Amendment No. 2

As filed with the Securities and Exchange Commission on August 29, 2014

File No. 001-36486

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 2

TO

FORM 10

 

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

 

Dealer Services Holdings, LLC

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   46-5743146

(State or Other Jurisdiction

of Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

1950 Hassell Road

Hoffman Estates, IL

  60169

(Address of Principal

Executive Offices)

  (Zip Code)

(847) 397-1700

(Registrant’s telephone number,

including area code)

 

 

Securities to be registered

pursuant to Section 12(b) of the Act:

 

Title of each class

to be so registered

 

Name of each exchange on which

each class is to be registered

Common Stock, par value $0.01 per share   The NASDAQ Global Select Market

Securities to be registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   x  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

 

 

 


EXPLANATORY NOTE

This Amendment No. 2 (the “Amendment”) to the Registrant’s Registration Statement on Form 10 (File No. 001-36486) (the “Registration Statement”) is being filed solely to file certain exhibits to the Registration Statement as indicated in the exhibit index contained in Item 15 of this Amendment. No change has been made to the other sections of the Registration Statement. Accordingly, they have been omitted.


Item 15. Financial Statements and Exhibits.

(b) Exhibits

 

Exhibit

Number

  

Description

  2.1    Form of Separation and Distribution Agreement between the Registrant and Automatic Data Processing, Inc. (“ADP”)
  3.1    Form of Certificate of Incorporation of the Registrant
  3.2    Form of By-laws of the Registrant
10.1    Form of Tax Matters Agreement between the Registrant and ADP
10.2    Form of Transition Services Agreement between the Registrant and ADP
10.3    Form of Intellectual Property Transfer Agreement between the Registrant and ADP
10.4*    Form of Data Center Services Agreement between the Registrant and ADP
10.5    Form of Employee Matters Agreement between the Registrant and ADP
10.6    Form of Change in Control Severance Plan for Corporate Officers
10.7    Form of 2014 Omnibus Award Plan
10.8    Form of 2014 Deferred Compensation Plan
21.1*    Subsidiaries of the Registrant
99.1†    Information Statement

 

* To be filed by amendment
Previously Filed


SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dealer Services Holdings, LLC
By:   /s/ Steven J. Anenen
  Name:  Steven J. Anenen
  Title:    Chief Executive Officer

Date: August 29, 2014

EX-2.1

Exhibit 2.1

SEPARATION AND DISTRIBUTION AGREEMENT

by and between

AUTOMATIC DATA PROCESSING, INC.

and

CDK GLOBAL HOLDINGS, LLC

Dated as of [], 2014


TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINITIONS

     3   

Section 1.1

 

Definitions

     3   

Section 1.2

 

General Interpretive Principles

     14   

ARTICLE II THE PRE-DISTRIBUTION TRANSACTIONS

     15   

Section 2.1

 

Restructuring, Recapitalization and Other Transactions

     15   

Section 2.2

 

Financings and Dealer Cash Dividend

     15   

Section 2.3

 

The Separation and Related Transactions

     15   

Section 2.4

 

Conditions Precedent to Consummation of the Pre-Distribution Transactions

     20   

ARTICLE III THE DISTRIBUTION

     21   

Section 3.1

 

Actions Prior to the Distribution

     21   

Section 3.2

 

The Distribution

     22   

Section 3.3

 

Conditions to Distribution

     23   

ARTICLE IV SURVIVAL AND INDEMNIFICATION; RELEASE

     25   

Section 4.1

 

Survival of Agreements

     25   

Section 4.2

 

Indemnification by Dealer

     25   

Section 4.3

 

Indemnification by ADP

     26   

Section 4.4

 

Insurance

     26   

Section 4.5

 

Procedures for Indemnification of Third Party Claims

     27   

Section 4.6

 

Procedures for Indemnification of Non-Third Party Claims

     29   

Section 4.7

 

Survival of Indemnities

     29   

Section 4.8

 

Remedies Cumulative

     29   

Section 4.9

 

Ancillary Agreements

     29   

Section 4.10

 

Mutual Release

     29   

ARTICLE V ANCILLARY AGREEMENTS

     31   

Section 5.1

 

Data Center Services Agreement

     31   

Section 5.2

 

Employee Matters Agreement

     31   

Section 5.3

 

Intellectual Property Transfer Agreement

     31   

Section 5.4

 

Tax Matters Agreement

     32   

Section 5.5

 

Transition Services Agreement

     32   

Section 5.6

 

Restructuring Documents

     32   

ARTICLE VI CERTAIN ADDITIONAL COVENANTS

     32   

Section 6.1

 

Consents for Business

     32   

Section 6.2

 

Additional Consents

     32   

 

(i)


Section 6.3

 

Further Assurances

     32   

Section 6.4

 

Future Activities

     33   

Section 6.5

 

Settlement of Certain Insurance Claims

     34   

Section 6.6

 

Transitional Use of ADP Name

     34   

ARTICLE VII ACCESS TO INFORMATION

     35   

Section 7.1

 

Agreement for Exchange of Information

     35   

Section 7.2

 

Ownership of Information

     36   

Section 7.3

 

Compensation for Providing Information

     36   

Section 7.4

 

Record Retention

     36   

Section 7.5

 

Limitation of Liability

     37   

Section 7.6

 

Other Agreements Providing for Exchange of Information

     37   

Section 7.7

 

Production of Witnesses; Records; Cooperation

     37   

Section 7.8

 

Confidentiality

     39   

Section 7.9

 

Privileged Information

     40   

ARTICLE VIII NO REPRESENTATIONS OR WARRANTIES

     41   

Section 8.1

 

NO REPRESENTATIONS OR WARRANTIES

     41   

ARTICLE IX TERMINATION

     42   

Section 9.1

 

Termination

     42   

Section 9.2

 

Effect of Termination

     42   

ARTICLE X MISCELLANEOUS

     42   

Section 10.1

 

Complete Agreement; Representations

     42   

Section 10.2

 

Costs and Expenses

     43   

Section 10.3

 

Governing Law

     43   

Section 10.4

 

Notices

     43   

Section 10.5

 

Amendment, Modification or Waiver

     44   

Section 10.6

 

No Assignment; Binding Effect; No Third Party Beneficiaries

     44   

Section 10.7

 

Counterparts

     44   

Section 10.8

 

Negotiation

     45   

Section 10.9

 

Specific Performance

     45   

Section 10.10

 

New York Forum

     45   

Section 10.11

 

WAIVER OF JURY TRIAL

     46   

Section 10.12

 

Interpretation

     46   

Section 10.13

 

Severability

     46   

Section 10.14

 

No Set-Off

     46   

 

(ii)


EXHIBITS   
Bylaws of Dealer   

Exhibit A

Certificate of Incorporation of Dealer   

Exhibit B

Form of Data Center Services Agreement   

Exhibit C

Form of Employee Matters Agreement   

Exhibit D

Form of Intellectual Property Transfer Agreement   

Exhibit E

Form of Tax Matters Agreement   

Exhibit F

Form of Transition Services Agreements   

Exhibit G

SCHEDULES   
ADP Assigned Agreements    Schedule 2.3(c)(i)
Dealer Assigned Agreements    Schedule 2.3(c)(ii)
Surviving ADP Group and Dealer Group Agreements    Schedule 2.3(d)
Guarantee Fees    Schedule 2.3(f)
ADP Statements in Information Statement    Schedule 4.3(d)
Transaction Expenses    Schedule 10.2

 

(iii)


SEPARATION AND DISTRIBUTION AGREEMENT

SEPARATION AND DISTRIBUTION AGREEMENT, dated as of [            ], 2014, by and between Automatic Data Processing, Inc., a Delaware corporation (“ADP”), and CDK Global Holdings, LLC, a Delaware limited liability company whose sole member is ADP (each, a “Party” and collectively, the “Parties”).

RECITALS

WHEREAS, the Board of Directors of ADP has determined that it is in the best interests of ADP to separate the Dealer Business (as defined below) and the ADP Business (as defined below) into two independent companies (the “Separation”), on the terms and subject to the conditions set forth in this Agreement (as defined below), in order to provide greater flexibility for the management, capital requirements and growth of the Dealer Business while ensuring that ADP can focus its time and resources on the development of the ADP Business;

WHEREAS, to effect the Separation, Dealer (as defined below) intends to retain ownership and possession of all Dealer Assets (as defined below) and ADP intends to retain ownership and possession of all ADP Assets (as defined below);

WHEREAS, to further effect the Separation, Dealer intends to remain solely liable for all Dealer Liabilities (as defined below) and ADP intends to remain solely liable for all ADP Liabilities (as defined below);

WHEREAS, to further effect the Separation, and as an integral part thereof, ADP intends to cause the Restructuring (as defined below) to occur prior to the Separation;

WHEREAS, it is the intention of the Parties that, following the Restructuring and the Separation but prior to the Distribution (as defined below), Dealer will be converted from a Delaware limited liability company into a Delaware corporation pursuant to Section 18-216 of the Delaware Limited Liability Company Act (the “LLC Conversion”), and will be recapitalized such that all of the shares of common stock of Dealer, par value $0.01 per share (the “Dealer Common Stock”), then outstanding will be owned by ADP;

WHEREAS, following the Restructuring, the Separation and the LLC Conversion but prior to the Distribution, Dealer intends to effect the Financings (as defined below) and the Dealer Cash Dividend (as defined below);

WHEREAS, following the Restructuring, the Separation, the LLC Conversion, the Financings and the Dealer Cash Dividend, ADP intends to distribute on a pro rata basis to holders of issued and outstanding shares of common stock, par value $0.10 per share, of ADP (“ADP Common Stock”), other than shares of ADP Common Stock held in the treasury of ADP, all of the issued and outstanding shares of Dealer Common Stock owned by ADP, by means of a dividend of the Dealer Common Stock to ADP’s stockholders (the “Distribution”), on the terms and subject to the conditions set forth in this Agreement;

 

1


WHEREAS, it is the intention of the Parties that, for United States federal income tax purposes, (i) each U.S. Subsidiary Conversion (as defined below) shall qualify as a tax-free liquidation pursuant to Sections 332 and 337 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and each U.S. Legal Transfer (as defined below) shall be disregarded, (ii) the India Restructuring (as defined below) shall qualify as a tax-free spin-off pursuant to Sections 368(a)(1)(D) and 355 of the Code, (iii) the Preliminary Dutch Spin-off (as defined below) shall qualify as a tax-free spin-off pursuant to Sections 368(a)(1)(D) and 355 of the Code, and the Subsequent Dutch Spin-off (as defined below) shall qualify as a tax-free spin-off pursuant to Section 355 of the Code, (iv) the Canadian Restructuring (as defined below) shall qualify as a tax-free spin-off pursuant to Sections 368(a)(1)(D) and 355 of the Code, (v) the LLC Conversion and the Distribution shall qualify as a tax-free spin-off pursuant to Sections 368(a)(1)(D) and 355 of the Code and (vi) this Agreement shall constitute, and is hereby adopted as, a plan of liquidation under Section 332 of the Code with respect to each U.S. Subsidiary Conversion, a plan of reorganization under Section 368 of the Code with respect to the India Restructuring, a plan of reorganization under Section 368 of the Code with respect to the Preliminary Dutch Spin-Off, a plan of reorganization under Section 368 of the Code with respect to the Canadian Restructuring and a plan of reorganization under Section 368 of the Code with respect to the LLC Conversion;

WHEREAS, the Board of Directors of ADP has (i) determined that the Restructuring, the Separation, the LLC Conversion, the Financings, the Dealer Cash Dividend, the Distribution and the other transactions contemplated by this Agreement and the Ancillary Agreements (as defined below) are in furtherance of and consistent with its business strategy and are in the best interests of ADP and (ii) approved this Agreement and the Ancillary Agreements;

WHEREAS, the Restructuring, the Separation, the LLC Conversion, the Financings, the Dealer Cash Dividend, the Distribution and the other transactions contemplated by this Agreement and the Ancillary Agreements shall be consummated in the order and in the manner agreed by the Parties; and

WHEREAS, it is appropriate and desirable to set forth in this Agreement the principal corporate transactions required to effect the Separation, the Financings, the Dealer Cash Dividend and the Distribution and certain other agreements that will govern certain matters relating to these transactions and the relationship of ADP and Dealer and their respective Subsidiaries (as defined below) following the Distribution.

 

2


NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

Action” means any claim, demand, action, cause of action, suit, countersuit, arbitration, litigation, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal or authority.

ADP” has the meaning assigned to such term in the Preamble hereto.

ADP Amalco” has the meaning assigned to such term in the definition of Canadian Restructuring.

ADP Assets” means all Assets of the ADP Group (including the amount of the Dealer Cash Dividend after declaration thereof), other than the Dealer Assets.

ADP Atlantic” has the meaning assigned to such term in the definition of ADP Atlantic Conversion.

ADP Atlantic Conversion” means the conversion of ADP Atlantic, Inc., a Delaware corporation (“ADP Atlantic”), to a Delaware limited liability company (“ADP Atlantic, LLC”) in a transaction intended to qualify as a tax-free liquidation pursuant to Sections 332 and 337 of the Code.

ADP Atlantic Legal Transfer” means the distribution by ADP Atlantic, LLC to ADP of all of the equity and any other assets received by ADP Atlantic, LLC in the ADP Legal Transfer or the ADP Network Services International Legal Transfer.

ADP Atlantic LLC” has the meaning assigned to such term in the definition of ADP Atlantic Conversion.

ADP Business” means all businesses and operations of the ADP Group, other than the Dealer Business.

ADP Claims” has the meaning assigned to such term in Section 4.10(a).

ADP Common Stock” has the meaning assigned to such term in the Recitals hereto.

ADP Conversion” means the conversion of ADP, Inc., a Delaware corporation (“ADP, Inc.”), to a Delaware limited liability company (“ADP, LLC”) in a transaction intended to qualify as a tax-free liquidation pursuant to Sections 332 and 337 of the Code.

 

3


ADP Group” means ADP and each Person that will be a direct or indirect Subsidiary of ADP immediately after the Distribution and each Person that is or becomes a member of the ADP Group after the Distribution, including any Person that is or was merged into ADP or any such direct or indirect Subsidiary, and each other Person that would have been included in the ADP Group in connection with the Restructuring but for the delayed transfers required by Section 2.3(b).

ADP, Inc.” has the meaning assigned to such term in the definition of ADP Conversion.

ADP Indemnified Parties” has the meaning assigned to such term in Section 4.2.

ADP Legal Transfer” means the distribution by ADP, LLC to ADP Atlantic, LLC of all of the equity of the first-tier Subsidiaries of ADP, LLC that conduct the Dealer Business, and any other Dealer Assets held by ADP, LLC. For the avoidance of doubt, the ADP Legal Transfer shall include the transfer by ADP, LLC to ADP Atlantic, LLC of all of the equity of ADP Dealer Services Holding Company, Inc., a Delaware corporation, and Performance Consultants Corporation, a corporation incorporated under the laws of Quebec.

ADP Liabilities” means those Liabilities of ADP, other than the Dealer Liabilities.

ADP, LLC” has the meaning assigned to such term in the definition of ADP Conversion.

ADP Nederland BV” has the meaning assigned to such term in the definition of Dutch Restructuring.

ADP Network Services International Conversion” means the conversion of ADP Network Services International Inc., a Delaware corporation (“ADP Network Services International, Inc.”), to a Delaware limited liability company (“ADP Network Services International, LLC”) in a transaction intended to qualify as a tax-free liquidation pursuant to Sections 332 and 337 of the Code.

ADP Network Services International, Inc.” has the meaning assigned to such term in the definition of ADP Network Services International Conversion.

ADP Network Services International Legal Transfer” means the distribution by ADP Network Services International, LLC to ADP Atlantic, LLC of the 19.41% equity interest in ADP Holding BV, a company organized under the Laws of the Netherlands, held by ADP Network Services International, LLC.

ADP Network Services International, LLC” has the meaning assigned to such term in the definition of ADP Network Services International Conversion.

 

4


ADP Parties” has the meaning assigned to such term in Section 4.10(b).

ADP Releasors” has the meaning assigned to such term in Section 4.10(a).

Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person; provided, however, that for purposes of this Agreement, no member of either Group shall be deemed to be an Affiliate of any member of the other Group. As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

Agreement” means this Separation and Distribution Agreement, as the same may be modified, amended, restated or otherwise supplemented from time to time in accordance with the terms hereof.

Ancillary Agreements” means the Employee Matters Agreement, the Intellectual Property Transfer Agreement, the Data Center Services Agreement, the Transition Services Agreement, the Tax Matters Agreement, the Restructuring Documents and any other instruments, assignments, documents and agreements executed in connection with the implementation of the transactions contemplated by this Agreement.

Asset” means any right, property or asset, whether real, personal or mixed, tangible or intangible, of any kind, nature and description, whether accrued, contingent or otherwise, and wheresoever situated and whether or not carried or reflected, or required to be carried or reflected, on the books of any Person.

Balance Sheet” has the meaning assigned to such term in the definition of “Dealer Assets.”

Business” means the Dealer Business and/or the ADP Business, as the context requires.

Canadian Restructuring” means the amalgamation under the Laws of Nova Scotia, Canada, of ADP Canada Holding Co., a corporation incorporated pursuant to the laws of Nova Scotia, and ADP Canada Co./Compagnie ADP Canada, a corporation amalgamated pursuant to the Laws of Nova Scotia to form “ADP Amalco”, followed by the transfer of the Dealer Business conducted directly or indirectly by ADP Amalco from ADP Amalco to a new Canadian company that will be transferred to a second newly formed Canadian company that will be a Subsidiary of, and treated for United States federal income tax purposes as disregarded from, Dealer in a transaction intended to qualify as a tax-free spin-off pursuant to Sections 368(a)(1)(D) and 355 of the Code and as tax-free pursuant to paragraph 55(3)(b) of the Income Tax Act (Canada).

 

5


Code” has the meaning assigned to such term in the Recitals hereto.

Consents” means any consents, waivers, notices, reports or other filings to be made, or any registrations, licenses, permits, authorizations to be obtained from, or approvals from, or notification requirements to, any third parties, including any Governmental Authority.

Continuing ADP Guarantees” has the meaning assigned to such term in Section 2.3(f)(ii).

Data Center Services Agreement” means the Data Center Services Agreement to be entered into between ADP, LLC and Dealer, substantially in the form attached hereto as Exhibit C, with such changes as may be agreed to by the Parties.

Dealer” means, prior to the LLC Conversion, CDK Global Holdings, LLC, a Delaware limited liability company whose sole member is ADP and, immediately after the LLC Conversion, CDK Global, Inc., a Delaware corporation whose sole stockholder is ADP.

Dealer Assets” means, without duplication:

(i) all of the outstanding shares of all classes of capital stock of (or other equity interests in) Dealer Subsidiaries and joint ventures owned (either of record or beneficially) by Dealer or a Dealer Subsidiary, as of the Effective Time;

(ii) all of the Assets included on the unaudited pro forma combined balance sheet of Dealer, including the notes thereto, as of June 30, 2014, that is included or incorporated by reference in the Registration Statement (the “Balance Sheet”) to the extent such Assets would have been included as Assets on a consolidated balance sheet of Dealer, and the notes thereto, as of the Effective Time (were such balance sheet and notes to be prepared) on a basis consistent with the determination of Assets included on the Balance Sheet;

(iii) all other Assets that are of a nature or type that would have resulted in such Assets being included as Assets on a consolidated balance sheet of Dealer, and the notes thereto, as of the Effective Time (were such balance sheet and notes to be prepared) on a basis consistent with the determination of Assets included on the Balance Sheet;

(iv) the Assets expressly contributed, assigned, transferred, conveyed or delivered to any member of the Dealer Group pursuant to the Ancillary Agreements;

(v) the contract rights, licenses, Trade Secrets (as defined in the definition of “Intellectual Property”), know-how, and any other rights and Intellectual Property, and any other rights, claims or properties (including any and all rights as an insured party under any ADP insurance policy), in each case of any member of the Dealer Group and as of the Effective Time; and

(vi) all other Assets that are held by any member of the Dealer Group as of the Effective Time and that relate primarily to, are used primarily in or held primarily for use in, or otherwise arise primarily from the operation of the Dealer Business.

 

6


Dealer Business” means the business and operations conducted by the Dealer Group from time to time, whether prior to, at or after the Effective Time, including, without duplication, (i) the Dealer Services Business conducted by ADP prior to the Restructuring (including with respect to any terminated, divested or discontinued business or operations of the Dealer Group), (ii) the Dealer Services Business conducted by ADP prior to any previous internal restructurings of ADP relating to the Dealer Services Business and (iii) the business and operations conducted by the Dealer Group, as more fully described in the Information Statement.

Dealer Bylaws” means the Bylaws of Dealer substantially in the form attached hereto as Exhibit A, with such changes as may be agreed to by the Parties.

Dealer Cash Dividend” means a cash dividend of $[        ] million to be paid by Dealer to ADP in one or more transactions intended to be treated as part of a plan with the LLC Conversion and the Distribution and to qualify as tax-free pursuant to Section 361(b) of the Code, using the net proceeds from the Financings taken together with additional funds on hand and approximately $[        ] million from ADP’s Canadian Subsidiaries.

Dealer Certificate of Incorporation” means the Certificate of Incorporation of Dealer substantially in the form attached hereto as Exhibit B, with such changes as may be agreed to by the Parties.

Dealer Claims” has the meaning assigned to such term in Section 4.10(b).

Dealer Common Stock” has the meaning assigned to such term in the Recitals hereto.

Dealer Group” means Dealer and each Person that will be a direct or indirect Subsidiary of Dealer immediately prior to the Distribution (but after giving effect to the Restructuring) and each Person that is or becomes a member of the Dealer Group after the Distribution, including any Person that is or was merged into Dealer or any such direct or indirect Subsidiary, and each other Person that would have been included in the Dealer Group in connection with the Restructuring but for the delayed transfers required by Section 2.3(b).

Dealer Indemnified Parties” has the meaning assigned to such term in Section 4.3.

 

7


Dealer Legal Contribution” means the contribution by ADP to Dealer of all of the equity and any other Dealer Assets received by ADP in the ADP Atlantic Legal Transfer or the Dutch Restructuring.

Dealer Liabilities” means, without duplication:

(i) all outstanding Liabilities included on the Balance Sheet, to the extent such Liabilities would have been included on a consolidated balance sheet of Dealer, and the notes thereto, as of the Effective Time (were such balance sheet and notes to be prepared) on a basis consistent with the determination of Liabilities included on the Balance Sheet;

(ii) all other Liabilities that are of a nature or type that would have resulted in such Liabilities being included as Liabilities on a consolidated balance sheet of Dealer, and the notes thereto, as of the Effective Time (were such balance sheet and notes to be prepared) on a basis consistent with the determination of Liabilities included on the Balance Sheet;

(iii) all Liabilities to the extent relating to, arising out of or resulting from any terminated, divested or discontinued business or operations of the Dealer Business;

(iv) all Liabilities expressly assumed by any member of the Dealer Group pursuant to this Agreement or the Ancillary Agreements; and

(v) all Liabilities to the extent relating to, arising out of or resulting from actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to, at or after the Effective Time, in each case to the extent such Liabilities relate to, arise out of or result from (w) any Dealer Asset, (x) the Dealer Business, (y) any service or function used by the Dealer Group at shared locations or (z) any service or function performed by any member of the ADP Group for (but not exclusively for) the Dealer Business.

Dealer Parties” has the meaning assigned to such term in Section 4.10(a).

Dealer Releasors” has the meaning assigned to such term in Section 4.10(b).

Dealer Services Business” means all of the ADP Dealer Services’ business and operations, as more fully described in ADP’s Annual Report on Form 10-K for the fiscal year ended June 30, 2014.

Delayed Transfer Asset and/or Liability” has the meaning assigned to such term in Section 2.3(b).

Dispute Escalation Notice” has the meaning assigned to such term in Section 10.8.

 

8


Distribution” has the meaning assigned to such term in the Recitals hereto.

Distribution Agent” means Wells Fargo Bank, N.A.

Distribution Agent Agreement” has the meaning assigned to such term in Section 3.1(b).

Distribution Date” means the date on which the Distribution shall be effected, such date to be determined by, or under the authority of, the Board of Directors of ADP in its sole and absolute discretion.

Dutch Restructuring” means (i) the transfer of the Dealer Business conducted by the Subsidiaries of ADP Nederland BV, a company organized under the Laws of the Netherlands (“ADP Nederland BV”), from ADP Nederland BV to a company newly formed under the Laws of the Netherlands (“Nederland 2”) that will be transferred to ADP Holding BV, a company formed under the Laws of the Netherlands, in a transaction intended to qualify as a tax-free spin-off pursuant to Sections 368(a)(1)(D) and 355 of the Code (the “Preliminary Dutch Spin-off”), followed by (ii) the transfer by ADP Network Services International, LLC of all of its equity in ADP Holding BV to ADP Atlantic, LLC and the transfer by ADP Atlantic, LLC of such interest to ADP in transactions intended to be disregarded for United States federal income tax purposes, followed by (iii) the distribution by ADP Holding BV of Nederland 2 to ADP in a transaction intended to qualify as a tax-free spin-off pursuant to Section 355 of the Code (the “Subsequent Dutch Spin-off”).

Effective Time” means the time at which the Distribution occurs on the Distribution Date.

Employee Matters Agreement” means the Employee Matters Agreement to be entered into between ADP and Dealer, substantially in the form attached hereto as Exhibit D, with such changes as may be agreed to by the Parties.

Exchange Act” means the United States Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

FIFO Basis” means, with respect to the payment of Unrelated Claims pursuant to the same ADP insurance policy, the payment in full of each successful claim (regardless of whether ADP or Dealer is the claimant) in the order in which such successful claim is approved by the insurance carrier, until the limit of the applicable ADP insurance policy is met.

Finally Determined” has the meaning assigned to such term in Section 7.9(c).

Financings” means (i) the issuance and sale by Dealer prior to the Distribution and in connection with the Separation of certain senior unsecured notes in

 

9


an aggregate principal amount of up to $[        ] million, including the execution, delivery and performance of various transactions, actions and transaction documents related thereto, and (ii) that certain term loan facility, in the amount not to exceed $[        ] million, and a revolving credit facility, in the amount not to exceed $[        ] million, in each case to be entered into prior to the Distribution and in connection with the Separation, by and between Dealer, an administrative agent, certain arrangers, and each of the financial institutions from time to time party thereto.

Governmental Authority” means any federal, state, local, foreign or international court, government, department, commission, board, bureau or agency, or any other regulatory, self-regulatory, administrative or governmental organization or authority, including the NASDAQ.

Group” means the ADP Group and/or the Dealer Group, as the context requires.

Indemnified Party” has the meaning assigned to such term in Section 4.3.

Indemnifying Party” means Dealer, for any indemnification obligation arising under Section 4.2, and ADP, for any indemnification obligation arising under Section 4.3.

India Restructuring” means the transfer of the Dealer Business conducted by ADP Private Limited, an Indian company, to a newly formed Indian company (“New IndiaCo”), followed by the transfer of New IndiaCo to ADP Nederland BV (in part directly and in part to a Subsidiary of ADP Nederland BV that is treated for United States federal income tax purposes as disregarded from ADP Nederland BV) in a transaction intended to qualify as a tax-free spin-off pursuant to Sections 368(a)(1)(D) and 355 of the Code.

Information” means all information of either the ADP Group or the Dealer Group, as the context requires, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including non-public financial information, studies, reports, records, books, accountants’ work papers, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other Software (as defined in the definition of “Intellectual Property”), marketing plans, customer data, communications by or to attorneys, memos and other materials prepared by attorneys and accountants or under their direction (including attorney work product), and other technical, financial, legal, employee or business information or data.

Information Statement” means the information statement and any related documentation distributed to holders of ADP Common Stock in connection with the Distribution, including any amendments or supplements thereto.

 

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Intellectual Property” means all intellectual property and other similar proprietary rights in any jurisdiction, whether owned or held for use under license, whether registered or unregistered, including any and all such rights in and to: (i) trademarks, trade dress, service marks, certification marks, logos, and trade names, and the goodwill associated with the foregoing (collectively, “Trademarks”); (ii) patents and patent applications, and any and all divisions, continuations, continuations-in-part, reissues, continuing patent applications, reexaminations, and extensions thereof, any counterparts claiming priority therefrom, utility models, patents of importation/confirmation, certificates of invention, certificates of registration, design registrations or patents and like rights (collectively, “Patents”); inventions, invention disclosures, discoveries and improvements, whether or not patentable; (iii) copyrights, writings and other works of authorship (“Copyrights”); (iv) trade secrets (including, those trade secrets defined in the Uniform Trade Secrets Act and under corresponding foreign statutory Law and common law), Information, business, technical and know-how information, business processes, non-public information, proprietary information and confidential information and rights to limit the use or disclosure thereof by any Person (collectively, “Trade Secrets”); (v) software, including data files, source code, object code, application programming interfaces, databases and other software-related specifications and documentation (collectively, “Software”); (vi) domain names and uniform resource locators; (vii) moral rights; (viii) privacy and publicity rights; (ix) any and all technical information, Software, specifications, drawings, records, documentation, works of authorship or other creative works, ideas, knowledge, invention disclosures or other data, not including works subject to Copyright, Patent or Trademark protection; (x) advertising and promotional materials, whether or not copyrightable; and (xi) claims, causes of action and defenses relating to the enforcement of any of the foregoing; in each case, including any registrations of, applications to register, and renewals and extensions of, any of the foregoing with or by any Governmental Authority in any jurisdiction.

Intellectual Property Transfer Agreement” means the Intellectual Property Transfer Agreement to be entered into between ADP and Dealer, substantially in the form attached hereto as Exhibit E, with such changes as may be agreed to by the Parties.

Inter-Group Indebtedness” means any intercompany receivables, payables, accounts, advances, loans, guarantees, commitments and indebtedness for borrowed funds between a member of the ADP Group and a member of the Dealer Group; provided, that “Inter-Group Indebtedness” shall not include any contingent Liabilities and accounts payable arising pursuant to the Ancillary Agreements, any agreements with respect to continuing transactions between a member of the ADP Group and a member of the Dealer Group and any other agreements entered into in the ordinary course of business.

