned bya Person who was or became an Acquiring Person or an Affiliate or Associate ofan Acquiring Person (as such terms are defined in the Rights Agreement).  Accordingly, this Rights Certificate and theRights represented hereby may become null and void in the circumstancesspecified in Section 7(e) of the Rights Agreement.

 

Section 5.                         Countersignatureand Registration.

 

(a)                                  The RightsCertificates shall be executed on behalf of the Company by its Chairman of theBoard, its President or any Vice President, either manually or by facsimilesignature, and shall have affixed thereto the Company’s seal or a facsimilethereof which shall be attested by the Secretary or an Assistant Secretary ofthe Company, either manually or by facsimile signature.  The Rights Certificates shall becountersigned by the Rights Agent, either manually or by facsimile signatureand shall not be valid for any purpose unless so countersigned.  In case any officer of the Company who shallhave signed any of the Rights Certificates shall cease to be such officer ofthe Company before countersignature by the Rights Agent and issuance anddelivery by the Company, such Rights Certificates, nevertheless, may becountersigned by the Rights Agent and issued and delivered by the Company withthe same force and effect as though the person who signed such RightsCertificates had not ceased to be such officer of the Company; and any RightsCertificates may be signed on behalf of the Company by any person who, at theactual date of the execution of such Rights Certificate, shall be a proper officerof the Company to sign such Rights Certificate, although at the date of theexecution of this Rights Agreement any such person was not such an officer.

 

(b)                                 Following theDistribution Date, the Rights Agent will keep, or cause to be kept, at its principaloffice or offices designated as the appropriate place for surrender of RightsCertificates upon exercise or transfer, books for registration and transfer ofthe Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holdersof the Rights Certificates, the number of Rights evidenced on its face by eachof the Rights Certificates and the date of each of the Rights Certificates.

 

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Section 6.                         Transfer, Split-Up,Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost orStolen Rights Certificates.

 

(a)                                  Subject to theprovisions of Section 4(b), Section 7(e) and Section 14 hereof,at any time after the close of business on the Distribution Date, and at orprior to the close of business on the Expiration Date, any Rights Certificateor Certificates (other than Rights Certificates representing Rights that mayhave been exchanged pursuant to Section 24 hereof) may be transferred,split up, combined or exchanged for another Rights Certificate or Certificates,entitling the registered holder to purchase a like number of oneone-thousandths of a share of Preferred Stock (or, following a TriggeringEvent, Common Stock, other securities, cash or other assets, as the case maybe) as the Rights Certificate or Certificates surrendered then entitles suchholder (or former holder in the case of a transfer) to purchase.  Any registered holder desiring to transfer,split up, combine or exchange any Rights Certificate or Certificates shall makesuch request in writing delivered to the Rights Agent, and shall surrender theRights Certificate or Certificates to be transferred, split up, combined orexchanged at the principal office or offices of the Rights Agent designated forsuch purpose.  Neither the Rights Agentnor the Company shall be obligated to take any action whatsoever with respectto the transfer of any such surrendered Rights Certificate until the registeredholder shall have completed and signed the certificate contained in the form ofassignment on the reverse side of such Rights Certificate and shall haveprovided such additional evidence of the identity of the Beneficial Owner (orformer Beneficial Owner) or Affiliates or Associates thereof as the Companyshall reasonably request.  Thereupon theRights Agent shall, subject to Section 4(b), Section 7(e),Section 14 hereof and Section 24 hereof, countersign and deliver tothe Person entitled thereto a Rights Certificate or Rights Certificates, as thecase may be, as so requested.  TheCompany may require payment of a sum sufficient to cover any tax orgovernmental charge that may be imposed in connection with any transfer, splitup, combination or exchange of Rights Certificates.

 

(b)                                 Upon receipt bythe Company and the Rights Agent of evidence reasonably satisfactory to them ofthe loss, theft, destruction or mutilation of a Rights Certificate, and, incase of loss, theft or destruction, of indemnity or security reasonablysatisfactory to them, and reimbursement to the Company and the Rights Agent ofall reasonable expenses incidental thereto, and upon surrender to the RightsAgent and cancellation of the Rights Certificate, if mutilated, the Companywill execute and deliver a new Rights Certificate of like tenor to the RightsAgent for countersignature and delivery to the registered owner in lieu of theRights Certificate so lost, stolen, destroyed or mutilated.

 

Section 7.                         Exercise ofRights; Purchase Price; Expiration Date of Rights.

 

(a)                                  Subject toSection 7(e) hereof, at any time after the Distribution Date theregistered holder of any Rights Certificate may exercise the Rights evidencedthereby (except as otherwise provided herein including, without limitation, therestrictions on exercisability set forth in Section 9(c),Section 11(a)(iii) and Section 23(a) hereof) in whole or in part uponsurrender of the Rights Certificate, with the form of election to purchase andthe certificate on the reverse side thereof duly executed, to the

 

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Rights Agent at the principal office oroffices of the Rights Agent designated for such purpose, together with paymentof the aggregate Purchase Price with respect to the total number of oneone-thousandths of a share (or other securities, cash or other assets, as thecase may be) as to which such surrendered Rights are then exercisable, at orprior to the earlier of (i) 5:00 P.M., New York City time, on June 24,2014, or such later date as may be established by the Board of Directors priorto the expiration of the Rights (such date, as it may be extended by the Board,the (“Final Expiration Date”), or (ii) the time at which the Rights areredeemed or exchanged as provided in Section 23 and Section 24 hereof(the earlier of (i) and (ii) being herein referred to as the “ExpirationDate”).

 

(b)                                 The Purchase Pricefor each one one-thousandth of a share of Preferred Stock pursuant to theexercise of a Right initially shall be $116.00, shall be subject to adjustmentfrom time to time as provided in Section 11 and Section 13(a) hereofand shall be payable in accordance with paragraph (c) below.

 

(c)                                  Upon receipt of aRights Certificate representing exercisable Rights, with the form of electionto purchase and the certificate duly executed, accompanied by payment, withrespect to each Right so exercised, of the Purchase Price per oneone-thousandth of a share of Preferred Stock (or other shares, securities, cashor other assets, as the case may be) to be purchased as set forth below and anamount equal to any applicable transfer tax, the Rights Agent shall, subject toSection 20(k) hereof, thereupon promptly (i) (A) requisition from anytransfer agent of the shares of Preferred Stock (or make available, if theRights Agent is the transfer agent for such shares) certificates for the totalnumber of one one-thousandths of a share of Preferred Stock to be purchased andthe Company hereby irrevocably authorizes its transfer agent to comply with allsuch requests, or (B) if the Company shall have elected to deposit the totalnumber of shares of Preferred Stock issuable upon exercise of the Rightshereunder with a depositary agent, requisition from the depositary agentdepositary receipts representing such number of one one-thousandths of a shareof Preferred Stock as are to be purchased (in which case certificates for theshares of Preferred Stock represented by such receipts shall be deposited bythe transfer agent with the depositary agent) and the Company will direct thedepositary agent to comply with such request, (ii) requisition from the Companythe amount of cash, if any, to be paid in lieu of fractional shares inaccordance with Section 14 hereof, (iii) after receipt of suchcertificates or depositary receipts, cause the same to be delivered to or, uponthe order of the registered holder of such Rights Certificate, registered insuch name or names as may be designated by such holder, and (iv) after receiptthereof, deliver such cash, if any, to or upon the order of the registered holderof such Rights Certificate.  The paymentof the Purchase Price (as such amount may be reduced pursuant toSection 11(a)(iii) hereof) shall be made in cash or by certified bankcheck or bank draft payable to the order of the Company.  In the event that the Company is obligatedto issue other securities (including Common Stock) of the Company, pay cashand/or distribute other property pursuant to Section 11(a) hereof, theCompany will make all arrangements necessary so that such other securities, cashand/or other property are available for distribution by the Rights Agent, ifand when appropriate.  The Companyreserves the right to require prior to the occurrence of a Triggering Eventthat, upon any exercise of Rights, a number of Rights be exercised so that onlywhole shares of Preferred Stock would be issued.

 

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(d)                                 In case theregistered holder of any Rights Certificate shall exercise less than all theRights evidenced thereby, a new Rights Certificate evidencing the Rightsremaining unexercised shall be issued by the Rights Agent and delivered to, orupon the order of, the registered holder of such Rights Certificate, registeredin such name or names as may be designated by such holder, subject to the provisionsof Section 14 hereof.

 

(e)                                  Notwithstandinganything in this Agreement to the contrary, from and after the first occurrenceof a Section 11(a)(ii) Event, any Rights beneficially owned by (i) anAcquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) atransferee of an Acquiring Person (or of any such Associate or Affiliate) whobecomes a transferee after the Acquiring Person becomes such, or (iii) atransferee of an Acquiring Person (or of any such Associate or Affiliate) who becomesa transferee prior to or concurrently with the Acquiring Person becoming suchand receives such Rights pursuant to either (A) a transfer (whether or not forconsideration) from the Acquiring Person to holders of equity interests in suchAcquiring Person or to any Person with whom the Acquiring Person has anycontinuing agreement, arrangement or understanding regarding the transferredRights or (B) a transfer which the Board of Directors of the Company hasdetermined is part of a plan, arrangement or understanding which has as aprimary purpose or effect the avoidance of this Section 7(e), shall becomenull and void without any further action and no holder of such Rights shallhave any rights whatsoever with respect to such Rights, whether under any provisionof this Agreement or otherwise.  TheCompany shall use all reasonable efforts to insure that the provisions of thisSection 7(e) and Section 4(b) hereof are complied with, but shallhave no liability to any holder of Rights Certificates or any other Person as aresult of its failure to make any determinations with respect to an AcquiringPerson or any of its Affiliates, Associates or transferees hereunder.

 

(f)                                    Notwithstandinganything in this Agreement to the contrary, neither the Rights Agent nor theCompany shall be obligated to undertake any action with respect to a registeredholder upon the occurrence of any purported exercise as set forth in thisSection 7 unless such registered holder shall have (i) completed andsigned the certificate contained in the form of election to purchase set forthon the reverse side of the Rights Certificate surrendered for such exercise,and (ii) provided such additional evidence of the identity of the BeneficialOwner (or former Beneficial Owner) or Affiliates or Associates thereof as theCompany shall reasonably request.

 

Section 8.                         Cancellation andDestruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise,transfer, split-up, combination or exchange shall, if surrendered to theCompany or any of its agents, be delivered to the Rights Agent for cancellationor in cancelled form, or, if surrendered to the Rights Agent, shall becancelled by it, and no Rights Certificates shall be issued in lieu thereofexcept as expressly permitted by any of the provisions of this Agreement.  The Company shall deliver to the RightsAgent for cancellation and retirement, and the Rights Agent shall so cancel andretire, any other Rights Certificate purchased or acquired by the Companyotherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to theCompany, or shall, at the written request of the Company,

 

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destroy such cancelled Rights Certificates,and in such case shall deliver a certificate of destruction thereof to theCompany.

 

Section 9.                         Reservation andAvailability of Capital Stock.

 

(a)                                  The Companycovenants and agrees that it will cause to be reserved and kept available outof its authorized and unissued shares of Preferred Stock (and, following theoccurrence of a Triggering Event, out of its authorized and unissued shares ofCommon Stock and/or other securities or out of its authorized and issued sharesheld in its treasury), the number of shares of Preferred Stock (and, followingthe occurrence of a Triggering Event, Common Stock and/or other securities)that, as provided in this Agreement including Section 11(a)(iii) hereof,will be sufficient to permit the exercise in full of all outstanding Rights.

 

(b)                                 So long as theshares of Preferred Stock (and, following the occurrence of a Triggering Event,Common Stock and/or other securities) issuable and deliverable upon theexercise of the Rights may be listed on any national securities exchange, theCompany shall use its best efforts to cause, from and after such time as theRights become exercisable, all shares reserved for such issuance to be listedon such exchange upon official notice of issuance upon such exercise.

 

(c)                                  The Company shalluse its best efforts to (i) file, as soon as practicable following the earliestdate after the first occurrence of a Section 11(a)(ii) Event on which theconsideration to be delivered by the Company upon exercise of the Rights hasbeen determined in accordance with Section 11(a)(iii) hereof, aregistration statement under the Act, with respect to the securitiespurchasable upon exercise of the Rights on an appropriate form, (ii) cause suchregistration statement to become effective as soon as practicable after suchfiling, and (iii) cause such registration statement to remain effective (with aprospectus at all times meeting the requirements of the Act) until the earlierof (A) the date as of which the Rights are no longer exercisable for suchsecurities, and (B) the date of the expiration of the Rights.  The Company will also take such action asmay be appropriate under, or to ensure compliance with, the securities or “bluesky” laws of the various states in connection with the exercisability of theRights.  The Company may temporarilysuspend, for a period of time not to exceed ninety (90) days after the date setforth in clause (i) of the first sentence of this Section 9(c), theexercisability of the Rights in order to prepare and file such registration statementand permit it to become effective.  Uponany such suspension, the Company shall issue a public announcement stating thatthe exercisability of the Rights has been temporarily suspended, as well as apublic announcement at such time as the suspension has been rescinded.  In addition, if the Company shall determinethat a registration statement is required following the Distribution Date, theCompany may temporarily suspend the exercisability of the Rights until suchtime as a registration statement has been declared effective.  Notwithstanding any provision of thisAgreement to the contrary, the Rights shall not be exercisable in anyjurisdiction if the requisite qualification in such jurisdiction shall not havebeen obtained, the exercise thereof shall not be permitted under applicablelaw, or a registration statement shall not have been declared effective.

 

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(d)                                 The Companycovenants and agrees that it will take all such action as may be necessary toensure that all one one-thousandths of a share of Preferred Stock (and,following the occurrence of a Triggering Event, Common Stock and/or othersecurities) delivered upon exercise of Rights shall, at the time of delivery ofthe certificates for such shares (subject to payment of the Purchase Price), beduly and validly authorized and issued and fully paid and nonassessable.

