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6.3. Other Liabilities.
(a) Except as provided in Section 6.4, this Section 6
shall not be applicable to any Tax-Related Losses, which shall be governed by
Section 4 of this Agreement.
(b) This Section 6 shall not be applicable to any
Losses relating to, arising out of, or due to any breach of the provisions of
any other contract, agreement or understanding between Daisytek International or
any Daisytek Affiliate and PFSweb or any PFSweb Affiliate, including, without
limitation, the Separation Agreement and any of the other Ancillary Agreements,
which Losses shall be governed by the terms of such contract, agreement or
understanding.
6.4. Tax Effects of Indemnification.
(a) Any indemnification payment made under this
Agreement shall be characterized for tax purposes as if such payment were made
immediately prior to the latest Distribution Date, and shall therefore be
treated, to the extent permitted by law, as either (i) a distribution from
PFSweb to Daisytek or (ii) a capital contribution from Daisytek to PFSweb.
(b) The amount of any Loss or Tax-Related Losses for
which indemnification is provided under this Agreement shall be (i) increased to
take account of net Tax cost, if any, incurred by the Indemnitee arising from
the receipt or accrual of an Indemnity Payment hereunder (grossed up for such
increase) and (ii) reduced to take account of net Tax benefit, if any, realized
by the Indemnitee arising from incurring or paying such Loss or Tax-Related
Losses. In computing the amount of any such Tax cost or Tax benefit, the
Indemnitee shall be deemed to recognize all other items of income, gain, loss,
deduction or credit before recognizing any item arising from the receipt or
accrual of any Indemnity Payment hereunder or incurring or paying any
indemnified Loss or Tax-Related Losses. Any Indemnity Payment hereunder shall
initially be made without regard to this Section 6.4 and shall be increased or
reduced to reflect any such net Tax cost (including gross-up) or net Tax benefit
only after the Indemnitee has actually realized such cost or benefit. For
purposes of this Agreement, an Indemnitee shall be deemed to have "actually
realized" a net Tax cost or a net Tax benefit to the extent that, and at such
time as, the amount of Taxes payable by such Indemnitee is increased above or
reduced below, as the case may be, the amount of Taxes that such Indemnitee
would be required to pay but for the receipt or accrual of the Indemnity Payment
or the incurrence or payment of such Loss or Tax-Related Losses, as the case may
be. The amount of any increase or reduction hereunder shall be adjusted to
reflect any final determination (which shall include the execution of Form
870-AD or successor form) with respect to the Indemnitee's liability for Taxes,
and payments between Daisytek and PFSweb to reflect such adjustment shall be
made if necessary.
6.5. Effect Of Insurance upon Indemnification. The amount
which an Indemnifying Party is required to pay to any Indemnitee pursuant to
this Section 6 shall be reduced (including retroactively) by any Insurance
Proceeds and other amounts actually recovered by such Indemnitee in reduction
of the related Loss, it being understood and agreed that each of PFSweb and
Daisytek International shall use commercially reasonable efforts to collect any
such proceeds or other amounts to which it or any of its Affiliates is
entitled, without regard to
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