Document:

Exhibit 10.1

 

EXECUTION VERSION

 

 

 

 

TAX MATTERS AGREEMENT

 

 

by and between

 

 

Viacom Inc.

 

and

 

New Viacom Corp.

 

 

Dated as of December 30,
2005

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
  2

  
	
  Section 1.1

  	
  Certain Defined Terms

  	
  2

  
	
  Section 1.2

  	
  Additional Definitions

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE II TAX RETURN FILINGS

  	
  9

  
	
  Section 2.1

  	
  Filing of Federal Consolidated Tax Returns

  	
  9

  
	
  Section 2.2

  	
  Allocation of Responsibility for Federal Income
  Taxes for Pre-Separation Periods

  	
  9

  
	
  Section 2.3

  	
  The 2005 Federal Consolidated Income Tax Return

  	
  9

  
	
  Section 2.4

  	
  Tax Returns for Taxable Periods Beginning After the
  Separation Date

  	
  11

  
	
  Section 2.5

  	
  Amended Returns; Refunds; Carrybacks

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE III TAX CONTEST

  	
  13

  
	
  Section 3.1

  	
  Tax Contest

  	
  13

  
	
  Section 3.2

  	
  Notice and Overriding Elections; Freezing Liability
  with Respect to a Tax Contest; Assuming Control of a Tax Contest; Correlative
  Adjustments.

  	
  14

  
	
  Section 3.3

  	
  Recalculation of the Share of Liability to Reflect
  Adjustments

  	
  15

  
	
  Section 3.4

  	
  Interest Netting

  	
  16

  
	
  Section 3.5

  	
  Certain Dutch Tax Return Filings

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV SPIN-OFF DISQUALIFICATION AND OTHER
  TAXES ARISING FROM SEPARATION TRANSACTIONS

  	
  17

  
	
  Section 4.1

  	
  Indemnification by New Viacom

  	
  17

  
	
  Section 4.2

  	
  Indemnification by CBS

  	
  17

  
	
  Section 4.3

  	
  Treatment of Other Income Tax Items Attributable to
  the Separation Transactions

  	
  18

  
	
  Section 4.4

  	
  Dual Consolidated Losses.

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE V PAYMENTS MADE UNDER THIS AGREEMENT

  	
  19

  
	
  Section 5.1

  	
  Interest

  	
  19

  
	
  Section 5.2

  	
  Tax Treatment of Payments Made Under This Agreement

  	
  19

  
	
  Section 5.3

  	
  Tax Effecting Obligations Under This Agreement

  	
  19

  
	
  Section 5.4

  	
  Direct Payments to the IRS

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI STATE, LOCAL AND FOREIGN INCOME
  TAXES

  	
  20

  
	
  Section 6.1

  	
  State, Local and Foreign Income Taxes; Capital Taxes

  	
  20

  
	
  Section 6.2

  	
  Certain Transfer Taxes

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII DISPUTE RESOLUTION

  	
  21

  

 

 

	
  ARTICLE VIII CONFIDENTIALITY; EXCHANGE OF
  INFORMATION

  	
  21

  
	
  Section 8.1

  	
  Ownership of Income Tax Information

  	
  21

  
	
  Section 8.2

  	
  Restrictions on Disclosure of Income Tax Information

  	
  22

  
	
  Section 8.3

  	
  Disclosure of Income Tax Information

  	
  22

  
	
  Section 8.4

  	
  Access to Income Tax Information

  	
  23

  
	
  Section 8.5

  	
  Record Retention

  	
  24

  
	
  Section 8.6

  	
  Income Tax Information Relating to Non-Income Taxes

  	
  25

  
	
  Section 8.7

  	
  Witness Services

  	
  25

  
	
  Section 8.8

  	
  Privileged Matters

  	
  26

  
	
  Section 8.9

  	
  Tax Library

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX MISCELLANEOUS

  	
  28

  
	
  Section 9.1

  	
  Termination

  	
  28

  
	
  Section 9.2

  	
  Effect of Termination

  	
  28

  
	
  Section 9.3

  	
  Amendments

  	
  28

  
	
  Section 9.4

  	
  Waiver

  	
  28

  
	
  Section 9.5

  	
  Limitation of Liability

  	
  29

  
	
  Section 9.6

  	
  Expenses

  	
  29

  
	
  Section 9.7

  	
  Counterparts

  	
  29

  
	
  Section 9.8

  	
  Notices

  	
  29

  
	
  Section 9.9

  	
  Severability

  	
  30

  
	
  Section 9.10

  	
  Entire Agreement; Assignment

  	
  31

  
	
  Section 9.11

  	
  Parties in Interest

  	
  31

  
	
  Section 9.12

  	
  Governing Law

  	
  31

  
	
  Section 9.13

  	
  Waiver of Jury Trial

  	
  31

  
	
  Section 9.14

  	
  Headings

  	
  32

  
	
  Section 9.15

  	
  Survival of Covenants

  	
  32

  

 

ii

 

TAX MATTERS
AGREEMENT

 

THIS TAX MATTERS
AGREEMENT (the “Agreement”), dated as of December 30, 2005 is
entered into by and between Viacom Inc., a Delaware corporation (“Viacom”),
and New Viacom Corp., a Delaware corporation (“New Viacom”).

 

WHEREAS, Viacom, directly
and through its various subsidiaries, is engaged in the CBS Business and the
New Viacom Business;

 

WHEREAS, the Board of
Directors of Viacom has determined that it is in the best interests of Viacom
and its stockholders to separate Viacom into two separate, publicly traded
companies, which will operate the CBS Business and the New Viacom Business,
respectively;

 

WHEREAS, in order to
effect such separation, (i) Viacom will, and will cause its Subsidiaries
to, transfer to New Viacom and to the New Viacom Subsidiaries all of the
Subsidiaries, assets and liabilities of Viacom and its Subsidiaries that relate
primarily to the New Viacom Business and that are not already owned or
otherwise held by New Viacom and the New Viacom Subsidiaries, (ii) New
Viacom will, and will cause the New Viacom Subsidiaries to, transfer to Viacom
and the CBS Subsidiaries all of the Subsidiaries, assets and liabilities of New
Viacom and the New Viacom Subsidiaries that relate primarily to the CBS
Business and that are not already owned or otherwise held by Viacom and the CBS
Subsidiaries, in each case in the manner set forth and except as otherwise
provided in the Separation Agreement and the Ancillary Agreements and (iii) Viacom
and Viacom Merger Sub Inc., a Delaware corporation, will consummate the Merger
(the transactions described in clauses (i), (ii) and (iii) collectively,
the “Separation Transactions”);

 

WHEREAS, prior to
consummation of the Separation Transactions, Viacom is the common parent
corporation of an affiliated group of corporations within the meaning of Section 1504
of the Code;

 

WHEREAS, in the Merger,
Viacom will be renamed “CBS Corporation” (“CBS”) and New Viacom will be
renamed “Viacom Inc.” and, after the Separation Date, CBS and its Subsidiaries will
conduct the CBS Business and New Viacom and its Subsidiaries will conduct the
New Viacom Business;

 

WHEREAS, in the Merger,
each share of stock of Viacom outstanding immediately prior to the Effective
Time (as defined in the Merger Agreement) shall be canceled and shall be
converted automatically into the right to receive 0.5 shares of common stock of
New Viacom, and 0.5 shares of common stock of CBS.

 

WHEREAS, the distribution
of stock in New Viacom to the shareholders of Viacom is intended to qualify as
a tax-free reorganization under Section 368(a)(1)(D) of the Code and
as tax-free under Sections 355 and 361 of the Code;

 

 

WHEREAS, Viacom and New
Viacom wish to allocate and settle among themselves in an equitable manner,
among other things, all applicable federal, state, local and foreign Income
Taxes for all taxable periods that include or end prior to the Separation Date;
and

 

WHEREAS, it is
appropriate and desirable for Viacom and New Viacom to set forth the principles
and responsibilities of the parties to this Agreement with respect to
indemnification for Income Taxes, proceedings and other matters relating to
Income Taxes, Capital Taxes and Transfer Taxes.

 

NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants and agreements herein
contained, and intending to be legally bound hereby, the parties hereby agree
as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1                                      Certain
Defined Terms.  For purposes of this
Agreement:

 

“2005 Consolidated Tax
Return” means the U.S. federal consolidated Income Tax Return for the Old
Viacom Group for the 2005 calendar year.

 

“Actually Received”
has the following meaning:  an Income Tax
benefit shall be treated as Actually Received by any Person at the time at
which and to the extent that (i) a cash payment is received from the
appropriate taxing authority in respect of such Income Tax benefit or (ii) the
amount of Income Taxes payable by such Person is reduced below the amount of
Income Taxes that such Person would be required to pay but for such incremental
Income Tax benefit.

 

“Adjusted Swap Rate”
means the bid-side quote for U.S. dollar interest rate swaps, plus 50 basis
points, as shown on Bloomberg page IRSB as of the close of business on the
date as of which the determination is to be made for swaps with a maturity
closest to the average life of the payments being discounted.

 

“Capital Tax” and “Capital
Taxes” means (i) any and all state and local taxes imposed on capital,
net worth or equity, (ii) any and all interest, penalties, additions to
tax, or additional amounts imposed by any taxing authority in connection with (A) any
item described in clause (i) or this clause (ii) or (B) the
failure to comply with any requirement imposed with respect to any Tax Return
relating to any Capital Tax, and (iii) any obligation with respect to any
item described in clause (i) and/or (ii) above payable by reason of
contract, assumption, transferee or successor liability, operation of Law, or
otherwise.

 

“Carryback” has
the meaning set forth in Section 2.5(c).

 

2

 

“CBS Adjusted Tax
Liability” means, with respect to any taxable period (or portion thereof)
ending on or before the Separation Date, the sum of (i) the CBS Business
Tax and (ii) the product of (x) 0.5 and (y) the amount equal to the
Old Viacom Tax Liability minus the sum of the CBS Business Tax and the New
Viacom Business Tax; in each case, with respect to such taxable period.  For the avoidance of doubt, the amount
described in clause (ii)(y) of this definition may be a negative number.

 

“CBS Business” has
the meaning set forth in the Separation Agreement, except, for purposes of this
Agreement, without regard to whether such business is conducted before or after
consummation of the Separation Transactions.

 

“CBS Business Tax”
means, with respect to any taxable period (or portion thereof) ending on or
before the Separation Date, the federal Income Tax liability that the Old
Viacom Group would have if (i) during the entirety of the particular
taxable period (or portion thereof), it owned only the assets and conducted only
the activities and operations of the CBS Business and the CBS Discontinued
Operations, (ii) any and all carryforwards and Carrybacks of tax attributes
of the Old Viacom Group arising on or before the Separation Date (regardless of
whether originating from a segment of the CBS Business, the CBS Discontinued
Operations, the New Viacom Business or the New Viacom Discontinued Operations) actually
available in such taxable period (or portion thereof) were taken into account, (iii) any
and all Carrybacks of tax attributes of any CBS Entity arising after the
Separation Date actually available in such taxable period (or portion thereof)
were taken into account, (iv) solely for purposes of applying Section 2.5(c) to
a CBS Carryback, taking into account any New Viacom Carryback arising in
earlier taxable periods, (v) any tax attribute generated in the same
taxable period (or portion thereof) but not absorbed in the computation of the
New Viacom Business Tax for the same taxable period (or portion thereof) were taken
into account, and (vi) items relating to the issues described in the Schedule resulting
from a Resolution of such issues were taken into account in the percentages allocated
to CBS therein.  For the avoidance of
doubt, for purposes of this definition, the definition of New Viacom Business
Tax and the calculations relating thereto, the same carryforward or carryback
tax attribute may be used in computing the CBS Business Tax and the New Viacom
Business Tax.

 

“CBS Carryback” means
a Carryback with respect to a net operating loss, a net capital loss or any other
tax attribute incurred by CBS after the Separation Date.

 

“CBS Discontinued
Operations” means any terminated, divested or discontinued business the
assets and liabilities of which are allocated to CBS pursuant to the Separation
Agreement and not included in the CBS Business.

