Document:

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

 

 

 

 

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

  	
   

  

 

i

 

	
  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

  

 

ii

 

RIGHTS AGREEMENT

 

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

 

W  I  T  N  E  S  S  E  T  H

 

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

 

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

 

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

 

(a)                                  “Acquiring
Person” shall mean any Person who or which, together with all Affiliates
and Associates of such Person, shall be the Beneficial Owner of 15% or more of
the shares of Common Stock then outstanding, but shall not include (i) the
Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of
the Company, or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan, or (iv) any Person who becomes the Beneficial Owner of
fifteen percent (15%) or more of the shares of Common Stock then outstanding as
a result of a reduction in the number of shares of Common Stock outstanding due
to the repurchase of shares of Common Stock by the Company unless and until
such Person, after becoming aware that such Person has become the Beneficial
Owner of fifteen percent (15%) or more of the then outstanding shares of Common
Stock, acquires beneficial ownership of additional shares of Common Stock
representing 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 any
comparable or successor report) or on Schedule 13D under the Exchange Act
(or any comparable or successor report) which Schedule 13D does not state
any intention to or reserve the right to control or influence the management or
policies of the Company or

 

 

engage in any of the actions specified in
Item 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 it
regarding the same, certifies to the Company that such Person acquired shares
of Common Stock in excess of 14.9% inadvertently or without knowledge of the
terms of the Rights and who or which, together with all Affiliates and
Associates, thereafter does not acquire additional shares of Common Stock while
the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding; provided, however, that if the Person requested to
so certify fails to do so within 10 Business Days, then such Person shall
become an Acquiring Person immediately after such 10-Business-Day period.

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

“beneficially
own,” 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 or
consent solicitation made pursuant to, and in accordance with, the applicable
provisions 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 are
beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person (or any of such Person’s
Affiliates 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 to
subparagraph (ii) of this paragraph (d)) or disposing of any voting securities
of the Company; provided, however, that nothing in this paragraph
(d) shall cause a Person engaged in business as an underwriter of securities to
be the “Beneficial Owner” of, or to “beneficially own,” any securities acquired
through such Person’s participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition, and then only if such securities continue to be owned by such
Person at such expiration of forty days.

 

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

 

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

 

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

 

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

 

(j)                                     “Current Market
Price” 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)                                     “Distribution
Date” shall have the meaning set forth in Section 3(a) hereof.

 

3

 

(m)                               “Equivalent
Preferred 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)                                 “Expiration
Date” shall have the meaning set forth in Section 7(a) hereof.

 

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

 

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

 

(s)                                  “Preferred
Stock” 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 are
not a sufficient number of shares of Series A Junior Participating Preferred
Stock authorized to permit the full exercise of the Rights, any other series of
preferred stock of the Company designated for such purpose containing terms
substantially similar to the terms of the Series A Junior Participating
Preferred Stock.

 

(t)                                    “Principal
Party” 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)                                 “Rights
Certificates” shall have the meaning set forth in Section 3(a) hereof.

 

(z)                                   “Rights
Dividend Declaration Date” shall have the meaning set forth in the preamble
of this Agreement.

 

4

 

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

 

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

 

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

 

(dd)                          “Stock
Acquisition Date” shall mean the first date of public announcement (which,
for purposes of this definition, shall include, without limitation, a report
filed or amended pursuant to Section 13(d) under the Exchange Act) by the
Company 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 of
voting securities sufficient to elect at least a majority of the directors of
such corporation is beneficially owned, directly or indirectly, by such Person,
or otherwise controlled by such Person.

 

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

 

(gg)                          “Summary of
Rights” 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)                                  “Triggering
Event” shall mean any Section 11(a)(ii) Event or any Section 13
Event.

 

Section 2.                         Appointment of
Rights Agent.  The Company hereby appoints
the 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 Distribution
Date also be the holders of the Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint such
co-rights agents as it may deem necessary or desirable.

 

Section 3.                         Issuance of Rights
Certificates.

 

(a)                                  Until the earlier
of (i) the close of business on the tenth Business Day after the Stock
Acquisition Date (or, if the tenth Business Day after the Stock Acquisition
Date 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 as
the Board shall determine) after the date that a tender or exchange offer by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is

 

5

 

first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the
Exchange Act, if upon consummation thereof, such Person would become an
Acquiring Person (the earlier of (i) and (ii) being herein referred to as the “Distribution
Date”), (x) the Rights will be evidenced (subject to the provisions of
paragraph (b) of this Section 3) by the certificates for the Common Stock
registered in the names of the holders of the Common Stock (which certificates
for Common Stock shall be deemed also to be certificates for Rights) and not by
separate certificates, and (y) the Rights will be transferable only in
connection 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 Agent
will send by first-class, insured, postage-prepaid mail, to each record holder
of the Common Stock as of the close of business on the Distribution Date, at
the address of such holder shown on the records of the Company, one or more
rights certificates, in substantially the form of Exhibit B hereto (the “Rights
Certificates”), evidencing one Right for each share of Common Stock so
held, subject to adjustment as provided herein.  In the event that an adjustment in the number of Rights per share
of Common Stock has been made pursuant to Section 11(p) hereof, at the
time of distribution of the Rights Certificates, the Company shall make the
necessary and appropriate rounding adjustments (in accordance with
Section 14(a) hereof) so that Rights Certificates representing only whole
numbers of Rights are distributed and cash is paid in lieu of any fractional
Rights.  As of and after the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.

 

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

 

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

 

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

 

6

 

the
principal offices of the Company.  Under
certain circumstances, as set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced by this
certificate.  The Company will mail to
the holder of this certificate a copy of the Rights Agreement, as in effect on
the 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 Acquiring
Person or any Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement), whether currently held by or on behalf of such Person or by
any subsequent holder, may become null and void.

 

With
respect to such certificates containing the foregoing legend, until the earlier
of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone and registered holders of Common Stock shall also be
the registered holders of the associated Rights, and the transfer of any of
such certificates shall also constitute the transfer of the Rights associated
with the Common Stock represented by such certificates.

 

Section 4.                         Form of Rights
Certificates.

 

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

 

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

 

7

 

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

 

The
Rights represented by this Rights Certificate are or were beneficially owned by
a Person who was or became 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 represented hereby may become null and void in the circumstances
specified in Section 7(e) of the Rights Agreement.

 

Section 5.                         Countersignature
and Registration.

 

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

 

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

 

8

 

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

 

(a)                                  Subject to the
provisions 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 or
prior to the close of business on the Expiration Date, any Rights Certificate
or Certificates (other than Rights Certificates representing Rights that may
have 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 one
one-thousandths of a share of Preferred Stock (or, following a Triggering
Event, Common Stock, other securities, cash or other assets, as the case may
be) as the Rights Certificate or Certificates surrendered then entitles such
holder (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 make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose.  Neither the Rights Agent
nor the Company shall be obligated to take any action whatsoever with respect
to the transfer of any such surrendered Rights Certificate until the registered
holder shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.  Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e),
Section 14 hereof and Section 24 hereof, countersign and deliver to
the Person entitled thereto a Rights Certificate or Rights Certificates, as the
case may be, as so requested.  The
Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.

 

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

 

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

 

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

 

9

 

Rights Agent at the principal office or
offices of the Rights Agent designated for such purpose, together with payment
of the aggregate Purchase Price with respect to the total number of one
one-thousandths of a share (or other securities, cash or other assets, as the
case may be) as to which such surrendered Rights are then exercisable, at or
prior 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 prior
to 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 are
redeemed or exchanged as provided in Section 23 and Section 24 hereof
(the earlier of (i) and (ii) being herein referred to as the “Expiration
Date”).

 

(b)                                 The Purchase Price
for each one one-thousandth of a share of Preferred Stock pursuant to the
exercise of a Right initially shall be $116.00, shall be subject to adjustment
from time to time as provided in Section 11 and Section 13(a) hereof
and shall be payable in accordance with paragraph (c) below.