 

(e)                                  The Companyfurther covenants and agrees that it will pay when due and payable any and allfederal and state transfer taxes and charges which may be payable in respect ofthe issuance or delivery of the Rights Certificates and of any certificates fora number of one one-thousandths of a share of Preferred Stock (or Common Stockand/or other securities, as the case may be) upon the exercise of Rights.  The Company shall not, however, be requiredto pay any transfer tax which may be payable in respect of any transfer ordelivery of Rights Certificates to a Person other than, or the issuance ordelivery of a number of one one-thousandths of a share of Preferred Stock (orCommon Stock and/or other securities, as the case may be) in respect of a nameother than, that of the registered holder of the Rights Certificates evidencingRights surrendered for exercise or to issue or deliver any certificates for anumber of one one-thousandths of a share of Preferred Stock (or Common Stockand/or other securities, as the case may be) in a name other than that of theregistered holder upon the exercise of any Rights until such tax shall have beenpaid (any such tax being payable by the holder of such Rights Certificates atthe time of surrender) or until it has been established to the Company’ssatisfaction that no such tax is due.

 

Section 10.                   Preferred StockRecord Date.  Each person in whose name anycertificate for a number of one one-thousandths of a share of Preferred Stock(or Common Stock and/or other securities, as the case may be) is issued uponthe exercise of Rights shall for all purposes be deemed to have become theholder of record of such fractional shares of Preferred Stock (or Common Stockand/or other securities, as the case may be) represented thereby on, and suchcertificate shall be dated, the date upon which the Rights Certificateevidencing such Rights was duly surrendered and payment of the Purchase Price(and all applicable transfer taxes) was made; provided, however, that if thedate of such surrender and payment is a date upon which the Preferred Stock (orCommon Stock and/or other securities, as the case may be) transfer books of theCompany are closed, such Person shall be deemed to have become the recordholder of such shares (fractional or otherwise) on, and such certificate shallbe dated, the next succeeding Business Day on which the Preferred Stock (orCommon Stock and/or other securities, as the case may be) transfer books of theCompany are open.  Prior to the exerciseof the Rights evidenced thereby, the holder of a Rights Certificate shall notbe entitled to any rights of a stockholder of the Company with respect toshares for which the Rights shall be exercisable, including, withoutlimitation, the right to vote, to receive dividends or other distributions orto exercise any preemptive rights, and shall not be entitled to receive anynotice of any proceedings of the Company, except as provided herein.

 

Section 11.                   Adjustment ofPurchase Price, Number and Kind of Shares or Number of Rights.  The Purchase Price, the number and kind ofshares covered by each

 

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Right and the number of Rights outstandingare subject to adjustment from time to time as provided in thisSection 11.

 

(a)                                  (i)  In the event the Company shall at any timeafter the date of this Agreement (A) declare a dividend on the Preferred Stockpayable in shares of Preferred Stock, (B) subdivide the outstanding PreferredStock, (C) combine the outstanding Preferred Stock into a smaller number ofshares, or (D) issue any shares of its capital stock in a reclassification ofthe Preferred Stock (including any such reclassification in connection with aconsolidation or merger in which the Company is the continuing or survivingcorporation), except as otherwise provided in this Section 11(a) andSection 7(e) hereof, the Purchase Price in effect at the time of therecord date for such dividend or of the effective date of such subdivision,combination or reclassification, and the number and kind of shares of PreferredStock or capital stock, as the case may be, issuable on such date, shall beproportionately adjusted so that the holder of any Right exercised after suchtime shall be entitled to receive, upon payment of the Purchase Price then ineffect, the aggregate number and kind of shares of Preferred Stock or capitalstock, as the case may be, which, if such Right had been exercised immediatelyprior to such date and at a time when the Preferred Stock transfer books of theCompany were open, such holder would have owned upon such exercise and beenentitled to receive by virtue of such dividend, subdivision, combination orreclassification.  If an event occurswhich would require an adjustment under both this Section 11(a)(i) andSection 11(a)(ii) hereof, the adjustment provided for in thisSection 11(a)(i) shall be in addition to, and shall be made prior to, anyadjustment required pursuant to Section 11(a)(ii) hereof.

 

(ii)                                  In the event anyPerson shall, at any time after the Rights Dividend Declaration Date, become anAcquiring Person, unless the event causing such Person to become an AcquiringPerson is a transaction set forth in Section 13(a) hereof, then, promptlyfollowing the occurrence of such event, proper provision shall be made so thateach holder of a Right (except as provided below and in Section 7(e)hereof) shall thereafter have the right to receive, upon exercise thereof atthe then current Purchase Price in accordance with the terms of this Agreement,in lieu of a number of one one-thousandths of a share of Preferred Stock, suchnumber of shares of Common Stock of the Company as shall equal the resultobtained by (x) multiplying the then current Purchase Price by the then numberof one one-thousandths of a share of Preferred Stock for which a Right wasexercisable immediately prior to the first occurrence of aSection 11(a)(ii) Event, and (y) dividing that product (which, followingsuch first occurrence, shall thereafter be referred to as the “Purchase Price”for each Right and for all purposes of this Agreement) by 50% of the CurrentMarket Price (determined pursuant to Section 11(d) hereof) per share ofCommon Stock on the date of such first occurrence (such number of shares, the “AdjustmentShares”).

 

(iii)                               In the event thatthe number of shares of Common Stock which is authorized by the Company’scertificate of incorporation, but not outstanding or reserved for issuance forpurposes other than upon exercise of the Rights, is not sufficient to permitthe exercise in full of the Rights in accordance with the foregoingsubparagraph (ii) of this Section 11(a), the Company shall (A) determinethe value of the Adjustment

 

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Shares issuable upon the exercise of a Right(the “Current Value”), and (B) with respect to each Right (subject toSection 7(e) hereof), make adequate provision to substitute for the AdjustmentShares, upon the exercise of a Right and payment of the applicable PurchasePrice, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock orother equity securities of the Company (including, without limitation, shares,or units of shares, of preferred stock, such as the Preferred Stock, which theBoard has deemed to have essentially the same value or economic rights asshares of Common Stock (such shares of preferred stock being referred to as “CommonStock Equivalents”)), (4) debt securities of the Company, (5) other assets,or (6) any combination of the foregoing, having an aggregate value equal to theCurrent Value (less the amount of any reduction in the Purchase Price), wheresuch aggregate value has been determined by the Board based upon the advice ofa nationally recognized investment banking firm selected by the Board; provided,however, that if the Company shall not have made adequate provision todeliver value pursuant to clause (B) above within thirty (30) days followingthe later of (x) the first occurrence of a Section 11(a)(ii) Event and (y)the date on which the Company’s right of redemption pursuant toSection 23(a) expires (the later of (x) and (y) being referred to hereinas the “Section 11(a)(ii) Trigger Date”), then the Company shall beobligated to deliver, upon the surrender for exercise of a Right and withoutrequiring payment of the Purchase Price, shares of Common Stock (to the extentavailable) and then, if necessary, cash, which shares and/or cash have anaggregate value equal to the Spread. For purposes of the preceding sentence, the term “Spread” shallmean the excess of (i) the Current Value over (ii) the Purchase Price.  If the Board determines in good faith thatit is likely that sufficient additional shares of Common Stock could beauthorized for issuance upon exercise in full of the Rights, the thirty (30)day period set forth above may be extended to the extent necessary, but notmore than ninety (90) days after the Section 11(a)(ii) Trigger Date, inorder that the Company may seek shareholder approval for the authorization ofsuch additional shares (such thirty (30) day period, as it may be extended, isherein called the “Substitution Period”).  To the extent that the Company determines that action should betaken pursuant to the first and/or third sentences of thisSection 11(a)(iii), the Company (1) shall provide, subject toSection 7(e) hereof, that such action shall apply uniformly to alloutstanding Rights, and (2) may suspend the exercisability of the Rights untilthe expiration of the Substitution Period in order to seek such shareholderapproval for such authorization of additional shares and/or to decide theappropriate form of distribution to be made pursuant to such first sentence andto determine the value thereof.  In theevent of any such suspension, the Company shall issue a public announcementstating that the exercisability of the Rights has been temporarily suspended,as well as a public announcement at such time as the suspension is no longer ineffect.  For purposes of thisSection 11(a)(iii), the value of each Adjustment Share shall be theCurrent Market Price per share of the Common Stock on theSection 11(a)(ii) Trigger Date and the per share or per unit value of anyCommon Stock Equivalent shall be deemed to equal the Current Market Price pershare of the Common Stock on such date.

 

(b)                                 In case theCompany shall fix a record date for the issuance of rights, options or warrantsto all holders of Preferred Stock entitling them to subscribe for or purchase(for a period expiring within forty-five (45) calendar days after such record date) Preferred Stock(or shares having the same rights, privileges and preferences as the

 

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shares of Preferred Stock (“EquivalentPreferred Stock”)) or securities convertible into Preferred Stock orEquivalent Preferred Stock at a price per share of Preferred Stock or per shareof Equivalent Preferred Stock (or having a conversion price per share, if asecurity convertible into Preferred Stock or Equivalent Preferred Stock) lessthan the Current Market Price (as determined pursuant to Section 11(d)hereof) per share of Preferred Stock on such record date, the Purchase Price tobe in effect after such record date shall be determined by multiplying thePurchase Price in effect immediately prior to such record date by a fraction,the numerator of which shall be the number of shares of Preferred Stockoutstanding on such record date, plus the number of shares of Preferred Stockwhich the aggregate offering price of the total number of shares of PreferredStock and/or Equivalent Preferred Stock so to be offered (and/or the aggregateinitial conversion price of the convertible securities so to be offered) wouldpurchase at such Current Market Price, and the denominator of which shall bethe number of shares of Preferred Stock outstanding on such record date, plusthe number of additional shares of Preferred Stock and/or Equivalent PreferredStock to be offered for subscription or purchase (or into which the convertiblesecurities so to be offered are initially convertible).  In case such subscription price may be paidby delivery of consideration, part or all of which may be in a form other thancash, the value of such consideration shall be as determined in good faith bythe Board of Directors of the Company, whose determination shall be describedin a statement filed with the Rights Agent and shall be binding on the RightsAgent and the holders of the Rights. Shares of Preferred Stock owned by or held for the account of theCompany shall not be deemed outstanding for the purpose of any suchcomputation.  Such adjustment shall bemade successively whenever such a record date is fixed, and in the event thatsuch rights or warrants are not so issued, the Purchase Price shall be adjustedto be the Purchase Price which would then be in effect if such record date hadnot been fixed.

 

(c)                                  In case theCompany shall fix a record date for a distribution to all holders of Preferred Stock(including any such distribution made in connection with a consolidation ormerger in which the Company is the continuing corporation), cash (other than aregular quarterly cash dividend out of the earnings or retained earnings of theCompany), assets (other than a dividend payable in Preferred Stock, butincluding any dividend payable in stock other than Preferred Stock) orevidences of indebtedness, or of subscription rights or warrants (excludingthose referred to in Section 11(b) hereof), the Purchase Price to be ineffect after such record date shall be determined by multiplying the PurchasePrice in effect immediately prior to such record date by a fraction, thenumerator of which shall be the Current Market Price (as determined pursuant toSection 11(d) hereof) per share of Preferred Stock on such record date,less the fair market value (as determined in good faith by the Board ofDirectors of the Company, whose determination shall be described in a statementfiled with the Rights Agent) of the portion of the cash, assets or evidences ofindebtedness so to be distributed or of such subscription rights or warrantsapplicable to a share of Preferred Stock, and the denominator of which shall besuch Current Market Price (as determined pursuant to Section 11(d) hereof)per share of Preferred Stock.  Suchadjustments shall be made successively whenever such a record date is fixed,and in the event that such distribution is not so made, the Purchase Price shallbe adjusted to be the Purchase Price which would have been in effect if suchrecord date had not been fixed.

 

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(d)                                 (i)  For the purpose of any computationhereunder, other than computations made pursuant to Section 11(a)(iii)hereof, the Current Market Price per share of Common Stock on any date shall bedeemed to be the average of the daily closing prices per share of such CommonStock for the thirty (30) consecutive Trading Days immediately prior to suchdate, and for purposes of computations made pursuant to Section 11(a)(iii)hereof, the Current Market Price per share of Common Stock on any date shall bedeemed to be the average of the daily closing prices per share of such CommonStock for the ten (10) consecutive Trading Days immediately following suchdate; provided, however, that in the event that the CurrentMarket Price per share of the Common Stock is determined during a periodfollowing the announcement by the issuer of such Common Stock of (A) a dividendor distribution on such Common Stock payable in shares of such Common Stock orsecurities convertible into shares of such Common Stock (other than theRights), or (B) any subdivision, combination or reclassification of such CommonStock, and the ex-dividend date for such dividend or distribution, or therecord date for such subdivision, combination or reclassification shall nothave occurred prior to the commencement of the requisite thirty (30) TradingDay or ten (10) Trading Day period, as set forth above, then, and in each suchcase, the Current Market Price shall be properly adjusted to take into accountex-dividend trading.  The closing pricefor each day shall be the last sale price, regular way, or, in case no suchsale takes place on such day, the average of the closing bid and asked prices,regular way, in either case as reported in the principal consolidatedtransaction reporting system with respect to securities listed or admitted totrading on the New York Stock Exchange or, if the shares of Common Stock arenot listed or admitted to trading on the New York Stock Exchange, as reportedin the principal consolidated transaction reporting system with respect tosecurities listed on the principal national securities exchange on which theshares of Common Stock are listed or admitted to trading or, if the shares ofCommon Stock are not listed or admitted to trading on any national securitiesexchange, the last quoted price or, if not so quoted, the average of the highbid and low asked prices in the over-the-counter market, as reported by TheNasdaq Stock Market (“NASDAQ”) or such other system then in use, or, ifon any such date the shares of Common Stock are not quoted by any suchorganization, the average of the closing bid and asked prices as furnished by aprofessional market maker making a market in the Common Stock selected by theBoard.  If on any such date no marketmaker is making a market in the Common Stock, the fair value of such shares onsuch date as determined in good faith by the Board shall be used.  The term “Trading Day” shall mean aday on which the principal national securities exchange on which the shares ofCommon Stock are listed or admitted to trading is open for the transaction ofbusiness or, if the shares of Common Stock are not listed or admitted totrading on any national securities exchange, a Business Day.  If the Common Stock is not publicly held ornot so listed or traded, Current Market Price per share shall mean the fairvalue per share as determined in good faith by the Board, whose determinationshall be described in a statement filed with the Rights Agent and shall beconclusive for all purposes.

