DISTRIBUTION AGREEMENT
between
Pitney Bowes Inc.
and
Pitney Bowes Office Systems, Inc.
Dated as of _________, 2001
TABLE OF CONTENTS
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PAGE
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions..........................................................2
ARTICLE 2
CONTRIBUTIONS TO OFFICE SYSTEMS
SECTION 2.01. Contribution of Contributed Subsidiaries.............................7
SECTION 2.02. Transfers of Certain Assets; Assumption of Certain
Liabilities....................................................................7
SECTION 2.03. Agreement Relating to Consents Necessary to Transfer
Assets.........................................................................7
ARTICLE 3
THE DISTRIBUTION
SECTION 3.01. Cooperation Prior to the Distribution................................8
SECTION 3.02. Pitney Bowes Board Action; Conditions Precedent to the
Distribution...................................................................9
SECTION 3.03. The Distribution....................................................10
SECTION 3.04. Subdivision of Office Systems Common Stock to
Accomplish the Distribution...................................................10
SECTION 3.05. Fractional Shares...................................................10
ARTICLE 4
INDEMNIFICATION
SECTION 4.01. Office Systems Indemnification of the Pitney Bowes Group............11
SECTION 4.02. Pitney Bowes Indemnification of Office Systems Group................11
SECTION 4.03. Insurance; Third Party Obligations; Tax Benefits....................12
SECTION 4.04. Notice and Payment of Claims........................................12
SECTION 4.05. Notice and Defense of Third-Party Claims............................13
SECTION 4.06. Contribution........................................................14
SECTION 4.07. Non-Exclusivity of Remedies.........................................14
ARTICLE 5
EMPLOYEE MATTERS AND SERVICES
SECTION 5.01. Employee Matters Generally..........................................15
SECTION 5.02. Restriction on Solicitation or Employment of Employees..............15
SECTION 5.03. Notification of Termination of Employees............................15
PAGE
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ARTICLE 6
ACCESS TO INFORMATION
SECTION 6.01. Provision of Corporate Records......................................15
SECTION 6.02. Access to Information...............................................16
SECTION 6.03. Litigation Cooperation..............................................16
SECTION 6.04. Reimbursement.......................................................16
SECTION 6.05. Retention of Records................................................16
SECTION 6.06. Confidentiality.....................................................16
SECTION 6.07. Inapplicability of Article to Tax Matters...........................17
ARTICLE 7
CERTAIN OTHER AGREEMENTS AND COVENANTS
SECTION 7.01. Amounts Payable and Intercompany Accounts...........................17
SECTION 7.02. Covenants Not to Compete............................................17
SECTION 7.03. Further Assurances and Consents.....................................19
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Notices.............................................................20
SECTION 8.02. Amendments; No Waivers..............................................21
SECTION 8.03. Expenses............................................................21
SECTION 8.04. Insurance Matters...................................................21
SECTION 8.05. Successors and Assigns..............................................21
SECTION 8.06. Governing Law.......................................................22
SECTION 8.07. Counterparts; Effectiveness.........................................22
SECTION 8.08. Entire Agreement....................................................22
SECTION 8.09. Tax Separation Agreement............................................22
SECTION 8.10. Jurisdiction........................................................22
SECTION 8.11. Existing Arrangements...............................................23
SECTION 8.12. Termination Prior to the Distribution...............................23
SECTION 8.13. Termination After the Distribution..................................23
SECTION 8.14. Severability........................................................24
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SECTION 8.15. Survival............................................................24
SECTION 8.16. Captions............................................................24
SECTION 8.17. Specific Performance................................................24
Schedule 2.01 -- Contributed Subsidiaries
Schedule 4.04 -- Non-Income Tax Claims
Schedule 5.01 -- Employee Matters
EXHIBITS
Exhibit A Tax Separation Agreement
Exhibit B Transition Services Agreement
Exhibit C Intellectual Property Agreement
Exhibit D Pitney Bowes Management Services Reseller Agreement
Exhibit E Pitney Bowes of Canada Ltd. Reseller Agreement
Exhibit F Vendor Financing Agreement
Exhibit G-1 Form of Assignment and Novation Agreements
Exhibit G-2 Form of Sublease Agreements
Exhibit G-3 Form of Sublease and License Agreements
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DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT dated as of _________________, 2001 (the
"Agreement") between Pitney Bowes Inc., a Delaware corporation ("Pitney
Bowes"), and Pitney Bowes Office Systems, Inc., a Delaware corporation
("Office Systems").
W I T N E S S E T H:
-------------------
WHEREAS, Pitney Bowes, acting through the Office Systems Group
(as defined herein), currently conducts a number of businesses, including
providing document imaging solutions through copiers, facsimile machines,
multi-functional products and other related products.
WHEREAS, Pitney Bowes has determined to transfer certain assets
to Office Systems and cause Office Systems to assume certain Liabilities (as
defined herein) of Pitney Bowes;
WHEREAS, the Board of Directors of Pitney Bowes has authorized
the distribution to the holders of the issued and outstanding shares of common
stock, par value $.01 per share, of Pitney Bowes (together with the associated
preferred share purchase rights, the "Pitney Bowes Common Stock") as of the
record date of 100% of the issued and outstanding shares of common stock, par
value $.01 per share, of Office Systems (together with the associated preferred
share purchase rights, the "Office Systems Common Stock"), on the basis of 0.08
shares of Office Systems Common Stock for each one share of Pitney Bowes Common
Stock (the "Distribution"); and
WHEREAS, the parties hereto have determined to set forth the
principal corporate and other transactions required to effect the Distribution
and to set forth other agreements that will govern certain other matters prior
to and following the Distribution.
NOW, THEREFORE, in consideration of the mutual covenants
contained in this Agreement, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein,
have the following meanings:
"Action" means any demand, claim, suit, action, arbitration,
inquiry, investigation or other proceeding by or before or any Governmental
Authority or any arbitration or mediation tribunal.
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common control with,
such other Person; provided, however, that for purposes of this Agreement, any
Person who was a member of both Groups prior to the Distribution shall be deemed
to be an Affiliate only of the Group of which such Person is a member following
the Distribution. For the purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. Any
contrary provision of this Agreement notwithstanding, neither Pitney Bowes nor
any of its Subsidiaries shall be deemed to be an Affiliate of Office Systems.
"Agreement" has the meaning set forth in the preamble hereto, as
such agreement may be amended and supplemented from time to time in accordance
with its terms.
"Ancillary Agreement" means each of the Tax Separation Agreement,
the Transition Services Agreement, the Intellectual Property Agreement, the
Reseller Agreements, the Vendor Financing Agreement, the Assignment and Novation
Agreements, the Sublease Agreements, the Sublease and License Agreements and the
Credit Agreement.
"Assignment and Novation Agreements" means the Assignment and
Novation Agreements entered or to be entered into among Pitney Bowes, Office
Systems and the several landlords party thereto in connection with the
Distribution.
"Canada Reseller Agreement" means the Reseller Agreement dated as
of the date hereof between Pitney Bowes of Canada Ltd. and Office Systems.
"Commission" means the Securities and Exchange Commission.
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"Credit Agreement" means the Credit Agreement dated
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between Office Systems and Merrill Lynch.
"Distribution" has the meaning set forth in the recitals to this
Agreement.
"Distribution Agent" means EquiServe Trust Company, N.A.
"Distribution Date" means the day as of which the Distribution
shall be effected.
"Distribution Documents" means all of the agreements and other
documents entered into in connection with the Distribution as contemplated
hereby, including, without limitation, this Agreement and the Ancillary
Agreements.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, permits, licenses and governmental
restrictions, whether now or hereafter in effect, relating to the environment,
the effect of the environment on human health or to emissions, discharges,
releases, manufacturing, storage, processing, distribution, use, treatment,
disposal, transportation or handling of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic, radioactive or hazardous
substances or wastes or the clean-up or other remediation thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Finally Determined" means, with respect to any Action or other
matter, that the outcome or resolution of such Action or matter has been
judicially determined by judgment or order not subject to further appeal or
discretionary review.
"Form 10" means the registration statement on Form 10 initially
filed by Office Systems with the Commission on April 18, 2001 to effect the
registration of Office Systems Common Stock pursuant to the Exchange Act in
connection with the Distribution, as such registration statement may be amended
or supplemented from time to time.
"Group" means, as the context requires, the Office Systems Group
or the Pitney Bowes Group.
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"Income Taxes" has the meaning set forth in the Tax Separation
Agreement.
"Indemnified Party" has the meaning set forth in Section 4.04.
"Indemnifying Party" has the meaning set forth in Section 4.04.
"Information Statement" means the Final Information Statement to
be sent to each holder of Pitney Bowes Common Stock in connection with the
Distribution.
"Intellectual Property Agreement" means the Intellectual Property
Agreement dated as of the date hereof between Pitney Bowes and Office Systems.
"IRS" means the Internal Revenue Service.
"Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under this
Agreement, any law, rule, regulation, any action, order, injunction or consent
decree of any governmental agency or entity, or any award of any arbitrator of
any kind, and those arising under any agreement, commitment or undertaking.
"Losses" means, with respect to any Person, any and all damage,
loss, liability and expense incurred or suffered by such Person (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any and all Actions or
threatened Actions).
"Management Services Reseller Agreement" means the Reseller
Agreement dated as of the date hereof between Pitney Bowes Management Services
and Office Systems.
"Non-Income Taxes" has the meaning set forth in the Tax
Separation Agreement.
"NYSE" has the meaning set forth in Section 3.01.
"Office Systems" has the meaning set forth in the preamble.
"Office Systems Balance Sheet" means the most recent balance
sheet of Office Systems as reflected in the final Information Statement of
Office Systems.
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"Office Systems Business" means the business of Office Systems
and its Subsidiaries as conducted by the office systems division of Pitney Bowes
(except for the facsimile business conducted by Pitney Bowes of Canada Ltd.) as
of the date hereof, including document imaging solutions and related products
and maintenance.
"Office Systems Common Stock" has the meaning set forth in the
recitals to this Agreement.