 

“CBS Entities” or
the “CBS Group” means, collectively, CBS and the CBS Subsidiaries; “CBS
Entity” means CBS or any CBS Subsidiary.

 

“CBS Estimated Tax
Payments” means, with respect to any taxable period (or portion thereof)
ending on or before the Separation Date, the sum of (i) the total amount
of estimated federal Income Tax payments made on or prior to the Separation
Date multiplied by the CBS Original Tax Percentage and (ii) the total
amount for which

 

3

 

CBS is responsible and
paid to the taxing authorities pursuant to Section 2.3(b)(i) with respect
to estimated federal Income Tax payments made after the Separation Date.

 

“CBS Original Tax Percentage”
means a percentage equal to the CBS Adjusted Tax Liability for any taxable
period (or portion thereof) ending on or before the Separation Date divided by the
Old Viacom Tax Liability for such taxable period, as the amount of those
liabilities were determined based on the original federal consolidated Income
Tax Return actually filed for such taxable period, provided, however,
that, for purposes of this definition, (i) the CBS Adjusted Tax Liability
will be calculated without taking into account any contribution made in December 2005
or later to a qualified benefit plan that is allocated to CBS pursuant to the
Separation Agreement and (ii) the Old Viacom Tax Liability will be
calculated without taking into account any contribution made in December 2005
or later to a qualified benefit plan that is allocated to CBS or New Viacom, as
the case may be, pursuant to the Separation Agreement.  For the avoidance of doubt, adjustments made
to the CBS Adjusted Tax Liability or to the Old Viacom Tax Liability after such
original filing (or such finalization) shall not, for purposes of this
Agreement, change the CBS Original Tax Percentage.

 

“CBS Tax Packages”
means, collectively, all Tax Packages for a particular taxable period (or
portion thereof) with respect to the CBS Business and the CBS Discontinued
Operations.  A “CBS Tax Package”
means a Tax Package with respect to a part of the CBS Business and/or the CBS
Discontinued Operations.

 

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

 

“Confidential Income
Tax Information” has the meaning set forth in Section 8.2(a).

 

“Current Practices”
means of the current practices, tax accounting methods, and positions used by
the members of the Old Viacom Group as of the Separation Date in connection
with any and all Income Tax matters, including the preparation of Tax Packages and
the preparation and filing of Tax Returns, revised as appropriate to take into
account (i) changes in the applicable Law after the Separation Date, (ii) good
faith resolutions of Tax Contests after the Separation Date and (iii) methods
or positions adopted in the preparation of Income Tax Returns previously filed (after
the Separation Date) in accordance with this Agreement.

 

“DCL” has the
meaning set forth in Section 4.4(a).

 

“DCL Closing Agreement”
has the meaning set forth in Section 4.4(a).

 

“Deviation” has
the meaning set forth in Section 2.3(a)(ii).

 

“Dispute” has the
meaning set forth in Section 2.3(a)(ii).

 

“Electing Party”
has the meaning set forth in Section 3.2(a).

 

4

 

“Election” has the
meaning set forth in Section 3.2(a).

 

“Governmental
Authority” has the meaning set forth in the Separation Agreement.

 

“Income Tax
Information” means any and all records, documents, data and other
information relating to Income Taxes, including, without limitation, Income Tax
Returns and Tax Packages.

 

“Income Tax Returns”
means any Tax Return relating to Income Taxes.

 

“Income Taxes”
means (i) any and all federal, state, local and foreign taxes based upon,
measured by, or computed by reference to net income or profits (including
alternative minimum tax), (ii) any and all interest, penalties, additions
to tax, or additional amounts imposed by any taxing authority in connection
with (A) any item described in clause (i) or this clause (ii) or
(B) the failure to comply with any requirement imposed with respect to any
Income Tax Return, and (iii) any obligation with respect to Income Taxes
described in clause (i) and/or (ii) above payable by reason of
contract, assumption, transferee or successor liability, operation of Law,
Treasury Regulation section 1.1502-6(a) or 1.1502-78 (or predecessor
or successor thereof or any analogous or similar provisions under Law) or
otherwise.

 

“Interest Netting
Rules” means Section 6621(d) of the Code and any similar
provision of state, local or foreign Law.

 

“IRS” means the
U.S. Internal Revenue Service.

 

“IRS Private Letter
Ruling” means the federal income tax rulings issued to Old Viacom on November 22,
2005 by the IRS in connection with the Separation Transactions.

 

“Joint Owner” has
the meaning set forth in Section 8.3.

 

“New Viacom Adjusted
Tax Liability” means, with respect to any taxable period (or portion
thereof) ending on or before the Separation Date, the sum of (i) the New
Viacom Business Tax and (ii) the product of (x) 0.5 and (y) the
amount equal to the Old Viacom Tax Liability minus the sum of the CBS Business
Tax and the New Viacom Business Tax; in each case, with respect to such taxable
period.  For the avoidance of doubt, the
amount described in clause (ii)(y) of this definition may be a negative number.

 

“New Viacom Business”
has the meaning set forth in the Separation Agreement, except, for purposes of
this Agreement, without regard to whether such business is conducted before or
after consummation of the Separation Transactions.

 

“New Viacom Business
Tax” means, with respect to any taxable period (or portion thereof) ending
on or before the Separation Date, the federal Income Tax liability that the Old
Viacom Group would have if (i) during the entirety of the particular

 

5

 

taxable period (or
portion thereof), it owned only the assets and conducted only the activities
and operations of the New Viacom Business and/or the New Viacom Discontinued
Operations, (ii) any and all carryforwards and Carrybacks of tax
attributes of the Old Viacom Group arising on or before the Separation Date (regardless
of whether originating from a segment of the CBS Business, the CBS Discontinued
Operations, the New Viacom Business or the New Viacom Discontinued Operations) actually
available in such taxable period (or portion thereof) were taken into account, (iii) any
and all Carrybacks of tax attributes of any New Viacom Entity arising after the
Separation Date actually available in such taxable period (or portion thereof)
were taken into account, (iv) solely for purposes of applying Section 2.5(c) to
a New Viacom Carryback, taking into account any CBS Carryback arising in
earlier taxable periods, (v) any tax attribute generated in the same
taxable period (or portion thereof) but not absorbed in the computation of the
CBS Business Tax for the same taxable period (or portion thereof) were taken
into account, and (vi) items relating to the issues described in the Schedule resulting
from a Resolution of such issues were taken into account in the percentages
allocated to New Viacom therein.  For the
avoidance of doubt, for purposes of this definition, the definition of CBS
Business Tax and the calculations relating thereto, the same carryforward or
carryback tax attribute may be used in computing the CBS Business Tax and the
New Viacom Business Tax.

 

“New Viacom Carryback”
means a Carryback with respect to a net operating loss, a net capital loss or any
other tax attribute incurred by New Viacom after the Separation Date.

 

“New Viacom
Discontinued Operations” means any terminated, divested or discontinued
business the assets and liabilities of which are allocated to New Viacom
pursuant to the Separation Agreement and not included in the New Viacom
Business.

 

“New Viacom Entities”
or the “New Viacom Group” means, collectively, New Viacom and the New
Viacom Subsidiaries; “New Viacom Entity” means New Viacom or any New
Viacom Subsidiary.

 

“New Viacom Estimated
Tax Payments” means, with respect to any taxable period (or portion
thereof) ending on or before the Separation Date, the sum of (i) the total
amount of estimated payments made on or prior to the Separation Date multiplied
by the New Viacom Original Tax Percentage and (ii) the total amount for
which New Viacom is responsible and paid to CBS pursuant to Section 2.3(b)(i) with
respect to estimated payments made after the Separation Date.

 

“New Viacom Original
Tax Percentage” means a percentage equal to the New Viacom Adjusted Tax
Liability for any taxable period (or portion thereof) ending on or before the
Separation Date divided by the Old Viacom Tax Liability for such taxable
period, as the amount of those liabilities were determined based on the
original federal consolidated Income Tax Return actually filed for such taxable
period, provided, however, that, for purposes of this definition,
(i) the New Viacom Adjusted Tax Liability will be calculated without
taking into account any contribution made in December 2005 or later to a
qualified benefit plan that is allocated to New Viacom pursuant to the

 

6

 

Separation Agreement and (ii) the
Old Viacom Tax Liability will be calculated without taking into account any
contribution made in December 2005 or later to a qualified benefit plan
that is allocated to CBS or New Viacom, as the case may be, pursuant to the
Separation Agreement.  For the avoidance
of doubt, adjustments made to the New Viacom Adjusted Tax Liability or to the
Old Viacom Tax Liability after such original filing (or such finalization) shall
not, for purposes of this Agreement, change the New Viacom Original Tax
Percentage.

 

“New Viacom Tax
Packages” means, collectively, all Tax Packages for a particular taxable
period (or portion thereof) with respect to the New Viacom Business and the New
Viacom Discontinued Operations.  A “New
Viacom Tax Package” means a Tax Package with respect to a part of the New
Viacom Business and/or the New Viacom Discontinued Operations.

 

“Non-Settling Party”
has the meaning set forth in Section 3.2(b).

 

“Old Viacom Group”
means the affiliated group of corporations (within the meaning of Section 1504
of the Code) of which the common parent is Viacom for taxable periods (or
portions thereof) ending on or before the Separation Date.

 

“Old Viacom Return”
means the U.S. federal consolidated income Tax Return for the Old Viacom Group
for any taxable period ending on or prior to December 31, 2005.

 

“Old Viacom Tax
Liability” means, with respect to any taxable period (or portion thereof)
ending on or before the Separation Date, the federal Income Tax liability of
the Old Viacom Group.

 

“Overriding Party”
has the meaning set forth in Section 3.2(a).

 

“Payment” has the
meaning set forth in Section 5.3.

 

“Person” has the
meaning set forth in the Separation Agreement.

 

“Post-Separation Date
Interest” has the meaning set forth in the Separation Agreement.

 

“Pre-Separation
Liability” has the meaning set forth in the Separation Agreement.

 

“Pre-Separation Period”
means any taxable period (or portion thereof) ending on or before the
Separation Date.

 

“Providing Party”
has the meaning set forth in Section 8.4(a).

 

“Records” has the
meaning set forth in the Separation Agreement.

 

7

 

“Refund” means,
with respect to any Person, any refund of Income Taxes including any reduction
of Income Tax liabilities by means of a credit, offset or otherwise, but
excluding any interest payable by the appropriate taxing authority.

 

“Related Party”
has the meaning set forth in Section 8.4(a).

 

“Representative”
has the meaning set forth in the Separation Agreement.

 

“Requesting Party”
has the meaning set forth in Section 8.4(a).

 

“Section 3.2
Settlement Amount” has the meaning set forth in Section 3.2(d).

 

“Separation Agreement”
means the Separation Agreement by and between Viacom and New Viacom, dated as
of December 19, 2005, and thereafter as amended.

 

“Separation
Transactions” has the meaning set forth in the Recitals.

 

“Settling Party”
has the meaning set forth in Section 3.2(d).

 

“Special Committee”
means a committee whose members are the chair of the audit committee of CBS and
the chair of the audit committee of New Viacom.

 

“Spin-Off
Disqualification” means the failure of any of the transactions taken in
connection with the Separation Transactions from qualifying for tax-free treatment,
where tax-free treatment was intended by the parties as reflected in the IRS Private
Letter Ruling.

 

“Tax Basis” has
the meaning set forth in Section 5.3.

 

“Tax Contest” has
the meaning set forth in Section 3.1.

 

“Tax Opinion”
means the opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP to
Old Viacom, dated December 30, 2005, addressing the federal income tax
treatment of certain components of the Separation Transactions.

 

“Tax Package”
means all of the information necessary to prepare a Tax Return for a particular
taxable period (or portion thereof) with respect to an activity or operation
conducted by Old Viacom or any direct or indirect Subsidiary of Old Viacom.

 

“Tax Return” means
any returns, reports, declarations, elections, notices, designations, filings,
statements, forms, and information returns and reports filed or required to be
filed with any taxing authority in respect of Taxes, including any schedules
thereto.

 

“Transfer Taxes”
shall mean any Taxes (other than Income Taxes and Capital Taxes) that the
parties have agreed to share under the Separation Agreement.

