AGREEMENT
AND
PLAN OF DISTRIBUTION
Dated as of June 9, 1998
between
U.S. Office Products Company,
Workflow Management, Inc.,
School Specialty, Inc.,
Aztec Technology Partners, Inc.
and
Navigant International, Inc.
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.......................................................................................................2
SECTION 1.01 General.........................................................................2
SECTION 1.02 References; Interpretation.....................................................16
ARTICLE II
PRELIMINARY TRANSACTIONS.........................................................................................16
SECTION 2.01 Stock Transfers................................................................16
SECTION 2.02 Liabilities....................................................................17
SECTION 2.03 Transfer of Certain Licenses and Permits.......................................17
SECTION 2.04 Transfer and Assumption Documentation..........................................18
SECTION 2.05 Intercompany Accounts..........................................................19
SECTION 2.06 Elimination of Guarantees......................................................19
SECTION 2.07 Assignments and Transfers Not Effected
Prior to the Distribution..............................................19
SECTION 2.08 Debt...........................................................................20
SECTION 2.09 Assignment of Acquisition Claims...............................................21
SECTION 2.10 Pledged Shares.................................................................21
SECTION 2.11 Other Transactions.............................................................21
SECTION 2.12 Certain Acquisition Expenses Not Resulting
in the Incurrence of Debt..............................................21
ARTICLE III
THE DISTRIBUTION.................................................................................................22
SECTION 3.01 Directors and Employees........................................................22
SECTION 3.02 Mechanics of Distribution......................................................22
SECTION 3.03 Timing of Distribution.........................................................23
ARTICLE IV
MUTUAL RELEASE...................................................................................................23
ARTICLE V
INDEMNIFICATION..................................................................................................24
SECTION 5.01 Indemnification by the Company.................................................24
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SECTION 5.02 Indemnification by Printco.....................................................25
SECTION 5.03 Indemnification by Schoolco....................................................26
SECTION 5.04 Indemnification by Techco......................................................26
SECTION 5.05 Indemnification by Travelco....................................................27
SECTION 5.06 Limitations on Indemnification Obligations.....................................28
SECTION 5.07 Procedures for Indemnification of Third Party Claims...........................28
SECTION 5.08 Indemnification Payments.......................................................30
SECTION 5.09 Defaults.......................................................................30
SECTION 5.10 Tax Adjustments................................................................31
SECTION 5.11 MCI Agreement..................................................................31
SECTION 5.12 Survival of Indemnities........................................................31
ARTICLE VI
COVENANTS........................................................................................................32
SECTION 6.01 Provision of Corporate Records.................................................32
SECTION 6.02 Access to Information..........................................................32
SECTION 6.03 Retention of Records...........................................................32
SECTION 6.04 Witness Services...............................................................33
SECTION 6.05 Reimbursement..................................................................33
SECTION 6.06 Confidentiality................................................................33
SECTION 6.07 Further Assurances.............................................................34
ARTICLE VII
INSURANCE........................................................................................................34
SECTION 7.01 General........................................................................34
SECTION 7.02 Distributed Companies' Insurance...............................................34
SECTION 7.03 Access to the Company's Insurance Program......................................35
SECTION 7.04 Insurance Recoveries...........................................................35
SECTION 7.05 Insurance Representations......................................................35
SECTION 7.06 Assignment.....................................................................36
SECTION 7.07 Deductibles and Maximums.......................................................36
SECTION 7.08 Conflicts Between Article VII and the Company's
Insurance Program......................................................36
SECTION 7.09 Maintenance of Insurance Policies..............................................36
ARTICLE VIII
CONDITIONS.......................................................................................................36
SECTION 8.01 Conditions to Obligations of the Company.......................................36
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ARTICLE IX
DISPUTE RESOLUTION...............................................................................................38
SECTION 9.01 Mediation and Binding Arbitration..............................................38
SECTION 9.02 Initiation of Negotiation......................................................38
SECTION 9.03 Submission to Mediation........................................................38
SECTION 9.04 Selection of Mediator..........................................................38
SECTION 9.05 Treatment of Negotiation and Mediation.........................................38
SECTION 9.06 Arbitration....................................................................39
SECTION 9.07 Confidentiality................................................................40
SECTION 9.08 Notices........................................................................40
SECTION 9.09 Consolidation..................................................................40
ARTICLE X
MISCELLANEOUS....................................................................................................40
SECTION 10.01 Modification, Amendment or Termination........................................40
SECTION 10.02 Waiver; Remedies..............................................................40
SECTION 10.03 Counterparts..................................................................41
SECTION 10.04 Notices.......................................................................41
SECTION 10.05 Entire Agreement..............................................................43
SECTION 10.06 Certain Obligations...........................................................43
SECTION 10.07 Assignment....................................................................43
SECTION 10.08 Captions......................................................................43
SECTION 10.09 Severability..................................................................43
SECTION 10.10 Equitable Relief..............................................................43
SECTION 10.11 Third Party Beneficiaries.....................................................44
SECTION 10.12 Expenses......................................................................44
SECTION 10.13 Exhibits and Schedules........................................................44
SECTION 10.14 Governing Law.................................................................44
SECTION 10.15 Consent to Jurisdiction.......................................................44
SECTION 10.16 Ancillary Agreements..........................................................44
SECTION 10.17 Survival of Agreements........................................................45
SECTION 10.18 Successors and Assigns........................................................45
EXHIBITS
Exhibit I Employee Benefits Services and Liabilities Agreement
Exhibit II Distributed Company Subsidiaries
Exhibit III Estimated Pro Rata Share Percentages
Exhibit IV Shared Liabilities
Exhibit V Shared Liabilities: Information Statement Sections
Exhibit VI Tax Allocation Agreement
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SCHEDULES
Schedule 2.06 Specified Guarantees
Schedule 2.08 Debt Amounts
Schedule 2.09 Net Recovery Amounts
Schedule 2.10 Distribution of Pledged Shares
Schedule 2.11 Other Transactions
Schedule 5.11 Terms Applicable to MCI Agreement
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AGREEMENT AND PLAN OF DISTRIBUTION
AGREEMENT AND PLAN OF DISTRIBUTION dated as of June 9, 1998
(the "Agreement"), between U.S. OFFICE PRODUCTS COMPANY, a Delaware corporation
(the "Company"), WORKFLOW MANAGEMENT, INC., a Delaware corporation and wholly
owned subsidiary of the Company ("Printco"), SCHOOL SPECIALTY, INC., a Delaware
corporation and wholly owned subsidiary of the Company ("Schoolco"), AZTEC
TECHNOLOGY PARTNERS, INC., a Delaware corporation and wholly owned subsidiary of
the Company ("Techco"), and NAVIGANT INTERNATIONAL, INC., a Delaware corporation
and wholly owned subsidiary of the Company ("Travelco"). Certain capitalized
terms used herein without definition have the meanings specified in Section
1.01.
W I T N E S S E T H:
WHEREAS the Board of Directors of the Company has approved the
form, terms and provisions of this Agreement, pursuant to which and subject to
the terms of which (a) the Company will distribute all the issued and
outstanding shares of common stock of the Distributed Companies held by the
Company (as to the shares of each Distributed Company, the "Printco Common
Shares," the "Schoolco Common Shares," the "Techco Common Shares," and the
"Travelco Common Shares") to the holders of record of shares of common stock of
the Company (the "Company Common Stock"), other than shares held in the treasury
of the Company, (b) each Distributed Company will assume entirely such
Distributed Company's Liabilities and other liabilities specified herein, (c)
each Distributed Company will agree to indemnify the Company and hold it
harmless from and against its Pro Rata Share of certain Shared Liabilities and
(d) certain other transactions will be consummated, all as set forth in Article
II hereof (the "Preliminary Transactions");
WHEREAS the purpose of the Preliminary Transactions and the
Distributions is to divest the Company of all businesses, operations and
Liabilities other than the Retained Business, Retained Assets and Retained
Liabilities of the Company and its Subsidiaries;
WHEREAS it is the intention of the parties to this Agreement
that for U.S. federal income tax purposes the Distributions shall qualify as
tax-free spin-offs under Section 355 of the Code and shall not be taxable under
Section 355(e) of the Code; and
WHEREAS in order to effect the separation of ownership of the
Company and the Distributed Companies, this Agreement sets forth the principal
corporate transactions required to effect the Preliminary Transactions and the
Distributions and sets forth other agreements that will govern certain other
matters following the Distributions.
NOW, THEREFORE, in consideration of the premises, and of the
covenants and agreements set forth herein, the parties hereto hereby agree as
follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01 General. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"AAA" shall mean the American Arbitration Association.
"Acquisition Agreement" shall mean each of the merger, stock
purchase, asset purchase or other acquisition agreements pursuant to which
certain of the Distributed Company Subsidiaries (or divisions within such
Subsidiaries or Distributed Company) were acquired by the Company or any of its
Subsidiaries prior to the Distributions.
"Acquisition Claim" shall mean any and all rights or claims
that the Company or any of its Subsidiaries may have against the sellers of the
Distributed Company Subsidiaries under any of the Acquisition Agreements.
"Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency, body or commission or any arbitration
tribunal.
"Affiliate" shall mean, when used with respect to a specified
Person, another Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with the
Person specified.
"Agent" shall mean American Stock Transfer & Trust Company, as
transfer agent for the Company.
"Ancillary Agreements" shall mean the Employee Benefits
Agreement, the Tax Allocation Agreement, the Imagenet Licensing Agreement and
the Lead Generation System Licensing Agreement.
"Assets" shall mean any and all assets, properties and rights,
whether tangible or intangible, whether real, personal or mixed, whether fixed,
contingent or otherwise, and wherever located, including, without limitation,
the following:
(i) real property interests (including leases), land, plants,
buildings and improvements;
(ii) machinery, equipment, tooling, vehicles, furniture and
fixtures, leasehold improvements, repair parts, tools, plant,
and office equipment and other tangible personal property,
together with any rights or claims arising
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out of the breach of any express or implied warranty by the
manufacturers or sellers of any of such assets or any
component part thereof;
(iii) inventories, including raw materials, work-in-process,
finished goods, parts, accessories and supplies;
(iv) cash, bank accounts, notes, loans and accounts receivable
(whether current or not current), interests as beneficiary
under letters of credit, advances and performance and surety
bonds;
(v) certificates of deposit, banker's acceptances, shares of
stock, bonds, debentures, evidences of indebtedness,
certificates of interest or participation in profit-sharing
agreements, collateral-trust certificates, preorganization
certificates or subscriptions, transferable shares, investment
contracts, voting-trust certificates, puts, calls, straddles,
options, swaps, collars, caps and other securities or hedging
arrangements of any kind;
(vi) financial, accounting and operating data and records
including, without limitation, books, records, notes, sales
and sales promotional data, advertising materials, credit
information, cost and pricing information, customer and
supplier lists, reference catalogs, payroll and personnel
records, minute books, stock ledgers, stock transfer records
and other similar property, rights and information;
(vii) patents, patent applications, trademarks, trademark
applications and registrations, trade names, service marks,
service xxxx applications and registrations, service names,
copyrights and copyright applications and registrations,
commercial and technical information including engineering,
production and other designs, drawings, specifications,
formulae, technology, computer and electronic data processing
programs and software, inventions, processes, trade secrets,
know-how, confidential information and other proprietary
property, rights and interest and all rights thereto;
(viii) agreements, leases, contracts, sale orders, purchase
orders, open bids and other commitments and all rights
therein;
(ix) prepaid expenses, deposits and retentions held by third
parties;
(x) claims, causes of action, choses in action, rights under
insurance policies, rights under express or implied
warranties, rights of recovery, rights of set-off, rights of
subrogation and all other rights of any kind;
(xi) licenses, franchises, permits, authorizations and
approvals; and
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(xii) goodwill and going concern value.
"Assignee" shall have the meaning set forth in Section 2.07.
"Assignor" shall have the meaning set forth in Section 2.07.
"CDR-PC" shall mean CDR-PC Acquisition, L.L.C., a Delaware
limited liability company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the Treasury regulations promulgated thereunder, including any
successor legislation.
"Company" shall have the meaning set forth in the heading of
this Agreement.
"Company Debt" shall mean all Liabilities of the Company and
its Subsidiaries under or arising out of the Company Credit Agreement.
"Company Common Stock" shall have the meaning set forth in the
recitals to this Agreement.
"Company Credit Agreement" shall mean the Credit Agreement,
dated as of August 21, 1996, as amended, among the Company, various lending
institutions and Bankers Trust Company, as agent.
"Company Indemnitees" shall mean the Company, each Affiliate
of the Company after the Distribution Date, Xxxxxxx, Dubilier & Rice, Inc.,
CDR-PC, Xxxxxxx, Dubilier & Rice Fund V Limited Partnership, CD&R Associates V
Limited Partnership, each of their respective partners, members, directors,
officers, employees and agents and each of the heirs, executors, successors and
assigns of any of the foregoing.
"Company Transaction Costs" shall mean Transaction Costs
incurred by the Company in connection with the Transactions.
"Conveyancing and Assumption Instruments" shall have the
meaning set forth in Section 2.04.
"Conveyancing Instruments" shall have the meaning set forth in
Section 2.04.
"Covered Claims" shall mean those Liabilities that,
individually or in the aggregate, and if reported timely, are covered within the
terms and conditions of any Policy in the Insurance Program.
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"Defaulted Payment Obligation" shall have the meaning set
forth in Section 5.09.
"Dispute" shall have the meaning set forth in Section 9.01.
"Distributed Companies" shall mean Printco, Schoolco, Techco
and Travelco.
"Distributed Companies' Assets" shall mean the Printco Assets,
the Schoolco Assets, the Techco Assets and the Travelco Assets.
"Distributed Companies' Businesses" shall mean the Printco
Business, the Schoolco Business, the Techco Business and the Travelco Business.
"Distributed Companies' Indemnitees" shall mean the Printco
Indemnitees, the Schoolco Indemnitees, the Techco Indemnitees and the Travelco
Indemnitees.
"Distributed Companies' Liabilities" shall mean the Printco
Liabilities, the Schoolco Liabilities, the Techco Liabilities and the Travelco
Liabilities.
"Distributed Company Subsidiaries" shall mean the Printco
Subsidiaries, the Schoolco Subsidiaries, the Techco Subsidiaries and the
Travelco Subsidiaries.
"Distributed Company Transaction Costs" shall mean, as to any
Distributed Company, the Transaction Costs incurred by such Distributed Company
or the Company that relate to such Distributed Company's IPO or credit
facilities described in Section 2.08.
"Distribution Date" shall mean such date as hereafter may be
determined by the Company's Board of Directors as the date as of which the
Distributions shall be effected.
"Distribution Record Date" shall mean such date as hereafter
may be determined by the Company's Board of Directors as the record date for the
Distributions.
"Distribution Shares" shall mean the Printco Common Shares,
the Schoolco Common Shares, the Techco Common Shares and the Travelco Common
Shares.
"Distribution Time" shall mean 11:59 P.M. (Eastern time) on
the Distribution Date.
"Distributions" shall mean the distributions on the
Distribution Date to holders of record of shares of Company Common Stock, as of
the Distribution Record Date, other than shares held in the treasury of the
Company, of (i) all the Printco Common Shares on the basis of one Printco Common
Share for each seven and one-half (7.5) outstanding shares of Company Common
Stock, (ii) all the Schoolco Common Shares on the basis of one
5
Schoolco Common Share for each nine (9) outstanding shares of Company Common
Stock, (iii) all the Techco Common Shares on the basis of one Techco Common
Share for each five (5) outstanding shares of Company Common Stock, and (iv) all
the Travelco Common Shares on the basis of one Travelco Common Share for each
ten (10) outstanding shares of Company Common Stock.
"Earn-Out Payment Liability" shall mean any contingent cash
payment required to be made after the Distribution Date by the Company or any of
its Subsidiaries to sellers of certain Distributed Company Subsidiaries (or
divisions within such Subsidiaries or Distributed Company) or Retained
Subsidiaries (or divisions within such Subsidiaries) under circumstances that
may arise under the Acquisition Agreements.
"Employee Benefits Agreement" shall mean the Employee Benefits
and Services Liabilities Agreement between the Company and the Distributed
Companies substantially in the form of Exhibit I hereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Guaranteed Liability" shall have the meaning set forth in
Section 2.06.
"Guaranteed Party" shall have the meaning set forth in Section
2.06.
"Guarantor" shall have the meaning set forth in Section 2.06.
"Imagenet Licensing Agreement" shall have the meaning set
forth in Schedule 2.11.