"Office Systems Group" means Office Systems and its Subsidiaries
as of and after the Distribution Date (including all predecessors to such
Persons).
"Office Systems Liabilities" means all (i) Liabilities of the
Office Systems Group under this Agreement, (ii) except for the liabilities
accrued as of the Distribution Date to the accounts reflected on Schedule 2.02
and as otherwise specifically provided herein or in any Ancillary Agreement,
other Liabilities, whether arising before, on or after the Distribution Date, of
or relating to the Office Systems Group or arising from or in connection with
the conduct of the Office Systems Business or the ownership or use of assets in
connection therewith, including without limitation any Liabilities for
Non-Income Taxes and any Liabilities arising under or relating to Environmental
Laws, and (iii) Liabilities of the Office Systems Group set forth in Schedule
5.01 hereto. Notwithstanding the foregoing, "Office Systems Liabilities" shall
exclude: (x) any Liabilities for Income Taxes (since such Liabilities shall be
governed by the Tax Separation Agreement), (y) any Liabilities specifically
retained or assumed by Pitney Bowes pursuant to this Agreement.
"Person" means an individual, corporation, limited liability
company, partnership, association, trust or other entity or organization,
including a governmental or political subdivision or an agency or
instrumentality thereof.
"Pitney Bowes" has the meaning set forth in the preamble.
"Pitney Bowes Common Stock" has the meaning set forth in the
recitals to this Agreement.
"Pitney Bowes Group" means Pitney Bowes and its Subsidiaries
(other than any Subsidiary or member of, or other entity in, the Office Systems
Group).
"Pitney Bowes Liabilities" means all Liabilities of the Pitney
Bowes Group under this Agreement, including the liabilities accrued as of the
Distribution Date to the accounts reflected on Schedule 2.02, except as
otherwise specifically provided herein or in any Ancillary Agreements, other
Liabilities,
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whether arising before, on or after the Distribution Date, of or relating to the
Pitney Bowes Group or arising from or in connection with the conduct of the
businesses of the Pitney Bowes Group (other than the Office Systems Business) or
the ownership or use of assets in connection therewith, including without
limitation any Liabilities arising under or relating to Environmental Laws.
Notwithstanding the foregoing, "Pitney Bowes Liabilities" shall exclude (x) any
Liabilities for Income Taxes (since such Liabilities shall be governed by the
Tax Separation Agreement) and (y) any Liabilities specifically retained or
assumed by Office Systems pursuant to this Agreement.
"Record Date" means the date determined by Pitney Bowes' Board of
Directors (or determined by a committee of such Board of Directors pursuant to
authority delegated to such committee by Pitney Bowes' Board of Directors) as
the record date for determining the holders of Pitney Bowes Common Stock
entitled to receive the Distribution.
"Restated Office Systems Charter" has the meaning set forth in
Section 3.02.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Sublease Agreements" means each of the Sublease Agreements
entered or to be entered into between Pitney Bowes and Office Systems.
"Sublease and License Agreements" means each of the Sublease
Agreements entered or to be entered into between Pitney Bowes and Office
Systems.
"Subsidiary" means, with respect to any Person, any other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Tax" means Income Taxes and Non-Income Taxes, each as defined in
the Tax Separation Agreement.
"Tax Separation Agreement" means the Tax Separation Agreement
dated as of the date hereof between Pitney Bowes and Office Systems.
"Third-Party Claim" has the meaning set forth in Section 4.05.
"Transfer" has the meaning set forth in Section 2.02.
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"Transition Services Agreement" means the Transition Services
Agreement dated as of the date hereof between Pitney Bowes and Office Systems.
"Vendor Financing Agreement" means the Vendor Financing Agreement
dated as of the date hereof between Pitney Bowes Credit Corporation and Office
Systems.
ARTICLE 2
CONTRIBUTIONS TO OFFICE SYSTEMS
SECTION 2.01. Contribution of Contributed Subsidiaries. Prior to
the Distribution Date, Pitney Bowes shall contribute or transfer to Office
Systems or to one or more wholly owned Subsidiaries of Office Systems, as
specified by Office Systems, all the outstanding shares of capital stock of, or
other ownership interests in, each of the subsidiaries set forth in Schedule
2.01 hereto.
SECTION 2.02. Transfers of Certain Assets; Assumption of Certain
Liabilities. (a) Prior to the Distribution Date, subject to receipt of any
necessary consents or approvals of third parties or of Governmental Authorities
and subject to Section 7.03, Pitney Bowes shall, or shall cause the relevant
member of the Pitney Bowes Group to, assign, contribute, convey, transfer and
deliver ("Transfer") to Office Systems or to one or more wholly-owned
Subsidiaries of Office Systems, as specified by Office Systems, all of the
right, title and interest of Pitney Bowes or such member of the Pitney Bowes
Group in and to all assets held by any member of the Pitney Bowes Group that
relate solely to the Office Systems Business (and not to the businesses of the
Pitney Bowes Group including, without limitation, all assets reflected in the
Office Systems Balance Sheet, subject to transactions in the ordinary course)
and Office Systems shall assume and take transfer of all Office Systems
Liabilities.
SECTION 2.03. Agreement Relating to Consents Necessary to
Transfer Assets. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall not constitute an agreement to transfer or assign any asset
or any claim or right or any benefit arising thereunder or resulting therefrom
if an attempted assignment thereof, without the necessary consent of a third
party, would constitute a breach or other contravention thereof or in any way
adversely affect the rights of Office Systems, or any member of the Office
Systems Group, or Pitney Bowes, or any member of the Pitney Bowes Group,
thereunder. Office Systems and Pitney Bowes will, subject to Section 7.03, use,
and cause the relevant members of the Office Systems Group or the Pitney Bowes
Group, respectively, to use, their reasonable efforts to obtain the consent of
any third
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party or any Governmental Authority, if any, required in connection with the
transfer or assignment pursuant to Section 2.02 of any such asset or any claim
or right or any benefit arising thereunder. Until such required consent is
obtained, or if such consent cannot be obtained, or an attempted assignment
thereof would be ineffective or would adversely affect the rights of the
transferor thereunder so that the intended transferee would not in fact receive
all such rights, Office Systems and Pitney Bowes will cooperate in a mutually
agreeable arrangement under which the intended transferee would obtain the
benefits and assume the obligations thereunder in accordance with this
Agreement, including (but not limited to) sub-contracting, sub-licensing or
sub-leasing to such transferee, or under which the transferor would enforce for
the benefit of the transferee and (except as otherwise provided herein or in any
Ancillary Agreement) at the transferee's expense any and all rights of the
transferor against, with the transferee assuming the transferor's obligations
to, each third party thereto. In the case of any Transfer involving a third
party consent, the transferor shall not agree to any terms of transfer (without
prior written consent of the transferee) which have the effect of materially
altering the rights or benefits arising under any of the particular assets
subject to the Transfer.
ARTICLE 3
THE DISTRIBUTION
SECTION 3.01. Cooperation Prior to the Distribution. (a) Pitney
Bowes and Office Systems shall prepare, and Office Systems shall file with the
Commission, the Form 10, which shall include the Information Statement, and
which shall set forth appropriate disclosure concerning Office Systems and the
Distribution. Pitney Bowes and Office Systems shall use reasonable efforts to
cause the Form 10 to become effective under the Exchange Act as soon as
practicable. After the Form 10 has become effective, Pitney Bowes shall mail the
Information Statement to the holders of Pitney Bowes Common Stock as of the
Record Date.
(b) Pitney Bowes and Office Systems shall cooperate in
preparing, filing with the Commission and causing to become effective any
registration statements or amendments thereto that are appropriate to reflect
the establishment of or amendments to any employee benefit and other plans
contemplated by this Agreement and the Ancillary Agreements.
(c) Pitney Bowes and Office Systems shall take all such action
as may be necessary or appropriate under the securities or blue sky laws of
states or other political subdivisions of the United States and shall take
reasonable efforts to
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comply with all applicable foreign securities laws in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements.
(d) Office Systems shall prepare, file and pursue an
application to permit listing of the Office Systems Common Stock on the New York
Stock Exchange, Inc. ("NYSE").
SECTION 3.02. Pitney Bowes Board Action; Conditions Precedent to
the Distribution. Pitney Bowes' Board of Directors shall, in its discretion,
establish (or delegate authority to establish) the Record Date and the
Distribution Date and any appropriate procedures in connection with the
Distribution. In no event shall the Distribution occur unless the following
conditions shall have been waived by Pitney Bowes or shall have been satisfied:
(i) the Form 10 shall have become effective under the
Exchange Act;
(ii) the Office Systems Common Stock to be delivered in the
Distribution shall have been approved for listing on the NYSE,
subject to official notice of issuance;
(iii) the Board of Directors of Pitney Bowes shall be
satisfied that the Distribution will be made out of surplus
within the meaning of Section 170 of the General Corporation Law
of the State of Delaware;
(iv) Pitney Bowes' Board of Directors shall have approved
the Distribution and shall not have abandoned, deferred or
modified the Distribution at any time prior to the Record Date;
(v) the contributions referred to in Section 2.01 of this
Agreement shall have been effected and the parties hereto shall
have complied with Section 2.02 of this Agreement;
(vi) Office Systems' Board of Directors, as named in the
Information Statement, shall have been elected by Pitney Bowes,
as sole stockholder of Office Systems, and Office Systems'
certificate of incorporation (the "Restated Office Systems
Charter") and bylaws, in substantially the forms filed as
exhibits to the Form 10, shall be in effect;
(vii) each of the Ancillary Agreements shall have been duly
executed and delivered by the parties thereto; and
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(viii) Pitney Bowes shall have received a favorable ruling
from the Internal Revenue Service or a legal opinion from Pitney
Bowes' counsel, Davis Polk & Wardwell, or another nationally
recognized law firm, stating that the Distribution qualifies as
tax-free to Pitney Bowes and its stockholders for United States
federal income tax purposes.