 

(c)                                  Upon receipt of a
Rights Certificate representing exercisable Rights, with the form of election
to purchase and the certificate duly executed, accompanied by payment, with
respect to each Right so exercised, of the Purchase Price per one
one-thousandth of a share of Preferred Stock (or other shares, securities, cash
or other assets, as the case may be) to be purchased as set forth below and an
amount equal to any applicable transfer tax, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-thousandths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a share
of Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to or, upon
the order of the registered holder of such Rights Certificate, registered in
such name or names as may be designated by such holder, and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the registered holder
of such Rights Certificate.  The payment
of the Purchase Price (as such amount may be reduced pursuant to
Section 11(a)(iii) hereof) shall be made in cash or by certified bank
check or bank draft payable to the order of the Company.  In the event that the Company is obligated
to issue other securities (including Common Stock) of the Company, pay cash
and/or distribute other property pursuant to Section 11(a) hereof, the
Company will make all arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the Rights Agent, if
and when appropriate.  The Company
reserves the right to require prior to the occurrence of a Triggering Event
that, upon any exercise of Rights, a number of Rights be exercised so that only
whole shares of Preferred Stock would be issued.

 

10

 

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

 

(e)                                  Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an
Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes
a transferee prior to or concurrently with the Acquiring Person becoming such
and receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become
null and void without any further action and no holder of such Rights shall
have any rights whatsoever with respect to such Rights, whether under any provision
of this Agreement or otherwise.  The
Company shall use all reasonable efforts to insure that the provisions of this
Section 7(e) and Section 4(b) hereof are complied with, but shall
have no liability to any holder of Rights Certificates or any other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person or any of its Affiliates, Associates or transferees hereunder.

 

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

 

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

 

11

 

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

 

Section 9.                         Reservation and
Availability of Capital Stock.

 

(a)                                  The Company
covenants and agrees that it will cause to be reserved and kept available out
of its authorized and unissued shares of Preferred Stock (and, following the
occurrence of a Triggering Event, out of its authorized and unissued shares of
Common Stock and/or other securities or out of its authorized and issued shares
held in its treasury), the number of shares of Preferred Stock (and, following
the 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 the
shares of Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) issuable and deliverable upon the
exercise of the Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed
on such exchange upon official notice of issuance upon such exercise.

 

(c)                                  The Company shall
use its best efforts to (i) file, as soon as practicable following the earliest
date after the first occurrence of a Section 11(a)(ii) Event on which the
consideration to be delivered by the Company upon exercise of the Rights has
been determined in accordance with Section 11(a)(iii) hereof, a
registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, and (B) the date of the expiration of the Rights.  The Company will also take such action as
may be appropriate under, or to ensure compliance with, the securities or “blue
sky” laws of the various states in connection with the exercisability of the
Rights.  The Company may temporarily
suspend, for a period of time not to exceed ninety (90) days after the date set
forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration statement
and permit it to become effective.  Upon
any such suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension has been rescinded.  In addition, if the Company shall determine
that a registration statement is required following the Distribution Date, the
Company may temporarily suspend the exercisability of the Rights until such
time as a registration statement has been declared effective.  Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such jurisdiction shall not have
been obtained, the exercise thereof shall not be permitted under applicable
law, or a registration statement shall not have been declared effective.

 

12

 

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

 

(e)                                  The Company
further covenants and agrees that it will pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of
the issuance or delivery of the Rights Certificates and of any certificates 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) upon the exercise of Rights.  The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of one one-thousandths of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) in respect of a name
other than, that of the registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or deliver any certificates 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) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificates at
the time of surrender) or until it has been established to the Company’s
satisfaction that no such tax is due.

 

Section 10.                   Preferred Stock
Record Date.  Each person in whose name any
certificate 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 upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record
holder of such shares (fractional or otherwise) on, and such certificate shall
be dated, the next succeeding Business Day on which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are open.  Prior to the exercise
of the Rights evidenced thereby, the holder of a Rights Certificate shall not
be entitled to any rights of a stockholder of the Company with respect to
shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or
to exercise any preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.

 

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

 

13

 

Right and the number of Rights outstanding
are subject to adjustment from time to time as provided in this
Section 11.

 

(a)                                  (i)  In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding Preferred
Stock, (C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification of
the Preferred Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a) and
Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of Preferred
Stock or capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Preferred Stock or capital
stock, as the case may be, which, if such Right had been exercised immediately
prior to such date and at a time when the Preferred Stock transfer books of the
Company were open, such holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification.  If an event occurs
which would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii) hereof, the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.

 

(ii)                                  In the event any
Person shall, at any time after the Rights Dividend Declaration Date, become an
Acquiring Person, unless the event causing such Person to become an Acquiring
Person is a transaction set forth in Section 13(a) hereof, then, promptly
following the occurrence of such event, proper provision shall be made so that
each holder of a Right (except as provided below and in Section 7(e)
hereof) shall thereafter have the right to receive, upon exercise thereof at
the 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, such
number of shares of Common Stock of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the then number
of one one-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event, and (y) dividing that product (which, following
such 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 Current
Market Price (determined pursuant to Section 11(d) hereof) per share of
Common Stock on the date of such first occurrence (such number of shares, the “Adjustment
Shares”).

 

(iii)                               In the event that
the number of shares of Common Stock which is authorized by the Company’s
certificate of incorporation, but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights, is not sufficient to permit
the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall (A) determine
the value of the Adjustment

 

14

 

Shares issuable upon the exercise of a Right
(the “Current Value”), and (B) with respect to each Right (subject to
Section 7(e) hereof), make adequate provision to substitute for the Adjustment
Shares, upon the exercise of a Right and payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock, such as the Preferred Stock, which the
Board has deemed to have essentially the same value or economic rights as
shares of Common Stock (such shares of preferred stock being referred to as “Common
Stock Equivalents”)), (4) debt securities of the Company, (5) other assets,
or (6) any combination of the foregoing, having an aggregate value equal to the
Current Value (less the amount of any reduction in the Purchase Price), where
such aggregate value has been determined by the Board based upon the advice of
a nationally recognized investment banking firm selected by the Board; provided,
however, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following
the 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 to
Section 23(a) expires (the later of (x) and (y) being referred to herein
as the “Section 11(a)(ii) Trigger Date”), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. 
For purposes of the preceding sentence, the term “Spread” shall
mean the excess of (i) the Current Value over (ii) the Purchase Price.  If the Board determines in good faith that
it is likely that sufficient additional shares of Common Stock could be
authorized 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 not
more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the Company may seek shareholder approval for the authorization of
such additional shares (such thirty (30) day period, as it may be extended, is
herein called the “Substitution Period”).  To the extent that the Company determines that action should be
taken pursuant to the first and/or third sentences of this
Section 11(a)(iii), the Company (1) shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights, and (2) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek such shareholder
approval for such authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof.  In the
event of any such suspension, the Company shall issue a public announcement
stating 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 in
effect.  For purposes of this
Section 11(a)(iii), the value of each Adjustment Share shall be the
Current Market Price per share of the Common Stock on the
Section 11(a)(ii) Trigger Date and the per share or per unit value of any
Common Stock Equivalent shall be deemed to equal the Current Market Price per
share of the Common Stock on such date.

 

(b)                                 In case the
Company shall fix a record date for the issuance of rights, options or warrants
to 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

 

15

 

shares of Preferred Stock (“Equivalent
Preferred Stock”)) or securities convertible into Preferred Stock or
Equivalent Preferred Stock at a price per share of Preferred Stock or per share
of Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into Preferred Stock or Equivalent Preferred Stock) less
than the Current Market Price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price, and the denominator of which shall be
the number of shares of Preferred Stock outstanding on such record date, plus
the number of additional shares of Preferred Stock and/or Equivalent Preferred
Stock to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible).  In case such subscription price may be paid
by delivery of consideration, part or all of which may be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. 
Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation.  Such adjustment shall be
made successively whenever such a record date is fixed, and in the event that
such rights or warrants are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.