"Indemnifiable Losses" shall mean any and all losses,
liabilities, claims, damages, demands, costs or expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses and any and
all out-of-pocket expenses) arising from Third Party Claims or any Indemnifying
Party's breach of its obligations under the Ancillary Agreements or this
Agreement, including all losses, liabilities, claims, damages, demands, costs or
expenses reasonably incurred in investigating, preparing for or defending
against any Actions or potential Actions or in asserting, preserving or
enforcing any rights hereunder (including, without limitation, rights under
Article V) or under any Ancillary Agreement.
"Indemnifying Party" shall have the meaning set forth in
Section 5.06.
"Indemnitee" shall have the meaning set forth in Section 5.06.
"Information" of a party shall mean any and all information
that such party or any of its Representatives furnishes or has furnished to the
receiving party or any of its Representatives whether furnished orally or in
writing or by any other means or gathered by
6
inspection and regardless of whether the same is specifically marked or
designated as "confidential" or "proprietary," together with any and all notes,
memoranda, analyses, compilations, studies or other documents (whether in hard
copy or electronic media) prepared by the receiving party or any of its
Representatives which contain or otherwise reflect such Information, together
with any and all copies, extracts or other reproductions of any of the same;
provided, however, that for the purposes hereof all information relating to the
Distributed Companies, the Distributed Companies' Businesses or the Distributed
Companies' Assets in the possession of the Company at the Distribution Time
shall be deemed to have been furnished by the related Distributed Company and
all information relating to the Retained Business or the Retained Assets in the
possession of the Distributed Companies or any of the Distributed Company
Subsidiaries at the Distribution Time shall be deemed to have been furnished by
the Company; provided further, however, that the term "Information" does not
include information that:
(a) at the time of disclosure is generally available to
and known by the public (other than as a result of a violation of this Agreement
or any other confidentiality obligation, whether directly or indirectly, by a
party to this Agreement or any of its Representatives);
(b) is available to the receiving party on a
non-confidential basis from a source other than the providing party or its
Representatives, provided that such source is not known by the receiving party
to be subject to a confidentiality agreement regarding such information; or
(c) has been independently acquired or developed by the
receiving party without violation of any of the obligations of the receiving
party or its Representatives under this Agreement.
"Information Statements" shall mean the Information
Statements/Prospectuses to be sent to the holders of shares of Company Common
Stock, as of the Distribution Record Date, in connection with the Distributions,
including any amendments or supplements thereto, which are included as exhibits
to the registration statements on Forms S-1 filed by the Distributed Companies,
as applicable, under the Securities Act.
"Insurance Program" shall mean, collectively, the series of
policies pursuant to which various insurance carriers provide insurance coverage
to the Company and its Affiliates in respect of claims or occurrences relating
to, without limitation, property damage, bodily injury, business interruption,
transit, fire, non-owned aircrafts, crime, fiduciary liability, general
liability, products' liability, professional liability, automobile liability and
employer's liability.
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"Investment Agreement" shall mean the Investment Agreement
dated as of January 12, 1998 between the Company and CDR-PC, as amended by
Amendment No. 1 thereto, dated February 3, 1998, and as the same may be amended
from time to time.
"IPO" shall mean, as to any Distributed Company, the initial
public offering of securities to be conducted by such company, which offering is
scheduled to occur on or about the Distribution Date.
"IPO Prospectus" shall mean, as to any Distributed Company,
the Registration Statement/Prospectus prepared in connection with such
Distributed Company's IPO.
"Liabilities" shall mean any and all debts, liabilities,
obligations, claims, damages, fees, costs and expenses, absolute or contingent,
matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or
unknown, whenever arising, including, without limitation, those debts,
liabilities, obligations, claims, damages, fees, costs and expenses, arising
under any law, rule, regulation, Action, threatened Action, order or consent
decree of any court, any governmental or other regulatory or administrative
agency or commission or any award of any arbitration tribunal, and those arising
under any contract, guarantee, commitment or undertaking.
"Mediation Period" shall have the meaning set forth in Section
9.03.
"MCI Agreement" shall mean the Special Customer Arrangement,
effective as of November 15, 1997, by and between MCI Telecommunications
Corporation and the Company.
"NASDAQ" shall mean the NASDAQ National Market System.
"Nonassignable Contract" shall have the meaning set forth in
Section 2.07.
"Person" shall mean any natural person, corporation, trust,
limited liability company, joint venture, association, company, partnership,
entity, unincorporated organization or government, or any agency or political
subdivision thereof.
"Pledged Shares" shall mean any Company Common Stock pledged
or assigned to the Company as of the Distribution Date as collateral security by
sellers of certain of the Distributed Company Subsidiaries (or divisions within
such Subsidiaries or Distributed Company) under the Acquisition Agreements.
"Policies" shall mean insurance policies and insurance
contracts of any kind (other than life and benefits policies or contracts),
including, without limitation, primary, excess and umbrella policies, commercial
general liability policies, fiduciary liability, automobile, aircraft, property
and casualty, workers' compensation and employee dishonesty
8
insurance policies, bonds and self-insurance and captive insurance company
arrangements, together with the rights, benefits and privileges thereunder.
"Preliminary Transactions" shall have the meaning set forth in
the recitals to this Agreement.
"Printco" shall have the meaning set forth in the heading of
this Agreement.
"Printco Acquisition Claims" shall mean any and all rights or
claims that the Company or any of its Subsidiaries may have against the sellers
of Printco and the Printco Subsidiaries (or divisions within such Subsidiaries
or Printco) under the Acquisition Agreements pursuant to which Printco and the
Printco Subsidiaries (or divisions within such Subsidiaries or Printco) were
acquired by the Company or any of its Subsidiaries.
"Printco Assets" shall mean (a) the Assets of Printco and the
Printco Subsidiaries and (b) the rights of Printco and the Printco Subsidiaries
under this Agreement and the Ancillary Agreements; provided, however, that
Printco Assets shall not include any claim of Printco against the Company
relating to the payment of finders' fees or other compensation in respect of
customers referred to the Company by Printco or the payment of rebates or other
compensation in respect of office products sold by Printco.
"Printco Business" shall mean all the businesses, Assets and
operations heretofore, currently or hereafter conducted or owned by Printco and
the Printco Subsidiaries including all businesses, Assets and operations
conducted or owned by Printco and the Printco Subsidiaries that have been sold
or otherwise disposed of or discontinued.
"Printco Common Shares" shall have the meaning set forth in
the recitals to this Agreement.
"Printco Indemnitees" shall mean Printco, the Printco
Subsidiaries, their Affiliates, each of their respective directors, officers,
employees and agents and each of the heirs, executors, successors and assigns of
any of the foregoing.
"Printco Liabilities" shall mean collectively, whenever
arising, whether prior to, at or following the Distribution Time, (i) all
Liabilities of Printco and the Printco Subsidiaries under this Agreement or the
Ancillary Agreements, (ii) all Liabilities of the Company and its Subsidiaries
arising primarily out of or relating primarily to the management or conduct of
the Printco Business or the administration of the Printco Subsidiaries, (iii)
all Specified Securities Liabilities of Printco, (iv) all Liabilities of the
Company relating to any Earn-Out Payment Liabilities arising out of any of the
Acquisition Agreements pursuant to which any of the Printco Subsidiaries or any
part of the Printco Business was acquired, (v) the Distributed Company
Transaction Costs of Printco,
9
(vi) $1,000,000 of the Company Transaction Costs and (vii) any Company Debt
allocated to Printco pursuant to Section 2.08 of this Agreement.
"Printco Subsidiaries" shall mean the Subsidiaries of Printco
as listed on Exhibit II.
"Pro Rata Share" shall mean, (i) as to any Distributed
Company, the percentage that is equal to the average of (a) the ratio of the pro
forma fiscal year 1998 revenues for such Distributed Company to the fiscal year
1998 consolidated revenues of the Company (prior to the Distributions), and (b)
the ratio of the pro forma fiscal year 1998 net income for such Distributed
Company to the fiscal year 1998 consolidated net earnings of the Company (prior
to the Distributions), and (ii) as to the Company, the percentage that is equal
to 100% less the sum of the Pro Rata Share percentages of the Distributed
Companies as defined in (i) above. Estimations of the Company's Pro Rata Share
and each Distributed Company's Pro Rata Share using financial data for the
nine-month period ended January 24, 1998 are set forth in Exhibit III.
"Proxy" shall mean the definitive proxy statement dated May 1,
1998, distributed by the Company to the holders of the Company Common Stock,
describing and seeking approval for (i) the investment provided for in the
Investment Agreement and (ii) a one-for-four reverse stock split, as the same
may be amended.
"Recovery" shall mean those monies received by an insured from
an insurance carrier or paid by an insurance carrier on behalf of an insured
pursuant to a claim under an insurance policy in the Insurance Program.
"Recovery Costs" shall have the meaning set forth in Section
7.04.
"Representatives" of either party shall mean such party's
Affiliates, directors, officers, partners, employees, agents or other
representatives (including attorneys, accountants and financial advisors).
"Retained Assets" shall mean (a) all the Assets of the Company
and its Subsidiaries except for the Distributed Companies' Assets, and (b) the
rights of the Company and its Subsidiaries under this Agreement and the
Ancillary Agreements.
"Retained Business" shall mean all the businesses, Assets and
operations heretofore, currently or hereafter conducted or owned by the Company
and the Retained Subsidiaries, including all businesses, Assets or operations
conducted or owned by the Company or its Subsidiaries that have been sold or
otherwise disposed of or discontinued, (other than the Distributed Companies'
Assets, Distributed Companies' Businesses and the business of managing and
administering the Distributed Companies' Subsidiaries).
10
"Retained Liabilities" shall mean collectively, whenever
arising, whether prior to, at or following the Distribution Time, (i) all
Liabilities of the Company and the Retained Subsidiaries under this Agreement or
the Ancillary Agreements, (ii) all Liabilities of the Company and its Retained
Subsidiaries arising primarily out of or relating primarily to the management or
conduct of the Retained Business or the administration of the Retained
Subsidiaries, (iii) all Specified Securities Liabilities of the Company, (iv)
all Liabilities of the Company relating to any Earn-Out Payment Liabilities
arising out of any of the Acquisition Agreements pursuant to which any of the
Retained Subsidiaries or any part of the Retained Business was acquired, (v) all
of the Company Transaction Costs (excluding, in aggregate, the $4,000,000 that
is treated as part of the Distributed Companies' Liabilities) and (vi) any
indebtedness for borrowed money of the Company other than Company Debt to be
allocated to the Distributed Companies pursuant to Section 2.08 of this
Agreement.
"Retained Subsidiaries" shall mean (x) all of the Subsidiaries
of the Company other than the Distributed Companies and the Distributed Company
Subsidiaries, and (y) 1186203 Ontario Limited, 1243231 Ontario Limited and
1203803 Ontario Limited, and their respective Subsidiaries.
"Schoolco" shall have the meaning set forth in the heading of
this Agreement.
"Schoolco Acquisition Claims" shall mean any and all rights or
claims that the Company or any of its Subsidiaries may have against the sellers
of Schoolco and the Schoolco Subsidiaries (or divisions within such Subsidiaries
or Schoolco) under the Acquisition Agreements pursuant to which Schoolco and the
Schoolco Subsidiaries (or divisions within such Subsidiaries or Schoolco) were
acquired by the Company or any of its Subsidiaries.
"Schoolco Assets" shall mean (a) the Assets of Schoolco and
the Schoolco Subsidiaries and (b) the rights of Schoolco and the Schoolco
Subsidiaries under this Agreement and the Ancillary Agreements; provided,
however, that Schoolco Assets shall not include any claim of Schoolco against
the Company relating to the payment of finders' fees or other compensation in
respect of customers referred to the Company by Schoolco or the payment of
rebates or other compensation in respect of office products sold by Schoolco.
"Schoolco Business" shall mean all the businesses, Assets and
operations heretofore, currently or hereafter conducted or owned by Schoolco and
the Schoolco Subsidiaries including all businesses, Assets or operations
conducted or owned by Schoolco and the Schoolco Subsidiaries that have been sold
or otherwise disposed of or discontinued.
"Schoolco Common Shares" shall have the meaning set forth in
the recitals to this Agreement.
11
"Schoolco Indemnitees" shall mean Schoolco, the Schoolco
Subsidiaries, their Affiliates, each of their respective directors, officers,
employees and agents and each of the heirs, executors, successors and assigns of
any of the foregoing.
"Schoolco Liabilities" shall mean collectively, whenever
arising, whether prior to, at or following the Distribution Time, (i) all
Liabilities of Schoolco and the Schoolco Subsidiaries under this Agreement or
the Ancillary Agreements, (ii) all the Liabilities of the Company and its
Subsidiaries or Affiliates, arising primarily out of or relating primarily to
the management or conduct of the Schoolco Business or the administration of the
Schoolco Subsidiaries, (iii) all Specified Securities Liabilities of Schoolco,
(iv) all Liabilities of the Company relating to any Earn-Out Payment Liabilities
arising out of any of the Acquisition Agreements pursuant to which any of the
Schoolco Subsidiaries or any part of the Schoolco Business was acquired, (v) the
Distributed Company Transaction Costs of Schoolco, (vi) $1,000,000 of the
Company Transaction Costs and (vii) any Company Debt allocated to Schoolco
pursuant to Section 2.08 of this Agreement.
"Schoolco Subsidiaries" shall mean the Subsidiaries of
Schoolco as listed on Exhibit II.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Securities Laws" shall mean the Exchange Act, the Securities
Act and foreign, provincial and state securities laws.
"Shared Liability" shall mean (i) any Liability of the Company
and its Subsidiaries, including without limitation a Liability arising under the
Securities Laws, that (x) arises out of an act or omission that occurred prior
to the Distribution Date, and (y) is not a Retained Liability, Printco
Liability, Schoolco Liability, Techco Liability or Travelco Liability, and (ii)
the Liabilities listed on Exhibit IV. By way of example and not of limitation,
Shared Liabilities shall include: any Liability arising in connection with the
Proxy, the 2001 Note Exchange Offer or Tender Offer (other than a liability
relating to information supplied by a specific subsidiary of the Company); and
any Liability relating to the operation of the Company's headquarters arising
prior to the Distribution Date; and any other liability not relating to the
business of any particular Retained Subsidiary or Distributed Company
Subsidiary.
"Special Insurance Recoveries" shall mean Recoveries whenever
received by the Company (i) relating to insured casualty losses of a Distributed
Company or Distributed Company Subsidiary occurring prior to the Distribution
Date and (ii) not actually used by the relevant Distributed Company or
Distributed Company Subsidiary to rebuild, reconstruct, renovate or repair
properties or facilities that suffered such loss.
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"Specified Securities Liabilities" shall mean (a) as to any
Distributed Company, any Liability under the Securities Laws arising out of or
relating to (x) the Information Statement (other than Liabilities relating to
those sections of the Information Statements specified on Exhibit V) and/or IPO
Prospectus of such Distributed Company, and (y) any other securities filings or
disclosures made by, or the failure to make filings or disclosures required to
be made by, the Company or any of its Subsidiaries prior to the Distribution
Date to the extent such Liability arises primarily out of material omissions
made by or materially incorrect, false, or misleading information supplied by
such Distributed Company or any of its Subsidiaries; and (b) as to the Company,
any Liability under the Securities Laws arising out of or relating to any
securities filings or disclosures made by, or the failure to make filings or
disclosures required to be made by, the Company, or any of its Subsidiaries
prior to the Distribution Date to the extent such Liability arises primarily out
of material omissions made by or materially incorrect, false or misleading
information supplied by the Retained Business or a Retained Subsidiary.
"Subsidiary" shall mean any corporation, partnership, joint
venture, limited liability company or other entity (i) in which another entity
owns, directly or indirectly, ownership interests sufficient to elect a majority
of the Board of Directors (or persons performing similar functions)
(irrespective of whether at the time any other class or classes of ownership
interests of such corporation, partnership, joint venture, limited liability
company or other entity shall or might have such voting power upon the
occurrence of any contingency) or (ii) of which another entity is a general
partner or an entity performing similar functions (e.g., a trustee or managing
member).
"Tax" shall mean all U.S. federal, state, local and foreign
taxes and assessments, including all interest, penalties and additions imposed
with respect to such amounts.
"Tax Allocation Agreement" shall mean the Tax Allocation
Agreement between the Company and the Distributed Companies substantially in the
form of Exhibit VI hereto, as and to the extent amended and restated as of the
closing of the Transactions.