SECTION 3.03. The Distribution. Subject to the terms and
conditions set forth in this Agreement, (i) prior to the Distribution Date,
Pitney Bowes shall deliver to the Distribution Agent for the benefit of holders
of record of Pitney Bowes Common Stock on the Record Date, a stock certificate
or certificates, endorsed by Pitney Bowes in blank, representing 100% of the
outstanding shares of Office Systems Common Stock, (ii) the Distribution shall
be effective on the Distribution Date and (iii) Pitney Bowes shall instruct the
Distribution Agent to distribute, on or as soon as practicable after the
Distribution Date, to each holder of record of Pitney Bowes Common Stock as of
the Record Date 0.08 shares of Office Systems Common Stock for each one share of
Pitney Bowes Common Stock so held. Office Systems agrees to provide all
certificates for shares of Office Systems Common Stock that Pitney Bowes shall
require (after giving effect to Sections 3.04 and 3.05) in order to effect the
Distribution.
SECTION 3.04. Subdivision of Office Systems Common Stock to
Accomplish the Distribution. Effective upon the filing of the Restated Office
Systems Charter with the Secretary of State of the State of Delaware, each share
of Office Systems Common Stock then issued and outstanding shall, without any
action on the part of the holder thereof, be subdivided and converted into that
number of fully paid and non-assessable shares of Office Systems Common Stock
issued and outstanding equal to the number of shares of Pitney Bowes Common
Stock outstanding on the Record Date times 0.08 divided by the number of shares
of Office Systems Common Stock outstanding immediately prior to such filing.
SECTION 3.05. Fractional Shares. No certificates representing
fractional shares of Office Systems Common Stock will be distributed in the
Distribution. The Distribution Agent will be directed to determine the number of
whole shares and fractional shares of Office Systems Common Stock allocable to
each holder of Pitney Bowes Common Stock as of the Record Date. Upon the
determination by the Distribution Agent of such number of fractional shares, as
soon as practicable after the Distribution Date, the Distribution Agent, acting
on behalf of the holders thereof, shall sell such fractional shares for cash on
the open market and shall disburse to each holder entitled thereto the
appropriate portion of the resulting cash proceeds (calculated by multiplying
the average gross selling price per share times the number of fractional shares
allocable to such holder). Pitney Bowes shall bear the cost of all commissions
incurred in connection with the sale of fractional shares pursuant to this
Section 3.05.
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ARTICLE 4
INDEMNIFICATION
SECTION 4.01. Office Systems Indemnification of the Pitney
Bowes Group. (a) Subject to Section 4.03, on and after the Distribution Date,
Office Systems shall indemnify, defend and hold harmless the Pitney Bowes Group
and the respective directors, officers and Affiliates of each Person in the
Pitney Bowes Group (the "Pitney Bowes Indemnitees") from and against any and all
Losses incurred or suffered by any of the Pitney Bowes Indemnitees arising out
of, or due to the failure of any Person in the Office Systems Group to pay,
perform or otherwise discharge, any of the Office Systems Liabilities.
(b) Subject to Section 4.03, on and after the Distribution
Date, Office Systems shall indemnify, defend and hold harmless each of the
Pitney Bowes Indemnitees from and against the failure of Office Systems to
reimburse Pitney Bowes for the employee benefit related costs, expenses and fees
as set forth in Schedule 5.01 hereof.
(c) Subject to Section 4.03, Office Systems shall indemnify,
defend and hold harmless each of the Pitney Bowes Indemnitees and each Person,
if any, who controls any Pitney Bowes Indemnitee within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all Losses caused by any untrue statement or alleged untrue
statement of a material fact contained in the Form 10 or any amendment thereof
or the Information Statement (as amended or supplemented if Office Systems shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as such Losses are caused by any such
untrue statement or omission or alleged untrue statement or omission arising out
of information furnished to Office Systems in writing by Pitney Bowes expressly
for use therein.
SECTION 4.02. Pitney Bowes Indemnification of Office Systems
Group. (a) Subject to Section 4.03, on and after the Distribution Date, Pitney
Bowes shall indemnify, defend and hold harmless the Office Systems Group and the
respective directors, officers and Affiliates of each Person in the Office
Systems Group (the "Office Systems Indemnitees") from and against any and all
Losses incurred or suffered by any of the Office Systems Indemnitees and arising
out of, or due to the failure of any Person in the Pitney Bowes Group to pay,
perform or otherwise discharge, any of the Pitney Bowes Liabilities.
(b) Subject to Section 4.03, Pitney Bowes shall indemnify,
defend and hold harmless each of the Office Systems Indemnitees and each Person,
if any,
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who controls any Office Systems Indemnitee within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act from and against any
and all Losses caused by any untrue statement or alleged untrue statement of a
material fact contained in the Form 10 or any amendment thereof or the
Information Statement (as amended or supplemented if Office Systems shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
such Losses are caused by any such untrue statement or omission or alleged
untrue statement or omission arising out of information furnished to Office
Systems in writing by Pitney Bowes expressly for use therein.
SECTION 4.03. Insurance; Third Party Obligations; Tax Benefits.
Any indemnification pursuant to Sections 4.01 or 4.02 shall be paid net of the
amount of any insurance or other amounts that would be payable by any third
party to the Indemnified Party (as defined below) in the absence of this
Agreement (irrespective of time of receipt of such insurance or other amounts)
and net of any tax benefit to the Indemnified Party attributable to the relevant
payment or Liability. Such indemnification shall be increased to reflect any tax
liability of the indemnified party so that the indemnified party receives 100%
of the after-tax amount of any payment or liability. It is expressly agreed that
no insurer or any other third party shall be (i) entitled to a benefit it would
not be entitled to receive in the absence of the foregoing indemnification
provisions, (ii) relieved of the responsibility to pay any claims to which it is
obligated or (iii) entitled to any subrogation rights with respect to any
obligation hereunder.
SECTION 4.04. Notice and Payment of Claims. If any Pitney Bowes
Indemnitee or Office Systems Indemnitee (the "Indemnified Party") determines
that it is or may be entitled to indemnification by any party (the "Indemnifying
Party") under Article 4 (other than in connection with any Action subject to
Section 4.05), the Indemnified Party shall deliver to the Indemnifying Party a
written notice specifying, to the extent reasonably practicable, the basis for
its claim for indemnification and the amount for which the Indemnified Party
reasonably believes it is entitled to be indemnified. The methodology for
determining claims for indemnification related to sales, use and personal
property taxes is set forth on Schedule 4.04 hereto. Within 30 days after
receipt of such notice, the Indemnifying Party shall pay the Indemnified Party
such amount in cash or other immediately available funds unless the Indemnifying
Party objects to the claim for indemnification or the amount thereof. If the
Indemnifying Party does not give the Indemnified Party written notice objecting
to such indemnity claim and setting forth the grounds therefor within such
30-day period, the Indemnified Party shall give the Indemnifying Party an
additional notice of its
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claims for indemnification and if the Indemnifying Party does not give the
Indemnified Party written notice objecting to such claims within 10 days after
receipt of such additional notice, the Indemnifying Party shall be deemed to
have acknowledged its liability for such claim and the Indemnified Party may
exercise any and all of its rights under applicable law to collect such amount.
In the event of such a timely objection by the Indemnifying Party, the amount,
if any, that is Finally Determined to be required to be paid by the Indemnifying
Party in respect of such indemnity claim shall be paid by the Indemnifying Party
to the Indemnified Party in cash within 15 days after such indemnity claim has
been so Finally Determined. Notice and payment of all Non-Income Tax Claims
shall be in accordance with the provisions of this Agreement and with a copy of
the notice to:
Pitney Bowes Office Systems, Inc.
100 Oakview Drive
Trumbull, CT 06611
Telecopy: (203) 365-2349
Attention: Vice President-Tax
SECTION 4.05. Notice and Defense of Third-Party Claims. Promptly
following the earlier of (i) receipt of notice of the commencement by a third
party of any Action against or otherwise involving any Indemnified Party or (ii)
receipt of information from a third party alleging the existence of a claim
against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a "Third-Party
Claim"), the Indemnified Party shall give the Indemnifying Party written notice
thereof. The failure of the Indemnified Party to give notice as provided in this
Section 4.05 shall not relieve the Indemnifying Party of its obligations under
this Agreement, except to the extent that the Indemnifying Party is prejudiced
by such failure to give notice. Within 15 days after receipt of such notice, the
Indemnifying Party may (i) by giving written notice thereof to the Indemnified
Party, acknowledge liability for such indemnification claim and at its option
elect to assume the defense of such Third-Party Claim at its sole cost and
expense (except as provided for in Schedule 4.04) or (ii) object to the claim
for indemnification set forth in the notice delivered by the Indemnified Party
pursuant to the first sentence of this Section 4.05; provided that if the
Indemnifying Party does not within such 15-day period give the Indemnified Party
written notice objecting to such indemnification claim and setting forth the
grounds therefor, the Indemnified Party shall give the Indemnifying Party an
additional notice of its claims for indemnification and if the Indemnifying
Party does not give the Indemnified Party written notice objecting to such
claims within 10 days after receipt of such additional notice, the Indemnifying
Party shall be deemed to have acknowledged its liability for such
indemnification claim. If the Indemnifying Party has elected to assume the
13
defense of a Third-Party Claim, (x) the defense shall be conducted by counsel
retained by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party, provided that the Indemnified Party shall have the right to
participate in such proceedings and to be represented by counsel of its own
choosing at the Indemnified Party's sole cost and expense; and (y) the
Indemnifying Party may settle or compromise the Third Party Claim without the
prior written consent of the Indemnified Party so long as such settlement
includes an unconditional release of the Indemnified Party from all claims that
are the subject of such Third Party Claim, provided that the Indemnifying Party
may not agree to any such settlement pursuant to which any remedy or relief,
other than monetary damages for which the Indemnifying Party shall be
responsible hereunder, shall be applied to or against the Indemnified Party,
without the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld. If the Indemnifying Party does not assume the
defense of a Third-Party Claim for which it has acknowledged liability for
indemnification hereunder, the Indemnified Party may require the Indemnifying
Party to reimburse it on a current basis for its reasonable expenses of
investigation, reasonable attorneys' fees and reasonable out-of-pocket expenses
incurred in defending against such Third-Party Claim and the Indemnifying Party
shall be bound by the result obtained with respect thereto by the Indemnified
Party; provided that the Indemnifying Party shall not be liable for any
settlement effected without its consent, which consent shall not be unreasonably
withheld. The Indemnifying Party shall pay to the Indemnified Party in cash the
amount, if any, for which the Indemnified Party is entitled to be indemnified
hereunder within 15 days after such Third Party Claim has been Finally
Determined, in the case of an indemnity claim as to which the Indemnifying Party
has acknowledged liability or, in the case of any indemnity claim as to which
the Indemnifying Party has not acknowledged liability, within 15 days after such
Indemnifying Party's objection to liability hereunder has been Finally
Determined.
