Document:

Unassociated Document

    Exhibit 10.1

       

       

      Execution
Version

      

      

      

      

      

      

      

      

      SEPARATION
AGREEMENT

       

       

      by and
among

       

       

      LOEWS
CORPORATION,

       

       

      LORILLARD,
INC.,

       

       

      LORILLARD
TOBACCO COMPANY,

       

       

      LORILLARD
LICENSING COMPANY, LLC,

       

       

      ONE PARK
MEDIA SERVICES, INC.

       

       

      and

       

       

      PLISA
S.A.

      

      

      

      

      

      

      

      

      

      

      

      Dated as
of May 7, 2008.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       

      TABLE OF
CONTENTS

      Page

       

      ARTICLE
I

      

      DEFINITIONS

      

      
        	
                Section
      1.1

              	
                Certain
      Definitions

              	
                2

              
	
                Section
      1.2

              	
                Other
      Definitions

              	
                7

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      II

              	 
      
	 
      	 
      	 
      
	 
      	
                ALLOCATION
      OF COSTS AND EXPENSES

              	 
      
	 
      	 
      	 
      
	
                Section
      2.1

              	
                Allocation
      of Costs and Expenses

              	
                8

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      III

              	 
      
	 
      	 
      	 
      
	 
      	
                RELEASE
      AND INDEMNIFICATION

              	 
      
	 
      	 
      	 
      
	
                Section
      3.1

              	
                Release
      of Pre-Separation Claims

              	
                10

              
	
                Section
      3.2

              	
                General
      Cross Indemnification

              	
                12

              
	
                Section
      3.3

              	
                Registration
      Statement Indemnification

              	
                13

              
	
                Section
      3.4

              	
                Notice
      and Defense of Claims

              	
                15

              
	
                Section
      3.5

              	
                Contribution

              	
                17

              
	
                Section
      3.6

              	
                Subrogation

              	
                17

              
	
                Section
      3.7

              	
                Other
      Matters

              	
                18

              
	
                Section
      3.8

              	
                Covenant
      to Remove Indemnified Party

              	
                18

              
	
                Section
      3.9

              	
                Tax
      Matters

              	
                18

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      IV

              	 
      
	 
      	 
      	 
      
	 
      	
                TAX
      RELATED PROVISIONS

              	 
      
	 
      	 
      	 
      
	
                Section
      4.1

              	
                Non-Taxable
      Transaction

              	
                19

              
	
                Section
      4.2

              	
                Tax
      Returns and Tax Payments

              	
                19

              
	
                Section
      4.3

              	
                Representations
      and Covenants

              	
                24

              
	
                Section
      4.4

              	
                Indemnity
      Obligations and Payments

              	
                27

              
	
                Section
      4.5

              	
                Tax
      Contests

              	
                28

              
	
                Section
      4.6

              	
                Cooperation;
      Retention of Records; Access; Confidentiality

              	
                29

              
	
                Section
      4.7

              	
                Further
      Assurances

              	
                31

              
	
                Section
      4.8

              	
                Dispute
      Resolution

              	
                31

              

      

       

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

       

      
        	 
      	 
      	 
      
	 
      	
                ARTICLE
      V

              	 
      
	 
      	 
      	 
      
	 
      	
                CONSOLIDATION,
      MERGER, CONVEYANCE, TRANSFER, DISPOSITION
      AND 

              	 
      
	 
      	
                DIVESTITURE

              	 
      
	 
      	 
      	 
      
	
                Section
      5.1

              	
                Consolidation,
      Merger, Conveyance, Transfer, Disposition and
      Divestiture

              	
                31

              
	 
      	
                 

              	 
      
	 
      	
                ARTICLE
      VI

              	 
      
	 
      	 
      	 
      
	 
      	
                DISPUTE
      RESOLUTION

              	 
      
	 	 	 
	
                Section
      6.1

              	
                Negotiation

              	
                32

              
	
                Section
      6.2

              	
                Arbitration

              	
                33

              
	
                Section
      6.3

              	
                Costs
      and Expenses

              	
                34

              
	
                Section
      6.4

              	
                Confidentiality
      of Arbitration Proceedings

              	
                34

              
	
                Section
      6.5

              	
                Tax
      Matters

              	
                34

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      VII

              	 
      
	 
      	 
      	 
      
	 
      	
                OTHER
      PROVISIONS

              	 
      
	 
      	 
      	 
      
	
                Section
      7.1

              	
                Treatment
      of Carolina Group 2002 Stock Option Plan

              	
                34

              
	
                Section
      7.2

              	
                Provision
      of Information

              	
                35

              
	
                Section
      7.3

              	
                Binding
      Effect

              	
                35

              
	
                Section
      7.4

              	
                No
      Assignment

              	
                35

              
	
                Section
      7.5

              	
                No
      Third Party Beneficiaries

              	
                36

              
	
                Section
      7.6

              	
                Notices

              	
                36

              
	
                Section
      7.7

              	
                Governing
      Law

              	
                36

              
	
                Section
      7.8

              	
                Counterparts

              	
                36

              
	
                Section
      7.9

              	
                Severability

              	
                36

              
	
                Section
      7.10

              	
                Amendment,
      Modification and Termination

              	
                36

              
	
                Section
      7.11

              	
                Entire
      Agreement

              	
                36

              
	
                Section
      7.12

              	
                No
      Circumvention

              	
                36

              
	
                Section
      7.13

              	
                Descriptive
      Headings

              	
                36

              
	
                Section
      7.14

              	
                Drafting
      of Language

              	
                36

              

      

       

      
        
           

        

        
           
ii

          
            

          

        

        
           

        

      

       

      SEPARATION
AGREEMENT

       

       

      SEPARATION
AGREEMENT, dated as of May 7, 2008, by and among LOEWS CORPORATION, a Delaware
corporation (“Loews”), LORILLARD,
INC., a Delaware corporation (“Lorillard”),
LORILLARD TOBACCO COMPANY, a Delaware corporation, LORILLARD LICENSING COMPANY,
LLC, a North Carolina limited liability company, ONE PARK MEDIA SERVICES, INC.,
a Delaware corporation, and PLISA S.A., a Swiss société anonyme.

       

       

      WHEREAS,
Loews is and will remain the owner of all of the issued and outstanding shares
of common stock of Lorillard until the Effective Date (as defined below);
and

       

       

      WHEREAS,
in accordance with its certificate of incorporation and applicable law, the
Board of Directors of Loews has determined to distribute Loews’s entire
ownership interest in Lorillard to the holders of Loews’s Carolina Group stock
(“CG Stock”)
and Loews common stock in several integrated transactions by which Lorillard
will become a separate public company; and

       

       

      WHEREAS,
Loews and Lorillard acknowledge and agree that the Separation will benefit both
Loews and the Lorillard Group as more fully described in the Registration
Statement; and

       

       

      WHEREAS,
Loews and Lorillard acknowledge and agree that Lorillard has always operated as
an independent subsidiary of Loews, although from time to time plaintiffs
have named Loews as a defendant in Actions allegedly arising out of the
business and activities of Lorillard and other members of the Lorillard Group,
and may do so in the future; and

       

       

      WHEREAS,
each member of the Lorillard Group acknowledges that Loews is not a proper party
in any Action of the type referred to in the preceding clause, and is not
responsible for any costs or damages which may arise from any such Action and,
accordingly, it would be appropriate to indemnify the Loews Group in respect
thereof; and

       

       

      WHEREAS,
Loews acknowledges that Lorillard, as an independent company, would not be a
proper party to any Action based on the actions of Loews, and, accordingly, it
would be appropriate to indemnify the Lorillard Group in respect
thereof.

       

       

      NOW,
THEREFORE, in contemplation of Lorillard ceasing to be wholly-owned by Loews and
for good and valuable consideration, the receipt and adequacy of which are
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      ARTICLE
I

       

      DEFINITIONS

       

      
        Section
1.1    Certain
Definitions.  In addition to the terms defined elsewhere in
this Agreement, the following terms have the following meanings:

         

      

      “Action” means any
claim, action, cause of action, suit, proceeding, demand or investigation,
whether civil, criminal, administrative, investigative or other.

       

       

      “Agreement” and “hereof” and “herein” means this
Separation Agreement, including all amendments, modifications and supplements
and any exhibits or schedules to any of the foregoing, and refers to the
Agreement as the same may be in effect at the time such reference becomes
operative.

       

       

      “Business Day” means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York City are authorized or obligated by law or
executive order to close.

       

       

      “Carryback Item” means
any net operating loss, net capital loss, excess tax credit or other similar Tax
item which may or must be carried from one taxable period to another taxable
period under the Code or other applicable Tax law.

       

       

      “Code” means the
Internal Revenue Code of 1986, as amended.

       

       

      “Contingent Dividend”
shall have the meaning ascribed to such term in the Registration
Statement.

       

       

      “Deconsolidation Date”
means the date of the Deconsolidation Event.

       

       

      “Deconsolidation
Event” means any event or transaction occurring on or after the Effective
Date, including the Separation or any component thereof, that causes Lorillard
to no longer be eligible to be included in the Loews Consolidated Group for
Federal Income Tax purposes.

       

       

      “Effective Date” shall
mean the closing date of the Redemption.

       

       

      “Exchange Act” means
the Securities Exchange Act of 1934.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       

      “Exchange Offer” shall
have the meaning ascribed to such term in the Registration
Statement.

       

       

      “Federal Income Tax”
means any Tax imposed under Subtitle A of the Code and any related interest and
any penalties, additions to such Tax, or additional amounts imposed with respect
thereto.

       

       

      “Filings” means annual
audited financial statements, annual reports to stockholders, annual, quarterly
and current reports issued or filed pursuant to or under the Exchange Act and
any registration statements, prospectuses and other filings made with the SEC
prior to, on or after the Effective Date, other than the Registration
Statement.

       

       

      “Final Determination”
means a determination within the meaning of Section 1313(a) of the Code or any
similar provision of state or local Tax law.

       

       

      “Governmental Entity”
means any federal, national, state, provincial, local, foreign, international or
other court, government, department, commission, board, bureau or agency,
authority (including, but not limited to, any central bank or taxing authority)
or instrumentality (including, but not limited to, any court, tribunal or grand
jury).

       

       

      “Group” means either
the Loews Group or the Lorillard Group, as applicable.

       

       

       “IRS” means the
Internal Revenue Service.

       

       

      “Keepwell” means any
guaranty, keepwell, net worth or financial condition maintenance agreement of or
by any member of the Loews Group provided to any Person with respect to any
actual or contingent obligation of any member of the Lorillard
Group.

       

       

      “Liabilities” means
any and all debts, liabilities, costs, expenses and obligations, whether accrued
or fixed, absolute or contingent, matured or unmatured, reserved or unreserved,
known or unknown, or determined or determinable, including those arising under
any law, claim, demand or Action (whether asserted or unasserted), or order,
writ, judgment, injunction, decree, stipulation, determination or award entered
by or with any governmental entity, and those arising under any contract, in
tort or otherwise, or any fines, damages or equitable relief which may be
imposed, and including all costs and expenses related thereto.

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

       

      “Loews Consolidated
Group” means an affiliated group of corporations within the meaning of
Section 1504(a) of the Code, of which Loews is the common parent corporation,
that has filed consolidated Federal Income Tax Returns.

       

       

      “Loews Group” means,
collectively, Loews and all of its direct and indirect Subsidiaries now or
hereafter existing and their respective successors, other than members of the
Lorillard Group.

       

       

      “Lorillard Group”
means, collectively, Lorillard, Lorillard Tobacco Company, Lorillard Licensing
Company, LLC, One Park Media Services, Inc., Plisa S.A., all of Lorillard’s
other direct and indirect Subsidiaries now or hereafter existing and each of
their respective predecessors and successors.

       

       

      “Losses” means with
respect to any Person, all losses, damages (whether compensatory, punitive,
consequential, multiple or other), judgments, settlements, assessments,
equitable or injunctive relief or disgorgements, Taxes and, to the extent
incurred, other Liabilities, including all punitive damages and criminal and
civil fines and penalties suffered by such Person, and including all costs,
expenses and interest relating thereto (including, but not limited to, all
expenses of investigation and preparation for defense, all accountant or
attorneys’ fees and all other out-of-pocket expenses incurred), regardless of
whether any such Losses relate to or arise out of such Person’s own alleged or
actual negligent or grossly negligent conduct, reckless conduct or intentional
misconduct.

       

       

      “Person” means any
individual, corporation, partnership, joint venture, limited liability company,
association or other entity and any trust, unincorporated organization or
government or any agency or political subdivision thereof or any other
Governmental Entity.

       

       

      “Post-Deconsolidation
Period” means any taxable year or other taxable period beginning after
the Deconsolidation Date and, in the case of any taxable year or other taxable
period that begins on or before and ends after the Deconsolidation Date, that
part of the taxable year or other taxable period that begins after the
Deconsolidation Date.

       

       

      “Pre-Deconsolidation
Period” means any taxable year or other taxable period that ends on or
before the Deconsolidation Date and, in the case of any taxable year or other
taxable period that begins on or before and ends after the Deconsolidation Date,
that part of the taxable year or other taxable period that ends on the
Deconsolidation Date.

       

       

      “Prime Rate” means the
rate of interest per annum published in The Wall Street Journal as the Prime
Rate, as in effect from time to time.

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

       

      “Proposed Acquisition
Transaction” means a transaction or series of related transactions (or
any agreement, understanding, arrangement or substantial negotiations, within
the meaning of Section 355(e) of the Code and Regulations, to enter into a
transaction or series of related transactions), as a result of which (i)
Lorillard would merge or consolidate with any other Person or (ii) any Person or
group of Persons would (directly or indirectly) acquire, or have the right to
acquire (through an option or otherwise) from Lorillard and/or one or more of
its stockholders, respectively, any amount of stock of Lorillard, that would,
when combined with any other changes in ownership of the stock of Lorillard
pertinent for purposes of Section 355(e) of the Code and Regulations, comprise
more than 35% of the total combined voting power or total value of all
outstanding stock of Lorillard as of the date of such transaction or, in the
case of a series of transactions, the date of the last transaction of such
series.   In determining whether a transaction constitutes an
indirect acquisition for purposes of the preceding sentence, any
recapitalization resulting in a shift of voting power or any redemption of
shares of stock (including any redemption of Lorillard equity pursuant to the
exception in Section
4.3(b)(iii)) shall be treated as an indirect acquisition of stock by the
non-exchanging stockholders.   This definition and the
application thereof is intended to monitor compliance with Section 355(e) of the
Code and Regulations and shall be interpreted accordingly by Loews, in its sole
and absolute discretion, which discretion shall be exercised in good
faith.

       

       

      “Prospectus” means,
collectively, the prospectuses included in the Registration Statement, and in
the form filed with the SEC pursuant to Rule 424 under the Securities Act, as
amended or supplemented by any prospectus supplement and by all other amendments
and supplements to such prospectuses, including post-effective amendments and
all material incorporated by reference in such prospectuses.

       

       

      “Redemption” shall
have the meaning ascribed to such term in the Registration
Statement.

       

       

      “Registration
Statement” means the registration statement on Form S-4 of Lorillard (No.
333-149051) filed with the SEC under the Securities Act, including the
Prospectus relating thereto, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and all materials
incorporated by reference in such Registration Statement and
Prospectus.

       

       

      “Regulations” means
the regulations promulgated from time to time under the Code as in effect for
the relevant taxable year or other taxable period.

       

       

      “Regulation S-K” means
Regulation S-K of the General Rules and Regulations under the Securities
Act.