 

(c)                                  In case the
Company shall fix a record date for a distribution to all holders of Preferred Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation), cash (other than a
regular quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
evidences of indebtedness, or of subscription rights or warrants (excluding
those referred to in Section 11(b) hereof), the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the Current Market Price (as determined pursuant to
Section 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 of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock, and the denominator of which shall be
such Current Market Price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock.  Such
adjustments 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 shall
be adjusted to be the Purchase Price which would have been in effect if such
record date had not been fixed.

 

16

 

(d)                                 (i)  For the purpose of any computation
hereunder, other than computations made pursuant to Section 11(a)(iii)
hereof, the Current Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such Common
Stock for the thirty (30) consecutive Trading Days immediately prior to such
date, 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 be
deemed to be the average of the daily closing prices per share of such Common
Stock for the ten (10) consecutive Trading Days immediately following such
date; provided, however, that in the event that the Current
Market Price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a dividend
or distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other than the
Rights), or (B) any subdivision, combination or reclassification of such Common
Stock, and the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification shall not
have occurred prior to the commencement of the requisite thirty (30) Trading
Day or ten (10) Trading Day period, as set forth above, then, and in each such
case, the Current Market Price shall be properly adjusted to take into account
ex-dividend trading.  The closing price
for each day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Common Stock are
not listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by The
Nasdaq Stock Market (“NASDAQ”) or such other system then in use, or, if
on any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board.  If on any such date no market
maker is making a market in the Common Stock, the fair value of such shares on
such date as determined in good faith by the Board shall be used.  The term “Trading Day” shall mean a
day on which the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, a Business Day.  If the Common Stock is not publicly held or
not so listed or traded, Current Market Price per share shall mean the fair
value per share as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.

 

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

 

17

 

determined in the manner provided above or if
the Preferred Stock is not publicly held or listed or traded in a manner
described in clause (i) of this Section 11(d), the Current Market Price
per share of Preferred Stock shall be conclusively deemed to be an amount equal
to 1,000 (as such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the Current Market
Price per share of the Common Stock.  If
neither the Common Stock nor the Preferred Stock is publicly held or so listed
or traded, Current Market Price per share of the Preferred Stock shall mean the
fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

 

(e)                                  Anything herein to
the contrary notwithstanding, no adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.  All calculations
under this Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth of a share of Common Stock or other share or one-millionth of a
share of Preferred Stock, as the case may be. 
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction which mandates
such adjustment, or (ii) the Expiration Date.

 

(f)                                    If as a result of
an adjustment made pursuant to Section 11(a)(ii) or Section 13(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock other than Preferred Stock, thereafter the
number of such other shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect 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 14
hereof with respect to the Preferred Stock shall apply on like terms to any
such other shares.

 

(g)                                 All Rights
originally issued by the Company subsequent to any adjustment made to the
Purchase Price hereunder shall evidence the right to purchase, at the adjusted
Purchase Price, the number of one one-thousandths of a share of Preferred Stock
purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.

 

(h)                                 Unless the Company
shall have exercised its election as provided in Section 11(i), upon each
adjustment of the Purchase Price as a result of the calculations made in
Sections 11(b) and (c), each Right outstanding immediately prior to the making
of such adjustment shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of one one-thousandths of a share of
Preferred 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 immediately
prior to this adjustment,

 

18

 

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

 

(i)                                     The Company may
elect on or after the date of any adjustment of the Purchase Price to adjust
the number of Rights, in lieu of any adjustment in the number of one
one-thousandths of a share of Preferred Stock purchasable upon the exercise of
a Right.  Each of the Rights outstanding
after the adjustment in the number of Rights shall be exercisable for the
number of one one-thousandths of a share of Preferred Stock for which a Right
was exercisable immediately prior to such adjustment.  Each Right held of record prior to such adjustment of the number
of Rights shall become that number of Rights (calculated to the nearest one-ten-thousandth)
obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. 
The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made.  This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement.  If
Rights Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be
entitled 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 and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment.  Rights
Certificates so to be distributed shall be issued, executed and countersigned
in 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 the
holders of record of Rights Certificates on the record date specified in the
public announcement.

 

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

 

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

 

19

 

(l)                                     In any case in
which this Section 11 shall require that an adjustment in the Purchase
Price be made effective as of a record date for a specified event, the Company
may elect to defer until the occurrence of such event the issuance to the
holder of any Right exercised after such record date the number of one
one-thousandths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on 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 or
other appropriate instrument evidencing such holder’s right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence
of the event requiring such adjustment.

 

(m)                               Anything in this
Section 11 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Purchase Price, in addition to those adjustments
expressly required by this Section 11, as and to the extent that in their
good faith judgment the Board of Directors of the Company shall determine to be
advisable in order that any (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less
than the Current Market Price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are convertible into or
exchangeable 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 be
taxable to such stockholders.

 

(n)                                 The Company
covenants and agrees that it shall not, at any time after the Distribution
Date, (i) consolidate with any other Person (other than a Subsidiary of the
Company 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 in
a transaction which complies with Section 11(o) hereof), or (iii) sell or
transfer (or permit any Subsidiary to sell or transfer), in one transaction, or
a series of related transactions, assets, cash flow or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), if (x) at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the shareholders of the
Person who constitutes, or would constitute, the “Principal Party” for purposes
of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.

 

(o)                                 The Company
covenants and agrees that, after the Distribution Date, it will not, except as
permitted by Section 23 or Section 26 hereof, take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably 

 

20

 

foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by
the Rights.

 

(p)                                 Anything in this
Agreement to the contrary notwithstanding, in the event that the Company shall
at any time after the Rights Dividend Declaration Date and prior to the
Distribution Date (i) declare a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares
of Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction the numerator which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.

 

Section 12.                   Certificate of
Adjusted Purchase Price or Number of Shares. 
Whenever an adjustment is made as provided in Section 11 and
Section 13 hereof, the Company shall (a) promptly prepare a certificate
setting forth such adjustment and a brief statement of the facts accounting for
such adjustment, (b) promptly file with the Rights Agent, and with each
transfer agent for the Preferred Stock and the Common Stock, a copy of such
certificate and (c) if a Distribution Date has occurred, mail a brief summary
thereof to each holder of a Rights Certificate.  The Rights Agent shall be fully protected in relying on any such
certificate 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 Company
shall consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof) shall consolidate with, or merge with or into, the
Company, and the Company shall be the continuing or surviving corporation of
such consolidation or merger and, in connection with such consolidation or
merger, all or part of the outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (z) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of
the 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 more
transactions each of which complies with Section 11(o) hereof), then, and
in each such case, proper provision shall be made so that: (i) each holder of a
Right, except

 

21

 

as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement,
such number of validly authorized and issued, fully paid, non-assessable and
freely tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by
(1) multiplying the then current Purchase Price by the number of one
one-thousandths of a share of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one one-thousandths of a
share for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence of a Section 11(a)(ii) Event),
and (2) dividing that product (which, following the first occurrence of a
Section 13 Event, shall be referred to as the “Purchase Price” for each
Right 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 Common
Stock of such Principal Party on the date of consummation of such
Section 13 Event; (ii) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such Section 13 Event, all the
obligations and duties of the Company pursuant to this Agreement; (iii) the
term “Company” shall thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares 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 effect
following the first occurrence of any Section 13 Event.

 

(b)                                 “Principal
Party” shall mean:

 

(i)                                     in the case of any
transaction described in clause (x) or (y) of the first sentence of
Section 13(a), the Person that is the issuer of any securities into which
shares of Common Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the other
party to such merger or consolidation; and

 

(ii)                                  in the case of any
transaction described in clause (z) of the first sentence of
Section 13(a), the Person that is the party receiving the greatest portion
of the assets, cash flow or earning power transferred pursuant to such
transaction or transactions;

 

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

 

22

 

“Principal
Party” 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 or
more of which are and have been so registered, “Principal Party” shall refer to
whichever of such Persons is the issuer of the Common Stock having the greatest
aggregate market value.