 

(ii)                                  For the purpose ofany computation hereunder, the Current Market Price per share of PreferredStock shall be determined in the same manner as set forth above for the CommonStock in clause (i) of this Section 11(d) (other than the last sentencethereof).  If the Current Market Priceper share of Preferred Stock cannot be

 

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determined in the manner provided above or ifthe Preferred Stock is not publicly held or listed or traded in a mannerdescribed in clause (i) of this Section 11(d), the Current Market Priceper share of Preferred Stock shall be conclusively deemed to be an amount equalto 1,000 (as such number may be appropriately adjusted for such events as stocksplits, stock dividends and recapitalizations with respect to the Common Stockoccurring after the date of this Agreement) multiplied by the Current MarketPrice per share of the Common Stock.  Ifneither the Common Stock nor the Preferred Stock is publicly held or so listedor traded, Current Market Price per share of the Preferred Stock shall mean thefair value per share as determined in good faith by the Board, whosedetermination shall be described in a statement filed with the Rights Agent andshall be conclusive for all purposes.

 

(e)                                  Anything herein tothe contrary notwithstanding, no adjustment in the Purchase Price shall berequired unless such adjustment would require an increase or decrease of atleast one percent (1%) in the Purchase Price; provided, however,that any adjustments which by reason of this Section 11(e) are notrequired to be made shall be carried forward and taken into account in anysubsequent adjustment.  All calculationsunder this Section 11 shall be made to the nearest cent or to the nearestten-thousandth of a share of Common Stock or other share or one-millionth of ashare of Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section 11(e), anyadjustment required by this Section 11 shall be made no later than theearlier of (i) three (3) years from the date of the transaction which mandatessuch adjustment, or (ii) the Expiration Date.

 

(f)                                    If as a result ofan adjustment made pursuant to Section 11(a)(ii) or Section 13(a)hereof, the holder of any Right thereafter exercised shall become entitled toreceive any shares of capital stock other than Preferred Stock, thereafter thenumber of such other shares so receivable upon exercise of any Right and thePurchase Price thereof shall be subject to adjustment from time to time in amanner and on terms as nearly equivalent as practicable to the provisions withrespect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14hereof with respect to the Preferred Stock shall apply on like terms to anysuch other shares.

 

(g)                                 All Rightsoriginally issued by the Company subsequent to any adjustment made to thePurchase Price hereunder shall evidence the right to purchase, at the adjustedPurchase Price, the number of one one-thousandths of a share of Preferred Stockpurchasable from time to time hereunder upon exercise of the Rights, allsubject to further adjustment as provided herein.

 

(h)                                 Unless the Companyshall have exercised its election as provided in Section 11(i), upon eachadjustment of the Purchase Price as a result of the calculations made inSections 11(b) and (c), each Right outstanding immediately prior to the makingof such adjustment shall thereafter evidence the right to purchase, at theadjusted Purchase Price, that number of one one-thousandths of a share ofPreferred Stock (calculated to the nearest one-millionth) obtained by (i) multiplying(x) the number of one one-thousandths of a share covered by a Right immediatelyprior to this adjustment,

 

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by (y) the Purchase Price in effectimmediately prior to such adjustment of the Purchase Price, and (ii) dividingthe product so obtained by the Purchase Price in effect immediately after suchadjustment of the Purchase Price.

 

(i)                                     The Company mayelect on or after the date of any adjustment of the Purchase Price to adjustthe number of Rights, in lieu of any adjustment in the number of oneone-thousandths of a share of Preferred Stock purchasable upon the exercise ofa Right.  Each of the Rights outstandingafter the adjustment in the number of Rights shall be exercisable for thenumber of one one-thousandths of a share of Preferred Stock for which a Rightwas exercisable immediately prior to such adjustment.  Each Right held of record prior to such adjustment of the numberof Rights shall become that number of Rights (calculated to the nearest one-ten-thousandth)obtained by dividing the Purchase Price in effect immediately prior toadjustment of the Purchase Price by the Purchase Price in effect immediatelyafter adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjustthe number of Rights, indicating the record date for the adjustment, and, ifknown at the time, the amount of the adjustment to be made.  This record date may be the date on whichthe Purchase Price is adjusted or any day thereafter, but, if the RightsCertificates have been issued, shall be at least ten (10) days later than thedate of the public announcement.  IfRights Certificates have been issued, upon each adjustment of the number of Rightspursuant to this Section 11(i), the Company shall, as promptly aspracticable, cause to be distributed to holders of record of RightsCertificates on such record date Rights Certificates evidencing, subject toSection 14 hereof, the additional Rights to which such holders shall beentitled as a result of such adjustment, or, at the option of the Company,shall cause to be distributed to such holders of record in substitution andreplacement for the Rights Certificates held by such holders prior to the dateof adjustment, and upon surrender thereof, if required by the Company, newRights Certificates evidencing all the Rights to which such holders shall beentitled after such adjustment.  RightsCertificates so to be distributed shall be issued, executed and countersignedin the manner provided for herein (and may bear, at the option of the Company,the adjusted Purchase Price) and shall be registered in the names of theholders of record of Rights Certificates on the record date specified in thepublic announcement.

 

(j)                                     Irrespective ofany adjustment or change in the Purchase Price or the number of oneone-thousandths of a share of Preferred Stock issuable upon the exercise of theRights, the Rights Certificates theretofore and thereafter issued may continueto express the Purchase Price per one one-thousandth of a share and the numberof one one-thousandth of a share which were expressed in the initial RightsCertificates issued hereunder.

 

(k)                                  Before taking anyaction that would cause an adjustment reducing the Purchase Price below thethen stated value, if any, of the number of one one-thousandths of a share ofPreferred Stock issuable upon exercise of the Rights, the Company shall takeany corporate action which may, in the opinion of its counsel, be necessary inorder that the Company may validly and legally issue fully paid andnonassessable such number of one one-thousandths of a share of Preferred Stockat such adjusted Purchase Price.

 

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(l)                                     In any case inwhich this Section 11 shall require that an adjustment in the PurchasePrice be made effective as of a record date for a specified event, the Companymay elect to defer until the occurrence of such event the issuance to theholder of any Right exercised after such record date the number of oneone-thousandths of a share of Preferred Stock and other capital stock orsecurities of the Company, if any, issuable upon such exercise over and abovethe number of one one-thousandths of a share of Preferred Stock and othercapital stock or securities of the Company, if any, issuable upon such exerciseon the basis of the Purchase Price in effect prior to such adjustment; provided,however, that the Company shall deliver to such holder a due bill orother appropriate instrument evidencing such holder’s right to receive suchadditional shares (fractional or otherwise) or securities upon the occurrenceof the event requiring such adjustment.

 

(m)                               Anything in thisSection 11 to the contrary notwithstanding, the Company shall be entitledto make such reductions in the Purchase Price, in addition to those adjustmentsexpressly required by this Section 11, as and to the extent that in theirgood faith judgment the Board of Directors of the Company shall determine to beadvisable in order that any (i) consolidation or subdivision of the PreferredStock, (ii) issuance wholly for cash of any shares of Preferred Stock at lessthan the Current Market Price, (iii) issuance wholly for cash of shares ofPreferred Stock or securities which by their terms are convertible into orexchangeable for shares of Preferred Stock, (iv) stock dividends or (v)issuance of rights, options or warrants referred to in this Section 11,hereafter made by the Company to holders of its Preferred Stock shall not betaxable to such stockholders.

 

(n)                                 The Companycovenants and agrees that it shall not, at any time after the DistributionDate, (i) consolidate with any other Person (other than a Subsidiary of theCompany in a transaction which complies with Section 11(o) hereof), (ii)merge with or into any other Person (other than a Subsidiary of the Company ina transaction which complies with Section 11(o) hereof), or (iii) sell ortransfer (or permit any Subsidiary to sell or transfer), in one transaction, ora series of related transactions, assets, cash flow or earning poweraggregating more than 50% of the assets or earning power of the Company and itsSubsidiaries (taken as a whole) to any other Person or Persons (other than theCompany and/or any of its Subsidiaries in one or more transactions each ofwhich complies with Section 11(o) hereof), if (x) at the time of orimmediately after such consolidation, merger or sale there are any rights,warrants or other instruments or securities outstanding or agreements in effectwhich would substantially diminish or otherwise eliminate the benefits intendedto be afforded by the Rights or (y) prior to, simultaneously with orimmediately after such consolidation, merger or sale, the shareholders of thePerson who constitutes, or would constitute, the “Principal Party” for purposesof Section 13(a) hereof shall have received a distribution of Rightspreviously owned by such Person or any of its Affiliates and Associates.

 

(o)                                 The Companycovenants and agrees that, after the Distribution Date, it will not, except aspermitted by Section 23 or Section 26 hereof, take (or permit anySubsidiary to take) any action if at the time such action is taken it isreasonably 

 

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foreseeable that such action will diminishsubstantially or otherwise eliminate the benefits intended to be afforded bythe Rights.

 

(p)                                 Anything in thisAgreement to the contrary notwithstanding, in the event that the Company shallat any time after the Rights Dividend Declaration Date and prior to theDistribution Date (i) declare a dividend on the outstanding shares of CommonStock payable in shares of Common Stock, (ii) subdivide the outstanding sharesof Common Stock, or (iii) combine the outstanding shares of Common Stock into asmaller number of shares, the number of Rights associated with each share ofCommon Stock then outstanding, or issued or delivered thereafter but prior tothe Distribution Date, shall be proportionately adjusted so that the number ofRights thereafter associated with each share of Common Stock following any suchevent shall equal the result obtained by multiplying the number of Rightsassociated with each share of Common Stock immediately prior to such event by afraction the numerator which shall be the total number of shares of CommonStock outstanding immediately prior to the occurrence of the event and thedenominator of which shall be the total number of shares of Common Stockoutstanding immediately following the occurrence of such event.

 

Section 12.                   Certificate ofAdjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 andSection 13 hereof, the Company shall (a) promptly prepare a certificatesetting forth such adjustment and a brief statement of the facts accounting forsuch adjustment, (b) promptly file with the Rights Agent, and with eachtransfer agent for the Preferred Stock and the Common Stock, a copy of suchcertificate and (c) if a Distribution Date has occurred, mail a brief summarythereof to each holder of a Rights Certificate.  The Rights Agent shall be fully protected in relying on any suchcertificate and on any adjustment therein contained.

 

Section 13.                   Consolidation,Merger or Sale or Transfer of Assets Cash Flow or Earning Power.

 

(a)                                  In the event that,following the Stock Acquisition Date, directly or indirectly, (x) the Companyshall consolidate with, or merge with and into, any other Person (other than aSubsidiary of the Company in a transaction which complies withSection 11(o) hereof), and the Company shall not be the continuing orsurviving corporation of such consolidation or merger, (y) any Person (otherthan a Subsidiary of the Company in a transaction which complies withSection 11(o) hereof) shall consolidate with, or merge with or into, theCompany, and the Company shall be the continuing or surviving corporation ofsuch consolidation or merger and, in connection with such consolidation ormerger, all or part of the outstanding shares of Common Stock shall be changedinto or exchanged for stock or other securities of any other Person or cash orany other property, or (z) the Company shall sell or otherwise transfer (or oneor more of its Subsidiaries shall sell or otherwise transfer), in onetransaction or a series of related transactions, assets, cash flow or earningpower aggregating more than 50% of the assets, cash flow or earning power ofthe Company and its Subsidiaries (taken as a whole) to any Person or Persons(other than the Company or any Subsidiary of the Company in one or moretransactions each of which complies with Section 11(o) hereof), then, andin each such case, proper provision shall be made so that: (i) each holder of aRight, except

 

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as provided in Section 7(e) hereof,shall thereafter have the right to receive, upon the exercise thereof at thethen current Purchase Price in accordance with the terms of this Agreement,such number of validly authorized and issued, fully paid, non-assessable andfreely tradeable shares of Common Stock of the Principal Party (as such term ishereinafter defined), not subject to any liens, encumbrances, rights of firstrefusal or other adverse claims, as shall be equal to the result obtained by(1) multiplying the then current Purchase Price by the number of oneone-thousandths of a share of Preferred Stock for which a Right is exercisableimmediately prior to the first occurrence of a Section 13 Event (or, if aSection 11(a)(ii) Event has occurred prior to the first occurrence of aSection 13 Event, multiplying the number of such one one-thousandths of ashare for which a Right was exercisable immediately prior to the firstoccurrence of a Section 11(a)(ii) Event by the Purchase Price in effectimmediately prior to such first occurrence of a Section 11(a)(ii) Event),and (2) dividing that product (which, following the first occurrence of aSection 13 Event, shall be referred to as the “Purchase Price” for eachRight and for all purposes of this Agreement) by 50% of the Current Market Price(determined pursuant to Section 11(d)(i) hereof) per share of the CommonStock of such Principal Party on the date of consummation of suchSection 13 Event; (ii) such Principal Party shall thereafter be liablefor, and shall assume, by virtue of such Section 13 Event, all theobligations and duties of the Company pursuant to this Agreement; (iii) theterm “Company” shall thereafter be deemed to refer to such Principal Party, itbeing specifically intended that the provisions of Section 11 hereof shallapply only to such Principal Party following the first occurrence of aSection 13 Event; (iv) such Principal Party shall take such steps(including, but not limited to, the reservation of a sufficient number ofshares of its Common Stock) in connection with the consummation of any suchtransaction as may be necessary to assure that the provisions hereof shallthereafter be applicable, as nearly as reasonably may be, in relation to itsshares of Common Stock thereafter deliverable upon the exercise of the Rights;and (v) the provisions of Section 11(a)(ii) hereof shall be of no effectfollowing the first occurrence of any Section 13 Event.

 

(b)                                 “PrincipalParty” shall mean:

 

(i)                                     in the case of anytransaction described in clause (x) or (y) of the first sentence ofSection 13(a), the Person that is the issuer of any securities into whichshares of Common Stock of the Company are converted in such merger orconsolidation, and if no securities are so issued, the Person that is the otherparty to such merger or consolidation; and

 

(ii)                                  in the case of anytransaction described in clause (z) of the first sentence ofSection 13(a), the Person that is the party receiving the greatest portionof the assets, cash flow or earning power transferred pursuant to suchtransaction or transactions;

 

provided, however,that in any such case, (1) if the Common Stock of such Person is not at suchtime and has not been continuously over the preceding twelve (12) month periodregistered under Section 12 of the Exchange Act, and such Person is adirect or indirect Subsidiary of another Person the Common Stock of which isand has been so registered,

 

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“PrincipalParty” shall refer to such other Person; and (2) in case such Person is a Subsidiary,directly or indirectly, of more than one Person, the Common Stock of two ormore of which are and have been so registered, “Principal Party” shall refer towhichever of such Persons is the issuer of the Common Stock having the greatestaggregate market value.