"Techco" shall have the meaning set forth in the heading of
this Agreement.
"Techco Acquisition Claims" shall mean any and all rights or
claims that the Company or any of its Subsidiaries may have against the sellers
of Techco and the Techco Subsidiaries (or divisions within such Subsidiaries or
Techco) under the Acquisition Agreements pursuant to which Techco and the Techco
Subsidiaries (or divisions within such Subsidiaries or Techco) were acquired by
the Company or any of its Subsidiaries.
"Techco Assets" shall mean (a) the Assets of Techco and the
Techco Subsidiaries and (b) the rights of Techco and the Techco Subsidiaries
under this Agreement and the Ancillary Agreements; provided, however, that
Techco Assets shall not include any
13
claim of Techco against the Company relating to the payment of finders' fees or
other compensation in respect of customers referred to the Company by Techco or
the payment of rebates or other compensation in respect of office products sold
by Techco.
"Techco Business" shall mean all the businesses, Assets and
operations heretofore, currently or hereafter conducted or owned by Techco and
the Techco Subsidiaries including all businesses, Assets or operations conducted
or owned by Techco and the Techco Subsidiaries that have been sold or otherwise
disposed of or discontinued.
"Techco Common Shares" shall have the meaning set forth in the
recitals to this Agreement.
"Techco Indemnitees" shall mean Techco, the Techco
Subsidiaries, their Affiliates, each of their respective directors, officers,
employees and agents and each of the heirs, executors, successors and assigns of
any of the foregoing.
"Techco Liabilities" shall mean collectively, whenever
arising, whether prior to, at or following the Distribution Time, (i) all
Liabilities of Techco and the Techco Subsidiaries under this Agreement or the
Ancillary Agreements, (ii) all the Liabilities of the Company and its
Subsidiaries, arising primarily out of or relating primarily to the management
or conduct of the Techco Business or the administration of the Techco
Subsidiaries, (iii) all Specified Securities Liabilities of Techco, (iv) all
Liabilities of the Company relating to any Earn-Out Payment Liabilities arising
out of any of the Acquisition Agreements pursuant to which any of the Techco
Subsidiaries or any part of the Techco Business was acquired, (v) the
Distributed Company Transaction Costs of Techco, (vi) $1,000,000 of the Company
Transaction Costs and (vii) any Company Debt allocated to Techco pursuant to
Section 2.08 of this Agreement.
"Techco Subsidiaries" shall mean the Subsidiaries of Techco as
listed on Exhibit II.
"Tender Offer" shall mean, collectively, (i) the cash tender
offer by the Company to purchase approximately 37 million shares (including
shares issuable upon exercise of outstanding stock options) of Company Common
Stock at a price of $27 per share commenced on May 4, 1998 (the "Equity
Tender"), and (ii) the tender offer of the Company to purchase any and all of
its $230.0 million outstanding 5 1/2% Convertible Subordinated Notes due 2003
for a purchase price of 94.5% of the principal amount, plus accrued interest,
commenced on May 5, 1998.
"Third Party Claim" shall have the meaning set forth in
Section 5.07.
"Transaction Costs" shall mean all transaction costs including
legal, accounting, investment banking, financial advisory and other fees
incurred by a party hereto
14
(or one of its Subsidiaries) in connection with the Transactions or any of the
other transactions described in, or contemplated by, IPO Prospectuses and
Section 2.08.
"Transactions" shall mean the execution, delivery and
performance of this Agreement, the Ancillary Agreements, and the Investment
Agreement and the consummation of the Preliminary Transactions, the
Distributions, the Proxy, the Tender Offer, the 2001 Note Exchange Offer and any
other transactions contemplated by this Agreement, the Ancillary Agreements and
the Investment Agreement, including without limitation the financing of the
Company related thereto, but not including the initial public offerings by the
Distributed Companies or the financings of the Distributed Companies.
"Transferred Policies" shall have the meaning set forth in
Section 7.02(b).
"Travelco" shall have the meaning set forth in the heading of
this Agreement.
"Travelco Acquisition Claims" shall mean any and all rights or
claims that the Company or any of its Subsidiaries may have against the sellers
of Travelco and the Travelco Subsidiaries (or divisions within such Subsidiaries
or Travelco) under the Acquisition Agreements pursuant to which Travelco and the
Travelco Subsidiaries (or divisions within such Subsidiaries or Travelco) were
acquired by the Company or any of its Subsidiaries.
"Travelco Assets" shall mean (a) the Assets of Travelco and
the Travelco Subsidiaries and (b) the rights of Travelco and the Travelco
Subsidiaries under this Agreement and the Ancillary Agreements; provided,
however, that Travelco Assets shall not include any claim of Travelco against
the Company relating to the payment of finders' fees or other compensation in
respect of customers referred to the Company by Travelco or the payment of
rebates or other compensation in respect of office products sold by Travelco.
"Travelco Business" shall mean all the businesses, Assets and
operations heretofore, currently or hereafter conducted or owned by Travelco and
the Travelco Subsidiaries including all businesses, Assets or operations
conducted or owned by Travelco and the Travelco Subsidiaries that have been sold
or otherwise disposed of or discontinued.
"Travelco Common Shares" shall have the meaning set forth in
the recitals to this Agreement.
"Travelco Indemnitees" shall mean Travelco, the Travelco
Subsidiaries, their Affiliates, each of their respective directors, officers,
employees and agents and each of the heirs, executors, successors and assigns of
any of the foregoing.
"Travelco Liabilities" shall mean collectively, whenever
arising, whether prior to, at or following the Distribution Time, (i) all
Liabilities of Travelco and the Travelco
15
Subsidiaries under this Agreement or the Ancillary Agreements, (ii) all the
Liabilities of the Company and its Subsidiaries, arising primarily out of or
relating primarily to the management or conduct of the Travelco Business or the
administration of the Travelco Subsidiaries, (iii) all Specified Securities
Liabilities of Travelco, (iv) all Liabilities of the Company relating to any
Earn-Out Payment Liabilities arising out of any of the Acquisition Agreements
pursuant to which any of the Travelco Subsidiaries or any part of the Travelco
Business was acquired, (v) the Distributed Company Transaction Costs of
Travelco, (vi) $1,000,000 of the Company Transaction Costs and (vii) any Company
Debt allocated to Travelco pursuant to Section 2.08 of this Agreement.
"Travelco Subsidiaries" shall mean the Subsidiaries of
Travelco as listed on Exhibit II.
"2001 Note Exchange Offer" shall mean the Company's offer to
exchange its 5 1/2% Convertible Subordinated Notes due 2001 for Company Common
Stock at a temporarily reduced conversion price commenced on May 1, 1998.
SECTION 1.02 References; Interpretation. References to an
"Exhibit" or to a "Schedule" are, unless otherwise specified, to one of the
Exhibits or Schedules attached to this Agreement, and references to a "Section"
or "Article" are, unless otherwise specified, to one of the Sections and
Articles of this Agreement. Any time the word "including" is used herein it
means "including without limitation".
ARTICLE II
PRELIMINARY TRANSACTIONS
SECTION 2.01 Stock Transfers.
(a) At or prior to the Distribution Time, the Company
shall transfer or otherwise convey to Printco all its right, title and interest
in and to all the shares of capital stock of the Printco Subsidiaries.
(b) At or prior to the Distribution Time, the Company
shall transfer or otherwise convey to Schoolco all its right, title and interest
in and to all the shares of capital stock of the Schoolco Subsidiaries.
(c) At or prior to the Distribution Time, the Company
shall transfer or otherwise convey to Techco all its right, title and interest
in and to all the shares of capital stock of the Techco Subsidiaries.
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(d) At or prior to the Distribution Time, the Company
shall transfer or otherwise convey to Travelco all its right, title and interest
in and to all the shares of capital stock of the Travelco Subsidiaries.
Immediately after the stock transfers set forth in this Section 2.01, the
Company shall not own any capital stock of (or other equity interest in) any of
the Distributed Company Subsidiaries.
SECTION 2.02 Liabilities.
(a) Effective as of the Distribution Time and except as
otherwise specifically provided in this Agreement or any of the Ancillary
Agreements, Printco hereby unconditionally agrees to cause each Printco
Subsidiary that has incurred a Printco Liability to pay, perform and discharge
such Liability when due in accordance with its terms.
(b) Effective as of the Distribution Time and except as
otherwise specifically provided in this Agreement or any of the Ancillary
Agreements, Schoolco hereby unconditionally agrees to cause each School
Subsidiary that has incurred a Schoolco Liability to pay, perform and discharge
such Liability when due in accordance with its terms.
(c) Effective as of the Distribution Time and except as
otherwise specifically provided in this Agreement or any of the Ancillary
Agreements, Techco hereby unconditionally agrees to cause each Techco Subsidiary
that has incurred a Techco Liability to pay, perform and discharge such
Liability when due in accordance with its terms.
(d) Effective as of the Distribution Time and except as
otherwise specifically provided in this Agreement or any of the Ancillary
Agreements, Travelco hereby unconditionally agrees to cause each Travelco
Subsidiary that has incurred a Travelco Liability to pay, perform and discharge
such Liability when due in accordance with its terms.
SECTION 2.03 Transfer of Certain Licenses and Permits.
(a) In furtherance of the transfer of the capital stock
of the Printco Subsidiaries to Printco and the assumption of the Printco
Liabilities set forth in this Article II, at or prior to the Distribution Time,
(i) all transferrable licenses, permits and authorizations issued by
governmental or regulatory entities which are used primarily in connection with
the Printco Business but which are held in the name of the Company or any
Retained Subsidiary shall be duly and validly transferred by the Company or such
Subsidiary to Printco or the appropriate Printco Subsidiary, and (ii) all
transferrable licenses, permits and authorizations issued by governmental or
regulatory entities which are used primarily in connection with the Retained
Business but which are held in the name of Printco or the Printco Subsidiaries
shall be duly and validly transferred by Printco or such Subsidiary to the
Company or the appropriate Subsidiary of the Company.
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(b) In furtherance of the transfer of the capital stock
of the Schoolco Subsidiaries to Schoolco and the assumption of the Schoolco
Liabilities set forth in this Article II, at or prior to the Distribution Time,
(i) all transferrable licenses, permits and authorizations issued by
governmental or regulatory entities which are used primarily in connection with
the Schoolco Business but which are held in the name of the Company or any
Retained Subsidiary shall be duly and validly transferred by the Company or such
Subsidiary to Schoolco or the appropriate Schoolco Subsidiary, and (ii) all
transferrable licenses, permits and authorizations issued by governmental or
regulatory entities which are used primarily in connection with the Retained
Business but which are held in the name of Schoolco or the Schoolco Subsidiaries
shall be duly and validly transferred by Schoolco or such Subsidiary to the
Company or the appropriate Subsidiary of the Company.
(c) In furtherance of the transfer of the capital stock
of the Techco Subsidiaries to Techco and the assumption of the Techco
Liabilities set forth in this Article II, at or prior to the Distribution Time,
(i) all transferrable licenses, permits and authorizations issued by
governmental or regulatory entities which are used primarily in connection with
the Techco Business but which are held in the name of the Company or any
Retained Subsidiary shall be duly and validly transferred by the Company or such
Subsidiary to Techco or the appropriate Techco Subsidiary, and (ii) all
transferrable licenses, permits and authorizations issued by governmental or
regulatory entities which are used primarily in connection with the Retained
Business but which are held in the name of Techco or the Techco Subsidiaries
shall be duly and validly transferred by Techco or such Subsidiary to the
Company or the appropriate Subsidiary of the Company.
(d) In furtherance of the transfer of the capital stock
of the Travelco Subsidiaries to Travelco and the assumption of the Travelco
Liabilities set forth in this Article II, at or prior to the Distribution Time,
(i) all transferrable licenses, permits and authorizations issued by
governmental or regulatory entities which are used primarily in connection with
the Travelco Business but which are held in the name of the Company or any
Retained Subsidiary shall be duly and validly transferred by the Company or such
Subsidiary to Travelco or the appropriate Travelco Subsidiary, and (ii) all
transferrable licenses, permits and authorizations issued by governmental or
regulatory entities which are used primarily in connection with the Retained
Business but which are held in the name of Travelco or the Travelco Subsidiaries
shall be duly and validly transferred by Travelco or such Subsidiary to the
Company or the appropriate Subsidiary of the Company.
SECTION 2.04 Transfer and Assumption Documentation. In
furtherance of the transfer of the capital stock of the Distributed Company
Subsidiaries to the relevant Distributed Companies and the assumption of the
Distributed Companies' Liabilities set forth in this Article II, at or prior to
the Distribution Time, (i) the parties hereto shall execute and deliver, and
cause their respective Subsidiaries to execute and deliver, such deeds, bills of
sale, stock powers, certificates of title, assignments of leases and contracts
and other instruments of contribution, grant, conveyance, assignment, transfer
and delivery necessary
18
to evidence such contribution, grant, conveyance, assignment, transfer and
delivery (collectively, the "Conveyancing Instruments") and (ii) each party
hereto or the appropriate Subsidiary of such party shall execute and deliver
such instruments of assumption (together with the Conveyancing Instruments, the
"Conveyancing and Assumption Instruments") as and to the extent necessary to
evidence such assumption.
SECTION 2.05 Intercompany Accounts. All intercompany
receivables, payables and loans (other than receivables, payables and loans
otherwise specifically provided for in any of the Ancillary Agreements or
hereunder) between any Distributed Company or Distributed Company Subsidiary, on
the one hand, and the Company or any of the Retained Subsidiaries, on the other
hand, including, without limitation, in respect of any cash balances, any cash
balances representing deposited checks or drafts for which only a provisional
credit has been allowed or any cash held in any centralized cash management
system, shall be settled or otherwise eliminated prior to the Distribution Date.
SECTION 2.06 Elimination of Guarantees. To the extent that any
of the parties to this Agreement or any Subsidiary thereof is a guarantor of or
obligor for (a "Guarantor") any Liability of any other party to this Agreement
or any Subsidiary thereof (a "Guaranteed Party"), the Guarantor and the
Guaranteed Party shall use their commercially reasonable efforts to have, on or
prior to the Distribution Date, or as soon as practicable thereafter, the
Guarantor removed as guarantor of or obligor for such Liability of the
Guaranteed Party (a "Guaranteed Liability"). In the event that the Guarantor
cannot be removed as guarantor of or obligor for such Guaranteed Liability, the
Guaranteed Party agrees that until such Guaranteed Liability is discharged in
full, the Guaranteed Party shall take no action, and shall not permit any of its
Subsidiaries to take any action, which will have the effect of increasing the
contingent liability or exposure of the Guarantor or any of its Subsidiaries
with respect to such Guaranteed Liability. The first sentence of this Section
2.06 shall not apply, but the second sentence of this Section 2.06 shall apply,
to the obligations set forth on Schedule 2.06.
SECTION 2.07 Assignments and Transfers Not Effected Prior to
the Distribution. Anything contained herein to the contrary notwithstanding, (a)
this Agreement shall not constitute an agreement to assign or transfer any
agreement, contract, lease, license, permit, sales order, purchase order, open
bid or other commitment if an assignment, attempted assignment, transfer or
attempted transfer of the same without the consent of a third party would
constitute a breach thereof or in any way impair the rights of the Distributed
Companies or the Company or any of their respective Subsidiaries thereunder (any
such item being referred to as a "Nonassignable Contract") and (b) nothing
herein shall be deemed to require the transfer of any Assets or the assumption
of any Liabilities which by their terms or operation of law cannot be
transferred or assumed. To the extent that any assignments or transfers
contemplated by this Article II shall not have been consummated at or prior to
the Distribution Time, the parties hereto and their respective Subsidiaries
shall cooperate and use commercially reasonable efforts to obtain any necessary
consents or
19
approvals for the assignment of all Nonassignable Contracts, the transfer of all
Assets and the assumption of all Liabilities contemplated to be assigned,
transferred or assumed pursuant to this Article II and shall otherwise cooperate
and use reasonable best efforts to effect any such assignments, transfers or
assumptions as promptly following the Distribution Time as shall be practicable.