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

       

      “Regulation S-X” means
Regulation S-X of the General Rules and Regulations under the Securities
Act.

       

       

      “Ruling Request” means
the request for rulings submitted by Loews to the IRS related to the Separation,
including the exhibits attached thereto, and all related
supplements.

       

       

      “SEC” means the
Securities and Exchange Commission.

       

       

      “Securities Act” means
the Securities Act of 1933.

       

       

      “Separation” has the
meaning set forth in the Registration Statement.

       

       

      “Separation Date”
shall mean the latest of (i) the Effective Date, (ii) the day of the closing of
the Exchange Offer, or (iii) the day of the distribution of the Contingent
Dividend.

       

       

      “Separation Tax
Liability” shall mean (i) any Taxes imposed on, increase in Taxes
incurred by, or reduction of a Tax Asset of any member of the Loews Group,
pursuant to a Final Determination resulting from, or arising in connection with,
the failure of the Separation to qualify as tax-free under Section 355 of the
Code (including, without limitation, any Tax resulting from the application of
Section 355(d) or Section 355(e) of the Code to the Separation) or any
corresponding provisions of any successor statute and any similar provision of
state or local Tax law, and (ii) any and all Losses of any member of the Loews
Group resulting from, based upon, arising out of or otherwise in respect of the
failure of the Separation to qualify as tax-free under the Code (or any similar
provision of state or local Tax law).

       

       

      “Subsidiary” means
with respect to any Person (i) a corporation, 50% or more of the voting or
capital stock of which is, as of the time in question, directly or indirectly
owned by such Person, (ii) any partnership, joint venture, association, limited
liability company, joint stock company, trust, unincorporated organization or
other entity in which such Person, directly or indirectly, owns 50% or more of
the equity thereof or economic interest therein or has the power to elect or
direct the election of 50% or more of the members of the governing body of such
entity or otherwise has control (including shared control) over such entity
(e.g., as a general
partner of a partnership or a managing member of a limited liability company),
or (iii) any other Person which would be considered a subsidiary of such Person
within the meaning of Regulation S-K or Regulation S-X.

       

       

      “Tax” or “Taxes” means all
taxes, charges, fees, duties, levies, imposts, rates or other assessments or
governmental charges of any kind imposed by any Governmental Entity, including,
without limitation, income, gross receipts, employment, excise, severance,
stamp, 

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      

        occupation,
premium, windfall profits, environmental, estimated, custom duties, property,
sales, use, license, capital stock, transfer, franchise, registration, payroll,
withholding, social security, unemployment, disability, value added, alternative
or add-on minimum or other taxes, and including any interest, penalties, charges
or additions attributable thereto.

      

       

       

      “Tax Asset” means any
Tax item of loss, deduction or credit, or other attribute that has not been used
during a taxable period and that could reduce a Tax in another taxable period,
including a net operating loss, net capital loss, unused investment tax credit,
unused foreign tax credit, research and experimentation credit, excess
charitable deduction, credit related to alternative minimum tax, or any other
unused Tax credit.

       

       

      “Tax Certificate”
means the officer’s certificate of Loews, dated as of May 5, 2008, provided to
Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”) in
connection with the Tax Opinion.

       

       

      “Tax Contest” means an
audit (including the Compliance Assurance Process), claim, dispute, suit,
action, proposed assessment, review, examination, or other administrative or
judicial proceeding with the purpose or effect of redetermining Taxes (including
any administrative or judicial review of any claim for refund).

       

       

      “Tax Opinion” means
the written opinion to be delivered by Skadden to Loews in connection with the
Separation to the effect that the Separation will qualify as tax-free under
Section 355 of the Code to Loews and Loews’s stockholders (except with respect
to cash received by Loews’s stockholders in lieu of fractional shares of
Lorillard common stock).

       

       

      “Tax Return” means any
return, report, certificate, form or similar statement or document (including
any related supporting information or schedule attached thereto and any
information return, amended tax return, claim for refund or declaration of
estimated tax) required to be supplied to, or filed with, a Governmental Entity,
or any bill for or notice related to ad valorem or other similar Taxes received
from a Governmental Entity, in each case, in connection with the determination,
assessment or collection of any Tax or the administration of any laws,
regulations or administrative requirements relating to any Tax.

       

       

      “Third Party Claim”
means any Action made against any member of either the Loews Group or the
Lorillard Group by any Person that is not a member of either Group.

       

      Section
1.2    
Other
Definitions.

      

        
          	
                       

                	
                  Term

                	 
      	
                  Defined
      in Section

                	
                       

                
	 
      	
                  “AAA”                                                                      

                	 
      	
                  6.2
            

                	 
      
	 
      	
                  “Agreement
      Disputes”                                                                      

                	 
      	
                  6.1 
           

                	    
      

        

         

      

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

       

      
        	 
      	
                “CFO”                                                                      

              	 	
                4.8

              	 
      
	 
      	
                “CG
      Option”                                                                      

              	 	
                7.1

              	 
      
	 
      	
                “CG
      SAR”                                                                      

              	 	
                7.1

              	 
      
	 
      	
                “CG
      Stock”                                                                      

              	 	
                Preamble

              	 
      
	 
      	
                “Dispute
      Notice”                                                                      

              	 	
                6.1

              	 
      
	 
      	
                “Indemnified
      Party”                                                                      

              	 	
                3.4(a)

              	 
      
	 
      	
                “Indemnifying
      Party”                                                                      

              	 	
                3.4(a)

              	 
      
	 
      	
                “Loews”                                                                      

              	 	
                Preamble

              	 
      
	 
      	
                “Loews
      Filed Tax
      Return”                                                                      

              	 	
                4.2(a)(i)

              	 
      
	 
      	
                “Loews
      Taxes”                                                                      

              	 	
                4.2(c)(i)

              	 
      
	 
      	
                “Lorillard”                                                                      

              	 	
                Preamble

              	 
      
	 
      	
                “Lorillard
      Filed Tax
      Return”                                                                      

              	 	
                4.2(a)(ii)

              	 
      
	 
      	
                “Lorillard
      Taxes”                                                                      

              	 	
                4.2(c)(ii)

              	 
      
	 
      	
                “Prohibited
      Acts”                                                                      

              	 	
                4.3(b)(viii)

              	 
      
	 
      	
                “Repayment
      Amount”                                                                      

              	 	
                4.2(b)(iii)

              	 
      
	 
      	
                “Rules”                                                                      

              	 	
                6.2

              	 
      
	 
      	
                “Ruling”                                                                      

              	 	
                4.3(a)(i)

              	 
      
	 
      	
                “Tax
      Advisor”                                                                      

              	 	
                4.8

              	 
      
	 
      	
                “Tax
      Benefit”                                                                      

              	 	
                4.2(b)(iii)

              	 
      
	 
      	
                “Tax
      Dispute”                                                                      

              	 	
                4.8

              	 
      
	 
      	
                “Tax
      Materials”                                                                      

              	 	
                4.3(a)(i)

              	 
      
	 
      	
                “Tax
      Records”                                                                      

              	 	
                4.6(c)

              	 
      

      

      

      ARTICLE
II

       

      ALLOCATION
OF COSTS AND EXPENSES

       

      Section
2.1    Allocation of Costs and
Expenses.

       

      (a)    Lorillard
shall pay (or, to the extent incurred by and paid for by any member of the Loews
Group, will promptly reimburse such member of the Loews Group for any and all
amounts so paid) for:

       

       

          (i)    all fees,
costs and expenses (including fees and expenses of counsel) related to
Lorillard’s organizational documents;

       

          (ii)   all fees, costs and
expenses (including fees and expenses of counsel) related to the listing of
Lorillard common stock on any domestic or foreign securities exchange and
associated costs;

       

       

          (iii)         
all fees, costs and expenses (including fees and expenses of counsel) related to
the preparation of (1) documents related to Lorillard’s 

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

         

         

        employee
benefit plans, retirement plans and equity-based plans to be in effect following
the Separation, (2) the descriptions thereof in the Registration Statement and
Prospectus, and (3) the “Management” section of the Registration Statement and
Prospectus;

         

         

            (iv)         all
fees, costs and expenses (including fees and expenses of counsel) of the
independent accountants associated with the financial statements, management’s
discussion and analysis of Lorillard’s financial condition and results of
operation and the other financial information of Lorillard set forth in the
Registration Statement and Prospectus; and

         

         

            (v)          50%
of the fees payable to Lehman Brothers for financial advisory services in
connection with the Separation.

         

         

                (b)    Loews shall
pay (or, to the extent incurred by and paid for by any member of the Lorillard
Group, will promptly reimburse such member of the Lorillard Group for any and
all amounts so paid) for:

         

         

            (i)    all fees,
costs and expenses (including fees and expenses of counsel) related to the
Ruling Request;

         

         

            (ii)    all fees,
costs and expenses (including fees and expenses of counsel) of the independent
accountants associated with the pro forma financial information of Loews set
forth in the Registration Statement and Prospectus, and with the issuance of a
comfort letter with respect to the Registration Statement;

         

         

            (iii)           50%
of the fees payable to Lehman Brothers for financial advisory services in
connection with the Separation;

         

         

            (iv)           100%
of the fees payable to Morgan Stanley & Co. Incorporated and J.P. Morgan for
financial advisory services in connection with the Separation; and

         

         

            (v)            100%
of the fees payable to any dealer manager in the Exchange Offer.

         

         

      

       

      (c)    Except as
otherwise provided in Section 2.1(a) and
Section 2.1(b),
Lorillard and Loews shall each pay 50% of the aggregate fees, costs and expenses
(including fees and

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

       

      expenses
of counsel) incurred by them and their Subsidiaries in connection with the
Separation, including, but not limited to:

       

       

          (i)            
all fees, costs and expenses (including fees and expenses of counsel) related to
the preparation, negotiation, execution, printing and filing, as required, of
this Agreement and all of the other documents, agreements, forms, applications,
contracts or consents related to the Separation;

       

       

          (ii)             all
fees, costs and expenses (including fees and expenses of counsel) related to the
preparation, printing, filing and distribution, as required, of the Registration
Statement and Prospectus, including all fees, costs and expenses of complying
with applicable federal, state or foreign securities laws and domestic or
foreign securities exchange rules and regulations; and

       

       

          (iii)            all
registration fees paid to the SEC in connection with the Registration
Statement.

       

       

      To the
extent that Loews or Lorillard previously shall have paid an amount in excess of
its 50% share of the fees, costs and expenses referred to in this Section 2.1(c),
Lorillard or Loews, as the case may be, shall reimburse the other for such
excess payment.

       

       

                 (d)     The allocations
provided for in this Section 2.1 shall not
apply to the extent that Article III, Article IV or Article VI otherwise
address the responsibilities of any party with respect to any fees, costs or
expenses.

       

       

      ARTICLE
III

       

      
 

      RELEASE
AND INDEMNIFICATION

       

       

      Section
3.1    
Release of
Pre-Separation Claims.

       

       

      (a)    Except as
otherwise provided in this Agreement, each member of the Lorillard Group
remises, releases and forever discharges Loews and all Persons who at any time
prior to the Effective Date have been stockholders, directors, officers, or
employees of Loews (in their respective capacities as such) (the “Loews
Releasees”), and their respective heirs, executors, administrators, successors
and assigns, from any and all Liabilities owed by Loews or any of the Loews
Releasees to any member of the Lorillard Group, whether at law or in equity
(including any right of contribution), whether arising under any contract or
agreement, by operation of law or otherwise, existing or arising from any acts
or events occurring or failing to occur or alleged to have occurred or to have
failed to occur or any conditions existing or alleged to have existed

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

       

      on or before the Effective Date, including in connection with all
activities to implement the Separation.

       

       

      (b)    Except as
otherwise provided in this Agreement, Loews remises, releases and forever
discharges each member of the Lorillard Group and all Persons who at any time
prior to the Effective Date have been directors, officers, or employees of any
member of the Lorillard Group (in each case, in their respective capacities as
such)(the “Lorillard Releasees”), and their respective heirs, executors,
administrators, successors and assigns, from any and all Liabilities owed by any
member of the Lorillard Group or any of the Lorillard Releasees to Loews,
whether at law or in equity (including any right of contribution), whether
arising under any contract or agreement, by operation of law or otherwise,
existing or arising from any acts or events occurring or failing to occur or
alleged to have occurred or to have failed to occur or any conditions existing
or alleged to have existed on or before the Effective Date, including in
connection with all activities to implement the Separation.

       

       

      (c)    Lorillard
shall not make, and shall not permit any member of the Lorillard Group to make,
any claim or demand or commence any Action asserting any claim or demand,
including any claim of contribution or any indemnification, against Loews or any
other Person released pursuant to Section 3.1(a) with
respect to any Liabilities released pursuant to Section 3.1(a). Loews
shall not make any claim or demand, or commence any Action asserting any claim
or demand, including any claim of contribution or any indemnification, against
Lorillard or any member of the Lorillard Group, or any other Person released
pursuant to Section
3.1(b), with respect to any Liabilities released pursuant to Section
3.1(b).

       

       

      (d)         It
is the intent of each of Loews and Lorillard by virtue of the provisions of this
Section 3.1 to
provide for a full and complete release and discharge of all Liabilities
existing or arising from all acts and events occurring or failing to occur or
alleged to have occurred or to have failed to occur and all conditions existing
or alleged to have existed on or before the Effective Date between or among
Lorillard or any member of the Lorillard Group, on the one hand, and Loews, on
the other hand (including any contractual agreements or arrangements existing or
alleged to exist between or among any such members on or before the Effective
Date), except as expressly set forth in Section 3.1(e). At any time, at
the request of Loews or Lorillard, as the case may be, any party shall execute
and deliver a release reflecting the provisions of this Section
3.1.

       

       

      (e)    Notwithstanding the
foregoing, nothing contained in this Section 3.1 shall
impair any right of any Person to enforce this Agreement in accordance with its
terms.

       

       

      (f)    This Section 3.1 shall not
apply to any matters to which Article IV
applies.

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

       

      Section
3.2    
General Cross
Indemnification.

       

       

      (a)    Each member
of the Lorillard Group, jointly and severally, shall indemnify and hold harmless
each member of the Loews Group and each of its officers, directors, and
employees against any and all Losses arising out of Actions, including, without
limitation, Losses arising out of, resulting from or in connection with any
Action, whether grounded in tort, contract, statute or otherwise, whether now
pending or hereafter asserted, which may arise out of, pertain to or be in
connection with any of the following, and whether occurring before, on or after
the Effective Date:

       

       

          (i)    any breach by
any member of the Lorillard Group of all or any portion of this Agreement, or
any other acts or omissions by any member of the Lorillard Group arising out of
the performance of its obligations under this Agreement;

       

       

          (ii)    the ownership
or the operation of the assets or properties of, and the operation or conduct of
the business of, including contracts entered into by, any member of the
Lorillard Group;

       

       

          (iii)    any matter
relating, directly or indirectly, to the tobacco or cigarette business,
including without limitation any health-related claim, the use of any tobacco
products (including, without limitation, flavorings, filters, wrappers, or other
elements used in the manufacturing of tobacco products), the manufacture, sale,
promotion, distribution, or marketing of any tobacco products, or exposure to
tobacco products, such as environmental tobacco smoke, whether or not such
products relate to any member of the Lorillard Group;

       

       

          (iv)    any employee,
former employee, or independent contractor of any member of the Lorillard Group
(or the termination of any such relationship), or any employee benefit plan,
program, agreement or arrangement sponsored by or contributed to by any member
of the Lorillard Group or to which any member of the Lorillard Group is, or at
any time was, a party;

       

       

          (v)    any other
activities, action or inaction on the part of any member of the Lorillard Group
or its officers, directors, employees, affiliates acting as such (other than a
member of the Loews Group acting as such), fiduciaries or agents, excluding any
action expressly permitted hereunder;

       

       

          (vi)    any Keepwell;
and

       

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

       

          (vii)                 any
untrue statement or alleged untrue statement of a material fact contained in any
Filing of any member of the Loews Group, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only with respect to information, if
any, relating to a member of the Lorillard Group and provided to Loews by or on
behalf of a member of the Lorillard Group or derived from the records of any
member of the Lorillard Group.