 

(c)                                  The Company shallnot consummate any such consolidation, merger, sale or transfer unless thePrincipal Party shall have a sufficient number of authorized shares of itsCommon Stock which have not been issued or reserved for issuance to permit theexercise in full of the Rights in accordance with this Section 13 andunless prior thereto the Company and such Principal Party shall have executedand delivered to the Rights Agent a supplemental agreement providing for theterms set forth in paragraphs (a) and (b) of this Section 13 and furtherproviding that, as soon as practicable after the date of any consolidation,merger or sale of assets mentioned in paragraph (a) of this Section 13,the Principal Party will

 

(i)                                     prepare and file aregistration statement under the Act, with respect to the Rights and thesecurities purchasable upon exercise of the Rights on an appropriate form, andwill use its best efforts to cause such registration statement to (A) becomeeffective as soon as practicable after such filing and (B) remain effective(with a prospectus at all times meeting the requirements of the Act) until theExpiration Date; and

 

(ii)                                  take all suchother action as may be necessary to enable the Principal Party to issue thesecurities purchasable upon exercise of the Rights, including but not limitedto the registration or qualification of such securities under all requisitesecurities laws of jurisdictions of the various states and the listing of suchsecurities on such exchanges and trading markets as may be necessary orappropriate; and

 

(iii)                               will deliver toholders of the Rights historical financial statements for the Principal Partyand each of its Affiliates which comply in all respects with the requirementsfor registration on Form 10 under the Exchange Act.

 

Theprovisions of this Section 13 shall similarly apply to successive mergersor consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time afterthe occurrence of a Section 11(a)(ii) Event, the Rights which have nottheretofore been exercised shall thereafter become exercisable in the mannerdescribed in Section 13(a).

 

Section 14.                   Fractional Rightsand Fractional Shares.

 

(a)                                  The Company shallnot be required to issue fractions of Rights, except prior to the DistributionDate as provided in Section 11(p) hereof, or to distribute RightsCertificates which evidence fractional Rights. In lieu of such fractional Rights, the Company shall pay to theregistered holders of the Rights Certificates with regard to

 

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which such fractional Rights would otherwisebe issuable, an amount in cash equal to the same fraction of the current marketvalue of a whole Right.  For purposes ofthis Section 14(a), the current market value of a whole Right shall be theclosing price of the Rights for the Trading Day immediately prior to the dateon which such fractional Rights would have been otherwise issuable.  The closing price of the Rights for any dayshall be the last sale price, regular way, or, in case no such sale takes placeon such day, the average of the closing bid and asked prices, regular way, ineither case as reported in the principal consolidated transaction reportingsystem with respect to securities listed or admitted to trading on the New YorkStock Exchange or, if the Rights are not listed or admitted to trading on theNew York Stock Exchange, as reported in the principal consolidated transactionreporting system with respect to securities listed on the principal nationalsecurities exchange on which the Rights are listed or admitted to trading, orif the Rights are not listed or admitted to trading on any national securitiesexchange, the last quoted price or, if not so quoted, the average of the highbid and low asked prices in the over-the-counter market, as reported by NASDAQor such other system then in use or, if on any such date the Rights are notquoted by any such organization, the average of the closing bid and askedprices as furnished by a professional market maker making a market in theRights, selected by the Board of Directors of the Company.  If on any such date no such market maker ismaking a market in the Rights, the fair value of the Rights on such date asdetermined in good faith by the Board of Directors of the Company shall beused.

 

(b)                                 The Company shallnot be required to issue fractions of shares of Preferred Stock (other thanfractions which are integral multiples of one one-thousandth of a share ofPreferred Stock) upon exercise of the Rights or to distribute certificateswhich evidence fractional shares of Preferred Stock (other than fractions whichare integral multiples of one one-thousandth of a share of PreferredStock).  In lieu of fractional shares ofPreferred Stock that are not integral multiples of one one-thousandth of ashare of Preferred Stock, the Company may pay to the registered holders ofRights Certificates at the time such Rights are exercised as herein provided anamount in cash equal to the same fraction of the current market value of oneone-thousandth of a share of Preferred Stock. For purposes of this Section 14(b), the current market value of oneone-thousandth of a share of Preferred Stock shall be one one-thousandth of theclosing price of a share of Preferred Stock (as determined pursuant toSection 11(d)(ii) hereof) for the Trading Day immediately prior to thedate of such exercise.

 

(c)                                  Following theoccurrence of a Triggering Event, the Company shall not be required to issuefractions of shares of Common Stock upon exercise of the Rights or todistribute certificates which evidence fractional shares of Common Stock.  In lieu of fractional shares of CommonStock, the Company may pay to the registered holders of Rights Certificates atthe time such Rights are exercised as herein provided an amount in cash equalto the same fraction of the current market value of one (1) share of CommonStock.  For purposes of thisSection 14(c), the current market value of one share of Common Stock shallbe the closing price per share of Common Stock (as determined pursuant toSection 11(d)(i) hereof) on the Trading Day immediately prior to the dateof such exercise.

 

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(d)                                 The holder of aRight by the acceptance of the Rights expressly waives his right to receive anyfractional Rights or any fractional shares upon exercise of a Right, except aspermitted by this Section 14.

 

Section 15.                   Rights of Action.  All rights of action in respect of thisAgreement are vested in the respective registered holders of the RightsCertificates (and, prior to the Distribution Date, the registered holders ofthe Common Stock); and any registered holder of any Rights Certificate (or,prior to the Distribution Date, of the Common Stock), without the consent ofthe Rights Agent or of the holder of any other Rights Certificate (or, prior tothe Distribution Date, of the Common Stock), may, in his own behalf and for hisown benefit, enforce, and may institute and maintain any suit, action orproceeding against the Company to enforce, or otherwise act in respect of, hisright to exercise the Rights evidenced by such Rights Certificate in the mannerprovided in such Rights Certificate and in this Agreement.  Without limiting the foregoing or anyremedies available to the holders of Rights, it is specifically acknowledgedthat the holders of Rights would not have an adequate remedy at law for anybreach of this Agreement and shall be entitled to specific performance of theobligations hereunder and injunctive relief against actual or threatenedviolations of the obligations hereunder of any Person subject to thisAgreement.

 

Section 16.                   Agreement ofRights Holders.  Every holder of a Right byaccepting the same consents and agrees with the Company and the Rights Agentand with every other holder of a Right that:

 

(a)                                  prior to theDistribution Date, the Rights will be transferable only in connection with thetransfer of Common Stock;

 

(b)                                 after theDistribution Date, the Rights Certificates are transferable only on theregistry books of the Rights Agent if surrendered at the principal office oroffices of the Rights Agent designated for such purposes, duly endorsed oraccompanied by a proper instrument of transfer and with the appropriate forms andcertificates fully executed;

 

(c)                                  subject toSection 6(a) and Section 7(f) hereof, the Company and the RightsAgent may deem and treat the person in whose name a Rights Certificate (or,prior to the Distribution Date, the associated Common Stock certificate) isregistered as the absolute owner thereof and of the Rights evidenced thereby(notwithstanding any notations of ownership or writing on the RightsCertificates or the associated Common Stock certificate made by anyone otherthan the Company or the Rights Agent) for all purposes whatsoever, and neitherthe Company nor the Rights Agent, subject to the last sentence ofSection 7(e) hereof, shall be required to be affected by any notice to thecontrary; and

 

(d)                                 notwithstandinganything in this Agreement to the contrary, neither the Company nor the RightsAgent shall have any liability to any holder of a Right or other Person as aresult of its inability to perform any of its obligations under this Agreementby reason of any preliminary or permanent injunction or other order, decree

 

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or ruling issued by a court of competentjurisdiction or by a governmental, regulatory or administrative agency orcommission, or any statute, rule, regulation or executive order promulgated orenacted by any governmental authority, prohibiting or otherwise restrainingperformance of such obligation; provided, however, the Companymust use its best efforts to have any such order, decree or ruling lifted orotherwise overturned as soon as possible.

 

Section 17.                   Rights CertificateHolder Not Deemed a Stockholder.  Noholder, as such, of any Rights Certificate shall be entitled to vote, receivedividends or be deemed for any purpose the holder of the number of oneone-thousandths of a share of Preferred Stock or any other securities of theCompany which may at any time be issuable on the exercise of the Rightsrepresented thereby, nor shall anything contained herein or in any RightsCertificate be construed to confer upon the holder of any Rights Certificate,as such, any of the rights of a stockholder of the Company or any right to votefor the election of directors or upon any matter submitted to stockholders atany meeting thereof, or to give or withhold consent to any corporate action, orto receive notice of meetings or other actions affecting stockholders (exceptas provided in Section 25 hereof), or to receive dividends or subscriptionrights, or otherwise, until the Right or Rights evidenced by such RightsCertificate shall have been exercised in accordance with the provisions hereof.

 

Section 18.                   Concerning theRights Agent.

 

(a)                                  The Company agreesto pay to the Rights Agent reasonable compensation for all services rendered byit hereunder and, from time to time, on demand of the Rights Agent, itsreasonable expenses and counsel fees and disbursements and other disbursementsincurred in the administration and execution of this Agreement and the exerciseand performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to holdit harmless against, any loss, liability, or expense, incurred without grossnegligence, bad faith or willful misconduct on the part of the Rights Agent,for anything done or omitted by the Rights Agent in connection with theacceptance and administration of this Agreement, including the costs andexpenses of defending against any claim of liability in the premises.

 

(b)                                 The Rights Agentshall be protected and shall incur no liability for or in respect of any actiontaken, suffered or omitted by it in connection with its administration of thisAgreement in reliance upon any Rights Certificate or certificate for CommonStock or for other securities of the Company, instrument of assignment ortransfer, power of attorney, endorsement, affidavit, letter, notice, direction,consent, certificate, statement, or other paper or document believed by it tobe genuine and to be signed, executed and, where necessary, verified oracknowledged, by the proper Person or Persons.

 

Section 19.                   Merger orConsolidation or Change of Name of Rights Agent.

 

(a)                                  Any corporationinto which the Rights Agent or any successor Rights Agent may be merged or withwhich it may be consolidated, or any corporation

 

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resulting from any merger or consolidation towhich the Rights Agent or any successor Rights Agent shall be a party, or anycorporation succeeding to the corporate trust, stock transfer or othershareholder services business of the Rights Agent or any successor RightsAgent, shall be the successor to the Rights Agent under this Agreement withoutthe execution or filing of any paper or any further act on the part of any ofthe parties hereto; but only if such corporation would be eligible for appointmentas a successor Rights Agent under the provisions of Section 21hereof.  In case at the time suchsuccessor Rights Agent shall succeed to the agency created by this Agreement,any of the Rights Certificates shall have been countersigned but not delivered,any such successor Rights Agent may adopt the countersignature of a predecessorRights Agent and deliver such Rights Certificates so countersigned; and in caseat that time any of the Rights Certificates shall not have been countersigned,any successor Rights Agent may countersign such Rights Certificates either inthe name of the predecessor or in the name of the successor Rights Agent; andin all such cases such Rights Certificates shall have the full force providedin the Rights Certificates and in this Agreement.

 

(b)                                 In case at anytime the name of the Rights Agent shall be changed and at such time any of theRights Certificates shall have been countersigned but not delivered, the RightsAgent may adopt the countersignature under its prior name and deliver RightsCertificates so countersigned; and in case at that time any of the RightsCertificates shall not have been countersigned, the Rights Agent maycountersign such Rights Certificates either in its prior name or in its changedname; and in all such cases such Rights Certificates shall have the full forceprovided in the Rights Certificates and in this Agreement.

 

Section 20.                   Duties of RightsAgent.  The Rights Agent undertakesthe duties and obligations imposed by this Agreement upon the following termsand conditions, by all of which the Company and the holders of RightsCertificates, by their acceptance thereof, shall be bound:

 

(a)                                  The Rights Agentmay consult with legal counsel (who may be legal counsel for the Company), andthe opinion of such counsel shall be full and complete authorization andprotection to the Rights Agent as to any action taken or omitted by it in goodfaith and in accordance with such opinion.

 

(b)                                 Whenever in theperformance of its duties under this Agreement the Rights Agent shall deem itnecessary or desirable that any fact or matter (including, without limitation,the identity of any Acquiring Person and the determination of Current MarketPrice) be proved or established by the Company prior to taking or suffering anyaction hereunder, such fact or matter (unless other evidence in respect thereofbe herein specifically prescribed) may be deemed to be conclusively proved andestablished by a certificate signed by the Chairman of the Board, the ChiefExecutive Officer, the President, any Vice President, the Treasurer, anyAssistant Treasurer, the Secretary or any Assistant Secretary of the Companyand delivered to the Rights Agent; and such certificate shall be fullauthorization to the Rights Agent for any action taken or suffered in goodfaith by it under the provisions of this Agreement in reliance upon suchcertificate.

 

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(c)                                  The Rights Agentshall be liable hereunder only for its own gross negligence, bad faith orwillful misconduct.

 

(d)                                 The Rights Agentshall not be liable for or by reason of any of the statements of fact orrecitals contained in this Agreement or in the Rights Certificates or berequired to verify the same (except as to its countersignature on such RightsCertificates), but all such statements and recitals are and shall be deemed tohave been made by the Company only.

 

(e)                                  The Rights Agentshall not be under any responsibility in respect of the validity of thisAgreement or the execution and delivery hereof (except the due execution hereofby the Rights Agent) or in respect of the validity or execution of any RightsCertificate (except its countersignature thereof); nor shall it be responsiblefor any breach by the Company of any covenant or condition contained in thisAgreement or in any Rights Certificate; nor shall it be responsible for anyadjustment required under the provisions of Section 11, Section 13 orSection 24 hereof or responsible for the manner, method or amount of anysuch adjustment or the ascertaining of the existence of facts that wouldrequire any such adjustment (except with respect to the exercise of Rightsevidenced by Rights Certificates after actual notice of any such adjustment);nor shall it by any act hereunder be deemed to make any representation orwarranty as to the authorization or reservation of any shares of Common Stockor Preferred Stock to be issued pursuant to this Agreement or any RightsCertificate or as to whether any shares of Common Stock or Preferred Stock will,when so issued, be validly authorized and issued, fully paid and nonassessable.

 

(f)                                    The Company agreesthat it will perform, execute, acknowledge and deliver or cause to beperformed, executed, acknowledged and delivered all such further and other acts,instruments and assurances as may reasonably be required by the Rights Agentfor the carrying out or performing by the Rights Agent of the provisions ofthis Agreement.