In the event that any consent required with respect to a Nonassignable Contract
is not obtained or an attempted assignment thereof would be ineffective or would
impair either party's rights under any such Nonassignable Contract, then the
party obligated to assign such Nonassignable Contract (the "Assignor") will
promptly (i) pay or cause to be paid to the assignee thereof (the "Assignee"),
when received, all monies received by the Assignor with respect to any such
Nonassignable Contract and (ii) use commercially reasonable efforts to cause to
be tendered to the Assignee all non-monetary performance, and in consideration
thereof the Assignee shall pay, perform and discharge on behalf of the Assignor
all the Assignor's Liabilities, thereunder in a timely manner and in accordance
with the terms thereof. In the event that any such transfer of Assets or
assumption of Liabilities has not been consummated, from and after the
Distribution Time, the party retaining such Asset or Liability shall hold such
Asset in trust for the use and benefit of the party entitled thereto (at the
expense of the party entitled thereto) or retain such Liability for the account
of the party by whom such Liability is to be assumed pursuant hereto, as the
case may be. The parties hereto will take such other action as may be reasonably
requested by the Assignee or party to whom such Asset is to be transferred, or
by whom such Liability is to be assumed, as the case may be, in order to place
such party, insofar as is reasonably possible, in the same position as would
have existed had such Nonassignable Contract been assigned, or such Asset or
Liability been transferred or assumed, as contemplated hereby. As and when any
required consent to the assignment of a Nonassignable Contract is obtained or
any such Asset or Liability becomes transferable or able to be assumed, such
assignment, transfer or assumption shall be effected forthwith. The parties
agree that, as of the Distribution Time, each party hereto shall be deemed to
have acquired complete and sole beneficial ownership over all Assets, together
with all rights, powers and privileges incident thereto, and shall be deemed to
have assumed all Liabilities, and all duties, obligations and responsibilities
incident thereto, which such party is entitled to acquire or required to assume
pursuant to the terms of this Agreement or any of the Ancillary Agreements.
SECTION 2.08 Debt. On or prior to the consummation of all
transactions contemplated by the Investment Agreement, (a) each Distributed
Company shall obtain bank credit facilities, borrow funds under such facilities
and pay such moneys borrowed to reduce the Company Debt equal in amount to (i)
the amounts reflected in relation to such Distributed Company on Schedule 2.08,
and (ii) the amount of any debt incurred by the Company after January 12, 1998
(the original date of the Investment Agreement) in connection with the
acquisition of any entities that, upon the Distributions, will become a
Subsidiary of such Distributed Company, which money shall be paid to the Company
to be applied to the Company Debt; and (b) the Company shall repay the Company
Debt. Interest shall accrue on the amounts owed to the Company under this
Section 2.08 for each day such
20
obligation remains unpaid, beginning with the day following consummation of the
Investment Agreement until, but not including, the date of payment. Such
interest shall accrue at the annual rate then in effect under the Company's bank
credit facility. The preceding sentence shall not be construed as a waiver of
any closing condition relating to the repayment of debt by the Distributed
Companies and their Subsidiaries in any agreement entered into in connection
with the Transactions.
SECTION 2.09 Assignment of Acquisition Claims. The Company
hereby contributes, grants, conveys, assigns, transfers and delivers to Printco,
Schoolco, Techco and Travelco all the Company's rights and interest in and to
the Printco Acquisition Claims, the Schoolco Acquisition Claims, the Techco
Acquisition Claims and the Travelco Acquisition Claims, respectively.
Notwithstanding the assignment of the foregoing Acquisition Claims under this
Section 2.09: (i) the net recoveries of Printco arising out of the Printco
Acquisition Claims shall be shared between Printco and the Company, as they are
collected, in a ratio of 20% to 80%, respectively, until the Company has
received the amount shown on Schedule 2.09 (including through any Special
Insurance Proceeds retained by the Company pursuant to Section 7.04), after
which time any net recoveries from the Printco Acquisition Claims shall be
shared, as they are collected, between Printco and the Company in a ratio of 95%
to 5%, respectively, (ii) the net recoveries of Schoolco arising out of the
Schoolco Acquisition Claims shall be shared, as they are collected, between
Schoolco and the Company in a ratio of 20% to 80%, respectively, until the
Company has received the amount shown on Schedule 2.09, after which time any net
recoveries from the Schoolco Acquisition Claims shall be shared, as they are
collected, between Schoolco and the Company in a ratio of 95% to 5%,
respectively, (iii) the net recoveries from the Techco Acquisition Claims shall
be assigned 100% to Techco, and (iv) the net recoveries from the Travelco
Acquisition Claims shall be assigned 100% to Travelco.
SECTION 2.10 Pledged Shares. The Company shall hold all
Pledged Shares for the purposes specified in, and distribute such Pledged Shares
as provided pursuant to, Schedule 2.10.
SECTION 2.11 Other Transactions. In furtherance of the
transfer of the capital stock of the Distributed Company Subsidiaries to the
relevant Distributed Companies and the assumption of the Distributed Companies'
Liabilities set forth in this Article II, at or prior to the Distribution Time,
the parties agree to effect the transactions, if any, described in Schedule 2.11
attached hereto.
SECTION 2.12 Certain Acquisition Expenses Not Resulting in the
Incurrence of Debt. On or prior to the consummation of all transactions
contemplated by the Investment Agreement, each of the Distributed Companies
shall pay to the Company in cash an amount equal to all amounts expended by such
Distributed Company and its respective Subsidiaries after January 12, 1998 in
connection with the acquisition of any entity that, upon the Distributions, will
become a Subsidiary of such Distributed Company (plus any and
21
all fees and expenses incurred in connection with such acquisition) to the
extent that such amounts, fees and expenses were not paid with debt described
in Section 2.08(a)(ii).
ARTICLE III
THE DISTRIBUTION
SECTION 3.01 Directors and Employees.
(a) The Company shall cause all those individuals who
will be officers or directors of the Company or any Retained Subsidiary
immediately after the Distribution Time to resign, effective as of the
Distribution Time, from all officer or director positions with any of the
Distributed Companies or Distributed Company Subsidiaries in which they serve.
(b) The Company shall cause all those individuals who
will be officers or directors of any of the Distributed Companies or the
Distributed Company Subsidiaries immediately after the Distribution Time to
resign, effective as of the Distribution Time, from all officer or director
positions with the Company or any Retained Subsidiary in which they serve.
SECTION 3.02 Mechanics of Distribution.
(a) Delivery of Shares to Agent. Following consummation
of the transactions contemplated by Section 2.01 and subject to the closing
conditions set forth in Article VIII the Company shall deliver to the Agent, for
the benefit of holders of record of the Company Common Stock as at the close of
business on the Distribution Record Date, the share certificates representing
(i) all the Printco Common Shares, (ii) all the Schoolco Common Shares, (iii)
all the Techco Common Shares and (iv) all the Travelco Common Shares, and shall
instruct the Agent to distribute such share certificates to such holders of the
Company Common Stock upon notice from the Company that the conditions to the
obligation of the Company to consummate the Distributions have been satisfied or
waived and that the Agent is authorized to proceed with the distribution of the
Distribution Shares. Immediately following the Distributions, the Company shall
not own any capital stock of the Distributed Companies or the Distributed
Company Subsidiaries.
(b) Distribution of Certificates. The Distributions
shall be effected by the distribution to each holder of record of Company Common
Stock, as of the Distribution Record Date, of certificates representing one
Printco Common Share for each seven and one-half (7.5) shares of Company Common
Stock, one Schoolco Common Share for each nine (9) shares of Company Common
Stock, one Techco Common Share for each five (5) shares of Company Common Stock,
one Travelco Common Share for each ten (10) shares of Company Common Stock and
of cash in lieu of fractional shares as set forth in
22
Section 3.02(c). The Company shall instruct the Agent to distribute the
Distribution Shares and the cash in lieu of fractional shares as promptly as
practicable after the Distribution Time.
(c) Payment for Fractional Shares. No certificate or
scrip representing fractional shares of the Distribution Shares shall be
distributed to holders of the Company Common Stock as part of the Distributions.
Each holder of Company Common Stock who would otherwise be entitled to receive a
fractional share of the common stock of any of the Distributed Companies
pursuant to the Distributions shall receive cash in lieu of such fractional
share. As soon as practicable after the Distribution Date, the Company shall
direct the Agent to determine the number of fractional shares of any of the
Distribution Shares allocable to each holder of record of Company Common Stock
as of the Distribution Record Date who will receive cash in lieu of such
fractional shares, to aggregate all such fractional shares into whole shares and
sell the whole shares obtained thereby in open market transactions or otherwise,
in each case at then prevailing trading prices, and to cause to be distributed
to each such holder, in lieu of any fractional share, such holder's ratable
share of the proceeds of such sale, after making appropriate deductions of the
amount required to be withheld for U.S. federal income tax purposes and after
deducting an amount equal to all brokerage charges, commissions and transfer
taxes attributed to such sale.
SECTION 3.03 Timing of Distribution. The Board of Directors of
the Company shall, or shall authorize certain officers of the Company to,
formally declare the Distributions and shall authorize the Company to effect the
Distributions at the Distribution Time, subject to the satisfaction or waiver of
the conditions set forth in Article VIII. The Distributions shall be deemed to
be effective upon notification by the Company to the Agent that the conditions
to the obligations of the Company to consummate the Distributions have been
satisfied or waived and that the Agent is authorized to proceed with the
distribution of the Distribution Shares.
ARTICLE IV
MUTUAL RELEASE
Effective as of the Distribution Time and except as otherwise
specifically set forth in this Agreement or any of the Ancillary Agreements,
each of the parties hereto, on its own behalf and on behalf of each of its
respective Subsidiaries, releases and forever discharges all of the other
parties hereto and their respective Subsidiaries, and their respective officers,
directors, agents, Affiliates, record and beneficial security holders
(including, without limitation, trustees and beneficiaries of trusts holding
such securities), advisors and Representatives (in their respective capacities
as such) and their respective heirs, executors, administrators, successors and
assigns, of and from all debts, demands, actions, causes of action, suits,
accounts, covenants, contracts, agreements, damages, claims and Liabilities
whatsoever of every name and nature, both in law and in equity, which the
23
releasing party has or ever had, which arise out of or relate to the
Transactions or the IPOs; provided, however, that the foregoing general release
shall not apply to (i) any Liabilities (including Liabilities with respect to
indemnification) assumed, transferred, assigned, allocated or arising under this
Agreement, any of the Ancillary Agreements or the Investment Agreement and shall
not affect any party's right to enforce this Agreement, any Ancillary Agreement
or the Investment Agreement in accordance with their respective terms, (ii) any
Liabilities of the Company, any of its Subsidiaries or any seller of a Retained
Subsidiary or Distributed Company Subsidiary arising out of the agreement
pursuant to which such Retained Subsidiary or Distributed Company Subsidiary was
acquired by the Company or any of its Subsidiaries or any other agreement to
which the Company or any of its Subsidiaries and such a seller (acting in the
capacity of a seller) are parties, or (iii) any Liability arising out of an
agreement between any party to this Agreement and Xxxxxxxx X. Xxxxxxx. Each
party understands and agrees that, except as otherwise specifically provided in
this Agreement, the Ancillary Agreements or any agreements entered into between
the Company and the Distributed Companies in connection with the transactions
contemplated by Section 2.01, none of the parties is, in this Agreement or the
Ancillary Agreements or otherwise, representing or warranting in any way as to
the Assets, business or Liabilities transferred, assumed or retained as
contemplated hereby or as to any consents or approvals required in connection
with the consummation of the transactions contemplated by this Agreement or the
Ancillary Agreements, it being agreed and understood that each party shall take
or keep all of its Assets "as is" and that it shall bear the economic and legal
risk that conveyance of such Assets shall prove to be insufficient or that the
title to any Assets shall be other than good and marketable and free from
encumbrances of any nature whatsoever; provided, however, that the foregoing
disclaimer shall not apply to any representations made by the Company, any of
its Subsidiaries or any seller of a Retained Subsidiary or Distributed Company
Subsidiary under the agreement pursuant to which such Retained Subsidiary or
Distributed Company Subsidiary was acquired.
ARTICLE V
INDEMNIFICATION
SECTION 5.01 Indemnification by the Company. Except as
otherwise specifically set forth in any provision of this Agreement or of any
Ancillary Agreement, (a) the Company and, as to any particular Indemnifiable
Loss, the Retained Subsidiary out of whose assets, business or operations the
Indemnifiable Loss arises, shall indemnify, defend and hold harmless the
Distributed Companies' Indemnitees from and against, and pay or reimburse the
Distributed Companies' Indemnitees for, any and all Indemnifiable Losses, as
incurred, of the Distributed Companies' Indemnitees arising out of, relating to
or resulting from (i) the Retained Liabilities, the Retained Assets or the
Retained Business or (ii) the breach by the Company or any of the Retained
Subsidiaries of any provision of this Agreement or of any Ancillary Agreement to
which the Company is a party, in each case, whether such Indemnifiable Losses
relate to or arise out of or result from events, occur-
24
rences, actions, omissions, facts or circumstances occurring, existing or
asserted at, before or after the Distribution Time, and (b) the Company shall
bear the costs of and indemnify, defend and hold harmless the Printco
Indemnitees, the Schoolco Indemnitees, the Techco Indemnitees and the Travelco
Indemnitees from the Company's Pro Rata Share of Indemnifiable Losses, as
incurred, that relate to, arise out of or result from the Shared Liabilities;
provided, however, that the Company shall have no obligation to indemnify any of
the Distributed Companies' Indemnitees for any Indemnifiable Losses arising out
of, relating to or resulting from (y) the gross negligence, bad faith or wilful
misconduct of the relevant Distributed Company or Distributed Company Subsidiary
after the Distribution Time or (z) the failure of such Distributed Company or
any of its Subsidiaries to perform its obligations under any agreement in
accordance with the terms of such agreement after the Distribution Time.
SECTION 5.02 Indemnification by Printco. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, (a) Printco and, as to any particular Indemnifiable Loss, the Printco
Subsidiary out of whose assets, business or operations the Indemnifiable Loss
arises, shall indemnify, defend and hold harmless the Company Indemnitees, the
Schoolco Indemnitees, the Techco Indemnitees and the Travelco Indemnitees from
and against, and pay or reimburse such Indemnitees for, any and all
Indemnifiable Losses, as incurred, of the Company Indemnitees, the Schoolco
Indemnitees, the Techco Indemnitees and the Travelco Indemnitees arising out of,
relating to or resulting from (i) the Printco Liabilities, the Printco Assets,
the Printco Business or the Printco Acquisition Claims, (ii) the breach by
Printco or any of its Subsidiaries of any provision of this Agreement or of any
Ancillary Agreement to which Printco is a party, in each case, whether such
Indemnifiable Losses relate to, arise out of or result from events, occurrences,
actions, omissions, facts or circumstances occurring, existing or asserted at,
before or after the Distribution Time and (b) Printco shall bear the costs of
and indemnify, defend and hold harmless the Company Indemnitees, the Schoolco
Indemnitees, the Techco Indemnitees and the Travelco Indemnitees from Printco's
Pro Rata Share of Indemnifiable Losses, as incurred, that relate to, arise out
of or result from the Shared Liabilities; provided, however, that Printco shall
have no obligation to indemnify any of the Company Indemnitees, the Schoolco
Indemnitees, the Techco Indemnitees or the Travelco Indemnitees for any
Indemnifiable Losses relating to, arising out of or resulting from (x) the gross
negligence, bad faith or wilful misconduct of the Company, Schoolco, Techco,
Travelco, or any of their respective Subsidiaries, as applicable, after the
Distribution Time or (y) the failure of the Company, Schoolco, Techco or
Travelco, or any of their respective Subsidiaries, as applicable, to perform its
obligations under any agreement in accordance with the terms of such agreement
after the Distribution Time; provided further, however, that Printco shall have
no obligation to indemnify any of the Company Indemnitees, the Schoolco
Indemnitees, the Techco Indemnitees or the Travelco Indemnitees for any
Indemnifiable Losses (including such losses arising from Defaulted Payment
Obligations) pursuant to clause (b) of this Section 5.02 once Printco has
indemnified such Indemnitees for Losses pursuant to clause (b) of this Section
5.02 in an aggregate amount equal to $1.75 million.