Law” means any applicable foreign, federal, national, state, provincial or local law (including common law), statute, ordinance, rule, regulation, code or other requirement enacted, promulgated, issued or entered into, or act taken, by a Governmental Authority.

 

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Liabilities” means all debts, liabilities, obligations, responsibilities, response actions, Losses, damages (whether compensatory, punitive, consequential, treble or other), fines, penalties and sanctions, absolute or contingent, matured or unmatured, liquidated or unliquidated, foreseen or unforeseen, on- or off-balance sheet, joint, several or individual, asserted or unasserted, accrued or unaccrued, known or unknown, whenever arising, including those arising under or in connection with any Law, or other pronouncements of Governmental Authorities constituting an Action, order or consent decree of any Governmental Authority or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking, whether sought to be imposed by a Governmental Authority, private party, or a Party, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, and including any costs, expenses, interest, attorneys’ fees, disbursements and expense of counsel, expert and consulting fees, fees of third party administrators, and costs related thereto or to the investigation or defense thereof.

LLC Conversion” has the meaning assigned to such term in the Recitals hereto.

Loss” means any claim, demand, complaint, damage, loss, obligation, liability, cost or expense arising out of, relating to or in connection with any Action, including reasonable attorney’s, accountant’s, consultant’s and expert’s fees and expenses.

Mixed Account” has the meaning assigned to such term in Section 2.3(g)(ii).

Mixed Contract” has the meaning assigned to such term in Section 2.3(g)(i).

NASDAQ” means the NASDAQ Global Select Market.

Nederland 2” has the meaning assigned to such term in the definition of Dutch Restructuring.

New IndiaCo” has the meaning assigned to such term in the definition of India Restructuring.

Parties” has the meaning assigned to such term in the Preamble hereto.

Person” means any natural person, corporation, general or limited partnership, limited liability company or partnership, joint stock company, joint venture, association, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any Governmental Authority.

Pre-Distribution Policies” has the meaning assigned to such term in Section 6.5(a).

 

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Pre-Distribution Transactions” means, collectively, the Restructuring, the Separation, the LLC Conversion, the Recapitalization and the Dealer Cash Dividend.

Preliminary Dutch Spin-Off” has the meaning assigned to such term in the definition of Dutch Restructuring.

Preliminary U.S. Restructuring” means the ADP Conversion, followed by the ADP Network Services International Conversion, then followed by the ADP Atlantic Conversion.

Privileged Information” has the meaning assigned to such term in Section 7.9(a).

Recapitalization” has the meaning assigned to such term in Section 2.1(c).

Record Date” means the date to be determined by the Board of Directors of ADP in its sole and absolute discretion as the record date for determining stockholders of ADP entitled to receive shares of Dealer Common Stock pursuant to the Distribution.

Registration Statement” means the Registration Statement on Form 10 of Dealer relating to the registration under the Exchange Act of the Dealer Common Stock, including any amendments or supplements thereto.

Related Claims” means a claim or claims against an ADP insurance policy made by each of ADP and/or its insured parties, on the one hand, or Dealer and/or its insured parties, on the other hand, filed in connection with Losses suffered by each of ADP and Dealer arising out of the same underlying transaction, transactions, event or events.

Restructuring” means, collectively, the U.S. Subsidiary Conversions, the U.S. Legal Transfers, the Preliminary U.S. Restructuring, the India Restructuring, the Preliminary Dutch Spin-off, the Subsequent Dutch Spin-off, the Canadian Restructuring, the LLC Conversion and such other restructuring-related transactions agreed by the Parties in connection herewith.

Restructuring Documents” means, collectively, the contracts, agreements, arrangements, certificates, instruments, Consents and other documents to be entered into, approved, authorized, confirmed and/or ratified to implement or effect the Restructuring in the manner contemplated by this Agreement or otherwise relating to, arising out of or resulting from the transactions contemplated by this Agreement or the Restructuring, in each case in such form or forms and with such changes as may be agreed to by the Parties.

SEC” means the United States Securities and Exchange Commission.

Separation” has the meaning assigned to such term in the Recitals hereto.

 

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Shared Person” has the meaning assigned to such term in Section 2.3(h).

Subsequent Dutch Spin-Off” has the meaning assigned to such term in the definition of Dutch Restructuring.

Subsidiary” means, with respect to any Person, any other Person of which such first Person (either alone or through or together with any other Subsidiary of such first Person) owns, directly or indirectly, a majority of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such other Person.

Tax Matters Agreement” means the Tax Matters Agreement to be entered into between ADP and Dealer, substantially in the form attached hereto as Exhibit F, with such changes as may be agreed to by the Parties.

Third Party Claim” has the meaning assigned to such term in Section 4.5(a).

Transaction Expenses” has the meaning assigned to such term in Section 10.2.

Transition Services Agreement” means the Transition Services Agreement to be entered into between ADP and Dealer, substantially in the form attached hereto as Exhibit G, with such changes as may be agreed to by the Parties.

Unrelated Claims” means a claim or claims against an ADP insurance policy made by each of ADP and/or its insured parties, on the one hand, or Dealer and/or its insured parties, on the other hand, filed in connection with Losses suffered by each of ADP and Dealer arising out of unrelated and separate transactions or events.

U.S. Legal Transfers” means each of the ADP Legal Transfer, the ADP Network Services International Legal Transfer, the ADP Atlantic Legal Transfer and the Dealer Legal Contribution.

U.S. Subsidiary Conversions” means each of the ADP Conversion, the ADP Network Services International Conversion and the ADP Atlantic Conversion.

Section 1.2 General Interpretive Principles. (a) Words in the singular shall include the plural and vice versa, and words of one gender shall include the other gender, in each case, as the context requires, (b) the words “hereof,” “herein,” “hereunder,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement and not to any particular provision of this Agreement, and references to Article, Section, paragraph, Exhibit and Schedule are references to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise specified, (c) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified and (d) any reference to any federal, state, local or non-U.S. statute or Law shall be deemed to also refer to all rules and regulations promulgated thereunder, in each case as amended from time to time, unless the context otherwise requires.

 

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ARTICLE II

THE PRE-DISTRIBUTION TRANSACTIONS

Section 2.1 Restructuring, Recapitalization and Other Transactions. On or prior to the Distribution Date (but prior to the Dealer Cash Dividend and the Distribution), and subject to satisfaction or waiver of the conditions set forth in Section 2.4:

(a) the Parties shall effect the Restructuring;

(b) following the Restructuring, the Parties shall effect the LLC Conversion; and

(c) following the LLC Conversion, the Dealer Common Stock shall be recapitalized (the “Recapitalization”) such that the number of shares of Dealer Common Stock issued and outstanding and owned by ADP immediately prior to the Effective Time shall be in an amount calculated on the basis of the following: one (1) share of Dealer Common Stock with respect to every [                ] shares of ADP Common Stock issued and outstanding immediately prior to the Distribution (excluding shares held in the treasury of ADP); and such Dealer Common Stock owned by ADP will constitute all of the issued and outstanding capital stock of Dealer.

Section 2.2 Financings and Dealer Cash Dividend. On or prior to the Distribution Date (but prior to the Distribution), and subject to the consummation of the transactions contemplated by Section 2.1 and the satisfaction or waiver of the conditions set forth in Section 2.4, Dealer shall effect the Financings and the Dealer Cash Dividend.

Section 2.3 The Separation and Related Transactions.

(a) (i) The Parties acknowledge that the Separation, subject to the terms and conditions hereof and of the Ancillary Agreements, will result in (A) Dealer directly or indirectly operating the Dealer Group and the Dealer Business, owning all of the Dealer Assets and being liable for all of the Dealer Liabilities and (B) ADP directly or indirectly operating the ADP Group and the ADP Business, owning all of the ADP Assets and being liable for all of the ADP Liabilities.

(ii) Pursuant to the Separation, Dealer, or one or more members of the Dealer Group, shall remain and be the sole owner, and shall have exclusive right, title and interest in and to, all Dealer Assets. Concurrently therewith, Dealer shall remain solely liable for and shall faithfully perform, fulfill and discharge fully in due course all of the Dealer Liabilities in accordance with their respective terms, in each case except as otherwise provided in any Ancillary Agreement. Pursuant to the Separation, ADP, or one or more members of the ADP Group, shall remain the sole

 

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owner, and shall have exclusive right, title and interest in and to, all ADP Assets. Concurrently therewith, ADP shall remain and be solely liable for and shall faithfully perform, fulfill and discharge fully in due course all of the ADP Liabilities in accordance with their respective terms. From and after the Effective Time, Dealer or one or more members of the Dealer Group shall be solely responsible for all Dealer Liabilities and ADP or one or more members of the ADP Group shall be solely responsible for all ADP Liabilities, regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based occurred prior to, on or subsequent to the Distribution Date, regardless of where or against whom such Liabilities are asserted or determined (including any Liabilities arising out of claims made by ADP’s or Dealer’s respective directors, officers, employees, agents, Subsidiaries or Affiliates against any member of the ADP Group or the Dealer Group, as the case may be) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the ADP Group or the Dealer Group or any of their respective directors, officers, employees, agents, Subsidiaries or Affiliates, as the case may be. Notwithstanding anything herein to the contrary, this Section 2.3(a)(ii) shall not apply to any Assets or Liabilities contributed, assigned, transferred, conveyed, licensed, delivered and/or assumed under any Ancillary Agreement, which shall be governed by the terms thereof.

(iii) Subject to any Ancillary Agreement and to the extent that prior to the Effective Time, (A) any member of the ADP Group owns or is in possession of any Dealer Asset or any member of the Dealer Group owns or is in possession of any ADP Asset or (B) any member of the ADP Group is liable to any third party for any Dealer Liability or any member of the Dealer Group is liable to any third party for any ADP Liability, ADP and Dealer shall, and shall cause the respective members of their Groups to, cooperate and use their respective commercially reasonable efforts to obtain the necessary Consents to, and shall, contribute, assign, transfer, convey and/or deliver any ADP Asset or Dealer Asset, as the case may be, and/or assume any ADP Liability or Dealer Liability, as the case may be, such that, on or prior to the Effective Time, Dealer or a member of the Dealer Group owns and is in possession of the Dealer Assets and is solely liable for the Dealer Liabilities and ADP or a member of the ADP Group owns and is in possession of the ADP Assets and is solely liable for the ADP Liabilities.

(b) Delayed Transfer of Assets and/or Liabilities. To the extent that any contribution, assignment, transfer, conveyance, delivery or assumption required pursuant to Section 2.3 shall not have been consummated as of the Effective Time, whether by its terms or by operation of Law (any such Asset and/or Liability, a “Delayed Transfer Asset and/or Liability”) and subject to any Ancillary Agreement: (i) ADP and Dealer thereafter shall, and shall cause the members of their respective Groups to, use commercially reasonable efforts and cooperate to effect such contribution, assignment, transfer, conveyance, delivery or assumption as promptly following the Effective Time as shall be practicable; (ii) ADP shall thereafter, with respect to any such Dealer Asset, use commercially reasonable efforts, with the costs of ADP related thereto to be promptly reimbursed by Dealer, hold, or cause a member of the ADP Group to

 

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hold, such Dealer Asset in trust for the use and benefit of Dealer and, with respect to any such Dealer Liability, retain such Dealer Liability for the account of Dealer; and (iii) Dealer shall thereafter, with respect to any such ADP Asset, use commercially reasonable efforts, with the costs of Dealer related thereto to be promptly reimbursed by ADP, hold, or cause a member of the Dealer Group to hold, such ADP Asset in trust for the use and benefit of ADP and, with respect to any such ADP Liability, to retain such ADP Liability for the account of ADP; in each case in order to place each Party, insofar as is reasonably possible, in the same position as would have existed had such Delayed Transfer Asset and/or Liability been contributed, assigned, transferred, conveyed, delivered or assumed as contemplated hereby (it being understood that neither ADP (with respect to any Dealer Asset or Dealer Liability) nor Dealer (with respect to any ADP Asset or ADP Liability) shall be required to take any action pursuant to this clause that would, or could reasonably be expected to, result in any financial obligation to it or any restriction on its business or operations, except as may be required in any Ancillary Agreement). To the extent that Dealer is provided the use or benefit of any Dealer Asset or has any Dealer Liability held for its account pursuant to this Section 2.3(b), Dealer or another member of the Dealer Group shall perform, for the benefit of ADP and any third Person, the obligations of ADP thereunder or in connection therewith, or as may be directed by ADP and if Dealer or another member of the Dealer Group shall fail to perform to the extent required herein, Dealer shall hold ADP harmless and indemnify ADP therefor. To the extent that ADP or another member of the ADP Group is provided the use or benefit of any ADP Asset or has any ADP Liability held for its account pursuant to this Section 2.3(b), ADP or another member of the ADP Group shall perform, for the benefit of Dealer and any third Person, the obligations of Dealer thereunder or in connection therewith, or as may be directed by Dealer and if ADP or another member of the ADP Group shall fail to perform to the extent required herein, ADP shall hold Dealer harmless and indemnify Dealer therefor. Each Party shall, and/or shall cause members of its Group to, as and when any such Delayed Transfer Asset and/or Liability becomes contributable, assignable, transferable, conveyable, deliverable or assumable by such Party, effect such contribution, assignment, transfer, conveyance, delivery or assumption, as applicable, as promptly as practicable thereafter. Each of ADP and Dealer shall, and shall cause the members of its respective Group to, (A) treat for all income tax purposes (x) the Delayed Transfer Assets as assets owned by the Person entitled to such Delayed Transfer Assets as of the Effective Time and (y) the Delayed Transfer Liabilities as liabilities of, or owed by, the Person intended to be subject to such Delayed Transfer Liabilities as of the Effective Time and (B) neither report nor take any income tax position (on a tax return or otherwise) inconsistent with such treatment (unless required by a change in applicable Law or a good faith resolution of a tax contest relating to income taxes).

(c) Assignment of Certain Agreements. Subject to the Ancillary Agreements and to Section 2.3(g) hereof, (i) ADP shall assign to Dealer all of its right, title and interest under the agreements comprising Dealer Assets, as set forth on Schedule 2.3(c)(i) attached hereto, and (ii) Dealer shall assign to ADP all of its right, title and interest under the agreements comprising ADP Assets, as set forth on Schedule 2.3(c)(ii) attached hereto, and each Party shall execute and deliver any and all instruments of substitution and such other instruments or agreements as shall be necessary in connection with the discharge of the other Party from its respective obligations with respect to such agreements.

 

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(d) Termination of Certain Agreements. All contracts, licenses, agreements, commitments or other arrangements, formal or informal, between any member of the ADP Group, on the one hand, (i) and any member of the Dealer Group, on the other hand, or (ii) guarantying any obligation of any member of the Dealer Group, on the other hand, in each case in existence on or prior to the Distribution Date, shall be automatically settled, cancelled, assigned, assumed or terminated by the Parties at the Effective Time, except (A) for (x) such agreements specifically set forth on Schedule 2.3(d) attached hereto, (y) this Agreement and (z) each Ancillary Agreement (including each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by any of the Parties or any of the members of their respective Groups), (B) for any contracts, licenses, agreements, commitments or other arrangements to which any Person is a party in addition to either Party or any member of either Group, or (C) as otherwise agreed to in good faith by the Parties in writing on or after the date hereof. From and after the Distribution Date, no member of either Group shall have any rights or obligations under any such settled, cancelled, assigned, assumed or terminated contract, license, agreement, commitment or arrangement with any member of the other Group.

(e) Settlement of Inter-Group Indebtedness. Except with respect to the agreements specifically set forth on Schedule 2.3(d), the Parties shall use their commercially reasonable efforts to settle all amounts payable in connection with any Inter-Group Indebtedness on or prior to the Distribution Date.

(f) Guaranteed Obligations.

(i) ADP and Dealer shall cooperate, and shall cause their respective Groups to cooperate, to terminate, or to cause a member of the ADP Group to be substituted in all respects for any member of the Dealer Group in respect of, all obligations of such member of the Dealer Group under any ADP Liability for which such member of the Dealer Group may be liable, as guarantor, original tenant, primary obligor or otherwise. If such termination or substitution is not effected by the Distribution Date, (A) ADP shall indemnify and hold harmless the relevant Dealer Indemnified Party for any Liability arising from or relating thereto and (B) without the prior written consent of Dealer, from and after the Distribution Date, ADP shall not, and shall not permit any member of the ADP Group to, amend, renew or extend the term of, increase its obligations under, or transfer to a third Person, any loan, lease, contract or other obligation for which any member of the Dealer Group is or may be liable, unless all obligations of the Dealer Group with respect thereto are thereupon terminated by documentation reasonably satisfactory in form and substance to Dealer.

(ii) ADP and Dealer shall cooperate, and shall cause their respective Groups to cooperate, to terminate, or to cause a member of the Dealer Group to be substituted in all respects for any member of the ADP Group in respect of, all obligations of such member of the ADP Group under any Dealer Liability for which

 

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such member of the ADP Group may be liable, as guarantor, original tenant, primary obligor or otherwise, other than those guarantees listed on Schedule 2.3(d) (the “Continuing ADP Guarantees”). If such termination or substitution is not effected by the Distribution Date, (A) Dealer shall indemnify and hold harmless the relevant ADP Indemnified Party for any Liability arising from or relating thereto (including with respect to any Continuing ADP Guarantees), (B) without the prior written consent of ADP, from and after the Distribution Date, Dealer shall not, and shall not permit any member of the Dealer Group to, amend, renew or extend the term of, increase its obligations under, or transfer to a third Person, any loan, lease, contract or other obligation for which any member of the ADP Group is or may be liable (including any Continuing ADP Guarantee or any loan, lease, contract or other obligation underlying any Continuing ADP Guarantee), unless all obligations of the ADP Group with respect thereto are thereupon terminated by documentation reasonably satisfactory in form and substance to ADP and (C) with respect to each Continuing ADP Guarantee, for the period commencing on the Distribution Date through the date that such Continuing ADP Guarantee has terminated, the member of the Dealer Group that is a party to the underlying loan, lease, contract or other obligation relating to such Continuing ADP Guarantee shall pay a guarantee fee to ADP in the amounts specified on Schedule 2.3(f).

(g) Mixed Contracts; Mixed Accounts.

(i) Subject to the Ancillary Agreements, and unless the Parties agree otherwise, any agreement to which any member of the ADP Group or the Dealer Group is a party prior to the Effective Time that inures to the benefit or burden of both of the ADP Business and the Dealer Business (a “Mixed Contract”) shall be assigned in part to Dealer or one of its Subsidiaries, and/or to ADP or one of its Subsidiaries, as the case may be, if so assignable, prior to or as of the Effective Time, such that each Party or its respective Subsidiaries shall be entitled to the rights and benefits thereof and shall assume the related portion of any obligations thereunder and any Liabilities inuring to their respective Businesses; provided, however, that in no event shall either Party be required to assign any Mixed Contract in its entirety. If any Mixed Contract cannot be so partially assigned, ADP and Dealer shall, and shall cause each of their respective Subsidiaries to, take such other reasonable and permissible actions to cause: (A) the Assets associated with that portion of each Mixed Contract that relates to the Dealer Business to be enjoyed by Dealer or a Dealer Subsidiary; (B) the Liabilities associated with that portion of each Mixed Contract that relates to the Dealer Business to be borne by Dealer or a Dealer Subsidiary; (C) the Assets associated with that portion of each Mixed Contract that relates to the ADP Business to be enjoyed by ADP or an ADP Subsidiary; and (D) the Liabilities associated with that portion of each Mixed Contract that relates to the ADP Business to be borne by ADP or an ADP Subsidiary; provided, however, that the arrangements described in clauses (A), (B), (C) and (D) shall terminate on the earlier to occur of (1) the termination of the applicable Mixed Contract and (2) the first anniversary of the Distribution Date.

(ii) Except as may otherwise be agreed by the Parties, neither Party shall seek to assign any accounts receivable or accounts payable relating to both the ADP Business and the Dealer Business (“Mixed Accounts”). ADP and Dealer

 

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shall, and shall cause each of their respective Subsidiaries to, take such other reasonable and permissible actions to cause: (A) the Assets associated with that portion of each Mixed Account that relates to the ADP Business to be enjoyed solely by ADP or an ADP Subsidiary; (B) the Liabilities associated with that portion of each Mixed Account that relates to the ADP Business to be borne solely by ADP or an ADP Subsidiary; (C) the Assets associated with that portion of each Mixed Account that relates to the Dealer Business to be enjoyed solely by Dealer or a Dealer Subsidiary; and (D) the Liabilities associated with that portion of each Mixed Account that relates to the Dealer Business to be borne solely by Dealer or a Dealer Subsidiary; provided, however, that the arrangements described in clauses (A), (B), (C) and (D) shall terminate no later than the first anniversary of the Distribution Date.

(iii) Nothing in this Section 2.3(g) shall require any member of either Group to make any payment, incur any obligation or grant any concession to any third party in order to effect any transaction contemplated by this Section 2.3(g).

(h) Shared Personnel. Immediately prior to the Distribution Date, except for [                    ], (i) each Person who is an officer or director of any member of the Dealer Group and an officer or director of any member of the ADP Group (a “Shared Person”) and who is to continue as an officer or director of any member of the Dealer Group after the Distribution Date shall resign, effective at or prior to the Effective Time, from each of such Person’s positions with each member of the ADP Group and (ii) each such Shared Person who is to continue as an officer or director of any member of the ADP Group after the Distribution Date shall resign, effective at or prior to the Effective Time, from each of such Person’s positions with each member of the Dealer Group.

Section 2.4 Conditions Precedent to Consummation of the Pre-Distribution Transactions. The obligations of the Parties to consummate each of the Pre-Distribution Transactions is subject to the prior or simultaneous satisfaction, or waiver by ADP in its sole and absolute discretion, of each of the following conditions:

(a) final approval of each of the Pre-Distribution Transactions shall have been given by the Board of Directors of ADP in its sole and absolute discretion; and

(b) each of the conditions precedent to the consummation of the Distribution set forth in Section 3.3 hereof (other than Section 3.3(j)) shall have been satisfied or waived by ADP in its sole and absolute discretion.

Each of the foregoing conditions is for the benefit of ADP and ADP may, in its sole and absolute discretion, determine whether to waive any such condition. Any determination made by ADP prior to any of the Pre-Distribution Transactions concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 2.4 shall be conclusive and binding on the Parties.

 

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ARTICLE III

THE DISTRIBUTION

Section 3.1 Actions Prior to the Distribution. Subject to the satisfaction or waiver of the conditions set forth in Section 3.3, the actions set forth in this Section 3.1 shall be taken prior to the Distribution Date.

(a) The Board of Directors of ADP shall establish the Distribution Date and any appropriate procedures in connection with the Distribution. ADP and Dealer shall use commercially reasonable efforts to (i) cooperate with each other with respect to the preparation of the Registration Statement and the Information Statement, (ii) cause the Registration Statement to become effective under the Exchange Act and to keep the Registration Statement effective until the Effective Time, and (iii) mail, promptly after effectiveness of the Registration Statement and on or promptly after the Record Date, and in any event prior to the Distribution Date, to the holders of ADP Common Stock as of the Record Date, the Information Statement or a notice of the internet availability thereof.

(b) ADP shall enter into a distribution agent agreement with the Distribution Agent (the “Distribution Agent Agreement”) providing for, among other things, (i) the payment of the Distribution to the holders of ADP Common Stock in accordance with this Article III and the Distribution Agent Agreement, and (ii) the designation of Dealer as a third party beneficiary thereunder.

(c) ADP and Dealer shall deliver to the Distribution Agent (i) book-entry transfer authorizations for all of the outstanding shares of Dealer Common Stock to be distributed in connection with the payment of the Distribution and (ii) all information required to complete the Distribution on the basis set forth herein and under the Distribution Agent Agreement. Following the Distribution Date, upon the request of the Distribution Agent, Dealer shall provide to the Distribution Agent all book-entry transfer authorizations of Dealer Common Stock that the Distribution Agent shall require in order to further effect the Distribution.

(d) Each of ADP and Dealer shall execute and deliver to the other Party, or cause the appropriate members of its Group to execute and deliver to the other Party, each of the Ancillary Agreements and any other document necessary to effect the transactions contemplated by this Agreement.

(e) ADP will establish the Record Date and give the NASDAQ the required notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act and Rule 5250(e)(6) of the NASDAQ Continued Listing Guide.

(f) Each Party shall cooperate with the other Party to accomplish the Distribution and shall take any and all actions necessary or desirable to effect the Distribution.

 

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(g) The Parties will take all actions and make all filings as ADP, in consultation with Dealer but ultimately in its sole and absolute discretion, determines are necessary or appropriate, to cause the transfer or issuance of all material Consents in order for ADP and Dealer to operate their respective Businesses independently of each other in the manner contemplated hereunder and under the Ancillary Agreements. Dealer will prepare, file and use commercially reasonable efforts to make effective an application for listing of the Dealer Common Stock on the NASDAQ, subject to official notice of issuance.

(h) ADP shall, in its sole discretion, determine (i) whether to proceed with all or part of the Distribution, (ii) the Distribution Date, (iii) the timing and conditions to the Distribution and (iv) the terms thereof. ADP may, at any time and from time to time prior to the Effective Time, change the terms of the Distribution, including by delaying or accelerating the timing of the Distribution. ADP shall use good faith efforts to provide notice to Dealer of any such change. ADP may select, for itself and for Dealer, outside financial advisors, outside counsel, agents and the financial printer employed in connection with the transactions hereunder in its sole and absolute discretion.

(i) ADP and Dealer shall take all actions necessary so that the Dealer Certificate of Incorporation and the Dealer Bylaws shall be in effect at or prior to the Effective Time.

(j) ADP and Dealer shall take all such actions as ADP, in consultation with Dealer but ultimately in its sole and absolute discretion, determines are necessary or appropriate under applicable federal or state securities or blue sky laws of the United States (and any comparable Laws under any foreign jurisdiction) in connection with the Distribution.

Section 3.2 The Distribution. Subject to the satisfaction or waiver of the conditions set forth in Section 3.3, the actions set forth in this Section 3.2 shall be taken on the Distribution Date.

(a) ADP shall effect the Distribution by causing all of the issued and outstanding shares of Dealer Common Stock beneficially owned by ADP to be distributed to record holders of shares of ADP Common Stock as of the Record Date, other than with respect to shares of ADP Common Stock held in the treasury of ADP, by means of a pro rata dividend of such Dealer Common Stock to such record holders of shares of ADP Common Stock, on the terms and subject to the conditions set forth in this Agreement.

(b) Each record holder of ADP Common Stock on the Record Date (or such holder’s designated transferee or transferees), other than in respect of shares of ADP Common Stock held in the treasury of ADP, will be entitled to receive in the Distribution, one (1) share of Dealer Common Stock with respect to every [                ] shares of ADP Common Stock held by such record holder on the Record Date. ADP shall direct the Distribution Agent to distribute on the Distribution Date or as soon as reasonably practicable thereafter the appropriate number of shares of Dealer Common Stock to each such record holder or designated transferee(s) of such holder of record.

 

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(c) ADP shall direct the Distribution Agent to determine, as soon as is practicable after the Distribution Date, the number of fractional shares, if any, of Dealer Common Stock allocable to each holder of record of ADP Common Stock entitled to receive Dealer Common Stock in the Distribution and to promptly thereafter aggregate all such fractional shares and sell the whole shares obtained thereby, in open market transactions or otherwise at the then-prevailing trading prices, and to cause to be distributed to each such holder, in lieu of any fractional share, such holder’s ratable share of the proceeds of such sale, after making appropriate deductions of the amounts required to be withheld for federal income tax purposes and after deducting an amount equal to all brokerage charges, commissions and transfer taxes attributed to such sale.

(d) Any Dealer Common Stock or cash in lieu of fractional shares with respect to Dealer Common Stock that remains unclaimed by any holder of record 180 days after the Distribution Date shall be delivered to Dealer at its request. Dealer shall hold such Dealer Common Stock and/or cash for the account of such holder of record and any such holder of record shall look only to Dealer for such Dealer Common Stock and/or cash, if any, in lieu of fractional share interests, subject in each case to applicable escheat or other abandoned property Laws.

Section 3.3 Conditions to Distribution. The obligation of ADP to consummate the Distribution is subject to the prior or simultaneous satisfaction, or waiver by ADP, in its sole and absolute discretion, of each of the following conditions:

(a) final approval of the Distribution shall have been given by the Board of Directors of ADP, and the Board of Directors of ADP shall have declared the dividend of Dealer Common Stock, each such action in its sole and absolute discretion;

(b) the Registration Statement shall have been filed with, and declared effective by, the SEC, and there shall be no stop-order in effect with respect thereto and the Information Statement or a notice of the internet availability thereof shall have been mailed to ADP stockholders;

(c) the actions and filings necessary or appropriate under applicable federal and state securities Laws of the United States (and any comparable Laws under any foreign jurisdictions) in connection with the Distribution (including, if applicable, any actions and filings relating to the Registration Statement) and any other necessary and applicable Consents from any Governmental Authority shall have been taken, obtained and, where applicable, have become effective or been accepted, each as the case may be;

(d) the Dealer Common Stock to be delivered in the Distribution shall have been approved for listing on the NASDAQ, subject to official notice of issuance;

 

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(e) no order, injunction or decree issued by any Governmental Authority or other legal restraint or prohibition preventing the consummation of the Pre-Distribution Transactions or the Distribution or any of the other transactions contemplated by this Agreement or any Ancillary Agreement shall have been threatened or be in effect;

(f) ADP shall have received a tax opinion from Paul, Weiss, Rifkind, Wharton & Garrison LLP, in form and substance satisfactory to ADP, to the effect that the LLC Conversion and the Distribution will qualify as a tax-free spin-off under Sections 368(a)(1)(D) and 355 of the Code;

(g) ADP shall have established the Record Date and shall have given the NASDAQ not less than ten (10) days’ advance notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act and Rule 5250(e)(6) of the NASDAQ Continued Listing Guide;

(h) the Distribution will not violate or result in a breach of Law or any material agreement;

(i) all material Consents required in connection with the transactions contemplated hereby (that are not referred to in Section 3.3(c)) shall have been received and be in full force and effect;

(j) each of the Pre-Distribution Transactions shall have been consummated in accordance with this Agreement;

(k) the Ancillary Agreements shall have been duly executed and delivered and such agreements shall be in full force and effect and the parties thereto shall have performed or complied with all of their respective covenants, obligations and agreements contained herein and therein and as required to be performed or complied with prior to the Effective Time; and

(l) the Board of Directors of ADP shall have not determined that any event or development shall have occurred or exists, or might occur or exist, that makes it inadvisable to effect the Distribution.