 

(g)                                 The Rights Agentis hereby authorized and directed to accept instructions with respect to theperformance of its duties hereunder from the Chairman of the Board, the ChiefExecutive Officer, the President, any Vice President, the Secretary, anyAssistant Secretary, the Treasurer or any Assistant Treasurer of the Company,and to apply to such officers for advice or instructions in connection with itsduties, and it shall not be liable for any action taken or suffered to be takenby it in good faith in accordance with instructions of any such officer.

 

(h)                                 The Rights Agentand any stockholder, director, officer or employee of the Rights Agent may buy,sell or deal in any of the Rights or other securities of the Company or becomepecuniarily interested in any transaction in which the Company may beinterested, or contract with or lend money to the Company or otherwise act asfully and freely as though it were not Rights Agent under this Agreement.  Nothing herein shall preclude the RightsAgent from acting in any other capacity for the Company or for any other legalentity.

 

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(i)                                     The Rights Agentmay execute and exercise any of the rights or powers hereby vested in it orperform any duty hereunder either itself or by or through its attorneys oragents, and the Rights Agent shall not be answerable or accountable for anyact, default, neglect or misconduct of any such attorneys or agents or for anyloss to the Company resulting from any such act, default, neglect ormisconduct; provided, however, reasonable care was exercised in the selectionand continued employment thereof.

 

(j)                                     No provision ofthis Agreement shall require the Rights Agent to expend or risk its own fundsor otherwise incur any financial liability in the performance of any of itsduties hereunder or in the exercise of its rights if there shall be reasonablegrounds for believing that repayment of such funds or adequate indemnificationagainst such risk or liability is not reasonably assured to it.

 

(k)                                  If, with respectto any Rights Certificate surrendered to the Rights Agent for exercise ortransfer, the certificate attached to the form of assignment or form ofelection to purchase, as the case may be, has either not been completed orindicates an affirmative response to clause 1 and/or 2 thereof, the RightsAgent shall not take any further action with respect to such requested exerciseor transfer without first consulting with the Company.

 

Section 21.                   Change of RightsAgent.  The Rights Agent or anysuccessor Rights Agent may resign and be discharged from its duties under thisAgreement upon thirty (30) days’ notice in writing mailed to the Company, andto each transfer agent of the Common Stock and Preferred Stock, by registeredor certified mail, and, if such resignation occurs after the Distribution Date,to the registered holders of the Rights Certificates by first-class mail.  The Company may remove the Rights Agent orany successor Rights Agent upon thirty (30) days’ notice in writing, mailed tothe Rights Agent or successor Rights Agent, as the case may be, and to eachtransfer agent of the Common Stock and Preferred Stock, by registered orcertified mail, and, if such removal occurs after the Distribution Date, to theholders of the Rights Certificates by first-class mail.  If the Rights Agent shall resign or beremoved or shall otherwise become incapable of acting, the Company shallappoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period ofthirty (30) days after giving notice of such removal or after it has been notifiedin writing of such resignation or incapacity by the resigning or incapacitatedRights Agent or by the holder of a Rights Certificate (who shall, with suchnotice, submit his Rights Certificate for inspection by the Company), then anyregistered holder of any Rights Certificate may apply to any court of competentjurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whetherappointed by the Company or by such a court, shall be (a) a legal businessentity organized and doing business under the laws of the United States or ofthe State of New York or of any other state of the United States, in goodstanding, having an  office in the Stateof New York, which is authorized under such laws to exercise corporate trust,stock transfer or shareholder services powers and which has at the time of itsappointment as Rights Agent a combined capital and surplus of at least$50,000,000 or (b) an affiliate of a legal business entity described in clause(a) of this sentence.  After appointment,the successor Rights Agent shall be vested with the same powers, rights, dutiesand responsibilities as if it had been originally named as Rights Agent without

 

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further act or deed; but the predecessorRights Agent shall deliver and transfer to the successor Rights Agent anyproperty at the time held by it hereunder, and execute and deliver any furtherassurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of anysuch appointment, the Company shall file notice thereof in writing with thepredecessor Rights Agent and each transfer agent of the Common Stock and thePreferred Stock, and, if such appointment occurs after the Distribution Date,mail a notice thereof in writing to the registered holders of the RightsCertificates.  Failure to give anynotice provided for in this Section 21, however, or any defect therein,shall not affect the legality or validity of the resignation or removal of theRights Agent or the appointment of the successor Rights Agent, as the case maybe.

 

Section 22.                   Issuance of NewRights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rightsto the contrary, the Company may, at its option, issue new Rights Certificatesevidencing Rights in such form as may be approved by the Board of Directors toreflect any adjustment or change in the Purchase Price and the number or kindor class of shares or other securities or property purchasable under the RightsCertificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuanceor sale of shares of Common Stock following the Distribution Date and prior tothe redemption or expiration of the Rights, the Company (a) shall, with respectto shares of Common Stock so issued or sold pursuant to the exercise of stockoptions or under any employee plan or arrangement, granted or awarded as of theDistribution Date, or upon the exercise, conversion or exchange of securitieshereinafter issued by the Company, and (b) may, in any other case, if deemednecessary or appropriate by the Board of Directors of the Company, issue RightsCertificates representing the appropriate number of Rights in connection withsuch issuance or sale; provided, however, that (i) no such Rights Certificateshall be issued if, and to the extent that, the Company shall be advised bycounsel that such issuance would create a significant risk of material adversetax consequences to the Company or the Person to whom such Rights Certificatewould be issued, and (ii) no such Rights Certificate shall be issued if, and tothe extent that, appropriate adjustment shall otherwise have been made in lieuof the issuance thereof.

 

Section 23.                   Redemption andTermination.

 

(a)                                  The Board ofDirectors of the Company may, at its option, at any time prior to the earlierof (i) the close of business on the tenth Business Day following the StockAcquisition Date (or, if the Stock Acquisition Date shall have occurred priorto the Record Date, the close of business on the tenth Business Day followingthe Record Date), or (ii) the Final Expiration Date, direct the Company to, andif directed, the Company shall redeem all but not less than all of the thenoutstanding Rights at a redemption price of $.001 per Right, as such amount maybe appropriately adjusted to reflect any stock split, stock dividend or similartransaction occurring after the date hereof (such redemption price beinghereinafter referred to as the “Redemption Price”).  Notwithstanding anything contained in thisAgreement to the contrary, the Rights shall not be exercisable after the firstoccurrence of a Section 11(a)(ii) Event until such time as the Company’sright of redemption hereunder has expired. The Company may, at its option, pay the Redemption Price in cash, sharesof Common Stock (based on the Current

 

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Market Price, as defined inSection 11(d)(i) hereof, of the Common Stock at the time of redemption) orany other form of consideration deemed appropriate by the Board of Directors.

 

(b)                                 Immediately uponthe action of the Board of Directors of the Company ordering the redemption ofthe Rights, evidence of which shall have been filed with the Rights Agent andwithout any further action and without any notice, the right to exercise theRights will terminate and the only right thereafter of the holders of Rightsshall be to receive the Redemption Price for each Right so held.  Promptly after the action of the Board ofDirectors ordering the redemption of the Rights, the Company shall give noticeof such redemption to the Rights Agent and the holders of the then outstandingRights by mailing such notice to all such holders at each holder’s last addressas it appears upon the registry books of the Rights Agent or, prior to theDistribution Date, on the registry books of the transfer agent for the CommonStock.  Any notice which is mailed inthe manner herein provided shall be deemed given, whether or not the holderreceives the notice.  Each such noticeof redemption will state the method by which the payment of the RedemptionPrice will be made.

 

Section 24.                   Exchange.

 

(a)                                  The Board ofDirectors of the Company may, at its option, at any time after any Personbecomes an Acquiring Person, exchange all or part of the then outstanding andexercisable Rights (which shall not include Rights that have become voidpursuant to the provisions of Section 7(e) hereof) for Common Stock at anexchange ratio of one share of Common Stock per Right, appropriately adjustedto reflect any stock split, stock dividend or similar transaction occurringafter the date hereof (such exchange ratio being hereinafter referred to as the“Exchange Ratio”). Notwithstanding the foregoing, the Board of Directors of the Companyshall not be empowered to effect such exchange at any time after any Person(other than the Company, any Subsidiary of the Company, any employee benefitplan of the Company or any such Subsidiary, or any entity holding Common Stockfor or pursuant to the terms of any such plan), together with all Affiliatesand Associates of such Person, becomes the Beneficial Owner of 50% or more ofthe Common Stock then outstanding.

 

(b)                                 Immediately uponthe action of the Board of Directors of the Company ordering the exchange ofany Rights pursuant to subsection (a) of this Section 24 and withoutany further action and without any notice, the right to exercise such Rightsshall terminate and the only right thereafter of a holder of such Rights shallbe to receive that number of shares of Common Stock equal to the number of suchRights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give publicnotice of any such exchange; provided, however, that the failureto give, or any defect in, such notice shall not affect the validity of suchexchange.  The Company promptly shallmail a notice of any such exchange to all of the holders of such Rights attheir last addresses as they appear upon the registry books of the Rights Agent.  Any notice which is mailed in the mannerherein provided shall be deemed given, whether or not the holder receives thenotice.  Each such notice of exchangewill state the method by which the exchange of the Common Stock for Rights willbe effected and, in the event of

 

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any partial exchange, the number of Rightswhich will be exchanged.  Any partialexchange shall be effected pro rata based on the number of Rights (other thanRights which have become void pursuant to the provisions of Section 7(e)hereof) held by each holder of Rights.

 

(c)                                  In any exchangepursuant to this Section 24, the Company, at its option, may substitutePreferred Stock (or Equivalent Preferred Stock, as such term is defined inparagraph (b) of Section 11 hereof) for Common Stock exchangeable forRights, at the initial rate of one one-thousandth of a share of Preferred Stock(or Equivalent Preferred Stock) for each share of Common Stock, asappropriately adjusted to reflect stock splits, stock dividends and othersimilar transactions after the date hereof.

 

(d)                                 In the event thatthere shall not be sufficient shares of Common Stock issued but not outstandingor authorized but unissued to permit any exchange of Rights as contemplated inaccordance with this Section 24, the Company shall take all such action asmay be necessary to authorize additional shares of Common Stock for issuanceupon exchange of the Rights.

 

(e)                                  The Company shallnot be required to issue fractions of shares of Common Stock or to distributecertificates which evidence fractional shares of Common Stock.  In lieu of such fractional shares of CommonStock, there shall be paid to the registered holders of the Rights Certificateswith regard to which such fractional shares of Common Stock would otherwise beissuable, an amount in cash equal to the same fraction of the current marketvalue of a whole share of Common Stock. For the purposes of this subsection (e), the current market valueof a whole share of Common Stock shall be the closing price of a share ofCommon Stock (as determined pursuant to the second sentence ofSection 11(d)(i) hereof) for the Trading Day immediately prior to the dateof exchange pursuant to this Section 24.

 

Section 25.                   Notice of Certain Events.

 

(a)                                  In case theCompany shall propose, at any time after the Distribution Date, (i) to pay anydividend payable in stock of any class to the holders of Preferred Stock or tomake any other distribution to the holders of Preferred Stock (other than aregular quarterly cash dividend out of earnings or retained earnings of theCompany), or (ii) to offer to the holders of Preferred Stock rights or warrantsto subscribe for or to purchase any additional shares of Preferred Stock orshares of stock of any class or any other securities, rights or options, or(iii) to effect any reclassification of its Preferred Stock (other than areclassification involving only the subdivision of outstanding shares ofPreferred Stock), or (iv) to effect any consolidation or merger into or withany other Person (other than a Subsidiary of the Company in a transaction whichcomplies with Section 11(o) hereof), or to effect any sale or othertransfer (or to permit one or more of its Subsidiaries to effect any sale or othertransfer), in one transaction or a series of related transactions, of more than50% of the assets, cash flow or earning power of the Company and itsSubsidiaries (taken as a whole) to any other Person or Persons (other than theCompany and/or any of its Subsidiaries in one or more transactions each ofwhich complies with Section 11(o) hereof), or (v) to effect theliquidation, dissolution

 

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or winding up of the Company, then, in eachsuch case, the Company shall give to each holder of a Rights Certificate, tothe extent feasible and in accordance with Section 26 hereof, a notice ofsuch proposed action, which shall specify the record date for the purposes ofsuch stock dividend, distribution of rights or warrants, or the date on whichsuch reclassification, consolidation, merger, sale, transfer, liquidation,dissolution, or winding up is to take place and the date of participationtherein by the holders of the shares of Preferred Stock, if any such date is tobe fixed, and such notice shall be so given in the case of any action coveredby clause (i) or (ii) above at least twenty (20) days prior to the record datefor determining holders of the shares of Preferred Stock for purposes of suchaction, and in the case of any such other action, at least twenty (20) daysprior to the date of the taking of such proposed action or the date ofparticipation therein by the holders of the shares of Preferred Stock,whichever shall be the earlier.

 

(b)                                 In case any of theevents set forth in Section 11(a)(ii) hereof shall occur, then, in anysuch case, (i) the Company shall as soon as practicable thereafter give to eachholder of a Rights Certificate, to the extent feasible and in accordance withSection 26 hereof, a notice of the occurrence of such event, which shallspecify the event and the consequences of the event to holders of Rights underSection 11(a)(ii) hereof, and (ii) all references in the precedingparagraph to Preferred Stock shall be deemed thereafter to refer to CommonStock and/or, if appropriate, other securities.

 

Section 26.                   Notices.

 

(a)                                  Notices or demandsauthorized by this Agreement to be given or made by the Rights Agent or by theholder of any Rights Certificate to or on the Company shall be sufficientlygiven or made if sent by first-class mail, postage prepaid, addressed (untilanother address is filed in writing by the Rights Agent with the Company) asfollows:

 

JacksonHewitt Tax Service Inc.

7Sylvan Way

Parsippany,New Jersey 07054

Attention:  Corporate Secretary

 

(b)                                 Subject to theprovisions of Section 21, any notice or demand authorized by thisAgreement to be given or made by the Company or by the holder of any RightsCertificate to or on the Rights Agent shall be sufficiently given or made if sentby first-class mail, postage prepaid, addressed (until another address is filedin writing by the Rights Agent with the Company) as follows:

 

TheBank of New York

101Barclay Street, 11 East

NewYork, New York  10286

Attention:  Stock Transfer Administration

 

(c)                                  Notices or demandsauthorized by this Agreement to be given or made by the Company or the RightsAgent to the holder of any Rights Certificate (or, if

 

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prior to the Distribution Date, to the holderof certificates representing shares of Common Stock) shall be sufficientlygiven or made if sent by first-class mail, postage prepaid, addressed to suchholder at the address of such holder as shown on the registry books of theCompany.