25
SECTION 5.03 Indemnification by Schoolco. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, (a) Schoolco and, as to any particular Indemnifiable Loss, the
Schoolco Subsidiary out of whose assets, business or operations the
Indemnifiable Loss arises, shall indemnify, defend and hold harmless the Company
Indemnitees, the Printco Indemnitees, the Techco Indemnitees and the Travelco
Indemnitees from and against, and pay or reimburse such Indemnitees for, any and
all Indemnifiable Losses, as incurred, of the Company Indemnitees, the Printco
Indemnitees, the Techco Indemnitees and the Travelco Indemnitees arising out of,
relating to or resulting from (i) the Schoolco Liabilities, the Schoolco Assets,
the Schoolco Business or the Schoolco Acquisition Claims and (ii) the breach by
Schoolco or any of its Subsidiaries of any provision of this Agreement or of any
Ancillary Agreement to which Schoolco is a party, in each case, whether such
Indemnifiable Losses relate to, arise out of or result from events, occurrences,
actions, omissions, facts or circumstances occurring, existing or asserted at,
before or after the Distribution Time, and (b) Schoolco shall bear the costs of
and indemnify, defend and hold harmless the Company Indemnitees, the Printco
Indemnitees, the Techco Indemnitees and the Travelco Indemnitees from Schoolco's
Pro Rata Share of Indemnifiable Losses, as incurred, that relate to, arise out
of or result from the Shared Liabilities; provided, however, that Schoolco shall
have no obligation to indemnify any of the Company Indemnitees, the Printco
Indemnitees, the Techco Indemnitees and the Travelco Indemnitees for any
Indemnifiable Losses relating to, arising out of or resulting from (x) the gross
negligence, bad faith or wilful misconduct of the Company, Printco, Techco or
Travelco, as applicable, after the Distribution Time or (y) the failure of the
Company, Printco, Techco or Travelco, or any of their respective Subsidiaries,
as applicable, to perform its obligations under any agreement in accordance with
the terms of such agreement after the Distribution Time; provided further,
however, that Schoolco shall have no obligation to indemnify any of the Company
Indemnitees, the Printco Indemnitees, the Techco Indemnitees or the Travelco
Indemnitees for any Indemnifiable Losses (including such losses arising from
Defaulted Payment Obligations) pursuant to clause (b) of this Section 5.03 once
Schoolco has indemnified such Indemnitees for Losses pursuant to clause (b) of
this Section 5.03 in an aggregate amount equal to $1.75 million.
SECTION 5.04 Indemnification by Techco. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, (a) Techco and, as to any particular Indemnifiable Loss, the Techco
Subsidiary out of whose assets, business or operations the Indemnifiable Loss
arises, shall indemnify, defend and hold harmless the Company Indemnitees, the
Printco Indemnitees, the Schoolco Indemnitees and the Travelco Indemnitees from
and against, and pay or reimburse such Indemnitees for, any and all
Indemnifiable Losses, as incurred, of the Company Indemnitees, the Printco
Indemnitees, the Schoolco Indemnitees and the Travelco Indemnitees arising out
of, relating to or resulting from (i) the Techco Liabilities, the Techco Assets,
the Techco Business or the Techco Acquisition Claims and (ii) the breach by
Techco or any of its Subsidiaries of any provision of this Agreement or of any
Ancillary Agreement to which Techco is a party, in each case, whether such
Indemnifiable Losses relate to, arise out of or result from events, occurrences,
26
actions, omissions, facts or circumstances occurring, existing or asserted at,
before or after the Distribution Time, and (b) Techco shall bear the costs of
and indemnify, defend and hold harmless the Company Indemnitees, the Printco
Indemnitees, the Schoolco Indemnitees and the Travelco Indemnitees from Techco's
Pro Rata Share of Indemnifiable Losses, as incurred, that relate to, arise out
of or result from the Shared Liabilities; provided, however, that Techco shall
have no obligation to indemnify any of the Company Indemnitees, the Printco
Indemnitees, the Schoolco Indemnitees and the Travelco Indemnitees for any
Indemnifiable Losses relating to, arising out of or resulting from (x) the gross
negligence, bad faith or wilful misconduct of the Company, Printco, Schoolco or
Travelco, as applicable, after the Distribution Time or (y) the failure of the
Company, Printco, Schoolco or Travelco, or any of their respective Subsidiaries,
as applicable, to perform its obligations under any agreement in accordance with
the terms of such agreement after the Distribution Time; provided further,
however, that Techco shall have no obligation to indemnify any of the Company
Indemnitees, the Printco Indemnitees, the Schoolco Indemnitees or the Travelco
Indemnitees for any Indemnifiable Losses (including such losses arising from
Defaulted Payment Obligations) pursuant to clause (b) of this Section 5.04 once
Techco has indemnified such Indemnitees for Losses pursuant to clause (b) of
this Section 5.04 in an aggregate amount equal to $1.75 million.
SECTION 5.05 Indemnification by Travelco. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, (a) Travelco and, as to any particular Indemnifiable Loss, the
Travelco Subsidiary out of whose assets, business or operations the
Indemnifiable Loss arises, shall indemnify, defend and hold harmless the Company
Indemnitees, the Printco Indemnitees, the Schoolco Indemnitees and the Techco
Indemnitees from and against, and pay or reimburse such Indemnitees for, any and
all Indemnifiable Losses, as incurred, of the Company Indemnitees, the Printco
Indemnitees, the Schoolco Indemnitees and the Techco Indemnitees arising out of,
relating to or resulting from (i) the Travelco Liabilities, the Travelco Assets,
the Travelco Business or the Travelco Acquisition Claims and (ii) the breach by
Travelco or any of its Subsidiaries of any provision of this Agreement or of any
Ancillary Agreement to which Travelco is a party, in each case, whether such
Indemnifiable Losses relate to or arise from events, occurrences, actions,
omissions, facts or circumstances occurring, existing or asserted at, before or
after the Distribution Time, and (b) Travelco shall bear the costs of and
indemnify, defend and hold harmless the Company Indemnitees, the Printco
Indemnitees, the Schoolco Indemnitees and the Techco Indemnitees from Travelco's
Pro Rata Share of Indemnifiable Losses, as incurred, that relate to, arise out
of or result from the Shared Liabilities; provided, however, that Travelco shall
have no obligation to indemnify any of the Company Indemnitees, the Printco
Indemnitees, the Schoolco Indemnitees and the Techco Indemnitees for any
Indemnifiable Losses relating to, arising out of or resulting from (x) the gross
negligence, bad faith or wilful misconduct of the Company, Printco, Schoolco or
Techco, as applicable, after the Distribution Time or (y) the failure of the
Company, Printco, Schoolco or Techco, or any of their respective Subsidiaries,
as applicable, to perform its obligations under any agreement in accordance with
the terms of such agreement after the Distribution
27
Time; provided further, however, that Travelco shall have no obligation to
indemnify any of the Company Indemnitees, the Printco Indemnitees, the Schoolco
Indemnitees or the Techco Indemnitees for any Indemnifiable Losses (including
such losses arising from Defaulted Payment Obligations) pursuant to clause (b)
of this Section 5.05 once Travelco has indemnified such Indemnitees for Losses
pursuant to clause (b) of this Section 5.05 in an aggregate amount equal to
$1.75 million.
SECTION 5.06 Limitations on Indemnification Obligations. The
amount that any party (an "Indemnifying Party") is or may be required to pay to
any other Person (an "Indemnitee") pursuant to Sections 5.01, 5.02, 5.03, 5.04
or 5.05, as applicable, shall be reduced (retroactively or prospectively) by any
Insurance Proceeds, settlement recoveries or other amounts actually recovered by
or on behalf of such Indemnitee in respect of the related Indemnifiable Loss. If
an Indemnitee shall have received the payment required by this Agreement from an
Indemnifying Party in respect of an Indemnifiable Loss and shall subsequently
actually receive Insurance Proceeds, settlement recoveries or other amounts in
respect of such Indemnifiable Loss, then such Indemnitee shall pay to such
Indemnifying Party a sum equal to the amount of such Insurance Proceeds,
settlement recoveries or other amounts actually received, up to the aggregate
amount of any payments made by such Indemnifying Party pursuant to this
Agreement in respect of such Indemnifiable Loss. Amounts paid by an Indemnifying
Party pursuant to clause (b) of Sections 5.01, 5.02, 5.03, 5.04 or 5.05 which
are paid with, or reimbursed by, Insurance Proceeds, settlement recoveries or
other amounts actually recovered, by or on behalf of an Indemnifying Party, in
respect of the related Indemnifiable Loss, shall not count toward the limit on
each party's Shared Liabilities set forth in the second proviso of Sections
5.01, 5.02, 5.03, 5.04 or 5.05, as applicable.
SECTION 5.07 Procedures for Indemnification of Third Party
Claims.
(a) If a claim or demand is made against an Indemnitee
by any person who is not a party, or an Affiliate of a party, to this Agreement
or any of the Ancillary Agreements (a "Third Party Claim") as to which such
Indemnitee is entitled to indemnification pursuant to this Agreement, such
Indemnitee shall notify the Indemnifying Party in writing, and in reasonable
detail, of the Third Party Claim promptly (and in any event within 10 business
days) after receipt by such Indemnitee of written notice of the Third Party
Claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent that the
defense or conduct of such Third Party Claim by the Indemnifying Party shall
have been actually and materially prejudiced as a result of such failure (except
that the Indemnifying Party shall not be liable for any expenses incurred during
the period in which the Indemnitee failed to give such notice); provided
further, however, that in no event shall such failure to notify the Indemnifying
Party (i) constitute prejudice suffered by the Indemnifying Party if it has
otherwise received notice of the Third Party Claim or (ii) relieve it from any
liability or obligation that it may otherwise have to such Indemnitee.
Thereafter, the Indemnitee shall
28
deliver to the Indemnifying Party, promptly (and in any event within 10 business
days) after the Indemnitee's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnitee relating to the
Third Party Claim.
(b) (i) If a Third Party Claim is made against an
Indemnitee, the Indemnifying Party shall be entitled to participate in the
defense thereof and, if it so chooses and acknowledges in writing its obligation
to indemnify the Indemnitee therefor, to assume the defense thereof with counsel
selected by the Indemnifying Party, provided that such counsel is not reasonably
objected to by the Indemnitee, and, thereafter, the Indemnifying Party shall not
be liable to the Indemnitee for legal or other expenses subsequently incurred by
the Indemnitee in connection with the defense thereof. If the Indemnifying Party
elects to assume the defense of a Third Party Claim pursuant to this subsection
(b)(i), the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the Indemnifying Party, it being understood that the Indemnifying
Party shall have full control of such defense, and the Indemnifying Party shall
be liable for the reasonable fees and expenses of counsel employed by the
Indemnitee for any period during which the Indemnifying Party has failed to
assume the defense thereof.
(ii) Notwithstanding subsection (b)(i) of this
Section 5.07, if the Indemnitee reasonably believes that a Third Party Claim
could lead to a material adverse effect on its business, it shall be entitled to
retain control of (and the related Indemnifying Party shall not be entitled to
assume), or to reassert control over, the defense of the claim and shall be
entitled to be reimbursed for its reasonable out-of-pocket expenses attributable
to such defense. If the Indemnitee elects to retain control of, or to reassert
control over, the defense of a Third Party Claim pursuant to this subsection
(b)(ii), the Indemnifying Party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnitee, it being understood that the Indemnitee
shall have full control of such defense.
(c) If the Indemnifying Party elects to assume the
defense of any Third Party Claim pursuant to subsection (b)(i) of this Section
5.07, all of the Indemnitees shall cooperate with the Indemnifying Party in the
defense or prosecution thereof. If the Indemnitee elects to retain control of,
or to reassert control over, the defense of any Third Party Claim pursuant to
subsection (b)(ii) of this Section 5.07, the Indemnifying Party shall cooperate
with the Indemnitee in the defense or prosecution thereof. Such cooperation
shall include the retention and, upon the Indemnitee's or Indemnifying Party's
request, as applicable, the provision to such party of records and information
which are reasonably relevant to such Third Party Claim and making employees
available on a mutually convenient basis to provide additional information
regarding any material provided hereunder.
29
(d) Notwithstanding the foregoing, the Indemnifying
Party shall not be entitled to assume the defense of any Third Party Claim (and
shall be liable for the reasonable fees and expenses of counsel incurred by the
Indemnitee in defending such Third Party Claim) if the Third Party Claim seeks
an order, injunction or other equitable relief or relief for other than money
damages against the Indemnitee which the Indemnitee reasonably determines in
good faith, after conferring with its counsel, cannot be separated from any
related claim for money damages. If such equitable relief or other relief
portion of the Third Party Claim can be so separated from that for money
damages, the Indemnifying Party shall be entitled to assume the defense of the
portion relating to money damages.
(e) Notwithstanding the foregoing, the Indemnifying
Party shall not be entitled to assume the defense of any Third Party Claim (and
shall be liable for the reasonable fees and expenses of counsel incurred by the
Indemnitee in defending such Third Party Claim) if the Indemnitee reasonably
determines in good faith, after conferring with its counsel, that the Indemnitee
has available to it one or more defenses or counterclaims that are inconsistent
with one or more of those that may be available to the Indemnifying Party in
respect of such Third Party Claim.
(f) Whether or not the Indemnifying Party shall have
assumed the defense of a Third Party Claim, in no event will the Indemnitee
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the Indemnifying Party's prior written consent (which
consent shall not be unreasonably withheld or delayed); provided, however, that
the Indemnitee shall have the right to settle, compromise or discharge such
Third Party Claim without the consent of the Indemnifying Party if the
Indemnitee releases in writing the Indemnifying Party from its indemnification
obligation hereunder with respect to such Third Party Claim and such settlement,
compromise or discharge would not otherwise adversely affect the Indemnifying
Party. If the Indemnifying Party shall have assumed the defense of a Third Party
Claim (and the Indemnitee shall not have reasserted control over the defense of
such claim pursuant to Section 5.07(b)(ii)), the Indemnitee shall agree to any
settlement, compromise or discharge of a Third Party Claim that the Indemnifying
Party may recommend and that by its terms does not obligate the Indemnitee to
pay any of the liability in connection with such Third Party Claim, releases the
Indemnitee completely and unconditionally in connection with such Third Party
Claim and does not provide for injunctive or other nonmonetary relief affecting
the Indemnitee.
SECTION 5.08 Indemnification Payments. Indemnification
required by this Article V shall be made by prompt periodic payments of the
amount thereof during the course of the investigation, preparation or defense,
as and when bills are received or loss, liability, claim, damage, cost or
expense is incurred.
SECTION 5.09 Defaults. In the event that any obligation of any
Indemnifying Party to indemnify an Indemnitee as required by Sections 5.02,
5.03, 5.04 and
30
5.05 proves to be uncollectible by the Indemnitee despite reasonable collection
efforts (a "Defaulted Payment Obligation"), such Defaulted Payment Obligation
shall be treated as a Shared Liability and shall be shared by the Company and
the Distributed Companies as provided in clause (b) of Sections 5.02, 5.03, 5.04
and 5.05; provided, however, that for purposes of calculating each
non-defaulting party's Pro Rata Share of such Shared Liability, "Pro Rata Share"
for each non-defaulting party shall be calculated as the fraction (a) the
numerator of which is such party's Pro Rata Share and (b) the denominator of
which is the sum of each non-defaulting party's Pro Rata Share. Defaulted
Payment Obligations shall count toward the limit on each party's Shared
Liabilities set forth in the second proviso to Sections 5.02, 5.03, 5.04 and
5.05, as applicable.
SECTION 5.10 Tax Adjustments. The amount of any Indemnifiable
Loss shall be (i) increased by the amount of any net Tax cost actually incurred
by the Indemnitee arising from any payments required by this Article V (other
than this Section 5.10) and received from the Indemnifying Party, together with
such additional amounts as are necessary so that the aggregate payments received
from the Indemnifying Party on account of such Indemnifiable Loss, net of any
such net Tax cost and any net Tax cost actually incurred by the Indemnitee as a
result of the receipt or accrual of such additional amounts, is equal to the
amount of such Indemnifiable Loss; and (ii) reduced by the amount of any net Tax
benefit actually realized by the Indemnitee arising from the incurrence or
payment of any such Indemnifiable Loss; provided however, that in the event such
net Tax benefit is subsequently reduced as a result of the carryback of any
other Tax benefit, or disallowed, the Indemnifying party shall promptly pay the
Indemnitee the amount of such reduction or disallowance. For purposes of this
Section 5.10, a net Tax benefit shall be deemed to be "actually realized" only
to the extent of the excess of (i) the aggregate amount of Taxes that would have
been shown as due and payable on the U.S. federal, state and local income Tax
returns of the Indemnitee in the taxable period in which such net Tax benefit is
actually realized if such Indemnifiable Loss had not been incurred, and no
payment had been made in respect of such Indemnifiable Loss by the Indemnifying
Party over (ii) the aggregate amount of Taxes actually shown as due and payable
on such Tax returns.
SECTION 5.11 MCI Agreement. Notwithstanding Sections 5.01,
5.02, 5.03, 5.04 and 5.05, each of the parties hereto agrees to indemnify and
hold the other parties hereto harmless for any Liability under the MCI Agreement
attributable to the failure of such party to meet the required targets under the
MCI Agreement set forth on Schedule 5.11.