Each of the foregoing conditions is for the sole benefit of ADP and ADP may, in its sole and absolute discretion, determine whether to waive any such condition. Any determination made by ADP, in its sole and absolute discretion, prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 3.3 shall be conclusive and binding on the Parties. Each Party will use good faith efforts to keep the other Party apprised of its efforts with respect to, and the status of, each of the foregoing conditions.

 

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ARTICLE IV

SURVIVAL AND INDEMNIFICATION; RELEASE

Section 4.1 Survival of Agreements. All covenants and agreements of the Parties contained in this Agreement shall survive the Pre-Distribution Transactions and the Distribution.

Section 4.2 Indemnification by Dealer. Dealer shall indemnify, defend, release and hold harmless ADP, each member of the ADP Group and each of their respective directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ADP Indemnified Parties”), from and against any and all Losses or Liabilities of the ADP Indemnified Parties relating to, arising out of or resulting from any of the following items regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud, misrepresentation or otherwise (without duplication):

(a) the failure of Dealer or any other member of the Dealer Group or any other Person to pay, perform or otherwise promptly discharge any Dealer Liability or any contract, agreement or arrangement included in the Dealer Assets in accordance with their respective terms, whether arising prior to, on or after the Distribution Date;

(b) any Dealer Liability, any Dealer Asset or the Dealer Business, whether arising prior to, on or after the Distribution Date;

(c) any breach by Dealer or any member of the Dealer Group of this Agreement;

(d) except to the extent set forth in Section 4.3(d), any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, contained in the Registration Statement or the Information Statement or in any registration statement filed by Dealer (or related prospectus) in connection with the Distribution, or in any materials or information provided to investors by, or with the approval of, Dealer in connection with the marketing of the Distribution;

(e) the failure by Dealer to substitute a member of the Dealer Group for any member of the ADP Group as guarantor or primary obligor for any Dealer Agreement or Dealer Liability according to the terms and conditions of Section 2.3(f)(ii); and

(f) the failure by Dealer to perform in connection with any Delayed Transfer Asset and/or Liability held by ADP for Dealer’s benefit or account pursuant to Section 2.3(b).

 

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Section 4.3 Indemnification by ADP. ADP shall indemnify, defend, release and hold harmless Dealer, each member of the Dealer Group and each of their respective directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Dealer Indemnified Parties,” and, together with ADP Indemnified Parties, the “Indemnified Parties”), from and against any and all Losses or Liabilities of the Dealer Indemnified Parties relating to, arising out of or resulting from any of the following items regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud, misrepresentation or otherwise (without duplication):

(a) the failure of ADP or any other member of the ADP Group or any other Person to pay, perform or otherwise promptly discharge any ADP Liability or any contract, agreement or arrangement included in the ADP Assets in accordance with their respective terms, whether arising prior to, on or after the Distribution Date;

(b) any ADP Liability, ADP Asset or the ADP Business, whether arising prior to, on or after the Distribution Date;

(c) any breach by ADP or any member of the ADP Group of this Agreement;

(d) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with respect to the information contained in the Registration Statement or the Information Statement that is set forth on Schedule 4.3(d);

(e) the failure by ADP to substitute a member of the ADP Group for any member of the Dealer Group as guarantor or primary obligor for any ADP agreement or ADP Liability according to the terms and conditions of Section 2.3(f)(i); and

(f) the failure by ADP to perform in connection with any Delayed Transfer Asset and/or Liability held by Dealer for ADP’s benefit or account pursuant to Section 2.3(b).

Section 4.4 Insurance.

(a) Each of ADP and Dealer shall use its respective commercially reasonable efforts to collect any proceeds under its respective available and applicable third party insurance policies to which it or any of its Subsidiaries is entitled prior to seeking indemnification under this Agreement, where allowed; provided, however, that any such actions by an Indemnified Party will not relieve the Indemnifying Party of any of its obligations under this Agreement, including the Indemnifying Party’s obligation to pay directly or reimburse the Indemnified Party for costs and expenses actually incurred by the Indemnified Party.

 

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(b) The amount of any Loss subject to indemnification pursuant to this Agreement will be reduced by any amounts actually recovered (including insurance proceeds or other amounts actually recovered under insurance policies, net of any out-of-pocket costs or expenses incurred in the collection thereof), whether retroactively or prospectively, by the Indemnified Party from any third Person with respect to such Loss. If any Indemnified Party recovers an amount from a third Person in respect of any Loss for which indemnification is provided in this Agreement after the full amount of such indemnifiable Loss has been paid by an Indemnifying Party or after an Indemnifying Party has made a payment of such indemnifiable Loss and the amount received from the third Person exceeds the remaining unpaid balance of such indemnifiable Loss, then the Indemnified Party will promptly remit to the Indemnifying Party the excess (if any) of (i) the sum of the amount previously paid by such Indemnifying Party in respect of such indemnifiable Loss plus the amount received by such Indemnified Party from such third Person in respect of such indemnifiable Loss (after deducting any costs and expenses that have not yet been paid or reimbursed by the Indemnifying Party), minus (ii) the full amount of such indemnifiable Loss. An insurer or other third Person who would otherwise be obligated to pay any Loss shall not be relieved of the responsibility with respect thereto by virtue of the indemnification provisions hereof or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being understood and agreed that no insurer or any third Person shall be entitled to a “windfall” (i.e., a benefit it would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof.

Section 4.5 Procedures for Indemnification of Third Party Claims.

(a) If an Indemnified Party shall receive notice or otherwise learn of the assertion by any Person who is not a member of the ADP Group or the Dealer Group of any claim, or of the commencement by any such Person of any Action, with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnified Party pursuant to Section 4.2 or Section 4.3, or any other Section of this Agreement or any Ancillary Agreement (other than the Tax Matters Agreement) (collectively, a “Third Party Claim”), such Indemnified Party shall give such Indemnifying Party prompt written notice thereof and, in any event, within ten (10) days after such Indemnified Party received notice of such Third Party Claim. Any such notice shall describe the Third Party Claim in reasonable detail, including, if known, the amount of the Liability for which indemnification may be available. Notwithstanding the foregoing, the failure of any Indemnified Party or other Person to give notice as provided in this Section 4.5(a) shall not relieve the related Indemnifying Party of its obligations under this Article IV, except to the extent that such Indemnifying Party is actually prejudiced by such failure to give notice.

(b) An Indemnifying Party may elect (but is not required) to assume the defense of and defend, at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel, any Third Party Claim. Within thirty (30) days after the receipt of notice from an Indemnified Party in accordance with Section 4.5(a) (or sooner, if the nature of such Third Party Claim so requires), the Indemnifying Party

 

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shall notify the Indemnified Party of its election whether the Indemnifying Party will assume control of the defense of such Third Party Claim, which election shall specify any reservations or exceptions. If, in such notice, the Indemnifying Party elects to assume the defense of a Third Party Claim, the Indemnified Party shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, but the fees and expenses of such counsel shall be the expense solely of such Indemnified Party.

(c) If, in such notice, an Indemnifying Party elects not to assume responsibility for defending a Third Party Claim, or fails to notify an Indemnified Party of its election as provided in Section 4.5(b), such Indemnified Party may defend such Third Party Claim at the cost and expense of the Indemnifying Party (subject to the terms and conditions of this Agreement).

(d) The Indemnifying Party shall not have the right to compromise or settle a Third Party Claim the defense of which it shall have assumed pursuant to Section 4.5(b) except with the consent of the Indemnified Party (such consent not to be unreasonably withheld, delayed or conditioned). Any such settlement or compromise made or caused to be made of a Third Party Claim in accordance with this Article IV shall be binding on the Indemnified Party in the same manner as if a final judgment or decree had been entered by a court of competent jurisdiction in the amount of such settlement or compromise. For the avoidance of doubt, the Indemnified Party’s failure to consent to any such settlement or compromise shall be deemed unreasonable if such settlement or compromise (1) provides for an unconditional release of the Indemnified Party from Liability with respect to such Third Party Claim and (2) does not require the Indemnified Party to make any payment that is not fully indemnified under this Agreement or to be subject to any non-monetary remedy. If the Indemnified Party unreasonably withholds a consent required by this Section 4.5(d) to the terms of a compromise or settlement of a Third Party Claim proposed to the Indemnified Party by the Indemnifying Party, the Indemnifying Party’s obligation to indemnify the Indemnified Party for such Third Party Claim (if applicable) shall not exceed the total amount that had been proposed in such compromise or settlement offer plus the amount of all expenses incurred by the Indemnified Party with respect to such Third Party Claim through the date on which such consent was requested.

(e) In the event of payment by or on behalf of any Indemnifying Party to any Indemnified Party in connection with any Third Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnified Party as to any events or circumstances in respect of which such Indemnified Party may have any right, defense or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other Person. Such Indemnified Party shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

(f) The provisions of Section 4.2 through Section 4.6 shall not apply to matters that are governed by the Tax Matters Agreement.

 

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Section 4.6 Procedures for Indemnification of Non-Third Party Claims. Any claim with respect to a Liability that does not result from a Third Party Claim shall be asserted by written notice given by the Indemnified Party to the Indemnifying Party. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond in writing within such 30-day period, such Indemnifying Party shall be deemed to have agreed to accept responsibility to make payment. If such Indemnifying Party (a) does not respond within such 30-day period or (b) rejects such claim in whole or in part and does not deliver a Dispute Escalation Notice pursuant to Section 10.8 within such 30-day period, then, in either case, such Indemnified Party shall be free to pursue such remedies as may be available to such Party as contemplated by this Agreement.

Section 4.7 Survival of Indemnities. The rights and obligations of each of ADP and Dealer and their respective Indemnified Parties under this Article IV shall survive the sale or other transfer by any Party of any of its Assets or Businesses or the assignment by it of any Liabilities.

Section 4.8 Remedies Cumulative. The remedies provided in this Article IV shall be cumulative and shall not preclude assertion by any Indemnified Party of any other rights or the seeking of any and all other remedies against any Indemnifying Party; provided, that the procedures set forth in this Article IV shall be the exclusive procedures governing any indemnity action brought under this Agreement.

Section 4.9 Ancillary Agreements. Notwithstanding anything in this Agreement to the contrary, to the extent any Ancillary Agreement contains any indemnification obligation relating to any ADP Liability, ADP Asset, Dealer Liability or Dealer Asset contributed, assumed, retained, transferred, delivered or conveyed pursuant to such Ancillary Agreement, the indemnification obligations contained herein shall not apply to such ADP Liability, ADP Asset, Dealer Liability or Dealer Asset and instead the indemnification obligations set forth in such Ancillary Agreement shall govern with regard to such ADP Asset, ADP Liability, Dealer Asset or Dealer Liability.

Section 4.10 Mutual Release.

(a) Except as provided in Section 4.10(c), effective as of the Effective Time, ADP does hereby, on behalf of itself and each other member of the ADP Group, their respective Affiliates (other than any member of the Dealer Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders (other than any member of the Dealer Group), directors, officers, agents or employees of any member of the ADP Group (in each case, in their respective capacities as such) (the “ADP Releasors”), unconditionally and irrevocably release and discharge each of Dealer, the other members of the Dealer Group, their respective Affiliates (other than any member of the ADP Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the Dealer Group (in each case, in their respective capacities as such), and their respective heirs, executors, trustees, administrators, successors and assigns (the “Dealer Parties”), from any and all Liabilities

 

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existing or arising in connection with the implementation of the Separation (the “ADP Claims”); and the ADP Releasors hereby, unconditionally and irrevocably agree not to initiate proceedings with respect to, or institute, assert or threaten to assert, any ADP Claim.

(b) Except as provided in Section 4.10(c), effective as of the Effective Time, Dealer does hereby, on behalf of itself and each other member of the Dealer Group, their respective Affiliates (other than any member of the ADP Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders (other than any member of the ADP Group), directors, officers, agents or employees of any member of the Dealer Group (in each case, in their respective capacities as such) (the “Dealer Releasors”), unconditionally and irrevocably release and discharge each of ADP, the other members of the ADP Group, their respective Affiliates (other than any member of the Dealer Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders (other than any member of the Dealer Group), directors, officers, agents or employees of any member of the ADP Group (in each case, in their respective capacities as such), and their respective heirs, executors, trustees, administrators, successors and assigns (the “ADP Parties”), from any and all Liabilities existing or arising in connection with the implementation of the Separation (the “Dealer Claims”); and the Dealer Releasors hereby unequivocally, unconditionally and irrevocably agree not to initiate proceedings with respect to, or institute, assert or threaten to assert, any Dealer Claim.

(c) Nothing contained in Section 4.10(a) or 4.10(b) shall impair any right of any Person to enforce this Agreement or any Ancillary Agreement, nor shall anything contained in this Agreement or any Ancillary Agreement be interpreted as terminating as of the Effective Time any rights under this Agreement or any Ancillary Agreement. For purposes of clarification, nothing contained in Section 4.10(a) or 4.10(b) shall release any Person from:

(i) any Liability provided in or resulting from this Agreement or any of the Ancillary Agreements (including for greater certainty, any Liability resulting or flowing from any breaches of such agreements that arose prior to the Effective Time);

(ii) with respect to ADP, any ADP Liability and, with respect to Dealer, any Dealer Liability;

(iii) any Liability that the Parties may have under Article IV with respect to Third Party Claims;

(iv) any Liability for unpaid Inter-Group Indebtedness; or

(v) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 4.10.

 

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In addition, nothing contained in this Section 4.10 shall release ADP from honoring its existing obligations to indemnify any director, officer or employee of Dealer who was a director, officer or employee of ADP or any other member of the ADP Group on or prior to the Effective Time, to the extent that such director, officer or employee becomes a named defendant in any litigation involving ADP or any other member of the ADP Group and was entitled to such indemnification pursuant to the then existing obligations of a member of the ADP Group.

(d) ADP shall not make, and shall not permit any other member of the ADP Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Dealer or any other member of the Dealer Group or any other Person released pursuant to Section 4.10(a), with respect to any Liabilities released pursuant to Section 4.10(a). Dealer shall not make, and shall not permit any other member of the Dealer Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against ADP or any other member of the ADP Group or any other Person released pursuant to Section 4.10(b), with respect to any Liabilities released pursuant to Section 4.10(b).

ARTICLE V

ANCILLARY AGREEMENTS

Section 5.1 Data Center Services Agreement. All matters relating to or arising out of ADP’s data center shall be governed by the Data Center Services Agreement, except as may be expressly stated herein or therein. In the event of any inconsistency with respect to such matters between the Data Center Services Agreement and this Agreement or any other Ancillary Agreement, the Data Center Services Agreement shall govern to the extent of the inconsistency.

Section 5.2 Employee Matters Agreement. All matters relating to or arising out of any employee benefit, compensation or welfare arrangement in respect of any present and former employee of the ADP Group or the Dealer Group shall be governed by the Employee Matters Agreement, except as may be expressly stated herein or therein. In the event of any inconsistency with respect to such matters between the Employee Matters Agreement and this Agreement or any other Ancillary Agreement, the Employee Matters Agreement shall govern to the extent of the inconsistency.

Section 5.3 Intellectual Property Transfer Agreement. All matters relating to the ownership and right to use Intellectual Property, including the “ADP” name, shall be governed exclusively by the Intellectual Property Transfer Agreement, except as may be expressly stated herein or therein. In the event of any inconsistency with respect to such matters between the Intellectual Property Transfer Agreement and this Agreement or any other Ancillary Agreement, the Intellectual Property Transfer Agreement shall govern to the extent of the inconsistency.

 

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Section 5.4 Tax Matters Agreement. All matters relating to taxes shall be governed exclusively by the Tax Matters Agreement, except as may be expressly stated herein or therein. In the event of any inconsistency with respect to such matters between the Tax Matters Agreement and this Agreement or any other Ancillary Agreement, the Tax Matters Agreement shall govern to the extent of the inconsistency.

Section 5.5 Transition Services Agreement. All matters relating to the provision of support and other services by the ADP Group to the Dealer Group after the Effective Time, covered by the Transition Services Agreement, shall be governed exclusively by the Transition Services Agreement, except as may be expressly stated herein or therein. In the event of any inconsistency with respect to such matters between the Transition Services Agreement and this Agreement or any other Ancillary Agreement, the Transition Services Agreement shall govern to the extent of the inconsistency.

Section 5.6 Restructuring Documents. All matters relating to the Restructuring shall be governed exclusively by the applicable Restructuring Documents, except as may be expressly stated herein or therein. In the event of any inconsistency with respect to such matters between the applicable Restructuring Documents and this Agreement or any other Ancillary Agreement, the applicable Restructuring Document shall govern to the extent of the inconsistency.

ARTICLE VI

CERTAIN ADDITIONAL COVENANTS

Section 6.1 Consents for Business. After the Effective Time, each Party shall cause the appropriate members of its respective Group to prepare and file with the appropriate Governmental Authorities applications for the transfer or issuance, as each of the Parties determines is necessary or advisable, to its Group of all material Consents required for the members of its Group to operate its Business. The members of the Dealer Group and the members of the ADP Group shall cooperate and use all reasonable efforts to secure the transfer or issuance of such Consents.

Section 6.2 Additional Consents. In addition to the actions described in Section 6.1, the members of the ADP Group and the members of the Dealer Group shall cooperate to make all other filings and to give notice to and obtain any Consent required or advisable to consummate the transactions that are contemplated to occur from and after the Effective Time by this Agreement and the Ancillary Agreements.

Section 6.3 Further Assurances.

(a) Each of the Parties shall use its commercially reasonable efforts, on and after the Distribution Date, 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 to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

 

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(b) Without limiting the foregoing, on and after the Distribution Date, each Party shall cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party, cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and make all filings with, and to obtain all Consents, under any permit, license, agreement, indenture or other instrument, and take all such other actions as either Party may request to be taken by any other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and, to the extent necessary, (i) the transfer of any Dealer Asset from any member of the ADP Group to any member of the Dealer Group and the assignment and assumption of any Dealer Liability by any member of the Dealer Group and (ii) the transfer of any ADP Asset from any member of the Dealer Group to any member of the ADP Group and the assignment and assumption of any ADP Liability by any member of the ADP Group, and the other transactions contemplated hereby and thereby; provided that neither Party shall be obligated to make any payment, incur any obligation or grant any concession, other than the payment of ordinary and customary fees to Governmental Authorities.

(c) ADP and Dealer, in their respective capacities as direct and indirect stockholders of their respective Subsidiaries, shall each properly ratify or cause to be taken any actions that are reasonably necessary or desirable to be taken by ADP and Dealer, or any of their respective Subsidiaries, as the case may be, to effectuate the transactions contemplated by this Agreement and any Ancillary Agreement.

(d) Each of the Parties shall, and shall cause each of the members of their respective Groups, at the request of the other, to use its commercially reasonable efforts to obtain, or cause to be obtained, any Consent, substitution or amendment required to novate (including with respect to any federal government contract) or assign all obligations under agreements, leases, licenses and other obligations or Liabilities of any nature whatsoever that constitute Dealer Liabilities or ADP Liabilities, as the case may be, or to obtain in writing the unconditional release of all parties to such arrangements other than any member of either the Dealer Group or the ADP Group, as the case may be, so that, in any such case, such Group will be solely responsible for all such Liabilities.

(e) In the event that at any time and from time to time after the Effective Time any member of the ADP Group shall receive or otherwise possess any Dealer Asset, ADP shall or shall cause such member of the ADP Group to promptly transfer such Dealer Asset to Dealer or its Affiliate or designee.

(f) In the event that at any time and from time to time after the Effective Time any member of the Dealer Group shall receive or otherwise possess any ADP Asset, Dealer shall or shall cause such member of the Dealer Group to promptly transfer such ADP Asset to ADP or its Affiliate or designee.

Section 6.4 Future Activities. Following the Effective Time and except as set forth in any Ancillary Agreement, no member of either Group shall have any duty

 

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to refrain from (a) engaging in the same or similar activities or lines of business as any member of the other Group, (b) conducting its business with any potential or actual supplier or customer of any member of the other Group or (c) engaging in, or refraining from, any other activities whatsoever relating to any of the potential or actual suppliers or customers of any member of the Group.

Section 6.5 Settlement of Certain Insurance Claims.

(a) Notwithstanding the provisions of Section 2.3(a), the Parties acknowledge and agree that, following the Distribution Date, Dealer may make claims arising out of occurrences or events relating to the Dealer Business that occurred prior to the Distribution Date against applicable insurance policies of ADP covering periods prior to the Distribution Date (the “Pre-Distribution Policies”), in accordance with the terms and subject to the conditions of such Pre-Distribution Policies. ADP shall not be responsible to negotiate, investigate, defend, settle or otherwise handle such claims on behalf of Dealer. Notwithstanding the foregoing, each Party agrees to keep the other Party apprised of the status of any such claims and to cooperate and assist the other Party in a commercially reasonable manner in connection with the communications and discussions with the applicable insurance providers under the Pre-Distribution Policies. ADP shall instruct the applicable insurance carrier to negotiate with and accept proof of Loss directly from Dealer with respect to such claims, and to pay such claims directly to Dealer. ADP and Dealer each agree to provide necessary releases to resolve claim settlements.

(b) To the extent that the limits of any Pre-Distribution Policies preclude payment in full of Unrelated Claims filed by ADP and Dealer, the insurance proceeds available under such policies shall be paid to ADP and/or Dealer on a FIFO Basis.

(c) In the event that, after the Distribution Date, ADP and Dealer file Related Claims under any Pre-Distribution Policies, each of Dealer and ADP shall receive a pro rata amount of the available insurance proceeds, based on the relationship the Loss incurred by each such Party bears to the total Loss to both such Parties from the occurrence or event underlying the Related Claims.

Section 6.6 Transitional Use of ADP Name. ADP agrees that the Dealer Group shall have a royalty-free, non-exclusive, non-transferable right to use the trademark “ADP” and the “ADP” logo only in the following manner: (a) to the extent reasonably required during a transitional period not to exceed one (1) year following the Distribution Date; provided Dealer is diligently transitioning off of such use during such time; (b) solely to the extent that any tangible materials acquired by the Dealer Group hereunder contain the “ADP” trademark or “ADP” logo at the time such tangible materials are acquired by the Dealer Group hereunder, for a transitional period not to exceed six (6) months following the Distribution Date; and (c) solely with respect to software releases acquired by the Dealer Group hereunder and installed at sites of clients as of the Distribution Date, for a transitional period ending on the date that a new release of such software has been installed at such client site by the Dealer Group but in any

 

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event not later than one (1) year following the Distribution Date; provided that the Dealer Group shall not be liable for a breach of this clause (c) with respect to software used by a client if such client has not permitted the Dealer Group to install a new release in accordance with this clause (c), provided that the Dealer Group shall have used its reasonable commercial efforts to comply with this clause (c) and the Dealer Group is in compliance with this clause (c) within two (2) years following the Distribution Date. ADP agrees further that the Dealer Group shall have a perpetual, royalty-free, non-exclusive, non-transferable right to use the trademark “ADP” solely with respect to software that contains such trademark at the time such software is acquired by the Dealer Group hereunder, provided that such software is used solely by, and is not made available to persons other than, the Dealer Group. Any uses of the “ADP” trademark or the “ADP” logo during the periods referred to above shall be subject to ADP’s right to approve the manner, style and placement of the “ADP” trademark or “ADP” logo on or in connection with any materials, goods or services, except to the extent that any tangible materials acquired by the Dealer Group hereunder already contain the “ADP” trademark or “ADP” logo. All uses of the “ADP” trademark and “ADP” logo by the Dealer Group shall inure to the exclusive benefit of ADP, and the Dealer Group shall acquire no ownership rights of any kind or nature in and to the “ADP” trademark or the “ADP” logo by virtue of this transitional right to use such trademark or logo.

ARTICLE VII

ACCESS TO INFORMATION

Section 7.1 Agreement for Exchange of Information.

(a) Each of ADP and Dealer, on behalf of its respective Group, agrees to provide, or cause to be provided, to the other Party and its auditors, at any time after the Distribution Date, as soon as reasonably practicable after written request therefor from such other Party, any Information in the possession or under the control of such respective Group (including access to such Group’s accountants, personnel and facilities) that the requesting Party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting Party (including under applicable securities Laws) by a Governmental Authority having jurisdiction over the requesting Party (including pursuant to Section 7.1(d)), (ii) for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation or other similar requirements, or (iii) to comply with its obligations under this Agreement or any Ancillary Agreement (other than with respect to matters governed by the Tax Matters Agreement, which shall remain subject solely to the terms and conditions set forth therein); provided, however, that in the event that any Party reasonably determines that any such provision of Information could be commercially detrimental to such Party or any member of its Group, violate any Law or agreement to which such Party or member of its Group is a party, or waive any attorney-client privilege applicable to such Party or member of its Group, the Parties shall take reasonable measures to permit the compliance with the obligations pursuant to this Section 7.1(a) in a manner that avoids any such harm or consequence. ADP and Dealer intend that any transfer of Information that would otherwise be within the attorney-client privilege shall not operate as a waiver of any potentially applicable privilege.

 

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(b) Following the Distribution Date, each Party shall make its employees available during normal business hours and on reasonable prior notice to provide an explanation of any Information provided hereunder.

(c) Until the end of the first full ADP fiscal year occurring after the Distribution Date (and for a reasonable period of time afterwards as required for each Party to prepare consolidated financial statements or complete a financial statement audit for the fiscal year during which the Distribution Date occurs), each Party shall use its commercially reasonable efforts, consistent with past practice, to enable the other Party to meet its timetable for dissemination of its financial statements and enable such other Party’s auditors to timely complete their annual audit and quarterly financial statements.

(d) In order to enable the principal executive officer or officers, principal financial officer or officers and controller or controllers of the other Party to make the certifications required of them by Rule 13a-14 under the Exchange Act, within thirty (30) days following the end of any fiscal quarter during which Dealer is a Subsidiary of ADP, each Party shall cause its officers or employees to provide the other Party with the certification statements of such officers and employees with respect to such quarter or portion thereof, in substantially the same form and manner as such officers or employees provided such certification statements prior to the Distribution Date, or as otherwise agreed upon between the Parties. Such certification statements shall also reflect any changes in certification statements necessitated by the Separation, Distribution and any other transactions related thereto.

Section 7.2 Ownership of Information. Any Information owned by one Group that is provided to a requesting Party pursuant to Section 7.1 shall be deemed to remain the property of the providing Party. Unless specifically set forth herein or in any Ancillary Agreement, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information.

Section 7.3 Compensation for Providing Information. The Party requesting such Information agrees to reimburse the other Party for the reasonable out-of-pocket costs, if any, of creating, gathering and copying such Information or for providing explanations of Information provided, to the extent that such costs are incurred for the benefit of the requesting Party by or on behalf of such other Party’s Group. Except as may be specifically provided elsewhere in this Agreement or in any other Ancillary Agreement, such costs shall be computed in accordance with the providing Party’s reasonable standard methodology and procedures.

Section 7.4 Record Retention. Except as otherwise required or agreed in writing, or as otherwise provided in the Tax Matters Agreement, each Party shall use its good faith efforts to retain, in accordance with such Party’s record retention practices as in effect from time to time, all significant Information in such Party’s possession or

 

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under its control relating to the Business, Assets or Liabilities of the other Party, and, for a period of two (2) years following the Distribution Date, prior to destroying or disposing of any such Information, (a) the Party proposing to dispose of or destroy any such Information shall use its good faith efforts to provide reasonable prior written notice to the other Party, specifying the Information proposed to be destroyed or disposed of and (b) if, prior to the scheduled date for such destruction or disposal, the other Party requests in writing that any of the Information proposed to be destroyed or disposed of be delivered to such other Party, the Party proposing to dispose of or destroy such Information shall promptly arrange for the delivery of the requested Information to a location specified by, and at the expense of, the requesting Party; provided, however, that in the event that any Party reasonably determines that any such provision of Information could be commercially detrimental to such Party or any member of its Group, violate any Law or agreement to which such Party or member of its Group is a party, or waive any attorney-client privilege applicable to such Party or member of its Group, the Parties shall take reasonable measures to permit the compliance with the obligations pursuant to this Section 7.4 in a manner that avoids any such harm or consequence. ADP and Dealer intend that any transfer of Information that would otherwise be within the attorney-client privilege shall not operate as a waiver of any potentially applicable privilege.

Section 7.5 Limitation of Liability. Notwithstanding Article IV, no Party shall have any Liability to the other Party in the event that any Information exchanged or provided pursuant to this Agreement (and not otherwise constituting part of this Agreement, its Exhibits or Schedules), or otherwise in connection with the Separation and the other transactions contemplated hereby, is found to be inaccurate, whether such Information is exchanged or provided prior to or after the Effective Time. No Party shall have any Liability to the other Party if any Information is disposed of or destroyed after using good faith efforts to comply with its obligations under Section 7.4 with respect to the retention of such Information.

Section 7.6 Other Agreements Providing for Exchange of Information. The rights and obligations granted under this Article VII are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of Information set forth in any Ancillary Agreement. The provisions of Section 7.1 through Section 7.7 shall not apply to matters governed by the Tax Matters Agreement.

Section 7.7 Production of Witnesses; Records; Cooperation.

(a) Except in the case of an Action by one Party against another Party (which shall be governed by such discovery rules as may be applicable thereto), each Party shall use its commercially reasonable efforts to make available to the other Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such Person (giving consideration to business demands of such directors, officers, employees, other personnel

 

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and agents) or books, records or other documents may reasonably be required in connection with any Action in which the requesting Party may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The requesting Party shall bear all reasonable out-of-pocket costs and expenses in connection therewith.