SECTION 4.06. Contribution. If for any reason the indemnification
provided for in Section 4.01 or 4.02 is unavailable to any Indemnified Party, or
insufficient to hold it harmless, then the Indemnifying Party shall contribute
to the amount paid or payable by such Indemnified Party as a result of such
Losses in such proportion as is appropriate to reflect all relevant equitable
considerations.
SECTION 4.07. Non-Exclusivity of Remedies. The remedies provided
for in this Article 4 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any Indemnified Party at law or in
equity.
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ARTICLE 5
EMPLOYEE MATTERS AND SERVICES
SECTION 5.01. Employee Matters Generally. With respect to
employee matters and employee benefits arrangements, the parties hereto agree as
set forth in Schedule 5.01.
SECTION 5.02. Restriction on Solicitation or Employment of
Employees. For a period of two years following the Distribution Date, each of
the Pitney Bowes Group and the Office Systems Group agrees that (without the
prior written consent of the other) it will not, directly or indirectly, (i)
solicit or otherwise attempt to induce or influence any employee of the other
Group to terminate employment with his or her then-current employer or (ii)
employ any employee of the other Group.
Notwithstanding the foregoing, if an employee of either Group is
terminated or terminates employment within such two year period, the terminated
employee may be hired by the other Group at any time after 180 days following
such employee's termination; provided that the Group hiring such employee has
not violated the provisions of the immediately preceding paragraph with respect
to such employee.
SECTION 5.03. Notification of Termination of Employees. Office
Systems shall notify Pitney Bowes in writing within seven business days of the
date of termination of employment of any Transferred Employee (as defined in
Section 2 of Schedule 5.01 hereof) from the Office System Group or a related
company.
ARTICLE 6
ACCESS TO INFORMATION
SECTION 6.01. Provision of Corporate Records. Immediately prior
to or as soon as practicable following the Distribution Date, each Group shall
provide to the other Group all documents, contracts, books, records and data
(including but not limited to minute books, stock registers, stock certificates
and documents of title) in its possession relating to such other Group or such
other Group's business and affairs; provided that if any such documents,
contracts, books, records or data relate to both Groups or the business and
operations of both Groups, each such Group shall provide to the other Group true
and complete copies of such documents, contracts, books, records or data. Data
stored in electronic form shall be provided in the format in which it existed at
the Distribution Date and, if requested, in hard copy (at the expense of the
requesting party), except as otherwise specifically set forth in this Agreement
or any Ancillary Agreement.
15
SECTION 6.02. Access to Information. From and after the
Distribution Date, each Group shall, for a reasonable period of time, afford
promptly to the other Group and its accountants, counsel and other designated
representatives reasonable access during normal business hours to all documents,
contracts, books, records, computer data and other data in such Group's
possession relating to such other Group or the business and affairs of such
other Group (other than data and information subject to an attorney/client or
other privilege), insofar as such access is reasonably required by such other
Group, including, without limitation, for audit, accounting, litigation,
regulatory compliance and disclosure and reporting purposes.
SECTION 6.03. Litigation Cooperation. Each Group shall use
reasonable efforts to make available to the other Group and its accountants,
counsel, and other designated representatives, upon written request, its
directors, officers, employees and representatives as witnesses, and shall
otherwise cooperate with the other Group, to the extent reasonably required in
connection with any Action arising out of either Group's business and operations
prior to the Distribution Date in which the requesting party may from time to
time be involved.
SECTION 6.04. Reimbursement. Each Group providing information or
witnesses to the other Group, or otherwise incurring any expense in connection
with cooperating, under Sections 6.01, 6.02 or 6.03 shall be entitled to receive
from the recipient thereof, upon the presentation of invoices therefor, payment
for all out-of-pocket costs and expenses as may be reasonably incurred in
providing such information, witnesses or cooperation.
SECTION 6.05. Retention of Records. Except as otherwise required
by law or agreed to in writing, each party shall, and shall cause the members of
its respective Group to, retain all information relating to the other Group's
business and operations in accordance with the past practice of such party.
Notwithstanding the foregoing, any party may destroy or otherwise dispose of any
such information at any time, provided that, prior to such destruction or
disposal, (i) such party shall provide not less than 90 days' prior written
notice to the other party, specifying the information proposed to be destroyed
or disposed of and the scheduled date for such destruction or disposal, and (ii)
if the recipient of such notice shall request in writing prior to the scheduled
date for such destruction or disposal that any of the information proposed to be
destroyed or disposed of be delivered to such requesting party, the party
proposing the destruction or disposal shall promptly arrange for the delivery of
such of the information as was requested at the expense of the requesting party.
SECTION 6.06. Confidentiality. Each party shall hold and shall
cause its directors, officers, employees, agents, consultants and advisors
16
("Representatives") to hold in strict confidence all information (other than any
such information relating solely to the business or affairs of such party)
concerning the other party unless (i) such party is compelled to disclose such
information by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law or (ii) such information can be shown to
have been (A) in the public domain through no fault of such party or (B)
lawfully acquired after the Distribution Date on a non-confidential basis from
other sources. Notwithstanding the foregoing, such party may disclose such
information to its Representatives so long as such Persons are informed by such
party of the confidential nature of such information and are directed by such
party to treat such information confidentially. If such party or any of its
Representatives becomes legally compelled to disclose any documents or
information subject to this Section, such party will promptly notify the other
party so that the other party may seek a protective order or other remedy or
waive such party's compliance with this Section. If no such protective order or
other remedy is obtained or waiver granted, such party will furnish only that
portion of the information which it is advised by counsel is legally required
and will exercise its reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded such information. Such party agrees to
be responsible for any breach of this Section by it and its Representatives.
SECTION 6.07. Inapplicability of Article 6 to Tax Matters.
Notwithstanding anything to the contrary in Article 6, Article 6 shall not apply
with respect to information, records and other matters relating to Taxes, all of
which shall be governed by the Tax Separation Agreement.
ARTICLE 7
CERTAIN OTHER AGREEMENTS AND COVENANTS
SECTION 7.01. Amounts Payable and Intercompany Accounts. (a) On
the Distribution Date, Office Systems shall pay to Pitney Bowes an amount equal
to the sum of (i) $161,000,000 plus (ii) the aggregate amount of any additional
funds advanced to the Office Systems Business by the Pitney Bowes Group between
August 1, 2001 and the Distribution Date. The amount of such payment which
exceeds the net intercompany balance payable from Office Systems to Pitney Bowes
shall be paid as a dividend.
(b) All intercompany receivable, payable and loan balances in
existence as of the Distribution Date between the Pitney Bowes Group and Office
Systems Group will be settled by payment of the amount set forth in Section
7.01(a).
17
SECTION 7.02. Covenants Not to Compete. (a) In consideration of
the promises and representations of Pitney Bowes under this Agreement, Office
Systems covenants and agrees that, for a period of two years following the
Distribution Date, neither Office Systems nor any member of the Office Systems
Group nor any of their respective successors or assigns will, directly or
indirectly, engage in, or have any interest (including, as agent, partner,
consultant or shareholder) in any other person, firm, corporation or other
entity engaged in, any business activities, in the United States, the United
Kingdom, Canada and Europe, competitive with or similar or related to the
business or products (current and future) of the Pitney Bowes Group, as
reflected in Pitney Bowes' most recent strategic plan dated March 2001 (the
"March 2001 Strategic Plan") which includes the facilities management business,
as more fully described in paragraph (b) below.
(b) The parties hereby agree that Pitney Bowes is engaged in
the facilities management business. The parties further agree that the
facilities management business consists of on site, off site, near site and
multiple client location facilities management and outsourcing services aimed at
providing total Integrated Mail and Document Management, and Document Resource
Planning solutions defined as the delegation to a supplier of the creation,
production, mailing or electronic transmission, or fulfillment of any type of
printed or electronic document. Included in this is mail center operations, mail
delivery, literature fulfillment and supplies management, shipping and
receiving, network fax, on-line image retrieval, central reprographics, color
copy, convenience copy/fleet management including asset management,
microfilming, color print, print-on-demand, network print, computer output to
microfilm (COM), CD output and electronic scanning and indexing. The facilities
management vendor may assign specific business functions to either a business
specializing in those functions or one that offers the service as a complement
to other offerings. The facilities management vendor may acquire a customer's
distributed network printers, copiers and operating personnel and could be
responsible for all maintenance, network support services, equipment upgrades,
staff training, and other activities. Notwithstanding the provisions of
paragraph (a) above, the parties acknowledge that (x) Office Systems may, within
the facilities management business, engage in the business of selling,
maintenance of and placing copier, facsimile and multi-functional products that
fax, copy, print and scan and related sales of software and supplies, even if
this business competes with Pitney Bowes' business; provided that (i) such
competing business is the only activity of Office Systems within the facilities
management business and (ii) that such business is operated in a manner and on a
scale substantially consistent with past practice and the business of Office
Systems as of the Distribution Date, (y) Office Systems may engage in such
competing business to the extent required so that Office Systems may fulfill its
obligations under its existing contracts as of
18
the Distribution Date and (z) to the extent that Office Systems notifies Pitney
Bowes of its desire to enter into a business, pursuant to a specific contract or
customer requirement, not otherwise permitted to be engaged in by Office Systems
pursuant to Section 7.02 (a) or (b), Pitney Bowes may consent to Office Systems'
engaging in such competing business; provided that such consent shall not be
unreasonably withheld if but only if such competing business is limited to such
specific contract or customer requirement and is determined by Pitney Bowes to
be outside the scale and scope of its facilities management business. In such
case, Pitney Bowes will use reasonable efforts to respond to Office Systems'
request in a timely manner.