       

       

      (b)    Loews shall
indemnify and hold harmless each member of the Lorillard Group and each of its
officers, directors, and employees against any and all Losses arising out
of Actions, including, without limitation, Losses arising out of, resulting
from or in connection with any Action, whether grounded in tort, contract,
statute or otherwise, whether now pending or hereafter asserted, which may arise
out of, pertain to or be in connection with any of the following, and whether
occurring before, on or after the Effective Date:

       

       

          (i)    any breach by
Loews of all or any portion of this Agreement, or any other acts or omissions by
Loews arising out of the performance of its obligations under this
Agreement;

       

       

          (ii)    any other
activities, action or inaction on the part of Loews or its officers, directors,
employees, fiduciaries or agents, excluding any action expressly permitted
hereunder; and

       

       

          (iii)    any untrue
statement or alleged untrue statement of a material fact contained in any Filing
of any member of the Loews Group, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only with respect to information, if any,
not relating to any member of the Lorillard Group.

       

       

      (c)    The
indemnification obligations contained in this Section 3.2 shall be
applicable whether or not any Action or the facts or transactions giving rise to
such Action arose prior to, on or subsequent to the Effective Date and whether
or not the Action giving rise to any claim for indemnification is
valid.

       

       

      Section
3.3    
Registration Statement
Indemnification.

       

       

      (a)    Each member
of the Lorillard Group, jointly and severally, shall indemnify and hold harmless
each member of the Loews Group and each of its directors, officers, and
employees from and against any and all Losses arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or Prospectus, or any omission or alleged omission to
state therein a material fact required to be 

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

       

      stated
therein or necessary to make the statements therein not misleading, except
insofar as such untrue statement or omission or alleged untrue statement or
omission was made in reliance upon and in conformity with information relating
to Loews and furnished in writing by Loews expressly for use in the Registration
Statement or Prospectus.

       

       

      (b)    Loews shall
indemnify and hold harmless Lorillard and each of its directors, officers, and
employees from and against any and all Losses arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or Prospectus, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only insofar as such untrue statement
or omission or alleged untrue statement or omission was made in reliance upon
and in conformity with information relating to Loews and furnished in writing by
Loews expressly for use in the Registration Statement or
Prospectus.

       

       

      (c)    The parties
agree that the statements set forth in the Registration Statement and Prospectus
under the following captions constitute the only information relating to Loews
furnished in writing by Loews expressly for use in the Registration Statement or
Prospectus:

       

      
        	
                (i)

              	 
      	
                “Summary—Loews”,—The
      Carolina Group” and “The Redemption”;

              
	 	 	 
	
                (ii)

              	 
      	
                “Transaction
      Background”;

              
	 	 	 
	
                (iii)

              	 
      	
                “The
      Redemption”, excluding “-Listing and Trading of Lorillard Common
      Stock”;

              
	 	 	 
	
                (iv)

              	 
      	
                “Market
      Price of and Dividends on Common Equity and Related Matters—Historical
      Market

              
	 
      	 
      	
                Value
      of Loews Common Stock”, “—Historical Market Value of Carolina Group Stock”
      and “—Holders”;

              
	 	 	 
	
                (v)

              	 
      	
                “Documents
      Incorporated by Reference”;

              
	 	 	 
	
                (vi)

              	 
      	
                “Loews
      Corporation and Subsidiaries Pro Forma Financial
    Information”;

              
	 	 	 
	
                (vii)

              	 
      	
                the
      cover page of the Offer to Exchange;

              
	 	 	 
	
                (viii)

              	 
      	
                “Questions
      and Answers About the Exchange Offer”;

              
	 	 	 
	
                (ix)

              	 
      	
                “Summary—The
      Exchange Offer”, “—Effects of the Separation on Loews” and “—Summary
      Pro

              
	 
      	 
      	
                Forma
      Financial Information of Loews”;

              
	 	 	 
	
                (x)

              	 
      	
                “Risk
      Factors Relating to the Exchange Offer”;

              
	 	 	 
	
                (xi)

              	 
      	
                “Terms
      of the Exchange Offer”;

              
	 	 	 
	
                (xii)

              	 
      	
                “Contingent
      Dividend Distribution”;

              
	 	 	 
	
                (xiii)

              	 
      	
                “Transactions
      Concerning Loews Common Stock”;

              

      

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

       

      
        	
                (xiv)

              	 
      	
                “Comparison
      of Rights of Holders of Loews Common Stock and Lorillard Common Stock”,
      except for the

              
	 
      	 
      	
                description
      of Lorillard common stock;

              
	 	 	 
	
                (xv)

              	 
      	
                “Capitalization
      of Loews” and,

              
	 	 	 
	
                (xvi)

              	 
      	
                “Certain U.S.
      Federal Income Tax
Consequences”.

              

      

    

    
      

      
      

      
      

      
      

      
      

      
      

      
      

       

      Section
3.4    
Notice and Defense of
Claims.

       

       

      (a)    If any Action
shall be brought against any Person entitled to indemnification pursuant to this
Agreement (each, an “Indemnified Party”)
in respect of which indemnity may be sought, such Indemnified Party shall
promptly notify the applicable party or parties obligated under this Agreement
to indemnify such Indemnified Party (each, an “Indemnifying Party”),
and such Indemnifying Party shall assume the defense thereof, including
employment of counsel and payment of all fees and expenses.  The
failure of the Indemnified Party to give notice as provided in this Section 3.4 shall not
relieve the Indemnifying Party of its obligations under this Agreement, except
to the extent that the Indemnifying Party is materially prejudiced by the
failure to give notice.

       

       

      (b)    When an
Indemnified Party reasonably determines that an Action is likely to proceed to
trial or that it is otherwise appropriate that the Indemnified Party be
separately represented, such Indemnified Party shall have the right to
employ separate counsel in such Action and to participate in the defense
thereof at the expense of the Indemnifying Party.  Prior to employing
separate counsel, the Indemnified Party shall provide notice to the Indemnifying
Party of its intention to employ separate counsel.  It is understood,
however, that Indemnifying Party shall, in connection with any one such Action
or separate but substantially similar or related Actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of only one separate firm of attorneys (in
addition to any local counsel) at any time for all such Indemnified parties not
having actual or potential differing interests among themselves.

       

       

      (c)    The
Indemnified Party shall submit to the Indemnifying Party not less frequently
than quarterly, copies of invoices from separate counsel, and the Indemnifying
Party shall reimburse the Indemnified Party for uncontested fees and expenses
within thirty (30) days of the receipt of such invoices.  Any fees and
expenses objected to by the Indemnifying Party as not reasonable shall be
subject to the dispute resolution provisions of Article VI of this
Agreement.

       

       

      (d)    All
indemnification payments due under this Agreement shall be made by wire transfer
of immediately available funds to a bank account of the Indemnified
Party.  Late payments shall be subject to interest at a rate per annum
equal to the then effective Prime Rate 

       

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

       

      plus two
hundred (200) basis points (or the maximum legal rate, whichever is lower),
calculated for the actual number of days elapsed, accrued from the date on which
such payment was due up to the date of the actual receipt of
payment.

       

       

      (e)    An
Indemnified Party shall not settle or compromise any Action for which
indemnification hereunder has been sought by the Indemnified Party without first
providing notice to the Indemnifying Party, unless the Indemnifying Party has
failed to assume and prosecute the defense of such Action in accordance with
this Agreement.  Such notice to be provided by the Indemnified Party
will include a reasonable opportunity for the Indemnifying Party to consent to
the settlement or compromise, or to object on the basis that the settlement or
compromise will materially impair the rights or defenses of the Indemnifying
Party in the same or similar Actions.

       

       

      (f)    

       

       

          (i)    If an Action
for which indemnification hereunder has been sought by the Indemnified Party is
settled or compromised by the Indemnified Party despite the assumption of the
defense by the Indemnifying Party and the written objection of the Indemnifying
Party that such settlement or compromise will materially impair the rights
and defenses of the Indemnifying Party in the same or similar Actions, the
Indemnified Party shall not be entitled to indemnification pursuant to this
Agreement for any amounts paid pursuant to such settlement or
compromise unless it shall be determined thereafter in accordance with
Article VI hereof that such settlement or compromise did not materially impair
the rights and defenses of the Indemnifying Party in the same or similar
Actions.

       

       

          (ii)    If an Action
for which indemnification hereunder has been sought by the Indemnified Party is
settled or compromised by the Indemnified Party either with the consent of the
Indemnifying Party or where the Indemnifying Party has failed to assume and
prosecute the defense of such Action in accordance with this Agreement, the
Indemnifying Party shall indemnify and hold harmless each Indemnified Party, to
the extent provided by this Article III, from and against any Losses relating to
such Action, including Losses incurred by reason of such settlement.

       

       

          (iii)    If a final
judgment for plaintiff is entered in any Action for which indemnification
hereunder has been sought by the Indemnified Party, the Indemnifying Party shall
indemnify and hold harmless each Indemnified Party, to the extent provided in
this Article III, from and against any Losses relating to such Action, including
Losses incurred by reason of such judgment.

       

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

       

              (g)    The
provisions of this Article III shall
determine the respective indemnification obligations and rights of the parties
to this Agreement, but shall not be deemed to prevent or impair the absolute
right of any member of the Loews Group or the Lorillard Group from assuming the
defense of, or effecting any settlement or compromise of, any Action to which it
is a party, which rights are expressly permitted hereunder.

       

       

      Section
3.5    
Contribution.

       

       

      (a)    If the
indemnification provided for in this Article III is
unavailable to an Indemnified Party under Section 3.3 in
respect of any Losses referred to therein, or if such indemnification is
insufficient to hold the Indemnified Party harmless, then an Indemnifying Party,
in lieu of or in addition to indemnifying such Indemnified Party, as the case
may be, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and the Indemnified Party on the other
hand in connection with the statements or omissions that resulted in such
Losses, as well as any other relevant equitable considerations.  The
relative fault of the Indemnifying Party on the one hand and the applicable
Indemnified Party on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Party on the one hand or Indemnified
Party on the other hand, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.

       

       

      (b)    The parties
agree that it would not be just and equitable if contribution pursuant to this
Section 3.5 were determined by
a pro rata allocation or by
any other method of allocation that does not take account of the equitable
considerations referred to in Section
3.5(a).  The amount paid or payable by an Indemnified Party as
a result of the Losses referred to in Section 3.5(a) shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigating any claim or defending any such Action.  No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

       

       

      Section
3.6    
Subrogation.

       

      Upon
indemnification of the Losses under this Agreement, the Indemnifying Party shall
be subrogated to the rights of the Indemnified Party against insurers or other
third parties with respect to such assumed or indemnified amount. It is
expressly agreed that no insurer or any other third party shall be (i) entitled
to a benefit (as a third party beneficiary or otherwise) it would not be
entitled to receive in the absence of Section 3.2 or Section 3.3 of this
Agreement, (ii) relieved of the responsibility to pay any insured claims or
indemnified claims or any other claims for which it is obligated or (iii)
entitled to any subrogation rights with respect to any obligation
hereunder.  The Indemnified Party shall, upon request, provide a
formal assignment of 

       

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

       

      a claim
against an insurer or other third party to the Indemnifying Party with respect
to the assumed or indemnified amount or shall otherwise reasonably cooperate at
the Indemnifying Party’s request and expense, with any attempt by the
Indemnifying Party to recoup assumed or indemnified amounts from insurers or
other third parties.

       

       

      Section
3.7    
Other
Matters.

       

       

      (a)    No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending or threatened Action in respect of
which any Indemnified Party is a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party and each of its officers,
directors, and employees from any liability, penalty, admission of wrongdoing,
restraint or other obligation with respect to claims that are the subject matter
of such Action at least to the same extent as the Indemnifying Party is itself
released.

       

       

      (b)    The indemnity
and contribution obligations contained in this Article III shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any Indemnified Party or Indemnifying
Party.

       

       

      (c)    The parties
hereto shall, and shall cause their respective Subsidiaries to, cooperate with
each other in a reasonable manner with respect to access to unprivileged
information and similar matters in connection with any Action.  The
provisions of this Article III are for
the benefit of, and are intended to create third party beneficiary rights in
favor of, each of the Indemnified Parties referred to herein.

       

       

      Section
3.8    
Covenant to Remove
Indemnified Party.

       

       

      Loews and
each member of the Lorillard Group agree that at all times henceforth, if an
action is commenced by a third party with respect to which any member of either
the Loews Group or the Lorillard Group is indemnified pursuant to this Article III, then
such member of the Loews Group or the Lorillard Group, as the case may be, shall
use its best commercial efforts to cause such defendant to be removed from such
Action.  However, nothing in this Section 3.8 will
obligate any party to settle any Action.

       

       

      Section
3.9    
Tax
Matters.

       

       

      This Article III shall not
apply to any matters to which Article IV
applies.

       

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

       

      ARTICLE
IV

      

      TAX
RELATED PROVISIONS

       

      Section
4.1    
Non-Taxable
Transaction.

       

       

      Loews and Lorillard intend that the
Separation will qualify as a non-taxable transaction under Section 355 of the
Code, after which none of Lorillard or its Subsidiaries will be a member of the
Loews Consolidated Group.

       

       

      Section
4.2    
Tax Returns and Tax
Payments.

       

       

      (a)    Filing of Tax
Returns.

       

          (i)    Loews shall
have the sole and exclusive responsibility for preparing and filing each Tax
Return required to be filed after the Deconsolidation Date that includes any
member of the Loews Group (each, a “Loews Filed Tax
Return”).  Lorillard shall prepare and deliver (at its own cost
and expense) to Loews in a manner consistent with past practice pro forma Tax
Returns (including work papers) and any other information that Loews deems
necessary to prepare and timely file any Loews Filed Tax Return with respect to
each member of the Lorillard Group included in, or reflected on, a Loews Filed
Tax Return no later than ninety days before the due date for the filing of the
relevant Tax Return (giving effect to valid extensions thereof), provided, however, that with
respect to the Loews Filed Tax Return of the Loews Consolidated Group for the
taxable period ending on December 31, 2008, Lorillard shall prepare and deliver
such pro forma Tax Returns and information no later than ninety days after the
Deconsolidation Date.  Each member of the Lorillard Group hereby
irrevocably authorizes and designates Loews as its agent, coordinator and
administrator for the purpose of taking any and all actions necessary or
incidental to the filing of any such Loews Filed Tax Returns and, except as
otherwise provided in this Article IV, for the
purpose of making payments to, or collecting refunds from, any Governmental
Entity in respect of a Loews Filed Tax Return.  Except as otherwise
provided in this Article IV, Loews
shall have the exclusive right to file, prosecute, compromise or settle any
claim for, or refund of, Taxes in respect of a Loews Filed Tax Return and to
determine whether any refunds of Taxes shall be received by way of refund or
credit against a current or future Tax liability.