(b) If an Indemnifying Party chooses to defend or to seek to compromise or settle any Third Party Claim, the Indemnified Party shall use its commercially reasonable efforts to make available to the Indemnifying Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such Person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, and shall otherwise cooperate in such defense, settlement or compromise.

(c) Without limiting the foregoing, the Parties shall cooperate and consult, and shall cause each member of its respective Group to cooperate and consult, to the extent reasonably necessary with respect to any Actions and any Related Claims with respect thereto.

(d) Without limiting any provision of this Section 7.7, each of the Parties agrees to cooperate, and to cause each member of its respective Group to cooperate, at the other Party’s sole cost and expense, with the other Party and each member of its respective Group in the defense of any claim that the Business of the other Party or its Group members infringes upon or misappropriates third Person Intellectual Property and shall not acknowledge or concede, or permit any member of its respective Group to acknowledge or concede (i) that the Business of the other Party or its Group members infringes upon such third Person Intellectual Property (ii) or that such third Person Intellectual Property is valid or enforceable, in a manner that would hamper or undermine the defense of such infringement or misappropriation claim.

(e) In connection with any matter contemplated by this Section 7.7, the Parties will enter into a mutually acceptable joint defense agreement so as to maintain to the extent practicable any applicable attorney-client privilege or work product immunity of any member of any Group.

(f) With respect to any Third Party Claim that implicates both Parties in any material respect due to the allocation of Liabilities, responsibilities for management of defense and related indemnities pursuant to this Agreement or any of the Ancillary Agreements, the Parties agree to use commercially reasonable efforts to cooperate fully and maintain a joint defense (in a manner that will preserve for all Parties any privilege with respect thereto). The Party that is not responsible for managing the defense of any such Third Party Claim shall, upon reasonable request, be consulted with respect to significant matters relating thereto and may, if necessary or helpful, retain

 

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counsel to assist in the defense of such claims. Each of ADP and Dealer agrees that at all times from and after the Effective Time, if an Action is commenced by a third party naming two (2) or more Parties (or any member of such Parties’ respective Groups) as defendants and with respect to which one or more named Parties (or any member of such Party’s respective Group) is a nominal defendant and/or such Action is otherwise not a Liability allocated to such named Party under this Agreement or any Ancillary Agreement, then the other Party or Parties shall use commercially reasonable efforts to cause such nominal defendant to be removed from such Action, as soon as reasonably practicable.

Section 7.8 Confidentiality.

(a) General. Each Party acknowledges (i) that such Party has in its possession and, in connection with this Agreement and the Ancillary Agreements such Party will receive, Information of the other Party that is not available to the general public, and (ii) that such Information may constitute, contain or include material non-public Information of the other Party. Subject to Section 7.8(c), as of the Distribution Date, ADP, on behalf of itself and each of its Affiliates, and Dealer, on behalf of itself and each of its Affiliates, agrees to hold, and to cause its and their respective directors, officers, employees, agents, third party contractors, vendors, accountants, counsel and other advisors and representatives to hold, in strict confidence, with at least the same degree of care that such Party applies to its own confidential and proprietary Information pursuant to its applicable policies and procedures in effect as of the Distribution Date, all Information (including Information received and/or obtained pursuant to Section 7.1) concerning the other Party (or its Business) and such other Party’s Affiliates (or their respective Business) that is either in its possession (including Information in its possession prior to the Distribution Date) or furnished by the other Party or the other Party’s Affiliates or their respective directors, officers, employees, agents, third party contractors, vendors, accountants, counsel and other advisors and representatives at any time pursuant to this Agreement and the Ancillary Agreements, and will not use such Information other than for such purposes as may be expressly permitted hereunder, except, in each case, to the extent that such Information: (i) is or becomes available to the general public, other than as a result of a disclosure by such Party or its Affiliates or any of their respective directors, officers, employees, agents, third party contractors, vendors, accountants, counsel and other advisors and representatives in breach of this Agreement; (ii) was available to such Party or its Affiliates or becomes available to such Party or its Affiliates, on a non-confidential basis from a source other than the other Party hereto, provided, that, the source of such Information was not bound by a confidentiality obligation with respect to such Information, or otherwise prohibited from transmitting the Information to such Party or its Affiliates by a contractual, legal or fiduciary obligation; or (iii) is independently generated by such Party without use of or reference to any proprietary or confidential Information of the other Party.

(b) No Disclosure, Compliance with Law, Return or Destruction. Following the Effective Time, each Party agrees not to release or disclose, or permit to be released or disclosed, any Information with respect to the other Party to any other Person, except its directors, officers, employees, agents, third party contractors,

 

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vendors, accountants, counsel, lenders, investors and other advisors and representatives who need to know such Information in connection with this Agreement or the Ancillary Agreements or for valid business reasons relating thereto, and except in compliance with Section 7.8(c). Each Party shall advise its directors, officers, employees, agents, third party contractors, vendors, accountants, counsel, lenders, investors and other advisors and representatives who have been provided with such Information of such Party’s confidentiality obligations hereunder and that such Information may constitute, contain or include material non-public Information of the other Party. Following the Effective Time, each Party shall, and shall cause, its directors, officers, employees, agents, third party contractors, vendors, accountants, counsel, lenders, investors and other advisors and representatives who have been provided with such Information to, use such Information only in accordance with (i) the terms of this Agreement or the Ancillary Agreements and (ii) applicable Law (including federal and state securities Laws). Following the Effective Time, each Party shall promptly, after receiving a written request of the other Party, return to the other Party all such Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or certify to the other Party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon), as directed by the other Party; provided, however, that in no event shall either Party be required to destroy any hardware that includes Information if such Information is only accessible to highly skilled computer experts and cannot otherwise be deleted or destroyed without undue cost or effort (provided that such Information will remain subject to the confidentiality protection provisions herein).

(c) Protective Arrangements. Notwithstanding anything herein to the contrary, in the event that, following the Effective Time, either Party or any of its directors, officers, employees, agents, third party contractors, vendors, accountants, counsel, lenders, investors or other advisors or representatives either determines on the advice of its counsel that it is required to disclose any Information pursuant to applicable Law or the rules or regulations of a Governmental Authority or receives any demand under lawful process or from any Governmental Authority to disclose or provide Information of the other Party that is subject to the confidentiality provisions hereof, such Party shall, if possible, notify the other Party prior to disclosing or providing such Information and shall cooperate at the expense of the other Party in seeking any reasonable protective arrangements requested by such other Party. In the event that a protective arrangement is not obtained, the Person that received such request (i) may thereafter disclose or provide such Information to the extent required by such Law (as so advised by counsel) or by lawful process or such Governmental Authority, without liability therefor and (ii) shall exercise its commercially reasonable efforts to have confidential treatment accorded any such Information so furnished.

Section 7.9 Privileged Information. In furtherance of the rights and obligations of the Parties set forth in this Article VII:

(a) Each of Dealer (on behalf of itself and the other members of the Dealer Group) and ADP (on behalf of itself and the other members of the ADP Group) acknowledges that: (i) each member of the Dealer Group and the ADP Group has or may obtain Information that is or may be protected from disclosure pursuant to the

 

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attorney-client privilege, the work product doctrine, the common interest and joint defense doctrines or other applicable privileges (“Privileged Information”); (ii) actual, threatened or future Actions have been or may be asserted by or against, or otherwise affect, some or all members of the Dealer Group or the ADP Group; (iii) members of the Dealer Group and the ADP Group have or may in the future have a common legal interest in such Actions, in the Privileged Information and in the preservation of the protected status of the Privileged Information; and (iv) each of Dealer and ADP (on behalf of itself and the other members of its Group) intends that the transactions contemplated by this Agreement and the Ancillary Agreements and any transfer of Privileged Information in connection herewith or therewith shall not operate as a waiver of any applicable privilege or protection afforded Privileged Information.

(b) Each of Dealer and ADP agrees, on behalf of itself and each member of the Group of which it is a member, not to intentionally disclose or otherwise intentionally waive any privilege or protection attaching to any Privileged Information relating to a member of the other Group, without consulting with the other.

ARTICLE VIII

NO REPRESENTATIONS OR WARRANTIES

Section 8.1 NO REPRESENTATIONS OR WARRANTIES. EACH PARTY, ON BEHALF OF ITSELF AND ALL MEMBERS OF ITS GROUP, UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY OTHER ANCILLARY AGREEMENT, (A) NO MEMBER OF THE ADP GROUP, THE DEALER GROUP OR ANY OTHER PERSON IS, IN THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR IN ANY OTHER AGREEMENT OR DOCUMENT, MAKING ANY REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR ORAL, TO ANY PARTY OR ANY MEMBER OF ANY GROUP IN ANY WAY WITH RESPECT TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THE BUSINESS, ASSETS, CONDITION OR PROSPECTS (FINANCIAL OR OTHERWISE) OF, OR ANY OTHER MATTER INVOLVING, ANY ADP ASSETS, ANY ADP LIABILITIES, THE ADP BUSINESS, ANY DEALER ASSETS, ANY DEALER LIABILITIES OR THE DEALER BUSINESS, (B) EACH PARTY AND EACH MEMBER OF EACH GROUP SHALL TAKE ALL OF THE ASSETS, THE BUSINESS AND LIABILITIES TRANSFERRED TO OR ASSUMED BY IT PURSUANT TO THIS AGREEMENT OR ANY ANCILLARY AGREEMENT ON AN “AS IS, WHERE IS” BASIS, AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A SPECIFIC PURPOSE OR OTHERWISE ARE HEREBY EXPRESSLY DISCLAIMED, AND (C) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN ANY APPLICABLE ANCILLARY AGREEMENT, NONE OF ADP, DEALER OR ANY MEMBERS OF THE ADP GROUP OR DEALER GROUP OR ANY OTHER PERSON MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO ANY OF THE

 

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PRE-DISTRIBUTION TRANSACTIONS OR THE DISTRIBUTION OR THE ENTERING INTO OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, EACH PARTY AND EACH MEMBER OF EACH GROUP SHALL BEAR THE ECONOMIC AND LEGAL RISK THAT ANY CONVEYANCES OF ASSETS SHALL PROVE TO BE INSUFFICIENT OR THAT THE TITLE OF ANY MEMBER OF ANY GROUP TO ANY ASSETS SHALL BE OTHER THAN GOOD AND MARKETABLE AND FREE FROM ENCUMBRANCES.

ARTICLE IX

TERMINATION

Section 9.1 Termination. This Agreement may be terminated by ADP in its sole discretion at any time prior to the consummation of the Distribution.

Section 9.2 Effect of Termination. In the event of any termination of this Agreement prior to consummation of the Distribution, neither Party (nor any of its directors or officers) shall have any Liability or further obligation to the other Party.

ARTICLE X

MISCELLANEOUS

Section 10.1 Complete Agreement; Representations.

(a) This Agreement, together with the Exhibits and Schedules hereto and the other Ancillary Agreements, constitutes the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.

(b) ADP represents on behalf of itself and each other member of the ADP Group and Dealer represents on behalf of itself and each other member of the Dealer Group as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform each of this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated by such agreements; and

(ii) this Agreement has been duly executed and delivered by such Person (if such Person is a Party) and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof (assuming the due execution and delivery thereof by the other Party), and each of the Ancillary Agreements to which it is or will be a party is or will be duly executed and delivered by it and will

 

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constitute a valid and binding agreement of it enforceable in accordance with the terms thereof (assuming the due execution and delivery thereof by the other party or parties to such Ancillary Agreements), except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other Laws relating to creditors’ rights generally and by general equitable principles.

Section 10.2 Costs and Expenses. Except as expressly provided in this Agreement or any Ancillary Agreement, and except with respect to the Transaction Expenses (defined below) set forth on Schedule 10.2 to be borne by Dealer, the ADP Group shall bear all costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby (the “Transaction Expenses”) to the extent such costs and expenses are incurred on or prior to the Distribution Date. Except as expressly provided in this Agreement, any Ancillary Agreement or Schedule 10.2, each Party shall bear its respective Transaction Expenses to the extent incurred after the Distribution Date.

Section 10.3 Governing Law. This Agreement and any dispute arising out of, in connection with or relating to this Agreement shall be governed by and construed in accordance with the Laws of the State of New York, without giving effect to the conflicts of laws principles thereof.

Section 10.4 Notices. All notices, requests, claims, demands and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) to the Parties at the following addresses or facsimile numbers:

If to ADP or any member of the ADP Group, to:

Automatic Data Processing, Inc.

One ADP Boulevard

Roseland, New Jersey 07068

Attn: General Counsel

Fax: (973) 974-3399

If to Dealer or any member of the Dealer Group, to:

CDK Global Holdings, LLC

1950 Hassell Road Suite 1000

Hoffman Estates, IL 60169-6308

Attn: General Counsel

Fax: (847) 781-9873

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this section, be deemed given upon receipt and (iii) if delivered by mail in the manner described

 

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above to the address as provided in this section, be deemed given upon receipt. Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party.

Section 10.5 Amendment, Modification or Waiver.

(a) Prior to the Effective Time, this Agreement may be amended, modified, waived, supplemented or superseded, in whole or in part, by ADP in its sole discretion by execution of a written amendment delivered to Dealer. Subsequent to the Effective Time, this Agreement may be amended, modified, supplemented or superseded only by an instrument signed by duly authorized signatories of both Parties.

(b) Following the Effective Time, any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.

Section 10.6 No Assignment; Binding Effect; No Third Party Beneficiaries.

(a) Neither this Agreement nor any right, interest or obligation hereunder may be assigned by either Party hereto without the prior written consent of the other Party hereto and any attempt to do so will be void, except that following the Effective Time each Party hereto may assign any or all of its rights, interests and obligations hereunder to an Affiliate; provided that any such Affiliate agrees in writing to be bound by all of the terms, conditions and provisions contained herein; provided, further, that any such assignment shall not relieve the assigning party of its obligations or liabilities hereunder. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the Parties hereto and their respective successors and permitted assigns.

(b) Except for the provisions of Article IV relating to indemnification, the terms and provisions of this Agreement are intended solely for the benefit of each Party hereto and their respective Affiliates, successors or permitted assigns, and it is not the intention of the Parties to confer third party beneficiary rights upon any other Person.

Section 10.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

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Section 10.8 Negotiation. In the event that any dispute arises between the Parties that cannot be resolved, either Party shall have the right to refer the dispute for resolution to the chief financial officers of the Parties by delivering to the other Party a written notice of such referral (a “Dispute Escalation Notice”). Following receipt of a Dispute Escalation Notice, the chief financial officers of the Parties shall negotiate in good faith to resolve such dispute. In the event that the chief financial officers of the Parties are unable to resolve such dispute within fifteen (15) business days after receipt of the Dispute Escalation Notice, either Party shall have the right to refer the dispute to the chief executive officers of the Parties, who shall negotiate in good faith to resolve such dispute. In the event that the chief executive officers of the Parties are unable to resolve such dispute within thirty (30) business days after the date of the Dispute Escalation Notice, either Party shall have the right to commence litigation in accordance with Section 10.10. The Parties agree that all discussions, negotiations and other Information exchanged between the Parties during the foregoing escalation proceedings shall be without prejudice to the legal position of a Party in any subsequent Action.

Section 10.9 Specific Performance. From and after the Distribution, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any Ancillary Agreement, the Parties agree that the Party or Parties to this Agreement or such Ancillary Agreement who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its or their rights under this Agreement or such Ancillary Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that, from and after the Distribution, the remedies at law for any breach or threatened breach of this Agreement or any Ancillary Agreement, including monetary damages, are inadequate compensation for any loss, that any defense in any action for specific performance that a remedy at law would be adequate is hereby waived, and that any requirements for the securing or posting of any bond with such remedy are hereby waived.

Section 10.10 New York Forum. Subject to the prior exhaustion of the procedures set forth in Section 10.8, each of the Parties agrees that, notwithstanding anything herein, all Actions arising out of or in connection with this Agreement or any Ancillary Agreement (except to the extent any such Ancillary Agreement provides otherwise), or for recognition and enforcement of any judgment arising out of or in connection with the foregoing agreements, shall be tried and determined exclusively in the state or federal courts in the State of New York, County of New York, and each of the Parties hereby irrevocably submits with regard to any such Action for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of the Parties hereby expressly waives any right it may have to assert, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any such Action: (a) any claim that it is not subject to personal jurisdiction in the aforesaid courts for any reason; (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts; and (c) any claim that (i) any of the aforesaid courts is an inconvenient or inappropriate forum for such Action, (ii) venue is not proper in any of the aforesaid

 

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courts and (iii) this Agreement or any such Ancillary Agreement, or the subject matter hereof or thereof, may not be enforced in or by any of the aforesaid courts. Each of the Parties agrees that mailing of process or other papers in connection with any such Action in the manner provided in Section 10.4 or any other manner as may be permitted by Law shall be valid and sufficient service thereof.

Section 10.11 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE WAIVER IN THIS SECTION, (B) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) SUCH PARTY MAKES SUCH WAIVER VOLUNTARILY AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS, AGREEMENTS AND CERTIFICATIONS HEREIN.

Section 10.12 Interpretation. The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not in any way affect the meaning or interpretation of this Agreement.

Section 10.13 Severability. If any provision or any portion of any provision of this Agreement shall be held invalid or unenforceable, the remaining portion of such provision and the remaining provisions of this Agreement shall not be affected thereby. If the application of any provision or any portion of any provision of this Agreement to any Person or circumstance shall be held invalid or unenforceable, the application of such provision or portion of such provision to Persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby.

Section 10.14 No Set-Off. Each Party’s obligation to pay fees or make any other required payments under this Agreement shall not be subject to any right of offset, set-off, deduction or counterclaim, however arising, including, without limitation, pursuant to any claims under any of the Ancillary Agreements.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first above written.

 

AUTOMATIC DATA PROCESSING, INC.
By:  

 

  Name:
  Title:

CDK Global Holdings, LLC

By:   Automatic Data Processing, Inc.,
  Managing Member
By:  

 

  Name:
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[Signature Page – Separation and Distribution Agreement]

EX-3.1

Exhibit 3.1

CERTIFICATE OF INCORPORATION

of

CDK GLOBAL, INC.

The undersigned incorporator, in order to form a corporation under the General Corporation Law of the State of Delaware (the “DGCL”), certifies as follows:

1. Name. The name of the corporation is CDK Global, Inc. (the “Corporation”).

2. Address; Registered Office and Agent. The address of the Corporation’s registered office is 2711 Centerville Road Suite 400, City of Wilmington, County of New Castle, State of Delaware 19808; and the name of its registered agent at such address is Corporation Service Company.

3. Purposes. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

4. Capital Stock.

4.1 The total number of shares of all classes of stock that the Corporation shall have authority to issue is [] shares, divided into (A) [] shares of common stock, with the par value of $0.01 per share (the “Common Stock”), and (B) 50,000,000 shares of preferred stock, with the par value of $0.01 per share (the “Preferred Stock”). The authorized number of shares of any class of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, and no separate vote of such class of stock the authorized number of which is to be increased or decreased shall be necessary to effect such change.

4.2 The Board of Directors of the Corporation (the “Board”) is hereby authorized, by resolution or resolutions thereof, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting and other powers (if any) of the shares of such series, and the preferences and any relative, participating, optional or other special rights and any qualifications, limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.

4.3 Except as may otherwise be provided in this Certificate of Incorporation or by applicable law, each holder of Common Stock, as such, shall be entitled to one vote for each share of Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote. Except as may otherwise be


provided in this Certificate of Incorporation (including any certificate filed with the Secretary of State of the State of Delaware establishing the terms of a series of Preferred Stock in accordance with Section 4.2) or by applicable law, no holder of any series of Preferred Stock, as such, shall be entitled to any voting powers in respect thereof.

4.4 Subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock, dividends may be declared and paid on the Common Stock at such times and in such amounts as the Board in its discretion shall determine.

4.5 Upon the dissolution, liquidation or winding up of the Corporation, subject to the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of the Common Stock shall be entitled to receive the assets of the Corporation available for distribution to its stockholders ratably in proportion to the number of shares held by them.

5. Name and Mailing Address of Incorporator. The name and mailing address of the incorporator are: Lee Brunz, c/o CDK Global, Inc., 1950 Hassell Road, Hoffman Estates, IL 60169.

6. Limitation of Liability.

(A) To the fullest extent permitted under the DGCL, as amended from time to time, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.

(B) Any amendment or repeal of Section 6(A) shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment or repeal.

7. Indemnification.

7.1 Right to Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a “Covered Person”) who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director of the Corporation or an officer of the Corporation appointed by the Board or, while a director of the Corporation or an officer of the Corporation appointed by the Board, is or was serving at the request of the Corporation as a director, officer, employee or agent of another entity or enterprise, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 7.3, the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized by the Board.

 

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7.2 Prepayment of Expenses. To the extent not prohibited by applicable law, the Corporation shall pay the expenses (including attorneys’ fees) incurred by a Covered Person in defending any Proceeding in advance of its final disposition; provided, however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article 7 or otherwise.

7.3 Claims. If a claim for indemnification or advancement of expenses under this Article 7 is not paid in full within 30 days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law.

7.4 Nonexclusivity of Rights. The rights conferred on any Covered Person by this Article 7 shall not be exclusive of any other rights that such Covered Person may have or hereafter acquire under any statute, provision of this Certificate of Incorporation, the By-laws, agreement, vote of stockholders or disinterested directors or otherwise.

7.5 Other Sources. The Corporation’s obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of another entity or enterprise shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such other entity or enterprise.

7.6 Amendment or Repeal. Any amendment or repeal of the foregoing provisions of this Article 7 shall not adversely affect any right or protection hereunder of any Covered Person in respect of any act or omission occurring prior to the time of such amendment or repeal.

7.7 Other Indemnification and Prepayment of Expenses. This Article 7 shall not limit the right of the Corporation, to the extent and in the manner permitted by applicable law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.

8. Written Consent Prohibition. At any time Automatic Data Processing, Inc. ceases to own a majority of the issued and outstanding shares of Common Stock, and except as otherwise provided for or fixed pursuant to Article 4 relating to the rights of holders of any series of Preferred Stock, no action that is required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of

 

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stockholders may be effected by written consent of stockholders in lieu of a meeting of stockholders. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of at least 80% in voting power of the then outstanding voting stock of the Corporation, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with this Article 8.

9. Forum for Adjudication of Disputes. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (A) any derivative action or proceeding brought on behalf of the Corporation, (B) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (C) any action asserting a claim arising pursuant to any provision of the DGCL or (D) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article 9.

10. Adoption, Amendment or Repeal of By-Laws. The Board is authorized to adopt, amend or repeal the By-laws.

11. Powers of Incorporator. The powers of the incorporator are to terminate upon the filing of this Certificate of Incorporation with the Secretary of State of the State of Delaware. The name and mailing address of the person who is to serve as the initial director of the Corporation, or until his successor is duly elected and qualified, is set forth below:

Lee Brunz

1950 Hassell Road

Hoffman Estates, IL 60169

12. Certificate Amendments. The Corporation reserves the right at any time, and from time to time, to amend or repeal any provision contained in this Certificate of Incorporation, and add other provisions authorized by the laws of the State of Delaware at the time in force, in the manner now or hereafter prescribed by applicable law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation (as amended) are granted subject to the rights reserved in this Article.

 

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WITNESS the signature of this Certificate of Incorporation this      day of          2014.

 

 

Incorporator
Name: Lee Brunz
EX-3.2

Exhibit 3.2

 

 

BY-LAWS

of

CDK GLOBAL, INC.

(A Delaware Corporation)

 

 

Effective [], 2014


TABLE OF CONTENTS

 

     Page  

ARTICLE 1 DEFINITIONS

     1   

ARTICLE 2 STOCKHOLDERS

     2   

ARTICLE 3 DIRECTORS

     10   

ARTICLE 4 COMMITTEES OF THE BOARD

     16   

ARTICLE 5 OFFICERS

     17   

ARTICLE 6 GENERAL PROVISIONS

     19   


ARTICLE 1

DEFINITIONS

As used in these By-laws, unless the context otherwise requires, the term:

1.1 “Assistant Secretary” means an Assistant Secretary of the Corporation.

1.2 “Assistant Treasurer” means an Assistant Treasurer of the Corporation.

1.3 “Board” means the Board of Directors of the Corporation.

1.4 “By-laws” means the By-laws of the Corporation, as amended.

1.5 “Certificate of Incorporation” means the Certificate of Incorporation of the Corporation, as amended.

1.6 “Chairman” means the Chairman of the Board of Directors of the Corporation.

1.7 “Chief Executive Officer” means the Chief Executive Officer of the Corporation.

1.8 “Corporation” means CDK Global, Inc.

1.9 “DGCL” means the General Corporation Law of the State of Delaware, as amended.

1.10 “Directors” means the directors of the Corporation.

1.11 “law” means any U.S. or non-U.S., federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a governmental authority (including any department, court, agency or official, or non-governmental self-regulatory organization, agency or authority and any political subdivision or instrumentality thereof).

1.12 “Office of the Corporation” means the executive office of the Corporation, anything in Section 131 of the DGCL to the contrary notwithstanding.

1.13 “President” means the President of the Corporation.

1.14 “Secretary” means the Secretary of the Corporation.

1.15 “Stockholders” means the stockholders of the Corporation.


1.16 “Treasurer” means the Treasurer of the Corporation.

1.17 “Vice President” means a Vice President of the Corporation.

ARTICLE 2

STOCKHOLDERS

2.1 Place of Meetings. Meetings of Stockholders may be held at such place or solely by means of remote communication or otherwise, as may be designated by the Board from time to time.

2.2 Annual Meetings; Stockholder Proposals.

(A) A meeting of Stockholders for the election of Directors and other business shall be held annually at such date and time as may be designated by the Board from time to time.

(B) At an annual meeting of the Stockholders, only business (other than business relating to the nomination or election of Directors which is governed by Section 3.3) that has been properly brought before the Stockholder meeting in accordance with the procedures set forth in this Section 2.2 shall be conducted. To be properly brought before a meeting of Stockholders, such business must be brought before the meeting (i) by or at the direction of the Board or any committee thereof or (ii) by a Stockholder who (a) was a Stockholder of record of the Corporation when the notice required by this Section 2.2 is delivered to the Secretary of the Corporation and at the time of the meeting, (b) is entitled to vote at the meeting and (c) complies with the notice and other provisions of this Section 2.2. Subject to Section 2.2(L), and except with respect to nominations or elections of Directors, which are governed by Section 3.3, Section 2.2(B)(ii) is the exclusive means by which a Stockholder may bring business before a meeting of Stockholders. Any business brought before a meeting in accordance with Section 2.2(B)(ii) is referred to as “Stockholder Business”.

(C) Subject to Section 2.2(L), at any annual meeting of Stockholders, all proposals of Stockholder Business must be made by timely written notice given by or on behalf of a Stockholder of record of the Corporation (the “Notice of Business”) and must otherwise be a proper matter for Stockholder action. To be timely, the Notice of Business must be delivered personally or mailed to, and received at the Office of the Corporation, addressed to the Secretary of the Corporation, by no earlier than 120 days and no later than 90 days before the first anniversary of the date of the prior year’s annual meeting of Stockholders; provided, however, that if (i) the annual meeting of Stockholders is advanced by more than 30 days, or delayed by more than 60 days, from the first anniversary of the prior year’s annual meeting of Stockholders, (ii) no annual meeting was held during the prior year or (iii) in the case of the Corporation’s first annual meeting of Stockholders as a corporation with a class of equity security registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the notice by the

 

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Stockholder to be timely must be received (a) no earlier than 120 days before such annual meeting and (b) no later than the later of 90 days before such annual meeting and the tenth day after the day on which the notice of such annual meeting was made by mail or Public Disclosure (as defined below). In no event shall an adjournment, postponement or deferral, or Public Disclosure of an adjournment, postponement or deferral, of a Stockholder meeting commence a new time period (or extend any time period) for the giving of the Notice of Business.

(D) The Notice of Business must set forth:

 

  (i) the name and record address of each Stockholder proposing Stockholder Business (the “Proponent”), as they appear on the Corporation’s books;

 

  (ii) the name and address of any Stockholder Associated Person (as defined below);

 

  (iii)

as to each Proponent and any Stockholder Associated Person, (a) the class or series and number of shares of stock directly or indirectly held of record and beneficially by the Proponent or Stockholder Associated Person, (b) the date such shares of stock were acquired, (c) a description of any agreement, arrangement or understanding, direct or indirect, with respect to such Stockholder Business between or among the Proponent, any Stockholder Associated Person or any others (including their names) acting in concert with any of the foregoing, (d) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions and borrowed or loaned shares) that has been entered into, directly or indirectly, as of the date of the Proponent’s notice by, or on behalf of, the Proponent or any Stockholder Associated Person, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of the Proponent or any Stockholder Associated Person with respect to shares of stock of the Corporation (a “Derivative”), (e) a description in reasonable detail of any proxy (including revocable proxies), contract, arrangement, understanding or other relationship pursuant to which the Proponent or Stockholder Associated Person has a right to vote any shares of stock of the Corporation, (f) any rights to dividends on the stock of the Corporation owned beneficially by the Proponent or Stockholder Associated Person that are separated or separable from the underlying stock of the Corporation, (g) any proportionate interest in

 

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  stock of the Corporation or Derivatives held, directly or indirectly, by a general or limited partnership in which the Proponent or Stockholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (h) any performance-related fees (other than an asset-based fee) that the Proponent or Stockholder Associated Person is entitled to based on any increase or decrease in the value of stock of the Corporation or Derivatives thereof, if any, as of the date of such notice. The information specified in Section 2.2(D)(i) to (iii) is referred to herein as “Stockholder Information”;

 

  (iv) a representation that each Proponent is a holder of record of stock of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose such Stockholder Business,

 

  (v) a brief description of the Stockholder Business desired to be brought before the annual meeting, the text of the proposal (including the text of any resolutions proposed for consideration and, if such business includes a proposal to amend the bylaws, the language of the proposed amendment) and the reasons for conducting such Stockholder Business at the meeting;

 

  (vi) any material interest of each Proponent and any Stockholder Associated Person in such Stockholder Business;

 

  (vii) a representation as to whether the Proponent intends (a) to deliver a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt such Stockholder Business or (b) otherwise to solicit proxies from stockholders in support of such Stockholder Business;

 

  (viii) all other information that would be required to be filed with the Securities and Exchange Commission (“SEC”) if the Proponents or Stockholder Associated Persons were participants in a solicitation subject to Section 14 of the Exchange Act; and

 

  (ix) a representation that the Proponents shall provide any other information reasonably requested by the Corporation.