 

8

 

Section 1.2                                      Additional
Definitions.  Capitalized terms not
defined in this Agreement shall have the meaning ascribed to them in the
Separation Agreement.

 

ARTICLE II

TAX
RETURN FILINGS

 

Section 2.1                                      Filing
of Federal Consolidated Tax Returns. 
New Viacom and CBS shall cause the New Viacom Entities and the CBS
Entities to be included in the Old Viacom Group through the Separation Date to
the extent permitted under federal Income Tax Law.

 

Section 2.2                                      Allocation
of Responsibility for Federal Income Taxes for Pre-Separation Periods.  With respect to the Old Viacom Tax Liability
for each Pre-Separation Period, (i) New Viacom will be responsible for the
portion equal to New Viacom Adjusted Tax Liability for such taxable period and (ii) CBS
will be responsible for the portion equal to the CBS Adjusted Tax Liability for
such taxable period.

 

Section 2.3                                      The
2005 Federal Consolidated Income Tax Return.

 

(a)                                  Preparation and Filing of the 2005 Federal Consolidated Income Tax
Return.

 

(i)                                     New
Viacom shall provide CBS, no later than April 30, 2006, with the New
Viacom Tax Packages with respect to the 2005 calendar year in a CorpTax format
currently in use by the existing tax department.  CBS shall prepare the CBS Tax Packages with
respect to the same taxable year.  New
Viacom and CBS shall (1) cooperate with each other in preparing Tax Packages
for entities that conduct part of the New Viacom Business or the New Viacom
Discontinued Operations on the one hand and part of the CBS Business or the CBS
Discontinued Operations on the other hand, and (2) jointly prepare Tax
Packages with respect to assets, liabilities, activities or operations that do not
constitute part of the New Viacom Business, the New Viacom Discontinued
Operations, the CBS Business, or the CBS Discontinued Operations.  The Tax Packages for the 2005 calendar year shall
be prepared on a basis consistent with Current Practices.  New Viacom shall also promptly provide CBS with
any information reasonably requested to prepare the 2005 Consolidated Tax
Return and to determine estimated Income Tax payments, current and deferred
Income Tax liabilities, and Income Tax reserve items.

 

(ii)                                  CBS
shall have primary responsibility for preparing the 2005 Consolidated Tax
Return (including requests for extensions thereof).  CBS shall

 

9

 

prepare such Tax Return in a manner consistent with Current Practices
and shall report on such Tax Return the information and positions properly
contained in the Tax Packages except to the extent CBS determines that a
deviation is appropriate as a result of (i) consolidating the various Tax
Packages or (ii) information or a position contained in a New Viacom Tax
Package being inconsistent with information or a position contained in a CBS
Tax Package (a “Deviation”).  CBS shall
deliver to New Viacom for its review a final draft of the 2005 Consolidated Tax
Return at least thirty (30) days prior to the date (with extensions) such Tax
Return is required to be filed.  If New
Viacom believes that such Tax Return is inconsistent with the second preceding
sentence or contains a Deviation with which it disagrees, New Viacom may provide
CBS comments to that effect no later than fifteen (15) days after receipt of
the draft Tax Return and such comments shall specify which positions in such
draft, if any, New Viacom believes are inconsistent with the principles
contained in the second preceding sentence and with which Deviations it
disagrees (“Disputes”).  Disputes
that are not promptly resolved shall be resolved by an arbitrator in accordance
with Article VII.  CBS shall timely
file such Tax Return, as modified to reflect the resolution of any Dispute.  If any Dispute remains unresolved seven (7) days
before the due date (with extensions) for filing such Tax Return (regardless of
whether the Dispute has been submitted to an arbitrator), such Dispute shall be
submitted to the Special Committee, which shall decide how, for purposes of
filing such Tax Return, the items that are the subject of the Dispute will be
reported on such Tax Return if the parties do not agree and no decision has
been made by the arbitrator prior to the due date of such Tax Return (with
extensions).  CBS shall timely file such
Tax Return, properly reflecting thereon the agreement of the parties, the
decision of the Special Committee or the decision of the arbitrator, as
applicable, on the date such Tax Return is required to be filed (with
extensions).  If the Dispute is
subsequently resolved by the parties or by an arbitrator in accordance with Article VII
in a manner contrary to the 2005 Consolidated Tax Return as filed, then, in
accordance with the procedures contained in this Section 2.3(a)(ii), CBS
shall prepare an amended 2005 Consolidated Tax Return in a manner necessary to
effectuate such resolution and file such amended Tax Return.  If either party desires the filing of a
request for an extension of time within which to file the 2005 Consolidated Tax
Return, then CBS shall prepare any Tax Return necessary to obtain such
extension and file such Tax Return.  CBS
shall pay any and all third-party costs and expenses incurred by CBS, and New
Viacom shall pay any and all third-party costs and expenses incurred by New
Viacom, in connection with the preparation of the 2005 Consolidated Tax Return.

 

(b)                                 Payments of the 2005 Old Viacom Group Tax Liability.

 

(i)                                     If
one or more estimated federal Income Tax payments are required to be made with
respect to the Old Viacom Tax Liability for the 2005 calendar year after the
Separation Date, then New Viacom and CBS shall each fund 50% of such estimated
payments.  Amounts payable after the
Separation Date as estimated payments with respect to the Old Viacom Tax
Liability for the 2005 calendar year shall be determined in good faith by New
Viacom and CBS and, any disagreement relating thereto shall be referred to, and
resolved by, the Special Committee.

 

10

 

(ii)                                  If
a payment is required to be made (other than by reason of a Tax Contest or for estimated
Income Taxes) with respect to the Old Viacom Tax Liability for the 2005
calendar year after the Separation Date and after such Old Viacom Tax Liability
has been determined in accordance with this Agreement, then (1) New Viacom
shall bear the portion of such payment obligation equal to the excess, if any,
of the New Viacom Adjusted Tax Liability over the New Viacom Estimated Tax
Payments, and (2) CBS shall bear the portion of such payment obligation equal
to the excess, if any, of the CBS Adjusted Tax Liability over the CBS Estimated
Tax Payments, in each case, for such taxable period.

 

(iii)                               Where, pursuant to this Section 2.3(b),
New Viacom is required to bear a portion of any payment made after the
Separation Date with respect to the Old Viacom Tax Liability for the 2005
calendar year, then New Viacom shall remit its share to CBS two (2) Business
Days before the due date for such payment. 
CBS shall timely remit the entire amount of the payment obligation to
the IRS and shall thereafter promptly provide New Viacom with documentation
evidencing its payment to the IRS.

 

(iv)                              Where
one party has paid more, and the other party has paid less, than the amount for
which it is responsible under this Section 2.3(b) with respect to the
Old Viacom Tax Liability for the 2005 calendar year, then the other party shall
remit to such party the amount of such overpayment within five (5) Business
Days after the 2005 Consolidated Tax Return has been filed.

 

Section 2.4                                      Tax
Returns for Taxable Periods Beginning After the Separation Date.

 

(a)                                  The
New Viacom Entities shall be solely responsible for preparing and filing all
federal Income Tax Returns relating to the New Viacom Entities for taxable
periods beginning after the Separation Date. 
The New Viacom Entities shall be solely responsible for any Income Taxes
due with respect to the New Viacom Entities attributable to any and all taxable
periods (or portion thereof) beginning after the Separation Date.

 

(b)                                 The
CBS Entities shall be solely responsible for preparing and filing all federal
Income Tax Returns relating to the CBS Entities for taxable periods beginning
after the Separation Date.  The CBS Entities
shall be solely responsible for any Income Taxes due with respect to the CBS Entities
attributable to any and all taxable periods (or portions thereof) beginning
after the Separation Date.

 

(c)                                  None
of the New Viacom Entities nor the CBS Entities shall be obligated to CBS or
New Viacom, respectively, for using any tax attributes after the Separation
Date, which arose in a taxable period (or portion thereof) beginning on or
before the Separation Date.

 

11

 

Section 2.5                                      Amended
Returns; Refunds; Carrybacks.

 

(a)                                  Amended Returns.

 

(i)                                     Subject
to Section 3.2 and acting in good faith, New Viacom shall have the right
to require CBS to file, and CBS shall have the right to file, an amended Old
Viacom Return for any taxable period ending on or prior to December 31, 2005
if and only if the new positions desired to be reflected on such amended Tax
Return could have been reported on the original Tax Return had they been
included in the original Tax Package and prepared in a manner consistent with
Current Practices.  CBS shall promptly file
amended Tax Returns, which satisfy the requirements of the previous sentence,
that are requested to be filed by New Viacom. 
Except as provided in the second preceding sentence, CBS shall not be
permitted to file, and New Viacom shall not have the right to cause to be filed,
an amended Old Viacom Return for any taxable period ending on or prior to December 31,
2005.  Either party, acting in good
faith, shall be entitled to extend, or cause to be extended, the applicable
statute of limitations for any taxable period that includes or ends prior to
the Separation Date if such extension is reasonably necessary in connection
with filing an amended Old Viacom Return in accordance with this Section 2.5(a).

 

(ii)                                  CBS
shall have primary responsibility for preparing any amended Tax Return permitted
to be amended and filed in accordance with Section 2.5(a)(i).  The party requesting the filing of an amended
Tax Return shall prepare and deliver a new Tax Package to CBS, which shall be prepared
in a manner consistent with Current Practices. 
All amended Tax Returns shall be prepared in a manner consistent with
the second sentence in Section 2.3(a)(ii) and shall be subject to the
procedures specified in Section 2.3(a)(ii) (including third-party
costs and expenses).

 

(b)                                 Refunds.  Except as
provided in Section 2.5(c), any Refunds for any Pre-Separation Period shall
be allocated between New Viacom and CBS in accordance with this Section 2.5(b).  The Old Viacom Tax Liability, the New Viacom
Adjusted Tax Liability, and CBS Adjusted Tax Liability, each for the taxable period
to which the Refund relates, shall be recomputed to take into account the Refund
and the underlying Income Tax items.  New
Viacom’s share of the Refund shall be equal to the excess, if any, of the New
Viacom Adjusted Tax Liability, as originally computed (or previously recomputed
in accordance with this Agreement, as the case may be), over New Viacom
Adjusted Tax Liability, as recomputed in accordance with this Section 2.5(b).  CBS’s share of the Refund shall be equal to
the excess, if any, of the CBS Adjusted Tax Liability, as originally computed
(or previously recomputed in accordance with this Agreement, as the case may be),
over the CBS Adjusted Tax Liability, as recomputed in accordance with this Section 2.5(b).  Subject to Section 3.4, any interest paid
or payable by the IRS with respect to a Refund described in this Section 2.5(b) shall
be allocated between New Viacom and CBS by determining the amount of interest that
accrued on a year-by-year basis and, then, allocating each year’s accrued
interest between New Viacom and CBS in the same proportion as the Refund to
which such interest

 

12

 

relates is allocated.  If New
Viacom or CBS receives any Refund and interest related thereto described in
this Section 2.5(b) to which the other party is entitled (either in
whole or in part), then New Viacom or CBS, as the case may be, shall remit to
the other party that other party’s share of such Refund, net of any net Income
Taxes imposed on such share of the Refund and interest related thereto and of
any third-party costs and expenses related thereto, within five (5) Business
Days after the date such Refund is Actually Received.

 

(c)                                  Carrybacks.  If New
Viacom and/or CBS incurs a net operating loss, a net capital loss or other tax
attribute after the Separation Date which may be carried back (a “Carryback”)
to generate a Refund for the Old Viacom Group for any Pre-Separation Period,
then such Refund shall be allocated in accordance with the procedure set forth
in Section 2.5(b).  For purposes of
this Section 2.5(c), Carrybacks of tax attributes arising in earlier
taxable periods shall be considered before Carrybacks of tax attributes arising
in subsequent taxable periods.  At the good
faith request of the party desiring to carryback its tax attribute, CBS shall
prepare and file the appropriate Tax Return to claim the Refund arising from
the carryback.  All such Tax Returns
shall be prepared in a manner consistent with the second sentence in Section 2.3(a)(ii) and
shall be subject to the procedures specified in Section 2.3(a)(ii).  The parties shall cooperate with each other
to effectuate any claim for such Refund. 
CBS shall (i) pay to New Viacom the amount of such Refund and
interest related thereto, net of any net Income Taxes imposed on the Refund and
interest related thereto (other than Post-Separation Date Interest) and of any third-party
costs and expenses related thereto, to which New Viacom is entitled in
accordance with this Section 2.5(c) within five (5) Business
Days after the date such Refund is Actually Received, and (ii) be entitled
to retain the amount of such Refund to which it is entitled in accordance with
this Section 2.5(c).