(c) In consideration of the promises and representations of
Office Systems under this Agreement, Pitney Bowes covenants and agrees that, for
a period of two years following the Distribution Date, neither Pitney Bowes nor
any member of the Pitney Bowes Group nor any of their respective successors or
assigns will, directly or indirectly, engage in, or have any interest
(including, as agent, partner, consultant or shareholder) in any other person,
firm, corporation or other entity engaged in, any business activities, in the
United States, the United Kingdom or Europe (except the marketing and
maintenance of copiers in the United Kingdom in a manner and on a scale
substantially consistent with past practice), competitive with the business or
current products of the Office Systems Group as of the Distribution Date.
(d) Notwithstanding the preceding paragraphs, if either party
acquires a firm, corporation or other entity (the "Acquired Business") after the
Distribution Date, that party may operate the Acquired Business in a manner
substantially consistent with past practice, even if a portion of the Acquired
Business is in competition with the other party's business; provided that the
competing portion of the Acquired Business is incidental to the Acquired
Business, taken as a whole.
(e) If Pitney Bowes at any time asserts that Office Systems is
in violation of the non-compete clause set forth in Section 7.02 of this
Agreement, based on Office Systems engagement in business activities which
Pitney Bowes believes to be competitive with or similar or related to business
or products reflected in the March 2001 Strategic Plan, Office Systems shall be
entitled to an audit of the March 2001 Strategic Plan by a nationally-recognized
auditing firm. The scope of any such audit shall be limited to a determination
of Pitney Bowes' plans to enter into any such business or offer any products
that it asserts Office Systems has entered into or offered in violation of
Section 7.02. All costs of any such audit shall be borne by the party against
whom the dispute is resolved.
SECTION 7.03. Further Assurances and Consents. In addition to the
actions specifically provided for elsewhere in this Agreement, each of the
parties
19
hereto shall use its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things, reasonably necessary,
proper or advisable under applicable laws, regulations and agreements or
otherwise to consummate and make effective the transactions contemplated by this
Agreement, including but not limited to using its reasonable efforts to obtain
any consents and approvals and to make any filings and applications necessary or
desirable in order to consummate the transactions contemplated by this
Agreement; provided that no party hereto shall be obligated to pay any
consideration therefor (except for filing fees and other similar charges) to any
third party from whom such consents or approvals are requested or to take any
action or omit to take any action if the taking of or the omission to take such
action would be unreasonably burdensome to the party, its Group or its Group's
business.
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Notices. All notices and other communications to any party
hereunder shall be in writing (including telecopy or similar writing) and,
except as noted, shall be deemed given when received addressed as follows:
If to Pitney Bowes, to:
Pitney Bowes Inc.
1 Elmcroft Road
Stamford, CT 06926-0700
Telecopy: (203) 351-7691
Attention: Amy C. Corn
Title: Vice President and Corporate Secretary
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Attention: Sarah J. Beshar
If to Office Systems, to:
Pitney Bowes Office Systems, Inc.
100 Oakview Drive
Trumbull, CT 06611
Telecopy: (203) [ - ]
Attention: Chief Executive Officer
20
With a copy to:
Pitney Bowes Office Systems, Inc.
100 Oakview Drive
Trumbull, CT 06611
Telecopy: (203) 365-2353
Attention: General Counsel
Any party may, by written notice so delivered to the other parties, change the
address to which delivery of any notice shall thereafter be made.
SECTION 8.02. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by Pitney Bowes and Office
Systems, or in the case of a waiver, by the party against whom the waiver is to
be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 8.03. Expenses. Except as specifically provided otherwise
in this Agreement or any Ancillary Agreement, all costs and expenses incurred by
the Pitney Bowes Group in connection with the Distribution and related
transactions shall be paid by Pitney Bowes, and all costs and expenses incurred
by the Office Systems Group in connection with the Distribution and related
transactions shall be paid by Office Systems. Without limiting the foregoing,
the parties agree that Office Systems shall be responsible for and pay the fees,
expenses and other amounts payable to the lenders under Office Systems' credit
facilities and all other fees and expenses incurred in connection therewith.
SECTION 8.04. Insurance Matters. (a) From and after the date of
this Agreement, Pitney Bowes shall not take or fail to take any action if such
action or inaction, as the case may be, would adversely affect the applicability
of the insurance in effect on the date of this Agreement, listed on Schedule
8.04 hereto, including renewals thereof and applicable predecessor policies,
that covers all or any part of the assets, liabilities, business or employees of
the Office Systems Group with respect to events occurring prior to the
Distribution Date ("Applicable Insurance"), it being understood that in no event
shall Pitney Bowes be obligated to pay premiums with respect to periods after
the Distribution Date in respect of Applicable Insurance.
(b) Office Systems shall, with respect to any event pursuant to which
coverage may be available under Applicable Insurance (without regard to whether
any deductible or coverage limits would apply), provide prompt notice (which
notice shall, in any event, provide sufficient time for Pitney Bowes to provide
any required notices, make any required filings or otherwise obtain the benefit
of such Applicable Insurance) to Pitney Bowes of all applicable facts and
circumstances relating to such event.
(c) (i) With respect to claims under Applicable Insurance, Pitney
Bowes will assist Office Systems in the processing of any such claims as to
which notice has been timely submitted by Office Systems to Pitney Bowes, it
being understood that Office Systems shall be liable for any and all costs,
expenses, damages and liabilities associated with such claims to the extent not
covered by Applicable Insurance, including deductibles payable as further
described in this Section 8.04(c).
(ii) With respect to Applicable Insurance where the relevant deductible
has not been included in the accrual (referred to as "accrued insurance" on
Schedule 2.02 hereof) established by Pitney Bowes for such purpose, Office
Systems shall be liable for all of its costs and expenses in connection with
such claims, and Pitney Bowes will remit to Office Systems any insurance
proceeds paid through the Applicable Insurance policies subject to, and
subsequent to, satisfaction of the condition that applicable deductible(s) have
been satisfied by Office Systems consistent with the terms of the Applicable
Insurance policy.
(iii) With respect to Applicable Insurance where a deductible is not
payable either pursuant to the terms of the Applicable Insurance policy or
because the deductible is satisfied through accruals (referred to as "accrued
insurance" on Schedule 2.02 hereof), as reflected on Schedule 8.04 hereto,
established by Pitney Bowes for such purpose, Office Systems shall not bear the
liability of an insurance deductible.
(iv) With respect to all claims under any Applicable Insurance, in matters
where legal counsel is retained, Office Systems shall be required to use counsel
selected by Pitney Bowes and Pitney Bowes shall have the right to control any
such litigation, to the extent covered by Applicable Insurance and, provided,
however that Pitney Bowes shall not settle such litigation without the prior
consent of Office Systems which consent shall not be unreasonably withheld,
although Office Systems shall be liable for all of its costs and expenses in
connection with such claims (including the fees and expenses in connection with
such claims to the extent not covered by Applicable Insurance (including the
fees and expenses of such counsel)), provided that Office Systems shall have the
right to reject such counsel, subject to the approval of Pitney Bowes, such
approval not to be unreasonably withheld.
(d) The parties agree that, to the extent that the Applicable Insurance
applies directly or indirectly to any assets, liabilities, business or employees
of the Office Systems Group, such Applicable Insurance shall be limited to
insured events occurring prior to the Distribution Date. It is further
understood that such Applicable Insurance shall also be for the benefit of
Pitney Bowes Group to the extent directly or indirectly applicable to any
assets, liabilities, business or employees of Pitney Bowes Group. In no event
shall Pitney Bowes be liable to Office Systems for any amounts in excess of
moneys received by Pitney Bowes in respect of Applicable Insurance.
(e) All notices to be delivered to Pitney Bowes pursuant to this Section
8.04 shall be delivered to Deborah Fasoli, Risk Manager, Pitney Bowes Inc., 1
Elmcroft Road, Stamford, CT 06926-0700, Telecopy: 203-351-6878, with a copy to:
Amy C. Corn, Vice President and Corporate Secretary, Pitney Bowes Inc., 1
Elmcroft Road, Stamford, CT 06926-0700, Telecopy: 203-351-7691.
21
SECTION 8.05. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that neither party may
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the consent of the other parties hereto. If any party or
any of its successors or assigns (i) shall consolidate with or merge into any
other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) shall transfer all or substantially all
of its properties and assets to any Person, then, and in each such case, proper
provisions shall be made so that the successors and assigns of such party shall
assume all of the obligations of such party under the Distribution Documents.
SECTION 8.06. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of New York, without regard
to the conflicts of laws rules thereof.
SECTION 8.07. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other parties hereto.
SECTION 8.08. Entire Agreement. This Agreement and the other
Distribution Documents constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersedes all prior
agreements, understandings and negotiations, both written and oral, between the
parties with respect to the subject matter hereof and thereof. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein or in the other Distribution Documents has been made or relied
upon by any party hereto. Neither this Agreement nor any provision hereof is
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder. To the extent that the provisions of this Agreement are
inconsistent with the provisions of any other Distribution Document, the
provisions of such other Distribution Document shall prevail.
SECTION 8.09. Tax Separation Agreement. Except as otherwise
provided herein and not inconsistent with the Tax Separation Agreement, this
Agreement shall not govern any Income Tax, and any and all Liabilities relating
to Income Taxes shall be exclusively governed by the Tax Separation Agreement.
SECTION 8.10. Jurisdiction. Any Action seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby may be brought in the United
States District
22
Court for the Southern District of New York or any other New York State court
sitting in New York County, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient form. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 8.01
shall be deemed effective service of process on such party.
SECTION 8.11. Existing Arrangements. Except as otherwise
contemplated hereby or by the other Distribution Documents, all prior agreements
and arrangements, including those relating to goods, rights or services provided
or licensed, between the Office Systems Group and the Pitney Bowes Group shall
be terminated effective as of the Distribution Date, if not theretofore
terminated. No such agreements or arrangements shall be in effect after the
Distribution Date unless embodied in the Distribution Documents.