 

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(E) The Proponents shall also provide any other information reasonably requested by the Corporation within ten business days after such request.

(F) In addition, the Proponent shall affirm as true and correct the information provided to the Corporation in the Notice of Business or at the Corporation’s request pursuant to Section 2.2(E) (and shall update or supplement such information as needed so that such information shall be true and correct) as of (i) the record date for the meeting, (ii) the date that is ten calendar days before the date of the Corporation’s proxy statement released to Stockholders in connection with the previous year’s annual meeting and (iii) the date that is the later of ten business days before the meeting or any adjournment or postponement thereof. Such affirmation, update and/or supplement must be delivered personally or mailed to, and received at the Office of the Corporation, addressed to the Secretary of the Corporation, by no later than (x) five business days after the applicable date specified in clause (i) or (ii) of the foregoing sentence (in the case of the affirmation, update and/or supplement required to be made as of those dates), and (y) not later than seven business days before the date for the meeting (in the case of the affirmation, update and/or supplement required to be made as of ten business days before the meeting or any adjournment or postponement thereof).

(G) The person presiding over the meeting shall, if the facts warrant, determine and declare to the meeting, that business was not properly brought before the meeting in accordance with the procedures set forth in this Section 2.2, and, if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

(H) If the Proponent (or a qualified representative of the Proponent) does not appear at the meeting of Stockholders to present the Stockholder Business such business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.2, to be considered a qualified representative of the Proponent, a person must be a duly authorized officer, manager or partner of such Proponent or must be authorized by a writing executed by such Proponent or an electronic transmission delivered by such Proponent to act for such Proponent as proxy at the meeting of Stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of Stockholders.

(I) “Public Disclosure” of any date or other information means disclosure thereof by a press release reported by the Dow Jones News Services, Associated Press or comparable U.S. national news service or in a document publicly filed by the Corporation with the SEC pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(J) “Stockholder Associated Person” means with respect to any Stockholder, (i) any other beneficial owner of stock of the Corporation that is owned by such Stockholder, (ii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Stockholder or such beneficial owner and (iii) any “Associates” of a Stockholder as defined under Rule 12b-2 of the Exchange Act.

 

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(K) “control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, 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.

(L) The notice requirements of this Section 2.2 shall be deemed satisfied with respect to Stockholder proposals that have been properly brought under Rule 14a-8 of the Exchange Act and that are included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. Further, nothing in this Section 2.2 shall be deemed to affect any rights of the holders of any series of preferred stock of the Corporation pursuant to any applicable provision of the Certificate of Incorporation.

2.3 Special Meetings. Special meetings of Stockholders may be called at any time by the Board, the Chairman or the Chief Executive Officer and may not be called by any other person or persons. Business transacted at any special meeting of Stockholders shall be limited to the purposes stated in the notice.

2.4 Record Date.

(A) For the purpose of determining the Stockholders entitled to notice of any meeting of Stockholders or any adjournment thereof, unless otherwise required by the Certificate of Incorporation or applicable law, the Board may fix a record date (the “Notice Record Date”), which record date shall not precede the date on which the resolution fixing the record date was adopted by the Board and shall not be more than 60 or less than ten days before the date of such meeting. The Notice Record Date shall also be the record date for determining the Stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such Notice Record Date, that a later date on or before the date of the meeting shall be the date for making such determination (the “Voting Record Date”). For the purposes of determining the Stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, exercise any rights in respect of any change, conversion or exchange of stock or take any other lawful action, unless otherwise required by the Certificate of Incorporation or applicable law, the Board may fix a record date, which record date shall not precede the date on which the resolution fixing the record date was adopted by the Board and shall not be more than 60 days prior to such action.

(B) If no such record date is fixed:

(i) The record date for determining Stockholders entitled to notice of and to vote at a meeting of Stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and

 

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(ii) When a determination of Stockholders of record entitled to notice of or to vote at any meeting of Stockholders has been made as provided in this Section 2.4, such determination shall apply to any adjournment thereof, unless the Board fixes a new Voting Record Date for the adjourned meeting, in which case the Board shall also fix such Voting Record Date or a date earlier than such date as the new Notice Record Date for the adjourned meeting.

2.5 Notice of Meetings of Stockholders. Whenever under the provisions of applicable law, the Certificate of Incorporation or these By-laws, Stockholders are required or permitted to take any action at a meeting, notice shall be given stating the place, if any, date and hour of the meeting, the means of remote communication, if any, by which Stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the Voting Record Date, if such date is different from the Notice Record Date, and, in the case of a special meeting, the purposes for which the meeting is called. Unless otherwise provided by these By-laws or applicable law, notice of any meeting shall be given, not less than ten nor more than 60 days before the date of the meeting, to each Stockholder entitled to vote at such meeting as of the Notice Record Date. If mailed, such notice shall be deemed to be given when deposited in the U.S. mail, with postage prepaid, directed to the Stockholder at its, his or her address as it appears on the records of the Corporation. An affidavit of the Secretary, an Assistant Secretary or the transfer agent of the Corporation that the notice required by this Section 2.5 has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. If a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. Any business that might have been transacted at the meeting as originally called may be transacted at the adjourned meeting. If, however, the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each Stockholder of record entitled to vote at the meeting. If, after the adjournment, a new Voting Record Date is fixed for the adjourned meeting, the Board shall fix a new Notice Record Date in accordance with Section 2.4(B)(ii) hereof and shall give notice of such adjourned meeting to each Stockholder entitled to vote at such meeting as of the Notice Record Date.

2.6 Waivers of Notice. Whenever the giving of any notice to Stockholders is required by applicable law, the Certificate of Incorporation or these By-laws, a waiver thereof, given by the person entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance by a Stockholder at a meeting shall constitute a waiver of notice of such meeting except when the Stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Neither the business to be transacted at, nor the purposes of, any regular or special meeting of the Stockholders need be specified in any waiver of notice.

 

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2.7 List of Stockholders. The Secretary shall prepare and make, at least ten days before every meeting of Stockholders, a complete, alphabetical list of the Stockholders entitled to vote at the meeting, and showing the address of each Stockholder and the number of shares registered in the name of each Stockholder. Such list may be examined by any Stockholder, at the Stockholder’s expense, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting, during ordinary business hours at the principal place of business of the Corporation or on a reasonably accessible electronic network as provided by applicable law. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any Stockholder who is present. If the meeting is held solely by means of remote communication, the list shall also be open for inspection as provided by applicable law. Except as provided by applicable law, the stock ledger shall be the only evidence as to who are the Stockholders entitled to examine the list of Stockholders or to vote in person or by proxy at any meeting of Stockholders.

2.8 Quorum of Stockholders; Adjournment. At each meeting of Stockholders, the presence in person or by proxy of the holders of a majority of the voting power of all outstanding shares of stock entitled to vote at the meeting of Stockholders, shall constitute a quorum for the transaction of any business at such meeting. In the absence of a quorum, the holders of a majority in voting power of the shares of stock present in person or represented by proxy at any meeting of Stockholders, including an adjourned meeting, may adjourn such meeting to another time and place. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

2.9 Voting; Proxies. At any meeting of Stockholders, all matters other than the election of directors, except as otherwise provided by the Certificate of Incorporation, these By-laws or any applicable law, shall be decided by the affirmative vote of a majority in voting power of shares of stock present in person or represented by proxy and entitled to vote thereon. Each Stockholder entitled to vote at a meeting of Stockholders may authorize another person or persons to act for such Stockholder by proxy but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. A Stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary a revocation of the proxy or by delivering a new proxy bearing a later date.

2.10 Voting Procedures and Inspectors at Meetings of Stockholders. The Board, in advance of any meeting of Stockholders, shall appoint one or more inspectors, who may be employees of the Corporation, to act at the meeting and make a written report thereof. The Board may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to

 

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act at a meeting, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall (A) ascertain the number of shares outstanding and the voting power of each, (B) determine the shares represented at the meeting and the validity of proxies and ballots, (C) count all votes and ballots, (D) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and (E) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of their duties. Unless otherwise provided by the Board, the date and time of the opening and the closing of the polls for each matter upon which the Stockholders will vote at a meeting shall be determined by the person presiding at the meeting and shall be announced at the meeting. No ballot, proxies, votes or any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery of the State of Delaware upon application by a Stockholder shall determine otherwise. In determining the validity and counting of proxies and ballots cast at any meeting of Stockholders, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for office at an election may serve as an inspector at such election.

2.11 Conduct of Meetings; Adjournment. The Board may adopt such rules and procedures for the conduct of Stockholder meetings as it deems appropriate. At each meeting of Stockholders, the President or, in the absence of the President, the Chairman or, if there is no Chairman or if there be one and the Chairman is absent, a Vice President and, in case more than one Vice President shall be present, that Vice President designated by the Board (or in the absence of any such designation, the most senior Vice President present), shall preside over the meeting. Except to the extent inconsistent with the rules and procedures as adopted by the Board, the person presiding over the meeting of Stockholders shall have the right and authority to convene, adjourn and reconvene the meeting from time to time, to prescribe such additional rules and procedures and to do all such acts as, in the judgment of such person, are appropriate for the proper conduct of the meeting. Such rules and procedures, whether adopted by the Board or prescribed by the person presiding over the meeting, may include, (A) the establishment of an agenda or order of business for the meeting, (B) rules and procedures for maintaining order at the meeting and the safety of those present, (C) limitations on attendance at or participation in the meeting to Stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the person presiding over the meeting shall determine, (D) restrictions on entry to the meeting after the time fixed for the commencement thereof and (E) limitations on the time allotted to questions or comments by participants. The person presiding over any meeting of Stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, may determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, he or she shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent

 

9


determined by the Board or the person presiding over the meeting, meetings of Stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. The Secretary or, in his or her absence, one of the Assistant Secretaries, shall act as secretary of the meeting. If none of the officers above designated to act as the person presiding over the meeting or as secretary of the meeting shall be present, a person presiding over the meeting or a secretary of the meeting, as the case may be, shall be designated by the Board and, if the Board has not so acted, in the case of the designation of a person to act as secretary of the meeting, designated by the person presiding over the meeting.

2.12 Order of Business. The order of business at all meetings of Stockholders shall be as determined by the person presiding over the meeting.

ARTICLE 3

DIRECTORS

3.1 General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board. The Board may adopt such rules and procedures, not inconsistent with the Certificate of Incorporation, these By-laws or applicable law, as it may deem proper for the conduct of its meetings and the management of the Corporation.

3.2 Number; Term of Office. The Board shall consist of one or more members, the number thereof to be determined from time to time by the Board. Each Director shall hold office until a successor is duly elected and qualified or until the Director’s earlier death, resignation, disqualification or removal.

3.3 Nominations of Directors.

(A) Subject to Section 3.3(K), only persons who are nominated in accordance with the procedures set forth in this Section 3.3 are eligible for election as Directors.

(B) Nominations of persons for election to the Board may only be made at a meeting properly called for the election of Directors and only (i) by or at the direction of the Board or any committee thereof or (ii) by a Stockholder who (a) was a Stockholder of record of the Corporation when the notice required by this Section 3.3 is delivered to the Secretary of the Corporation and at the time of the meeting, (b) is entitled to vote for the election of Directors at the meeting and (c) complies with the notice and other provisions of this Section 3.3. Subject to Section 3.3(K), Section 3.3(B)(ii) is the exclusive means by which a Stockholder may nominate a person for election to the Board. Persons nominated in accordance with Section 3.3(B)(ii) are referred to as “Stockholder Nominees.” A Stockholder nominating persons for election to the Board is referred to as the “Nominating Stockholder.”

 

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(C) Subject to Section 3.3(K), all nominations of Stockholder Nominees must be made by timely written notice given by or on behalf of a Stockholder of record of the Corporation (the “Notice of Nomination”). To be timely, the Notice of Nomination must be delivered personally or mailed to and received at the Office of the Corporation, addressed to the attention of the Secretary of the Corporation, by the following dates:

 

  (i) in the case of the nomination of a Stockholder Nominee for election to the Board at an annual meeting of Stockholders, no earlier than 120 days and no later than 90 days before the first anniversary of the date of the prior year’s annual meeting of Stockholders; provided, however, that if (a) the annual meeting of Stockholders is advanced by more than 30 days, or delayed by more than 60 days, from the first anniversary of the prior year’s annual meeting of Stockholders, (b) no annual meeting was held during the prior year or (c) in the case of the Corporation’s first annual meeting of Stockholders as a corporation with a class of equity security registered under the Exchange Act, the notice by the Stockholder to be timely must be received (1) no earlier than 120 days before such annual meeting and (2) no later than the later of 90 days before such annual meeting and the tenth day after the day on which the notice of such annual meeting was made by mail or Public Disclosure, and

 

  (ii) in the case of the nomination of a Stockholder Nominee for election to the Board at a special meeting of Stockholders, no earlier than 120 days before and no later than the later of 90 days before such special meeting and the tenth day after the day on which the notice of such special meeting was made by mail or Public Disclosure.

(D) Notwithstanding anything to the contrary, if the number of Directors to be elected to the Board at a meeting of Stockholders is increased and there is no Public Disclosure by the Corporation naming the nominees for the additional directorships at least 100 days before the first anniversary of the preceding year’s annual meeting, a Notice of Nomination shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered personally and received at the Office of the Corporation, addressed to the attention of the Secretary of the Corporation, no later than the close of business on the tenth day following the day on which such Public Disclosure is first made by the Corporation.

(E) In no event shall an adjournment, postponement or deferral, or Public Disclosure of an adjournment, postponement or deferral, of an annual or special meeting commence a new time period (or extend any time period) for the giving of the Notice of Nomination.

 

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(F) The Notice of Nomination shall set forth:

 

  (i) the Stockholder Information with respect to each Nominating Stockholder and Stockholder Associated Person;

 

  (ii) a representation that each Stockholder nominating a Stockholder Nominee is a holder of record of stock of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose such nomination;

 

  (iii) all information regarding each Stockholder Nominee and Stockholder Associated Person that would be required to be disclosed in a solicitation of proxies subject to Section 14 of the Exchange Act, the written consent of each Stockholder Nominee to being named in a proxy statement as a nominee and to serve if elected and a completed signed questionnaire, representation and agreement required by Section 3.4;

 

  (iv) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among a Nominating Stockholder, Stockholder Associated Person or their respective associates, or others acting in concert therewith, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the Nominating Stockholder, Stockholder Associated Person or any person acting in concert therewith, were the “registrant” for purposes of such rule and the Stockholder Nominee were a director or executive of such registrant;

 

  (v) a representation as to whether the Nominating Stockholders intends (a) to deliver a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve the nomination or (b) otherwise to solicit proxies from stockholders in support of such nomination;

 

  (vi) all other information that would be required to be filed with the SEC if the Nominating Stockholders and Stockholder Associated Person were participants in a solicitation subject to Section 14 of the Exchange Act; and

 

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  (vii) a representation that the Nominating Stockholders shall provide any other information reasonably requested by the Corporation.

(G) The Nominating Stockholders shall also provide any other information reasonably requested by the Corporation within ten business days after such request.

(H) In addition, the Nominating Stockholder shall affirm as true and correct the information provided to the Corporation in the Notice of Nomination or at the Corporation’s request pursuant to Section 3.3(G) (and shall update or supplement such information as needed so that such information shall be true and correct) as of (i) the record date for the meeting, (ii) the date that is ten calendar days before the date of the Corporation’s proxy statement released to Stockholders in connection with the previous year’s annual meeting (in the case of an annual meeting) or 50 days before the date of the meeting (in the case of a special meeting) and (iii) the date that is ten business days before the date of the meeting or any adjournment or postponement thereof. Such affirmation, update and/or supplement must be delivered personally or mailed to, and received at the Office of the Corporation, addressed to the Secretary of the Corporation, by no later than (x) five business days after the applicable date specified in clause (i) or (ii) of the foregoing sentence (in the case of the affirmation, update and/or supplement required to be made as of those dates), and (y) not later than seven business days before the date for the meeting (in the case of the affirmation, update and/or supplement required to be made as of ten business days before the meeting or any adjournment or postponement thereof).

(I) The person presiding over the meeting shall, if the facts warrant, determine and declare to the meeting, that the nomination was not made in accordance with the procedures set forth in this Section 3.3, and, if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded.

(J) If the Nominating Stockholder (or a qualified representative of the Nominating Stockholder) does not appear at the applicable Stockholder meeting to nominate the Stockholder Nominees, such nomination shall be disregarded and such business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 3.3, to be considered a qualified representative of the Nominating Stockholder, a person must be a duly authorized officer, manager or partner of such Nominating Stockholder or must be authorized by a writing executed by such Nominating Stockholder or an electronic transmission delivered by such Nominating Stockholder to act for such Nominating Stockholder as proxy at the meeting of Stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of Stockholders.

 

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(K) Nothing in this Section 3.3 shall be deemed to affect any rights of the holders of any series of preferred stock of the Corporation pursuant to any applicable provision of the Certificate of Incorporation.

3.4 Nominee and Director Qualifications. Unless the Board determines otherwise, to be eligible to be a nominee for election or reelection as a Director, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 3.3) to the Secretary at the Office of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (A) is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person will act or vote as a Director on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (ii) any Voting Commitment that could limit or interfere with such person’s ability to comply with such person’s fiduciary duties as a Director under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a Director that has not been disclosed therein and (C) would be in compliance, and will comply, with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading and other policies and guidelines of the Corporation that are applicable to Directors.

3.5 Election. Directors shall, except as otherwise required by statute or by the Certificate of Incorporation, be elected by a majority of the votes cast at a meeting of Stockholders by the holders of shares present in person or represented by proxy at the meeting and entitled to vote in the election, provided that if the number of nominees exceeds the number of Directors to be elected, the Directors shall be elected by a plurality of such votes.

3.6 Newly Created Directorships and Vacancies. Any newly created directorships resulting from an increase in the authorized number of Directors and any vacancies occurring in the Board, may be filled by the affirmative votes of a majority of the remaining members of the Board, although less than a quorum. A Director so elected shall be elected to hold office until the earlier of the expiration of the term of office of the Director whom he or she has replaced, a successor is elected and qualified or the Director’s death, resignation or removal.

 

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3.7 Resignation. Any Director may resign at any time by notice given in writing or by electronic transmission to the Corporation. Such resignation shall take effect at the date of receipt of such notice or at such later time as is therein specified.

3.8 Regular Meetings. Regular meetings of the Board may be held without notice at such times and at such places as may be determined from time to time by the Board or its Chairman.

3.9 Special Meetings. Special meetings of the Board may be held at such times and at such places as may be determined by the Chairman or the President on at least 24 hours’ notice to each Director given by one of the means specified in Section 3.12 hereof other than by mail or on at least three days’ notice if given by mail. Special meetings shall be called by the Chairman, President or Secretary in like manner and on like notice on the written request of any two or more Directors.

3.10 Telephone Meetings. Board or Board committee meetings may be held by means of telephone conference or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation by a Director in a meeting pursuant to this Section 3.10 shall constitute presence in person at such meeting.

3.11 Adjourned Meetings. A majority of the Directors present at any meeting of the Board, including an adjourned meeting, whether or not a quorum is present, may adjourn and reconvene such meeting to another time and place. At least 24 hours’ notice of any adjourned meeting of the Board shall be given to each Director whether or not present at the time of the adjournment, if such notice shall be given by one of the means specified in Section 3.12 hereof other than by mail, or at least three days’ notice if by mail. Any business may be transacted at an adjourned meeting that might have been transacted at the meeting as originally called.

3.12 Notice Procedure. Subject to Sections 3.9 and 3.13 hereof, whenever notice is required to be given to any Director by applicable law, the Certificate of Incorporation or these By-laws, such notice shall be deemed given effectively if given in person or by telephone, mail addressed to such Director at such Director’s address as it appears on the records of the Corporation, telecopy or by other means of electronic transmission.

3.13 Waiver of Notice. Whenever the giving of any notice to Directors is required by applicable law, the Certificate of Incorporation or these By-laws, a waiver thereof, given by the Director entitled to the notice, whether before or after such notice is required, shall be deemed equivalent to notice. Attendance by a Director at a meeting shall constitute a waiver of notice of such meeting except when the Director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special Board or committee meeting need be specified in any waiver of notice.

 

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3.14 Organization. At each meeting of the Board, the Chairman or, in his or her absence, another Director selected by the Board shall preside. The Secretary shall act as secretary at each meeting of the Board. If the Secretary is absent from any meeting of the Board, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all Assistant Secretaries, the person presiding at the meeting may appoint any person to act as secretary of the meeting.

3.15 Quorum of Directors. The presence of a majority of the Board shall be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the Board.

3.16 Action by Majority Vote. Except as otherwise expressly required by these By-laws or the Certificate of Incorporation, the vote of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board.

3.17 Action Without Meeting. Unless otherwise restricted by these By-laws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all Directors or members of such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writings or electronic transmissions are filed with the minutes of proceedings of the Board or committee.

ARTICLE 4

COMMITTEES OF THE BOARD

The Board may designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. If a member of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present at the meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may, by a unanimous vote, appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent permitted by applicable law, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it to the extent so authorized by the Board. Unless the Board provides otherwise, at all meetings of such committee, a majority of the then authorized members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meetings. Unless the Board provides otherwise, each committee designated by the Board may make, alter and repeal rules and procedures for the conduct of its business. In the absence of such rules and procedures each committee shall conduct its business in the same manner as the Board conducts its business pursuant to ARTICLE 3.

 

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ARTICLE 5

OFFICERS

5.1 Positions; Election. The officers of the Corporation shall be a Chairman, a Chief Executive Officer, a President, a Secretary, a Treasurer and any other officers as the Board may elect from time to time, who shall exercise such powers and perform such duties as shall be determined by the Board from time to time. Any number of offices may be held by the same person.

5.2 Term of Office. Each officer of the Corporation shall hold office until such officer’s successor is elected and qualifies or until such officer’s earlier death, resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Such resignation shall take effect at the date of receipt of such notice or at such later time as is therein specified. The resignation of an officer shall be without prejudice to the contract rights of the Corporation, if any. Any officer may be removed at any time with or without cause by the Board. Any vacancy occurring in any office of the Corporation may be filled by the Board. The election or appointment of an officer shall not of itself create contract rights.

5.3 Chairman. The Chairman shall preside at all meetings of the Board and shall exercise such powers and perform such other duties as shall be determined from time to time by the Board.

5.4 Chief Executive Officer. The Chief Executive Officer shall have general supervision over the business of the Corporation and other duties incident to the office of Chief Executive Officer, and any other duties as may from time to time be assigned to the Chief Executive Officer by the Board and subject to the control of the Board in each case. The Chief Executive Officer may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by the Board or by these By-laws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed.

5.5 President. The President shall have general supervision over the business of the Corporation and other duties incident to the office of President, and any other duties as may from time to time be assigned to the President by the Board or, if the President is not also the Chief Executive Officer, the Chief Executive Officer, and subject to the control of the Board and, if applicable, the Chief Executive Officer in each case. The President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by the Board or by these By-laws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed.

 

17


5.6 Vice Presidents. Vice Presidents shall have the duties incident to the office of Vice President and any other duties that may from time to time be assigned to the Vice President by the President, the Chief Executive Officer or the Board. Any Vice President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments, except in cases in which the signing and execution thereof shall be expressly delegated by the Board or by these By-laws to some other officer or agent of the Corporation, or shall be required by applicable law otherwise to be signed or executed.

5.7 Secretary. The Secretary shall attend all meetings of the Board and of the Stockholders, record all the proceedings of the meetings of the Board and of the Stockholders in a book to be kept for that purpose and perform like duties for committees of the Board, when required. The Secretary shall give, or cause to be given, notice of all special meetings of the Board and of the Stockholders and perform such other duties as may be prescribed by the Board, by the Chief Executive Officer or by the President. The Secretary shall have custody of the corporate seal of the Corporation, and the Secretary or an Assistant Secretary, shall have authority to affix the same on any instrument that may require it, and when so affixed, the seal may be attested by the signature of the Secretary or by the signature of such Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to attest the same by such officer’s signature. The Secretary or an Assistant Secretary may also attest all instruments signed by the Chief Executive Officer, the President or any Vice President. The Secretary shall have charge of all the books, records and papers of the Corporation relating to its organization and management, see that the reports, statements and other documents required by applicable law are properly kept and filed and, in general, perform all duties incident to the office of secretary of a corporation and such other duties as may from time to time be assigned to the Secretary by the Board, the Chief Executive Officer or the President.

5.8 Treasurer. The Treasurer shall have charge and custody of, and be responsible for, all funds, securities and notes of the Corporation, receive and give receipts for moneys due and payable to the Corporation from any sources whatsoever; deposit all such moneys and valuable effects in the name and to the credit of the Corporation in such depositaries as may be designated by the Board, against proper vouchers, cause such funds to be disbursed by checks or drafts on the authorized depositaries of the Corporation signed in such manner as shall be determined by the Board and be responsible for the accuracy of the amounts of all moneys so disbursed, regularly enter or cause to be entered in books or other records maintained for the purpose full and adequate account of all moneys received or paid for the account of the Corporation, have the right to require from time to time reports or statements giving such information as the Treasurer may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same, render to the President, the Chief Executive Officer or the Board, whenever the President, the Chief

 

18


Executive Officer or the Board shall require the Treasurer so to do, an account of the financial condition of the Corporation and of all financial transactions of the Corporation, disburse the funds of the Corporation as ordered by the Board and, in general, perform all duties incident to the office of Treasurer of a corporation and such other duties as may from time to time be assigned to the Treasurer by the Board, the Chief Executive Officer or the President.

5.9 Assistant Secretaries and Assistant Treasurers. Assistant Secretaries and Assistant Treasurers shall perform such duties as shall be assigned to them by the Secretary or by the Treasurer, respectively, or by the Board, the Chief Executive Officer or the President.

ARTICLE 6

GENERAL PROVISIONS

6.1 Certificates Representing Shares. The shares of stock of the Corporation shall be represented by certificates or all of such shares shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such stock, or a combination of both. If shares are represented by certificates (if any), such certificates shall be in the form approved by the Board. The certificates representing shares of stock of each class shall be signed by, or in the name of, the Corporation by the Chairman, the Chief Executive Officer, the President or any Vice President, and by the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer. Any or all such signatures may be facsimiles. Although any officer, transfer agent or registrar whose manual or facsimile signature is affixed to such a certificate ceases to be such officer, transfer agent or registrar before such certificate has been issued, it may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at the date of its issue.

6.2 Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agents and registry offices or agents at such place or places as may be determined from time to time by the Board.

6.3 Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate or his legal representative to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

6.4 Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be maintained on any information storage device or method; provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to applicable law.

 

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6.5 Seal. The corporate seal shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.

6.6 Fiscal Year. The fiscal year of the Corporation shall be determined by the Board.

6.7 Amendments. These By-laws may be amended or repealed and new By-laws may be adopted by the Board, but the Stockholders may make additional By-laws and may alter and repeal any By-laws whether such By-laws were originally adopted by them or otherwise.

6.8 Conflict with Applicable Law or Certificate of Incorporation. These By-laws are adopted subject to any applicable law and the Certificate of Incorporation. Whenever these By-laws may conflict with any applicable law or the Certificate of Incorporation, such conflict shall be resolved in favor of such law or the Certificate of Incorporation.

 

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EX-10.1

Exhibit 10.1

TAX MATTERS AGREEMENT

by and between

AUTOMATIC DATA PROCESSING, INC.

and

CDK GLOBAL, INC.

Dated as of [], 2014


TABLE OF CONTENTS

 

            Page(s)  

ARTICLE I DEFINITIONS

     1   

Section 1.01

    

Definition of Terms

     1   

Section 1.02

    

General Interpretive Principles

     9   

ARTICLE II PAYMENT OF TAXES

     10   

Section 2.01

    

Income Taxes

     10   

Section 2.02

    

Transaction Taxes

     10   

Section 2.03

    

Other Taxes

     11   

Section 2.04

    

Other Income Taxes

     12   

Section 2.05

    

Allocation of Certain Income Taxes and Income Tax Items

     12   

Section 2.06

    

Refunds

     13   

Section 2.07

    

Carrybacks

     14   

Section 2.08

    

Treatment of Restricted Stock, Stock Options, and Deferred Compensation

     15   

Section 2.09

    

Successor Employer Status

     16   

Section 2.10

    

Advance Pricing Agreement

     16   

ARTICLE III PREPARATION AND FILING OF TAX RETURNS

     17   

Section 3.01

    

ADP Responsibility

     17   

Section 3.02

    

Dealer Responsibility

     18   

Section 3.03

    

Tax Accounting Practices

     18   

Section 3.04

    

Right to Review Tax Returns

     19   

ARTICLE IV TAX-FREE STATUS OF DISTRIBUTION

     19   

Section 4.01

    

Representations

     19   

Section 4.02

    

Covenants

     19   

Section 4.03

    

Procedures Regarding Opinions and Rulings

     22   

Section 4.04

    

Canadian Butterfly

     22   

ARTICLE V TAX CONTESTS; INDEMNIFICATION; COOPERATION

     23   

Section 5.01

    

Notice

     23   

Section 5.02

    

Control of Tax Contests

     23   

Section 5.03

    

Indemnification Payments

     24   

Section 5.04

    

Interest on Late Payments

     25   

Section 5.05

    

Treatment of Payments

     25   

Section 5.06

    

Expenses

     25   

Section 5.07

    

Cooperation

     25   

Section 5.08

    

Confidentiality

     26   

Section 5.09

    

Retention of Tax Records

     26   

ARTICLE VI RESOLUTION OF DISPUTES

     27   

Section 6.01

    

Tax Disputes

     27   

 

i


            Page(s)  

ARTICLE VII MISCELLANEOUS PROVISIONS

     27   

Section 7.01

    

Disposition of Dealer Subsidiaries

     27   

Section 7.02

    

Complete Agreement; Representations

     28   

Section 7.03

    

Costs and Expenses

     28   

Section 7.04

    

Governing Law

     28   

Section 7.05

    

Notices

     28   

Section 7.06

    

Amendment, Modification or Waiver

     29   

Section 7.07

    

No Assignment; Binding Effect; No Third Party Beneficiaries

     29   

Section 7.08

    

Counterparts

     30   

Section 7.09

    

Specific Performance

     30   

Section 7.10

    

New York Forum

     30   

Section 7.11

    

WAIVER OF JURY TRIAL

     31   

Section 7.12

    

Interpretation; Conflict With Ancillary Agreements

     31   

Section 7.13

    

Severability

     31   

Section 7.14

    

Survival

     31   

 

ii


TAX MATTERS AGREEMENT dated as of September 30, 2014 (this “Agreement”) by and between Automatic Data Processing, Inc., a Delaware corporation (“ADP”) and CDK Global, Inc., a Delaware corporation whose sole shareholder is ADP (“Dealer” and, together with ADP, each, a “Party” and collectively, the “Parties”).