       

       

          (ii)    Lorillard
shall have the sole and exclusive responsibility for preparing and filing each
Tax Return required to be filed after the Deconsolidation Date that includes any
member of the Lorillard Group which is not a Loews Filed Tax Return (each, a
“Lorillard
Filed Tax
Return”).  Except as

       

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

       

      otherwise
required by law, Lorillard shall prepare and file all Lorillard Filed Tax
Returns on a basis that is consistent with the Tax Materials and shall not take
any position (or make any election) in the preparation and filing of such
Lorillard Filed Tax Returns that is inconsistent with any position or election
made by Loews in connection with the preparation and filing of any Tax Return of
the Loews Consolidated Group that includes any Pre-Deconsolidation
Period.

       

       

      (b)    Obligation to
Remit Taxes.

       

       

          (i)    Loews and
Lorillard shall each remit or cause to be remitted to the applicable
Governmental Entity in a timely manner any Taxes due in respect of any Tax
Return that such party is required to file.  In the case of any Loews
Filed Tax Return or Lorillard Filed Tax Return, for which the party not required
to file such Tax Return is obligated under this Article IV to pay all
or a portion of the Taxes reported as due on such Tax Return, the party filing
such Tax Return shall notify the other party in writing of its obligation to pay
such Taxes and the party receiving such notice shall pay such amount to the
party filing such Tax Return in accordance with the notice provisions contained
in Section
4.4(b).

       

       

          (ii)    Not later
than thirty days after the Deconsolidation Date, the Lorillard Group shall
calculate its Federal Income Tax liability based upon its actual taxable income
for its taxable period ending on the Deconsolidation Date and shall pay such
amount to Loews, net of any previous estimated Federal Income Tax payments to
Loews in respect of the same taxable period.  If Loews and Lorillard
determine not later than thirty days after the Deconsolidation Date that the
Lorillard Group has, through previous estimated Federal Income Tax payments to
Loews, made an overpayment of Federal Income Tax for the taxable period of the
Lorillard Group ending on the Deconsolidation Date, Loews will pay an amount
equal to such overpayment to the Lorillard Group, but only at such time and only
to the extent that Loews is able to apply such overpayment to offset a
future estimated Federal Income Tax payment of the Loews Consolidated Group for
the taxable period ending on December 31, 2008.  Upon the filing of
the relevant Loews Filed Tax Return, a final adjustment payment shall be made by
Loews to the Lorillard Group or vice versa, as appropriate, reflecting any
difference between the amounts previously paid by the Lorillard Group to Loews
in respect of the taxable period of the Lorillard Group ending on the
Deconsolidation Date (including any estimated Federal Income Tax payments), any
amounts previously paid by Loews to the Lorillard Group relating to overpayments
of Federal Income Tax for the taxable period of the Lorillard Group ending on
the Deconsolidation Date, and the Federal Income Tax liability of the Lorillard
Group for such taxable period as reflected on such Loews Filed Tax
Return.

       

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

       

          (iii)    In the event
that the Lorillard Group generates a net operating loss during its taxable
period ending on the Deconsolidation Date and the Loews Consolidated Group
receives a refund from a Governmental Entity or realizes a reduction in
otherwise required Tax payments (a “Tax Benefit”) as a
result of the use of such net operating loss, not later than 90 days after Loews
files the Tax Return of the Loews Consolidated Group in respect of Federal
Income Taxes for the taxable period ending on December 31, 2008, Loews shall pay
to Lorillard an amount equal to such refund received or Tax Benefit realized;
provided, that
Loews shall be entitled to reduce the amount of any such payment for its
reasonable costs and expenses in obtaining such refund or realizing such Tax
Benefit, including any Taxes imposed on the receipt of such refund or
realization of such Tax Benefit; provided, further, that in the
event, and to the extent, that Loews is required to repay such refund or Tax
Benefit, plus any interest, penalties, charges or additions attributable thereto
(a “Repayment
Amount”), to a Governmental Entity, Lorillard shall pay Loews such
Repayment Amount within five Business Days of receiving a written request
therefor from Loews.

       

       

      (c)    Tax Sharing
Obligations and Prior Agreements.

       

       

          (i)    Loews and the
other members of the Loews Group shall be responsible for the payment of (and
shall be entitled to any refund of, whether received in cash or applied against
future Tax obligations) (1) all Taxes attributable to any member of the Loews
Group for any Pre-Deconsolidation Period or Post-Deconsolidation Period other
than the Separation Tax Liability and (2) the Separation Tax Liability but only
to the extent such Taxes arise solely as a result of any breach of any covenant
or any other obligation contained in the Tax Materials or this Agreement by
Loews, any other member of the Loews Group or any stockholder of Loews
(collectively, the “Loews
Taxes”).

       

       

          (ii)    Lorillard and
the other members of the Lorillard Group shall be responsible for the payment of
(and shall be entitled to any refund of, whether received in cash or applied
against future Tax obligations) (1) all Taxes attributable to any member of the
Lorillard Group and (2) the Separation Tax Liability, except to the extent that
the Separation Tax Liability arises solely as a result of any breach of any
covenant or any other obligation contained in the Tax Materials or this
Agreement by Loews, any other member of the Loews Group or any stockholder of
Loews (collectively, the “Lorillard
Taxes”).

       

       

          (iii)    For purposes
of this Article
IV, the liability for Federal Income Tax attributable to the members of
the Lorillard Group means, for any Pre-Deconsolidation Period, an amount equal
to the Federal Income Tax which 

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      would have been payable by the Lorillard Group for such taxable
period if the Lorillard Group had filed its own consolidated Tax Return in
respect of Federal Income Taxes for such taxable period and all prior taxable
periods.  In the case of any Loews Filed Tax Return that includes any
member of the Lorillard Group only for the portion of the relevant taxable
period that ends on the Deconsolidation Date, taxable income, assets
or other attributes of the Lorillard Group shall be allocated by Loews to
such portion of such taxable period based on an actual or hypothetical closing
of the books at the close of the Deconsolidation Date performed by Loews, unless
otherwise required by applicable Tax law.

       

       

          (iv)    Except to the
extent of a Final Determination to the contrary, no member of the Lorillard
Group shall take any position on any Tax Return, in connection with any Tax
Contest or otherwise that any member of the Loews Group (1) is or has been a
member of a combined, consolidated or unitary group of corporations for any Tax
purpose that includes a member of the Lorillard Group other than the Loews
Consolidated Group or (2) has any liability for any Taxes attributable to any
member of the Lorillard Group other than liability imposed under Regulations
Section 1.1502-6 with respect to Federal Income Taxes of the Loews Consolidated
Group.  In the event that any Governmental Entity challenges such
position, (x) Lorillard shall promptly notify Loews of such challenge, (y)
Lorillard shall, at its own cost and expense, use its best efforts to contest
such challenge, and (z) notwithstanding Lorillard’s control right as set forth
in Section
4.5(c), upon request by Loews, Loews shall, at its own cost and expense,
be allowed to participate in the handling of any such challenge and Lorillard
shall consult with Loews regarding any such challenge, including any
correspondence or filings submitted in connection therewith, and regarding
strategy and settlement decisions with respect to any such
challenge.  Lorillard shall not settle any such challenge without the
consent of Loews, which consent shall not be unreasonably withheld, delayed or
conditioned.

       

       

          (v)    In connection
with the Deconsolidation Event, Loews shall determine in accordance with
applicable Tax laws the allocation of applicable Tax Assets, if any, among
Loews, each other member of the Loews Group, Lorillard and each other member of
the Lorillard Group.  In the absence of controlling legal authority or
unless otherwise provided in this Agreement, each Tax Asset, if any, shall be
allocated to the member of the Loews Group or the Lorillard Group who generated
such Tax Asset.

       

       

          (vi)    Within thirty
days after the Separation Date, Lorillard shall provide such information as
Loews reasonably determines is necessary for Loews to calculate the amount of
earnings and profits that will be allocated to Lorillard as a result of the
Separation, determined in accordance with Section 312(h) of the 

       

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

       

      Code and
applicable Regulations.  Loews shall advise Lorillard in writing of an
estimate of such amount within ninety days after the Separation Date and shall
provide a final calculation of such amount when available.  Each of
Loews and Lorillard agrees to use the earnings and profits allocated pursuant to
this provision for all Tax purposes.

       

       

          (vii)    Except as set
forth in this Agreement and in consideration of the mutual indemnities and other
obligations under this Agreement, any and all prior Tax sharing or allocation
agreements or practices between any member of the Loews Group and any member of
the Lorillard Group shall be terminated as of the Deconsolidation Date, and no
member of the Loews Group or the Lorillard Group shall have any continuing
rights or obligations thereunder.

       

       

      (d)    Amended Tax
Returns.

       

       

          (i)    Lorillard
shall not, and shall not permit any other member of the Lorillard Group to, file
any amended Tax Return that includes any member of the Loews Group.

       

       

          (ii)    Loews shall
not, and shall not permit any other member of the Loews Group to, file any
amended Tax Return that includes any member of the Lorillard Group and that has
an adverse effect on Lorillard without the prior written consent of Lorillard,
which shall not be unreasonably withheld, delayed or
conditioned.  Receipt of consent by Loews or any other member of the
Loews Group from Lorillard under the provisions of this Section 4.2(d)(ii)
shall not limit or modify Loews’s continuing indemnification obligation under
Section
4.4(a)(i).

       

      (e)    Carrybacks
from Post-Deconsolidation Period.

       

       

          (i)    Except as
otherwise required by applicable Tax law, each of Lorillard and the other
members of the Lorillard Group hereby agrees to relinquish, and make or cause to
be made, any available elections and take any other actions required to
relinquish, the right to claim in any Pre-Deconsolidation Period of the
Lorillard Group any Carryback Item arising in any Post-Deconsolidation Period of
the Lorillard Group.

       

       

          (ii)    Notwithstanding Section 4.2(e)(i), if
Lorillard or any other member of the Lorillard Group is required by applicable
Tax law to carry back a Carryback Item arising in a Post-Deconsolidation Period
to a Pre-Deconsolidation Period, then (1) any Carryback Item of any member of
the Loews Group that may 

       

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

       

      be
carried back to the same Pre-Deconsolidation Period shall be used before any
Carryback Item of any member of the Lorillard Group unless expressly
prohibited by applicable Tax law, and (2) to the extent the Carryback Item of
any member of the Lorillard Group is used in a Pre-Deconsolidation Period and
any member of the Loews Group receives a refund from a Governmental Entity or
realizes a Tax Benefit as a result of the use of such Carryback Item, Loews
shall pay Lorillard an amount equal to such refund received or Tax Benefit
realized within thirty days following either the receipt of such refund or the
filing of the Tax Return reflecting the realization of such Tax Benefit; provided, that Loews
shall be entitled to reduce the amount of any such payment for its reasonable
costs and expenses in obtaining such refund or realizing such Tax Benefit,
including any Taxes imposed on the receipt of such refund or realization of such
Tax Benefit; provided, further, that in the
event, and to the extent, that Loews is required to repay a Repayment Amount to
a Governmental Entity, Lorillard shall pay Loews such Repayment Amount within
five Business Days of receiving a written request therefor from
Loews.

       

       

      Section
4.3    Representations and
Covenants.

       

       

      (a)    Compliance
with the Ruling and Tax Opinion.

       

       

          (i)      Loews
hereby represents and warrants that (1) it has examined final copies (or, if
final copies are not available, drafts in substantially finalized form) of (A)
the private letter ruling received from the IRS by Loews related to the
Separation (the “Ruling”) with respect
to the transactions addressed therein, (B) the Tax Opinion, (C) the Ruling
Request, (D) the Tax Certificate and (E) any other materials delivered or
deliverable in connection with the issuance of the Ruling and the rendering of
the Tax Opinion (collectively, the “Tax Materials”) and
(2) the facts presented and representations made therein, to the extent
descriptive of or otherwise relating to Loews or any other member of the Loews
Group, were, at the time presented or represented and from such time until and
including the date hereof true, correct and complete in all material
respects.  Loews hereby reaffirms and agrees to comply with any and
all covenants and agreements in the Tax Materials applicable to Loews or any
other member of the Loews Group.

       

       

          (ii)     
Lorillard (on behalf of itself and all other members of the Lorillard Group)
hereby represents and warrants that (1) it has examined the Tax Materials, (2)
the facts presented and representations made therein, to the extent descriptive
of or otherwise relating to Lorillard or any other member of the Lorillard
Group, were, at the time presented or represented and from such time until and
including the date hereof true, correct and complete in all material respects,
and (3) it has not entered into any agreement, understanding, or 

       

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

       

      arrangement,
and has not had substantial negotiations (each within the meaning of Section
355(e) of the Code and applicable Regulations) regarding the acquisition of
Lorillard or any other member of the Lorillard Group at any time during the
two-year period ending on the date hereof, and shall neither enter into any such
agreement, understanding, or arrangement, nor have any such substantial
negotiations, between the date hereof and the Deconsolidation
Date.  Lorillard (on behalf of itself and all other members of the
Lorillard Group) hereby reaffirms and agrees to comply with any and all
covenants and agreements in the Tax Materials applicable to Lorillard or any
other member of the Lorillard Group.

       

       

          (iii)    Each party to
this Agreement shall deliver a certificate of an officer or other appropriate
authorized representative affirming the truth and accuracy of the
representations and warranties of such party and compliance with the covenants
of such party set forth in this Section 4.3(a) and
such other matters reasonably requested by another party hereto.  Such
certificates shall be dated as of the Effective Date and, if requested by any
party hereto, the closing date of the Exchange Offer and /or the Contingent
Dividend.  Skadden shall be entitled to rely on any such certificate
in connection with rendering the Tax Opinion.

       

       

      (b)    Prohibited
Acts.  Except as provided in Section 4.3(c), no
member of the Lorillard Group shall take or permit to be taken any action or
fail to take any other action at any time, which action or failure to act may
(x) preclude the Separation from qualifying as tax-free under Section 355 of the
Code (or any corresponding provisions of any successor statute and any similar
provision of state or local Tax law) or (y) cause Loews, any other member of the
Loews Group, or any stockholder of Loews that receives Lorillard common stock in
the Separation to recognize gain or loss, or otherwise include any amount in
income, as a result of the Separation for Tax purposes (except with respect to
gain or loss recognized by Loews’s stockholders with respect to cash received in
lieu of fractional shares of Lorillard common stock).  Without
limiting the generality of the foregoing, except as provided in Section 4.3(c),
Lorillard (on behalf of itself and all other members of the Lorillard Group)
hereby covenants and agrees that no member of the Lorillard Group shall take or
permit to be taken within two years of the Separation Date the following
actions:

       

       

          (i)     any Proposed
Acquisition Transaction or approval of any Proposed Acquisition Transaction for
any purpose;

       

       

          (ii)     the issuance
of any Lorillard equity (including any instrument that is convertible or
exchangeable into such equity) or rights to acquire any Lorillard equity (other
than (1) any such issuance qualifying under Regulations Section 1.355-7(d)(8) in
connection with the performance of services or (2) any issuances which, in the
aggregate, would not result in a Proposed Acquisition Transaction);

       

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

       

          (iii)    redemptions
or repurchases of any Lorillard equity (except to the extent consistent with the
requirements of Revenue Procedure 96-30, 1996-1 C.B. 696, and statements made
with respect thereto in the Tax Materials, provided that Lorillard shall provide
written notification to Loews of any such redemptions or repurchases within
twenty (20) days thereof);

       

       

          (iv)    recapitalizations or
other dispositions of, or modifications to the terms of, any Lorillard
equity;

       

       

          (v)    any
liquidation, merger or consolidation involving any member of the Lorillard
Group;

       

       

          (vi)    any sale or
other disposition of all or substantially all of the assets of any member of the
Lorillard Group in a single transaction or series of related
transactions;

       

       

          (vii)    the
disposition or discontinuance of the operation of the Lorillard Group’s active
trade or business used to satisfy Section 355(b) of the Code in the Ruling;
or

       

       

          (viii)    actions or
positions inconsistent with any representation or covenant of Lorillard or any
member of the Lorillard Group contained in Section 4.3(a)(ii) or
Section 4.6(b);
(all of such actions in this subsection are collectively referred to as the
“Prohibited Acts”).