 

(c)                                  The Company shall
not consummate any such consolidation, merger, sale or transfer unless the
Principal Party shall have a sufficient number of authorized shares of its
Common Stock which have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing 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 a
registration statement under the Act, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate form, and
will use its best efforts to cause such registration statement to (A) become
effective as soon as practicable after such filing and (B) remain effective
(with a prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and

 

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

 

(iii)                               will deliver to
holders of the Rights historical financial statements for the Principal Party
and each of its Affiliates which comply in all respects with the requirements
for registration on Form 10 under the Exchange Act.

 

The
provisions of this Section 13 shall similarly apply to successive mergers
or consolidations or sales or other transfers. 
In the event that a Section 13 Event shall occur at any time after
the occurrence of a Section 11(a)(ii) Event, the Rights which have not
theretofore been exercised shall thereafter become exercisable in the manner
described in Section 13(a).

 

Section 14.                   Fractional Rights
and Fractional Shares.

 

(a)                                  The Company shall
not be required to issue fractions of Rights, except prior to the Distribution
Date as provided in Section 11(p) hereof, or to distribute Rights
Certificates which evidence fractional Rights. 
In lieu of such fractional Rights, the Company shall pay to the
registered holders of the Rights Certificates with regard to

 

23

 

which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right.  For purposes of
this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date
on which such fractional Rights would have been otherwise issuable.  The closing price of the Rights for any day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading, or
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights, selected by the Board of Directors of the Company.  If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the Company shall be
used.

 

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

 

(c)                                  Following the
occurrence of a Triggering Event, the Company shall not be required to issue
fractions of shares of Common Stock upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Common Stock.  In lieu of fractional shares of Common
Stock, the Company may pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one (1) share of Common
Stock.  For purposes of this
Section 14(c), the current market value of one share of Common Stock shall
be the closing price per share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) on the Trading Day immediately prior to the date
of such exercise.

 

24

 

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

 

Section 15.                   Rights of Action.  All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Stock); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of
the Rights Agent or of the holder of any other Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement.  Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this
Agreement.

 

Section 16.                   Agreement of
Rights Holders.  Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

 

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

 

(b)                                 after the
Distribution Date, the Rights Certificates are transferable only on the
registry books of the Rights Agent if surrendered at the principal office or
offices of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms and
certificates fully executed;

 

(c)                                  subject to
Section 6(a) and Section 7(f) hereof, the Company and the Rights
Agent may deem and treat the person in whose name a Rights Certificate (or,
prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and

 

(d)                                 notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights
Agent shall have any liability to any holder of a Right or other Person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, decree

 

25

 

or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company
must use its best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.

 

Section 17.                   Rights Certificate
Holder Not Deemed a Stockholder.  No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one
one-thousandths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate 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 vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except
as provided in Section 25 hereof), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by such Rights
Certificate shall have been exercised in accordance with the provisions hereof.

 

Section 18.                   Concerning the
Rights Agent.

 

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

 

(b)                                 The Rights Agent
shall be protected and shall incur no liability for or in respect of any action
taken, suffered or omitted by it in connection with its administration of this
Agreement in reliance upon any Rights Certificate or certificate for Common
Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to
be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.

 

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

 

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

 

26

 

resulting from any merger or consolidation to
which the Rights Agent or any successor Rights Agent shall be a party, or any
corporation succeeding to the corporate trust, stock transfer or other
shareholder services business of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; but only if such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21
hereof.  In case at the time such
successor 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 predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights Certificates either in
the name of the predecessor or in the name of the successor Rights Agent; and
in all such cases such Rights Certificates shall have the full force provided
in the Rights Certificates and in this Agreement.

 

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

 

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

 

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

 

(b)                                 Whenever in the
performance of its duties under this Agreement the Rights Agent shall deem it
necessary or desirable that any fact or matter (including, without limitation,
the identity of any Acquiring Person and the determination of Current Market
Price) be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.

 

27

 

(c)                                  The Rights Agent
shall be liable hereunder only for its own gross negligence, bad faith or
willful misconduct.

 

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

 

(e)                                  The Rights Agent
shall not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the validity or execution of any Rights
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor shall it be responsible for any
adjustment required under the provisions of Section 11, Section 13 or
Section 24 hereof or responsible for the manner, method or amount of any
such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock
or Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate 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 agrees
that it will perform, execute, acknowledge and deliver or cause to be
performed, executed, acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the Rights Agent
for the carrying out or performing by the Rights Agent of the provisions of
this Agreement.

 

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

 

(h)                                 The Rights Agent
and 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 become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this Agreement.  Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.

 

28

 

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

 

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

 

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

 

Section 21.                   Change of Rights
Agent.  The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days’ notice in writing mailed to the Company, and
to each transfer agent of the Common Stock and Preferred Stock, by registered
or 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 or
any successor Rights Agent upon thirty (30) days’ notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and, if such removal occurs after the Distribution Date, to the
holders of the Rights Certificates by first-class mail.  If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. 
If the Company shall fail to make such appointment within a period of
thirty (30) days after giving notice of such removal or after it has been notified
in writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate (who shall, with such
notice, submit his Rights Certificate for inspection by the Company), then any
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a legal business
entity organized and doing business under the laws of the United States or of
the State of New York or of any other state of the United States, in good
standing, having an  office in the State
of 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 its
appointment 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, duties
and responsibilities as if it had been originally named as Rights Agent without

 

29

 

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

 

Section 22.                   Issuance of New
Rights Certificates. 
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind
or class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.

 

Section 23.                   Redemption and
Termination.

 

(a)                                  The Board of
Directors of the Company may, at its option, at any time prior to the earlier
of (i) the close of business on the tenth Business Day following the Stock
Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior
to the Record Date, the close of business on the tenth Business Day following
the Record Date), or (ii) the Final Expiration Date, direct the Company to, and
if directed, the Company shall redeem all but not less than all of the then
outstanding Rights at a redemption price of $.001 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the “Redemption Price”).  Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11(a)(ii) Event until such time as the Company’s
right of redemption hereunder has expired. 
The Company may, at its option, pay the Redemption Price in cash, shares
of Common Stock (based on the Current

 

30

 

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

 

(b)                                 Immediately upon
the action of the Board of Directors of the Company ordering the redemption of
the Rights, evidence of which shall have been filed with the Rights Agent and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right so held.  Promptly after the action of the Board of
Directors ordering the redemption of the Rights, the Company shall give notice
of such redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to all such holders at each holder’s last address
as it appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock.  Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice
of redemption will state the method by which the payment of the Redemption
Price will be made.

 

Section 24.                   Exchange.

 

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

 

(b)                                 Immediately upon
the action of the Board of Directors of the Company ordering the exchange of
any Rights pursuant to subsection (a) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights shall
be to receive that number of shares of Common Stock equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give public
notice of any such exchange; provided, however, that the failure
to give, or any defect in, such notice shall not affect the validity of such
exchange.  The Company promptly shall
mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.  Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice.  Each such notice of exchange
will state the method by which the exchange of the Common Stock for Rights will
be effected and, in the event of

 

31

 

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

 

(c)                                  In any exchange
pursuant to this Section 24, the Company, at its option, may substitute
Preferred Stock (or Equivalent Preferred Stock, as such term is defined in
paragraph (b) of Section 11 hereof) for Common Stock exchangeable for
Rights, at the initial rate of one one-thousandth of a share of Preferred Stock
(or Equivalent Preferred Stock) for each share of Common Stock, as
appropriately adjusted to reflect stock splits, stock dividends and other
similar transactions after the date hereof.

 

(d)                                 In the event that
there shall not be sufficient shares of Common Stock issued but not outstanding
or authorized but unissued to permit any exchange of Rights as contemplated in
accordance with this Section 24, the Company shall take all such action as
may be necessary to authorize additional shares of Common Stock for issuance
upon exchange of the Rights.

 

(e)                                  The Company shall
not be required to issue fractions of shares of Common Stock or to distribute
certificates which evidence fractional shares of Common Stock.  In lieu of such fractional shares of Common
Stock, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional shares of Common Stock would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole share of Common Stock. 
For the purposes of this subsection (e), the current market value
of a whole share of Common Stock shall be the closing price of a share of
Common Stock (as determined pursuant to the second sentence of
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date
of exchange pursuant to this Section 24.