 

ARTICLE III

TAX CONTEST

 

Section 3.1                                      Tax
Contest.

 

(a)                                  Control.  New Viacom
and CBS shall jointly control the conduct, settlement, compromise or other
resolution of any notice of deficiency, proposed adjustment, assessment, inquiry,
audit, examination, or any administrative or judicial proceeding involving any
matter relating to Income Taxes of the Old Viacom Group for any taxable period
(or portion thereof) ending on or prior to December 31, 2005 (a “Tax
Contest”); provided, however, that if the potential adverse
effect (including collateral effects) on one party with respect to a particular
issue raised in a Tax Contest is de minimis, then such party shall only have
the right to participate in, and shall not share in the control of, such
issue.  New Viacom and CBS may provide in
a side letter additional and/or alternative procedures for administering Tax
Contests.  New Viacom and CBS shall
equally bear the cost of counsel and other advisors jointly selected to assist
with matters related to issues that are jointly controlled, but shall otherwise
bear their own out-

 

13

 

of-pocket expenses incurred in connection with a Tax Contest.  Where New Viacom and CBS jointly control an
issue in a Tax Contest, neither party may settle that issue without the other
party’s consent, which consent shall not be unreasonably withheld.  Where a Tax Contest is part of a larger
dispute or action with the taxing authorities, the rights and obligations of
the parties as set forth in this Section 3.1(a), Section 3.2 or Section 3.3
shall, to the extent practicable, only apply with respect to the specific
issues raised in the Tax Contest.

 

(b)                                 Extending the Statute of Limitations.  Where control over any issue raised in a Tax
Contest is shared pursuant to Section 3.1(a), then either party may,
subject to Section 3.2 and acting in good faith, extend the statute of
limitations for the taxable period or periods to which such issue relates, regardless of (i) whether control over
other issues included in the Tax Contest is not shared or (ii) the
existence of issues from tax controversies that are outside the scope of this
Agreement.  A party with sole control, as
determined under Section 3.1(a), over all of the issues in a Tax Contest
may, subject to Section 3.2 and acting in good faith, extend the statute
of limitations for the taxable period or periods to which such Tax Contest
relates, regardless of the existence of issues
from tax controversies that are outside the scope of this Agreement.  If New Viacom decides to extend the
applicable statute of limitations pursuant to this Section 3.1(b), New
Viacom shall notify CBS in writing of such decision and then CBS shall take all
actions necessary to extend such statute of limitations.  If CBS decides to extend the applicable
statute of limitations pursuant to this Section 3.1, CBS shall notify New
Viacom in writing of such decision and then CBS shall be responsible for taking
all actions necessary to extend such statute of limitations.

 

Section 3.2                                      Notice
and Overriding Elections; Freezing Liability with Respect to a Tax Contest; Assuming
Control of a Tax Contest; Correlative Adjustments.

 

(a)                                  Notice and Overriding Elections.  The party desiring to file, or cause to be
filed, an amended Tax Return in accordance with Section 2.5(a)(i),
effectuate a Carryback of a tax item in accordance with Section 2.5(c), or
extend the applicable statute of limitations in accordance with Section 2.5(a)(i) or
Section 3.1(b) (in any such case, the “Electing Party”, and
each such election, an “Election”) shall provide the other party (the “Overriding
Party”) ten (10) days prior written notice of such Election, during
which time the Overriding Party shall have the right to prevent such action by
agreeing to make payment to, and indemnify, the Electing Party so that the
Electing Party is in the same position as if the amended Tax Return had been
filed, the Carryback had been made, or the applicable statute of limitations
had been extended, as applicable (including, without limitation, paying the amount
of any associated Refund)

 

(b)                                 Freezing Liability with Respect to a Tax Contest.  Where New Viacom or CBS wishes to accept a
settlement of one or more of the issues raised in a Tax Contest (the “Settling
Party”) and the other party does not consent to such settlement where such
consent is required pursuant to Section 3.1 (the “Non-Settling Party”),
then the Settling Party may elect in writing to “freeze” its liability with
respect to

 

14

 

such issues so that its liability will equal what the Settling Party
would owe if the proposed settlement were consummated after taking into account
the computations described in Sections 3.2(d) and 3.3 (the “Section 3.2
Settlement Amount”).  The Settling
Party shall remit to the Non-Settling Party the amount of the Section 3.2
Settlement Amount within five (5) Business Days after the Section 3.2
Settlement Amount has been calculated in accordance with Sections 3.2(d) and
3.3.  Where the Settling Party elects to
freeze its liability pursuant to the first sentence in this Section 3.2,
the Non-Settling Party shall be entitled to retain any benefit and shall bear
any detriment from not accepting such settlement.

 

(c)                                  Assuming Control of a Tax Contest.  Each party shall have the right to have sole
control over, and the related rights described in Section 3.1 with respect
to, any issue raised in a Tax Contest if that party (i) agrees to
indemnify and hold harmless the other party with respect to any liability for
Income Taxes that may ultimately be owed as a result of a Resolution (as
defined below) of such issue and (ii) notifies the other party in writing
of its decision to exercise such right.

 

(d)                                 Correlative Adjustments. 
For purposes of this Section 3.2, correlative adjustments shall be (i) taken
into account at the earliest time under applicable federal Income Tax Law as in
effect on the date such calculation is made, (ii) determined by assuming
that no sale or other dispositions of assets shall be treated as occurring
except for those sales and dispositions that have already occurred before the
time that the calculation is made, and (iii) computed on a present value
basis using 60% of the Adjusted Swap Rate.

 

Section 3.3                                      Recalculation
of the Share of Liability to Reflect Adjustments.

 

(a)                                  Subject
to Sections 3.2(b) and 3.2(c), New Viacom and CBS shall bear any
Income Taxes owed by reason of a resolution of an issue or issues in a Tax
Contest for any Pre-Separation Period (the “Resolution”) in accordance
with this Section 3.3.  The Old
Viacom Tax Liability, the New Viacom Adjusted Tax Liability and the CBS
Adjusted Tax Liability shall each, for the taxable period to which the
Resolution relates, be recomputed to take into account the adjustments required
by the Resolution; provided, however, that any interest or
penalties owed as part of the Resolution shall be excluded from such
recomputation and shall be allocated in accordance with the last three sentences
of this Section 3.3(a).  Subject to the
following sentence, (i) New Viacom’s share of any additional Income Taxes shall
be equal to the excess, if any, of the New Viacom Adjusted Tax Liability, as
recomputed in accordance with this Section 3.3(a), over the New Viacom Adjusted
Tax Liability, as originally computed (or previously recomputed in accordance
with this Agreement, as the case may be) and (ii) CBS’s share of any
additional Income Taxes shall be equal to the excess, if any, of the CBS
Adjusted Tax Liability, as recomputed in accordance with this Section 3.3(a),
over the CBS Adjusted Tax Liability, as originally computed (or previously
recomputed in accordance with this Agreement, as the case may be).  The amounts described in the previous

 

15

 

sentence shall be subject to equitable adjustment to the extent that either
party receives or incurs a correlative adjustment (whether as a benefit or
burden) that is disproportionate to the manner in which the liability due from
the Resolution was borne.  For purposes
of making an equitable adjustment pursuant to the preceding sentence, the
correlative adjustment (whether as a benefit or burden) at issue shall be determined
in accordance with Section 3.2(d).  Subject
to Section 3.4, any interest owed as part of a Resolution (except interest
on Income Tax penalties) shall be allocated between New Viacom and CBS by
determining the amount of interest that accrued on a year-by-year basis and,
then, allocating each year’s accrued interest between New Viacom and CBS in the
same proportion as the Income Tax liability to which such interest relates is
allocated.  Subject to Section 3.4,
any Income Tax penalties (other than interest on such penalties, which interest
shall be allocated in accordance with the following sentence) owed as part of a
Resolution shall be allocated between New Viacom and CBS in the same proportion
as the Income Tax liability to which such penalty relates is allocated.  Any interest owed on Income Tax penalties
imposed as part of a Resolution shall be allocated between New Viacom and CBS
by determining the amount of interest that accrued on such penalties on a
year-by-year basis and, then, allocating each year’s accrued interest between
New Viacom and CBS in the same proportion as such penalties to which such
interest relates is allocated.

 

(b)                                 If
New Viacom has a payment obligation pursuant to Section 3.3(a), then New
Viacom shall remit its payment to CBS two (2) Business Days before the
date payment is due to the IRS under the Resolution.  CBS shall timely remit to the IRS the full
amount due under the Resolution and shall promptly thereafter provide New
Viacom with documentation evidencing such payment.

 

Section 3.4                                      Interest
Netting.  For purposes of Sections
2.5 and 3.3, interest payable to or receivable from a taxing authority shall be
calculated as if the Interest Netting Rules did not apply in respect of
any underpayment for which CBS or New Viacom is responsible under this
Agreement and any overpayment to which the other party is entitled under this
Agreement. To the extent that the net amounts actually payable or receivable by
the parties in respect of interest differ from the amount payable to or
receivable from the relevant taxing authority, the difference shall be shared
equally by the parties.  In addition, any
interest that would be receivable by a party pursuant to the first sentence of
this section but is not actually received in cash shall be treated as
Actually Received when it reduces the amount that otherwise would be payable in
cash or by way of offset to a taxing authority.

 

Section 3.5                                      Certain
Dutch Tax Return Filings.  CBS and
New Viacom agree to use their best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary or appropriate to
(i) file all outstanding Tax Returns of Viacom International (Netherlands)
B.V. and its Subsidiaries in compliance with the existing ruling issued by the
Dutch taxing authorities

 

16

 

in 1995 and (ii) cooperate
with respect to all Dutch tax issues relating to Viacom International
(Netherlands) B.V. and its Subsidiaries for any Pre-Separation Period.

 

ARTICLE IV

SPIN-OFF
DISQUALIFICATION AND OTHER TAXES ARISING FROM SEPARATION TRANSACTIONS

 

Section 4.1                                      Indemnification
by New Viacom.  The New Viacom
Business Tax shall include any and all Income Taxes resulting from:  (i) a Spin-Off Disqualification that is
attributable to any action, or failure to take any action, by any New Viacom
Entity after the Separation Date if such act or the failure to act (or the
combination of any such act or failure to act after the Separation Date with an
event occurring prior to the Separation Date) would be inconsistent with the
Tax Opinion or the IRS Private Letter Ruling, information included in any
submission to the IRS in connection with the IRS Private Letter Ruling or with
any representation or covenant made in connection with the Tax Opinion or (ii) any
action, or failure to take any action, by any New Viacom Entity after the
Separation Date if such act or the failure to act (or the combination of any
such act or failure to act after the Separation Date with an event occurring
prior to the Separation Date) results in the recognition of income or gain pursuant
to Section 355(e) of the Code; provided, however, that
this Section 4.1 shall not apply to any liability for Income Taxes
resulting from the failure of the Merger and the related distribution of New
Viacom stock to satisfy the business purpose requirement of Section 355 of
the Code and the Treasury regulations promulgated thereunder.

 

Section 4.2                                      Indemnification
by CBS.  The CBS Business Tax shall
include any and all Income Taxes resulting from:  (i) a Spin-Off Disqualification that is
attributable to any action, or failure to take any action, by any CBS Entity
after the Separation Date if such act or failure to act (or the combination of
any such act or failure to act after the Separation Date with an event
occurring prior to the Separation Date) would be inconsistent with the Tax
Opinion or the IRS Private Letter Ruling, information included in any
submission to the IRS in connection with IRS Private Letter Rulings or with any
representation or covenant made in connection with the Tax Opinion or (ii) any
action, or failure to take any action, by any CBS Entity after the Separation
Date if such act or the failure to act (or the combination of any such act or
failure to act after the Separation Date with an event occurring prior to the
Separation Date) results in the recognition of income or gain pursuant to Section 355(e) or
361(b) of the Code; provided, however, that this Section 4.2
shall not apply to any liability for taxes resulting from the failure of the
Merger and the related distribution of New Viacom stock to satisfy the business
purpose requirement of Section 355 of the Code and the Treasury
regulations promulgated thereunder.