 

Section 27.                   Supplements andAmendments.  Prior to the DistributionDate, the Company and the Rights Agent shall, if the Company so directs,supplement or amend any provision of this Agreement without the approval of anyholders of certificates representing shares of Common Stock.  From and after the Distribution Date, theCompany and the Rights Agent shall, if the Company so directs, supplement oramend this Agreement without the approval of any holders of Rights Certificatesin order (i) to cure any ambiguity, (ii) to correct or supplement any provisioncontained herein which may be defective or inconsistent with any otherprovisions herein, (iii) to shorten or lengthen any time period hereunder or(iv) to change or supplement the provisions hereunder in any manner which theCompany may deem necessary or desirable and which shall not adversely affectthe interests of the holders of Rights Certificates (other than an AcquiringPerson or an Affiliate or Associate of an Acquiring Person).  Upon the delivery of a certificate from anappropriate officer of the Company which states that the proposed supplement oramendment is in compliance with the terms of this Section 27, the RightsAgent shall execute such supplement or amendment.  Notwithstanding anything herein to the contrary, this Agreementmay not be amended (other than pursuant to clauses (i) or (ii) of the precedingsentence) at a time when the Rights are not redeemable.

 

Section 28.                   Successors.  All the covenants and provisions of thisAgreement by or for the benefit of the Company or the Rights Agent shall bindand inure to the benefit of their respective successors and assigns hereunder.

 

Section 29.                   Determinations andActions by the Board of Directors, etc.  Forall purposes of this Agreement, any calculation of the number of shares ofCommon Stock or any other class of capital stock outstanding at any particulartime, including for purposes of determining the particular percentage of suchoutstanding shares of Common Stock of which any Person is the Beneficial Owner,shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) ofthe General Rules and Regulations under the Exchange Act.  The Board of Directors of the Company shallhave the exclusive power and authority to administer this Agreement and toexercise all rights and powers specifically granted to the Board or to theCompany, or as may be necessary or advisable in the administration of thisAgreement, including, without limitation, the right and power to (i) interpretthe provisions of this Agreement, and (ii) make all determinations deemednecessary or advisable for the administration of this Agreement (including adetermination to redeem or not redeem the Rights or to amend theAgreement).  All such actions,calculations, interpretations and determinations (including, for purposes ofclause (y) below, all omissions with respect to the foregoing) which are doneor made by the Board in good faith, shall (x) be final, conclusive and bindingon the Company, the Rights Agent, the holders of the Rights and all otherparties, and (y) not subject the Board or any of the directors on the Board toany liability to the holders of the Rights.

 

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Section 30.                   Benefits of thisAgreement.  Nothing in this Agreementshall be construed to give to any Person other than the Company, the RightsAgent and the registered holders of the Rights Certificates (and, prior to theDistribution Date, registered holders of the Common Stock) any legal orequitable right, remedy or claim under this Agreement; but this Agreement shallbe for the sole and exclusive benefit of the Company, the Rights Agent and theregistered holders of the Rights Certificates (and, prior to the DistributionDate, registered holders of the Common Stock).

 

Section 31.                   Severability.  If any term, provision, covenant orrestriction of this Agreement is held by a court of competent jurisdiction orother authority to be invalid, void or unenforceable, the remainder of theterms, provisions, covenants and restrictions of this Agreement shall remain infull force and effect and shall in no way be affected, impaired or invalidated;provided, however, that notwithstanding anything in this Agreement to thecontrary, if any such term, provision, covenant or restriction is held by suchcourt or authority to be invalid, void or unenforceable and the Board ofDirectors of the Company determines in its good faith judgment that severingthe invalid language from this Agreement would adversely affect the purpose oreffect of this Agreement, the right of redemption set forth in Section 23hereof shall be reinstated and shall not expire until the close of business onthe tenth Business Day following the date of such determination by the Board ofDirectors.

 

Section 32.                   Governing Law.  This Agreement, each Right and each RightsCertificate issued hereunder shall be deemed to be a contract made under thelaws of the State of Delaware and for all purposes shall be governed by andconstrued in accordance with the laws of such State applicable to contractsmade and to be performed entirely within such State; provided, however,that the rights, obligations and duties of the Rights Agent shall be governedby and construed in accordance with the laws of the State of New York.  The parties agree that all actions andproceedings arising out of this Agreement or any of the transactionscontemplated hereby, shall be brought in the U.S. District Court in theSouthern District of New York or in a New York State Court in the County of NewYork and that, in connection with any such action or proceeding, submit to thejurisdiction of, and venue in, such court.

 

Section 33.                   Counterparts.  This Agreement may be executed in any numberof counterparts and each of such counterparts shall for all purposes be deemedto be an original, and all such counterparts shall together constitute but oneand the same instrument.

 

Section 34.                   DescriptiveHeadings.  Descriptive headings of theseveral sections of this Agreement are inserted for convenience only and shallnot control or affect the meaning or construction of any of the provisionshereof.

 

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INWITNESS WHEREOF, the parties hereto have caused this Agreement to be dulyexecuted, all as of the day and year first above written.

 
|   | JACKSON  HEWITT TAX SERVICE INC. |
|--------|----------------------------------|
|   |                             |   |
|   |                             |   |
|   | By:                              | /s/  Steven L. Barnett |   |
|   |                             | Name:  Steven L. Barnett |
|   |                             | Title:  Senior Vice President |
|   |                             |   |
|   |                             |   |
|   | THE  BANK OF NEW YORK            |
|   |                             |
|   |                             |
|   | By:                              | /s/  Eon A. Canzius |   |
|   |                             | Name:  Eon A. Canzius |
|   |                             | Title:  Vice President |

 

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Exhibit A

 

FORM OF

CERTIFICATE OF DESIGNATION, PREFERENCES AND

RIGHTS OF SERIES A PREFERRED STOCK

 

of

 

JACKSON HEWITT TAX SERVICE INC.

 

Pursuant to Section 151 of the GeneralCorporation Law

of the State of Delaware

 

We,the undersigned officers of JACKSON HEWITT TAX SERVICE INC., a corporationorganized and existing under the General Corporation Law of the State ofDelaware, in accordance with the provisions of Section 103 thereof DOHEREBY CERTIFY:

 

Thatpursuant to the authority conferred upon the Board of Directors by the Amendedand Restated Certificate of Incorporation of the said Corporation, the saidBoard of Directors on June 21, 2004, adopted the following resolutioncreating a series of 200,000 shares of Preferred Stock designated as Series AJunior Participating Preferred Stock:

 

RESOLVED,that pursuant to the authority vested in the Board of Directors of thisCorporation in accordance with the provisions of its Amended and RestatedCertificate of Incorporation, a series of Preferred Stock of the Corporation beand it hereby is created, and that the designation and amount thereof and thevoting powers, preferences and relative, participating, optional and otherspecial rights of the shares of such series, and the qualifications, limitationsor restrictions thereof are as follows:

 

Section 1.  Designation and Amount.  The shares of such series shall bedesignated as “Series A Junior Participating Preferred Stock” and the number ofshares constituting such series shall be 200,000.

 

Section 2.  Dividends and Distributions.

 

(A)  The holders of shares of Series A JuniorParticipating Preferred Stock shall be entitled to receive, when, as and ifdeclared by the Board of Directors out of funds legally available for thepurpose, quarterly dividends payable in cash on the 15th day of May, August,November and February in each year (each such date being referred toherein as a “Quarterly Dividend Payment Date”), commencing on the firstQuarterly Dividend Payment Date after the first issuance of a share or fractionof a share of Series A Junior Participating Preferred Stock, in an amount pershare (rounded to the nearest cent) equal to the greater of (a) $0.01 or (b)subject to the provision for adjustment hereinafter set forth, 1,000 times theaggregate per share amount of all cash dividends, and 1,000 times the aggregateper share amount (payable in kind) of all non-cash

 

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dividends or other distributions other than adividend payable in shares of Common Stock or a subdivision of the outstandingshares of Common Stock (by reclassification or otherwise), declared on theCommon Stock, par value $0.01 per share, of the Corporation (the “CommonStock”) since the immediately preceding Quarterly Dividend Payment Date, or,with respect to the first Quarterly Dividend Payment Date, since the firstissuance of any share or fraction of a share of Series A Junior ParticipatingPreferred Stock.  In the event theCorporation shall at any time after June 25, 2004 (the “Rights DeclarationDate”) (i) declare any dividend on Common Stock payable in shares of CommonStock, (ii) subdivide the outstanding Common Stock, or (iii) combine theoutstanding Common Stock into a smaller number of shares, then in each suchcase the amount to which holders of shares of Series A Junior ParticipatingPreferred Stock were entitled immediately prior to such event under clause (b)of the preceding sentence shall be adjusted by multiplying such amount by afraction the numerator of which is the number of shares of Common Stockoutstanding immediately after such event and the denominator of which is thenumber of shares of Common Stock that were outstanding immediately prior tosuch event.

 

(B)  The Corporation shall declare a dividend ordistribution on the Series A Junior Participating Preferred Stock as providedin Paragraph (A) above immediately after it declares a dividend or distributionon the Common Stock (other than a dividend payable in shares of Common Stock);provided that, in the event no dividend or distribution shall have beendeclared on the Common Stock during the period between any Quarterly DividendPayment Date and the next subsequent Quarterly Dividend Payment Date, adividend of $0.01 per share on the Series A Junior Participating PreferredStock shall nevertheless be payable on such subsequent Quarterly DividendPayment Date.

 

(C)  Dividends shall begin to accrue and becumulative on outstanding shares of Series A Junior Participating PreferredStock from the Quarterly Dividend Payment Date next preceding the date of issueof such shares of Series A Junior Participating Preferred Stock, unless thedate of issue of such shares is prior to the record date for the firstQuarterly Dividend Payment Date, in which case dividends on such shares shallbegin to accrue from the date of issue of such shares, or unless the date ofissue is a Quarterly Dividend Payment Date or is a date after the record datefor the determination of holders of shares of Series A Junior ParticipatingPreferred Stock entitled to receive a quarterly dividend and before suchQuarterly Dividend Payment Date, in either of which events such dividends shallbegin to accrue and be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bearinterest.  Dividends paid on the sharesof Series A Junior Participating Preferred Stock in an amount less than thetotal amount of such dividends at the time accrued and payable on such sharesshall be allocated pro rata on a share-by-share basis among all such shares atthe time outstanding.  The Board ofDirectors may fix a record date for the determination of holders of shares ofSeries A Junior Participating Preferred Stock entitled to receive payment of adividend or distribution declared thereon, which record date shall be no morethan 30 days prior to the date fixed for the payment thereof.

 

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Section 3.  Voting Rights.  The holders of shares of Series A JuniorParticipating Preferred Stock shall have the following voting rights:

 

(A)  Subject to the provision for adjustmenthereinafter set forth, each share of Series A Junior Participating PreferredStock shall entitle the holder thereof to 1,000 votes on all matters submittedto a vote of the stockholders of the Corporation.  In the event the Corporation shall at any time after the RightsDeclaration Date (i) declare any dividend on Common Stock payable in shares ofCommon Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine theoutstanding Common Stock into a smaller number of shares, then in each suchcase the number of votes per share to which holders of shares of Series AJunior Participating Preferred Stock were entitled immediately prior to such eventshall be adjusted by multiplying such number by a fraction the numerator ofwhich is the number of shares of Common Stock outstanding immediately aftersuch event and the denominator of which is the number of shares of Common Stockthat were outstanding immediately prior to such event.

 

(B)  Except as otherwise provided herein or bylaw, the holders of shares of Series A Junior Participating Preferred Stock andthe holders of shares of Common Stock shall vote together as one class on allmatters submitted to a vote of stockholders of the Corporation.

 

(C)  (i) If at any time dividends on any Series A Junior Participating PreferredStock shall be in arrears in an amount equal to six (6) quarterly dividendsthereon, the occurrence of such contingency shall mark the beginning of aperiod (herein called a “default period”) which shall extend until such timewhen all accrued and unpaid dividends for all previous quarterly dividendperiods and for the current quarterly dividend period on all shares of Series AJunior Participating Preferred Stock then outstanding shall have been declaredand paid or set apart for payment. During each default period, all holders of Preferred Stock (includingholders of the Series A Junior Participating Preferred Stock) with dividends inarrears in an amount equal to six (6) quarterly dividends thereon, voting as aclass, irrespective of series, shall have the right to elect two (2) directors.

 

(ii)  During any default period, such voting rightof the holders of Series A Junior Participating Preferred Stock may beexercised initially at a special meeting called pursuant to subparagraph (iii)of this Section 3(C) or at any annual meeting of stockholders, andthereafter at annual meetings of stockholders, provided that neither such votingright nor the right of the holders of any other series of Preferred Stock, ifany, to increase, in certain cases, the authorized number of directors shall beexercised unless the holders of ten percent (10%) in number of shares ofPreferred Stock outstanding shall be present in person or by proxy.  The absence of a quorum of the holders ofCommon Stock shall not affect the exercise by the holders of Preferred Stock ofsuch voting right.  At any meeting atwhich the holders of Preferred Stock shall exercise such voting right initiallyduring an existing default period, they shall have the right, voting as aclass, to elect directors to fill such vacancies, if any, in the Board ofDirectors as may then exist up to two (2) directors or, if such right is exercisedat an annual meeting, to elect two (2) directors.  If the number which may be so elected at any

 

A-3

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special meeting does not amount to therequired number, the holders of the Preferred Stock shall have the right tomake such increase in the number of directors as shall be necessary to permitthe election by them of the required number. After the holders of the Preferred Stock shall have exercised theirright to elect directors in any default period and during the continuance ofsuch period, the number of directors shall not be increased or decreased exceptby vote of the holders of Preferred Stock as herein provided or pursuant to therights of any equity securities ranking senior to or pari passu with the SeriesA Junior Participating Preferred Stock.