WHEREAS, as of the date of this Agreement, the ADP affiliated group includes Dealer and its Subsidiaries;

WHEREAS, the Parties (or their predecessors-in-interest) have entered into the Separation Agreement, pursuant to which ADP has contributed to Dealer the stock and assets associated with the Dealer Business (as defined herein) in exchange for shares of common stock of Dealer, cash and the assumption by Dealer of certain liabilities related to the Dealer Business (the “Contribution”);

WHEREAS, ADP intends to distribute on a pro rata basis to its shareholders all of the shares of stock of Dealer (the “Distribution”);

WHEREAS, the Parties believe the Distribution will provide greater flexibility for management, capital requirements and growth of the Dealer Business while ensuring that ADP senior management can focus its time and resources on the development of the ADP retained businesses;

WHEREAS, the Parties intend that the Contribution and Distribution qualify as a “reorganization” under Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), with respect to which no gain or loss is recognized under Code Sections 361 and 355;

WHEREAS, as a result of and upon the Distribution, Dealer and its Subsidiaries will cease to be members of the ADP Group; and

WHEREAS, the Parties desire to allocate the Tax responsibilities, liabilities and benefits of transactions that occur on or prior to, and that may occur after, the date on which the Distribution occurs (the “Distribution Date”) and to provide for and address certain other Tax matters.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Parties (each on behalf of itself and each of its Affiliates) hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definition of Terms. The following terms shall have the following meanings (such meanings to apply equally to both the singular and the plural forms of the terms defined). All Section and Exhibit references are to this Agreement unless otherwise stated.

 

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Action” means any claim, demand, action, cause of action, suit, countersuit, arbitration, litigation, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal or authority.

Active Trade or Business” means the active conduct by Dealer of the businesses conducted by the members of the Dealer Group as of the Distribution (determined in accordance with Code Section 355(b)), which shall include, for the avoidance of doubt, the businesses conducted by the ATB Entities.

Adjustment Request” means any formal or informal claim or request filed with any governmental authority for any Refund, underpayment or overpayment of Tax or any change in available Tax Attributes.

ADP” has the meaning set forth in the recitals.

ADP Amalco” has the meaning assigned to such term in the definition of Canadian Restructuring.

ADP Business” means all businesses and operations of the ADP Group, other than the Dealer Business.

ADP Consolidated Group” means the affiliated group of corporations (within the meaning of Section 1504 of the Code) of which ADP is the common parent prior to the Distribution Date.

ADP Employee” means an employee of ADP or any ADP Affiliate immediately after the Distribution.

ADP Group” means ADP and each Person that will be a direct or indirect Subsidiary of ADP immediately after the Distribution and each Person that is or becomes a member of the ADP Group after the Distribution, including any Person that is or was merged into ADP or any such direct or indirect Subsidiary, and each other Person that would have been included in the ADP Group in connection with the Restructuring but for the delayed transfers required by Section 2.3(b) of the Separation Agreement.

ADP Restricted Stock” means ADP common stock received by an ADP Employee in connection with his or her employment, which restricted stock unit has not yet been settled as of the Distribution Date.

ADP Restricted Stock Unit” means an ADP restricted stock unit received by an ADP Employee in connection with his or her employment, which stock has not yet been included in the income of such ADP Employee as of the Distribution Date.

ADP Stock Option” means an Option to acquire ADP common stock received by an ADP Employee in connection with his or her employment, which Option has not yet been exercised as of the Distribution Date.

 

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Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person; provided, however, that for purposes of this Agreement, no member of either Group shall be deemed to be an Affiliate of any member of the other Group. As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

Agreement” has the meaning set forth in the recitals.

Ancillary Agreement” has the meaning set forth in the Separation Agreement.

APA” means the advance pricing agreement currently being negotiated, as such agreement is finally agreed, or any similar agreement (including any related competent authority agreement for pre-APA years) that is finally agreed, among ADP Amalco, ADP and the United States Subsidiaries of ADP, with the Internal Revenue Service and the Canada Revenue Agency (including any competent authority for the United States or Canada) relating to the pricing of services and software that ADP and its United States Subsidiaries (both in the Dealer Business and in the ADP Business) provide to ADP Amalco and its Subsidiaries. For the avoidance of doubt, the APA shall not apply to Dealer or any Subsidiary of Dealer for any period or portion thereof beginning from and after the Separation.

ATB Entities” means the entities listed on Schedule A.

Balance Sheet” has the meaning set forth in Section 2.01(a).

Butterfly Transactions” means each of the transactions involving ADP, Dealer and the other applicable parties specifically set out in the Canadian Tax Ruling.

Canadian Restructuring” means the amalgamation under the Laws of Nova Scotia, Canada, of ADP Canada Holding Co., a corporation incorporated pursuant to the laws of Nova Scotia, and ADP Canada Co./Compagnie ADP Canada, a corporation amalgamated pursuant to the laws of Nova Scotia to form “ADP Amalco”, followed by the transfer of the Dealer Business conducted directly or indirectly by ADP Amalco from ADP Amalco to a new Canadian company that will be transferred to a second newly formed Canadian company that will be a Subsidiary of, and treated for United States federal income tax purposes as disregarded from, Dealer in a transaction intended to qualify as a tax-free spin-off pursuant to Sections 368(a)(1)(D) and 355 of the Code and as tax-free pursuant to paragraph 55(3)(b) of the Income Tax Act (Canada).

Canadian Tax Ruling” means the advance income tax ruling issued by the CRA (whether granted prior to, on or after the date hereof) relating to the Butterfly Transactions and includes all supplemental rulings, requests for rulings, information and legal submissions and exhibits to the foregoing.

 

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Canadian Tax-Free Status” means the Canadian federal and provincial income tax position of the applicable parties relating to the Butterfly Transactions that would arise on the assumptions that (i) each of the rulings and opinions provided in the Canadian Tax Ruling applied to determine such income tax position of the applicable parties and (ii) the requisite conditions for such rulings and opinions as set out in the Canadian Tax Ruling were satisfied.

Code” has the meaning set forth in the recitals.

Contribution” has the meaning set forth in the recitals.

CRA” means the Canada Revenue Agency.

Dealer” has the meaning set forth in the recitals.

Dealer Assets” has the meaning set forth in the Separation Agreement.

Dealer Business” has the meaning set forth in the Separation Agreement.

Dealer Capital Stock” means (i) all classes or series of capital stock of Dealer, including common stock and all other instruments treated as equity in Dealer for U.S. federal Income Tax purposes and (ii) all options, warrants and other rights to acquire such capital stock.

Dealer Cash” means the cash amounts which are distributed to ADP in one or more transactions intended to qualify as tax-free pursuant to Section 361(b) of the Code.

Dealer Employee” means an employee of Dealer or an employee of any member of the Dealer Group immediately after the Distribution.

Dealer Group” means Dealer and each Person that will be a direct or indirect Subsidiary of Dealer immediately prior to the Distribution (but after giving effect to the Restructuring) and each Person that is or becomes a member of the Dealer Group after the Distribution, including any Person that is or was merged into Dealer or any such direct or indirect Subsidiary, and each other Person that would have been included in the Dealer Group in connection with the Restructuring but for the delayed transfers required by Section 2.3(b) of the Separation Agreement.

Dealer Restricted Stock” means Dealer common stock received by a Dealer Employee in connection with his or her employment, which stock has not yet been included in the income of such Employee as of the Distribution Date.

Dealer Restricted Stock Unit” means a Dealer restricted stock unit received by a Dealer Employee in connection with his or her employment, which stock has not yet been included in the income of such Dealer Employee as of the Distribution Date.

 

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Dealer Stock Option” means an Option to acquire Dealer common stock received by a Dealer Employee in connection with his or her employment, which Option has not yet been exercised as of the Distribution Date.

Distribution” has the meaning set forth in the recitals.

Distribution Date” has the meaning set forth in the recitals.

Final Determination” means the final resolution of liability for any Tax for any taxable period by or as a result of (i) a final and unappealable decision, judgment, decree or other order by any court of competent jurisdiction; (ii) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Code Sections 7121 or 7122, or a comparable arrangement under the laws of another jurisdiction; (iii) any allowance of a Refund in respect of an overpayment of Tax, but only after the expiration of all periods during which such amount may be recovered by the Taxing Authority imposing the Tax; (iv) a final settlement resulting from a competent authority determination; or (v) any other final disposition, including by mutual agreement of the parties or by reason of the expiration of the applicable statute of limitations or period for the filing of claims for refunds, amended Tax Returns or appeals from adverse determinations.

Gain Recognition Agreement” means any agreement to recognize gain that is described in Treasury Regulation Section 1.367(a)-8 and entered into in connection with the Transactions and to which any member of the ADP Group or the Dealer Group is a party.

Governmental Authority” means any federal, state, local, foreign or international court, government, department, commission, board, bureau or agency, or any other regulatory, self-regulatory, administrative or governmental organization or authority, including the NASDAQ.

Group” means the ADP Group and/or the Dealer Group, as the context requires.

Income Taxes” means all federal, state, local, and foreign income or franchise Taxes or other Taxes based on income or net worth.

Indemnifying Party” has the meaning set forth in Section 5.01.

Indemnitee” has the meaning set forth in Section 5.01.

IRS” means the U.S. Internal Revenue Service.

Joint Return” means any Return that includes both a member of the ADP Group and a member of the Dealer Group.

Law” means any applicable foreign, federal, national, state, provincial or local law (including common law), statute, ordinance, rule, regulation, code or other requirement enacted, promulgated, issued or entered into, or act taken, by a Governmental Authority.

 

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NASDAQ” means the NASDAQ Global Select Market.

New CanCo 2” has the meaning assigned to such term in Section 2.10(a).

Option” means an option to acquire common stock, or other equity-based incentives the economic value of which is designed to mirror that of an option, including non-qualified stock options, discounted non-qualified stock options, cliff options to the extent stock is issued or issuable (as opposed to cash compensation), and tandem stock options to the extent stock is issued or issuable (as opposed to cash compensation).

Other Taxes” means all Taxes other than Income Taxes, including (but not limited to) transfer, sales, use, payroll, property, and unemployment Taxes.

Past Practices” has the meaning set forth in Section 3.03(a).

Person” means any natural person, corporation, general or limited partnership, limited liability company or partnership, joint stock company, joint venture, association, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any Governmental Authority.

Post-Distribution Tax Period” means any taxable period (or portion thereof) beginning after the Distribution Date.

Pre-Distribution Tax Period” means any taxable period (or portion thereof) ending on or before the close of the Distribution Date.

Proposed Acquisition Transaction” has the meaning set forth in Section 4.02(b)(i).

Refund” means any cash refund of Taxes or reduction of Taxes by means of credit, deduction, offset or otherwise.

Reportable Transaction” means a reportable or listed transaction as defined in Section 6011 of the Code or the Treasury Regulations promulgated thereunder, other than a loss transaction as defined in Treasury Regulations Section 1.6011-4(b)(5).

Restricted Period” means the period beginning on the date of this Agreement and ending on, and including, the last day of the two-year period following the Distribution Date.

Restructuring” has the meaning assigned to such term in the Separation Agreement.

Ruling” means all private letter rulings granted by the IRS, the CRA or any other taxing authority relating to the Transactions (whether granted prior to, on or after the date hereof), requests for such rulings, including all supplemental ruling requests and information submissions, and any exhibit to any of the foregoing.

 

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Satisfactory Guidance” means either a ruling from the IRS (or the CRA in respect of Section 4.04) or an Unqualified Tax Opinion, at the election of Dealer, in either case reasonably satisfactory to ADP in both form and substance, including with respect to any underlying assumptions or representations. Satisfactory Guidance shall not include an Unqualified Tax Opinion with respect to which ADP’s counsel, of recognized national standing, provides an opinion to ADP that the conclusions in such Unqualified Tax Opinion are not free from doubt. For the avoidance of doubt, this definition is intended to allow ADP to prevent Dealer from taking the action that is the subject of a ruling from the IRS or an Unqualified Tax Opinion, if ADP determines in good faith that there is any Tax risk to it from such action based upon either (1) any uncertainty concerning any underlying assumptions or representations in such ruling or opinion or (2) any legal uncertainty referred to in advice it receives from its counsel.

Section 355 Entities” means the entities listed on Schedule B.

Separation” means the separation of the Dealer Business and the ADP Business into two independent companies on the terms and subject to the conditions set forth in the Separation Agreement.

Separate Return” means (i) in the case of the Dealer Group, a Tax Return of any member of that Group (including any consolidated, combined, affiliated or unitary Return) that does not include, for all or any portion of the relevant taxable period, any member of the ADP Group and (ii) in the case of the ADP Group, a Tax Return of any member of that Group (including any consolidated, combined, affiliated or unitary Return) that does not include, for all or any portion of the relevant taxable period, any member of the Dealer Group.

Separation Agreement” means the Separation and Distribution Agreement, as amended from time to time, by and between ADP and Dealer (or its predecessor-in-interest) dated as of [            , 2014].

Straddle Period” means any taxable period beginning on or before the Distribution Date and ending after the Distribution Date.

Subsidiary” means, with respect to any Person, any other Person of which such first Person (either alone or through or together with any other Subsidiary of such first Person) owns, directly or indirectly, a majority of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such other Person.

Tax Advisor” means a U.S. Tax counsel or other Tax advisor of recognized national standing reasonably acceptable to both Parties.

 

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Tax Attributes” means earnings and profits, Tax basis, net operating and capital loss carryovers or carrybacks, alternative minimum Tax credit carryovers or carrybacks, general business credit carryovers or carrybacks, Tax credits or credits against Tax, disqualified interest and excess limitation carryovers or carrybacks, overall foreign losses, research and experimentation credit base periods, all other items that are determined or computed on an affiliated group basis (as defined in Section 1504(a) of the Code determined without regard to the exclusion contained in Section 1504(b)(3) of the Code) or other consolidated, combined or unitary basis, and any other item of loss, deduction, or credit that could reduce a Tax liability.

Tax Contest” means an audit, review, examination or any other administrative or judicial proceeding with the purpose or effect of determining or redetermining Taxes (including any administrative or judicial review of any Adjustment Request).

Tax Dispute” means any dispute arising in connection with this Agreement.

Tax-Free Status” means the qualification of the Contribution and Distribution taken together as a transaction, (i) that is a “reorganization” described in Code Sections 355(a) and 368(a)(1)(D), (ii) in which the Dealer stock distributed is “qualified property” for purposes of Code Sections 355(c) and 361(c), (iii) in which no gain or loss will be recognized by ADP upon the receipt of the Dealer Cash from Dealer, (iv) in which ADP, Dealer and the shareholders of ADP recognize no income or gain for U.S. federal Income Tax purposes pursuant to Code Sections 355, 361 and 1032 and (v) that qualifies for tax-free treatment under comparable provisions of state, local and foreign law. For the avoidance of doubt, recognition of income or gain that relates to items described in Sections 2.03(c)(i)(A) or 2.04 or to intercompany items shall not cause the Distribution to fail to achieve Tax-Free Status.

Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit, or any other item (including the basis or adjusted basis of property) which increases or decreases Income Taxes paid or payable in any taxable period.

Tax Opinions/Rulings” means (i) any Ruling and (ii) the opinions of Tax Advisors relating to the Transactions including, without limitation, those issued either at the time of the Distribution or to allow a Party to take actions otherwise prohibited under this Agreement.

Tax Return” or “Return” means any return, filing, report, questionnaire, information statement, claim for Refund, or other document required or permitted to be filed, including any amendments that may be filed, for any taxable period with any Taxing Authority.

Taxes” means all forms of taxation or duties imposed, or required to be collected or withheld, including charges, together with any related interest, penalties or other additional amounts. For the avoidance of doubt, the term “Taxes” does not include amounts to be paid to any governmental authority pursuant to escheat law.

 

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Taxing Authority” means any governmental authority imposing Taxes.

Transaction Taxes” means all (i) Taxes of any member of the ADP Group or the Dealer Group resulting from, or arising in connection with, the failure of the Contribution and the Distribution to have Tax-Free Status, (ii) Taxes of the type described in clause (i) of any third party for which any member of the ADP Group or the Dealer Group is or becomes liable, and (iii) reasonable out of pocket legal, accounting and other advisory and court fees in connection with liability for Taxes described in clauses (i) or (ii).

Transactions” means the Contribution, the Distribution, the transactions contemplated by the Separation Agreement and any other transfer of assets (whether by contribution, sale or otherwise) between any member of the ADP Group and any member of the Dealer Group in connection with the Contribution or the Distribution.

Transition Services Agreement” has the meaning set forth in the Separation Agreement.

Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor that permits reliance by ADP. The Tax Advisor, in issuing its opinion, shall be permitted to rely on the validity and correctness, as of the date given, of any previously issued Tax Opinions/Rulings, unless such reliance would be unreasonable under the circumstances.

Section 1.02 General Interpretive Principles. (i) Words in the singular shall include the plural and vice versa, and words of one gender shall include the other gender, in each case, as the context requires, (ii) the words “hereof,” “herein,” “hereunder,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement and not to any particular provision of this Agreement, and references to Article, Section, paragraph and Schedule are references to the Articles, Sections, paragraphs and Schedules to this Agreement unless otherwise specified, (iii) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified, (iv) any reference to any federal, state, local or non-U.S. statute or Law shall be deemed to also refer to all rules and regulations promulgated thereunder, in each case as amended from time to time, unless the context otherwise requires and (v) references to a Person also refer to its predecessors and permitted successors and assigns.

 

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ARTICLE II

PAYMENT OF TAXES

Section 2.01 Income Taxes.

(a) Except as provided in sections 2.02 and 2.04, ADP shall be responsible for all Income Taxes (i) of Dealer and its Affiliates for any Pre-Distribution Tax Period; (ii) of Dealer and its Affiliates for any Straddle Period, but only to the extent allocated to ADP pursuant to Section 2.05; or (iii) imposed under Treasury Regulation Section 1.1502–6 or under any comparable or similar provision of state, local or foreign laws or regulations on Dealer or an Affiliate solely as a result of such company being a member of a consolidated, combined, or unitary group with ADP or any ADP Affiliate during any Tax period, in each case to the extent in excess of amounts provided for in respect of such Income Taxes on the condensed combined balance sheet of Dealer, including the notes thereto, as of September 30, 2014 (the “Balance Sheet”).

(b) Dealer shall be responsible for all Income Taxes (i) of Dealer and its Affiliates which are not the responsibility of ADP pursuant to Section 2.01(a) (including Income Taxes for Post–Distribution Tax Periods of Dealer and its Affiliates); and (ii) of ADP and its Affiliates attributable to acts or omissions of Dealer or its Affiliates taken after the Distribution (other than acts or omissions in the ordinary course of business or otherwise contemplated by the Separation Agreement and Ancillary Agreements).

Section 2.02 Transaction Taxes.

(a) Dealer shall be liable, and shall indemnify the ADP Group, for any Transaction Taxes that are attributable to (i) any inaccurate statement or representation of fact or intent (or omission to state a material fact) in Section 4.01 that relates to the Dealer Group; (ii) any inaccurate statement or representation of fact or intent (or omission to state a material fact) in a letter or certificate that is provided by any member of the Dealer Group after the date hereof, and that forms the basis for the Tax Opinions/Rulings; (iii) any act or omission by the Dealer Group after the date of this Agreement inconsistent with the covenants set forth in this Agreement; or (iv) any other act or omission by the Dealer Group after the date of this Agreement (except for acts disclosed in any Ruling request submitted to the IRS or the CRA prior to the date hereof or required by the Separation Agreement or any of the Ancillary Agreements), including any act or omission that would have resulted in Dealer being in breach of Section 4.02(b) but for the receipt by Dealer of a Ruling from the IRS or the CRA, an Unqualified Tax Opinion or a waiver.

(b) ADP shall be liable, and shall indemnify the Dealer Group, for any Transaction Taxes attributable to: (i) any inaccurate statement or representation of fact or intent (or omission to state a material fact) made (x) in Section 4.01 that relates to the ADP Group or (y) before the date hereof and that formed the basis for any Tax Opinions/Rulings; (ii) any inaccurate statement or representation of fact or intent (or

 

10


omission to state a material fact) in a letter or certificate that is provided by any member of the ADP Group after the date hereof and that forms the basis for the Tax Opinions/Rulings; (iii) any act or omission by the ADP Group after the date of this Agreement inconsistent with the covenants set forth in this Agreement; or (iv) any other act or omission (except for acts disclosed in any Ruling request submitted to the IRS prior to the date hereof or required by the Separation Agreement or any of the Ancillary Agreements) by the ADP Group.

(c) Liability for any Transaction Taxes described in both paragraphs (a) and (b) shall be shared by ADP and Dealer according to relative fault.

Section 2.03 Other Taxes.

(a) ADP shall be responsible for all Other Taxes attributable to ADP and its Affiliates (other than Dealer and its Affiliates) and to its business activities other than the Dealer Business, or resulting from the Transactions for all Pre–Distribution Tax Periods, Straddle Periods, and Post–Distribution Tax Periods.

(b) Dealer shall be responsible for all Other Taxes attributable to Dealer and its Affiliates, to the Dealer Business, or to any Dealer Asset, without duplication, for all Pre–Distribution Tax Periods, Straddle Periods, and Post–Distribution Tax Periods, including (1) all Other Taxes to the extent relating to, arising out of or resulting from any terminated, divested or discontinued business or operations of the Dealer Business; and (2) all Other Taxes to the extent relating to, arising out of or resulting from actions, inactions, omissions, conditions, facts or circumstances occurring or existing prior to, at or after the Distribution Date, in each case to the extent such Other Taxes relate to, arise out of or result from (w) any Dealer Asset, (x) the Dealer Business, (y) any service or function used by the Dealer Group at shared locations or (z) any service or function performed by any member of the ADP Group for (but not exclusively for) the Dealer Business.

(c) In each case the responsibilities of Section 2.03(a) and 2.03(b) shall be consistent with the principles described below:

(i) Transfer Taxes.

(A) The ADP Group shall be liable, and shall indemnify the Dealer Group, for any stamp, sales, use, gross receipts, value-added, real estate transfer or other transfer Taxes imposed in connection with the Transactions.

(B) If business operations of an ADP entity are transferred to a Dealer entity as part of the Transactions, the transferee shall assume any and all liabilities for stamp, sales, use, gross receipts, value-added, real estate transfer and other transfer Taxes associated with such transferred operations (excluding any Taxes described in sub-clause (A) of this clause (i)) and will have sole responsibility for satisfying such liabilities.

 

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(C) With respect to Refund claims pending on the Distribution Date involving any sales, use, gross receipts or other similar Taxes, (x) in the case of a Refund received by ADP and payable to Dealer pursuant to the terms hereof, the amount of such payment shall be net of all contingent fee expenses and Taxes paid by ADP and related to such Refund, or (y) in the event that Dealer receives a Refund directly from the relevant Taxing Authority, it shall reimburse ADP for all contingent fee expenses and Taxes paid by ADP with respect to such Refund. For the avoidance of doubt, Dealer shall not be liable for any contingent fee expenses or Taxes related to Refunds received prior to the Distribution Date.

(ii) Property Taxes. If property is transferred between legal entities, the transferee shall assume any and all liabilities for real and personal property Taxes associated with such transferred property and will have sole responsibility for satisfying such liabilities.

(iii) Payroll Taxes. Except as otherwise provided in the Transition Services Agreement, if an employee moves from one employer to another, the “new” employer shall assume any and all employment related Taxes attributable to such transferred employee and will have sole responsibility for satisfying such liabilities.

Section 2.04 Other Income Taxes. Without regard to anything to the contrary in this Article II, ADP shall be liable, and shall indemnify the Dealer Group, for all Taxes arising as a result of the Transactions from (i) excess loss accounts taken into account under Code Section 1502, (ii) Code Section 357(c) or (iii) Code Section 361(b), in each case, including under similar state and local law provisions. Any Taxes attributable to deferred intercompany gains that are triggered as a result of the Transactions shall be the responsibility of ADP and shall not be included in determining the Dealer Group’s Income Tax liability. To the extent there are adjustments to the amount of any deferred intercompany gain triggered as a result of the Distribution, ADP shall be responsible for paying the additional Tax associated with any increase in the amount of gain and shall also be entitled to a Refund attributable to any reduction of gain.

Section 2.05 Allocation of Certain Income Taxes and Income Tax Items.

(a) If ADP, Dealer or any of their respective Affiliates is permitted but not required under applicable U.S. federal, state, local or foreign Tax laws to treat the Distribution Date as the last day of a taxable period, then the Parties shall treat such day as the last day of a taxable period under such applicable Tax law, and shall file any elections necessary or appropriate to such treatment; provided that this Section 2.05(a) shall not be construed to require ADP to change its taxable year.

(b) Transactions occurring, or actions taken, on the Distribution Date but after the Distribution outside the ordinary course of business by, or

 

12


with respect to, Dealer or any of its Affiliates shall be deemed subject to the “next day rule” of Treasury Regulation Section 1.1502–76(b)(1)(ii)(B) (and under any comparable or similar provision under state, local or foreign laws or regulations, provided that if there is no comparable or similar provision under state, local or foreign laws or regulations, then the transaction will be deemed subject to the “next day rule” of Treasury Regulation Section 1.1502–76(b)(1)(ii)(B)) and as such shall for purposes of this Agreement be treated (and consistently reported by the Parties) as occurring in a Post–Distribution Tax Period of Dealer or a Dealer Affiliate, as appropriate.

(c) Any Taxes for a Straddle Period with respect to Dealer and/or its Affiliates (or entities in which Dealer and/or one of its Affiliates has an ownership interest) shall, for purposes of this Agreement, be apportioned between ADP and Dealer based on the portion of the period ending on and including the Distribution Date and the portion of the period beginning after the Distribution Date, and each such portion of such period shall be deemed to be a taxable period (whether or not it is in fact a taxable period). Any allocation of income or deductions required to determine any Income Taxes for a Straddle Period shall be made by means of a closing of the books and records of Dealer and its Affiliates as of the close of business on the Distribution Date; provided that (i) ADP may elect to allocate Tax Items (other than any extraordinary Tax Items) ratably in the month in which the Distribution occurs (and if ADP so elects, Dealer shall so elect) as described in Treasury Regulation Section 1.1502–76(b)(2)(iii) and corresponding provisions of state, local, and foreign Tax laws; and (ii) subject to (i), exemptions, allowances or deductions that are calculated on an annual basis, and not on a closing of the books method, (including depreciation and amortization deductions) shall be allocated between the period ending on and including the Distribution Date and the period beginning after the Distribution Date based on the number of days for the portion of the Straddle Period ending on and including the Distribution Date, on the one hand, and the number of days for the portion of the Straddle Period beginning after the Distribution Date, on the other hand.

(d) Tax Attributes determined on a consolidated or combined basis for taxable periods ending before or including the Distribution Date shall be allocated to ADP and its Affiliates, and Dealer and its Affiliates, in accordance with the Code and the Treasury Regulations (and any applicable state, local, or foreign law or regulation). ADP shall reasonably determine the amounts and proper allocation of such attributes, and the Tax basis of the assets and liabilities transferred to Dealer in connection with the Transactions, as of the Distribution Date; provided that Dealer shall be entitled to participate in such determination. ADP and Dealer agree to compute their Tax liabilities for taxable periods after the Distribution Date consistent with that determination and allocation, and treat the Tax Attributes and Tax Items as reflected on any federal (or applicable state, local or foreign) Income Tax Return filed by the Parties as presumptively correct.

Section 2.06 Refunds. Except as provided in Section 2.07:

(a) ADP shall be entitled to all Refunds with respect to any Tax for which ADP is responsible under Sections 2.01, 2.02, 2.03, or 2.04. Dealer shall be entitled to all Refunds with respect to any Tax for which Dealer is responsible under Sections 2.01, 2.03, or 2.04.

 

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(b) Dealer and ADP shall each forward to the other Party, or reimburse such other Party for, any Refunds received by the first Party and due to such other Party pursuant to this Section (net of all contingent fees and Taxes payable by the first Party and related to such Refund). Where a Refund is received in the form of a deduction from, or credit or other offset against other or future Tax liabilities, reimbursement with respect to such Refund shall be due in each case on the due date for payment of the Tax from or against which such Refund has been deducted, credited or otherwise offset.

(c) If one Party reasonably so requests, the other Party (at the first Party’s expense) shall file for and pursue any Refund to which the first Party is entitled under this Section; provided that the other Party need not pursue any Refund on behalf of the first Party unless the first Party provides the other Party a certification by an appropriate officer of the first Party setting forth the first Party’s belief (together with supporting analysis) that the Tax treatment of the Tax Items on which the entitlement to such Refund is based is more likely than not correct, and is not a Tax Item arising from a Reportable Transaction.

(d) If the other Party pays any amount to the first Party under this Section 2.06 and, as a result of a subsequent Final Determination, the first Party is not entitled to some or all of such amount, the other Party shall notify the first Party of the amount to be repaid to the other Party, and the first Party shall then repay such amount to the other Party, together with any interest, fines, additions to Tax, penalties or any additional amounts imposed by a Taxing Authority relating thereto.

Section 2.07 Carrybacks.