SECTION 8.12. Termination Prior to the Distribution. The Pitney
Bowes Board of Directors may at any time prior to the Distribution abandon the
Distribution and, by notice to Office Systems, terminate this Agreement (whether
or not the Pitney Bowes Board of Directors has theretofore approved this
Agreement and/or the Distribution).
SECTION 8.13. Termination After the Distribution.
(a) Termination of the Agreement. Except upon the mutual consent
of both parties hereto or an automatic termination as set forth in Section 8.13,
this Agreement shall not be terminable until the third anniversary of the
Distribution Date, and thereafter shall be terminable upon six months' prior
written notice by either party to the other party. Notwithstanding the
immediately preceding sentence, (i) Pitney Bowes may terminate this Agreement
(but not Sections 5.02 and 7.02) at any time if Office Systems shall have failed
to perform any of its material obligations under this Agreement, Pitney Bowes
has notified Office Systems in writing of such failure and such failure shall
have continued for a period of 60 days after receipt by Office Systems of
written notice of such failure and (ii) Office Systems may terminate this
Agreement (but not Sections 5.02 and 7.02) at any time if Pitney Bowes shall
have failed to perform any of its material obligations under this Agreement,
Office Systems has notified Pitney Bowes in writing of such failure and such
failure shall have continued for a period of 60
23
days after receipt by Pitney Bowes of written notice of such failure. In
addition, a material default by one party of its obligations under Section 7.02
will relieve the other party of its obligations under such Section 7.02, without
relieving the defaulting party of any liability or obligation under such Section
7.02.
(b) Termination of Covenant Not to Compete. Each party may, at
its option, terminate the provisions of Section 7.02 effective upon or after the
expiration of one year from the Distribution Date; provided that such party has
given six months prior written notice of termination to the other party. Upon
such termination (i) all of the provisions of the non-compete set forth in
Section 7.02 shall cease to apply to each party; (ii) the license of the name
Pitney Bowes (and the associated trademarks) to Office Systems as set forth
under the provisions of the Intellectual Property Agreement shall terminate, (as
set forth in Section 11.04(d) of such Agreement) and (iii) the Canada Reseller
Agreement shall be automatically amended, upon notice of termination, to permit
Pitney Bowes Canada to source its equipment requirements from alternative
suppliers and to require Office Systems to continue to fulfill its obligations
to supply product, as required for an interim period not to exceed nine months
from the date of such notice, during which Pitney Bowes Canada can establish
alternative suppliers on acceptable terms.
SECTION 8.14. Severability. If any one or more of the provisions
contained in this Agreement should be declared invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained in this Agreement shall not in any way be affected or
impaired thereby so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such a declaration, the parties shall modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner so that the transactions contemplated hereby are consummated
as originally contemplated to the fullest extent possible.
SECTION 8.15. Survival. All covenants and agreements of the
parties contained in this Agreement shall survive the Distribution Date
indefinitely, unless a specific survival or other applicable period is expressly
set forth herein.
SECTION 8.16. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 8.17. Specific Performance. Each party to this Agreement
acknowledges and agrees that damages for a breach or threatened breach of any of
the provisions of this Agreement would be inadequate and irreparable harm would
24
occur. In recognition of this fact, each party agrees that, if there is a breach
or threatened breach, in addition to any damages, the other nonbreaching party
to this Agreement, without posting any bond, shall be entitled to seek and
obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction, attachment, or any other
equitable remedy which may then be available to obligate the breaching party (i)
to perform its obligations under this Agreement or (ii) if the breaching party
is unable, for whatever reason, to perform those obligations, to take any other
actions as are necessary, advisable or appropriate to give the other party to
this Agreement the economic effect which comes as close as possible to the
performance of those obligations (including, but not limited to, transferring,
or granting liens on, the assets of the breaching party to secure the
performance by the breaching party of those obligations).
25
IN WITNESS WHEREOF the parties hereto have caused this
Distribution Agreement to be duly executed by their respective authorized
officers as of the date first above written.
PITNEY BOWES INC.
By: ------------------------------
Name:
Title:
PITNEY BOWES OFFICE SYSTEMS, INC.
By: ------------------------------
Name:
Title:
26
Schedule 2.01
Contributed Subsidiaries
None.
Schedule 2.02
Specified Accrued Liabilities
ACCOUNT DESCRIPTION
------- -----------
10600 PAYROLL ADVANCES
13000 PREPAID INSURANCE
13010 PREPAID POSTAGE
13050 PREPAID FIELD TRAVEL EXPENSE
13060 PREPAID RENT EXPENSE
13100 PREPAID REAL ESTATE TAXES
16590 RETIREMENT PAYROLL MISC ADJUSTS
16700 RELOCATION CLEARING ACCOUNT
16720 GRP UNIV LIFE EMP DEDUCTIONS
16730 PROP 7 CAS EMP DEDUCTIONS
16740 LONG TERM CARE-EMP DEDUCTIONS
16750 LEGAL - EMP DEDUCTIONS
16760 FIN PLANNING EMP DEDUCTIONS
16860 FICA TAXES CLEARING ACCOUNT
16880 UNEMPLOYMENT INS CLEARING ACCT
16910 DEFERRED 401K & 401A
16920 SPOUSE LIFE INSURANCE
16950 PERSONAL LIFE (PRE-TAX)
16970 CHILD LIFE INSURANCE
20140 UNCLAIMED COMPENSATION
20200 EMPLOYEE SAVINGS BOND DEDUCTION
20230 EMPLOYEE STOCK PURCH INSTALLMENT
20240 EMPLOYEE UNITED FUND DEDUCTIONS
20250 EMPLOYEES CR UND DED
20260 EMPLOYEE GARNISHMENT DEDUCTIONS
20280 RET EMPL WITH - GARNISHMENTS
20290 LTD EMPL WITH - GARNISHMENTS
21100 EMPLOYEES INCOME TAX DEDUCTIONS
21120 UNEMPLOYMENT INS TAX ACCRUED
21130 FEDERAL INS CONTRIBUTION TAX
21140 OTHER SALARY TAX ACCRUED
21200 SALES AND USE TAX ACCRUED
21190 ACCRUED M M I P
21340 ACCRUED PERFORMANCE BASED COMPEN
21380 ACCRUED KE EMPL INCEN PLAN COMP
21620 PAYROLL ACCRUAL
21640 LONG TERM DISABILITY-PRE TAX
Schedule 2.02-Page 1
21740 LONG TERM DISABILITY-POST TAX
21300 ACCRUED COMPANY-PAID 401K CONTRIB.
21320 RESERVE FOR EARLY RETIREMENT
21630 RETIREMENT PLAN TRUST FUND
21650 EXCESS BENEFIT PLAN
21610 ACCIDENT COMPENSATION
21760 DEFERRED INCENTIVE SAVINGS PLAN
21770 PBC BONUS EXCESS PRINCIPAL
21590 RETIREMENT MEDICAL LIABILITY
21560 POST EMPLOYMENT BENEFITS LIABILITY
21580 SUPPLEMENTAL OTHER POSTEMP BENE
20170 ACCRUED INSURANCE
21290 401K PLUS
21300 401K MATCH
21900 SHARE POWER
21910 ACCRUED 401K PLUS
16930 ACCIDENTAL DEATH
16950 PERSONAL LIFE ISN.
16560 EMPLOYEE GROUP MEDICAL
16770 EMPLOYEE METROPOOL COMMUTER DEDUCTION
21230 FIELD MISCELLANEOUS TAXES
Schedule 2.02-Page 2
Schedule 4.04
Non-Income Tax Claims
Sales, Use and Personal Property Taxes
1. Sales and Use Taxes
(a) Use Taxes. In the event of an audit adjustment related to any
---------
use tax payable by Pitney Bowes for any period prior to August 1, 2001, Office
Systems will indemnify Pitney Bowes for the portion of such adjustment
reflecting Office Systems' actual use tax liability.
(b) Sales Taxes. In the event of an audit adjustment related to
-----------
any sales tax payable by Pitney Bowes for any period prior to August 1, 2001,
Office Systems will indemnify Pitney Bowes for the same portion of such
adjustment that the total sales tax related to the Office Systems Business for
the relevant period (excluding the effect of such adjustment) bears to the total
sales tax of Pitney Bowes (including the Office Systems Business) for the same
period (excluding the effect of such adjustment). The relevant period referred
to in the previous sentence shall be the period used by the tax auditor in
determining the sales tax audit adjustment.
2. Personal Property Taxes
(a) Fixed Assets Taxes. Office Systems will indemnify Pitney
------------------
Bowes for any personal property taxes imposed on fixed assets that are a part of
the Office Systems Business for any period prior to August 1, 2001 based on the
District Office number, a plant code number or a cost center number of a
particular asset.
(b) Rental Equipment. Office Systems will indemnify Pitney Bowes
----------------
for any personal property taxes imposed on rental equipment for any period prior
to August 1, 2001 in an amount equal to the same portion of the total personal
property taxes imposed on rental equipment that the Office Systems rental
equipment summary ("Schedule C-2") value bears to the total Schedule C-2 value
as determined by the April, 2000 data used in preparation of the assessed value
filings.
3. Audit Cooperation
In the case of any audits of taxes related to sales, use of
property or possession of personal property in any period prior to August 1,
2001, Pitney Bowes shall control such audits, provided that Pitney Bowes shall
keep Office Systems fully informed of all material developments and shall permit
Office
Schedule 4.04-Page 1
Systems a reasonable opportunity to participate in the resolution of any audit-
related issues.
Schedule 4.04-Page 2
Schedule 5.01
Employee Matters
SECTION 1. General. Except as otherwise set forth in this
Schedule 5.01, (a) Pitney Bowes shall retain (i) any and all liabilities
relating to or arising out of any employee benefit or compensation arrangement
sponsored, maintained or contributed to by any member of the Pitney Bowes Group
(a "Plan") in respect of any employee or former employee of any member of the
Pitney Bowes Group who is not a Transferred Employee (as hereinafter defined),
and (ii) any and all liabilities relating to or arising out of any Plan in
respect of all Transferred Employees that were incurred or are otherwise related
to any period prior to and including the Distribution Date and
(b) Pitney Bowes shall have no liability relating to or arising
out of any Plan or otherwise in respect of Transferred Employees to the extent
that any such liability is incurred or otherwise relates to any period after the
Distribution Date.
