Tax Indemnity Agreement

TAX INDEMNIFICATION AGREEMENT


This Tax Indemnification Agreement (this "AGREEMENT") is made this ___ day of ____________, 1998, by and among Clark/Bardes Holdings, Inc., a Delaware corporation ("HOLDINGS"), Clark/Bardes, Inc., a Delaware Corporatoin ("CBI") and each of the former shareholders of Clark/Bardes, Inc., a Texas corporation (the "COMPANY"), (hereinafter referred to collectively as the "SHAREHOLDERS").


R E C I T A L S


A. The Company made an election to be treated as an S corporation within the meaning of Section 1361 of the Internal Revenue Code of 1986, as amended (the "CODE"), and corresponding provisions of state income tax law, for the period commencing ______________, 19__, to the date of termination of such election (the "S PERIOD").


B. CBI is a wholly-owned subsidiary of Holdings. Holdings contemplates filing consolidated tax returns with CBI.


C. The Company will be merged with and into CBI and CBI will be the surviving corporation upon the consummation of the merger (the "REORGANIZATION"). Further, CBI will be a C corporation within the meaning of Section 1361 of the Code and corresponding provisions of state income tax law from and after the date of termination of the Company's S election.


D. Pursuant to Section 1362(e)(2) of the Code, the Company's income or loss for all of 1998 will be pro rated among the days in 1998 for purposes of allocating the Company's income for 1998 between (i) the period commencing on January 1, 1998, and ending on the last day of the S Period, and (ii) the balance of the year, provided that such allocation is not required under Section 1362(e)(6)(D) of the Code to be based on a closing of the books.


E. The Board of Directors of the Company is expected to declare a dividend, payable to shareholders of record as of the date preceding the day that the Company's S election is revoked, in the amount described in Section 1(a).


A G R E E M E N T S


NOW, THEREFORE, in consideration of the premises and of the mutual agreements contained herein, the parties hereto agree as follows: 2 1. COVENANTS


(a) Subject to receipt by Holdings and CBI of this Agreement executed by all the Shareholders, the Company shall distribute to the Shareholders prior to the Reorganization cash in the amount equal to $3.2 million, or $1.00 per share (the "SHAREHOLDER DISTRIBUTION AMOUNT"). The Shareholder Distribution Amount may be (i) decreased if the amount of the Company's previously earned and undistributed taxable income immediately prior to the consummation of the Reorganization (such amount the "AAA AMOUNT") is less than the Shareholder Distribution Amount or (ii) increased if the Shareholder Distribution Amount is less than 42.6% of the AAA Amount.


(b) CBI shall, as soon as practical following the end of 1998, determine (i) the income or loss of CBI for 1998, (ii) the allocation of such income or loss as between (A) the period commencing on January 1, 1998 and ending on the last day of the S Period, and (B) the balance of 1998, using the method prescribed by Section 1362(e) of the Code, and (iii) the balance, if any, of the Company's accumulated adjustments account.


2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SHAREHOLDERS. The Shareholders, jointly and severally, represent, warrant and covenant to Holdings and CBI that:


(a) The Shareholders have duly and timely filed, or will duly and timely file, their personal income tax returns for each period with or within which ends any taxable year of the Company included in the S period ("SHAREHOLDER TAX RETURNS").


(b) The Shareholders have duly included, or will duly include, ...