 

17

 

Section 4.3                                      Treatment
of Other Income Tax Items Attributable to the Separation Transactions.  For purposes of this Agreement, items of
income or gain (i) to which Section 4.1 applies shall be treated as
attributable to the New Viacom Business, (ii) to which Section 4.2
applies shall be treated as attributable to the CBS Business, and (iii) relating
to the Separation Transactions that are not described in clauses (i) or (ii) (including
without limitation, except to the extent provided in Section 4.1(ii) or
4.2(ii), (w) items not arising from a Spin-Off Disqualification, (x) items
relating to Spin-Off Disqualification to which neither Section 4.1 nor 4.2
is applicable and to any Spin-Off Disqualification described in the proviso to Section 4.1
or 4.2, (y) items attributable to the repatriation of cash undertaken in connection
with the Separation Transactions and which occur on or prior to December 31,
2005, by any New Viacom Entity or any CBS Entity that is a foreign corporation to
any New Viacom Entity or CBS Entity that is a U.S. corporation, and (z) items
described in Section 4.4(b) other than in the proviso thereof) shall
not be treated as attributable to the New Viacom Business, the New Viacom
Discontinued Operations, the CBS Business or the CBS Discontinued Operations.

 

Section 4.4                                      Dual
Consolidated Losses.

 

(a)                                  CBS
and New Viacom agree to use their best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary or
appropriate to enter into and make effective a closing agreement with the IRS pursuant
to Treasury Regulation Section 1.1503-2(g)(2)(iv)(B)(3) (a “DCL
Closing Agreement”) with respect to any dual consolidated loss (within the
meaning of Section 1503 of the Code) of any New Viacom Entity, any entity
that conducts or conducted a New Viacom Discontinued Operation or any separate
unit (within the meaning of Treasury Regulation Section 1.1503-2(c)(3)) of
the New Viacom Business or New Viacom Discontinued Operation (a “DCL”),
as well to obtain relief under Treasury Regulation Section 301.9100 with
respect to utilization, certification, or avoidance of recapture of DCLs.  Without limitation of the forgoing, CBS and
New Viacom shall, as promptly as practicable after the date hereof, prepare and
file with the IRS a ruling request applying for one or more DCL Closing Agreements
with respect to the DCLs and thereafter shall cooperate in causing to become
effective such DCL Closing Agreements. 
Each of CBS and New Viacom shall execute and deliver, or use its best
efforts to cause to be executed and delivered, all instruments, data or
information, including any required certifications, and to make all filings,
and obtain all representations or consents required by the IRS, and to take all
such other actions as may be requested by the IRS from time to time in order to
enter into one or more DCL Closing Agreements with respect to the DCLs.  New Viacom and CBS shall share equally all
third-party costs and expenses incurred by them in connection with entering
into a DCL Closing Agreement with respect to any DCL and all third-party costs
and expenses incurred by them in determining and investigating issues related
to dual consolidated losses of the Old Viacom Group arising in any
Pre-Separation Period.

 

18

 

(b)                                 Any
Income Taxes owed in connection with the disallowance of, the failure of certifying,
or the recapture of any dual consolidated loss (within the meaning of Section 1503
of the Code) of any member of the Old Viacom Group or any separate unit (within
the meaning of Treasury Regulation Section 1.1503-2(c)(3)) where such dual
consolidated loss arose in a Pre-Separation Period and relates to the New
Viacom Business or the New Viacom Discontinued Operations (excluding the
business of Blockbuster Inc., its subsidiaries and any of their respective
separate units) shall be shared equally between New Viacom and CBS and shall
not be treated as attributable to the New Viacom Business, the New Viacom
Discontinued Operations, the CBS Business or the CBS Discontinued Operations; provided,
however, that where such Income Taxes are attributable to any action, or
failure to take any action, after the Separation Date by a party hereto (or its
Subsidiaries) that would be inconsistent with any applicable DCL Closing
Agreement or otherwise results in a “triggering event” (within the meaning of Section 1503
of the Code and the Treasury Regulations promulgated thereunder), then such
party shall bear all of the Income Taxes resulting from such recapture; provided,
further, that in applying Section 3.2(d) with
respect to this Section 4.4(b), correlative adjustments shall be computed
by also taking into account (without duplication) tax benefits Actually Received
within 3 years of the date that the Income Taxes to which this Section 4.4(b) applies
are due, and the parties shall make appropriate payments to reflect the
foregoing.

 

ARTICLE V

PAYMENTS
MADE UNDER THIS AGREEMENT

 

Section 5.1                                      Interest.  Any payments required to be made by one party
to another party pursuant to this Agreement, which is not made within the time
period specified in this Agreement, shall bear interest at a rate equal to one
month LIBOR plus 3.00%.

 

Section 5.2                                      Tax
Treatment of Payments Made Under This Agreement.  For all Income Tax purposes (unless required
by a change in applicable Tax Law or good faith resolution of a Tax Contest), (i) New
Viacom and CBS shall treat, and shall cause their respective Subsidiaries to
treat, (A) any payment obligation arising, and any payment made, under
this Agreement after the Separation Date with respect to Pre-Separation
Liabilities as arising or occurring immediately before the Merger and (B) the
portion of any payment owed or paid by one party to another party that is
attributable to Post-Separation Date Interest shall be treated as interest and
not treated as arising or being paid immediately before the Merger, and (ii) no
New Viacom Entity or CBS Entity shall take any position inconsistent with this Section 5.2
in connection with any matter relating to Income Taxes or Income Tax Returns.

 

Section 5.3                                      Tax
Effecting Obligations Under This Agreement.

 

19

 

The
amount of any payment required to be paid under this Agreement between any New
Viacom Entity and any CBS Entity in respect of a Pre-Separation Liability
accruing for federal Income Tax purposes after the Separation Date (a “Payment”)
shall be reduced to take into account any net Income Tax benefit of the payee
arising from incurring or satisfying the Pre-Separation Liability giving rise
to the payment obligation.  The preceding
sentence shall be implemented by reducing the Payment at the time such Payment
is due to reflect the amount of such net Income Tax benefit, assuming for this
purpose that any such net Income Tax benefit would be fully and immediately
utilized, unless such benefit is reflected in tax basis or similar item (Tax
Basis”), in which case, assuming such Tax Basis would be fully and immediately
utilizable over the depreciation or amortization period, if applicable,
computed on a present value basis using 60% of the Adjusted Swap Rate.  If such Tax Basis is not depreciable or
amortizable, then the payee shall promptly refund to the payor the portion of
such Payment or Payments equal to the net Income Tax benefits arising from such
Tax Basis at the time such benefits are actually realized.

 

Section 5.4                                      Direct
Payments to the IRS.  Notwithstanding
anything herein to the contrary, New Viacom may, at is sole election, remit
payment in respect of its portion of any Old Viacom Tax Liability directly to
the IRS, unless (i) such direct payment is not permitted under applicable
federal Income Tax law or (ii) New Viacom, as the Settling Party for
purposes of Section 3.2(b), elected to “freeze” its liability with respect
to such portion in accordance with Section 3.2(b).  CBS shall cooperate with New Viacom in making
any such direct payment.

 

ARTICLE VI

STATE,
LOCAL AND FOREIGN INCOME TAXES

 

Section 6.1                                      State,
Local and Foreign Income Taxes; Capital Taxes.  Subject to the
following five sentences, the principles of this Agreement shall apply with
respect to any and all state, local or foreign Income Tax matters, as well as Capital
Tax matters, of any New Viacom Entity or any CBS Entity, including, without
limitation, the preparation and filing of Income Tax Returns and Tax Returns
relating to Capital Taxes, paying Income Taxes and Capital Taxes, and resolving
Tax Contests.  With respect to state,
local and foreign Income Tax Returns and Tax Returns relating to Capital Taxes required
to be filed after the Separation Date for any taxable period that includes or
ends before the Separation Date, (i) New Viacom shall prepare, and New
Viacom or CBS as appropriate shall file, (A) those Income Tax Returns that
reflect solely conduct, activities or operations related to the New Viacom
Business and/or the New Viacom Discontinued Operations and (B) those Tax
Returns relating to Capital Taxes that reflect solely the capital, net worth or
equity relating to a New Viacom Entity, and (ii) CBS shall prepare, and
New Viacom or CBS as appropriate shall file, (A) those Income Tax Returns
that reflect solely conduct, activities or operations related to the CBS
Business and/or the CBS Discontinued Operations and (B) those Tax Returns

 

20

 

relating to Capital Taxes that reflect solely the
capital, net worth or equity relating to a CBS Entity.  New Viacom shall pay all Income Taxes and
Capital Taxes due with respect to the Tax Returns described in clause (i) of
the previous sentence and CBS shall pay all Income Taxes and Capital Taxes due
with respect to the Tax Returns described in clause (ii) of the previous
sentence.  CBS shall provide New Viacom,
by August 1, 2006, with a pro forma federal Income Tax Return for the 2005
calendar year for any New Viacom Entity for which New Viacom is required to
file any Tax Return under this Section 6.1, provided that New Viacom has
given CBS a list of such New Viacom Entities on or before June 30,
2006.  For purposes of calculating state
Income Taxes and Capital Taxes for purposes of this Agreement, items relating
to state Income Taxes or Capital Taxes determined in a Resolution and relating
to issues or principles described in the Schedule shall be allocated between
CBS and New Viacom in the manner set forth in the Schedule.  For the avoidance of doubt, in applying Section 6.1
or Section 6.2, the term “IRS” shall mean the relevant state, local or
foreign Governmental Authority having jurisdiction over the assessment,
determination, collection, or other imposition of any Income Taxes, Capital
Taxes or Transfer Taxes.

 

Section 6.2                                      Certain
Transfer Taxes.  The principles of
this Agreement shall apply with respect to any Transfer Taxes allocated between
New Viacom and CBS pursuant to Section 2.06 of the Separation Agreement,
except for (i) Section 6.1 and (ii) calculating the proportion in
which the liability for Income Taxes and Capital Taxes are shared pursuant to
this Agreement.  Liability for such
Transfer Taxes shall, except as provided in Section 3.2, be shared between
New Viacom and CBS in the manner set forth in Section 2.06 of the
Separation Agreement.

 

ARTICLE VII

DISPUTE RESOLUTION

 

Procedures for
discussion, negotiation and arbitration set forth in Article X of the
Separation Agreement shall apply to all disputes, controversies or claims
(whether arising in contract, tort or otherwise) between the parties that may
arise out of or relate to, or arise under or in connection with any Agreement
Disputes relating to Taxes, but the arbitrator shall be a Big Four accounting
firm mutually acceptable to CBS and New Viacom.

 

ARTICLE VIII

CONFIDENTIALITY;
EXCHANGE OF INFORMATION

 

Section 8.1                                      Ownership
of Income Tax Information.  Subject
to Section 8.6, any Income Tax Information owned (or jointly owned) by a
Providing Party that is provided to a Requesting Party pursuant to Section 8.4
shall be deemed to remain the property (or joint property, as the case may be)

 

21

 

of the Providing
Party.  Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Income Tax Information.  For the avoidance of doubt, any and all Income Tax Information
currently in possession of the CBS Group or the New Viacom Group (for this
purpose, possession shall include the right to obtain such Income Tax
Information) shall be jointly owned by New Viacom and CBS, except to the extent
that any such Income Tax Information relates solely to Taxes or Tax Returns for
which a member of the CBS Group or the New Viacom Group, as the case may be,
has no responsibility under this Agreement or under applicable Tax Law, in
which event such Income Tax Information shall be owned by the member of the CBS
Group or the New Viacom Group, as the case may be, with responsibility for such
Tax or Tax Return.