 

(iii)  Unless the holders of Preferred Stock shall,during an existing default period, have previously exercised their right toelect directors, the Board of Directors may order, or any stockholder orstockholders owning in the aggregate not less than ten percent (10%) of thetotal number of shares of Preferred Stock outstanding, irrespective of series,may request, the calling of a special meeting of the holders of PreferredStock, which meeting shall thereupon be called by the President, aVice-President or the Secretary of the Corporation.  Notice of such meeting and of any annual meeting at which holdersof Preferred Stock are entitled to vote pursuant to this Paragraph (C)(iii)shall be given to each holder of record of Preferred Stock by mailing a copy ofsuch notice to him at his last address as the same appears on the books of theCorporation.  Such meeting shall becalled for a time not earlier than 20 days and not later than 60 days aftersuch order, such meeting may be called on similar notice by any stockholder orstockholders owning in the aggregate not less than ten percent (10%) of thetotal number of shares of Preferred Stock outstanding.  Notwithstanding the provisions of thisParagraph (C)(iii), no such special meeting shall be called during the periodwithin 60 days immediately preceding the date fixed for the next annual meetingof the stockholders.

 

(iv)  In any default period, the holders of CommonStock, and other classes of stock of the Corporation if applicable, shallcontinue to be entitled to elect the whole number of directors until theholders of Preferred Stock shall have exercised their right to elect two (2)directors voting as a class, after the exercise of which right (x) thedirectors so elected by the holders of Preferred Stock shall continue in officeuntil their successors shall have been elected by such holders or until theexpiration of the default period, and (y) any vacancy in the Board of Directorsmay (except as provided in Paragraph (C)(ii) of this Section 3) be filledby vote of a majority of the remaining directors theretofore elected by theholders of the class of stock which elected the director whose office shallhave become vacant.  References in thisParagraph (C) to directors elected by the holders of a particular class ofstock shall include directors elected by such directors to fill vacancies asprovided in clause (y) of the foregoing sentence.

 

(v)  Immediately upon the expiration of a defaultperiod, (x) the right of the holders of Preferred Stock as a class to electdirectors shall cease, (y) the term of any directors elected by the holders ofPreferred Stock as a class shall terminate, and (z) the number of directorsshall be such number as may be provided for in the certificate of incorporationor by-laws irrespective of any increase made pursuant to the provisions ofParagraph (C)(ii) of this Section 3 (such number being subject, however,to change thereafter in any manner provided by law or in the certificate ofincorporation or by-laws).

 

A-4

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Any vacancies in the Board of Directorseffected by the provisions of clauses (y) and (z) in the preceding sentence maybe filled by a majority of the remaining directors.

 

(D)  Except as set forth herein, holders ofSeries A Junior Participating Preferred Stock shall have no special votingrights and their consent shall not be required (except to the extent they areentitled to vote with holders of Common Stock as set forth herein) for takingany corporate action.

 

Section 4.  Certain Restrictions.

 

(A)  Whenever quarterly dividends or otherdividends or distributions payable on the Series A Junior ParticipatingPreferred Stock as provided in Section 2 are in arrears, thereafter anduntil all accrued and unpaid dividends and distributions, whether or notdeclared, on shares of Series A Junior Participating Preferred Stockoutstanding shall have been paid in full, the Corporation shall not

 

(i)  declareor pay dividends on, make any other distributions on, or redeem or purchase orotherwise acquire for consideration any shares of stock ranking junior (eitheras to dividends or upon liquidation, dissolution or winding up) to the Series AJunior Participating Preferred Stock;

 

(ii) declare or pay dividends on or make any other distributions on anyshares of stock ranking on a parity (either as to dividends or uponliquidation, dissolution or winding up) with the Series A Junior ParticipatingPreferred Stock, except dividends paid ratably on the Series A JuniorParticipating Preferred Stock and all such parity stock on which dividends arepayable or in arrears in proportion to the total amounts to which the holdersof all such shares are then entitled;

 

(iii) redeem or purchase or otherwise acquire for consideration shares of anystock ranking on a parity (either as to dividends or upon liquidation,dissolution or winding up) with the Series A Junior Participating PreferredStock, provided that the Corporation may at any time redeem, purchase orotherwise acquire shares of any such parity stock in exchange for shares of anystock of the Corporation ranking junior (either as to dividends or upondissolution, liquidation or winding up) to the Series A Junior Participating PreferredStock; or

 

(iv) purchase or otherwise acquire for consideration any shares of Series AJunior Participating Preferred Stock, or any shares of stock ranking on aparity with the Series A Junior Participating Preferred Stock, except inaccordance with a purchase offer made in writing or by publication (asdetermined by the Board of Directors) to all holders of such shares upon suchterms as the Board of Directors, after consideration of the respective annualdividend rates and other relative rights and preferences of the respectiveseries and classes, shall determine in good faith will result in fair andequitable treatment among the respective series or classes.

 

A-5

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(B)  The Corporation shall not permit anysubsidiary of the Corporation to purchase or otherwise acquire forconsideration any shares of stock of the Corporation unless the Corporationcould, under Paragraph (A) of this Section 4, purchase or otherwiseacquire such shares at such time and in such manner.

 

Section 5.  Reacquired Shares.  Any shares of Series A Junior ParticipatingPreferred Stock purchased or otherwise acquired by the Corporation in anymanner whatsoever shall be retired and cancelled promptly after the acquisitionthereof.  All such shares shall upontheir cancellation become authorized but unissued shares of Preferred Stock andmay be reissued as part of a new series of Preferred Stock to be created byresolution or resolutions of the Board of Directors, subject to the conditionsand restrictions on issuance set forth herein.

 

Section 6.  Liquidation, Dissolution or Winding Up.  (A) Upon any liquidation (voluntary or otherwise), dissolution or winding upof the Corporation, no distribution shall be made to the holders of shares ofstock ranking junior (either as to dividends or upon liquidation, dissolutionor winding up) to the Series A Junior Participating Preferred Stock unless,prior thereto, the holders of shares of Series A Junior Participating PreferredStock shall have received an amount equal to $1,000 per share of Series AParticipating Preferred Stock, plus an amount equal to accrued and unpaiddividends and distributions thereon, whether or not declared, to the date ofsuch payment (the “Series A Liquidation Preference”).  Following the payment of the full amount of the Series ALiquidation Preference, no additional distributions shall be made to theholders of shares of Series A Junior Participating Preferred Stock unless,prior thereto, the holders of shares of Common Stock shall have received anamount per share (the “Common Adjustment”) equal to the quotient obtained bydividing (i) the Series A Liquidation Preference by (ii) 1,000 (asappropriately adjusted as set forth in subparagraph (C) below to reflect suchevents as stock splits, stock dividends and recapitalizations with respect tothe Common Stock) (such number in clause (ii), the “Adjustment Number”).  Following the payment of the full amount ofthe Series A Liquidation Preference and the Common Adjustment in respect of alloutstanding shares of Series A Junior Participating Preferred Stock and CommonStock, respectively, holders of Series A Junior Participating Preferred Stockand holders of shares of Common Stock shall receive their ratable and proportionateshare of the remaining assets to be distributed in the ratio of the AdjustmentNumber to 1 with respect to such Preferred Stock and Common Stock, on a pershare basis, respectively.

 

(B)  In the event, however, that there are notsufficient assets available to permit payment in full of the Series ALiquidation Preference and the liquidation preferences of all other series ofpreferred stock, if any, which rank on a parity with the Series A JuniorParticipating Preferred Stock, then such remaining assets shall be distributedratably to the holders of such parity shares in proportion to their respectiveliquidation preferences.  In the event,however, that there are not sufficient assets available to permit payment infull of the Common Adjustment, then such remaining assets shall be distributedratably to the holders of Common Stock.

 

A-6

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(C)  In the event the Corporation shall at anytime after the Rights Declaration Date (i) declare any dividend on Common Stockpayable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,or (iii) combine the outstanding Common Stock into a smaller number of shares,then in each such case the Adjustment Number in effect immediately prior tosuch event shall be adjusted by multiplying such Adjustment Number by afraction the numerator of which is the number of shares of Common Stockoutstanding immediately after such event and the denominator of which is thenumber of shares of Common Stock that were outstanding immediately prior tosuch event.

 

Section 7.  Consolidation, Merger, etc.  In case the Corporation shall enter into anyconsolidation, merger, combination or other transaction in which the shares ofCommon Stock are exchanged for or changed into other stock or securities, cashand/or any other property, then in any such case the shares of Series A JuniorParticipating Preferred Stock shall at the same time be similarly exchanged orchanged in an amount per share (subject to the provision for adjustmenthereinafter set forth) equal to 1,000 times the aggregate amount of stock,securities, cash and/or any other property (payable in kind), as the case maybe, into which or for which each share of Common Stock is changed or exchanged.  In the event the Corporation shall at anytime after the Rights Declaration Date (i) declare any dividend on Common Stockpayable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,or (iii) combine the outstanding Common Stock into a smaller number of shares,then in each such case the amount set forth in the preceding sentence withrespect to the exchange or change of shares of Series A Junior ParticipatingPreferred Stock shall be adjusted by multiplying such amount by a fraction thenumerator of which is the number of shares of Common Stock outstandingimmediately after such event and the denominator of which is the number ofshares of Common Stock that were outstanding immediately prior to such event.

 

Section 8.  No Redemption.  The shares of Series A Junior ParticipatingPreferred Stock shall not be redeemable.

 

Section 9.  Ranking.  The Series A Junior Participating Preferred Stock shall rankjunior to all other series of the Corporation’s Preferred Stock as to thepayment of dividends and the distribution of assets, unless the terms of anysuch series shall provide otherwise.

 

Section 10.  Amendment.  At any time when any shares of Series A Junior ParticipatingPreferred Stock are outstanding, neither the Amended and Restated Certificateof Incorporation of the Corporation nor this Certificate of Designation shallbe amended in any manner which would materially alter or change the powers,preferences or special rights of the Series A Junior Participating PreferredStock so as to affect them adversely without the affirmative vote of theholders of a majority or more of the outstanding shares of Series A JuniorParticipating Preferred Stock, voting separately as a class.

 

A-7

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Section 11.  Fractional Shares.  Series A Junior Participating PreferredStock may be issued in fractions of a share which shall entitle the holder, inproportion to such holder’s fractional shares, to exercise voting rights,receive dividends, participate in distributions and to have the benefit of allother rights of holders of Series A Junior Participating Preferred Stock.

 

INWITNESS WHEREOF, we have executed and subscribed this Certificate and do affirmthe foregoing as true under the penalties of perjury this      day of June, 2004.

 

 
|      |                   |
|-----------|------------------------|
|      | Chairman  of the Board |
|      |                   |
| Attest:   |                   |
|      |                   |
|      |                   |
|      |                   |   |
| Secretary |                   |
|           |                        |  |

 

A-8

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Exhibit B

 

[Form of Rights Certificate]

 

| Certificate  No. R- |   |   |                   Rights |
|---------------------|--------|--------|----------------------------------------------------------------------------------------------------------|

 

NOTEXERCISABLE AFTER                      , 2014 OR EARLIER IF REDEEMED BY THE COMPANY.  THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THEOPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTSAGREEMENT.  UNDER CERTAIN CIRCUMSTANCES,RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED INTHE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULLAND VOID.  [THE RIGHTS REPRESENTED BYTHIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS ORBECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).  ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTEDHEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED INSECTION 7(e) OF SUCH AGREEMENT.](1)

 

Rights Certificate

 

[THE COMPANY]

 

Thiscertifies that                                            ,or registered assigns, is the registered owner of the number of Rights setforth above, each of which entitles the owner thereof, subject to the terms,provisions and conditions of the Rights Agreement, dated as of              ,2004 (the “Rights Agreement”), between Jackson Hewitt Tax Service Inc., aDelaware corporation (the “Company”), and The Bank of New York, a New Yorkbanking corporation (the “Rights Agent”), to purchase from the Company at anytime prior to 5:00 P.M. (New York City time) on                      , 2014 (unless such date is extended prior thereto bythe Board of Directors) at the office or offices of the Rights Agent designatedfor such purpose, or its successors as Rights Agent, one one-thousandth of afully paid, non-assessable share of Series A Junior Participating PreferredStock (the “Preferred Stock”) of the Company, at a purchase price of$           per oneone-thousandth of a share (the “Purchase Price”), upon presentation andsurrender of this Rights Certificate with the Form of Election to Purchase andrelated Certificate duly executed.  Thenumber of Rights evidenced by this Rights Certificate (and the number of shareswhich may be purchased upon exercise thereof) set forth above, and the Purchase

 

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(1)                                  The portion of the legend in brackets shallbe inserted only if applicable and shall replace the preceding sentence.

 

B-1

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Price per share set forth above, are thenumber and Purchase Price as of                      , 2004, based on the Preferred Stock as constituted atsuch date.  The Company reserves theright to require prior to the occurrence of a Triggering Event (as such term isdefined in the Rights Agreement) that a number of Rights be exercised so thatonly whole shares of Preferred Stock will be issued.

 

Uponthe occurrence of a Section 11(a)(ii) Event (as such term is defined inthe Rights Agreement), if the Rights evidenced by this Rights Certificate arebeneficially owned by (i) an Acquiring Person or an Affiliate or Associate ofany such Acquiring Person (as such terms are defined in the Rights Agreement),(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or(iii) under certain circumstances specified in the Rights Agreement, atransferee of a person who, after such transfer, became an Acquiring Person, oran Affiliate or Associate of an Acquiring Person, such Rights shall become nulland void and no holder hereof shall have any right with respect to such Rightsfrom and after the occurrence of such Section 11(a)(ii) Event.

 

Asprovided in the Rights Agreement, the Purchase Price and the number and kind ofshares of Preferred Stock or other securities, which may be purchased upon theexercise of the Rights evidenced by this Rights Certificate are subject tomodification and adjustment upon the happening of certain events, includingTriggering Events.

 

ThisRights Certificate is subject to all of the terms, provisions and conditions ofthe Rights Agreement, which terms, provisions and conditions are herebyincorporated herein by reference and made a part hereof and to which RightsAgreement reference is hereby made for a full description of the rights,limitations of rights, obligations, duties and immunities hereunder of theRights Agent, the Company and the holders of the Rights Certificates, whichlimitations of rights include the temporary suspension of the exercisability ofsuch Rights under the specific circumstances set forth in the RightsAgreement.  Copies of the RightsAgreement are on file at the above-mentioned office of the Rights Agent and arealso available upon written request to the Rights Agent.