SECTION 5.12 Survival of Indemnities. The obligations of the
parties under this Article V shall survive the sale or other transfer by any of
them of any Assets or businesses or the assignment by any of them of any
Liabilities, with respect to any Indemnifiable Loss of any Indemnitee related to
such Assets, businesses or Liabilities.
31
ARTICLE VI
COVENANTS
SECTION 6.01 Provision of Corporate Records. Prior to or as
promptly as practicable after the Distribution Time, the Company shall deliver
to each Distributed Company copies of, or, if in the possession of such
Distributed Company or its Subsidiaries, such Distributed Company shall retain,
all corporate books and records and the relevant portions (or copies thereof) of
all corporate books and records relating directly and primarily to such
Distributed Company's Assets, such Distributed Company's Business, or such
Distributed Company's Liabilities, including, in each case, all agreements,
litigation files and government filings, whether or not active; provided
however, that if original versions of the above documents are in the possession
of the Company and not in the possession of the relevant Distributed Company,
the Company shall deliver said originals to such relevant Distributed Company.
From and after the Distribution Time, all such books, records and other items or
such copies thereof shall be the property of such Distributed Company; provided
however, that nothing in this Section 6.01 shall preclude the Company from
retaining duplicates of all such corporate records that are delivered to a
Distributed Company.
SECTION 6.02 Access to Information. From and after the
Distribution Time each party hereto shall afford to each other party and their
respective authorized accountants, counsel and other designated representatives
reasonable access and duplicating rights (at such other party's expense) during
normal business hours and upon reasonable advance notice, subject to the
confidentiality provisions hereof and any additional appropriate restrictions
for classified, privileged or confidential information, to all Information
within the possession or control of such party or to which it has access
relating to the business, Assets or Liabilities of such other party as they
existed prior to the Distribution Time or relating to or arising in connection
with the relationship between the Retained Business, on the one hand, and the
Distributed Companies' Businesses, on the other hand, on or prior to the
Distribution Time, insofar as such access is reasonably required for a
reasonable purpose. Without limiting the foregoing, Information may be requested
under this Section 6.02 for audit, accounting, claims, litigation and Tax
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations.
SECTION 6.03 Retention of Records. Except as provided in this
Agreement or any of the Ancillary Agreements or as otherwise agreed in writing,
if any Information relating to the business, Assets or Liabilities of a party
hereto, as they existed prior to the Distribution Time or as they are
transferred, assumed or imposed pursuant to this Agreement, is retained by one
of the other parties hereto, the party retaining such Information shall, and
shall cause its Subsidiaries to, retain all such Information in such party's
possession or under its control until such Information is at least ten years old
except that if, prior to the expiration of such period, the party retaining such
information wishes to destroy or dispose of any such Information that is at
least three years old, prior to destroying or disposing of any of such
32
Information, (a) such party shall provide no less than 30 days' prior written
notice to the other party, specifying the Information proposed to be destroyed
or disposed of and (b) if, prior to the scheduled date for such destruction or
disposal, the other party requests in writing that any of the Information
proposed to be destroyed or disposed of be delivered to such other party, the
party proposing to dispose of or destroy such Information shall arrange for the
delivery of the requested Information to a location specified by, and at the
expense of, the requesting party.
SECTION 6.04 Witness Services. From and after the Distribution
Time, each of the parties hereto shall use commercially reasonable efforts to
make available to each other party hereto, upon reasonable written request, its
and its Subsidiaries' officers, directors, employees and agents as witnesses to
the extent that (i) such persons may reasonably be required in connection with
the prosecution, investigation or defense of any Action or threatened Action in
which the requesting party may from time to time be involved and (ii) there is
no conflict in the Action or threatened Action between the requesting party and
the other party.
SECTION 6.05 Reimbursement. Except to the extent otherwise
contemplated by any Ancillary Agreement, a party providing books and records,
access to Information or witness services to the other party under this Article
VI shall be entitled to receive from the recipient, upon the presentation of
invoices therefor, payments for supplies, disbursements and other out-of-pocket
expenses and direct and indirect costs of employees, as may be reasonably
incurred in providing such books and records, access to Information or witness
services.
SECTION 6.06 Confidentiality.
(a) Each party hereto shall keep, and shall cause its
Representatives to keep, the other party's Information strictly confidential and
will disclose such Information only to such of its Representatives who need to
know such Information and who agree to be bound by this Section 6.06 and not to
disclose such Information to any other Person or entity. Without the prior
written consent of the other party, each party and its Representatives shall not
disclose the other party's Information to any Person or entity except as may be
required by law or judicial process or in connection with the enforcement of its
rights under this Agreement or any of the Ancillary Agreements and, in each
case, in accordance with this Section 6.06. Each party agrees to be responsible
for any breach of this confidentiality provision by any of its Representatives.
(b) In the event that any party hereto or any of its
Representatives becomes legally compelled (by deposition, interrogatory, request
for documents, subpoena, civil investigative demand or similar process), or
determines that it is necessary in connection with the enforcement of its rights
under this Agreement or any of the Ancillary Agreements, to disclose all or any
part of the other party's Information, the receiving party or its
Representatives shall promptly notify the other party of such compulsion or
determination in writing, and consult with and assist the other party in seeking
a protective order or request for other appropriate remedy. In the event that
such protective order or other remedy is not obtained or the other party waives
compliance with the terms hereof, such receiving party
33
or its Representatives, as the case may be, shall disclose only that portion of
the Information which, in the opinion of the receiving party's outside counsel,
is legally required to be disclosed, and shall exercise all commercially
reasonable efforts to assure that confidential treatment will be accorded such
Information by the Persons or entities receiving such Information. The providing
party shall be given an opportunity to review the Information prior to
disclosure.
SECTION 6.07 Further Assurances. In case at any time after the
Distribution Time any further action is reasonably necessary or desirable to
carry out the purposes of this Agreement and the Ancillary Agreements, the
proper officers at such time of each party to this Agreement shall promptly take
all such action. Without limiting the foregoing, the Company and the Distributed
Companies or their respective Subsidiaries, as appropriate, shall use
commercially reasonable efforts to obtain all consents and approvals, to enter
into all agreements and to make all filings and applications that may be
required or are reasonably necessary for the consummation of the Transactions,
including, without limitation, all applicable governmental and regulatory
filings. In addition, the Company shall use commercially reasonable efforts to
obtain releases of all liens on the Distributed Companies' Assets that exist as
a result of the Company Credit Agreement.
ARTICLE VII
INSURANCE
SECTION 7.01 General. Except as provided in this Article, the
Company shall keep in effect all policies under its Insurance Program as of the
date hereof insuring the Distributed Companies' Assets and the operations of the
Distributed Companies' Businesses until 12:00 midnight (Eastern time) on the
Distribution Date, except to the extent that a Distributed Company shall have
earlier obtained appropriate coverage and notified the Company in writing to
that effect. Beginning at 12:01 a.m. on the day following the Distribution Date,
the Distributed Companies will cease to be insured under all policies in the
Company's Insurance Program.
SECTION 7.02 Distributed Companies' Insurance.
(a) Each Distributed Company will purchase and pay for
the types and amounts of insurance coverage that it reasonably deems appropriate
and sufficient for the period beginning on and continuing after the Distribution
Date, including Broad Form Contractual Liability insurance coverage as to such
Distributed Company's indemnity obligations set forth in this Agreement.
34
(b) Each Distributed Company agrees that the Company
has made no warranty, expressed or implied, and no representation that the
insurance described in Sections 7.01 or 7.02(a) above is or will be adequate or
sufficient to meet such Distributed Company's current or future insurance needs.
SECTION 7.03 Access to the Company's Insurance Program. Each
Distributed Company and its Affiliates shall have access through the Company
after the Distribution Date to such coverages and limits as may be available
under the Company's Insurance Program for Covered Claims occurring prior to the
Distribution Date. Such access shall be subject to available coverage and to all
of the terms, conditions, exclusions, retentions and limits of such Policies.
SECTION 7.04 Insurance Recoveries. The Company shall use
reasonable efforts to obtain Recoveries for the Distributed Companies and their
Affiliates from the Company's insurance carriers for coverage available under
Section 7.03 and shall keep the Distributed Companies reasonably informed of the
Company's efforts under this Section 7.04. The Company will reimburse the
Distributed Companies for any Recovery obtained by it on behalf of such
Distributed Company or Affiliate thereof pursuant to such claims; provided,
however, that Special Insurance Recoveries shall be shared between the Company
and the relevant Distributed Company in the same manner as any net recoveries of
an Acquisition Claim of such Distributed Company (payable at that time) would be
shared between the Company and such Distributed Company pursuant to Section
2.09, including that, if the net recoveries from an Acquisition Claim of such
Distributed Company are not required to be shared in any manner with the Company
pursuant to Section 2.09, any Special Insurance Recoveries related to such
Distributed Company should be entirely payable to it. Any Distributed Company
receiving a Recovery in its entirety under this Section 7.04 shall pay all costs
incurred by the Company after the Distribution Date in making the related claim
pursuant to this Section 7.04, including the salaries of the Company's officers
and employees based on the portion of time spent on such claims ("Recovery
Costs"), and such Recovery Costs incurred in pursuing the claim may be deducted
from the Recovery. As to any Recovery Costs incurred in relation to Special
Insurance Recoveries, the party or parties receiving such Special Insurance
Recoveries, or a portion thereof, shall bear the related Recovery Costs in
proportion to the share of the Special Insurance Recoveries such party receives.
Each Distributed Company agrees to make available to the Company such of its
employees as the Company may reasonably request as witnesses or deponents in
connection with the Company's management of claims, at such Distributed
Company's sole cost and expense notwithstanding Sections 6.04 and 6.05. Each
Distributed Company agrees that, if the Company has paid a Recovery to it for
such a claim and such Distributed Company receives proceeds from any other
person with respect to such claim, it will pay over to the Company the amount of
proceeds it has received.
SECTION 7.05 Insurance Representations. Each Distributed
Company hereby represents and warrants to the Company that no representation by
such Distributed
35
Company (or any of its officers, directors or Subsidiaries) relating to
information underlying any Insurance Policy of the Company contains an untrue
statement of material fact or omits to state a material fact necessary to make a
statement contained therein, in light of the circumstances under which they were
made, not misleading with respect to such information.
SECTION 7.06 Assignment. Nothing in this Agreement shall be
deemed to constitute (or to reflect) an assignment of any insurance policy or
insurance benefit.
SECTION 7.07 Deductibles and Maximums.
(a) To the extent that there are deductible amounts or
retentions applicable to potential insurance recoveries for claims of the
Company or a Distributed Company that are not per-occurrence deductibles, the
Company shall allocate such deductibles or retentions in such manner as the
Company or a Distributed Company, as applicable, determines, in good faith, is
fair and reasonable. For purposes of this Section 7.07, the parties agree that
it is fair and reasonable to allocate the deductibles, if any, first to any
claims based on recklessness, bad faith or wilful misconduct.
(b) To the extent that the Recoveries for any
particular group of claims of the Company or a Distributed Company may be
subject to overall policy limits, the Company shall allocate Recoveries in such
manner as the Company determines, in good faith, is fair and reasonable.
SECTION 7.08 Conflicts Between Article VII and the Company's
Insurance Program. Any provision of this Agreement that conflicts with any term
or provision of the Company's applicable insurance policies shall be void.
SECTION 7.09 Maintenance of Insurance Policies. Each of the
Company and the Distributed Companies covenants to maintain insurance policies
related to such Company's or Distributed Company's indemnification obligations
under this Agreement with similar covenants, limits and deductibles as in effect
as of 12:01 a.m. on the day following the Distribution Date for a period of four
years from such date and time.
ARTICLE VIII
CONDITIONS
SECTION 8.01 Conditions to Obligations of the Company. The
obligation of the Company to consummate the Distributions hereunder shall be
subject to the satisfaction or waiver of each of the following conditions:
(a) All of the transactions contemplated by Article II
hereof to occur prior to the Distribution Time shall have been consummated.
36
(b) The Distribution Shares to be issued in the
Distributions shall have been approved for trading on the NASDAQ, subject only
to official notice of issuance.
(c) All filings required to be made prior to the
Distribution Time with, and all consents, approvals and authorizations required
to be obtained prior to the Distribution Time from, any government or any court,
arbitral tribunal, administrative agency or commission or other regulatory
authority, agency or commission, governmental or otherwise, in connection with
the consummation of the Preliminary Transactions, the Distributions and any
other transaction contemplated hereby shall have been made or obtained, except
where the failure to make or obtain the same would not, individually or in the
aggregate, have a material adverse effect on the business, properties, results
of operations or financial condition of the Company, the Distributed Companies
or any of their respective Subsidiaries, or on the ability of any thereof to
consummate the transactions contemplated hereby, or to perform its obligations
under this Agreement or any of the Ancillary Agreements to which it is or will
be a party.
(d) Each of the Ancillary Agreements shall have been
executed and delivered by each of the parties thereto and shall be in full force
and effect in accordance with its terms.
(e) Each of the registration statements on Forms S-1
under the Securities Act filed with the SEC by the Distributed Companies in
connection with the Distributions shall have become effective under the Exchange
Act, no stop order suspending the effectiveness thereof shall have been issued
and no proceedings for that purpose shall have been initiated by the SEC; and
the Information Statements shall have been or shall be simultaneously or
promptly mailed to holders of Distribution Shares in accordance with the rules,
regulations and policies of the SEC.
(f) No statute, rule or regulation or temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
shall be in effect that prohibits consummation of the Preliminary Transactions
or the Distributions.
(g) All conditions to the Tender Offer shall have been
satisfied or waived by the Company, and the Tender Offer shall have been
consummated prior to or on the Distribution Date.
(h) The Company and each of the Distributed Companies
shall have received an opinion of Xxxxxx, Xxxxxx & Xxxxxxxxx, counsel to the
Company, that for U.S. federal income tax purposes the Distributions will
qualify as tax-free spin-offs under Section 355 of the Code and will not be
taxable under Section 355(e) of the Code. In rendering such opinion, such
counsel shall be entitled to rely on certain assumptions and representations
provided by the Company, the Distributed Companies and CDR-PC and certain other
37
information, data, documentation and other materials that Xxxxxx, Xxxxxx &
Xxxxxxxxx deems necessary.
ARTICLE IX
DISPUTE RESOLUTION
SECTION 9.01 Mediation and Binding Arbitration. Except as may
be expressly provided in any of the Ancillary Agreements or in any other
agreement between the parties entered into pursuant hereto, if a dispute,
controversy or claim (collectively, a "Dispute") between the Company and any of
the Distributed Companies or any of their respective Affiliates arises out of or
relates to this Agreement, any Ancillary Agreement, or any other agreement
entered into pursuant hereto or thereto, including, without limitation, the
breach, termination, enforceability, interpretation or validity of any such
agreement or any matter involving an Indemnifiable Loss, the Company and such
Distributed Company agree to use the following procedures, in lieu of either
party pursuing other available remedies and as the sole and exclusive remedy
(except as provided in Section 10.11 below), to resolve the Dispute.
SECTION 9.02 Initiation of Negotiation. A party seeking to
initiate the procedures shall provide written notice to the other party,
describing briefly the nature of the Dispute. A meeting shall be held between
the parties within 10 days of the receipt of such notice, attended by executives
who have decision-making authority regarding the Dispute, to attempt in good
faith to negotiate a resolution of the Dispute.
SECTION 9.03 Submission to Mediation. If, within 30 days after
such meeting, the parties have not succeeded in negotiating a resolution of the
Dispute, the parties agree to submit the Dispute at the earliest possible date
to mediation conducted in accordance with the Commercial Mediation Rules of the
AAA, and to bear equally the costs of the mediation. The parties agree to
participate in good faith in the mediation and negotiations related thereto for
a period of 30 days or such longer period as they may mutually agree following
the initial mediation session (the "Mediation Period").
SECTION 9.04 Selection of Mediator. The parties will jointly
appoint a mutually acceptable and neutral mediator. If they are unable to agree
upon such appointment within 20 days from the conclusion of the negotiation
period, a mediator shall be appointed by the AAA pursuant to the Commercial
Mediation Rules of the AAA.
SECTION 9.05 Treatment of Negotiation and Mediation. All
negotiations and mediations pursuant to this Article shall be treated as
compromise and settlement negotiations for purposes of Rule 408 of the Federal
Rules of Evidence and comparable state rules.
38
SECTION 9.06 Arbitration.