 

Section 8.2                                      Restrictions
on Disclosure of Income Tax Information.

 

(a)                                  Without
limiting any rights or obligations under any other agreement between or among any
member of the CBS Group and any member of the New Viacom Group relating to
confidentiality and subject to Section 8.3 and Section 8.8, each of
the parties hereto agrees that it shall not, and shall not permit any member of
its Group to, and that its or their respective Representatives shall not,
disclose to any Person or use any Income Tax Information with respect to the
members or the business of the other Group (“Confidential Income Tax
Information”) (other than such members of its Group or its or their
Representatives on a “need-to-know” basis in connection with the purpose for
which the Confidential Income Tax Information was originally disclosed).  Such Income Tax Information shall no longer
be deemed Confidential Income Tax Information to the extent that it is or was (i) in
the public domain other than as a result of the breach of this Agreement or any
other agreement between any member of the CBS Group and any member of the New
Viacom Group, (ii) available to the Requesting Party outside the context
of the Prior Relationship on a non-confidential basis prior to the disclosure
of such Confidential Income Tax Information by the Providing Party, or (iii) independently
developed by, or on behalf of, such party by Persons who do not have access to,
or descriptions of, such Confidential Income Tax Information.  Notwithstanding anything to the contrary in
this Section 8.2(a), any member of either Group may, subject to Section 8.8
disclose or use Confidential Income Tax Information (x) if the parties hereto
have consented in writing to such disclosure, which consent shall not be
unreasonably withheld or delayed, or (y) in connection with preparing and
filing Tax Returns or in connection with any Tax Contest.

 

(b)                                 Each
of the parties hereto shall be responsible for any breach of this Section 8.2
and Section 8.3 by the Representatives of any member of its Group, and
shall maintain, develop, and shall cause the members of its respective Group to
maintain and develop, such policies and procedures as shall from time to time
become necessary or appropriate to ensure compliance with this Section 8.2
and Section 8.3.

 

Section 8.3                                      Disclosure
of Income Tax Information.

 

22

 

If
either CBS or New Viacom or any member of their respective Groups or its or
their respective Representatives becomes legally required to disclose any
Confidential Income Tax Information which is jointly owned as provided in Section 8.1,
such disclosing party shall promptly notify New Viacom or CBS, as the case may
be (the “Joint Owner”), and, except to the extent such Confidential
Income Tax Information is to be used in connection with preparing or filing Tax
Returns or in connection with any Tax Contest, shall use all commercially
reasonable efforts to cooperate with the Joint Owner so that the Joint Owner
may seek a protective order or other appropriate remedy and/or waive compliance
with this Section 8.3.  All expenses
reasonably incurred by the disclosing party in seeking a protective order or other
remedy shall be borne by the Joint Owner. 
If such protective order or other remedy is not obtained, or if the Joint
Owner waives compliance with this Section 8.3, the disclosing party shall (a) disclose
only that portion of the Confidential Income Tax Information it is legally required
to disclose, (b) use all commercially reasonable efforts to obtain
reliable assurances requested by the Joint Owner that confidential treatment
will be accorded such Confidential Income Tax Information and (c) promptly
provide the Joint Owner with a copy of the Confidential Income Tax Information
so disclosed, in the same form and format as so disclosed, together with the
identity of all Persons to whom such Confidential Income Tax Information was
disclosed.

 

Section 8.4                                      Access
to Income Tax Information.

 

(a)                                  Subject
to paragraph (c) below, during the Retention Period, at the request of
either of the parties hereto (the “Requesting Party”), the other party
hereto (the “Providing Party”) shall, and shall cause the members of its
Group or its or their respective Representatives, successors and assignees, and
shall use commercially reasonable efforts to cause joint ventures to which it
is and they are a party but that are not members of their respective Group
(collectively, “Related Parties”) to, cooperate with and afford to the
Requesting Party and its Representatives, upon reasonable advance written
request, reasonable access to all Income Tax Information within the possession
of the Providing Party or any Related Party (other than Income Tax Information (i) the
disclosure of which would have the effect of waiving a legal privilege, or (ii) that
is the subject of a confidentiality agreement between the Providing Party and a
third party which prohibits disclosure to the Requesting Party, provided
that the Providing Party shall use all commercially reasonable efforts to
obtain such third party’s consent to disclosure of such Income Tax Information).  The
Requesting Party shall have the right to make photocopies or images of any such
requested Income Tax Information and any third-party costs and expenses
incurred in connection with making such photocopies or images shall be for the
account of the Requesting Party.

 

(b)                                 Subject
to paragraph (c) below, each party agrees to cooperate fully, and to cause
the members of its respective Group or its or their respective Representatives,
successors and assignees, to cooperate fully and to use commercially reasonable
efforts to cause Related Parties to cooperate fully, to allow access during
normal business hours and upon reasonable notice to each other’s employees (i) to
the

 

23

 

extent that they are reasonably necessary to discuss and explain
requested Income Tax Information with and to the Requesting Party and (ii) with
respect to any matter relating to Income Taxes or Income Tax Returns
(including, without limitation, any Tax Contests or any other action or
proceeding relating to Income Taxes for any taxable period beginning after December 31,
2005); provided, however, that such access will be granted only
to the extent that such access does not unreasonably interfere with any
employee’s performance of his or her employment duties.

 

(c)                                  With
respect to subsections (a) and (b) of this Section 8.4, access
to the requested Income Tax Information shall be provided to the extent (i) permitted
or required by Section 8.8, (ii) such Income Tax Information
reasonably relates to the Requesting Party’s assets, business or operations or
any Liability the Requesting Party has assumed or is responsible for hereunder,
(iii) access is reasonably required by the Requesting Party for any Income
Tax purpose (including, without limitation, preparing and filing any Tax Return
or engaging in any Tax Contest or any other action or proceeding relating to
Income Taxes for any taxable period beginning after December 31, 2005).  Nothing herein is intended to put either party’s
Income Tax Information within the possession, custody or control of the other party
except to the extent expressly provided herein. 
All expenses of the Providing Party complying with this Section 8.4
shall be borne by the Requesting Party.

 

Section 8.5                                      Record
Retention.

 

(a)                                  The
originals of (and if no originals exist, then a copy or image of) all Income
Tax Information currently in the possession of the existing tax department
shall be stored in mutually agreed storage locations.  Each of CBS and New Viacom shall, and shall
cause the members of their respective Group to, preserve and keep their Records
relating to any Income Tax matters for any and all Pre-Separation Periods in
their possession, whether in electronic form or otherwise, until one year after
the expiration of the applicable statute of limitations (the “Retention
Period”).  The costs of storing the such
Records shall be shared equally between New Viacom and CBS.  The Requesting Party shall be responsible for
any and all costs related to the retrieval of any Records.  Prior to disposing of any material records or
work papers (whether created internally or by a third party) regarding Income
Tax matters for any Pre-Separation Period, each of CBS and New Viacom shall,
and shall cause the members of their respective Groups, to notify the other
party in writing of such intention and afford the other party the opportunity to
take possession or request copies of such records or work papers, at its
discretion, that relate to such other party’s Income Tax liabilities and
obligations.  Any Records that are
delivered (by transfer of the original, copy or images of the Records) to a
party pursuant to the previous sentence shall be treated as Confidential Income
Tax Information to the extent such Records qualified as Confidential Income Tax
Information immediately prior to the transfer.

 

(b)                                 Each
of the parties hereto shall, and shall cause the members of its respective
Group to, use reasonable efforts to deliver to the other party (i)

 

24

 

on or prior to the Separation Date, any and all Income Tax Information (including
Records relating to Income Tax matters for any and all Pre-Separation Periods) that
such party or any member of its Group has in its possession relating to the
other party’s business or discontinued operations and (ii) as soon as
reasonably practicable following their discovery, any Income Tax Information
described in clause (i) above which it or any member of its Group
discovers are in its possession or control and a copy has not been provided to
the other party following the Separation Date, provided, however,
that, with respect to clauses (i) and (ii) of this paragraph (b), the
party providing such Records may retain copies or images of any such Records.  The parties hereto agree that it shall not be
necessary to search individual offices or desktop computers for such Records
unless specifically requested to do so by the other party and, in each such
case, only to the extent it is reasonably necessary for a specific, identified
business purpose.

 

(c)                                  New Viacom and CBS shall cooperate with each
other in imaging (or otherwise digitizing) in a manner mutually agreeable all
Income Tax Information mutually agreeable with New Viacom and CBS.  All reasonable third-party costs and expenses
incurred in connection with such imaging or digitizing shall constitute
One-Time Transaction Costs (as defined in the Separation Agreement).  For the avoidance of doubt, the images and
other digital products resulting from the efforts described in this Section 8.5(c) shall
be jointly owned by New Viacom and CBS and the third-party costs and expenses
of maintaining the same shall be shared equally by New Viacom and CBS.

 

Section 8.6                                      Income
Tax Information Relating to Non-Income Taxes.  Subject to Article VI, this Article VIII
shall not apply to Information related to non-Income Taxes, which shall instead
be governed by the Separation Agreement.

 

Section 8.7                                      Witness
Services.  At all times from and
after the Separation Date, each of CBS and New Viacom shall use its
commercially reasonable efforts to make available to the other, upon reasonable
written request, its and its Subsidiaries’ officers, directors, employees and
agents as witnesses to the extent that (a) such persons may reasonably be
required in connection with the investigation, prosecution or defense of any claim,
demand or Action relating to Income Taxes in which either CBS or New Viacom or
the members of their respective Group may from time to time be involved (except
for claims, demands or Actions between members of each Group) and (b) there
is no conflict in the claim, demand or Action between the Requesting Party and
the other party hereto or any such witnesses. 
A party providing witness services to the other party under this Section 8.7
shall be entitled to receive from the recipient of such services, upon the
presentation of reasonably detailed invoices therefor, payments for such
amounts, relating to disbursements and other out-of-pocket expenses (which
shall not include the costs of salaries and benefits of employees who are
witnesses or any pro rata portion of overhead or other costs of employing such
employees which would have been incurred by such

 

25

 

employees’ employer
regardless of the employees’ services as witnesses), as may be reasonably
incurred in providing such witness services.

 

Section 8.8                                      Privileged
Matters.  CBS and New Viacom
recognize that legal and other professional services relating to Income Tax
matters that have been or will have been provided prior to the Separation Date have
been or will be rendered for the benefit of each of Viacom, the members of the
CBS Group and the members of the New Viacom Group, and that each of Viacom, the
members of the CBS Group and the members of the New Viacom Group should be
deemed to be the client for the purposes of asserting all privileges which may
be asserted under applicable Law in connection therewith.  Subject to paragraphs (a) through (h) of
this Section 8.8, CBS and New Viacom shall, and shall cause the members of
their respective Groups to, agree to maintain their respective separate and
joint privileges, including, without limitation, by executing common interest
agreements where necessary or useful for this purpose.  To allocate the interests of each party in
the information as to which any party is entitled to assert a privilege, whether
or not such a privilege exists or the existence of which is in dispute, the
parties agree as follows:

 

(a)                                  CBS
shall be entitled, in perpetuity, to control the assertion or waiver of all
privileges in connection with privileged Income Tax Information which relates
to the CBS Business or to the CBS Discontinued Operations and not to the New
Viacom Business or the New Viacom Discontinued Operations, whether or not the
privileged information is in the possession of or under the control of members
of the CBS Group or the New Viacom Group. 
CBS shall also be entitled, in perpetuity, to control the assertion or
waiver of all privileges in connection with privileged Income Tax Information
which relates to the subject matter of any pending or future claim, demand or
Action relating to Income Taxes that is, or which CBS reasonably anticipates
may become a Liability for which CBS may be responsible under this Agreement or
otherwise, and that is not also, or that CBS reasonably anticipates will not
become a Liability for which New Viacom may be responsible under this Agreement
or otherwise, whether or not the privileged Income Tax Information is in the
possession of or under the control of members of the CBS Group or the New Viacom
Group.