 

Section 25.                   Notice of Certain Events.

 

(a)                                  In case the
Company shall propose, at any time after the Distribution Date, (i) to pay any
dividend payable in stock of any class to the holders of Preferred Stock or to
make any other distribution to the holders of Preferred Stock (other than a
regular quarterly cash dividend out of earnings or retained earnings of the
Company), or (ii) to offer to the holders of Preferred Stock rights or warrants
to subscribe for or to purchase any additional shares of Preferred Stock or
shares of stock of any class or any other securities, rights or options, or
(iii) to effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Preferred Stock), or (iv) to effect any consolidation or merger into or with
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one transaction or a series of related transactions, of more than
50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the
liquidation, dissolution

 

32

 

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

 

(b)                                 In case any of the
events set forth in Section 11(a)(ii) hereof shall occur, then, in any
such case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof, and (ii) all references in the preceding
paragraph to Preferred Stock shall be deemed thereafter to refer to Common
Stock and/or, if appropriate, other securities.

 

Section 26.                   Notices.

 

(a)                                  Notices or demands
authorized by this Agreement to be given or made by the Rights Agent or by the
holder of any Rights Certificate to or on the Company shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing by the Rights Agent with the Company) as
follows:

 

Jackson
Hewitt Tax Service Inc.

7
Sylvan Way

Parsippany,
New Jersey 07054

Attention:  Corporate Secretary

 

(b)                                 Subject to the
provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed (until another address is filed
in writing by the Rights Agent with the Company) as follows:

 

The
Bank of New York

101
Barclay Street, 11 East

New
York, New York  10286

Attention:  Stock Transfer Administration

 

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

 

33

 

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

 

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

 

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

 

Section 29.                   Determinations and
Actions by the Board of Directors, etc.  For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock or any other class of capital stock outstanding at any particular
time, including for purposes of determining the particular percentage of such
outstanding 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) of
the General Rules and Regulations under the Exchange Act.  The Board of Directors of the Company shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the
Agreement).  All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board in good faith, shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board or any of the directors on the Board to
any liability to the holders of the Rights.

 

34

 

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

 

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

 

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

 

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

 

Section 34.                   Descriptive
Headings.  Descriptive headings of the
several sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.

 

35

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, 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

  

 

 

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 General
Corporation Law

of the State of Delaware

 

We,
the undersigned officers of JACKSON HEWITT TAX SERVICE INC., a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof DO
HEREBY CERTIFY:

 

That
pursuant to the authority conferred upon the Board of Directors by the Amended
and Restated Certificate of Incorporation of the said Corporation, the said
Board of Directors on June 21, 2004, adopted the following resolution
creating a series of 200,000 shares of Preferred Stock designated as Series A
Junior Participating Preferred Stock:

 

RESOLVED,
that pursuant to the authority vested in the Board of Directors of this
Corporation in accordance with the provisions of its Amended and Restated
Certificate of Incorporation, a series of Preferred Stock of the Corporation be
and it hereby is created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof are as follows:

 

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

 

Section 2.  Dividends and Distributions.

 

(A)  The holders of shares of Series A Junior
Participating Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the 15th day of May, August,
November and February in each year (each such date being referred to
herein as a “Quarterly Dividend Payment Date”), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Junior Participating Preferred Stock, in an amount per
share (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 the
aggregate per share amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash

 

A-1

 

dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, par value $0.01 per share, of the Corporation (the “Common
Stock”) since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior Participating
Preferred Stock.  In the event the
Corporation shall at any time after June 25, 2004 (the “Rights Declaration
Date”) (i) declare any dividend on Common Stock payable 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 to which holders of shares of Series A Junior Participating
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

 

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

 

(C)  Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Junior Participating Preferred
Stock from the Quarterly Dividend Payment Date next preceding the date of issue
of such shares of Series A Junior Participating Preferred Stock, unless the
date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear
interest.  Dividends paid on the shares
of Series A Junior Participating Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding.  The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.

 

A-2

 

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

 

(A)  Subject to the provision for adjustment
hereinafter set forth, each share of Series A Junior Participating Preferred
Stock shall entitle the holder thereof to 1,000 votes on all matters submitted
to a vote of the stockholders of the Corporation.  In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable 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 number of votes per share to which holders of shares of Series A
Junior Participating Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

 

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

 

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

 

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

 

A-3

 

special meeting does not amount to the
required number, the holders of the Preferred Stock shall have the right to
make such increase in the number of directors as shall be necessary to permit
the election by them of the required number. 
After the holders of the Preferred Stock shall have exercised their
right to elect directors in any default period and during the continuance of
such period, the number of directors shall not be increased or decreased except
by vote of the holders of Preferred Stock as herein provided or pursuant to the
rights of any equity securities ranking senior to or pari passu with the Series
A Junior Participating Preferred Stock.

 

(iii)  Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised their right to
elect directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding, irrespective of series,
may request, the calling of a special meeting of the holders of Preferred
Stock, which meeting shall thereupon be called by the President, a
Vice-President or the Secretary of the Corporation.  Notice of such meeting and of any annual meeting at which holders
of 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 of
such notice to him at his last address as the same appears on the books of the
Corporation.  Such meeting shall be
called for a time not earlier than 20 days and not later than 60 days after
such order, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding.  Notwithstanding the provisions of this
Paragraph (C)(iii), no such special meeting shall be called during the period
within 60 days immediately preceding the date fixed for the next annual meeting
of the stockholders.

 

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

 

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

 

A-4

 

Any vacancies in the Board of Directors
effected by the provisions of clauses (y) and (z) in the preceding sentence may
be filled by a majority of the remaining directors.

 

(D)  Except as set forth herein, holders of
Series A Junior Participating Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action.

 

Section 4.  Certain Restrictions.

 

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

 

(i)  declare
or pay dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series A
Junior Participating Preferred Stock;

 

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

 

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

 

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

 

A-5

 

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

 

Section 5.  Reacquired Shares.  Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof.  All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.

 

Section 6.  Liquidation, Dissolution or Winding Up.  (A) 
Upon any liquidation (voluntary or otherwise), dissolution or winding up
of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Junior Participating Preferred
Stock shall have received an amount equal to $1,000 per share of Series A
Participating Preferred Stock, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the “Series A Liquidation Preference”).  Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the
holders of shares of Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Common Stock shall have received an
amount per share (the “Common Adjustment”) equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as
appropriately adjusted as set forth in subparagraph (C) below to reflect such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock) (such number in clause (ii), the “Adjustment Number”).  Following the payment of the full amount of
the Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series A Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.

 

(B)  In the event, however, that there are not
sufficient assets available to permit payment in full of the Series A
Liquidation Preference and the liquidation preferences of all other series of
preferred stock, if any, which rank on a parity with the Series A Junior
Participating Preferred Stock, then such remaining assets shall be distributed
ratably to the holders of such parity shares in proportion to their respective
liquidation preferences.  In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.

 

A-6

 

(C)  In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable 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 to
such event shall be adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

 

Section 7.  Consolidation, Merger, etc.  In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of Series A Junior
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter 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 may
be, into which or for which each share of Common Stock is changed or exchanged.  In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable 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 with
respect to the exchange or change of shares of Series A Junior Participating
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

 

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

 

Section 9.  Ranking.  The Series A Junior Participating Preferred Stock shall rank
junior to all other series of the Corporation’s Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.