       

       

      (c)    Requirement
for Prohibited Acts.  Lorillard or any other member of the Lorillard
Group may take any of the Prohibited Acts if (i) Lorillard provides
notification, upon determining that it desires to pursue such action, to Loews
of its plans with respect to such action, and promptly responds to any inquiries
made by Loews following such notification, and (ii) prior to taking such action,
obtains, at its own cost and expense, either an unqualified written opinion of a
nationally recognized law firm, or a supplemental ruling from the IRS, in
either case in form and substance reasonably acceptable to Loews, that the
taking of such action will not (x) preclude the Separation from qualifying as
tax-free under Section 355 of the Code (or any corresponding provisions of
any successor statute and any similar provision of state or local Tax law) or
(y) cause Loews, any other member of the Loews Group, or any stockholder of
Loews that receives Lorillard common stock in the Separation to recognize gain
or loss, or otherwise include any amount in income, as a result of the
Separation for Tax purposes (except with respect to gain or loss recognized by
Loews’s stockholders with respect to cash received in lieu of fractional shares
of Lorillard common stock); provided, however, that (A) no
request for a supplemental ruling shall be made prior to obtaining Loews’s prior
written consent, which shall not be unreasonably withheld, delayed or
conditioned, and (B) Loews shall have the right to 

       

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

       

      participate
in the preparation of all correspondence and in all calls, meetings and similar
events related to obtaining such supplemental ruling.  Receipt of an
opinion or a supplemental ruling by Lorillard or any other member of the
Lorillard Group under the provisions of this Section 4.3(c) shall not
limit or modify Lorillard’s continuing indemnification obligation under Section
4.4(a)(ii).

       

       

      Section
4.4    
Indemnity Obligations
and Payments.

       

       

      (a)    Indemnity
Obligations.

       

       

          (i)    Each member
of the Loews Group, jointly and severally, shall indemnify and hold harmless
each member of the Lorillard Group and each of its officers, directors, and
employees from and against, and will reimburse such Persons for all Losses
attributable to Loews Taxes.

       

       

          (ii)    Notwithstanding
whether any action is permitted or consented to hereunder and notwithstanding
anything to the contrary contained in this Agreement, each member of the
Lorillard Group, jointly and severally, shall indemnify and hold harmless each
member of the Loews Group and each of its officers, directors, and employees
from and against, and will reimburse such Persons for (1) all Losses
attributable to Lorillard Taxes and (2) all Taxes and other Losses arising out
of, based upon or relating or attributable to any breach of any representation,
covenant or obligation of any member of the Lorillard Group under this Article
IV.

       

       

      (b)   Notice.  An
Indemnified Party making a claim for indemnification under this Article IV shall
provide the Indemnifying Party from whom such indemnification is sought with
written notice of such claim describing such claim in reasonable detail and
accompanied by reasonable documentation supporting such claim no later than
twenty (20) Business Days after the Indemnified Party (i) files a Tax Return
reporting Taxes due which are subject to indemnification or (ii) receives
written notice from a Governmental Entity with respect to Taxes that may be
subject to indemnification under this Article
IV; provided, however, that the
failure of the Indemnified Party to give notice as provided in this Section 4.4(b) shall
not relieve the Indemnifying Party of its obligations under this Agreement,
except to the extent that the Indemnifying Party is prejudiced by the failure to
give notice.

       

       

      (c)    Indemnification
Payments.  The Indemnifying Party shall pay the Indemnified Party the
amount of any claim made under this Article IV within
three Business Days of receipt of written notice of such claim; provided, however, that if such
claim is still subject to the outcome of any Tax Contest, then payment shall not
be due until ten (10) Business Days after such claim either is resolved through
a Final Determination, or prior to a Final 

       

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

       

      Determination,
if the Indemnified Party and the Indemnifying Party agree on the indemnification
obligation under this Article IV with
respect to such claim.

       

       

      (d)    Treatment of
Payments.  Any payment made between the parties pursuant to this
Agreement shall be treated, for all Tax purposes and to the extent permitted by
law, as a contribution by Loews to Lorillard or a distribution by Lorillard to
Loews, as the case may be, occurring immediately prior to the
Deconsolidation Date.  If the recipient of such payment (or any member
of its Group) is subject to Tax attributable, directly or indirectly, to
the receipt of such payment, the payor shall reimburse the recipient for all
Losses attributable to such Tax liability and pay to the recipient an
additional amount that, when added to any other payment otherwise required to be
made, will result in the recipient receiving and retaining an amount equal to
such other payment, after taking into account all Taxes payable by the recipient
(or any member of its Group) that are attributable to the receipt of such other
payment and such additional amount.

       

       

      (e)    The
provisions of this Article IV are for
the benefit of, and are intended to create third party beneficiary rights in
favor of, each of the Indemnified Parties referred to herein.

       

       

      Section
4.5    
Tax
Contests.

       

       

      (a)    Notice.

       

       

          (i)    If an
Indemnified Party becomes aware of any pending or threatened Tax Contest in
respect of which indemnity may be sought under this Article IV, such
Indemnified Party shall promptly notify the Indemnifying Party.  The
failure of the Indemnified Party  to give notice as provided in this
Section 4.5(a)
shall not relieve the Indemnifying Party of its obligations under this
Agreement, except to the extent that the Indemnifying Party is prejudiced by the
failure to give notice.

       

       

          (ii)    The
Indemnified Party shall submit to the Indemnifying Party a list of all fees and
expenses at the end of the calendar month in which such fees and expenses are
incurred, and the Indemnifying Party shall reimburse the Indemnified Party for
such fees and expenses within thirty days of the receipt of such
list.

       

       

      (b)    Control of
Tax Contests by Loews.  Loews shall have the sole responsibility and
control over the handling of any pending or threatened Tax Contest, including
the exclusive right to communicate with agents of the Governmental Entity and to
control, resolve, settle or agree to any deficiency, claim or adjustment
proposed, asserted or assessed in connection with or as a result of any such Tax
Contest, involving any Loews Filed Tax Return; provided, however,

       

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

       

      that
Loews shall be obligated to act in good faith with respect to any Tax Contest
which involves a Tax or adjustment for which Lorillard is liable pursuant to
this Article
IV.  Specifically, Loews shall, in good faith, (i) consult with
Lorillard regarding its comments with respect to any such Tax Contest, including
any correspondence or filings submitted in connection therewith, (ii) consult
with Lorillard as to strategy and settlement decisions with respect to any such
Tax Contest, and (iii) use its best efforts to arrive at a settlement of any
such Tax Contest that reflects the ultimate merits of the issues without taking
into account the fact that Lorillard is liable for the Tax or adjustment under
this Article
IV.

       

       

      (c)    Control of
Tax Contests by Lorillard.  Lorillard shall have the full
responsibility and control over the handling of any pending or threatened Tax
Contest, including the exclusive right to communicate with agents of the
Governmental Entity and to control, resolve, settle or agree to any deficiency,
claim or adjustment proposed, asserted or assessed in connection with or as a
result of any such Tax Contest, involving any Lorillard Filed Tax Return; provided, however, that
Lorillard shall be obligated to act in good faith with respect to any Tax
Contest which involves a Tax or adjustment for which Loews is liable pursuant to
this Article
IV.  Specifically, Lorillard shall, in good faith, (i) consult
with Loews regarding its comments with respect to any such Tax Contest,
including any correspondence or filings submitted in connection therewith, (ii)
consult with Loews as to strategy and settlement decisions with respect to any
such Tax Contest, and (iii) use its best efforts to arrive at a settlement
of any such Tax Contest that reflects the ultimate merits of the issues without
taking into account the fact that Loews is liable for the Tax or adjustment
under this Article
IV.

       

       

      (d)    Exclusivity.  The
procedures set forth in this Section 4.5 and not
in Article III
shall govern for all claims for indemnification relating to Taxes.

       

       

      Section
4.6    
Cooperation; Retention
of Records; Access;
Confidentiality.

       

       

      (a)    General.  Each
party shall fully cooperate, and shall cause all members of such party’s Group
(the Loews Group or the Lorillard Group) to fully cooperate, with the other
party in connection with the preparation and filing of any Tax Return or the
conduct of any Tax Contest (including, where appropriate or necessary, providing
a power of attorney) concerning any issues or any other matter contemplated
under this Article
IV.  Each party shall make its employees and facilities
available on a mutually convenient basis to facilitate such
cooperation.

       

       

      (b)    Consistent
Treatment.  Unless and until there has been a Final Determination to
the contrary, no member of the Loews Group or the Lorillard Group shall take any
position on any Tax Return, in connection with any Tax Contest or otherwise that
is inconsistent with (i) the allocation of Taxes, Tax Assets and earnings
and profits between the Loews Group and the Lorillard Group as set forth in this
Article IV,
(ii) the Ruling or (iii) the Tax Opinion.

       

       

      
        
          
          

        

        
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      (c)    Retention of
Tax Records.  For as  long as the contents thereof may
become material in the administration of any matter under applicable Tax law,
but in any event until the later of (x) the expiration of any applicable
statutes of limitation (as extended), and (y) seven years after the Separation
Date, the parties shall retain records, documents, work papers, accounting data
and other information (including computer data) necessary for the preparation
and filing of all Tax Returns in respect of Taxes of any member of either the
Loews Group or the Lorillard Group for any Pre-Deconsolidation Period or
any Post-Deconsolidation Period or for any Tax Contests relating to such
Tax Returns (collectively, the “Tax
Records”).  At any time after the Deconsolidation Date that
Lorillard proposes to destroy any such Tax Records, it shall first notify Loews
in writing and Loews shall be entitled to receive such Tax Records proposed to
be destroyed which could affect the liability of any member of the Loews Group
for Taxes.  At any time after the Deconsolidation Date that Loews
proposes to destroy any such Tax Records, it shall first notify Lorillard in
writing and Lorillard shall be entitled to receive that portion of such Tax
Records proposed to be destroyed that relates solely to Lorillard Taxes for
taxable periods beginning on or before the Deconsolidation Date and that could
reasonably affect the liability of any member of the Lorillard Group for
Taxes.

       

       

      (d)    Access.  Lorillard
shall make available, and cause the other members of the Lorillard Group to make
available, to members of the Loews Group and their advisors and representatives
all Tax Records in their possession that relate to any taxable period beginning
on or before the Separation Date.  At Lorillard’s reasonable request,
Loews shall provide to Lorillard and its advisors and representatives a copy of
that portion, and only that portion, of any Tax Record in its possession that
relates to Lorillard Taxes for taxable periods beginning on or before the
Deconsolidation Date and that is reasonably necessary for the preparation of a
Tax Return of a member of the Lorillard Group or with respect to a Tax Contest
of such Tax Return.

       

       

      (e)    Confidentiality.  Each
party shall hold and cause its directors, officers, employees, advisors and
consultants to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law, all information (other than any such information relating
solely to the business or affairs of such party) concerning the other party
hereto furnished to it by such other party or its representatives pursuant to
this Article IV
(except to the extent that such information can be shown to have been (i) in the
public domain through no fault of such party, (ii) later lawfully acquired from
other sources not known to be under a duty of confidentiality by the party to
which it was furnished, or (iii) independently developed), and each party shall
not release or disclose such information to any other Person, except its
directors, officers, employees, auditors, attorneys, financial advisors, bankers
and other consultants who shall be advised of and agree to be bound by the
provisions of this Section
4.6(e).  Each party shall be deemed to have satisfied its
obligation to hold confidential information concerning or supplied by the other
party if it exercises the same care as it takes to preserve confidentiality for
its own similar information.

       

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

       

      Section
4.7    
Further
Assurances.

       

       

      Subject to the provisions hereof, the
parties hereto shall make, execute, acknowledge and deliver such other
instruments and documents, and take all such other actions, as may be reasonably
required in order to effectuate the purposes of this Article
IV.

       

       

      Section
4.8    
Dispute
Resolution.

       

       

      In the event of any disagreement
arising under this Article IV, including
any dispute in connection with a claim by a third party (a “Tax Dispute”), the
parties shall promptly notify the chief financial officer of each of Loews and
Lorillard (each, a “CFO” and, together,
the “CFOs”) of
such Tax Dispute, who together shall attempt in good faith to resolve such Tax
Dispute.  If such Tax Dispute is not resolved within seven Business
Days following the date on which the CFOs receive notification, the parties
shall jointly retain an independent, nationally recognized law or accounting
firm which must be located in New York, New York (the “Tax Advisor”) to act
as an arbitrator in order to resolve the Tax Dispute.  The Tax
Advisor’s determination as to any Tax Dispute shall be made in accordance with
the terms of this Article IV and shall
be final and binding on the parties and not subject to collateral attack for any
reason (other than manifest error).  All fees and expenses of the Tax
Advisor shall be shared equally by Loews and Lorillard.

       

       

      ARTICLE
V

      

      CONSOLIDATION,
MERGER, CONVEYANCE, TRANSFER, DISPOSITION AND 

      DIVESTITURE

       

       

      Section
5.1    
Consolidation, Merger,
Conveyance, Transfer, Disposition and Divestiture.

       

       

      (a)    If any member
of the Lorillard Group enters into a letter of intent, agreement in principle
(or other agreement whether or not subject to conditions) or enters into a
binding agreement to (i) consolidate with or merge into any other Person (other
than another member of the Lorillard Group that is a party to this Agreement) or
(ii) convey, transfer or otherwise dispose of or divest (including by way of
sale, assignment, license, lease, pledge or hypothecation) all or a significant
portion of its properties or assets to any other Person (other than another
member of the Lorillard Group that is a party to this Agreement), then such
member of the Lorillard Group shall promptly, but in no event later than
one Business Day following such event, provide notice to Loews of such event;
provided, however, that the
failure of such member of the Lorillard Group to deliver said notice shall not
release such party from its obligations hereunder.

       

       

      (b)    If any member
of the Lorillard Group (i) consolidates with or merges into any other Person
(other than another member of the Lorillard Group that is a party to this
Agreement) or (ii) conveys, transfers or otherwise disposes of or divests
(including by way of 

       

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

       

      sale,
assignment, license, lease, pledge or hypothecation) all or a significant
portion of its properties or assets to any other Person (other than another
member of the Lorillard Group that is a party to this Agreement), then as a
condition to the effectiveness of such consolidation, merger, conveyance,
transfer, disposition or divestiture, such other Person shall automatically
become jointly and severally bound by all of the obligations hereunder of each
party hereto that is a member of the Lorillard Group, and shall further evidence
such obligation by executing and delivering to Loews prior to or at the time of
such consolidation, merger, conveyance, transfer, disposition or divestiture a
written agreement substantially in the form attached hereto as Exhibit A.

       

       

      (c)    For purposes
of this Section
5.1, any equity security or equity interest of Lorillard Licensing
Company, LLC and any interest in the intellectual property owned by Lorillard
Licensing Company, LLC will be deemed a “significant portion” of the properties
or assets of each of Lorillard and Lorillard Licensing Company,
LLC.