 

(b)                                 New
Viacom shall be entitled, in perpetuity, to control the assertion or waiver of
all privileges in connection with privileged Income Tax Information which
relates to the New Viacom Business or to the New Viacom Discontinued Operations
and not to the CBS Business or the CBS Discontinued Operations, whether or not
the privileged information is in the possession of or under the control of
members of the CBS Group or the New Viacom Group.  New Viacom shall also be entitled, in
perpetuity, to control the assertion or waiver of all privileges in connection
with privileged Income Tax Information which relates to the subject matter of
any pending or future claim, demand or Action relating to Income Taxes that is,
or which New Viacom reasonably anticipates may become a Liability for which New
Viacom may be responsible under this Agreement or otherwise, and that is not
also, or that New Viacom reasonably anticipates will not become a Liability for
which CBS may be 

 

26

 

responsible under this Agreement or otherwise, whether or not the
privileged Income Tax Information is in the possession of or under the control
of members of the CBS Group or the New Viacom Group.

 

(c)                                  Subject
to the restrictions of this Section 8.8, New Viacom and CBS agree that
they shall have equal right to assert all shared privileges and all privileges
not allocated pursuant to the terms of Sections 8.8(a) or (b) and
which relate to the members of both the CBS Group and the New Viacom Group.

 

(d)                                 Each
party hereto shall ensure that no member of its respective Group may waive any privilege
which could be asserted under any applicable Law, and in which the other party
hereto has a shared privilege, without the consent of the other party, which
consent shall not be unreasonably withheld or delayed or as provided in
paragraph (e) or (f) below.

 

(e)                                  In
the event of any claim, demand or Action or other dispute between the members
of the New Viacom Group, on the one hand, and the members of the CBS Group, on
the other hand, either such party may waive a privilege in which the other
party has a shared privilege, without obtaining the consent of the other party;
provided, however, that such waiver of a shared privilege shall
be effective only as to the use of Information with respect to the claim,
demand or Action or other between the members of the New Viacom Group, on the
one hand, and the members of the CBS Group, on the other hand, and shall not
operate as a waiver of the shared privilege with respect to third parties.

 

(f)                                    If
a dispute arises between the members of the New Viacom Group, on the one hand,
and the members of the CBS Group, on the other hand, regarding whether a
privilege should be waived to protect or advance the interest of either party,
each party agrees that it shall negotiate in good faith, shall endeavor to
minimize any prejudice to the rights of the other party, and shall not
unreasonably withhold consent to any request for waiver by the other party.  Each party hereto specifically agrees that it
will not withhold consent to waiver for any purpose except to protect its own
legitimate interests.

 

(g)                                 Upon
receipt by either party hereto or by any Subsidiary thereof of any subpoena,
discovery or other request which arguably calls for the production or
disclosure of Income Tax Information subject to a shared privilege or as to
which the other party or a Subsidiary thereof has the sole right hereunder to
assert a privilege, or if either party obtains knowledge that any of its or any
of its Subsidiaries’ current or former directors, officers, agents or employees
have received any subpoena, discovery or other requests which arguably call for
the production or disclosure of such privileged Information, such party shall
promptly notify the other party of the existence of the request and shall
provide the other party a reasonable opportunity to review the Information and
to assert any rights it or they may have under this Section 8.8 or
otherwise to prevent the production or disclosure of such privileged
information.

 

27

 

(h)                                 The
transfer of all Records and other Income Tax Information and each party’s
retention of Records and other information which may include privileged
Information of the other pursuant to this Agreement is made in reliance on the
agreement of CBS and New Viacom, as set forth in Section 8.2 and this Section 8.8,
to maintain the confidentiality of privileged Information and to assert and
maintain all applicable privileges.  The
access to Information being granted pursuant to Sections 8.3 and 8.4
hereof, the agreement to provide witnesses pursuant to Section 8.7 hereof,
the furnishing of notices and documents and other cooperative efforts
contemplated by this Agreement, and the transfer of privileged Information
between and among the parties and their respective Subsidiaries pursuant to
this Agreement shall not be deemed a waiver of any privilege that has been or
may be asserted under this Agreement or otherwise.

 

Section 8.9                                      Tax
Library.  The parties agree to share
the written materials in the tax library on the 32nd floor of 1515 Broadway,
New York, New York as long as the tax departments of New Viacom and CBS are
sharing office space at such location. 
At such time as one tax department vacates such location, the written
materials shall be reasonably divided between New Viacom and CBS.

 

ARTICLE IX

MISCELLANEOUS

 

Section 9.1                                      Termination.  Except as provided for pursuant to a written
agreement of the parties hereto, this Agreement shall remain in force and be
binding so long as the applicable period of assessment (including extensions)
remains unexpired for any Taxes contemplated by this Agreement.

 

Section 9.2                                      Effect
of Termination.  In the event of
termination of this Agreement as provided in Section 9.1, this Agreement
shall forthwith become void and there shall be no liability on the part of
either party hereto.

 

Section 9.3                                      Amendments.  This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the
parties hereto or (b) by a waiver in accordance with Section 9.4.

 

Section 9.4                                      Waiver.

 

28

 

Either
party to this Agreement may (a) extend the time for the performance of any
of the obligations or other acts of the other party and (b) waive
compliance with any of the agreements of the other party or conditions to such
party’s obligations contained herein. 
Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party to be bound thereby.  Any waiver of any term or condition shall not
be construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition of this
Agreement.  The failure of either party
hereto to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.

 

Section 9.5                                      Limitation
of Liability.  IN NO EVENT SHALL ANY
MEMBER OF THE CBS GROUP OR THE NEW VIACOM GROUP BE LIABLE TO ANY MEMBER OF THE
NEW VIACOM GROUP OR THE CBS GROUP, RESPECTIVELY, FOR ANY SPECIAL,
CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS,
HOWEVER, CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING, WITHOUT LIMITATION,
NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

Section 9.6                                      Expenses.  Except as otherwise specified in this
Agreement, all costs and expenses, including fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated by this Agreement, to the extent they are
incurred prior to the Separation Date, shall be borne by CBS and New Viacom
equally, and to the extent they are incurred subsequent to the Separation Date,
shall be borne by the party incurring such costs and expenses.

 

Section 9.7                                      Counterparts.  This Agreement may be executed and delivered
(including by facsimile transmission) in counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement.

 

Section 9.8                                      Notices.  All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by an internationally recognized overnight courier service, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties hereto at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 9.8):

 

29

 

	
  If to CBS, to:

  	
   

  
	
   

  	
   

  
	
  CBS Corporation

  	
   

  
	
  51 West 52nd
  Street

  	
   

  
	
  New York, NY 10019

  	
   

  
	
  Facsimile No.: (212) 975-4215

  	
   

  
	
   

  	
   

  
	
  Attn:

  	
  Louis J. Briskman

  	
   

  
	
   

  	
  Richard M. Jones

  	
   

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  
	
   

  	
   

  
	
  Weil, Gotshal &
  Manges LLP

  	
   

  
	
  767 Fifth Avenue

  	
   

  
	
  New York, NY 10153

  	
   

  
	
  Facsimile No.: (212) 310-8007

  	
   

  
	
   

  	
   

  
	
  Attn:

  	
  Howard Chatzinoff

  	
   

  
	
   

  	
  Michael E. Lubowitz

  	
   

  
	
   

  	
   

  
	
  If to New Viacom, to:

  	
   

  
	
   

  	
   

  
	
  Viacom Inc.

  	
   

  
	
  1515 Broadway

  	
   

  
	
  New York, NY 10036

  	
   

  
	
  Facsimile No.: (212) 258-6099

  	
   

  
	
   

  	
   

  
	
  Attn:

  	
  Michael D. Fricklas

  	
   

  
	
   

  	
  Jay Kushner

  	
   

  
	
   

  	
   

  
	
  With a copy to:

  	
   

  
	
   

  	
   

  
	
  Paul, Weiss, Rifkind,
  Wharton & Garrison LLP

  	
   

  
	
  1285 Avenue of the
  Americas

  	
   

  
	
  New York, NY 10019

  	
   

  
	
  Facsimile No.: (212) 757-3990

  	
   

  
	
   

  	
   

  
	
  Attn:

  	
  Alfred D. Youngwood

  	
   

  
	
   

  	
  David R. Sicular

  	
   

  

 

Section 9.9                                      Severability.  If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect for so long as the economic or
legal substance of the transactions contemplated by this Agreement is not
affected in any manner materially adverse to either party hereto.  Upon such

 

30

 

determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement are
consummated as originally contemplated to the greatest extent possible.

 

Section 9.10                                Entire
Agreement; Assignment.  This
Agreement, the Schedule attached hereto, and any side letter described in Section 3.1(a) constitute
the entire agreement of the parties hereto with respect to the subject matter
hereof and thereof and supersede all prior agreements and undertakings, both
written and oral, between the parties hereto with respect to the subject matter
hereof and thereof.  This Agreement may
not be assigned (whether pursuant to a merger, by operation of Law or otherwise)
by a party hereto without the consent of the other parties hereto, provided
that no such assignment shall relieve the assigning party of its obligations
hereunder.

 

Section 9.11                                Parties
in Interest.  This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
successors and permitted assigns, and nothing herein, express or implied, is
intended to or shall confer upon any other Person any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.

 

Section 9.12                                Governing
Law.  This Agreement shall be
governed by, and construed in accordance with, the Laws of the State of New York.

 

Section 9.13                                Waiver
of Jury Trial.  EACH OF THE PARTIES
HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.13.

 

31

 

Section 9.14                                Headings.  The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.  Unless otherwise expressly provided for in
this Agreement, the word “including” or any variation thereof means “including,
without limitation” and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.

 

Section 9.15                                Survival
of Covenants.  Except as expressly
set forth herein, the covenants, representations and warranties contained in
this Agreement and each Ancillary Agreement, and liability for the breach of
any obligations contained herein or therein, shall survive the Separation and
shall remain in full force and effect.

 

*               *               *               *               *

 

32

 

IN WITNESS WHEREOF, each
of the parties has caused this Agreement to be executed by its duly authorized
officer as of the date first set forth above.

 

	
   

  	
  VIACOM INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph R. Ianniello

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joseph R. Ianniello

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President,

  Finance and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NEW VIACOM CORP.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael D. Fricklas

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael D. Fricklas

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President,

  
	
   

  	
   

  	
   

  	
  General Counsel and
  Secretary

  
						

 

33Exhibit 10.1

 

LENOX GROUP INC. 
(“LGI”) STOCK OPTION AGREEMENT

FOR OPTIONS UNDER THE 2004 STOCK
INCENTIVE PLAN

 

	
  Optionee:

  	
   

  	
  Grant Date:

  
	
   

  	
   

  	
   

  
	
  Number of Shares
  subject to the Option:

  	
   

  	
  Exercise Price per
  Share:

  

 

1.                    General.

 

1.1    The
Company hereby grants to the Optionee, subject to the terms of this Agreement
and the Company’s 2004 Stock Incentive Plan (the “Plan”), the right and option
(the “Option”) to purchase, at the Exercise Price, the number of Shares set
forth above.  The number of Shares and
the Exercise Price are subject to adjustment as provided in Section 13 of
the Plan, which is made a part of this Agreement.  Except as otherwise defined herein,
capitalized terms used in this Agreement shall have the same definitions as set
forth in the Plan.  For purposes of this
Agreement, (a) the term “person” shall mean an individual, a corporation, a
partnership, an association, a trust, a sole proprietorship, a limited
liability company, or any other entity or organization, including a government
or governmental agency, instrumentality, authority, commission or court, (b)
the term “Affiliate” of the Company shall mean any person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Company and (b) the term “control” shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of any person, whether through the
ownership of equity interests, by contract or otherwise.

 

1.2         This Option is not
intended to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code.

 

1.3       The Option shall be
exercisable to the extent and in the manner provided in this Agreement for a
period of 10 years from the date hereof (the “Exercise Term”); provided,
however, that the Option may be terminated earlier as provided in
Section 4 or 5.

 

2.                    Vesting and
Exercisability of Options.

 

2.1         Fully Vested Upon
Grant; Delayed Exercisability.  The
Option shall be fully vested on and as of the Grant Date, subject to forfeiture
only as set forth in this Agreement and the Plan. Notwithstanding the foregoing
and subject to the provisions of this Agreement and the Plan, the Option shall
become exercisable with respect to the total number of Shares which may be
purchased pursuant to the Option on the second anniversary of the Grant Date.