 

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

 

A-7

 

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

 

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

 

 

	
   

  	
   

  
	
   

  	
  Chairman
  of the Board

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  
			

 

A-8

 

Exhibit B

 

[Form of Rights Certificate]

 

	
  Certificate
  No. R-

  	
   

  	
   

  	
                  
  Rights

  

 

NOT
EXERCISABLE AFTER
                  
    , 2014 OR EARLIER IF REDEEMED BY THE COMPANY.  THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN
THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL
AND VOID.  [THE RIGHTS REPRESENTED BY
THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR
BECAME 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 REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.](1)

 

Rights Certificate

 

[THE COMPANY]

 

This
certifies that
                                            ,
or registered assigns, is the registered owner of the number of Rights set
forth 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., a
Delaware corporation (the “Company”), and The Bank of New York, a New York
banking corporation (the “Rights Agent”), to purchase from the Company at any
time prior to 5:00 P.M. (New York City time) on
                  
    , 2014 (unless such date is extended prior thereto by
the Board of Directors) at the office or offices of the Rights Agent designated
for such purpose, or its successors as Rights Agent, one one-thousandth of a
fully paid, non-assessable share of Series A Junior Participating Preferred
Stock (the “Preferred Stock”) of the Company, at a purchase price of
$           per one
one-thousandth of a share (the “Purchase Price”), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed.  The
number of Rights evidenced by this Rights Certificate (and the number of shares
which may be purchased upon exercise thereof) set forth above, and the Purchase

 

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

 

B-1

 

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

 

Upon
the occurrence of a Section 11(a)(ii) Event (as such term is defined in
the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any 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, a
transferee of a person who, after such transfer, became an Acquiring Person, or
an Affiliate or Associate of an Acquiring Person, such Rights shall become null
and void and no holder hereof shall have any right with respect to such Rights
from and after the occurrence of such Section 11(a)(ii) Event.

 

As
provided in the Rights Agreement, the Purchase Price and the number and kind of
shares of Preferred Stock or other securities, which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events.

 

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

 

This
Rights Certificate, with or without other Rights Certificates, upon surrender
at the principal office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Rights Certificate or Rights Certificates
of like tenor and date evidencing Rights entitling the holder to purchase a
like aggregate number of one one-thousandths of a share of Preferred Stock as
the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase.  If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender
hereof another Rights Certificate or Rights Certificates for the number of
whole Rights not exercised.

 

Subject
to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at its option at a redemption price
of $.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 time
period may be extended pursuant to the Rights Agreement), and (ii) the Final
Expiration Date. The

 

B-2

 

foregoing notwithstanding, the Rights
generally may not be redeemed for one hundred eighty (180) days following a
change in a majority of the Board as a result of a proxy contest.  In addition, under certain circumstances
following the Stock Acquisition Date, the Rights may be exchanged, in whole or in
part, for shares of the Common Stock, or shares of preferred stock of the
Company having essentially the same value or economic rights as such
shares.  Immediately upon the action of
the Board of Directors of the Company authorizing any such exchange, and
without any further action or any notice, the Rights (other than Rights which
are not subject to such exchange) will terminate and the Rights will only
enable holders to receive the shares issuable upon such exchange.

 

No
fractional shares of Preferred Stock will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at
the election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement. The
Company, at its election, may require that a number of Rights be exercised so
that only whole shares of Preferred Stock would be issued.

 

No
holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give consent to or withhold consent from any corporate action, or, to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.

 

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

 

B-3

 

WITNESS
the facsimile signature of the proper officers of the Company and its corporate
seal.

 

Dated
as of
                  
    ,         

 

 

	
   

  	
  JACKSON
  HEWITT TAX SERVICE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  Countersigned:

  	
   

  
	
   

  	
   

  
	
  THE
  BANK OF NEW YORK

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Signature

  	
   

  
					

 

 

[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.)

 

FOR
VALUE RECEIVED • hereby sells,
assigns and transfers unto • (Please print
name and address of transferee) this Rights Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint • Attorney, to transfer the within Rights
Certificate on the books of the within named Company, with full power of
substitution.

 

Dated:
                                    ,    

 

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
  Signature
  Guaranteed:

  	
   

  

 

 

Certificate

 

The
undersigned hereby certifies by checking the appropriate boxes that:

 

(1)  this Rights Certificate [ ] is [ ] is not
being sold, assigned and transferred by or on behalf of a Person who is or was
an 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 knowledge
of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.

 

Dated:
                                    ,    

 

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
  Signature
  Guaranteed:

  	
   

  

 

 

NOTICE

 

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

 

 

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.:

 

The
undersigned hereby irrevocably elects to exercise
                    
Rights represented by this Rights Certificate to purchase the shares of Preferred
Stock issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:

 

Please
insert social security

or other identifying number

 

 

(Please print name and address)

 

 

 

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

 

Please
insert social security

or other identifying number

 

 

(Please print name and address)

 

 

 

Dated:
                                    ,    

 

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
  Signature
  Guaranteed:

  	
   

  

 

 

Certificate

 

The
undersigned hereby certifies by checking the appropriate boxes that:

 

(1)  the Rights evidenced by this Rights
Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who
is or was an 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 knowledge
of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person.

 

Dated:
                                    ,    

 

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
  Signature
  Guaranteed:

  	
   

  

 

 

NOTICE

 

The
signature to the foregoing Election to Purchase and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.

 

 

Exhibit C

 

SUMMARY OF RIGHTS TO PURCHASE

 

PREFERRED STOCK

 

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

 

Initially,
the Rights will be attached to all Common Stock certificates representing
shares then outstanding, and no separate Rights Certificates will be
distributed.  Subject to certain
exceptions specified in the Rights Agreement, the Rights will separate from the
Common Stock and a Distribution Date will occur upon the earlier of (i) 10
business days following a public announcement that a person or group of
affiliated or associated persons (an “Acquiring Person”) has acquired
beneficial ownership of 15% or more of the outstanding shares of Common Stock
(the “Stock Acquisition Date”), other than as a result of repurchases of stock
by the Company or certain inadvertent actions by institutional or certain other
stockholders or (ii) 10 business days (or such later date as the Board shall
determine) following the commencement of a tender offer or exchange offer that
would result in a person or group becoming an Acquiring Person.  Until the Distribution Date, (i) the Rights
will be evidenced by the Common Stock certificates and will be transferred with
and only with such Common Stock certificates, (ii) new Common Stock
certificates issued after the Record Date will contain a notation incorporating
the Rights Agreement by reference and (iii) the surrender for transfer of any
certificates for Common Stock outstanding will also constitute the transfer of
the Rights associated with the Common Stock represented by such
certificate.  Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of
a Triggering Event (as defined below) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of Preferred Stock will
be issued.

 

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

 

As
soon as practicable after the Distribution Date, Rights Certificates will be
mailed to holders of record of the Common Stock as of the close of business on
the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights.  Except as
otherwise determined by the Board of Directors, only shares of Common Stock
issued prior to the Distribution Date will be issued with Rights.

 

C-1

 

In
the event that a Person becomes an Acquiring Person, each holder of a Right
will thereafter have the right to receive, upon exercise, Common Stock (or, in
certain 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 set
forth in this paragraph, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void.  However,
Rights are not exercisable following the occurrence of the event set forth
above until such time as the Rights are no longer redeemable by the Company as
set forth below.

 

For
example, at an exercise price of $116 per Right, each Right not owned by an
Acquiring Person (or by certain related parties) following an event set forth
in the preceding paragraph would entitle its holder to purchase $232 worth of
Common Stock (or other consideration, as noted above) for $116.  Assuming that the Common Stock had a per
share value of $17.00 at such time, the holder of each valid Right would be
entitled to purchase 13 shares of Common Stock for $116.

 

In
the event that, at any time following the Stock Acquisition Date, (i) the
Company engages in a merger or other business combination transaction in which
the Company is not the surviving corporation, (ii) the Company engages in a
merger or other business combination transaction in which the Company is the
surviving corporation and the Common Stock of the Company is changed or
exchanged, or (iii) 50% or more of the Company’s assets, cash flow or earning
power is sold or transferred, each holder of a Right (except Rights which have
previously been voided as set forth above) shall thereafter have the right to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Right.  The events set forth in this paragraph and in the second
preceding paragraph are referred to as the “Triggering Events.”

 

At
any time after a person becomes an Acquiring Person and prior to the
acquisition by such person or group of fifty percent (50%) or more of the
outstanding Common Stock, the Board may exchange the Rights (other than Rights
owned by such person or group which have become void), in whole or in part, at
an exchange ratio of one share of Common Stock, or one one-thousandth of a
share of Preferred Stock (or of a share of a class or series of the Company’s
preferred stock having equivalent rights, preferences and privileges), per
Right (subject to adjustment).