       

       

      (d)    Any
consolidation, merger, conveyance, transfer, disposition or divestiture in
violation of this Section 5.1 shall be
void.

       

       

      (e)    Lorillard
shall describe its obligations under this Agreement, including specifically
those provided for in this Article V, in each
set of annual audited financial statements or interim unaudited financial
statements that is included in any Filing that it makes with the
SEC.

       

       

      ARTICLE
VI

      

      DISPUTE
RESOLUTION

       

      Section
6.1    
Negotiation.

       

       

      In the event of a controversy, dispute
or claim arising out of, in connection with, or in relation to the
interpretation, performance, nonperformance, validity, termination or breach of
this Agreement or otherwise arising out of, or in any way related to, this
Agreement (collectively, “Agreement Disputes”),
the general counsels of Lorillard and Loews and/or such other executive officer
designated by the relevant party shall in good faith negotiate for a reasonable
period of time to settle such Agreement Dispute; provided, that such
reasonable period shall not, unless otherwise agreed by the relevant parties in
writing, exceed thirty days from the time of receipt by any such party of
written notice of such Agreement Dispute (“Dispute Notice”);
provided, further, that in the
event of any arbitration in accordance with Section 6.2 hereof,
the relevant parties shall not assert the defenses of statute of limitations and
laches arising during the period beginning after the date of receipt of the
Dispute Notice, and any contractual time period or deadline under this Agreement
to which such Agreement Dispute 

       

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

       

      relates
occurring after the Dispute Notice is received shall not be deemed to have
passed until such Agreement Dispute has been resolved.

       

       

      Section
6.2    
Arbitration.

       

      If the Agreement Dispute has not been
resolved for any reason after thirty days have elapsed from the receipt by a
party thereto of a Dispute Notice, such Agreement Dispute shall be determined,
at the request of any relevant party, by arbitration conducted in New York City,
before and in accordance with the then-existing Commercial Arbitration Rules of
the American Arbitration Association (“AAA”), except as
modified herein (the “Rules”). There shall
be three arbitrators. Each of Loews and Lorillard shall appoint one arbitrator
within thirty (30) days of receipt by respondent of a copy of the demand for
arbitration. The two party-appointed arbitrators shall have thirty (30) days
from the appointment of the second arbitrator to agree on a third arbitrator who
shall chair the arbitral tribunal. Any arbitrator not timely appointed by the
parties shall be appointed by the AAA upon the written request of either Loews
or Lorillard within thirty (30) days of such request in accordance with the
listing, ranking and striking method in the Rules, and in any such procedure,
each party shall be given a limited number of strikes, excluding strikes for
cause. The hearing shall be held no later than one hundred twenty (120) days
following the appointment of the third arbitrator.  Any controversy
concerning whether an Agreement Dispute is an arbitrable Agreement Dispute,
whether arbitration has been waived, whether any Person is bound to arbitrate,
or as to the interpretation of enforceability of this Article VI shall be
determined by the arbitrators. In resolving any Agreement Dispute, the parties
intend that the arbitrators shall apply the substantive laws of the State of New
York, without regard to any choice of law principles thereof that would mandate
the application of the laws of another jurisdiction. The parties intend that the
provisions to arbitrate set forth herein be valid, enforceable and irrevocable,
and any award rendered by the arbitrators shall be final and binding on the
parties. The parties agree to comply and cause the members of their applicable
Group to comply with any award made in any such arbitration proceedings and
agree to enforcement of or entry of judgment upon such award, in any court of
competent jurisdiction, including (a) the Supreme Court of the State of New
York, New York County, or (b) the United States District Court for the Southern
District of New York. The arbitrators shall be entitled, if appropriate, to
award any remedy in such proceedings, including monetary damages, specific
performance and all other forms of legal and equitable relief; provided, however, the
arbitrators shall not be entitled to award punitive, exemplary, treble or any
other form of non-compensatory damages unless in connection with indemnification
for a Third Party Claim (and in such a case, only to the extent awarded in such
Third Party Claim). Without limiting the provisions of the Rules, unless
otherwise agreed in writing by or among the relevant parties or permitted by
this Agreement, the relevant parties shall keep, and shall cause the members of
their applicable Group to keep, confidential all matters relating to the
arbitration or the award, and any negotiations, conferences and discussions
pursuant to this Article VI shall be
treated as compromise and settlement negotiations; provided, that such
matters may be disclosed (i) to the extent reasonably necessary in any
proceeding brought to enforce the award or for entry of a judgment upon the
award and (ii) to the extent otherwise required by law, rule, regulation or
legal process. Nothing said or disclosed, nor any document produced, in the
course of any negotiations, conferences and discussions that is not otherwise
independently discoverable shall 

       

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

       

      be
offered or received as evidence or used for impeachment or for any other purpose
in any current or future arbitration. Nothing contained herein is intended to or
shall be construed to prevent any party from applying to any court of competent
jurisdiction for interim measures or other provisional relief in connection with
the subject matter of any Agreement Disputes. Without prejudice to such
provisional remedies as may be available under the jurisdiction of a court, the
arbitral tribunal shall have full authority to grant provisional remedies and to
direct the parties to request that any court modify or vacate any temporary or
preliminary relief issued by such court, and to award damages for the failure of
any party to respect the arbitral tribunal’s orders to that effect.

       

       

      Section
6.3    
Costs and
Expenses.

       

       

      Loews and Lorillard will bear equally
all fees, costs, disbursements and other expenses of the arbitration, and each
of them shall be solely responsible for all fees, costs, disbursements and other
expenses incurred in the preparation and prosecution of its case; provided, that in the
event that a party fails to comply with the orders or decision of the arbitral
tribunal, then such non-complying party shall be liable for all costs and
expenses (including, without limitation, attorneys fees) incurred by the other
party in its effort to obtain either an order to compel, or an enforcement of an
award, from a court of competent jurisdiction.

       

       

      Section
6.4    
Confidentiality of Arbitration
Proceedings.

       

       

      Except to the extent necessary in
connection with arbitration of any Agreement Dispute, a court challenge to the
arbitration contemplated by Section 6.2 hereof or
for enforcement of an arbitral award, information concerning (i) the existence
of an arbitration pursuant to Section 6.2 hereof,
(ii) any documentary or other evidence given by a party or a witness in the
arbitration and (iii) the arbitration award may not be disclosed by the tribunal
administrator, the arbitrators, any party or its counsel to any Person or entity
not connected with the proceeding unless required by law, rule, regulation or
legal process, and then only to the extent of disclosing what is legally
required.  A party filing any document arising out of or relating to
any arbitration in court shall seek from the court confidential treatment for
such document.

       

       

      Section
6.5    
Tax
Matters.

       

       

      This Article VI shall not
apply to any matters to which Article IV
applies.

       

       

      ARTICLE
VII

      

      OTHER
PROVISIONS

       

      Section
7.1    
Treatment of
Carolina
Group 2002
Stock Option Plan.

       

       

       Each of Loews and Lorillard shall
take all actions necessary so that each option to purchase shares of CG Stock
(each, a “CG
Option”) and each stock appreciation right to be 

       

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

       

      settled
in shares of CG Stock (each, a “CG SAR”) issued under
the Carolina Group 2002 Stock Option Plan which is outstanding and unexercised
immediately prior to the Effective Date shall be assumed as of such date by
Lorillard and shall be converted into, as applicable, either (a) an option to
purchase the same number of shares of Lorillard common stock as was subject to
the CG Option being assumed, at the same exercise price, for the same remaining
period and subject to the same terms and conditions (including those relating to
vesting) applicable to the CG Option being assumed, or (b) a stock appreciation
right with respect to the same number of shares of Lorillard common stock as
were subject to the CG SAR being assumed, at the same exercise price, for the
same remaining period and subject to the same terms and conditions (including
those relating to vesting) applicable to the CG SAR being
assumed.  Effective as of the Effective Date, Lorillard shall assume
the Carolina Group 2002 Stock Option Plan.

       

       

      Section
7.2    
Provision of
Information.

       

       

      (a)    If, from time
to time after the Effective Date, Loews determines in good faith that it
requires financial or other information related to Lorillard or any other member
of the Lorillard Group for the purpose of complying with its obligations under
the federal securities laws, including for use in connection with any Filing,
then Lorillard shall promptly provide such information to Loews upon
request.

       

       

      (b)    If, from time
to time after the Effective Date, Lorillard determines in good faith that it
requires financial or other information related to Loews for the purpose of
complying with its obligations under the federal securities laws, including for
use in connection with any Filing, then Loews shall promptly provide such
information to Lorillard upon request.

       

       

      Section
7.3    
Binding
Effect.

       

       

      This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and their
successors and assigns (including, but not limited to, any successor of Loews or
Lorillard succeeding to the Tax attributes of such party under Section 381 of
the Code), except as expressly otherwise provided herein.  All
references in this Agreement to the equity of any member of the Lorillard Group
shall also mean and refer to the equivalent securities of or ownership interest
in any successor to such Lorillard Group member.

       

       

      Section
7.4    
No
Assignment.

       

       

      Except as otherwise provided for in
this Agreement, neither this Agreement nor any of the rights, interests or
obligations of any party hereto may be assigned by such party without the prior
written consent of the other parties, other than an assignment by any party to
this Agreement of all of its rights, interests or obligations hereunder to its
successor.

       

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

       

       

      Section
7.5    
No Third Party
Beneficiaries.

       

       

      Nothing in this Agreement shall convey
any rights upon any Person or entity which is not a party or a permitted
assignee of a party to this Agreement, except with respect to released Persons
and Indemnified Parties under Article III and Article
IV.

       

       

      Section
7.6    
Notices.

       

       

      All notices and other communications
provided for hereunder shall be dated and in writing and shall be deemed to have
been given (a) when delivered, if delivered personally, sent by confirmed
telecopy or sent by registered or certified mail, return receipt requested,
postage prepaid, (b) on the next Business Day if sent by overnight courier, and
(c) when received if delivered otherwise.  Such notices shall be
delivered to the address set forth below, or to such other address as any party
shall furnish to each other party.

       

       

      If to
Loews or any other member of the Loews Group, to:

       

      General
Counsel

      Loews
Corporation

      667
Madison Avenue

      New York,
New York 10065-8087

      Phone:
(212) 521-2000

      Fax:
(212) 521-2997

       

      If to
Lorillard or any other member of the Lorillard Group, to:

       

      General
Counsel

      Lorillard,
Inc.

      714 Green
Valley Road

      Greensboro,
North Carolina 27408-7018

      Phone:
(336) 335-7718

      Facsimile:
(336) 335-7707

       

       

      Section
7.7    
Governing
Law.

       

       

      This Agreement shall be construed and
enforced in accordance with, and the rights and duties of the parties shall be
governed by, the laws of the State of New York without regard to any principles
of conflicts of law or choice of law that would mandate the application of laws
of another jurisdiction.

       

       

      Section
7.8    
Counterparts.

       

       

      This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

       

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

       

       

      Section
7.9    
Severability.

       

       

      In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions contained herein shall not be in
any way impaired thereby, it being intended that all of the rights and
privileges of the parties hereto shall be enforceable to the fullest extent
permitted by law.  To the extent that any such provision is so held to
be invalid, illegal or unenforceable, Loews and Lorillard shall in good faith
use their best efforts to find and effect an alternative means to achieve the
same or substantially the same result as that contemplated by such
provision.

       

       

      Section
7.10   Amendment, Modification and
Termination.

       

       

      This Agreement may be amended,
modified, supplemented or terminated only by written agreement executed by all
of the parties hereto or their respective successors, provided, however, this
Agreement may be terminated by Loews at any time and for any reason prior to the
Effective Date.

       

       

      Section
7.11   Entire
Agreement.

       

       

      This Agreement, including any schedules
or exhibits annexed hereto, embodies the entire agreement and understanding of
the parties hereto in respect of the subject matter hereof, and supersedes all
previous negotiations, commitments and writings with respect to such subject
matter.  There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein.

       

       

      Section
7.12   No
Circumvention.

       

       

      The parties, on behalf of themselves
and their successors, agree not to directly or indirectly take any actions, act
in concert with any Person who takes an action, or cause or allow any member of
any such party’s Group or any successor to such Person to take any actions
(including the failure to take a reasonable action) such that the resulting
effect is to materially undermine the effectiveness of any of the provisions of
this Agreement (including adversely affecting the rights or ability of any party
to successfully pursue indemnification, contribution or payment pursuant to
Article III or
Article
IV).

       

       

      Section
7.13   Descriptive
Headings.

       

       

      The descriptive headings of the several
articles and sections of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.

       

       

      Section
7.14   Drafting of
Language.

       

       

      Each of the parties hereto agrees that
the drafting of the language contained in this Agreement was a cooperative
effort, that each party was equally responsible for such drafting 

       

       

      
        
           

        

        
          37

          
            

          

        

        
           

        

      

      and that
it would be inequitable for any party to be deemed the “drafter” of any specific
language contained herein pursuant to any judicial doctrine or presumption
relating thereto.

       

       

      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

       

       

      IN
WITNESS HEREOF, the parties have caused this Agreement to be executed and
delivered as of the date first above written.

       

       

       

      
        
          	 	LOEWS
      CORPORATION	 
	 	 	 	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Gary
      W. Garson	 
	 	 	Name: Gary
      W. Garson	 
	 	 	Title:  
      Senior Vice President, Secretary	 
	 	 	           
      and General Counsel	 

        

      

       

       

      
        
          	 	LORILLARD,
      INC.	 
	 	 	 	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Ronald
      S. Milstein	 
	 	 	Name:
      Ronald S. Milstein 	 
	 	 	Title:  
      Senior Vice President, Legal	 
	 	 	           
      and External Affairs, General	 
	 	 	            Counsel
      and Secretary	 

        

      

       

       

      
        
          	 	LORILLARD
      TOBACCO COMPANY	 
	 	 	 	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Ronald
      S. Milstein	 
	 	 	Name:
      Ronald S. Milstein 	 
	 	 	Title:  
      Senior Vice President, Legal	 
	 	 	           
      and External Affairs, General	 
	 	 	           
      Counsel and Secretary	 

        

      

       

       

      
        
          	 	 LORILLARD
      LICENSING COMPANY, LLC	 
	 	 	 	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Victor
      Lindsley	 
	 	 	Name:
      Victor Lindsley 	 
	 	 	Title:  
      Member of the Board of Directors	 
	 	 	 	 

        

      

       

       

       

       

       

       

       

       

       

       

       

      
        

          
            	
                    Signature
      Page to Separation Agreement

                  

          

           

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      
        
          	 	ONE
      PARK MEDIA SERVICES, INC.	 
	 	 	 	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Ronald
      S. Milstein	 
	 	 	Name:
      Ronald S. Milstein 	 
	 	 	Title: 
       Vice President and Assistant Secretary	 
	 	 	 	 

        

      

       

       

      
        
          	 	PLISA
      S.A.	 
	 	 	 	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Vincent
      Losito	 
	 	 	Name:
      Vincent Losito 	 
	 	 	Title: 
       Member of the Board of Directors	 
	 	 	 	 

        

      

       

       

       

       

       

       

       

       

       

       

       

      

        
          	
                  Signature
      Page to Separation Agreement

                

        

         

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      Exhibit
A

       

       

      Form
of Assumption Agreement

       

       

      Date:
__________________

       

       

      Loews
Corporation

      Attention:
General Counsel

      667
Madison Avenue

      New York,
New York 10065-8087

       

       

      Ladies
and Gentlemen:

       

       

      Reference
is made to the Separation Agreement (the “Separation
Agreement”), dated as of May 7, 2008, by and among Loews Corporation, a
Delaware corporation (“Loews”), Lorillard,
Inc., a Delaware corporation (“Lorillard”), the
Subsidiaries of Lorillard named therein and any other Person who later becomes a
party to the Separation Agreement by an agreement substantially similar hereto
or otherwise pursuant to Section 5.1 of the
Separation Agreement. Capitalized terms used but not defined herein have the
meanings given in the Separation Agreement.