(a) Notwithstanding the foregoing provisions of this
Article IX, at the end of the Mediation Period any party may submit the matter
to binding arbitration conducted in accordance with the Commercial Arbitration
Rules of the AAA, by one or three arbitrators(s) selected in accordance with the
provisions of Section 9.06(b). Any arbitration proceeding hereunder shall be
held in the city of New York, New York, and shall be governed by the Federal
Arbitration Act, 9 U.S.C. xx.xx. 1-16, and judgment upon the award rendered by
the arbitrator(s) may be entered by any court having jurisdiction thereof or
having jurisdiction over the relevant party or its assets. Any arbitral award
hereunder shall be in writing, state the reasons for the award and be final and
binding on the parties.
(b) The parties shall seek to appoint jointly a
mutually acceptable sole arbitrator. If the parties cannot agree on an
acceptable sole arbitrator within 10 days after the commencement of the
arbitration, the Dispute shall be heard by a panel of three arbitrators, one
appointed by each of the parties within 20 days after commencement of the
arbitration, and the third arbitrator selected by the other two arbitrators
within 15 days of appointment of the first two arbitrators. If either side fails
to appoint an arbitrator within 20 days after the commencement of the
arbitration, then that arbitrator shall be appointed by the AAA, which shall
promptly notify the parties of such appointment. If the first two arbitrators
appointed fail to appoint a third arbitrator within the 15-day period prescribed
above, then the AAA shall appoint the third arbitrator and shall promptly notify
the parties of the appointment. References herein to the "Arbitrator" shall mean
the sole arbitrator or the three-arbitrator panel, as the case may be.
(c) In the event the Dispute involves (i) valuation of
a liability under (A) this Agreement, (B) any Ancillary Agreement or (C) any
other agreement entered into by the parties pursuant to this Agreement or any
Ancillary Agreement, (ii) an amount in controversy in a Dispute or (iii) the
amount of damages following a determination of liability, the arbitration shall
proceed in the following manner: Each party shall submit to the Arbitrator and
exchange with each other, on a schedule to be determined by the Arbitrator, a
proposed valuation, amount or damages, as the case may be, together with a
statement, including all supporting documents or other evidence upon which it
relies, setting forth such party's explanation as to why its proposal is
reasonable and appropriate. The Arbitrator, within 15 days of receiving such
proposals and supporting documents, shall choose between the two proposals and
shall be limited to awarding only one or the other of the two proposals
submitted.
(d) Cost of Arbitration. The costs of arbitration shall
be apportioned between the parties to the arbitration as determined by the
Arbitrator in such manner as the Arbitrator deems reasonable taking into account
the circumstances of the case, the conduct of the parties during the proceeding
and the result of the arbitration.
39
(e) Arbitration Period. Any arbitration proceeding
shall be concluded in a maximum of six (6) months from the commencement of the
arbitration. The parties involved in the proceeding may agree in writing to
extend the arbitration period if necessary to appropriately resolve the Dispute.
SECTION 9.07 Confidentiality. All negotiation, mediation and
arbitration proceedings under this Article shall be treated as confidential
Information in accordance with the provisions of Section 6.06 hereof. Any
mediator or the Arbitrator shall be bound by an agreement containing
confidentiality provisions at least as restrictive as those contained in Section
6.06 hereof.
SECTION 9.08 Notices. All notices by one party to the other
party in connection with the dispute resolution provisions set forth in this
Article shall be in accordance with the provisions of Section 10.05 hereof.
SECTION 9.09 Consolidation. The Arbitrator may consolidate an
arbitration under this Agreement with any arbitration arising under or relating
to the Ancillary Agreements or any other agreement between the parties entered
into pursuant hereto, as the case may be, if the subject of the Disputes
thereunder arise out of or relate essentially to the same set of facts or
transactions. Such consolidated arbitration shall be determined by the
arbitrator appointed for the arbitration proceeding that was commenced first in
time.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Modification, Amendment or Termination. This
Agreement may not be modified, amended or terminated except by an agreement in
writing signed by each of the parties hereto and approved by the board of
directors of each of the parties hereto; provided, however, that (a) any
modification or amendment to this Agreement that is adverse to the rights or
interests of CDR-PC, as a stockholder or warrantholder of the Company, and (b)
any termination of this Agreement, shall not be effective unless such
modification, amendment or termination was approved by an affirmative vote of
not less than three-fourths of the members of the board of directors of the
Company; provided further, however, that the preceding proviso shall apply only
for so long as CDR-PC has the right to designate at least two nominees to the
board of directors of the Company pursuant to Section 4.01(b) of the Investment
Agreement; provided further, however, that Article V shall not be terminated,
modified or amended after the Distribution Time in respect of the third party
beneficiaries thereto without the consent of such persons.
SECTION 10.02 Waiver; Remedies. The conditions to the
Company's obligation to consummate the Distributions are for the sole benefit of
the Company and may be waived by the Company in whole or in part in its sole
discretion. No delay on the part of
40
the Company or the Distributed Companies in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any waiver on the
part of either the Company or the Distributed Companies of any right, power or
privilege hereunder operate as a waiver of any other right, power or privilege
hereunder, nor will any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. Unless otherwise
provided, the rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which the parties may otherwise have at law
or in equity.
SECTION 10.03 Counterparts. For the convenience of the
parties, this Agreement may be executed in any number of separate counterparts,
each such counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
SECTION 10.04 Notices. Any notice, request, instruction or
other communication to be given hereunder by any party to another shall be in
writing and shall be deemed to have been duly given (i) on the date of delivery
if delivered personally, or by telefacsimile, upon confirmation of receipt, (ii)
on the first business day following the date of dispatch if delivered by Federal
Express or other nationally reputable next-day courier service with proof of
delivery, or (iii) on the fifth business day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice.
(a) If to Printco:
Workflow Management, Inc.
000 Xxxxx Xxxx Xxx
Xxxx Xxxxx, XX 00000
Attention: Xxxxxx X. X'Xxxxxxxx
Telefacsimile: (000) 000-0000
(b) If to Schoolco:
School Specialty, Inc.
0000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telefacsimile: (000) 000-0000
(c) If to Techco:
Aztec Technology Partners, Inc.
41
00 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Telefacsimile: (000) 000-0000
(d) If to Travelco:
Navigant International, Inc.
00 Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
Telefacsimile: (000) 000-0000
(e) If to the Company:
U.S. Office Products Company
0000 Xxxxxx Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000 Xxxx
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxx X. Director, Esq.
Xxxxxxxx Xxxxxxx, Esq.
Telefacsimile: (000) 000-0000
with copies to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telefacsimile: (000) 000-0000
and
Xxxxxxx, Dubilier & Rice, Inc.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxx
Telefacsimile: (000) 000-0000
and
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
00
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Telefacsimile: (000) 000-0000
SECTION 10.05 Entire Agreement. This Agreement and the
Ancillary Agreements (including Exhibits, Annexes and Schedules hereto and
thereto) constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties, both written and
oral, between the parties, with respect to the subject matter hereof and
thereof.
SECTION 10.06 Certain Obligations. Whenever any Ancillary
Agreement requires any of the Subsidiaries of any party to such Ancillary
Agreement to take any action, this Agreement will be deemed to include an
undertaking on the part of such party to cause such Subsidiary to take such
action.
SECTION 10.07 Assignment. This Agreement shall be assignable
in whole in connection with a merger or consolidation or the sale or transfer of
all or substantially all the Assets or stock of a party hereto so long as the
resulting, surviving or transferee entity assumes all the obligations of the
relevant party hereto by operation of law or pursuant to an agreement in form
and substance reasonably satisfactory to the other party. Otherwise, this
Agreement shall not be assignable, in whole or in part, directly or indirectly,
by any party hereto without the prior written consent of the other party, and
any attempt to assign any rights or obligations arising under this Agreement
without such consent shall be void.
SECTION 10.08 Captions. The Article, Section and paragraph
captions herein are for convenience of reference only, do not constitute part of
this Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
SECTION 10.09 Severability. If any provision of this Agreement
or any of the Ancillary Agreements or the application thereof to any person or
circumstance is determined to be invalid, void or unenforceable by a court of
competent jurisdiction or by one or more arbitrator(s), the remaining provisions
thereof, or the application of such provision to persons or circumstances other
than those as to which it has been held invalid or unenforceable, shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the
transactions contemplated thereby is not affected in any manner adverse to any
party. Upon any such determination, the parties shall negotiate in good faith in
an effort to agree upon a suitable and equitable substitute provision to effect
the original intent of the parties.
SECTION 10.10 Equitable Relief. No provision of this Agreement
shall preclude any party from seeking equitable relief to prevent any immediate,
irreparable harm to its interests, including multiple breaches of this Agreement
or the Ancillary Agreements by another party. Otherwise, the procedures set
forth in Article IX regarding dispute
43
resolution are exclusive and shall be fully exhausted prior to the initiation of
litigation. Any party to this Agreement may also seek specific enforcement of
the Arbitrator's decision under Article IX; the opposing party's only defense to
such a request for specific performance shall be fraud by or on the Arbitrator.
SECTION 10.11 Third Party Beneficiaries. Except as provided in
Article V relating to Indemnitees and Sections 10.01 and 10.02 relating to
modification, amendment and termination, this Agreement is solely for the
benefit of the parties hereto and their respective Subsidiaries and Affiliates,
directors and officers, and should not be deemed to confer upon third parties
any remedy, claim, liability, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement.
SECTION 10.12 Expenses. Except as otherwise set forth in this
Agreement or any Ancillary Agreement, each party shall bear its own costs and
expenses incurred after the Distribution Time.
SECTION 10.13 Exhibits and Schedules. The Exhibits and
Schedules to this Agreement shall be construed with and as an integral part of
this Agreement to the same extent as if the same had been set forth verbatim
herein.
SECTION 10.14 Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Delaware
applicable to contracts made and to be performed entirely within such state,
without regard to the conflicts of law principles of such state.
SECTION 10.15 Consent to Jurisdiction. Each of the parties
irrevocably submits to the exclusive jurisdiction of the state and federal
courts of Delaware for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties agree that service of any process, summons, notice or document by
U.S. registered mail to such party's respective address set forth above shall be
effective service of process for any action, suit or proceeding in Delaware with
respect to any matters to which it has submitted to jurisdiction in this Section
10.17. Each of the parties irrevocably and unconditionally waives any objection
to the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in the state and federal
courts of Delaware, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
This consent to jurisdiction provision does not, in any way, limit the force and
effect of the requirements set forth in Article IX regarding resolution of
Disputes.
SECTION 10.16 Ancillary Agreements. This Agreement is not
intended to address, and should not be interpreted to address, the matters
specifically and expressly covered by the Ancillary Agreements.
44
SECTION 10.17 Survival of Agreements. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Time.
SECTION 10.18 Successors and Assigns. The provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
45
IN WITNESS WHEREOF, the parties have caused this Agreement and
Plan of Distribution to be duly executed as of the day and year first above
written.
U.S. OFFICE PRODUCTS COMPANY
By /s/ Xxxx X. Director
-----------------------------
Name: Xxxx X. Director
Title: Executive Vice President-Administration
WORKFLOW MANAGEMENT, INC.
By /s/ Xxxxxx X. X'Xxxxxxxx
-----------------------------
Name: Xxxxxx X. X'Xxxxxxxx
Title: President
SCHOOL SPECIALTY, INC.
By
-----------------------------
Name:
Title:
AZTEC TECHNOLOGY PARTNERS, INC.
By
-----------------------------
Name:
Title:
NAVIGANT INTERNATIONAL, INC.
By
-----------------------------
Name:
Title:
46
IN WITNESS WHEREOF, the parties have caused this Agreement and
Plan of Distribution to be duly executed as of the day and year first above
written.
U.S. OFFICE PRODUCTS COMPANY
By
-----------------------------
Name:
Title:
WORKFLOW MANAGEMENT, INC.
By
-----------------------------
Name:
Title:
SCHOOL SPECIALTY, INC.
By /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
AZTEC TECHNOLOGY PARTNERS, INC.
By
-----------------------------
Name:
Title:
NAVIGANT INTERNATIONAL, INC.
By
-----------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties have caused this Agreement and
Plan of Distribution to be duly executed as of the day and year first above
written.
U.S. OFFICE PRODUCTS COMPANY
By
-----------------------------
Name:
Title:
WORKFLOW MANAGEMENT, INC.
By
-----------------------------
Name:
Title:
SCHOOL SPECIALTY, INC.
By
-----------------------------
Name:
Title:
AZTEC TECHNOLOGY PARTNERS, INC.
By /s/ Xxxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Chairman
NAVIGANT INTERNATIONAL, INC.
By
-----------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties have caused this Agreement and
Plan of Distribution to be duly executed as of the day and year first above
written.
U.S. OFFICE PRODUCTS COMPANY
By
-----------------------------
Name:
Title:
WORKFLOW MANAGEMENT, INC.
By
-----------------------------
Name:
Title:
SCHOOL SPECIALTY, INC.
By
-----------------------------
Name:
Title:
AZTEC TECHNOLOGY PARTNERS, INC.
By
-----------------------------
Name:
Title:
NAVIGANT INTERNATIONAL, INC.
By /s/ Xxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxx X. Xxxxx
Title: President
Exhibit II
Agreement and Plan of Distribution
Distributed Company Subsidiaries
I. Printco Subsidiaries
1. Astrid Offset Corp.
2. Data Business Forms Limited
3. Hano Document Printers, Inc.
4. Huxley Envelope Corp.
5. Pocono Envelope Corp.
6. Xxx Envelope Co., Inc.
7. SFI of Delaware, LLC
8. United Envelope, LLC
9. 3303471 Canada Limited
10. Data Business Forms Limited
11. 1186202 Ontario Limited (1)
II. Schoolco Subsidiaries
1. Childcraft Education Corp.
2. Xxx Xxxxxxxxx Ltd.
3. Sax Arts & Crafts, Inc.
4. School Specialty, Inc.
5. Re-Print, LLC
6. Bird-in-Hand, Inc.
III. Techco Subsidiaries
1. Aztec LLC
2. Bay State LLC
3. Compel LLC
4. Digital Network Associates, Inc.
5. Entra Computer Corp.
6. Fortran Corp.
-------------------
(1) But excluding (x) 0000000 Ontario Limited, 1243231 Ontario Limited
and 1203803 Ontario Limited (and their respective Subsidiaries), all of which
are Retained Subsidiaries, and (y) 1255994 Ontario Limited and its
Subsidiaries, all of which are Travelco Subsidiaries.
7. Xxxxx Communications Corporation
8. Office Equipment Services Co., Inc.
9. Professional Computer Solutions, Inc.
10. Professional Network Services, Inc.
IV. Travelco Subsidiaries
1. AQUA Software Products, Inc.
2. Associated Travel Services, LLC
3. Atlas Travel Service Ltd.
4. Envision Vacations, Inc.
5. Xxxxx Travel Group, Inc.
6. Jekela Investments Ltd.
7. XxXxxxxx Travel Management, Inc.
8. MTA, Inc.
9. MTMUK Acquisition Corp.
10. Mutual Travel, Inc.
11. Omni Travel Service, Inc.
12. Professional Travel Corporation
13. Xxxxxxx Associates, Inc.
14. St. Pierre Enterprises, Inc.
15. Travel Arrangements, Inc.
16. Travel Consultants, Inc.
17. Wareheim Travel Services, Inc.
18. 1255994 Ontario Limited
II-2
Exhibit III
Agreement and Plan of Distribution
Estimated Pro Rata Share Percentages
Navigant International, Inc. 5.2%
Aztec Technology Partners, Inc. 8.2%
School Specialty, Inc. 11.9%
Workflow Management, Inc. 9.1%
U.S. Office Products Company 65.6%
Exhibit IV
Agreement and Plan of Distribution
Shared Liabilities
------------------
The following are Shared Liabilities under clause (ii) of the
definition of Shared Liability in the Agreement:
(1.) Liabilities arising out of Xxxxxx x. Xxxxxxx et al., filed
April 14, 1998, in the Court of Chancery of the State of Delaware.