 

The
Purchase Price payable, and the number of Units of Preferred Stock or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) if holders of the Preferred Stock are granted certain
rights or warrants to subscribe for Preferred Stock or convertible securities
at less than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights
or warrants (other than those referred to above).

 

C-2

 

With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments amount to at least 1% of the Purchase Price.  No fractional Units will be issued and, in
lieu thereof, an adjustment in cash will be made based on the market price of the
Preferred Stock on the last trading date prior to the date of exercise.

 

At
any time until ten business days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.001
per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors). 
Immediately upon the action of the Board of Directors  ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the $.001 redemption price.  The
foregoing notwithstanding, the Rights generally may not redeemed for one
hundred eighty (180) days following a change in a majority of the Board of
Directors as a result of a proxy contest.

 

Until
a Right is exercised, the holder thereof, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends.  While the
distribution of the Rights will not be taxable to stockholders or to the
Company, stockholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Common Stock (or
other consideration) of the Company or for common stock of the acquiring
company or in the event of the redemption of the Rights as set forth above.

 

Any
of the provisions of the Rights Agreement may be amended by the Board of
Directors of the Company prior to the Distribution Date.  After the Distribution Date, the provisions
of 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 of
Rights, or to shorten or lengthen any time period under the Rights
Agreement.  The foregoing
notwithstanding, no amendment  may be
made at such time as the Rights are not redeemable.

 

A
copy of the Rights Agreement will be filed with the Securities and Exchange
Commission as an Exhibit to a Registration Statement on Form 8-A/Current Report
on Form 8-K.  A copy of the Rights
Agreement is available free of charge from the Rights Agent.  This summary description of the Rights does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.

 

C-3Exhibit
10.1

 

EMPLOYMENT AGREEMENT

 

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

 

WHEREAS, JTAX desires to employ the Executive as its
President and Chief Executive Officer, and the Executive desires to serve JTAX
in such capacity.

 

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

 

SECTION I

EMPLOYMENT

 

Subject to the
consummation of the Transaction, JTAX agrees to employ the Executive and the
Executive agrees to be employed by JTAX for the Period of Employment as
provided in Section III below and upon the terms and conditions provided in
this Agreement.  Subject to and
effective upon the consummation of the Transaction, the Executive will no
longer be an employee, officer or director of Cendant or any of its
subsidiaries or affiliates, and agrees to provide Cendant, upon request, with
written resignations from such positions.

 

SECTION II

POSITION AND
RESPONSIBILITIES

 

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

 

 

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

 

The Executive will,
during the Period of Employment, devote substantially all of his time and
attention during normal business hours to the performance of services for
JTAX.  The Executive will maintain a
primary office and conduct his business in Parsippany, New Jersey, except for
normal and reasonable business travel in connection with his duties
hereunder.  Nothing contained in this Agreement
will prevent the Executive from serving on civic and charitable boards or from
conducting his personal affairs.

 

The Executive will, in
accordance with JTAX policy and procedures and applicable law, certify to the
accuracy of JTAX’s publicly filed financial statements.

 

SECTION III

PERIOD OF EMPLOYMENT

 

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

 

SECTION IV

COMPENSATION AND BENEFITS

 

Compensation.  For all services rendered by the Executive
pursuant to this Agreement during the Period of Employment, including services
as an executive, officer, director or committee member of JTAX or any
subsidiary or affiliate of thereof, the Executive will be compensated as
follows:

 

i.              Base
Salary.

 

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

 

 

the New York/New Jersey
greater metropolitan area.  Base Salary
will be payable according to the customary payroll practices of JTAX, but in no
event less frequently than once each month.

 

ii.             Annual
Incentive Awards.

 

The Executive will be eligible for discretionary
annual incentive compensation awards; provided, that the Executive will
be eligible to receive an annual bonus opportunity in respect of each fiscal
year of JTAX during the Period of Employment based upon a target bonus equal to
no less than 100% of his earned Base Salary during such fiscal year; provided,
however, that such bonus will be subject to the attainment by JTAX of
applicable performance targets reasonably established and certified by the
Board or the Compensation Committee of the Board (the “Committee”).  The parties acknowledge that it is currently
contemplated that such performance targets will be stated in terms of “earnings
before interest and taxes” of JTAX, however such targets may relate to such
other financial and/or business criteria of JTAX, or any of their respective
subsidiaries or business units, as determined by the Board and/or the Committee
in its sole discretion (each such annual bonus, an “Incentive Compensation
Award”).

 

iii.            Long-Term
Incentive Awards

 

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

 

(b) Annual Incentive
Awards.  At such times as the Board
or the Committee determines to conduct annual or periodic grants of long term
incentive awards to employees and officers of JTAX, the Executive will be
eligible to receive such grants, subject to the sole and complete discretion of
the Board or the Committee, and upon such terms and conditions as determined by
the Board or the Committee, but with due consideration given to the Executive’s
position with JTAX and the Executive’s historical performance and anticipated
future contributions to JTAX.

 

 

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

 

iv.                                   Additional
Benefits

 

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

 

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

 

SECTION V

BUSINESS EXPENSES

 

JTAX will reimburse the Executive for all reasonable
travel and other expenses incurred by the Executive in connection with the
performance of his duties and obligations under this Agreement.  The Executive will comply with such
limitations and reporting requirements with respect to expenses as may be
established by JTAX from time to time and will promptly provide all appropriate
and requested documentation in connection with such expenses.

 

SECTION VI

DISABILITY

 

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

 

 

except for Base Salary
and Incentive Compensation Awards earned but unpaid as of the date of such
termination, and except for payment of a pro rata portion of his Incentive
Compensation Award in respect of the year in which such Disability occurs (paid
at target level).  For purposes of this
Agreement, “Disabled” means the Executive’s inability to perform his duties
hereunder as a result of serious physical or mental illness or injury for a
period of no less than 180 days, together with a determination by an
independent medical authority that the Executive is currently unable to perform
such duties.  Such medical authority
shall be mutually and reasonably agreed upon by JTAX and the Executive and such
opinion shall be binding on JTAX and the Executive.

 

SECTION VII

DEATH

 

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

 

SECTION VIII

EFFECT OF TERMINATION OF
EMPLOYMENT

 

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

 

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

D.            Conditions
to Payment and Acceleration.  All
payments due to the Executive under this Section VIII shall be made as soon as
practicable; provided, however, that such payments, shall be
subject to, and contingent upon, the execution by the Executive (or his
beneficiary or estate) of a release of any and all claims against JTAX and its
affiliates in such reasonable form agreed to by JTAX and the Executive (which
release will also require JTAX to execute a release of claims against the
Executive for any and all claims, but only including claims which JTAX is then
aware of, and specifically excluding claims relating to fraud, criminal
matters, and accounting irregularities). 
The payments due to the Executive under this Section VIII shall be in
lieu of any other severance benefits otherwise payable to the Executive under
any severance plan of JTAX or its affiliates and/or any other agreement or
arrangement.  Nothing herein shall be
construed as limiting the Executive’s entitlement to any other vested accrued
benefits to which he (or his estate if applicable) is then entitled under
JTAX’s (and Cendant’s) applicable employee benefit plans, including without
limitation any disability or death benefits which may become payable.

 

SECTION IX

OTHER DUTIES OF THE
EXECUTIVE

DURING AND AFTER THE PERIOD OF EMPLOYMENT

 

A.            The
Executive will, with reasonable notice during or after the Period of
Employment, furnish information as may be in his possession and fully

 

 

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

 

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

 

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

 

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

 

 

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

 

iii.            During
the Restricted Period, the Executive, without express prior written approval
from the Board, will not solicit any then-current clients of JTAX or any of its
affiliates for any existing business of JTAX or any of its affiliates or
discuss with any employee of JTAX or any of its affiliates information or
operation of any business intended to compete with JTAX or any of its
affiliates.

