TAX INDEMNIFICATION AND ALLOCATION AGREEMENT
THIS TAX INDEMNIFICATION AND ALLOCATION AGREEMENT ("Agreement") is entered
into as of __________, 1999 by and between Daisytek International Corporation, a
Delaware corporation ("Distributing") and PFSweb, Inc., a Delaware corporation
("Controlled") (Distributing and Controlled are sometimes collectively referred
to herein as the "Companies"). Capitalized terms used in this Agreement are
defined in Section 1 below. Unless otherwise indicated, all "Section" references
in this Agreement are to sections of this Agreement.
A. As of the date hereof, Distributing is the common parent of an
affiliated group of corporations, including Controlled, which has elected to
file consolidated Federal income tax returns.
B. Incident to an initial public offering ("IPO") of common stock of
Controlled in connection with the separation and distribution of Controlled from
Distributing pursuant to one overall integrated plan, the Companies have entered
into a Master Separation Agreement and an Initial Public Offering and
Distribution Agreement (the "Distribution Agreement").
C. After the IPO, and before the distribution of all of Distributing's
of Controlled to Distributing's shareholders, Controlled and its
subsidiaries (as constituted immediately after the consummation of the IPO) will
continue to be members of the affiliated group of which Distributing is the
D. After the stock of Controlled is distributed to Distributing's
shareholders, Controlled will no longer be a member of the affiliated group of
which Distributing is the common parent.
E. The Companies desire to provide for and agree upon the allocation
between the parties of liabilities for Taxes arising prior to, as a result of,
and subsequent to the actions contemplated by the Distribution Agreement, and to
provide for and agree upon other matters relating to Taxes.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
Section 1. DEFINITION OF TERMS. For purposes of this Agreement (including
the recitals hereof), the following terms have the following meanings:
"Accounting Firm" shall have the meaning provided in Section 15.
"Accrued Taxes" means the sum of any liabilities for current tax
expense required to be accrued as of the IPO Date under generally accepted
accounting principles on the books of Controlled or any member of the
Controlled Group for Taxes attributable to Tax Periods or portions thereof
ending on or before the IPO Date.