SECTION 2. Employees. With respect to each individual who, as of
the Distribution Date, is employed (including persons absent from active service
by reason of Short Term Disability or Long Term Disability, as hereinafter
defined, or absent for reasons not relating to disability, whether paid or
unpaid) in the Office Systems Business ("Transferred Employees"), Office Systems
shall cause the employment of each Transferred Employee to be continued on the
Distribution Date, provided that nothing stated herein shall limit the right of
Office Systems or any Subsidiary to terminate the employment of any Transferred
Employee following the Distribution Date or to reduce or otherwise modify the
position, responsibilities, compensation or benefits of any Transferred Employee
at any time. The employee benefit plans and arrangements maintained by Office
Systems shall give full service credit for purposes of eligibility and vesting
(and in connection with any vacation policy, for purposes of determining the
level of benefit) for any service on or prior to the Distribution Date of a
Transferred Employee with any member of the Pitney Bowes Group. For purposes of
this Agreement, (i) "Short Term Disability" shall mean a condition with respect
to which an employee is receiving benefits, as of the Distribution Date, under
the Pitney Bowes Short Term Disability Plan, and (ii) "Long Term Disability
Benefits" shall mean benefits under the Pitney Bowes Long Term Disability Plan.
Schedule 5.01-Page 1
SECTION 3. Qualified Retirement Plans.
(a) (i) Pitney Bowes Pension Plan. Effective as of the Distribution
-------------------------
Date, Transferred Employees (other than Transferred Employees whose age and
service totaled more than 50 as of September 1, 1997, referred to herein as
"Transition Credit Employees") shall cease accruals under the Pitney Bowes
Pension Plan ("Pension Plan"). Subject to Section 3(a)(ii) hereof, Transferred
Employees who have met the Pension Plan's requirements for commencement of
payment of their Pension Plan benefits may begin to receive such benefits
following the Distribution Date (it being understood that in some cases
commencement of benefit payments will be required) in accordance with Pension
Plan provisions.
(ii) Transition Credit Employees. Transition Credit Employees
---------------------------
shall continue to participate in the Pension Plan following the
Distribution for up to 3 years from the Distribution Date unless
a proper election is made to receive a distribution from the
Plan. Transition Credit Employees shall be eligible to receive a
distribution of their Pension Plan accruals in accordance with
Pension Plan provisions. Any Transition Credit Employee who
continues to participate in the Pension Plan following the
Distribution Date shall do so on the same terms and conditions as
other Pitney Bowes employees and shall have their service and
pensionable compensation with the Office Systems Group taken into
account in determining their benefit under the Pension Plan. The
rights and benefits of Transition Credit Employees under the
Pension Plan shall be set forth in the special amendment to the
Pension Plan intended to specifically govern such rights and
benefits, consistent with the provisions hereof, effective as of
the Distribution Date.
(iii) Transferred Employees with at Least One and Less than 5
-------------------------------------------------------------
Years of Service. Transferred Employees who have completed at
----------------
least one and less than 5 years of service as of the Distribution
Date ("Short Service Employees") shall have their period of
employment with the Office Systems Group credited towards
completion of the applicable vesting schedule under the Pension
Plan with full vesting occurring no later than December 31, 2003,
subject to their continued employment with Office Systems.
Transferred Employees who have not completed one year of service
as of the Distribution Date shall not be eligible to participate
in the Pension Plan and shall not have their periods of
employment at the Office Systems Group credited under the Pension
Plan for any purpose. The accrued benefit, if any, under the
Pension Plan of Short Service Employees shall not increase on
account of future service and compensation with the Office
Systems Group.
specifically govern such rights and benefits, consistent with the
terms hereof, effective as of October 1, 2000.
Schedule 5.01-Page 2
(iv) No Transfer of Pension Plan Assets and Liabilities. No
--------------------------------------------------
assets or liabilities of the Pension Plan shall be transferred to
or assumed by any member of the Office Systems Group in
connection with the Distribution. No member of the Office Systems
Group shall make any contributions to Pitney Bowes with respect
to the Pension Plan.
(v) No Office Systems Pension Plan. No member of the Office
------------------------------
Systems Group shall be required, or have any obligation, to
sponsor a defined benefit plan on or after the Distribution Date.
(b) Pitney Bowes 401(k) Plan. (i) Prior to the Distribution
------------------------
Date, Office Systems shall establish a defined contribution plan (the "OS 401(k)
Plan") for the benefit of Transferred Employees, shall take all necessary
action, if any, to qualify such Plan under Section 401(a) and (k) of the Code
and shall make any and all filings and submissions to the appropriate
governmental agencies required to be made by it in connection with the transfer
of assets described below.
(ii) As soon as practicable following the Distribution Date,
Pitney Bowes shall cause the trustee of the Pitney Bowes 401(k)
Plan (the "PB 401(k) Plan") to transfer in the form of cash
(except to the extent otherwise provided below) the full account
balances of Transferred Employees (and beneficiaries thereof)
under the PB 401(k) Plan to the appropriate trustee as designated
by Office Systems under the trust agreement forming a part of the
OS 401(k) Plan; provided, however, that the portion of any such
account to which shares of Pitney Bowes common stock or Office
Systems common stock is credited or to which an outstanding plan
loan exists shall be transferred in kind to the OS 401(k) Plan.
As of the date of transfer, the account balances of the
Transferred Employees shall be credited with appropriate earnings
attributable to the period from the Distribution Date to the date
of transfer described herein or shall have been reduced by any
necessary benefit or withdrawal payments to or in respect of
Transferred Employees occurring during the period from the
Distribution Date to the date of transfer described herein.
(iii) In consideration for the transfer of assets described
herein, Office Systems, shall, effective as of the date of
transfer described herein, assume all of the obligations of
Pitney Bowes in respect of the account balances accumulated by
Transferred Employees under the PB 401(k) Plan (exclusive of any
portion of such account balances that are paid or otherwise
withdrawn prior to the date of transfer described herein) with
respect to the account balances transferred to the OS 401(k)
Plan. Pitney Bowes hereby indemnifies Office Systems against and
agrees to hold it
Schedule 5.01-Page 3
harmless from any liabilities or claims (including claims for
benefits or for breach of fiduciary duties, but excluding claims
for benefits to the extent of the assets transferred hereunder)
relating to the PB 401(k) Plan (or the qualified status of that
Plan) that arose prior to the transfer of assets described herein
or that relate to the operation or administration of such Plan
prior to the transfer of assets. Office Systems hereby
indemnifies Pitney Bowes against and agrees to hold it harmless
from any liabilities or claims relating to the qualified status
of the OS 401(k) Plan or the operation or administration of such
Plan following the transfer of assets described herein.
(iv) The rights and benefits of Transferred Employees under the
PB 401(k) Plan shall be set forth in a special amendment to such
Plan, consistent with the foregoing, effective as of the
Distribution Date.
SECTION 4. Welfare Benefit Plans.
(a) Welfare Plans. (i) For the period from the Distribution Date
-------------
through December 31, 2001 ("Benefit Transition Period"), Pitney Bowes shall
continue to provide benefits for Transferred Employees (and their eligible
spouses and dependants) to the extent provided to such individuals immediately
prior to the Distribution Date under its medical plan, dental plan, long-term
disability plan, short-term disability policy, life insurance plan and
accidental death and dismemberment plan ("Pitney Bowes Welfare Plans"). Office
Systems shall promptly reimburse Pitney Bowes for the costs of such benefits
incurred during the Benefit Transition Period as follows:
(A) Office Systems shall transfer to an
account designated by Pitney Bowes a cash amount,
based on historical claim levels, on the first day
of October 2001, November 2001, December 2001,
January 2002 and February 2002 as stipulated in
writing by Pitney Bowes to cover the payment of
claims by Transferred Employees and their eligible
spouses and dependants incurred under the Pitney
Bowes Medical Plan and Pitney Bowes Dental Plan
during the Benefit Transition Period. No later than
December 31, 2002, if the actual claims incurred
for these individuals during the Benefit Transition
Period are less than the aggregate estimated
payments described above, Pitney Bowes shall
transfer to Office Systems an amount equal to the
excess, and if the actual claims incurred for such
period are greater than the aggregate estimated
payments, Office Systems shall transfer in cash an
amount equal to the underpayment.
SECTION 8. Severance. The continued employment by the Office
Systems Group of Transferred Employees after the Distribution Date shall not be
deemed a
Schedule 5.01-Page 4
(B) As soon as practicable following the
Distribution Date, Pitney Bowes shall cause any
Transferred Employee who was receiving benefits
under the Pitney Bowes Long Term Disability Plan
to be covered by UNUM, or other replacement
carrier, such that following such transfer of
coverage, neither Pitney Bowes nor Office
Systems will be responsible or liable for the
income replacement benefits which would
otherwise be provided by the Pitney Bowes Long
Term Disability Plan. In addition, as soon as
practicable following December 31, 2001, Pitney
Bowes shall cause any Transferred Employee who
becomes entitled to benefits under the Pitney
Bowes Long Term Disability Plan during the
Benefit Transition Period to be covered by UNUM,
or other replacement carrier, such that
following such transfer of coverage, neither
Pitney Bowes nor Offices Systems will be
responsible or liable for the income replacement
benefits which would otherwise be provided by
the Pitney Bowes Long Term Disability Plan.
Office Systems shall reimburse Pitney Bowes in
cash on the last day of September 2001, October
2001, November 2001 and December 2001, an amount
equal to the income replacement benefits
provided to Transferred Employees who become
eligible for such benefits under the Pitney
Bowes Long Term Disability Plan.
(C) Office Systems shall provide to
Transferred Employees who are receiving income
replacement benefits under the Pitney Bowes Long
Term Disability Plan as of the Distribution Date
medical benefits which are comparable, in terms of
coverage and cost sharing arrangements, to the
medical benefits provided to active Transferred
Employees for a period of three years following the
Distribution Date.