Exhibit V
Agreement and Plan of Distribution
Shared Liabilities: Information Statement Sections
--------------------------------------------------
Any Liability arising out of any of the following sections of
the Information Statements as indicated below shall be a Shared Liability:
Information Sections
Statement
All Distributed "Risk Factors -- Potential Conflicts of Interest in the Distributions"
Companies
"Risk Factors -- Tax Matters"
"Risk Factors -- Potential Liability for Taxes Related to the
Distributions"
"Risk Factors -- Possible Limitations on Issuances of Common Stock"
Workflow "Summary -- Background of the Workflow Distribution" and all
Management, Inc. subsections thereunder
"The Workflow Distribution" and all subsections thereunder
"Principal Stockholders of Workflow Management"
"The Spin-Offs from U.S. Office Products" and all subsections
thereunder
School Specialty, "Summary -- Background of the School Specialty Distribution" and all
Inc. subsections thereunder
"The School Specialty Distribution" and all subsections thereunder
"Principal Stockholders of School Specialty"
"The Spin-Offs from U.S. Office Products" and all subsections
thereunder
Information Sections
Statement
Aztec Technology "Summary -- Background of the Technology Distribution" and all
Partners, Inc. subsections thereunder
"The Technology Distribution" and all subsections thereunder
"Principal Stockholders"
"The Spin-Offs from U.S. Office Products" and all subsections
thereunder
Navigant "Summary -- Background of the Travel Distribution" and all subsections
International, Inc. thereunder
"The Travel Distribution" and all subsections thereunder
"Principal Stockholders of Navigant"
"Arrangements Among U.S. Office Products, Navigant and the Other
Spin-Off Companies After the Distributions" and all subsections
thereunder
V-2
Schedule 2.06
Agreement and Plan of Distribution
Specified Guarantees
--------------------
(1.) Aztec Technology Partners, Inc. PCSI Key Employee Agreement dated
May 15. 1998 between Xxxxx XxXxxxxxxxx and Aztec Technology Partners,
Inc. ("Aztec"), with obligations guaranteed by U.S. Office Products
Company;
(2.) Aztec Technology Partners, Inc. PCSI Key Employee Agreement dated May
15, 1998 between Xxxxxx Xxxxxx and Aztec, with obligations guaranteed
by U.S. Office Products Company;
(3.) Aztec Technology Partners, Inc. PCSI Key Employee Agreement dated May
15, 1998 between Xxxxxx Xxxxxx and Aztec, with obligations guaranteed
by U.S. Office Products Company;
(4.) Aztec Technology Partners, Inc. PCSI Key Employee Agreement dated May
15, 1998 between Xxxx Xxxxx and Aztec, with obligations guaranteed by
U.S. Office Products Company;
(5.) Aztec Technology Partners, Inc. PCSI Key Employee Agreement dated May
15, 1998 between Xxxxxxxx Xxxx and Aztec, with obligations guaranteed
by U.S. Office Products Company;
(6.) Aztec Technology Partners, Inc. PCSI Key Employee Agreement dated May
15, 1998 between Xxx Xxxxxx and Aztec, with obligations guaranteed
by U.S. Office Products Company;
(7.) Aztec Technology Partners, Inc. PCSI Key Employee Agreement dated May
15, 1998 between Xxxxxx Xxxx and Aztec, with obligations guaranteed
by U.S. Office Products Company; and
(8.) Aztec Technology Partners, Inc. PCSI Key Employee Agreement dated May
15, 1998 between Art Xxxxxxx and Aztec, with obligations guaranteed
by U.S. Office Products Companyx.
Schedule 2.08
Agreement and Plan of Distribution
Debt Amounts
Workflow Management, Inc. $ 30.0 million
School Specialty, Inc. $ 80.0 million
Aztec Technology Partners, Inc. $ 5.0 million
Navigant International, Inc. $ 15.0 million
Schedule 2.09
Agreement and Plan of Distribution
Net Recovery Amounts
--------------------
Workflow Management, Inc. $20.0 million
School Specialty, Inc. $70.0 million
Schedule 2.10
Agreement and Plan of Distribution
Distribution of Pledged Shares
1. Statement of Purpose
Pursuant to the Distributions, any person who owns shares of
Company Common Stock as of the Distribution Record Date is entitled to receive
Distribution Shares in respect of such stock, including Distribution Shares in
respect of any Company Common Stock pledged as collateral security by such
shareholder as a seller under an Acquisition Agreement. However, under the
Acquisition Agreements with such selling stockholders, the Company is entitled
to retain as pledged shares all non-cash dividends paid on Company Common Stock.
Therefore, Distribution Shares distributed to such sellers in respect of any
Company Common Stock that remains pledged as of the Distribution Date shall be
considered pledged under the relevant Acquisition Agreement and shall be held by
the Company as set forth in Section 2.10 of the Agreement as security for the
payment of claims of the Company or the relevant Distributed Company against
such seller. The following provisions govern the holding, distribution and
valuation of the Pledged Shares after the Distributions.
2. Definitions
"Adjusted Value" shall mean, as to any Original Pledged Shares
or any Distributed Company Pledged Shares, the value of such shares after the
Distributions as determined pursuant to clause 4.
"Distributed Company Pledged Shares" shall mean all
Distribution Shares distributed in respect of the Original Pledged Shares
remaining subject to the pledge.
"Historical Value" shall mean, as to any Original Pledged
Share, the value assigned to it under the Acquisition Agreement pursuant to
which such Original Pledged Share was pledged.
"Original Pledged Share" shall mean any share of Company
Common Stock pledged or assigned to the Company prior to the Distribution Date
(and remaining pledged or assigned as of the Distribution Date) as collateral
security by a seller of a Distributed Company Subsidiary (or a division within
such Subsidiary or Distributed Company) under the Acquisition Agreement
governing such sale.
"Pledged Shares" shall mean, collectively, the Original
Pledged Shares and the Distributed Company Pledged Shares.
"Trading Price" shall mean, as to any share of common stock,
the price at which such share is trading on the open market at the close of the
trading on a specified day.
3. Terms
(a) As of the Distribution Date, the Company shall continue to
hold all Original Pledged Shares pledged under the Acquisition Agreements
pursuant to which the Distributed Company Subsidiaries (or divisions within such
Subsidiaries or Distributed Companies) were acquired by the Company or any of
its Subsidiaries (or any cash resulting from liquidation of such Original
Pledged Shares or from the tender of such Original Pledged Shares in the Equity
Tender) for the benefit of the Company and the relevant Distributed Companies,
as applicable. The Company shall, after the Distribution Date, similarly hold
the Distributed Company Pledged Shares paid as a dividend on such Original
Pledged Shares. In the event it is determined after the Distribution Date that a
Distributed Company is entitled to a recovery under an Acquisition Claim and
such claim is secured by Pledged Shares held by the Company, the Company shall
distribute such shares as set forth below; provided, however, that, as to any
Acquisition Claim, no Pledged Shares shall be released to the Company or a
Distributed Company unless and until (i) the decision of the arbitrator or court
of competent jurisdiction concerning such Acquisition Claim is final and
non-appealable, or (ii) there has been a final settlement of such Acquisition
Claim and the Company has been released from all claims against it by the seller
under the related Acquisition Agreement (or the Company is otherwise reasonably
satisfied that the resolution of the Acquisition Claim will not impose liability
on it).
(b) In the event it is finally determined after the
Distribution Date that a Distributed Company is entitled to a recovery under an
Acquisition Claim and such claim is secured by Pledged Shares, the Company shall
distribute to such Distributed Company (in accordance with the provisions of the
related Acquisition Agreement) Pledged Shares (or cash related thereto) equal in
value to the value of the recovery to which the Distributed Company is entitled
(excluding the amount, if any, of the net recovery to which the Company is
entitled under Section 2.09 of the Agreement). The shares to be distributed
shall be distributed from the pool of Pledged Shares for that particular seller
in the following order of preference: (i) from the common shares of such
Distributed Company, to the extent available, (ii) from the common shares of the
other Distributed Companies in equal proportions, to the extent available, and
(iii) from Company Common Stock.
(c) In the event it is determined after the Distribution Date
that the Company is entitled to a recovery under an Acquisition Claim and such
claim is secured by Pledged Shares, the Company shall withdraw (in accordance
with the provisions of the related Acquisition Agreement) Pledged Shares (or
cash related thereto) equal in value to the net recovery to which it is
entitled. The shares to be withdrawn shall be withdrawn from the pool of Pledged
Shares in the following order of preference: (i) from Company Common Stock, to
the extent available, and (ii) from the common shares of the Distributed
Companies in equal proportions, to the extent available.
(d) In the event of a distribution or withdrawal of Pledged
Shares as described in (b) or (c) above, the Company shall first distribute or
withdraw, as applicable, all cash held in escrow as a result of the liquidation
or tender of the Pledged Shares, if any.
2
4. Valuation. For purposes of determining the value of the Pledged Shares to be
released pursuant to Section 2.10 and this Schedule 2.10 under any Acquisition
Agreement for a transaction accounted for as a pooling or where the relevant
Acquisition Agreement does not provide for the valuation of Pledged Shares as of
a date after the Distribution Date, the per share value of the Original Pledged
Shares or Distributed Company Pledged Shares, as the case may be, shall equal
the product of (i) such entity's Allocable Share times (ii) the Historical Value
of one underlying Original Pledged Share. The Allocable Share with respect to
the Distributed Company Pledged Shares of any particular Distributed Company
shall be the fraction (x) the numerator of which is the initial public offering
price of such Distributed Company in the Offering and (y) the denominator of
which is the average closing price of the Company's Common Stock for the lesser
of (1) ten business days preceding the Distributions, or (2) the number of
business days falling between the expiration of the Equity Tender and the
completion of the Distributions. The Allocable Share with respect to the
Original Pledged Shares of the Company shall be the number one minus the
Allocable Shares for each of the Distributed Companies.
5. Restrictions of Revalued Pledged Shares. The parties agree that they will
dispose of any Original Pledged Shares and Distributed Company Pledged Shares
received pursuant to Section 2.10 and this Schedule 2.10 as follows:
(i) Each Distributed Company agrees to retire any and
all Pledged Shares comprised of its own common shares
that are received in respect of Acquisition Claims;
and
(ii) Each Distributed Company agrees to sell in
ordinary open market transactions, as soon as
practicable, any and all Pledged Shares comprised of
common shares of the Company and any other
Distributed Company that are received in respect of
Acquisition Claims.
(iii) The parties further agree and acknowledge that
any Company Common Stock received by the Distributed
Companies pursuant to Section 2.10 and this Schedule
2.10 may be restricted stock (as defined in Rule 144
of the Securities Act) and may not be resold without
registration or an opinion that such shares may be
transferred without registration under the Securities
Act.
3
Schedule 2.11
Agreement and Plan of Distribution
Other Transactions
Licensing Agreement by and between the Company and Printco dated
_______________, 1998 in relation to Imagenet (the "Imagenet Licensing
Agreement").
Schedule 5.11
Agreement and Plan of Distribution
Terms Applicable to MCI Agreement
1 Travelco will enter into a separate Special Customer Agreement
with MCI Incor porated (the "Travel SCA"). None of the
Company, Printco, Schoolco or Techco shall have any liability
or obligation under the Travel SCA.
2 The Company shall enter into an amended MCI Agreement (the
"Amended Company SCA") pursuant to which the Company will have
reduced obligations to buy capacity from MCI (the "Collective
Minimums"), reflecting the creation of a separate Travel SCA
with its own minimums. The Amended Company SCA will give the
Company the right to have counted toward the Collective
Minimums capacity purchased from MCI by its former
subsidiaries, Printco, Schoolco and Techco (each, an "SCA
Subpurchaser" and, collectively, the "SCA Subpurchasers").
Travelco shall not have any liability or obligation under the
Amended Company SCA, and the SCA Subpurchasers will have no
liabilities or obligations to MCI under the Amended Company
SCA, but will have potential liabilities to the Company under
this Exhibit 5.11 and the Distribution Agreement.
3 The Amended Company SCA will provide that if the Company --
together with the SCA Subpurchasers -- shall collectively fail
to achieve the Collective Minimums, penalties will be imposed
on the Company. In order to allocate fairly the obligations
under the Amended Company SCA, the Company and the SCA
Subpurchasers hereby agree that if any such penalties are
assessed against the Company, such liabilities shall be
allocated among them as follows:
3.1 Attachment I sets forth the Company's and each of the
SCA Subpurchasers' respective minimum purchasing
requirements in four categories -- Annual Minimum,
Local Minimum, Frame Minimum and Core Product Term
Minimum (the "Separate Minimums").
3.2 If a penalty is imposed on the Company because of the
failure to achieve any particular Collective Minimum
under the Amended Company SCA, then each SCA
Subpurchaser that failed to achieve its corresponding
Separate Minimum shall be liable to the Company for
that portion of the penalty imposed on the Company by
MCI with respect to such Collective Minimum
multiplied by the fraction (i) the numerator of which
is the amount by which such SCA Subpurchaser's
Separate Minimum exceeds the amount of such services
actually purchased by such SCA Subpurchaser over the
period for which the penalty applies, and (ii) the
denominator of which is the sum, as to the entities
listed on Attachment I that failed to achieve the
relevant
Separate Minimum, of the amounts by which each such
entity's relevant Separate Minimum exceeds the amount
of such services actually purchased by such entity
over the relevant term.
4 The liabilities of any SCA Subpurchaser to the Company under
the terms of this Exhibit 5.11 shall be treated under the
Distribution Agreement as a Printco Liability, a Schoolco
Liability or a Techco Liability, as the case may be. Such
liabilities shall not be subject to the limitation on
liabilities set forth in the second proviso to Sections 5.02,
5.03, 5.04 and 5.05. The liabilities of Travelco under the
Travel SCA shall be treated as Travelco Liabilities under the
Distribution Agreement.
US OFFICE PRODUCTS
MCI VOLUME COMMITMENTS
Table 1: Annual Minimum*
Year 1 Year 2 Year 3
% $ % $ % $ Average (%)
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
USOP 75.1% 3.83 74.9% 4.42 74.8% 5.09 74.9%
----------------------------------------------------------------------------------------------------------------------------
Print 11.7% 0.60 11.6% 0.68 11.6% 0.79 11.6%
----------------------------------------------------------------------------------------------------------------------------
Tech 4.0% 0.20 4.6% 0.27 4.7% 0.32 4.4%
----------------------------------------------------------------------------------------------------------------------------
Education 9.2% 0.47 8.9% 0.53 8.9% 0.61 9.0%
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
TOTAL 100.0% 5.10 100.0% 5.90 100.0% 6.80 100.0%
----------------------------------------------------------------------------------------------------------------------------
$ = millions
*Includes inter- and intra-state long distance, international long distance,
local, frame relay, access, leased lines, and dynamic routing.
Table 2: Local Minimum
Year 1 Year 2 Year 3
% $ % $ % $ Average (%)
--------------------------------------------------------------------------------------------------------------
USOP 92.5% 0.50 85.0% 0.46 85.0% 0.46 87.5%
-------------------------------------------------------------------------------------------------------------------------------
Print 2.7% 0.01 6.0% 0.03 6.0% 0.03 4.9%
-------------------------------------------------------------------------------------------------------------------------------
Tech 3.4% 0.02 6.0% 0.03 6.0% 0.03 5.1%
-------------------------------------------------------------------------------------------------------------------------------
Education 1.4% 0.01 3.0% 0.02 3.0% 0.02 2.5%
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
TOTAL 100.0% 0.54 100.0% 0.54 100.0% 0.54 100.0%
-------------------------------------------------------------------------------------------------------------------------------
$ = millions
Table 3: Frame Minimum*
Year 1 Year 2 Year 3
% $ % $ % $ Average (%)
-------------------------------------------------------------------------------------------------------------
USOP 73.6% 0.51 73.6% 0.51 73.6% 0.51 73.6%
-------------------------------------------------------------------------------------------------------------------------------
Print 15.4% 0.11 15.4% 0.11 15.4% 0.11 15.4%
-------------------------------------------------------------------------------------------------------------------------------
Tech 0.4% 0.00 0.4% 0.00 0.4% 0.00 0.4%
-------------------------------------------------------------------------------------------------------------------------------
Education 10.6% 0.07 10.6% 0.07 10.6% 0.07 10.6%
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
TOTAL 100.0% 0.69 100.0% 0.69 100.0% 0.69 100.0%
-------------------------------------------------------------------------------------------------------------------------------
$ = millions
*Includes port and frame relay service but excludes access.
Table 4: Core Product Term Minimum*
% $
------------------------
USOP 74.9% 14.59
----------------------------------------------
Print 11.6% 2.26
----------------------------------------------
Tech 4.4% 0.86
----------------------------------------------
Education 9.0% 1.75
----------------------------------------------
----------------------------------------------
TOTAL 100.0% 19.47
----------------------------------------------
$ = millions
*Includes inter- and intra-state long distance, dynamic routing, frame relay,
and access.