 

ThisRights Certificate, with or without other Rights Certificates, upon surrenderat the principal office or offices of the Rights Agent designated for suchpurpose, may be exchanged for another Rights Certificate or Rights Certificatesof like tenor and date evidencing Rights entitling the holder to purchase alike aggregate number of one one-thousandths of a share of Preferred Stock asthe Rights evidenced by the Rights Certificate or Rights Certificatessurrendered shall have entitled such holder to purchase.  If this Rights Certificate shall beexercised in part, the holder shall be entitled to receive upon surrenderhereof another Rights Certificate or Rights Certificates for the number ofwhole Rights not exercised.

 

Subjectto the provisions of the Rights Agreement, the Rights evidenced by thisCertificate may be redeemed by the Company at its option at a redemption priceof $.001 per Right at any time prior to the earlier of the close of business on(i) the tenth Business Day following the Stock Acquisition Date (as such timeperiod may be extended pursuant to the Rights Agreement), and (ii) the FinalExpiration Date. The

 

B-2

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foregoing notwithstanding, the Rightsgenerally may not be redeemed for one hundred eighty (180) days following achange in a majority of the Board as a result of a proxy contest.  In addition, under certain circumstancesfollowing the Stock Acquisition Date, the Rights may be exchanged, in whole or inpart, for shares of the Common Stock, or shares of preferred stock of theCompany having essentially the same value or economic rights as suchshares.  Immediately upon the action ofthe Board of Directors of the Company authorizing any such exchange, andwithout any further action or any notice, the Rights (other than Rights whichare not subject to such exchange) will terminate and the Rights will onlyenable holders to receive the shares issuable upon such exchange.

 

Nofractional shares of Preferred Stock will be issued upon the exercise of anyRight or Rights evidenced hereby (other than fractions which are integralmultiples of one one-thousandth of a share of Preferred Stock, which may, atthe election of the Company, be evidenced by depositary receipts), but in lieuthereof a cash payment will be made, as provided in the Rights Agreement. TheCompany, at its election, may require that a number of Rights be exercised sothat only whole shares of Preferred Stock would be issued.

 

Noholder of this Rights Certificate shall be entitled to vote or receivedividends or be deemed for any purpose the holder of shares of Preferred Stockor of any other securities of the Company which may at any time be issuable onthe exercise hereof, nor shall anything contained in the Rights Agreement orherein be construed to confer upon the holder hereof, as such, any of therights of a stockholder of the Company or any right to vote for the election ofdirectors or upon any matter submitted to stockholders at any meeting thereof,or to give consent to or withhold consent from any corporate action, or, toreceive notice of meetings or other actions affecting stockholders (except asprovided in the Rights Agreement), or to receive dividends or subscriptionrights, or otherwise, until the Right or Rights evidenced by this RightsCertificate shall have been exercised as provided in the Rights Agreement.

 

ThisRights Certificate shall not be valid or obligatory for any purpose until itshall have been countersigned by the Rights Agent.

 

B-3

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WITNESSthe facsimile signature of the proper officers of the Company and its corporateseal.

 

Datedas of                      ,         

 

 
|                  | JACKSON  HEWITT TAX SERVICE INC. |
|-----------------------|----------------------------------|
|                  |                             |
|                  |                             |
|                  | By:                              |   |
|                  |                             | Title: |
|                  |                             |
| Countersigned:        |                             |
|                  |                             |
| THE  BANK OF NEW YORK |                             |
|                  |                             |
|                  |                             |
| By:                   |                             |   |   |
|                  | Authorized  Signature            |   |
|                       |                                  |  |  |  |

 

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[Form of Reverse Side of Rights Certificate]

 

FORM OF ASSIGNMENT

 

(To be executed by the registered holder if such holder desires to transfer the Rights Certificate.)

 

FORVALUE RECEIVED **•** hereby sells,assigns and transfers unto • (Please printname and address of transferee) this Rights Certificate, together with allright, title and interest therein, and does hereby irrevocably constitute andappoint • Attorney, to transfer the within RightsCertificate on the books of the within named Company, with full power ofsubstitution.

 

Dated:                                    ,    

 

 
|                   |      |
|------------------------|-----------|
|                   | Signature |
|                   |      |
| Signature  Guaranteed: |      |

 

----

 

Certificate

 

Theundersigned hereby certifies by checking the appropriate boxes that:

 

(1)  this Rights Certificate [ ] is [ ] is notbeing sold, assigned and transferred by or on behalf of a Person who is or wasan Acquiring Person or an Affiliate or Associate of any such Acquiring Person(as such terms are defined pursuant to the Rights Agreement);

 

(2)  after due inquiry and to the best knowledgeof the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by thisRights Certificate from any Person who is, was or subsequently became anAcquiring Person or an Affiliate or Associate of an Acquiring Person.

 

Dated:                                    ,    

 

 
|                   |      |
|------------------------|-----------|
|                   | Signature |
|                   |      |
| Signature  Guaranteed: |      |

 

----

 

NOTICE

 

Thesignature to the foregoing Assignment and Certificate must correspond to thename as written upon the face of this Rights Certificate in every particular,without alteration or enlargement or any change whatsoever.

 

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FORM OF ELECTION TO PURCHASE

 

(To be executed if holder desires to exercise Rights represented by the Rights Certificate.)

 

To:  Jackson Hewitt Tax Service Inc.:

 

Theundersigned hereby irrevocably elects to exercise                    Rights represented by this Rights Certificate to purchase the shares of PreferredStock issuable upon the exercise of the Rights (or such other securities of theCompany or of any other person which may be issuable upon the exercise of theRights) and requests that certificates for such shares be issued in the name ofand delivered to:

 

Pleaseinsert social securityor other identifying number

 

 

(Please print name and address)

 

 

 

Ifsuch number of Rights shall not be all the Rights evidenced by this RightsCertificate, a new Rights Certificate for the balance of such Rights shall beregistered in the name of and delivered to:

 

Pleaseinsert social securityor other identifying number

 

 

(Please print name and address)

 

 

 

Dated:                                    ,    

 

 
|                   |      |
|------------------------|-----------|
|                   | Signature |
|                   |      |
| Signature  Guaranteed: |      |

 

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Certificate

 

Theundersigned hereby certifies by checking the appropriate boxes that:

 

(1)  the Rights evidenced by this RightsCertificate [ ] are [ ] are not being exercised by or on behalf of a Person whois or was an Acquiring Person or an Affiliate or Associate of any suchAcquiring Person (as such terms are defined pursuant to the Rights Agreement);

 

(2)  after due inquiry and to the best knowledgeof the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by thisRights Certificate from any Person who is, was or became an Acquiring Person oran Affiliate or Associate of an Acquiring Person.

 

Dated:                                    ,    

 

 
|                   |      |
|------------------------|-----------|
|                   | Signature |
|                   |      |
| Signature  Guaranteed: |      |

 

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NOTICE

 

Thesignature to the foregoing Election to Purchase and Certificate must correspondto the name as written upon the face of this Rights Certificate in everyparticular, without alteration or enlargement or any change whatsoever.

 

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Exhibit C

 

SUMMARY OF RIGHTS TO PURCHASE

 

PREFERRED STOCK

 

OnJune 21, 2004, the Board of Directors of Jackson Hewitt Tax Service Inc.(the “Company”) declared a dividend distribution of one Right for eachoutstanding share of Company Common Stock to stockholders of record at theconsummation of the Company’s initial public offering of Company Common Stock(the “Record Date”).  Each Rightentitles the registered holder to purchase from the Company a unit consistingof one one-thousandth of a share (a “Unit”) of Series A Junior ParticipatingPreferred Stock, par value $0.01 per share (the “Series A Preferred Stock”) ata Purchase Price of $116.00 per Unit, subject to adjustment.  The description and terms of the Rights areset forth in a Rights Agreement (the “Rights Agreement”) between the Companyand The Bank of New York, as Rights Agent.

 

Initially,the Rights will be attached to all Common Stock certificates representingshares then outstanding, and no separate Rights Certificates will bedistributed.  Subject to certainexceptions specified in the Rights Agreement, the Rights will separate from theCommon Stock and a Distribution Date will occur upon the earlier of (i) 10business days following a public announcement that a person or group ofaffiliated or associated persons (an “Acquiring Person”) has acquiredbeneficial ownership of 15% or more of the outstanding shares of Common Stock(the “Stock Acquisition Date”), other than as a result of repurchases of stockby the Company or certain inadvertent actions by institutional or certain otherstockholders or (ii) 10 business days (or such later date as the Board shalldetermine) following the commencement of a tender offer or exchange offer thatwould result in a person or group becoming an Acquiring Person.  Until the Distribution Date, (i) the Rightswill be evidenced by the Common Stock certificates and will be transferred withand only with such Common Stock certificates, (ii) new Common Stockcertificates issued after the Record Date will contain a notation incorporatingthe Rights Agreement by reference and (iii) the surrender for transfer of anycertificates for Common Stock outstanding will also constitute the transfer ofthe Rights associated with the Common Stock represented by suchcertificate.  Pursuant to the RightsAgreement, the Company reserves the right to require prior to the occurrence ofa Triggering Event (as defined below) that, upon any exercise of Rights, anumber of Rights be exercised so that only whole shares of Preferred Stock willbe issued.

 

TheRights are not exercisable until the Distribution Date and will expire at 5:00P.M. (New York City time) on June 24, 2014, unless such date is extendedor the Rights are earlier redeemed or exchanged by the Company as describedbelow.

 

Assoon as practicable after the Distribution Date, Rights Certificates will bemailed to holders of record of the Common Stock as of the close of business onthe Distribution Date and, thereafter, the separate Rights Certificates alonewill represent the Rights.  Except asotherwise determined by the Board of Directors, only shares of Common Stockissued prior to the Distribution Date will be issued with Rights.

 

C-1

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Inthe event that a Person becomes an Acquiring Person, each holder of a Rightwill thereafter have the right to receive, upon exercise, Common Stock (or, incertain circumstances, cash, property or other securities of the Company)having a value equal to two times the exercise price of the Right.Notwithstanding any of the foregoing, following the occurrence of the event setforth in this paragraph, all Rights that are, or (under certain circumstancesspecified in the Rights Agreement) were, beneficially owned by any AcquiringPerson will be null and void.  However,Rights are not exercisable following the occurrence of the event set forthabove until such time as the Rights are no longer redeemable by the Company asset forth below.

 

Forexample, at an exercise price of $116 per Right, each Right not owned by anAcquiring Person (or by certain related parties) following an event set forthin the preceding paragraph would entitle its holder to purchase $232 worth ofCommon Stock (or other consideration, as noted above) for $116.  Assuming that the Common Stock had a pershare value of $17.00 at such time, the holder of each valid Right would beentitled to purchase 13 shares of Common Stock for $116.

 

Inthe event that, at any time following the Stock Acquisition Date, (i) theCompany engages in a merger or other business combination transaction in whichthe Company is not the surviving corporation, (ii) the Company engages in amerger or other business combination transaction in which the Company is thesurviving corporation and the Common Stock of the Company is changed orexchanged, or (iii) 50% or more of the Company’s assets, cash flow or earningpower is sold or transferred, each holder of a Right (except Rights which havepreviously been voided as set forth above) shall thereafter have the right toreceive, upon exercise, common stock of the acquiring company having a valueequal to two times the exercise price of the Right.  The events set forth in this paragraph and in the secondpreceding paragraph are referred to as the “Triggering Events.”

 

Atany time after a person becomes an Acquiring Person and prior to theacquisition by such person or group of fifty percent (50%) or more of theoutstanding Common Stock, the Board may exchange the Rights (other than Rightsowned by such person or group which have become void), in whole or in part, atan exchange ratio of one share of Common Stock, or one one-thousandth of ashare of Preferred Stock (or of a share of a class or series of the Company’spreferred stock having equivalent rights, preferences and privileges), perRight (subject to adjustment).

 

ThePurchase Price payable, and the number of Units of Preferred Stock or othersecurities or property issuable, upon exercise of the Rights are subject toadjustment from time to time to prevent dilution (i) in the event of a stockdividend on, or a subdivision, combination or reclassification of, thePreferred Stock, (ii) if holders of the Preferred Stock are granted certainrights or warrants to subscribe for Preferred Stock or convertible securitiesat less than the current market price of the Preferred Stock, or (iii) upon thedistribution to holders of the Preferred Stock of evidences of indebtedness orassets (excluding regular quarterly cash dividends) or of subscription rightsor warrants (other than those referred to above).

 

C-2

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Withcertain exceptions, no adjustment in the Purchase Price will be required untilcumulative adjustments amount to at least 1% of the Purchase Price.  No fractional Units will be issued and, inlieu thereof, an adjustment in cash will be made based on the market price of thePreferred Stock on the last trading date prior to the date of exercise.

 

Atany time until ten business days following the Stock Acquisition Date, theCompany may redeem the Rights in whole, but not in part, at a price of $.001per Right (payable in cash, Common Stock or other consideration deemedappropriate by the Board of Directors). Immediately upon the action of the Board of Directors  ordering redemption of the Rights, theRights will terminate and the only right of the holders of Rights will be toreceive the $.001 redemption price.  Theforegoing notwithstanding, the Rights generally may not redeemed for onehundred eighty (180) days following a change in a majority of the Board ofDirectors as a result of a proxy contest.

 

Untila Right is exercised, the holder thereof, as such, will have no rights as astockholder of the Company, including, without limitation, the right to vote orto receive dividends.  While thedistribution of the Rights will not be taxable to stockholders or to theCompany, stockholders may, depending upon the circumstances, recognize taxableincome in the event that the Rights become exercisable for Common Stock (orother consideration) of the Company or for common stock of the acquiringcompany or in the event of the redemption of the Rights as set forth above.

 

Anyof the provisions of the Rights Agreement may be amended by the Board ofDirectors of the Company prior to the Distribution Date.  After the Distribution Date, the provisionsof the Rights Agreement may be amended by the Board in order to cure any ambiguity,to make changes which do not adversely affect the interests of holders ofRights, or to shorten or lengthen any time period under the RightsAgreement.  The foregoingnotwithstanding, no amendment  may bemade at such time as the Rights are not redeemable.

 

Acopy of the Rights Agreement will be filed with the Securities and ExchangeCommission as an Exhibit to a Registration Statement on Form 8-A/Current Reporton Form 8-K.  A copy of the RightsAgreement is available free of charge from the Rights Agent.  This summary description of the Rights doesnot purport to be complete and is qualified in its entirety by reference to theRights Agreement, which is incorporated herein by reference.

 

C-3

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