(ii) As of December 31, 2001, Office Systems will
cease participation in the foregoing Pitney Bowes Welfare Plans
and will establish or designate welfare plans within the meaning
of Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended, for the benefit of Transferred Employees (the
"Replacement Welfare Plans"). Claims incurred by Transferred
Employees on and after January 1, 2002 shall be the
responsibility of the Replacement Welfare Plans.
(iii) During the Benefit Transition Period, Pitney
Bowes shall provide coverage and benefits for Transferred
Employees and their beneficiaries under Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985 and
Section 4980B of the Code and Office
Schedule 5.01-Page 5
Systems shall reimburse to Pitney Bowes the cost of providing
such benefits. For periods beginning after the Benefit Transition
Period, Office Systems shall assume full responsibility for the
provision of such benefits and Pitney Bowes shall have no
liability therefor.
(b) Retiree Medical Plan. As of the Distribution Date,
--------------------
Transferred Employees shall not be eligible, or become eligible, to participate
in or receive benefits under the Pitney Bowes Retiree Medical Plan (the "Retiree
Medical Plan") except as set forth below:
(i) 55/10 on the Distribution Date: Any Transferred Employee
------------------------------
who has completed at least 10 years of service with Pitney Bowes
on or after attainment of age 45 and has attained at least age 55
as of the Distribution Date (each such Transferred Employee is
referred to as an "Eligible Transferred Employee" and is listed
on Schedule 5.4(b)(i) hereto) shall be entitled to participate in
the Retiree Medical Plan following termination of employment from
Office Systems. Each Eligible Transferred Employee's
participation in the Retiree Medical Plan shall be subject to the
terms and conditions of such Plan as in effect at the time such
Employee claims benefits thereunder (other than the requirements
relating to eligibility to participate in such Plan), including
provisions of such Plan regarding the ability of Pitney Bowes to
amend, modify and terminate such Plan.
(ii) 55/10 within 3 years of the Distribution Date: Any
---------------------------------------------
Transferred Employee who has (x) completed at least 10 years of
service with Pitney Bowes and Office Systems on or after
attainment of age 45 within 3 years of the Distribution Date and
(y) has attained age 55 within 3 years of the Distribution Date
("Qualified Transferred Employee") shall be entitled to
participate in the Retiree Medical Plan following termination of
employment from Office Systems. Each Qualified Transferred
Employee's participation in the Retiree Medical Plan shall be
subject to the terms and conditions of such Plan as in effect at
the time such Employee claims benefits thereunder including any
requirements relating to eligibility to participate in such Plan
and Pitney Bowes' right to amend, modify or terminate such Plan.
For example, if the eligibility requirements at the time such
Employee terminates employment from Office Systems and seeks
benefits under such Plan are age 60 with 15 years if service,
such Qualified Transferred Employee must satisfy such 60/15
requirements.
(iii) At least age 45: Any Transferred Employee who is at
---------------
least age 45 on the Distribution Date and (x) attains age 55 and
(y) completes at
Schedule 5.01-Page 6
least 10 years of service with Pitney Bowes and Office Systems on
or after attainment of age 45 and who is not covered in the above
eligibility groups shall be entitled to participate in the
Retiree Medical Plan as provided hereinafter. Such Transferred
Employee shall pay the entire cost of such coverage as determined
by Pitney Bowes. Such Transferred Employee's participation in the
Retiree Medical Plan shall be subject to the terms and conditions
of such Plan as in effect at the time such Transferred Employee
claims benefits thereunder, including any requirements relating
to eligibility to participate in such Plan and Pitney Bowes'
right to amend, modify or terminate such Plan.
SECTION 5. Workers Compensation. Office Systems shall be
responsible for all workers compensation obligations related to claim events
occurring on or after the Distribution Date, with respect to any employee or
former employee of the Office Systems Business, including, but not limited to,
any Transferred Employee. Pitney Bowes shall be responsible for all workers
compensation obligations related to claim events occurring prior to the
Distribution Date with respect to any employee or former employee of the Office
Systems Business, including, but not limited to, any Transferred Employee.
SECTION 6. Stock-Based Plans.
(a) Pitney Bowes Stock Plan. Pitney Bowes and Office Systems
-----------------------
shall use their reasonable best efforts to take all actions necessary or
appropriate so that each Transferred Employee who has been granted options on
the common stock of Pitney Bowes pursuant to the Pitney Bowes Stock Plan and who
has outstanding options as of the Distribution Date shall have such options
equitably adjusted to reflect a change in the fair market value of Pitney Bowes
following the Distribution Date. In addition, such Transferred Employees shall
be granted options on the common stock of Office Systems under the Office
Systems Stock Plan following the Distribution Date with an intrinsic value
intended to make up for the reduced intrinsic value occurring by reason of their
Pitney Bowes options being adjusted. Transferred Employees shall not receive any
further grants of Pitney Bowes stock options following the Distribution Date.
For purposes of Pitney Bowes stock options granted to Transferred Employees
described herein, service with Office Systems will be recognized to satisfy any
vesting schedule with respect to such options that has not been satisfied as of
the Distribution Date. The Distribution will not result in a termination of
employment or otherwise be considered an exercise or forfeiture event under such
Plan or option award agreement. However, termination of employment from Office
Systems will be treated as a termination event under such Plan or option award
agreement. In any event, the rights and benefits of Transferred Employees under
the Pitney Bowes Stock Plan shall be set forth in the special amendment to such
Plan intended to specifically govern such rights and benefits, consistent with
the terms hereof, effective as of October 1, 2000.
Schedule 5.01-Page 7
(b) Employee Stock Purchase Plan. Transferred Employees shall
----------------------------
cease participation in the Pitney Bowes Employee Stock Purchase Plan as of the
Distribution Date and shall have their payroll deductions as of such date paid
to them in accordance with the terms of such Plan. Transferred Employees shall
not participate in such Plan following the Distribution Date.
SECTION 7. Bonus and Profit Incentive Plans.
(a) PBC and Annual Incentive Awards. Any Transferred Employee who
-------------------------------
is eligible for incentive compensation pursuant to the Pitney Bowes Performance
Based Compensation Program or who is eligible for incentive compensation under
the Pitney Bowes Key Employees' Incentive Plan shall have any such incentive
compensation paid to him or her as soon as practicable following the
Distribution Date. Any payments referred to in the preceding sentence shall be
paid by Pitney Bowes and based on the period of employment with Pitney Bowes
during calendar year 2001 through the Distribution Date and shall be further
based on the evaluation criteria customarily applied pursuant to the respective
incentive pay Program or Plan in which the Transferred Employee participates.
Transferred Employees shall not participate in any such Pitney Bowes Program or
Plan following the Distribution Date.
(b) CIUs. Any Transferred Employee who is eligible for cash
----
incentive units ("CIUs") under the Pitney Bowes Long Term Incentive Program
shall have the value of his or her CIUs paid in cash in accordance with the
terms and conditions of such Program based on the number of completed months of
service with Pitney Bowes during each 36 month CIU cycle and on the extent that
performance-based targets associated with the CIUs are achieved. Any such CIU
shall be paid to each eligible Transferred Employee at the time other
participants in the CIU program receive their payments based on the completion
of a 36 month cycle. For purposes of this prorated calculation, the targeted
payout shall be multiplied by a fraction, the numerator of which is the
Transferred Employee's total number of completed months of active service with
the relevant Group during the particular CIU cycle through the Distribution Date
and the denominator of which is 36. Transferred Employees shall not participate
in such Program following the Distribution Date.
(c) Excluded Arrangements. Mr. Marc C. Breslawsky entered into a
---------------------
Separation Agreement with Pitney Bowes effective as of October 27, 2000 and a
related letter agreement of the same date (collectively, the "MB Agreements") in
which his rights and obligations under certain plans and arrangements of Pitney
Bowes, identified therein, are separately described. Pitney Bowes and Offices
Systems agree that, in the case of Mr. Breslawsky, the MB Agreements shall not
be affected by, and shall supersede any contrary provisions of, this
Distribution Agreement.
Schedule 5.01 -Page 8
SECTION 8. Severance. The continued employment by the Office
Systems Group of Transferred Employees after the Distribution Date shall not be
deemed a severance of employment of such Transferred Employees from Pitney Bowes
for purposes of any policy, Plan, program or agreement of Pitney Bowes or any of
its Subsidiaries that provides for the payment of severance, salary continuation
or similar benefits.
SECTION 9. Deferred Compensation. Pitney Bowes shall retain as of
the Distribution Date all of the obligations and liabilities of Pitney Bowes and
any of its Affiliates (including, without limitation, office systems as a
division thereof) for any Transferred Employee under all non-qualified deferred
compensation and retirement plans of Pitney Bowes and its Affiliates and any
reserve or accrual in respect of such Transferred Employees shall be retained by
Pitney Bowes.
SECTION 10. No Third Party Beneficiaries. Neither Transferred
Employees nor any current, former or retired employee of the Pitney Bowes Group
shall be entitled to enforce the provisions of this Schedule 5.01 against the
respective parties as third party beneficiaries thereof.
Schedule 5.01 -Page 9
SCHEDULE 8.04
INSURANCE
Occurrence Policies
Comprehensive Automobile Liability*
Commercial General/Products Liability*
Workers' Compensation and Employers Liability*
Aircraft Liability (Non-Owned)
Financial Services Excess Umbrella
International Excess and Difference-In-Conditions
HealthCare Purchases Professional Liability
Property (Global) including Ocean Cargo
Travel Accident
Umbrella (Excess) Liability
*Accruals have been established to cover deductibles
Claims Made Policies
Specialty Errors & Ommissions Liability
Employment Practices Liability
Executive Risk Policies
Directors & Officers Liability
Fiduciary Liability
Kidnap/Ransom and Extortion
Outside Directorship
Excess Directors & Officers Liability
Excess Fiduciary Liability
Pollution and Remediation Legal Liability (3rd Party Dispositions)
Schedule 8.04 -Page 1