(a) Notwithstanding anything in this Agreement, Dealer shall file (or cause to be filed) on a timely basis any available election to waive the carryback of net operating losses, Tax credits or other Tax Items by Dealer or any Affiliate from a Post–Distribution Tax Period to a Straddle Period or Pre–Distribution Tax Period. Such elections shall include, but not be limited to, the election described in Treasury Regulation Section 1.1502–21T(b)(3)(ii)(B), and any analogous election under state, local, or foreign Income Tax laws, to waive the carryback of net operating losses for U.S. federal Income Tax purposes.

(b) If, notwithstanding the provisions of Section 2.07(a), Dealer is required to carryback losses or credits, Dealer shall be entitled to any Refund of any Tax obtained by ADP or an ADP Affiliate as a result of the carryback of losses or credits of Dealer or its Affiliate from any Post-Distribution Tax Period to any Pre-Distribution Tax Period. Such Refund is limited to the net amount received by ADP or an ADP Affiliate, net of any Tax cost incurred by ADP or such Affiliate resulting from such Refund. Upon request by Dealer, ADP shall advise Dealer of an estimate of any Tax cost ADP projects will be associated with any carryback of losses or credits of Dealer or its Affiliates as provided in this Section 2.07(b).

 

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(c) If Dealer has a Tax Item that must be carried back to any Pre-Distribution Tax Period, Dealer shall notify ADP in writing that such Tax Item must be carried back. Such notification shall include a description in reasonable detail of the grounds for the Refund and the amount thereof, and a certification by an appropriate officer of Dealer setting forth Dealer’s belief (together with supporting analysis) that the Tax treatment of such Tax Item is more likely than not correct, and is not a Tax Item arising from a Reportable Transaction.

(d) If ADP pays any amount to Dealer under Section 2.07(b) and, as a result of a subsequent Final Determination, Dealer is not entitled to some or all of such amount, ADP shall notify Dealer of the amount to be repaid to ADP, and Dealer shall then repay such amount to ADP, together with any interest, fines, additions to Tax, penalties or any additional amounts imposed by a Taxing Authority relating thereto.

Section 2.08 Treatment of Restricted Stock, Stock Options, and Deferred Compensation.

(a) To the extent permitted by law, ADP (or the appropriate ADP Affiliate) shall claim all Tax deductions arising by reason of the grant, vesting or settlement of ADP Restricted Stock or ADP Restricted Stock Units, and by reason of exercises of ADP Stock Options, at the time such Tax deduction can be claimed. To the extent permitted by law, Dealer (or the appropriate Dealer Affiliate) shall claim all Tax deductions arising by reason of the grant, vesting or settlement of Dealer Restricted Stock or Dealer Restricted Stock Units, and by reason of exercises of Dealer Stock Options, at the time such Tax deduction can be claimed. To the extent permitted by law, Dealer (or the appropriate Dealer Affiliate) shall claim all Tax deductions arising by reason of the payment (or inclusion in income) of compensation the receipt of which was deferred by a Dealer Employee prior to the Distribution Date, the payment of which will occur after the Distribution Date, and the obligation to make such payment is assumed by Dealer in connection with the Contribution and Distribution.

(b) If, pursuant to a Final Determination, all or any part of a Tax deduction claimed by a Party (or Affiliate thereof) pursuant to Section 2.08(a) is disallowed, then, to the extent permitted by law, the other Party (or Affiliate thereof) shall claim such Tax deduction. If such other Party (or Affiliate thereof) realizes a Tax benefit from the claiming of such Tax deduction, such other Party (or Affiliate) shall pay the amount of such Tax benefit (net of any Tax detriment suffered by the payor) to the Party who originally claimed the Tax deduction.

(c) The Party (or Affiliate thereof) initially claiming the Tax deduction described in Section 2.08(a) shall withhold applicable Taxes and satisfy applicable Tax reporting obligations with respect to the taxation of the restricted stock, restricted stock unit, option, or deferred compensation with respect to which the Tax deduction is claimed. The Parties to this Agreement shall cooperate so as to permit the Party initially claiming such deduction to discharge any applicable Tax withholding and Tax reporting obligations.

 

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Section 2.09 Successor Employer Status. ADP and Dealer shall, to the extent permitted by law, (i) treat Dealer and its Affiliates (as applicable) as a “successor employer” and ADP and its Affiliates (as applicable) as a “predecessor,” within the meaning of sections 3121(a)(1) and 3306(b)(1) of the Code, with respect to employees of the Dealer Business who were employed by Dealer and its Affiliates starting on October 1, 2014 for purposes of Taxes imposed under the United States Federal Unemployment Tax Act or the United States Federal Insurance Contributions Act and (ii) cooperate with each other to avoid the filing of more than one IRS Form W–2 with respect to each such employee for the calendar year in which the Distribution occurs.

Section 2.10 Advance Pricing Agreement.

(a) ADP Amalco shall transfer to a CDK Global (Canada) Co. (“New CanCo 2”), and New CanCo 2 shall assume the liability for, a portion of the amount, if any, finally determined to be payable by ADP Amalco to ADP or its Affiliates under the APA (as defined below), if so determined in the sole discretion of ADP prior to the Separation. ADP Amalco shall transfer to New CanCo2, and New CanCo 2 shall acquire the right to a portion of, the receivable, if any, finally determined to be owing to ADP Amalco by ADP or its Affiliates under the APA, if so determined in the sole discretion of ADP prior to the Separation.

(b) If it is finally determined that an amount is owing by ADP Amalco under the APA (an “APA Liability”) and New CanCo 2 has assumed a portion of such APA Liability as described in paragraph (a) above, then ADP and/or the United States Subsidiaries of ADP, as applicable, shall be deemed to have contributed to Dealer and/or the United States Subsidiaries of Dealer, prior to the Separation, receivables owing under the APA such that the total amount of receivables owing to Dealer and/or the United States Subsidiaries of Dealer, as applicable, under the APA equals the amount of the APA Liability assumed by New CanCo 2, which New CanCo 2 will then pay directly to Dealer and/or the United States Subsidiaries of Dealer, as applicable.

(c) If it is finally determined that an APA Liability is owing by ADP Amalco to a United States Subsidiary of Dealer (to the extent in excess of the portion of any such APA Liability that has been assumed by New CanCo 2 pursuant to paragraph (b) above), then such United States Subsidiary of Dealer shall be deemed to have distributed to ADP, prior to the Separation, the corresponding receivable owing to it by ADP Amalco under the APA.

(d) If it is finally determined under the APA that an amount is owing to ADP Amalco (an “APA Receivable”) and New CanCo 2 has assumed a portion of such APA Receivable as described in paragraph (a) above, then Dealer and/or the United States Subsidiaries of Dealer, as applicable, shall be deemed to have assumed a liability from ADP and/or the United States Subsidiaries of ADP, as applicable, prior to

 

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the Separation, such that the total amount owing by Dealer and/or the United States Subsidiaries of Dealer, as applicable, under the APA equals the amount of the APA Receivable acquired by New CanCo 2, which Dealer and/or the United States Subsidiaries of Dealer, as applicable, will pay directly to New CanCo 2.

(e) If it is finally determined that an APA Receivable is owing to ADP Amalco from a United States Subsidiary of Dealer (to the extent in excess of the portion of any such APA Receivable that has been acquired by New CanCo 2 pursuant to paragraph (d) above), then ADP shall be deemed to have assumed, prior to the Separation, the corresponding liability of the United States Subsidiary of Dealer owing to ADP Amalco under the APA.

(f) For the avoidance of doubt, and notwithstanding anything herein to the contrary, any tax owing or refund due as a result of the APA shall be treated as an Income Tax or a refund of an Income Tax, in each case that is governed by Section 2.01 of this Agreement.

(g) For greater certainty, the result of (i) Sections 2.10(a) and (b), to the extent applicable, is that any APA Liability ultimately owing by New CanCo 2 shall be payable to Dealer (and/or its United States Subsidiaries); (ii) Sections 2.10(a), (b) and (c), to the extent applicable, is that any APA Liability ultimately owing by ADP Amalco (less any amount assumed by New CanCo 2) shall be owing to ADP (and/or its United States Subsidiaries); (iii) Sections 2.10(a) and (d), to the extent applicable, is that any APA Receivable ultimately owing to New CanCo 2 shall be payable by Dealer (and/or its United States Subsidiaries); and (iv) Section 2.10(a), (d) and (e), to the extent applicable, is that any APA Receivable ultimately owing to ADP Amalco (less any receivable transferred to New CanCo 2) shall be payable by ADP.

ARTICLE III

PREPARATION AND FILING OF TAX RETURNS

Section 3.01 ADP Responsibility.

(a) Subject to paragraph (b) below, ADP shall make all determinations with respect to, have ultimate control over the preparation of and file all (i) Joint Returns and ADP Separate Returns, in each case as it determines to be mandatory or advisable for all taxable periods, (ii) Dealer Separate Returns that are Income Tax Returns for all Pre-Distribution Tax Periods and (iii) at ADP’s election, Dealer Separate Returns that are Income Tax Returns for all Straddle Periods provided that ADP provides written notice to Dealer 45 days after the end of such Straddle Period that ADP is exercising its right to prepare such Tax Return.

(b) If, in connection with the preparation of any Return, ADP materially modifies any information relating to, or provided in, the pro forma federal and state Income Tax Returns or other information related to members of the Dealer Group prepared by Dealer and provided to ADP pursuant to Section 3.02 below, the portions of

 

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the Returns that include such information shall be submitted to Dealer no later than 30 days prior to the due date (including extensions) for filing of such federal Returns and 20 days prior to the due date (including extensions) for filing of such state Returns (or if such due date is within 30 days following the Distribution Date, as promptly as practicable following the Distribution Date). Within 10 days after delivery of any such revised portions of any Return, Dealer shall provide comments to ADP in writing to the extent Dealer objects to any revisions that could reasonably be expected to adversely impact any member of the Dealer Group. Such Dealer comments shall be incorporated into the Return upon the consent of ADP, not to be unreasonably withheld. If Dealer does not so notify ADP of any objection, Dealer shall be considered to have consented to the filing of such Return. The dates for submissions to Dealer required in this section may be modified by mutual agreement of ADP and Dealer.

Section 3.02 Dealer Responsibility.

(a) Dealer shall make all determinations with respect to, have ultimate control over the preparation of and file all Tax Returns (other than those described in Section 3.01) for the Dealer Group as it determines to be mandatory or advisable and for all taxable periods. Dealer shall provide to ADP all information related to members of the Dealer Group that is reasonably requested by ADP and required to complete any Tax Return which is the responsibility of ADP pursuant to Section 3.01, in the format reasonably requested by ADP, and at least 110 days prior to the due date (including extensions) of the relevant federal Tax Return and at least 100 days prior to the due date (including extensions) of the relevant state Tax Return and at least 120 days prior to the due date of the relevant Canadian Tax Return and at such times as are reasonably requested by ADP in the case of other relevant Tax Returns. In particular, the Dealer Group tax department will support ADP and the filing of these Tax Returns with respect to data collection and compilation requirements. Dealer shall reimburse ADP for all reasonable costs and expenses (it being agreed and understood that the fees of ADP’s outside accounting firms are reasonable costs and expenses) incurred by the ADP Group in connection with the preparation of any Tax Return which is the responsibility of ADP pursuant to clause (ii) or (iii) of Section 3.01. The dates for submissions to ADP required in this section may be modified by mutual agreement of ADP and Dealer.

(b) In the case of any Tax Return that is the responsibility of ADP pursuant to Section 3.01(a) and that relates to an Income Tax that is provided for on the Balance Sheet, Dealer shall pay to ADP the amount of the provision for such Income Tax no later than 10 days prior to the due date (including extensions) for the filing of such Tax Return.

Section 3.03 Tax Accounting Practices.

(a) Except as provided in Section 3.03(b), any Tax Return for any Pre-Distribution Tax Period, to the extent it relates to members of the Dealer Group, shall be prepared in accordance with practices, accounting methods, elections, conventions and Tax positions used with respect to the Tax Return in question for periods prior to the Distribution (“Past Practices”), and, in the case of any item the treatment of

 

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which is not addressed by Past Practices, in accordance with generally acceptable Tax accounting practices. Notwithstanding the foregoing, for any Tax Return described in the preceding sentence, (i) a Party will not be required to follow Past Practices with either the written consent of the other Party (not to be unreasonably withheld) or a “should” level opinion from a Tax Advisor that the proposed method of reporting is correct and (ii) ADP shall have the right to determine which entities will be included in any consolidated, combined, affiliated or unitary Return that it is responsible for filing.

(b) The Parties shall report the Transactions for all Tax purposes in a manner consistent with the Tax Opinions/Rulings, unless, and only to the extent, an alternative position is required pursuant to a Final Determination. ADP shall determine the Tax treatment to be reported on any Tax Return of any Tax issue relating to the Transactions that is not covered by the Tax Opinions/Rulings.

Section 3.04 Right to Review Tax Returns. Upon request, each Party shall make available to the other Party the portion of Pre-Distribution Tax Period Tax Returns that relates to the Dealer Group that the first Party is responsible for preparing under this Article III.

ARTICLE IV

TAX-FREE STATUS OF DISTRIBUTION

Section 4.01 Representations. Each of Dealer and ADP represents that (i) it knows of no fact (other than the facts disclosed in any Ruling request submitted prior to the date hereof) that may cause the Contribution and the Distribution to fail to have Tax-Free Status and (ii) it has no plan or intention to take any action inconsistent with the Tax Opinions/Rulings or the covenants set forth in this Agreement.

Section 4.02 Covenants.

(a) Each of Dealer and ADP will not take or fail to take, or permit its Affiliates to take or fail to take, any action (which includes the undertaking of any transaction) where that action or omission would (i) violate, be inconsistent with or cause to be untrue any covenant, representation or statement in any Tax Opinions/Rulings or a letter or certificate that forms the basis therefor, or (ii) prevent, or be reasonably likely to prevent, or be inconsistent with, the Tax-Free Status.

(b) During the Restricted Period, except as provided in paragraph (c), Dealer shall not, and shall not permit its Affiliates to, in a single transaction or in a series of transactions:

(i) permit any transaction or series of transactions (or any agreement, understanding or arrangement to enter into a transaction or series of transactions, whether any such transaction is to occur during or after the Restricted Period) as determined for purposes of Code Section 355(e), in connection with which (A) any member of the Dealer Group would merge or consolidate with any Person other

 

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than any other member of the Dealer Group, (B) any member of the Dealer Group would form one or more joint ventures with any Person other than any other member of the Dealer Group in which, in the aggregate, more than 10% of the gross assets of the Dealer Group are transferred to such joint ventures or (C) one or more Persons would acquire, or have the right to acquire, directly or indirectly, from any other Person or Persons, an interest in the equity of any Section 355 Entity that, when combined with any other acquisitions of the equity of such Section 355 Entity (but excluding any other acquisition described in the final sentence of this clause (i)) comprises 10% or more of the value or the total combined voting power of all interests that are treated as outstanding equity in such Section 355 Entity for U.S. federal income Tax purposes immediately after such transaction, or, in the case of a series of related transactions, immediately after any transaction in such series (each of (A), (B), and (C), a “Proposed Acquisition Transaction). For these purposes, any recapitalization, repurchase or redemption of equity in any Section 355 Entity shall be treated as an indirect acquisition of such stock by any non-exchanging shareholder to the extent such shareholder’s percentage interest in the issuer increases by vote or value. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (w) the adoption by Dealer of a shareholder rights plan that meets the requirements of IRS Revenue Ruling 90-11, (x) issuances of Dealer Capital Stock pursuant to an employee stock purchase agreement or equity compensation plan that ADP has notified Dealer in writing is acceptable to ADP in its sole discretion (for the avoidance of doubt, (i) any modification or amendment to such agreement or plan is also subject to the prior written consent of ADP and (ii) ADP’s approval is required for the underlying purchase agreement or plan but not for each issuance of stock pursuant thereto), (y) transfers on an established market of Dealer Capital Stock described in Safe Harbor VII of Treasury Regulation Section 1.355-7(d) or (z) issuances of Dealer Capital Stock described in Safe Harbor VIII (relating to acquisitions in connection with a Person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d).

(ii) liquidate or partially liquidate Dealer, any Section 355 Entity, or any ATB Entity, whether by merger, consolidation or otherwise;

(iii) cause or permit any ATB Entity to cease to engage in its Active Trade or Business;

(iv) sell or transfer assets, other than inventory sold or transferred in the ordinary course of business, constituting (A) 50% or more of the gross assets that are held by any ATB Entity and are used in the Active Trade or Business and are relied upon to satisfy the requirements of Code Section 355(b), (B) 50% or more of the consolidated gross assets of the Dealer Group that are used in an Active Trade or Business (such percentages to be measured based on fair market value as of the Distribution Date) or (C) any lesser amount if that sale or transfer could reasonably be expected to result in a significant and material change to, or termination of, the Active Trade or Business immediately after the Distribution Date;

 

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(v) redeem or otherwise repurchase (directly or indirectly) any Dealer Capital Stock, except to the extent such redemptions or repurchases satisfy Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to its amendment by Revenue Procedure 2003-48).

(vi) amend its certificate of incorporation (or other organizational documents), or take any other action, affecting the relative voting rights of the separate classes of Dealer Capital Stock; provided, however, that this clause (vi) shall not be deemed to be violated upon Dealer’s adoption of a shareholder rights plan that meets the requirements of IRS Revenue Ruling 90-11.

(c) Notwithstanding paragraph (b):

(i) clauses (i) through (vi) of paragraph (b) shall not apply upon the prior written consent of ADP, which consent may not be withheld if ADP determines in good faith that Dealer has provided it with Satisfactory Guidance concluding that the proposed actions will not result in Transaction Taxes;

(ii) clause (iv) of paragraph (b) shall not apply after the six month anniversary of the Distribution Date;

(iii) for purposes of clause (i), if Dealer provides ADP an Unqualified Tax Opinion that is intended to be Satisfactory Guidance concerning a Proposed Acquisition Transaction, then such Opinion may be based on the assumption that ADP did not have any agreement, understanding, arrangement or substantial negotiations, within the meaning of Treasury Regulations Section 1.355-7(h), with the counterparty to the Proposed Acquisition Transaction within the two year period preceding the Distribution Date and such assumption shall not prevent such Unqualified Tax Opinion from being considered Satisfactory Guidance by the Parties, provided that (x) such assumption must be based on a certificate of such counterparty that such assumption is true to the best of its knowledge and belief, and (y) ADP may deem such Opinion not to be Satisfactory Guidance if, in its reasonable judgment, there is a risk that such assumption is not correct; and

(d) Notwithstanding anything herein to the contrary, for purposes of paragraph (c), no Ruling shall be obtained from the IRS if ADP determines that there is a reasonable possibility that such an action could have a significant adverse impact on any member of the ADP Group.

(e) Dealer will not take any action (including the sale or disposition of any stock, securities or other assets), or permit its Affiliates to take any such action, and Dealer will not fail to take any action or permit its Affiliates to fail to take any action that would cause ADP or any of its Affiliates or Dealer or any of its Affiliates to recognize gain under any Gain Recognition Agreement.

 

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Section 4.03 Procedures Regarding Opinions and Rulings.

(a) Subject to Section 4.02(d), if Dealer may take certain actions conditioned upon the receipt of Satisfactory Guidance, ADP, at the request of Dealer, shall use commercially reasonable efforts to expeditiously obtain, or assist Dealer in obtaining, such Satisfactory Guidance. ADP shall not be required to take any action pursuant to this Section 4.03(a) if Dealer fails to certify, upon request, that all information and representations relating to any member of the Dealer Group in the relevant documents are true, correct and complete. Dealer shall reimburse ADP for all reasonable out-of-pocket costs and expenses incurred by the ADP Group in obtaining Satisfactory Guidance.

(b) ADP shall have the right to obtain a Ruling from the IRS (or any other Taxing Authority) or an Unqualified Tax Opinion at any time in its sole discretion. ADP shall reimburse Dealer for all reasonable out-of-pocket costs and expenses incurred by the Dealer Group in obtaining such a Ruling or Unqualified Tax Opinion.

(c) ADP shall have exclusive control over the process of obtaining any Ruling relating to the Transactions and neither Dealer nor any of its Affiliates shall independently seek any guidance concerning the Transactions from any Taxing Authority at any time. In connection with any Ruling relating to the Transactions that can reasonably be expected to affect Dealer liabilities under this Agreement, ADP shall (i) keep Dealer informed of all material actions taken or proposed to be taken by ADP, (ii) reasonably in advance of the submission of any Ruling request provide Dealer with a draft thereof, consider Dealer’s comments on such draft, and provide Dealer with a final copy, and (iii) provide Dealer with notice reasonably in advance of, and permit Dealer to attend, any formally scheduled meetings with the IRS (subject to the approval of the IRS) that relate to such Ruling.

Section 4.04 Canadian Butterfly.

(a) Each of Dealer and ADP represents that (i) it knows of no fact (other than the facts disclosed in any Ruling request submitted to the CRA prior to the date hereof) that may cause the Butterfly Transactions to fail to have Canadian Tax-Free Status and (ii) it has no plan or intention to take any action inconsistent with the request for the Canadian Tax Ruling or the Canadian Tax-Free Status or the covenants set forth in this Agreement.

(b) Each of Dealer and ADP will not take or fail to take, or permit its Affiliates to take or fail to take, any action (which includes the undertaking of any transaction) where that action or omission would (i) violate, be inconsistent with or cause to be untrue any covenant, representation or statement in the Canadian Tax Ruling, or (ii) prevent, or be reasonably likely to prevent, or be inconsistent with, the Canadian Tax-Free Status, in each case without first obtaining Satisfactory Guidance concluding that the proposed action or omission will not have such effect.

 

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ARTICLE V

TAX CONTESTS; INDEMNIFICATION; COOPERATION

Section 5.01 Notice.

(a) Within 15 days after a Party (the “Indemnitee”) becomes aware of the existence of a Tax Contest that may give rise to an indemnification claim under this Agreement by it against the other Party (the “Indemnifying Party”), the Indemnitee shall promptly notify the Indemnifying Party of the Tax Contest, and thereafter shall promptly forward or make available to the Indemnifying Party copies of notices and communications with a Taxing Authority relating to such Tax Contest.

(b) The Indemnifying Party shall not be responsible for any increase in amounts to which the Indemnitee is otherwise entitled to the extent that such increase results solely from the failure of the Indemnitee to provide timely notice as required pursuant to Section 5.01(a).

Section 5.02 Control of Tax Contests.

(a) Except as otherwise provided in paragraphs (b) and (c):

(i) ADP shall control, and have sole discretion in handling, settling or contesting, any Tax Contest relating to any Joint Returns, as well as any Separate Returns or other Return if any such Return is related to Taxes for which ADP is responsible pursuant to Article II, or the Tax treatment of the Transactions, provided that (x) ADP shall act in good faith in connection with its control of any such Tax Contests and (y) Dealer shall have the right to participate in and advise on (including the opportunity to review and comment upon ADP’s communications with the Taxing Authority, which comments shall be incorporated upon the consent of ADP, not to be unreasonably withheld) such items for which Dealer could be liable under Article II as a result of such Tax Contest; and

(ii) If Dealer disagrees with ADP’s decision to settle a Tax Contest that may reasonably be expected materially to affect amounts for which Dealer is liable under Article II, Dealer shall have the right to contest its liability to ADP under Article II notwithstanding the settlement. Dealer shall provide written notice to ADP of its intention to contest its liability as a result of any settlement (and its irrevocable election described below) prior to the time such settlement is entered into. Any such contest by Dealer shall be made under the procedures set forth in Article VI. Under those procedures, Dealer may irrevocably elect, in its sole discretion, to require the Tax Advisor or the arbitrator to determine either (x) the amount of a settlement with the relevant Taxing Authority that would most accurately reflect the litigation risk of the relevant issue, or (y) the most likely outcome of the issue if it were litigated without a settlement. In either such case, Dealer shall be liable to ADP, or ADP shall be liable to Dealer, based solely on the determination of the Tax Advisor or the arbitrator as if a settlement or litigation implementing such determination had actually occurred, without regard to the actual settlement. For the avoidance of doubt, this clause (ii) shall not limit ADP’s ability to settle a Tax Contest.

 

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(b) Dealer shall control and have sole discretion in handling, settling or contesting, any Tax Contest for a Pre-Distribution Tax Period to the extent such Tax Contest relates solely to Taxes that are the responsibility of Dealer pursuant to Article II; provided that ADP shall have the right to participate in and advise on all aspects of such Tax Contests and may coordinate discussions with the relevant Taxing Authority with respect thereto.

(c) ADP and Dealer shall jointly control Tax Contests relating to Tax liability arising from the failure of the Transactions to qualify for tax-free treatment under Code Sections 355 or 361, if there is a reasonable likelihood that Dealer would be liable to ADP under Article II as a result of such Tax Contest. Neither Party shall have the right to settle any such Tax Contest without the consent of the other Party; provided that ADP may settle any such Tax Contest without the consent of Dealer if ADP waives any claim for indemnification with respect thereto.

(d) Except as otherwise provided in paragraph (a), (b) or (c), Dealer shall have sole control over any Tax Contest that relates to Dealer Separate Returns for any Post-Distribution Tax Period.

(e) Any out-of-pocket costs incurred in handling, settling or contesting a Tax Contest shall be borne ratably by the Parties based on their ultimate liability under this Agreement for the Taxes to which the Tax Contest relates; provided, however, that if Dealer contests a settlement made by ADP as provided in clause (ii) of paragraph (a), ADP shall bear the costs relating to Dealer’s contest of such settlement unless ADP substantially prevails in such contest.

Section 5.03 Indemnification Payments.

(a) An Indemnitee shall be entitled to make a claim for payment pursuant to this Agreement when the Indemnitee determines that it is entitled to such payment and the amount of such payment (including the finalization of a Return before filing). The Indemnitee shall provide to the Indemnifying Party notice of such claim within 10 days of the date on which it first so becomes entitled to claim such payment, including a description of such claim and a detailed calculation of the amount of the indemnification payment that is claimed, provided, however, that no delay on the part of the Indemnitee in notifying the Indemnitor shall relieve the Indemnitor from any obligation hereunder unless (and then solely to the extent) the Indemnitor is actually and materially prejudiced thereby. Except as provided in paragraph (b), the Indemnifying Party shall make the claimed payment to the Indemnitee within 10 days after receiving such notice, unless the Indemnifying Party reasonably disputes its liability for, or the amount of, such payment.

(b) If the Indemnitee will be obligated to make the payment described in paragraph (a) to a Taxing Authority or other third Party (including expenses

 

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reimbursable under this Agreement), the Indemnifying Party shall not be obligated to pay the Indemnitee more than 5 days before the Indemnitee incurs such expense or makes such payment. If the Indemnitee’s claim for payment arises from a payment that the Indemnifying Party will receive from a third Party, such as a Refund, the Indemnifying Party shall not be obligated to pay the Indemnitee until 5 days after the Indemnifying Party receives such payment.

(c) In the case of a claim under Article II where no payment will be made to or received from a Taxing Authority, paragraph (b) shall be applied to the payments that would be made to or from a Taxing Authority if the Dealer Group was treated as a standalone group for all taxable periods.

Section 5.04 Interest on Late Payments. Interest shall accrue with respect to any indemnification payment (including any disputed payment that is ultimately required to be made), not made within the period for payment, at the rate and in the manner provided in the Code for interest on large corporate underpayments for the relevant period.

Section 5.05 Treatment of Payments.

(a) The amount of all indemnification obligations under this Agreement shall be decreased to take into account the Tax benefits to the Indemnitee of the deductibility of any indemnified item (whether or not any Tax benefit is actually received for a deductible item and assuming the highest applicable taxable rate) and shall be increased where necessary so that, after all the required deductions (whether or not any Tax benefit is actually received for a deductible item and assuming the highest applicable taxable rate) have been made and Taxes imposed, the Indemnitee receives the amount it would have been entitled to receive under this Agreement in the absence of such deductions and Taxes.

(b) Any payments made to one Party by another Party pursuant to (i) this Agreement or (ii) Sections 2.3(b), 2.3(c), 4.2, and 4.3 of the Separation Agreement (or any other payment made pursuant to the Separation Agreement that relates to taxable periods (or portions thereof) ending on or before the Distribution) shall be treated by the Parties for all Tax purposes as a distribution by, or capital contribution to, Dealer, as the case may be, made immediately prior to the Distribution, except to the extent otherwise required by a Final Determination.

Section 5.06 Expenses. Except as otherwise provided herein, each Party and its Affiliates shall bear their own expenses incurred in connection with preparation of Tax Returns, Tax Contests, and other matters under this Agreement.

Section 5.07 Cooperation. Each member of the ADP Group and the Dealer Group shall cooperate fully with all reasonable requests from the other Party in connection with the preparation and filing of Tax Returns and Adjustment Requests, Tax Contests and other matters covered by this Agreement.

 

25


(a) Such cooperation shall include:

(i) the retention until the expiration of the applicable statute of limitations, and the provision upon request, of Tax Returns, books, records (including information regarding ownership and Tax basis of property), documentation and other information relating to the Tax Returns, including accompanying schedules, related workpapers, and documents relating to Rulings or other determinations by Taxing Authorities;

(ii) the execution of any document that may be necessary or reasonably helpful in connection with any Tax Contest, the filing of a Tax Return or Adjustment Request by a member of the ADP Group or the Dealer Group, obtaining a Tax opinion or private letter ruling (except as otherwise provided in Section 4.02(d)), or other matters covered by this Agreement, including certification (provided in such form as may be required by applicable law or reasonably requested and made to the best of a Party’s knowledge) of the accuracy and completeness of the information it has supplied;

(iii) the use of the Parties’ reasonable best efforts to obtain any documentation that may be necessary or reasonably helpful in connection with any of the foregoing;

(iv) the use of the Parties’ reasonable best efforts to make the applicable Party’s current or former directors, officers, employees, agents and facilities available on a reasonable and mutually convenient basis in connection with the foregoing matters; and

(v) making determinations with respect to actions described in Section 4.02(c) as promptly as practicable including making determinations within 10 days with respect to modifications and amendments of employee stock purchase agreements or equity compensation plans under Section 4.02(b)(i)(x).