       

       

      1.    Assumption.  The
undersigned hereby (i) acknowledges that it has received and reviewed a complete
copy of the Separation Agreement, and (ii) agrees that, upon its execution of
this Agreement, it shall become a party to the Separation Agreement as a member
of the Lorillard Group and shall be fully bound by, and subject to, all of the
terms, conditions and other provisions of the Separation Agreement that are
binding upon a member of the Lorillard Group with all attendant rights, duties
and obligations stated therein, with the same force and effect as if the
undersigned had executed the Separation Agreement on the date
thereof.

       

       

      2.    Notice.  Section 7.6 of the
Separation Agreement is hereby supplemented to reflect the undersigned party’s
address for notices:

       

      

      
        	
                Contact:

              	 
      	
                     

              
	
                Entity:

              	 
      	
                     

              
	
                Address:

              	 
      	
                     

              
	 	 	 
	
                Facsimile:

              	 
      	
                     

              

      

    

     

     

     

    
      

        
          	
                  Exhibit
      A-1

                

        

        
 

      

    

    
      
        
          
             

          

          
             

            
              

            

          

          
             

          

        

      

       

      
            3.    Governing
Law.  This Agreement shall be construed and enforced in
accordance with, and the rights and duties of the parties hereto shall be
governed by, the laws of the State of New York without regard to any principles
of conflicts of law or choice of law that would mandate the application of laws
of another jurisdiction.

       

       

      4.    Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

       

       

      5.    Amendment and
Modification.  This Agreement may be amended, modified or
supplemented only by written agreement executed by all of the parties to the
Separation Agreement or their respective successors.

       

       

      6.    Descriptive
Headings.  The descriptive headings of the several sections of
this Agreement are inserted for reference only and shall not limit or otherwise
affect the meaning of such sections.

       

       

      IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
set forth above.

       

       

      
        
          	 	Entity:	 	 

        

         

         

         

        
          	
                   

                	
                  By:
      

                	 	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 

        

      

       

      
         

        
          
            	 	Acknowledged
      by:	 	 

          

           

        

      

       

      
        
          	 	LOEWS
      CORPORATION	 
	 	 	 
	
                   

                	
                   

                	 	 
	 	 	Name: 	 
	 	 	Title: 	 
	 	 	 	 

        

      

       

       

       

      

        
          	
                  Exhibit
      A-2ex4-1.htm

     

    Exhibit 4.1

    AMENDED

     

    CERTIFICATE
OF DESIGNATION OF

     

    SERIES
B SENIOR CONVERTIBLE PREFERRED STOCK

     

    OF

     

    GEOKINETICS
INC.

     

    PURSUANT
TO SECTION 151(g) OF THE

     

    GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE

     

    Geokinetics
Inc (the “Corporation”), a
corporation organized and existing under the laws of the State of Delaware,
hereby certifies that:

     

    ONE:                      The
Certificate of Designation of Series B Senior Convertible Preferred Stock of the
Corporation was filed with the Secretary of State of the State of Delaware on
September 8, 2006.

     

    TWO:                     Pursuant
to the authority expressly granted to and vested in the Board of Directors of
the Corporation by Article FOURTH of the Corporation’s Certificate of
Incorporation (the “Certificate of
Incorporation”), the Board of Directors for the Corporation, by unanimous
written consent dated as of July 25, 2008, duly adopted a resolution providing:
(i) the Series B Senior Convertible Preferred Stock of the Corporation be
designated Series B-1 Senior Convertible Preferred Stock (the “Series B-1 Preferred Stock”)
and (ii) a new series of preferred stock of the Corporation, par value $10.00
per share, be created out of the authorized but unissued shares of capital stock
of the Corporation and be authorized to be issued, with such series to be
designated Series B-2 Senior Convertible Preferred Stock (the “Series B-2 Preferred Stock”),
and consist of 350,000 shares, par value $10.00 per share, of which the
powers, preferences and relative, participating, optional and other rights, and
the qualifications, limitations, and restrictions of the Series B-1 Preferred
Stock and the Series B-2 Preferred Stock (collectively, (the “Series B Preferred
Stock”), shall be, in addition to those set forth in the Corporation’s
Certificate of Incorporation, all in accordance with the provisions of Section
151(g) of the General Corporation Law of the State of Delaware, as set forth
herein.

     

    THREE:                 The
Certificate of Designation of Series B Senior Convertible Preferred Stock of
this Corporation is hereby amended in its entirety as follows:

     

    (1) Series B Preferred
Stock.

     

    (a) Dividends.

     

    (i) The
holders of Series B Preferred Stock, prior and in preference to any declaration
or payment of any dividend on any class or series of capital stock of this
Corporation, shall be entitled to receive cumulative dividends at the applicable
Dividend Rate (as

     

    
      
         

      

      
         

        
          

        

      

      
         

        Exhibit
4.1

      

    

    (ii) defined
below).  For purposes of this Section 1(a)(i), “Dividend Rate” shall
mean 8.0% per annum, compounded quarterly, of the Original Issue Price (defined
in Section 1(b)(i) below) for each share of Series B Preferred
Stock.  At the option of the Corporation, dividends payable on shares
of (A) Series B-1 Preferred Stock on any quarterly dividend payment date through
and including October 31, 2011, may be paid in additional shares of Series B-1
Preferred Stock, instead of cash or (B) Series B-2 Preferred Stock on any
quarterly dividend payment date through and including October 31, 2011, may be
paid in additional shares of Series B-2 Preferred Stock, instead of
cash.  The value of each share of Series B Preferred Stock paid in
lieu of cash shall be equal to the Original Issue Price.  After
October 31, 2011, all dividends shall be paid in cash when, and if declared. All
unpaid dividends on Series B Preferred Stock shall be cumulative and shall
accrue, compounding annually, regardless of whether or not the Corporation shall
have funds legally available for the payment of such dividends.

     

    (iii) After
payment of the dividends provided for in Section 1(a)(i), any additional
dividends or distributions shall be distributed among all holders of Common
Stock, Series B-1 Preferred Stock, Series B-2 Preferred Stock and other
preferred securities, which are convertible into shares of Common Stock, in
proportion to the number of shares of Common Stock that would be held by each
such holder if all shares of Series B-1 Preferred Stock, Series B-2 Preferred
Stock and other preferred securities were converted to Common Stock at the
then-effective conversion rate.

     

    (b) Liquidation
Preference.

     

    (i) The
holders of Series B Preferred Stock, in the event of any Liquidation Event (as
defined below), either voluntary or involuntary, shall be entitled to receive,
prior and in preference to the distribution of any proceeds of such Liquidation
Event (the “Proceeds”) to the
holders of Common Stock and other preferred securities (but pari passu to any other
holder of Series B Preferred Stock), an amount per share (the “Liquidation Preference
Amount”) equal to (A) the sum of the Original Issue Price (as defined
below) for the Series B Preferred Stock, plus (B) any accrued but unpaid
dividends, which have been accrued to the date of payment. In case the net
assets of the Corporation legally available therefor are insufficient to permit
the payment upon all outstanding shares of Series B Preferred Stock of the full
preferential amount to which the holders of such shares are entitled, then such
net assets shall be distributed ratably upon outstanding shares of Series B
Preferred Stock in proportion to the full preferential amount to which each such
share is entitled. For purposes hereof, “Original Issue Price”
shall mean $250.00 per share for each share of Series B Preferred Stock (as
adjusted for any stock splits, stock dividends, combinations, subdivisions,
recapitalizations or the like with respect to the Series B Preferred
Stock).

     

    (ii) After the
payment of the Liquidation Preference Amount with respect to each share of
Series B Preferred Stock, the holders of Series B Preferred Stock will have the
right following a Liquidation Event to receive an additional distribution for
each share of Series B Preferred Stock equal to the excess, if any, of (i) the
aggregate amount distributable with respect to each share of Common Stock
following the Liquidation Event multiplied times the number of shares of Common
Stock into which each share of Series B Preferred Stock is convertible at the
conversion rate effective at the time of the Liquidation Event over (ii) the
Liquidation Preference Amount.  As a result, the total amount
distributed with respect to each

     

    
      
         

      

      
         

        
          

        

      

      
         

        Exhibit
4.1

      

    

    (iii) share of
Series B Preferred Stock following a Liquidation Event will be not less than the
amount determined as if all shares of Series B Preferred Stock had been
converted to Common Stock at the conversion rate applicable at the time of the
Liquidation Event.  In view of this additional distribution right, the
Corporation and the holders of the Series B Preferred Stock expect that the
Series B Preferred Stock will not be treated as "preferred stock" for federal
income tax purposes under Treasury Regulation § 1.305-5(a).

     

    (iv) For
purposes of this Section 1(b), a “Liquidation Event”
shall include (A) the sale, transfer or other disposition of all or
substantially all of the Corporation’s assets, (B) the merger or consolidation
of the Corporation with or into another entity (except a merger or consolidation
in which the holders of capital stock of the Corporation immediately prior to
such merger or consolidation continue to hold at least 50% of the voting power
of the capital stock of the Corporation or the surviving or acquiring entity),
(C) the transfer (whether by merger, consolidation, exchange, reorganization or
otherwise), in one transaction or a series of related transactions, to a person
or group of affiliated persons (other than Avista Capital Partners, L.P. and its
affiliates), of the Corporation’s equity securities if, after such transfer,
such person or group of affiliated persons would hold 50% or more of the
outstanding voting stock of the Corporation (or the surviving or acquiring
entity) or (D) a liquidation, dissolution or winding up of the Corporation;
provided, however, that a transaction shall not constitute a Liquidation Event
if its sole purpose is to change the state of the Corporation’s incorporation or
to create a holding company that will be owned in substantially the same
proportions by the persons who held the Corporation’s securities immediately
prior to such transaction. The treatment of any particular transaction or series
of related transactions as a Liquidation Event hereunder may be waived by the
vote or written consent of the holders of a majority of the outstanding Series B
Preferred Stock (voting on an as converted basis).

     

    (v) In any
Liquidation Event, if Proceeds received by the Corporation or its stockholders
are other than cash, their value will be deemed their fair market value. The
determination of such fair market value shall be made by the Board of Directors
of the Corporation or as otherwise may be set forth in the definitive agreements
governing such Liquidation Event.

     

    (c) Redemption
Rights.

     

    (i) If, at
any time after March 31, 2014, the holders of not less than a majority of the
shares of Series B-1 Preferred Stock then outstanding deliver written notice to
the Corporation of such holders’ desire to have the Series B-1 Preferred Stock
redeemed, all outstanding shares of Series B-1 Preferred Stock, if not
previously converted pursuant to Section 1(d), shall be redeemed by the
Corporation on a date which is not more than 90 days after the date on which
such written notice was given to the Corporation by the holders of the Series
B-1 Preferred Stock.  If, at any time after March 31, 2014, the
holders of not less than a majority of the shares of Series B-2 Preferred Stock
then outstanding deliver written notice to the Corporation of such holders’
desire to have the Series B-2 Preferred Stock redeemed, all outstanding shares
of Series B-2 Preferred Stock, if not previously converted pursuant to Section
1(d), shall be redeemed by the Corporation on a date which is not more than 90
days after the date on which such written notice was given to the Corporation by
the holders of the Series B-2 Preferred Stock. Each share of Series B Preferred
Stock to be redeemed hereunder shall be

     

    
      
         

      

      
         

        
          

        

      

      
         

        Exhibit
4.1

      

    

    (ii) redeemed
by payment by the Corporation in cash of the Redemption Price (as defined
below). For purposes hereof, the term “Redemption Price”
shall mean, with respect to each share of Series B Preferred Stock, an amount
equal to the Liquidation Preference Amount.

     

    (iii) Any
redemption pursuant to Sections 1(c)(i) above shall be preceded by written
notice from the Corporation to each holder of Series B-1 Preferred Stock or
Series B-2 Preferred Stock, as the case may be, stating the date fixed for
redemption, the Redemption Price and the place at which holders of Series B-1
Preferred Stock or Series B-2 Preferred Stock, as the case may be, may obtain
payment of the Redemption Price upon surrender of their respective stock
certificates.

     

    (iv) All
shares of Series B Preferred Stock redeemed, otherwise acquired or returned (as
a result of conversion or otherwise) by the Corporation shall immediately be
canceled and shall not be reissued.

     

    (d) Conversion. The
holders of the Series B Preferred Stock shall have conversion rights as follows
(the “Conversion
Rights”):

     

    (i) Right to Convert.
Each share of Series B Preferred Stock shall be convertible, at the option of
the holder thereof, at any time after the date of issuance of such share, at the
office of the Corporation or any transfer agent for such stock, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing the Liquidation Preference Amount for the Series B Preferred Stock by
the applicable Conversion Price (as defined below) for the Series B Preferred
Stock (the conversion rate for Series B Preferred Stock into Common Stock is
referred to herein as the “Conversion Rate”),
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion. The “Conversion Price” per
share for Series B Preferred Stock shall initially be $25.00 (which amount takes
into account the 1-for-10 stock split of the Corporation effective as of
November 3, 2006); provided, however, that the Conversion Price for the Series B
Preferred Stock shall be subject to adjustment as set forth in subsection
1(e)(iv).

     

    (ii) Corporation Conversion
Election. At the election of the Corporation, each share of Series B
Preferred Stock shall be converted into shares of Common Stock at the Conversion
Rate at the time in effect for Series B Preferred Stock immediately upon the
Corporation’s sale of its Common Stock in an underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the “Securities Act”),
covering the offer and sale of Common Stock (A) at a price per share yielding
net proceeds to the Corporation of not less than $35.00 (as adjusted for any
stock splits, stock dividends, combinations, subdivisions or the like), (B)
which results in net proceeds to the Corporation and the selling stockholders,
if any, of not less than $75,000,000, and (C) after which the Common Stock is
listed on the NYSE, AMEX or the NASDAQ National Market (a “Qualified Public
Offering”).

     

    (iii) Mechanics of
Conversion. Before any holder of Series B Preferred Stock shall be
entitled to voluntarily convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates therefore, duly endorsed,
at the office of the

     

    
      
         

      

      
         

        
          

        

      

      
         

        Exhibit
4.1

      

    

    (iv) Corporation
or of any transfer agent for the Series B Preferred Stock, and shall give
written notice to the Corporation at its principal corporate office, of the
election to convert the same and shall state therein the name or names in which
the certificate or certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series B Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series B Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933, as amended, the conversion
may, at the option of any holder tendering Series B Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale of
securities pursuant to such offering, in which event the persons entitled to
receive the Common Stock upon conversion of the Series B Preferred Stock shall
not be deemed to have converted such Series B Preferred Stock until immediately
prior to the closing of such sale of securities. If the conversion is in
connection with automatic conversion provisions of subsection 1(d)(ii) above,
such conversion shall be deemed to have been made on the conversion date
described in the stockholder consent approving such conversion, and the persons
entitled to receive shares of Common Stock issuable upon such conversion shall
be treated for all purposes as the record holders of such shares of Common Stock
as of such date.

     

    (v) Conversion Price Adjustments
of Series B Preferred Stock for Certain Dilutive Issuances, Splits and
Combinations. The Conversion Price of the Series B Preferred Stock shall
be subject to adjustment from time to time as follows:

     

    (A) Conversion Price
Adjustments.