 

iv.            During
the Restricted Period, the Executive will not interfere with the employees or
affairs of JTAX or any of its affiliates or solicit or induce any person who is
an employee of JTAX or any of its affiliates to terminate any relationship such
person may have with JTAX or any of its affiliates, nor will the Executive
during such period directly or indirectly engage, employ or compensate, or
cause or permit any person with which the Executive may be affiliated, to
engage, employ or compensate, any employee of JTAX or any of its
affiliates.  The Executive hereby
represents and warrants that the Executive has not entered into any agreement,
understanding or arrangement with any employee of JTAX or any of its affiliates
pertaining to any business in which the Executive has participated or plans to
participate, or to the employment, engagement or compensation of any such
employee.

 

v.             For
the purposes of this Agreement, proprietary interest means legal or equitable
ownership, whether through stock holding or otherwise, of an equity interest in
a business, firm or entity or ownership of more than 5% of any class of equity
interest in a publicly-held company and the term “affiliate” will include
without limitation all subsidiaries and licensees of JTAX.

 

D.            The Executive hereby acknowledges that damages at law may
be an insufficient remedy to JTAX if the Executive violates the terms of this
Agreement

 

 

and that JTAX will be entitled, upon making the requisite showing, to
preliminary and/or permanent injunctive relief in any court of competent
jurisdiction to restrain the breach of or otherwise to specifically enforce any
of the covenants contained in this Section IX without the necessity of showing
any actual damage or that monetary damages would not provide an adequate
remedy.  Such right to an injunction
will be in addition to, and not in limitation of, any other rights or remedies
JTAX may have.  Without limiting the
generality of the foregoing, neither party will oppose any motion the other
party may make for any expedited discovery or hearing in connection with any
alleged breach of this Section IX.

 

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

 

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

 

SECTION X

INDEMNIFICATION; CENDANT
RELEASE

 

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

 

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

 

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

 

 

its subsidiaries and
affiliates, and under each and every other actual or purported compensation
entitlement pursuant to any agreement or otherwise) have been paid to the
Executive in full, and that the Executive has no further financial claims
against Cendant or its subsidiaries and affiliates (other than accrued benefits
under any tax qualified employee pension plan and other than equity awards to
the extent described in this Agreement). 
The Executive agrees that he has no legal claim or cause of action
against Cendant and its subsidiaries and affiliates, and hereby releases
Cendant and its subsidiaries, affiliates, officers, directors, agents and
employee benefit, equity and compensation plans (and the administrators and
fiduciaries of such plans) from and against any such actual or purported claims
and causes of action.  The Executive
acknowledges that Cendant entered into this Agreement in reliance of the
accuracy of the foregoing representation.

 

SECTION XI

MITIGATION

 

The Executive will not be required to mitigate the
amount of any payment provided for hereunder by seeking other employment or
otherwise, nor will the amount of any such payment be reduced by any
compensation earned by the Executive as the result of employment by another
employer after the date the Executive’s employment hereunder terminates or by
offset against any amount claimed to be owed by the Executive to JTAX, or
otherwise.

 

SECTION XII

WITHHOLDING TAXES; EXCISE
TAXES

 

The Executive acknowledges and agrees that JTAX may
directly or indirectly withhold from any payments under this Agreement all
federal, state, city or other taxes that will be required pursuant to any law
or governmental regulation.

 

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

 

 

Tax”) imposed under
section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the
Company shall pay to the Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by the Executive, after deduction
of any Excise Tax on the Relevant Payments and any federal, state and local
income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be
equal to the Relevant Payments.

 

A.            For
purposes of determining whether any of the Relevant Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) all payments or benefits
received or to be received by the Executive in connection with a Change in
Control or the Executive’s termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a Change in Control or any person
affiliated with the Company or such person) (all such payments and benefits,
excluding the Gross-Up Payment, being hereinafter referred to as the “Total
Payments”) shall be treated as “parachute payments” (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of tax counsel (“Tax
Counsel”) reasonably acceptable to the Executive and selected by the accounting
firm which was, immediately prior to the Change in Control, the Company’s
independent auditor (the “Auditor”), such payments or benefits (in whole or in
part) do not constitute parachute payments, including by reason of section
280G(b)(4)(A) of the Code, (ii) all “excess parachute payments” within the
meaning of section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in
excess of the Base Amount (within the meaning of section 280G(b)(3) of the
Code) allocable to such reasonable compensation, or are otherwise not subject
to the Excise Tax, and (iii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Auditor in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.  For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay federal income tax
at the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of the
Executive’s residence on the date of termination of his employment, net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.

 

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

 

 

the Executive shall repay
to the Company, within five (5) business days following the time that the
amount of such reduction in the Excise Tax is finally determined, the portion
of the Gross-Up Payment attributable to such reduction (plus that portion of
the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income and employment taxes imposed on the Gross-Up Payment being repaid
by the Executive), to the extent that such repayment results in a reduction in
the Excise Tax and a dollar-for-dollar reduction in the Executive’s taxable
income and wages for purposes of federal, state and local income and employment
taxes, plus interest on the amount of such repayment at 120% of the rate
provided in section 1274(b)(2)(B) of the Code. 
In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such excess) within five (5)
business days following the time that the amount of such excess is finally
determined.  The Executive and the
Company shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.

 

SECTION XIII

EFFECT OF PRIOR
AGREEMENTS

 

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

 

SECTION XIV

CONSOLIDATION, MERGER OR
SALE OF ASSETS

 

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

 

 

in form and substance
reasonably satisfactory to the Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that JTAX
would be required to perform it if no such succession had taken place.  Failure of JTAX to obtain such agreement
prior to the effectiveness of such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from JTAX in the same
amount and on the same terms as the Executive would be entitled to hereunder if
the Executive’s employment were to terminate in a Without Cause Termination
provided in Section VIII.A. hereof, except that the date on which any such
succession becomes effective shall be deemed the date of the Executive’s termination
of employment.

 

SECTION XV

MODIFICATION; WAIVER

 

This Agreement may not be modified or amended except
in writing signed by the parties.  No
term or condition of this Agreement will be deemed to have been waived except
in writing by the party charged with waiver. 
A waiver will operate only as to the specific term or condition waived
and will not constitute a waiver for the future or act on anything other than
that which is specifically waived.

 

SECTION XVI

GOVERNING LAW

 

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

 

SECTION XVII

ARBITRATION

 

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

 

 

before a single
arbitrator appointed in accordance with the arbitration rules of the American
Arbitration Association, modified only as herein expressly provided.  After the aforesaid twenty (20) days, either
party, upon ten (10) days notice to the other, may so submit the points in
dispute to arbitration.  The arbitrator
may enter a default decision against any party who fails to participate in the
arbitration proceedings.

 

B.            The
decision of the arbitrator on the points in dispute will be final, unappealable
and binding, and judgment on the award may be entered in any court having
jurisdiction thereof.

 

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

 

D.            The
parties agree that this Section XVII has been included to rapidly and
inexpensively resolve any disputes between them with respect to this Agreement,
and that this Section XVII will be grounds for dismissal of any court action
commenced by either party with respect to this Agreement, other than
post-arbitration actions seeking to enforce an arbitration award.  In the event that any court determines that
this arbitration procedure is not binding, or otherwise allows any litigation
regarding a dispute, claim, or controversy covered by this Agreement to
proceed, the parties hereto hereby waive any and all right to a trial by jury
in or with respect to such litigation.

 

E.             The
parties will keep confidential, and will not disclose to any person, except as
may be required by law, the existence of any controversy hereunder, the
referral of any such controversy to arbitration or the status or resolution
thereof.

 

SECTION XVIII

SURVIVAL

 

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

 

 

SECTION XIX

SEPARABILITY

 

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

 

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

 

	
   

  	
  JACKSON HEWITT TAX SERVICES INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Peter Karpiak

  	
   

  
	
   

  	
  By:

  	
  Peter Karpiak

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CENDANT CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Terry Connelly

  	
   

  
	
   

  	
  By:

  	
  Terry Connelly

  
	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MICHAEL LISTER

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Michael Lister

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