 

2.2         Timing of Exercise.  The Optionee or the guardian, executor,
administrator or other legal representative (each a “Legal Representative”) of
the Optionee may exercise the Option, in whole or in part, at any time or from
time to time, but only to the extent the Option is exercisable at such time.

 

2.3         Effect of Change in
Control.  Notwithstanding anything
contained in this Agreement to the contrary, in the event of a Change in
Control, the Option shall become immediately and fully exercisable.

 

3.                    Manner of
Exercise and Payment.

 

3.1         Subject to the terms and
conditions of this Agreement and the Plan, the Option may be exercised by
delivery of written notice, in person or by mail, to the Secretary of the
Company, at the Company’s principal executive office (or such other address as
the Company may from time to time notify the Optionee in writing). Such notice
shall state that the Optionee is electing to exercise the Option and the
underlying number of Shares being exercised and shall be signed by the Optionee
or, where applicable, by his/her Legal Representative.  The Company may require proof satisfactory to
it as to the right of the Legal Representative to exercise the Option.

 

 

3.2         The notice of exercise
described in Section 3.1 shall be accompanied by the full purchase price
for the underlying Shares being exercised, such purchase price to be paid by
check.  Not less than 10 Shares may be
purchased at any one time upon an exercise of the Option, unless the number of
Shares so purchased constitutes the total number of Shares then purchasable
under the Option.

 

3.3         The Optionee shall not be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any Shares subject to the Option until the conditions in Section
7.3 of the Plan have been satisfied.

 

4.                    Certain
Restrictions.

 

4.1         Non-transferability.  The Option shall not be transferable by the
Optionee otherwise than by will or the laws of descent and distribution, and an
Option may be exercised during the lifetime of such Optionee only by the
Optionee or his/her Legal Representative. 
The terms of such Option shall be final, binding and conclusive upon the
beneficiaries, executors, administrators, heirs and successors of the Optionee.

 

4.2    Employment Termination.  (a)  Except as may be agreed
between the Committee and the Optionee, if the Optionee shall no longer be
employed by the Company or any of its Subsidiaries, for any reason whatsoever
(including by reason of death, permanent disability or adjudicated
incompetency) (“Terminated” or a “Termination”), irrespective of whether the
Optionee receives, in connection with the Termination, any severance or other
payment from the Company or any of its Subsidiaries under any employment
agreement or otherwise, the Option shall terminate and shall be of no further
force or effect from and after the date of such Termination (the “Termination
Date”) as follows:

 

(1)     
In the event the Termination is the result of the Optionee’s resignation from
employment (other than “Retirement” as defined below), the last day on which
the Option may be exercised (and after which day the Option shall terminate and
be of no further force or effect) shall be the ninetieth (90th) day
following the Termination Date unless the second anniversary of the Grant Date
of the Option occurs after such ninetieth day, in which case the last day of
Option exercisability shall be the second anniversary of the Grant Date of the
Option; provided, however, that in the event the Optionee dies during
the period between the Termination Date and the last day of Option
exercisability as set forth in this clause 4.2(a)(1), then the Legal
Representative may exercise the Option at any time until and through (but not
after) the later to occur of (x) such last day of Option exercisability and (y)
the three-hundred-sixty-fifth (365th) day after the date of the Optionee’s
death.

 

(2)     
In the event the Termination is the result of the Optionee’s “Retirement”
(being the Optionee’s resignation from employment or the Company’s termination
of employment without Cause, in either case, at such time as the Optionee is
age sixty (60) or greater), the last day on which the Option may be exercised
(and after which day the Option shall terminate and be of no further force or
effect) shall be the tenth (10th) anniversary of the Grant Date of
the Option; provided, however, that in the event the Optionee dies
during the period between the Termination Date and the last day of Option
exercisability as set forth in this clause 4.2(a)(2), then the Legal
Representative may exercise the Option at any time until and through (but not
after) the later to occur of (x) the second anniversary of the Grant Date of
the Option and (y) the three-hundred-sixty-fifth (365th) day after the date of
the Optionee’s death.

 

(3)     
In the event the Termination is the result of the Optionee’s death while
employed by the Company or one of its Affiliates, the Legal Representative may
exercise the Option at any time within three-hundred-sixty-five (365) days
after the date of the Optionee’s death (and after such 365th day the Option
shall terminate and be of no further force or effect) unless the second
anniversary of the Grant Date of the Option occurs after the Termination Date,
in which case the last day of Option exercisability shall be the second
anniversary of the Grant Date of the Option.

 

 

(4)     
In the event the Termination is the result of the Company’s dismissal without
Cause of the Optionee from employment (other than due to Retirement), the last
day on which the Option may be exercised (and after which day the Option shall
terminate and be of no further force or effect) shall be the later (the “Later
Day”) of (x) the last day in respect of which the Optionee is paid severance
following the Termination Date (e.g., the end of the severance period) and (y)
the ninetieth (90th) day following the Termination Date; provided,
however, that in the event the second anniversary of the Grant Date of the
Option occurs after the Later Day, the last day of Option exercisability shall
be the second anniversary of the Grant Date of the Option; and further
provided, that in the event the Optionee dies during the period between the
Termination Date and the last day of Option exercisability as set forth in this
clause 4.2(a)(4), then the Legal Representative may exercise the Option at any
time until and through (but not after) the later to occur of (x) such last day
of Option exercisability as set forth in the preceding proviso and (y) the
three-hundred-sixty-fifth (365th) day after the date of the Optionee’s death.

 

(5)     
In the event the Termination is the result of the Company’s dismissal with
Cause of the Optionee from employment, the last day on which the Option may be
exercised (and after which day the Option shall terminate and be of no further
force or effect) shall be the Termination Date.

 

(b)         For purposes of this
Section 4.2, the term “Cause” shall mean the Company’s determination that the
Optionee shall have committed one or more of the following: fraud, material and
deliberate injury or attempted injury to the business or a fellow employee or
customer in the line of work, breach of any law or Company policy which
presents the reasonable likelihood of a material adverse impact to the
Company’s business or its reputation, material competition with the Company
(including solicitation of its employees or customers), willful breach of duty,
habitual neglect, or habitual absenteeism, or substantial dependence on or
addiction to alcohol or any controlled substance.

 

5.                    Prohibition
Against Certain Activities.

 

5.1         Restricted Activities.
The Optionee understands that the Company is granting to the Optionee an option
to purchase Shares to reward the Optionee for the Optionee’s future efforts and
loyalty to the Company and its Affiliates by giving the Optionee the
opportunity to participate in the potential future appreciation of the
Company.  Accordingly, the Optionee
agrees that: (a) s/he will not at any time during his/her employment with the
Company or any Affiliate, or after any Termination, directly or indirectly
disclose or furnish to any other person or use for his/her own or any other
person’s account any confidential or proprietary knowledge or any other
information which is not a matter of public knowledge obtained during the
entire course of his/her employment with, or other performance of services for,
the Company or any Affiliate or any predecessor of any of the foregoing, no
matter from where or in what manner the Optionee may have acquired such
knowledge or information, and s/he shall retain all such knowledge and
information in trust for the benefit of the Company, its Affiliates and the
successors and assigns of any of them; (b) if s/he is Terminated, s/he will not
for two years following the Termination directly or indirectly solicit for
employment, including without limitation recommending to any subsequent
employer the solicitation for employment of, any person who at the time of the
solicitation is employed by the Company or any Affiliate  (a ““LGI” Employee”) (it being understood
that, if the Optionee becomes affiliated with another person (the “Successor”)
and the Successor solicits for employment a “LGI” Employee, it shall not
constitute a solicitation hereunder if the Optionee does not solicit, recommend
to the Successor, or otherwise bring to the attention of the Successor, the
“LGI” Employee); and (c) s/he will not at any time during his/her employment or
after any Termination publish any statement or make any statement (under
circumstances reasonably likely to become public or that s/he might reasonably
expect to become public) critical of the Company or any Affiliate, or in any
way adversely affecting or otherwise maligning the business or reputation of
the Company or any of its Affiliates or any of their respective officers,
directors or employees (any activity described in clause (a), (b) or (c) of
this sentence being herein referred to as a “Prohibited Activity”).  In addition, accordingly, the Optionee agrees
that s/he will not at any time during his/her employment with the Company or
any Affiliate or the twelve (12) months thereafter (including any period
following Termination during or in respect of which s/he is receiving any severance
payment) engage in any Competitive Activity (as defined below) anywhere in the
world (including, without limitation, anywhere in the United States of America,
the United Kingdom, Hong Kong, China or Taiwan).

 

 

The term “Competitive Activity” shall mean engaging in
any of the following activities:  (a)
directly or indirectly through one or more intermediaries controlling any
Competitor (as defined below) or owning any equity or debt interests in any
Competitor (other than equity or debt interests which are publicly traded and
do not exceed 2% of the particular class of interests outstanding); (b)
directly or indirectly soliciting, diverting, taking away, appropriating or
otherwise interfering with any of the employees or customers of the Company or any
Affiliate; or (c) employment by (including serving as an officer or director
of), or providing consulting or other services to, any Competitor.  The term “Competitor” means any person who
derives  significant revenues, income or
reputational gain from producing, selling, designing, dealing or otherwise
conducting commercial activity in, with or pertaining to, tabletop products,
collectibles, miniature decorative or collectible buildings or coordinated
“village” accessories, figurines, jewelry, textiles, watches, small leather
goods or general decorative giftware products.

 

5.2         Right to Terminate
Option; Disgorgement.  The Optionee
understands that the Company is granting to the Optionee an option to purchase
Shares to reward the Optionee for the Optionee’s future efforts and loyalty to
the Company and its Affiliates by giving the Optionee the opportunity to
participate in the potential future appreciation of the Company.  Accordingly, if the Optionee: (a) engages in
any Prohibited Activity; (b) engages in any Competitive Activity; or (c) is
convicted of a crime against the Company or any Affiliate, then, in addition to
any other rights and remedies available to the Company, the Company shall be
entitled, in its sole discretion, to terminate the Option, which shall then be
of no further force or effect.

 

The Optionee
further understands that if he/she is found to have violated any provision of
Section 5.1 after he/she exercises the Option, the Company has the right to
demand repayment of (and the Optionee shall be obligated upon such written
demand to repay) all of Optionee’s after-tax profit realized from the exercise
of the Option (including any net cash proceeds from the sale of Shares acquired
through exercise of the Option and any Shares held by the Optionee acquired
through exercise of the Option).

 

6.                    Specific
Performance.  The parties hereto
acknowledge that there will be no adequate remedy at law for a violation of any
of the provisions of this Agreement and that, in addition to any other remedies
which may be available, all of the provisions of this
Agreement shall be specifically enforceable in accordance with their respective
terms.

 

7.                    Withholding.  Prior to the issuance of any Shares to the
Optionee hereunder, the Optionee shall remit to the Company the full amount of
any applicable Withholding Taxes.  The
Company shall have the right to deduct from any distribution of cash to the
Optionee any amount necessary in satisfaction of any applicable Withholding
Taxes.

 

8.                    Entire
Agreement.  This Agreement and the
Plan constitute the entire agreement, and supersede all prior agreements and
understandings, oral and written, between the parties hereto with respect to
the subject matter hereof.

 

9.                    Choice of
Law.  This Agreement shall be
interpreted under the laws of the State of Delaware (except with respect to
matters of employment law, which shall be interpreted under the laws of the
State of Minnesota), entirely independent of the forum in which the Agreement
or any part of it may come up for construction, interpretation or enforcement.

 

 

10.              Acknowledgment.  The Optionee hereby acknowledges prior
receipt of a copy of the Plan and agrees to be bound by all the terms and
provisions thereof as the same may be amended from time to time.  The Optionee hereby acknowledges that s/he
has reviewed the Plan and this Agreement and understands his/her rights and
obligations thereunder and hereunder. 
The Optionee also acknowledges that s/he has been provided with such
information concerning the Company, the Plan and this Agreement as s/he and
his/her advisors have requested.

 

 

LENOX GROUP INC.

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Optionee:

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