     

    1. If the
Corporation shall issue, on or after the date upon which this Amended
Certificate of Designation is accepted for filing by the Secretary of State of
the State of Delaware (the “Filing Date”), any
Additional Stock (as defined below) for a consideration per share less than the
Conversion Price applicable to the Series B Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, and if the aggregate
dollar amount of all previous issuances of Additional Stock since the Filing
Date is less than $50,000,000 (determined by aggregating all previous issuances
of Additional Stock made after the Filing Date) the Conversion Price for the
Series B Preferred Stock in effect immediately prior to each such issuance shall
forthwith be adjusted to a price equal to the per share consideration paid or
given for such Additional Stock; provided, however, if the
Corporation shall issue, on or after the Filing Date, any Additional Stock after
the aggregate amount of previous issuances made after the Filing Date are in
excess of $50,000,000 (determined by aggregating all previous issuances of
Additional Stock made after the Filing Date) for a consideration per share less
than the Conversion Price applicable to the Series B Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, the Conversion Price
for the Series B Preferred Stock in effect immediately prior to each such
issuance shall forthwith be adjusted to a price determined by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock

     

    
      
         

      

      
         

        
          

        

      

      
         

        Exhibit
4.1

      

    

    2. Outstanding
(as defined below) immediately prior to such issuance plus the number of shares
of Common Stock that the aggregate consideration received by the Corporation for
such issuance would purchase at such Conversion Price; and the denominator of
which shall be the number of shares of Common Stock Outstanding (as defined
below) immediately prior to such issuance plus the number of shares of such
Additional Stock.  For purposes of this Section 1(d)(iv)(A), the term
“Common Stock
Outstanding” shall mean and include the following: (1) outstanding Common
Stock, (2) Common Stock issuable upon exercise of outstanding stock options, (3)
Common Stock issuable upon exercise of outstanding warrants to purchase Common
Stock, (4) Common Stock issuable upon conversion of the Series B Preferred
Stock, and (5) Common Stock issuable upon the conversion of any other series or
class of equity securities issued after the date hereof which is convertible
into shares of Common Stock.  Shares described in (1) through (3)
above shall be included whether vested or unvested, whether contingent or
non-contingent and whether exercisable or not yet exercisable.

     

    3. No
adjustment of the Conversion Price for the Series B Preferred Stock shall be
made in an amount less than one cent per share, provided that any adjustments
that are not required to be made by reason of this sentence shall be carried
forward and shall be either taken into account in any subsequent adjustment made
prior to three (3) years from the date of the event giving rise to the
adjustment being carried forward, or shall be made at the end of three (3) years
from the date of the event giving rise to the adjustment being carried forward.
Except to the limited extent provided for in subsections 1(d)(iv)(A)(5)(c) and
(5)(d), no adjustment of such Conversion Price pursuant to this subsection
1(d)(iv) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.

     

    4. In the
case of the issuance of Additional Stock for cash, the consideration shall be
deemed to be the amount of cash paid therefore before deducting any reasonable
discounts, commission or other expenses allowed, paid or incurred by this
corporation for any underwriting or otherwise in connection with the issuance
and sale thereof.

     

    5. In the
case of the issuance of the Additional Stock for a consideration in whole or in
part other than cash, the consideration other than cash shall be deemed to be
the fair market thereof as determined by the Board of Directors irrespective of
any accounting treatment.

     

    6. In the
case of the issuance of options to purchase or rights to subscribe for Common
Stock, securities by their terms convertible into or exchangeable for Common
Stock or options to purchase or rights to subscribe for such convertible or
exchangeable securities, the following provisions shall apply for purposes of
determining the number of shares of Additional Stock issued and the
consideration paid therefor:

     

    a. The
aggregate maximum number of shares of Common Stock deliverable upon exercise
(assuming the satisfaction of any conditions to exercisability, including
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subsections 1(d)(iv)(A)(3)
and

     

    
      
         

      

      
         

        
          

        

      

      
         

        Exhibit
4.1

      

    

    b. (d)(iv)(A)(4)),
if any, received by the Corporation upon the issuance of such options or rights
plus the minimum exercise price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common Stock
covered thereby.

     

    c. The
aggregate maximum number of shares of Common Stock deliverable upon conversion
or, or in exchange (assuming the satisfaction of any conditions to
convertibility or exchangeability, including, without limitation, the passage of
time, but without taking into account potential antidilution adjustments) for,
any such convertible or exchangeable securities or upon the exercise of options
to purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such options or rights
were issued and for a consideration equal to the consideration, if any, received
by the Corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received by
the Corporation (without taking into account potential antidilution adjustments)
upon the conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be determined in
the manner provided in subsections 1(d)(iv)(A)(3) and
1(d)(iv)(A)(4).

     

    d. In the
event of any change in the number of shares of Common Stock deliverable or in
the consideration payable to the Corporation upon exercise of such options or
rights or upon conversion of or in exchange for such convertible or exchangeable
shares, the Conversion Price of the Series B Preferred Stock, to the extent in
any way affected by or computed using such options, rights or securities, shall
be recomputed to reflect such change, but no further adjustment shall be made
for the actual issuance of Common Stock or any payment of such consideration
upon the exercise of any such options or rights or the conversion or exchange of
such securities.

     

    e. The
number of shares of Additional Stock deemed issued and the consideration deemed
paid therefor pursuant to subsections 1(d)(iv)(A)(5)(a) and (b) shall be
appropriately adjusted to reflect any change, termination or expiration of the
type described in either subsection 1(d)(iv)(A)(5)(a) or (b).

     

    (B) “Additional Stock”
shall mean any shares of Common Stock issued (or deemed to have been issued
pursuant to subsection 1(d)(iv)(A)(5)) by the Corporation on or after the Filing
Date other than:

     

    1. Shares of
Common Stock issued to employees, directors, officers, consultants and other
service providers for the primary purpose of soliciting or retaining their
services pursuant to plans or agreements approved by this corporation’s Board of
Directors;

     

    2. Common
Stock issued pursuant to the conversion or exercise of convertible or
exercisable securities outstanding on the Filing Date;

     

    3. Common
Stock or other securities convertible into shares of Common Stock that are
issued with the approval of the holders of not less than a majority of the
then-outstanding

     

    
      
         

      

      
         

        
          

        

      

      
         

        Exhibit
4.1

      

    

    4. shares of
Series B-1 Preferred Stock and a majority of the then-outstanding shares of
Series B-2 Preferred Stock; and

     

    5. Common
Stock issued pursuant to the conversion of the Series B Preferred
Stock.

     

    (vi) In the
event the Corporation should at any time or from time to time after the Filing
Date fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as “Common Stock
Equivalents”) without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including the
additional shares of Common Stock issuable upon conversion or exercise thereof),
then, as of such record date (or the date of such dividend distribution, split
or subdivision if no record date is fixed), the Conversion Price of the Series B
Preferred Stock shall be appropriately decreased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
increased in proportion to such increase of the aggregate of shares of Common
Stock outstanding and those issuable with respect to such Common Stock
Equivalents.

     

    If the
number of shares of Common Stock outstanding at any time after the Filing Date
is decreased by a combination of the outstanding shares of Common Stock,
then, following the record date of such combination, the Conversion Price for
the Series B Preferred Stock shall be appropriately increased so that the number
of shares of Common Stock issuable on conversion of each share of such series
shall be decreased in proportion to such decrease in outstanding
shares.

     

    (vii) Reservation of Common
Stock. The Corporation shall reserve and keep available out of its
authorized but unissued Common Stock that number of shares of Common Stock as
shall from time to time be sufficient to effect the full conversion of all
outstanding shares of Series B Preferred Stock.

     

    (e) Election and Removal of
Directors by Series B Preferred Stock.  Subject to Section
1(f)(ii), the holders of record of the shares of Series B Preferred Stock,
exclusively, shall be entitled to nominate and elect one (1) director of the
Corporation (the “Series B
Director”).  At each regularly scheduled meeting of the
Corporation's stockholders which is called for the purpose of electing members
of the Board of Directors, the presence in person or by proxy of the holders of
a majority of the shares of Series B Preferred Stock then outstanding shall
constitute a quorum of the Series B Preferred Stock for the purpose of electing
the director by holders of the Series B Preferred Stock.  A vacancy in
said directorship filled by the holders of Series B Preferred Stock shall be
filled only by vote or written consent in lieu of a meeting of the holders of
the Series B Preferred Stock.  The Series B Director may be removed,
with our without cause, by the holders of Series B Preferred Stock in the same
manner as such director may be elected hereunder.

     

    (f) Voting
Rights.

     

    
      
         

      

      
         

        
          

        

      

      
         

        Exhibit
4.1

      

    

    (g) Except as
otherwise expressly provided herein or as required by law, the holders of Series
B Preferred Stock shall be entitled to vote on all matters upon which holders of
Common Stock have the right to vote and, with respect to such right to vote,
shall be entitled to notice of any stockholders’ meeting in accordance with the
Corporation’s Bylaws, and shall be entitled to a number of votes equal to the
number of shares of Common Stock into which such shares of Series B Preferred
Stock could then be converted, at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise expressly provided herein, or to
the extent class or series voting is otherwise required by law or agreement, the
holders of Series B Preferred Stock or Common Stock shall vote together as a
single class and not as separate classes.

     

    (i) So long
as at least 125,000 shares of Series B Preferred Stock remain outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by law) of not less than a majority of the then-outstanding
shares of the Series B Preferred Stock, as determined on a fully diluted and
as-converted basis:

     

    (A) Amend the
Corporation’s Certificate of Incorporation or Bylaws in any material respect
(other than an amendment to change the name of the Corporation);

     

    (B) Declare
or pay any dividend or other distribution upon the Corporation’s capital stock
(except dividends payable solely in shares of Common Stock), or purchase,
redeem, or otherwise acquire any shares of the Corporation’s capital stock,
except for repurchases, at cost, of shares of the capital stock of the
Corporation (pursuant to rights held by the Corporation as of the Filing Date)
held by the Corporation’s consultants, directors, officers or
employees;

     

    (C) Sell,
lease, assign, transfer or otherwise convey or otherwise dispose of all or
substantially all of the assets of the Corporation or any of its subsidiaries,
or effect any consolidation, merger or reorganization involving the Corporation
or any of its subsidiaries, or effect any transaction or series of related
transactions in which the Corporation’s stockholders immediately prior to such
transaction or transactions own immediately after such transaction or
transactions less than 50% of the voting securities of the surviving corporation
or entity (or its parent);

     

    (D) Reclassify,
reorganize or recapitalize the Corporation’s outstanding capital
stock;

     

    (E) Create or
issue any class or series of stock or other security of the Corporation on
parity with or having preference over the Series B Preferred Stock or increase
the authorized number of shares of the Series B Preferred Stock;

     

    (F) Effect
any transaction with the management, related parties or other affiliates of the
Corporation, or extend or waive the terms of any such existing transactions,
other than (1) issuances of options, warrants or Common Stock pursuant to an
equity incentive plan or similar arrangement approved by the Board of Directors
or (2) any other

     

    
      
         

      

      
         

        
          

        

      

      
         

        Exhibit
4.1

      

    

    (G) transaction
with management, related parties or affiliates of the Corporation on terms
approved by a majority of the members of the Board of Directors who are not,
either directly or indirectly, a party to such transaction; and

     

    (H) Increase
or decrease the number of directors on the Board of Directors of the
Corporation.

     

    (h) Financial Statements,
Reports, etc.  The Corporation shall furnish to each to each
holder of the Series B Preferred Stock:

     

    (i) within
90 days after the end of each fiscal year, its consolidated balance sheet
and related statements of income, stockholders’ equity and cash flows showing
the financial condition of the Corporation and its consolidated subsidiaries as
of the close of such fiscal year and the results of its operations and the
operations of such persons during such year, together with comparative figures
for the immediately preceding fiscal year, all in reasonable detail and prepared
in accordance with United States generally accepted accounting principles
(“GAAP”),
all audited by UHY, LLP or other independent public accountants of recognized
national standing and accompanied by an opinion of such accountants (which
opinion shall be without any qualification or exception as to the scope of such
audit) to the effect that such consolidated financial statements fairly present
the financial condition and results of operations of the Corporation and its
consolidated subsidiaries on a consolidated basis in accordance with
GAAP;

     

    (ii) within
45 days after the end of each of the first three fiscal quarters of each
fiscal year, its consolidated balance sheet and related statements of income,
stockholders’ equity and cash flows showing the financial condition of the
Corporation and its consolidated subsidiaries as of the close of such fiscal
quarter and the results of its operations and the operations of such persons
during such fiscal quarter and the then elapsed portion of the fiscal year, and
comparative figures for the same periods in the immediately preceding fiscal
year, all certified by one of its chief executive officer, chief financial
officer, any vice president, principal accounting officer, treasurer, assistant
treasurer or controller of such person as fairly presenting in all material
respects the financial condition and results of operations of the Corporation
and its consolidated subsidiaries on a consolidated basis in accordance with
GAAP, subject to normal year-end audit adjustments and the absence of
footnotes.

     

    (i) Preemptive Rights. If
the Corporation authorizes the issuance and sale of Additional Stock (as defined
in Section 1(d)(iv)(B)) other than pursuant to an underwritten public offering
registered under the Securities Act or for non-cash consideration pursuant to a
merger or consolidation approved by the Board of Directors of the Corporation,
the Corporation shall first offer in writing to sell to each holder of Series B
Preferred Stock a portion of the securities being issued equal to the quotient
obtained by dividing (A) the aggregate number of shares of Series B Preferred
Stock then owned by such holder by (B) the aggregate number of shares of Series
B Preferred Stock then outstanding. If all offered securities are not subscribed
to by such holder of Series B Preferred Stock in writing delivered to the
Corporation within twenty days after the date of delivery of the Corporation’s
original notice to such holder, then the Corporation shall offer all of such
securities for sale to those other holders of Series B Preferred Stock that did
elect to subscribe for such securities.  If such offer is
oversubscribed by such

     

    
      
         

      

      
         

        
          

        

      

      
         

        Exhibit
4.1

      

    

    (j) Series B
Preferred Stock holders then the Corporation shall offer such securities to such
Series B Preferred Stockholders pro rata on the basis of the number of
securities previously subscribed to by such holders pursuant to the formula
above.  If the holders of Series B Preferred Stock do not elect to
subscribe for all of such securities in writing delivered to the Corporation
within twenty days after the date of delivery of the Corporation’s second notice
then the Corporation shall be free to offer such securities to any other person
or persons at a price and on terms determined by the Corporation, provided that
such price and terms are no more favorable to such person or persons than the
price and terms on which such securities were offered to the holders of Series B
Preferred Stock. Any securities not sold by the Corporation within 90 days after
the date of the Corporation’s initial notice to the holders of Series B
Preferred Stock hereunder shall then become subject again to the provisions of
this Section 1(h).

     

    [SIGNATURES
ON FOLLOWING PAGE]

    

    
      
         

      

      
         

        
          

        

      

      
         

        Exhibit
4.1

      

    

    IN
WITNESS WHEREOF, Geokinetics Inc. has caused this Amended Certificate of
Designation to its Certificate of Incorporation to be signed by Richard F.
Miles, its President and Chief Executive Officer, this 28th day of July,
2008.

     

    GEOKINETICS INC.

    

    

    By:      
/s/ Richard F.
Miles                                                                           

    Richard F. Miles, President
and

    Chief Executive Officer

    

    

    

    0686369.05

    940480-000000

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