U.S. wholesale consumable supplies business. Under this agreement, we will
provide a wide range of transaction management services, including order
fulfillment and distribution, product warehousing, inbound call center services,
product return administration and other services.
The agreement has an initial term of five years from the completion of this
offering, although either party has the right to terminate the agreement at any
time, without cause. If Daisytek terminates the agreement without cause,
Daisytek must provide us with at least 180 days' prior notice and pay us a
termination fee. The termination fee is based upon the net value of the assets
being transferred to us by Daisytek which are primarily used in servicing the
Daisytek business. The termination fee declines over the five year term of the
agreement. If we terminate the agreement without cause, we must provide Daisytek
with at least 365 days' prior notice and Daisytek does not have to pay any
termination fee. In addition, if there is a change in control of Daisytek, we
may terminate the agreement upon 90 days' prior notice and Daisytek does not
have to pay the termination fee. During the term of this agreement, Daisytek
will pay us service fees based upon a percent of shipped revenue. We and
Daisytek have agreed that these fees are based upon certain assumptions
regarding the nature, cost and scope of the services we will be providing under
the agreement. If these assumptions should prove to be materially incorrect, we
and Daisytek have agreed to negotiate in good faith an adjustment to the fees
payable to us under the agreement.
During the term of the agreement, we have agreed not to engage, on our own
behalf, in the business of selling or distributing, on a wholesale basis, any
Daisytek products. This will not restrict us, however, from providing
transaction management services to third parties who may be engaged in the
business of selling or distributing, on a wholesale basis, the same or competing
As part of the restructuring of our arrangements with IBM, we have also
entered into transaction management agreements with Daisytek to provide
transaction management services, on a worldwide basis, in connection with their
distribution of various IBM products. Under these agreements, we will receive
service fees based upon a variable percent of Daisytek's gross profit arising
from its IBM product sales. These agreements are coterminous with our IBM
agreements which, generally, have terms of one to two years, although IBM may
terminate these agreements at any time.
TRANSITION SERVICES AGREEMENT
Upon completion of this offering, we will enter into a transition services
agreement with Daisytek. Under this agreement, Daisytek will provide us with
various services relating to employee payroll and benefits, use of facilities,
certain management information systems and other administrative services.
Daisytek will provide us with these services until the completion of the
spin-off (the "Transition Period"), except that, with respect to any particular
service, we may, upon notice to Daisytek, either terminate the Transition Period
as of an earlier date or extend the Transition Period for up to one year from
the completion of this offering.
The agreement requires us to use all commercially reasonable efforts to
obtain these transition services from a source other than Daisytek prior to the
conclusion of the Transition Period. If, however, we cannot obtain any
transition service from a source other than Daisytek and the transition service
is necessary for us to continue to operate our business, then, we may require
Daisytek to continue to provide the transition service for an additional period
not to exceed six months.
Generally, we will pay Daisytek for these transition services an amount
equal to the cost historically allocated by Daisytek to our business, adjusted
to reflect any changes in the nature, cost or level of the services so provided.
If we require Daisytek to provide us with any transition service after the
expiration of the Transition Period, we will pay Daisytek the fair market value
of these services.