(b) If a Party fails to comply with any of its obligations set forth in this Section 5.07 upon reasonable request and notice by the other Party, and such failure results in the imposition of additional Taxes, the nonperforming Party shall be liable in full for such additional Taxes.

Section 5.08 Confidentiality. Any information or documents provided under this Agreement shall be kept confidential by the recipient-Party, except as may otherwise be necessary in connection with the filing of Tax Returns or with any Tax Contest. In addition, if ADP or Dealer determines that providing such information could be commercially detrimental, violate any law or agreement or waive any privilege, the Parties shall use reasonable best efforts to permit compliance with the obligations under this Agreement in a manner that avoids any such harm or consequence.

Section 5.09 Retention of Tax Records. Dealer may request from ADP and retain copies of (i) with respect to any Joint Return, all pro forma federal

 

26


and state Tax Returns, supporting schedules and workpapers related to members of the Dealer Group, and (ii) any Separate Returns for any Dealer Group members, including supporting schedules and workpapers. If either ADP or Dealer intends to dispose of documentation with respect to any Pre-Distribution Tax Period, including books, records, Tax Returns and all supporting schedules and information relating thereto (after the expiration of the applicable statute of limitations), of any member of the other Group, or in the case of the Dealer Group any member included in a Joint Return, they shall provide written notice to the other Party describing the documentation to be disposed of 30 days prior to taking such action. The other Party may arrange to take delivery of the documentation described in the notice at its own expense during the succeeding 30 day period.

ARTICLE VI

RESOLUTION OF DISPUTES

Section 6.01 Tax Disputes. The Parties will endeavor, and will cause their respective Affiliates to endeavor, to resolve in an amicable manner all disputes arising in connection with this Agreement. The Parties shall negotiate in good faith to resolve any Tax Dispute for not less than 45 days. Upon written notice of either Party after 45 days, the matter will be referred to a Tax Advisor acceptable to both Parties. The Tax Advisor may, in its discretion, obtain the services of any third-party necessary to assist it in resolving the dispute. The Tax Advisor shall furnish written notice to the Parties of its resolution of the dispute as soon as practicable, but in any event no later than 45 days after its acceptance of the matter for resolution. Any such resolution by the Tax Advisor will be binding on the Parties and the Parties shall take, or cause to be taken, any action necessary to implement the resolution. All fees and expenses of the Tax Advisor shall be shared equally by ADP, on the one hand, and Dealer, on the other hand. If, having determined that the dispute must be referred to a Tax Advisor, after 45 days the Parties are unable to find a Tax Advisor willing to adjudicate the dispute in question and whom the Parties in good faith find acceptable, then the dispute will be submitted for arbitration to the American Arbitrators Association, provided, however, that only an arbitrator that qualifies as a Tax Advisor shall be selected.

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.01 Disposition of Dealer Subsidiaries. In the event that Dealer disposes of the stock of a Subsidiary that is not a Party to this Agreement (i) without receiving compensation equal to the fair market value of such Subsidiary, prior to the disposition, such Subsidiary shall deliver to ADP an executed agreement, in a form reasonably acceptable to ADP, agreeing to be bound by this Agreement as if it had been an original Party hereto or (ii) in an exchange intended to result in the receipt of compensation equal to the fair market value of such Subsidiary, prior to the disposition,

 

27


such Subsidiary shall deliver to ADP an executed agreement, in a form reasonably acceptable to ADP, agreeing to be bound by Sections 5.07, 5.08, 5.09 and Article VII of this Agreement as if it had been an original Party hereto.

Section 7.02 Complete Agreement; Representations.

(a) Except as explicitly stated herein, this Agreement, together with the exhibits and schedules hereto constitutes the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.

(b) ADP represents on behalf of itself and each other member of the ADP Group and Dealer represents on behalf of itself and each other member of the Dealer Group as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated by this Agreement; and

(ii) this Agreement has been duly executed and delivered by such Person (if such Person is a Party) and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof (assuming the due execution and delivery thereof by the other Party), except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other Laws relating to creditors’ rights generally and by general equitable principles.

Section 7.03 Costs and Expenses. All costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement and the transactions contemplated hereby shall be borne as provided in the Separation Agreement.

Section 7.04 Governing Law. This Agreement and any dispute arising out of, in connection with or relating to this Agreement shall be governed by and construed in accordance with the Laws of the State of New York, without giving effect to the conflicts of laws principles thereof.

Section 7.05 Notices. All notices, requests, claims, demands and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) to the Parties at the following addresses or facsimile numbers:

If to ADP or any member of the ADP Group, to:

Automatic Data Processing, Inc.

One ADP Boulevard

Roseland, New Jersey 07068

Attn: General Counsel

Fax: (973) 974-3399

 

28


If to Dealer or any member of the Dealer Group, to:

CDK Global, Inc.

1950 Hassell Road Suite 1000

Hoffman Estates, IL 60169-6308

Attn: General Counsel

Fax: (847) 781-9873

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this section, be deemed given upon receipt and (iii) if delivered by mail in the manner described above to the address as provided in this section, be deemed given upon receipt. Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party.

Section 7.06 Amendment, Modification or Waiver.

(a) Prior to the Distribution, this Agreement may be amended, modified, waived, supplemented or superseded, in whole or in part, by ADP in its sole discretion by execution of a written amendment delivered to Dealer. Subsequent to the Distribution, this Agreement may be amended, modified, supplemented or superseded only by a written instrument signed by duly authorized signatories of both Parties.

(b) Following the Distribution, any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.

Section 7.07 No Assignment; Binding Effect; No Third Party Beneficiaries.

(a) Neither this Agreement nor any right, interest or obligation hereunder may be assigned by either Party hereto without the prior written consent of the other Party hereto and any attempt to do so will be void, except that following the Distribution Date each Party hereto may assign any or all of its rights, interests and obligations hereunder to an Affiliate; provided that any such Affiliate agrees in writing to be bound by all of the terms, conditions and provisions contained herein; provided,

 

29


further, that any such assignment shall not relieve the assigning party of its obligations or liabilities hereunder. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the Parties hereto and their respective successors and permitted assigns.

(b) The terms and provisions of this Agreement are intended solely for the benefit of each Party hereto and their respective Affiliates, successors or permitted assigns, and it is not the intention of the Parties to confer third party beneficiary rights upon any other Person.

Section 7.08 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Section 7.09 Specific Performance. From and after the Distribution, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Parties agree that the Party or Parties to this Agreement who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that, from and after the Distribution, the remedies at law for any breach or threatened breach of this Agreement, including monetary damages, are inadequate compensation for any loss, that any defense in any action for specific performance that a remedy at law would be adequate is hereby waived, and that any requirements for the securing or posting of any bond with such remedy are hereby waived.

Section 7.10 New York Forum. Each of the Parties agrees that, except as otherwise provided in Section 6.01, all Actions arising out of or in connection with this Agreement, or for recognition and enforcement of any judgment arising out of or in connection with this Agreement, shall be tried and determined exclusively in the state or federal courts in the State of New York, County of New York, and each of the Parties hereby irrevocably submits with regard to any such Action for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of the Parties hereby expressly waives any right it may have to assert, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any such Action: (a) any claim that it is not subject to personal jurisdiction in the aforesaid courts for any reason; (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts; and (c) any claim that (i) any of the aforesaid courts is an inconvenient or inappropriate forum for such Action, (ii) venue is not proper in any of the aforesaid courts and (iii) this Agreement, or the subject matter hereof, may not be enforced in or by any of the aforesaid courts. Each of the Parties agrees that mailing of process or other papers in connection with any such Action in the manner provided in Section 7.05 or any other manner as may be permitted by Law shall be valid and sufficient service thereof.

 

30


Section 7.11 WAIVER OF JURY TRIAL EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE WAIVER IN THIS SECTION, (B) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) SUCH PARTY MAKES SUCH WAIVER VOLUNTARILY AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS, AGREEMENTS AND CERTIFICATIONS HEREIN.

Section 7.12 Interpretation; Conflict With Ancillary Agreements. The Parties acknowledge and agree that (i) each Party reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision, (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement and (iii) the terms and provisions of this Agreement shall be construed fairly as to each of the Parties, regardless of which Party was generally responsible for the preparation of this Agreement. Notwithstanding the foregoing, the purposes of Article IV are to ensure the Tax-Free Status and, accordingly, the Parties agree that the language thereof shall be interpreted in a manner that serves this purpose to the greatest extent possible. The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not in any way affect the meaning or interpretation of this Agreement. If, and to the extent, the provisions of this Agreement conflict with the Separation Agreement, or any Ancillary Agreement, the provisions of this Agreement shall control.

Section 7.13 Severability. If any provision or any portion of any provision of this Agreement shall be held invalid or unenforceable, the remaining portion of such provision and the remaining provisions of this Agreement shall not be affected thereby. If the application of any provision or any portion of any provision of this Agreement to any Person or circumstance shall be held invalid or unenforceable, the application of such provision or portion of such provision to Persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby.

Section 7.14 Survival. Except with respect to Sections 5.07, 5.08 and 5.09 which shall remain in effect without limitation as to time, the provisions in this Agreement shall be unconditional and absolute and shall remain in effect until the expiration of the statute of limitations for all taxable periods that end before or include June 30 of the calendar year in which the Distribution occurs and the resolution of all disputes under this Agreement that arose during such periods.

 

31


Section 7.15 No Set-off. Neither ADP’s obligation nor Dealer’s obligation to pay fees or make any other required payments under this Agreement shall be subject to any right of offset, set-off, deduction or counterclaim, however arising, including, without limitation, pursuant to any claims under the Separation Agreement or the Ancillary Agreements.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first above written.

 

AUTOMATIC DATA PROCESSING, INC.
By:  

 

  Name:   [                    ]
  Title:   [                    ]
CDK GLOBAL, INC.
By:  

 

  Name:   [                    ]
  Title:   [                    ]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page – Tax Allocation Agreement

EX-10.2

Exhibit 10.2

 

 

TRANSITION SERVICES AGREEMENT

between

AUTOMATIC DATA PROCESSING, INC.

and

CDK GLOBAL HOLDINGS, LLC

Dated as of [], 2014

 

 

 


TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINITIONS

     1   

Section 1.1

 

Certain Defined Terms

     1   

Section 1.2

 

General Interpretive Principles

     5   

ARTICLE II SERVICES

     6   

Section 2.1

 

Services

     6   

Section 2.2

 

Terms of the Service Schedules; Fees & Costs

     7   

Section 2.3

 

Services Management

     8   

ARTICLE III TERM AND TERMINATION

     9   

Section 3.1

 

Term and Service Terms

     9   

Section 3.2

 

Termination by Dealer or ADP

     9   

Section 3.3

 

Effect of Termination

     10   

ARTICLE IV CONFIDENTIALITY

     10   

Section 4.1

 

General

     10   

Section 4.2

 

No Disclosure, Compliance with Law, Return or Destruction

     11   

Section 4.3

 

Protective Arrangements

     11   

Section 4.4

 

Survival

     12   

Section 4.5

 

Ownership of Data

     12   

ARTICLE V INDEMNIFICATION

     12   

Section 5.1

 

Indemnification for Third Party Claims

     12   

Section 5.2

 

Procedures for Indemnification of Third Party Claims

     13   

Section 5.3

 

Limitation on Damages

     14   

Section 5.4

 

Disclaimer of Warranties

     14   

ARTICLE VI MISCELLANEOUS

     15   

Section 6.1

 

Cooperation

     15   

Section 6.2

 

Negotiation

     15   

Section 6.3

 

Consent to Jurisdiction; Forum; Service of Process; Waiver of Jury Trial

     15   

Section 6.4

 

Notices

     16   

Section 6.5

 

Entire Agreement

     17   

Section 6.6

 

Waivers and Amendments

     17   

Section 6.7

 

Governing Law

     17   

Section 6.8

 

Binding Effect; Assignment

     17   

Section 6.9

 

Monetary Amounts

     18   

Section 6.10

 

Articles and Sections

     18   

Section 6.11

 

Interpretation

     18   

 

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             Page  
 

Section 6.12

 

Severability of Provisions

     18   
 

Section 6.13

 

Counterparts

     18   
 

Section 6.14

 

No Personal Liability

     18   
 

Section 6.15

 

No Third Party Beneficiaries

     18   
 

Section 6.16

 

Force Majeure

     18   
 

Section 6.17

 

Independent Contractors

     19   
 

Section 6.18

 

Employees

     19   

 

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TRANSITION SERVICES AGREEMENT

TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of [            ], 2014, between Automatic Data Processing, Inc., a Delaware corporation (“ADP”), and CDK Global Holdings, LLC, a Delaware limited liability company. ADP and Dealer shall be separately referred to herein as a “Party” and together as the “Parties.

WHEREAS, the Board of Directors of ADP has determined that it is in the best interests of ADP to separate the Dealer Business (as defined below) and the ADP Business (as defined below) into two independent public companies (the “Separation”), in order to provide greater flexibility for the management, capital requirements and growth of the Dealer Business and to allow ADP to focus its time and resources on the development and growth of the ADP Business;

WHEREAS, ADP and Dealer have entered into a Separation and Distribution Agreement, dated as of [            ], 2014 (as the same may be amended, supplemented, restated and/or modified from time to time, the “Separation Agreement”), in order to carry out, effect and consummate the Separation (including the distribution, by dividend, to ADP stockholders of the capital stock of Dealer (or its successor), as more fully described in the Separation Agreement (the “Distribution”)); and

WHEREAS, the Separation Agreement requires that Dealer and ADP enter into this Agreement to properly document the transition services to be provided by ADP, Dealer and/or Third Party Service Providers (as defined below) to the applicable Service Recipients (as defined below).

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements entered into herein and in the Separation Agreement, and intending to be legally bound hereby, ADP and Dealer agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Certain Defined Terms. For all purposes of this Agreement:

Action” means any claim, demand, action, cause of action, suit, countersuit, arbitration, litigation, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal or authority.

ADP” has the meaning assigned to such term in the Preamble hereto.

ADP Business” means all businesses and operations of the ADP Group, other than the Dealer Business.


ADP Group” means ADP and each Person that will be a direct or indirect Subsidiary of ADP immediately after the Distribution and each Person that is or becomes a member of the ADP Group after the Distribution, including any Person that is or was merged into ADP or any such direct or indirect Subsidiary, and each other Person that would have been included in the ADP Group in connection with the Restructuring but for the delayed transfers required by Section 2.3(b) of the Separation Agreement.

ADP PL Dealer Associates” has the meaning assigned to such term in Service Schedule [1].

Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person; provided, however, that for purposes of this Agreement, no member of either Group shall be deemed to be an Affiliate of any member of the other Group. As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

Agreement” has the meaning assigned to such term in the Preamble hereto, as such Agreement is amended, restated, supplemented or otherwise modified from time to time.

Ancillary Agreements” means the Data Center Services Agreement, the Employee Matters Agreement, the Intellectual Property Transfer Agreement, the Restructuring Documents, the Tax Matters Agreement and any other instruments, assignments, documents and agreements executed in connection with the implementation of the transactions contemplated by the Separation Agreement.

Business” means the Dealer Business and/or the ADP Business, as the context requires.

Business Day(s)” means any day other than a Saturday, Sunday or national holiday.

Data Center Services Agreement” means the Data Center Services Agreement, to be entered into between ADP, LLC and Dealer, substantially in the form attached to the Separation Agreement, with such changes as may be agreed to by such parties and ADP.

Dealer” means, prior to the LLC Conversion, CDK Global Holdings, LLC, a Delaware limited liability company whose sole member is ADP and, immediately after the LLC Conversion, CDK Global, Inc., a Delaware corporation whose sole stockholder is ADP.

Dealer Business” means the business and operations conducted by the Dealer Group from time to time, whether prior to, at or after the Effective Time, including, without duplication, (i) the Dealer Services Business (as defined in the

 

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Separation Agreement) conducted by ADP prior to the Restructuring (including with respect to any terminated, divested or discontinued business or operations of the Dealer Group), (ii) the Dealer Services Business conducted by ADP prior to any previous internal restructurings of ADP relating to the Dealer Services Business and (iii) the business and operations conducted by the Dealer Group, as more fully described in the Information Statement (as defined in the Separation Agreement).

Dealer Group” means Dealer and each Person that will be a direct or indirect Subsidiary of Dealer immediately prior to the Distribution (but after giving effect to the Restructuring) and each Person that is or becomes a member of the Dealer Group after the Distribution, including any Person that is or was merged into Dealer or any such direct or indirect Subsidiary, and each other Person that would have been included in the Dealer Group in connection with the Restructuring but for the delayed transfers required by Section 2.3(b) of the Separation Agreement.

Dispute Escalation Notice” has the meaning assigned to such term in Section 6.2.

Distribution” has the meaning assigned to such term in the Recitals hereto.

Distribution Date” means the date on which the Distribution shall be effected, such date to be determined by, or under the authority of, the Board of Directors of ADP in its sole and absolute discretion.

Effective Time” means the time at which the Distribution occurs on the Distribution Date.

Employee Matters Agreement” means the Employee Matters Agreement to be entered into between ADP and Dealer, substantially in the form attached to the Separation Agreement, with such changes as may be agreed to by the Parties.

Fees” has the meaning assigned to such term in Section 2.2(b).

Force Majeure” has the meaning assigned to such term in Section 6.16.

Governmental Authority” means any federal, state, local, foreign or international court, government, department, commission, board, bureau or agency, or any other regulatory, self-regulatory, administrative or governmental organization or authority, including the NASDAQ.

Group” means the ADP Group and/or the Dealer Group, as the context requires.

Indemnified Party” has the meaning assigned to such term in Section 5.1.

Indemnifying Party” has the meaning assigned to such term in Section 5.1.

 

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Information” means all information of either the ADP Group or the Dealer Group, as the context requires, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including non-public financial information, studies, reports, records, books, accountants’ work papers, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer data, communications by or to attorneys, memos and other materials prepared by attorneys and accountants or under their direction (including attorney work product), and other technical, financial, legal, employee or business information or data.

Intellectual Property Transfer Agreement” means the Intellectual Property Transfer Agreement to be entered into between ADP and Dealer, substantially in the form attached to the Separation Agreement, with such changes as may be agreed to by the Parties.

Law” means any applicable foreign, federal, national, state, provincial or local law (including common law), statute, ordinance, rule, regulation, code or other requirement enacted, promulgated, issued or entered into, or act taken, by a Governmental Authority.

LLC Conversion” has the meaning assigned to such term in the Separation Agreement.

Losses” has the meaning assigned to such term in Section 5.1.

NASDAQ” means the NASDAQ Global Select Market.

Parties” has the meaning assigned to such term in the Preamble hereto.

Person” means any natural person, corporation, general or limited partnership, limited liability company or partnership, joint stock company, joint venture, association, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any Governmental Authority.

Restructuring” has the meaning assigned to such term in the Separation Agreement.

Restructuring Documents” has the meaning assigned such term in the Separation Agreement.

Separation” has the meaning assigned to such term in the Recitals hereto.

Separation Agreement” has the meaning assigned to such term in the Recitals hereto.

 

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Service Provider” means (i) with respect to Service Schedules [    ] through [    ], ADP, and (ii) with respect to Service Schedules [    ] through [    ], Dealer.

Service Recipient” means (i) with respect to Service Schedules [    ] through [    ], any member of the Dealer Group or its permitted assignees under the Separation Agreement and all legal entities owned by Dealer immediately after the Distribution, and (ii) with respect to Service Schedules [    ] through [    ], any member of the ADP Group or its permitted assignees under the Separation Agreement and all legal entities owned by ADP immediately after the Distribution.

Service Schedule” has the meaning assigned to such term in Section 2.1(a).

Services” has the meaning assigned to such term in Section 2.1(a).

Subsidiary” means, with respect to any Person, any other Person of which such first Person (either alone or through or together with any other Subsidiary of such first Person) owns, directly or indirectly, a majority of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such other Person.

Tax Matters Agreement” means the Tax Matters Agreement to be entered into between ADP and Dealer, substantially in the form attached to the Separation Agreement, with such changes as may be agreed to by the Parties.

Term” has the meaning assigned to such term in Section 3.1(a).

Third Party Service Providers” shall mean third parties which are or will be engaged by a Service Provider or its Affiliates to assist in the delivery of its obligations under this Agreement.

Transition” means the transition of the Services from a Service Provider or a Third Party Service Provider to a Service Recipient or its own third party service providers.

Type 2 Services” has the meaning assigned to such term in Service Schedule [1].

Section 1.2 General Interpretive Principles. (i) Words in the singular shall include the plural and vice versa, and words of one gender shall include the other gender, in each case, as the context requires, (ii) the words “hereof,” “herein,” “hereunder,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement and not to any particular provision of this Agreement, and references to Article, Section, paragraph and Schedule are references to the Articles, Sections, paragraphs and Schedules to this Agreement unless otherwise specified, (iii) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified, (iv) any reference to any federal, state, local or non-U.S. statute or Law shall be deemed to also refer to all rules and regulations promulgated thereunder, in each case as amended from time to time, unless the context otherwise requires and (v) references to a Person also refer to its predecessors and permitted successors and assigns.

 

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ARTICLE II

SERVICES

Section 2.1 Services.

(a) The term “Services” shall mean and refer solely to those services listed on Schedules 1 through [__] hereto (each a “Service Schedule”), that are necessary (i) for the uninterrupted and continued operations of each Business after the Distribution Date in substantially the same manner as such Business was conducted and operated immediately prior to the Distribution Date or (ii) to aid Dealer and ADP in the Transition.

(b) Commencing on the Distribution Date and continuing throughout the Term, each Service Provider agrees to provide through its Group and/or Third Party Service Providers, subject to changes in applicable Law, the Services in accordance with the applicable Service Schedules, it being understood by the Parties that (except as otherwise set forth in the Service Schedules) the Services shall be provided only to the extent that services of similar kind were provided by such Service Provider or Third Party Service Providers to the applicable Business prior to the Distribution Date.

(c) To the extent that any of the assets required by a Party (as Service Provider hereunder) to provide any Services have become the property of a Service Recipient pursuant to the Separation, such Service Recipient hereby grants to the applicable Service Provider a limited, non-exclusive license to use such assets, for a period not to exceed the Term, for the purpose of providing such Services and aiding the Transition on the terms and subject to the conditions set forth in this Agreement.

(d) The Parties shall use their respective commercially reasonable efforts to complete the Transition (including in the case of Dealer, identifying and recruiting applicable new personnel) as soon as practicable and in no event later than the expiration of the Term and shall commit and provide sufficient and appropriate resources to timely complete the Transition. Each Service Provider shall also use its best efforts to assist the applicable Service Recipient in obtaining licenses and/or consents with or from any of such Service Provider’s current vendors or service providers (excluding landlords) who are providing services, products or licenses to such Service Recipient, or to such Service Provider for the benefit of such Service Recipient, prior to the Distribution Date; provided that in no event shall such assistance by such Service Provider require or be deemed to require such Service Provider to incur any additional costs or make any additional payments to any such vendors or service providers.

(e) Except with respect to a Service Provider’s applicable efforts obligations under Section 2.1(d) above, each Service Recipient acknowledges and

 

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agrees that such Service Provider has no obligation to actually obtain licenses or consents with any vendor or service provider in connection with the Services and that any failure by such Service Provider to actually obtain any such license or consent will not constitute a breach of this Agreement or the negligence or willful misconduct of such Service Provider; provided that failure to obtain any such license or consent shall not relieve such Service Provider of its obligations to provide the applicable Services set forth herein.

(f) Unless specifically set forth elsewhere herein to the contrary, this Agreement does not apply to the services to be provided by a Service Provider (or any of its Subsidiaries) to a Service Recipient (or any of its Subsidiaries) pursuant to any Ancillary Agreements.

(g) If, after the execution of this Agreement, the Parties reasonably determine that a service (i) that was provided by a Service Provider or a Third Party Service Provider to a Service Recipient prior to the Distribution Date and (ii) is reasonably necessary to the conduct of a Business after the Distribution Date, was unintentionally omitted from the Service Schedules, then such Service Provider shall provide such additional service to such Service Recipient (with such service becoming a Service for purposes of this Agreement) and a Service Schedule shall be created for such Service, it being agreed by the Parties that the charges for such additional Services shall be their actual cost to such Service Provider (unless the exception contained in Section 2.2(b), regarding countries other than the United States, applies); provided, however, that no Service Provider shall be required to provide any additional service that would prevent, or be reasonably likely to prevent, or be inconsistent with the qualification of the Separation as a tax-free transaction for U.S. federal, state and local income tax purposes.

(h) The Parties hereby agree that each Service Provider is under no obligation to enter into any engagements with new Third Party Service Providers in connection with this Agreement unless (i) such Service Provider is entering into such new engagements with respect to its own internal business or in its ordinary course of business and (ii) the applicable Service Recipient is not able to engage its own third party service providers with respect to the same subject matter within the applicable timing needs of such Service Recipient. Each Party shall use its commercially reasonable efforts to transition from the other Group and the Third Party Service Providers to itself or its own third party service providers.

Section 2.2 Terms of the Service Schedules; Fees & Costs.

(a) Each Service Provider shall provide, and shall cause any Third Party Service Providers to provide, the Services with at least the same level of service and degree of quality as provided by such Service Provider to the applicable Business prior to the Distribution Date; provided, however, that, in light of the supervision and management of the ADP PL Dealer Associates, ADP (as Service Provider) shall not be responsible for either the level of service or degree of quality of the Type 2 Services set forth on Service Schedule [1].

 

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(b) Each Service Schedule shall, in addition to the Services to be delivered by a Service Provider, set forth the fees to be paid by the Service Recipient for such Services (collectively, the “Fees”). If not set forth in any Service Schedule, the Parties agree that the Fees for each of the Services are intended to be equal to the Service Provider’s applicable allocated costs to the applicable Business prior to the Distribution, except to the extent that legal counsel with respect to any applicable country other than the United States (including India) has advised that a different fee for the Services is required or is more appropriate under the applicable Law of such other country.

(c) Not more than thirty (30) days following the end of each calendar month during the Term, each Service Provider (directly or through one or more of its Affiliates) shall issue a monthly invoice to the Service Recipient, setting forth the Fees (itemized by Service) and any applicable taxes payable by such Service Recipient for such calendar month.

(d) Except as otherwise provided herein or in the applicable Service Schedules, the aggregate Fees under the Service Schedules shall be paid in full by each Service Recipient within thirty (30) days following receipt of an invoice from the Service Provider, unless such Service Recipient in good faith disputes the amount of Fees contained in any such invoice, as provided in Section 2.2(e) below.

(e) If a Service Recipient, in good faith, disputes any Fees, it shall promptly submit to the Service Provider written notice of such dispute and may withhold from its payment of the relevant invoice only such disputed amounts (except for applicable taxes), subject to resolution in accordance with Section 6.2.

(f) Each Service Recipient understands that prior to the date of this Agreement, the Service Provider may have contracted with Affiliates or Third Party Service Providers to provide services in connection with all or any portion of the Services. Each Service Provider may subcontract with its present and future Affiliates or Third Party Service Providers to provide the Services (and may increase the scope of such engagement of Affiliates or Third Party Service Providers).

(g) Each Service Provider shall promptly correct any errors or omissions in any of the Services that it has provided to a Service Recipient hereunder.

Section 2.3 Services Management.

(a) The Parties have established transition teams to lead and coordinate the Transition.

(b) The Parties shall support the activities of their respective transition teams with the intent of enabling the completion of the Transition as soon as practicable.

 

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ARTICLE III

TERM AND TERMINATION

Section 3.1 Term and Service Terms.

(a) The term of this Agreement shall commence on the Distribution Date and end on the first (1st) anniversary thereof, unless earlier terminated in accordance with Section 3.2 below (the “Term”); provided, however, that notwithstanding the foregoing, for purposes of (i) the use of the Premises set forth on Table 2.3 of Service Schedule [2] and (ii) Part [II] of Service Schedule [5], the “Term” shall commence on the Distribution Date and end on the second (2nd) anniversary thereof, unless terminated in accordance with Section 3.2 below. If the Parties agree (or if required by applicable Law), the Service Schedules will set forth any shorter periods for which particular Services will be provided.

(b) During the Term, each of ADP and Dealer shall continue to use their respective commercially reasonable efforts to timely complete the Transition.

Section 3.2 Termination by Dealer or ADP. This Agreement or any Service provided hereunder in accordance with a Service Schedule, as applicable, may be terminated as follows:

(a) except as otherwise provided by Law, by either Dealer or ADP at any time upon written notice to the other Party, if (i) the other Party is adjudicated as bankrupt, (ii) any insolvency, bankruptcy or reorganization proceeding is commenced by the other Party under any insolvency, bankruptcy or reorganization act, (iii) any action is taken by others against the other Party under any insolvency, bankruptcy or reorganization act and such Party fails to have such proceeding stayed or vacated within ninety (90) days or (iv) if the other Party makes an assignment for the benefit of creditors, or a receiver is appointed for the other Party which is not discharged within thirty (30) days after the appointment of the receiver;

(b) by ADP at any time upon written notice to Dealer, if Dealer fails to pay the amount of any undisputed Fees payable by it in accordance with Section 2.2 hereof and such failure is not cured within fifteen (15) Business Days after written notice from ADP or its applicable Affiliate;

(c) by Dealer at any time upon written notice to ADP, if ADP fails to pay the amount of any undisputed Fees payable by it in accordance with Section 2.2 hereof and such failure is not cured within fifteen (15) Business Days after written notice from Dealer or its applicable Affiliate; or

(d) by ADP or Dealer at the end of any calendar month, with respect to any or all of the Services provided to it hereunder; provided, that ADP or Dealer shall give the other Party not less than fifteen (15) Business Days prior written notice specifying the date that such termination is to be effective (or such shorter notice as may be agreed upon by Dealer and ADP); provided further that ADP and Dealer will not delay termination of those particular Services for which the Transition has been completed.

 

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Section 3.3 Effect of Termination. In the event this Agreement is validly terminated as provided herein, each of the Parties shall be relieved of its duties and obligations arising hereunder after the date of such termination; provided, however, that (i) the provisions set forth in Articles IV, V and VI hereof shall survive any termination of this Agreement and (ii) such termination in and of itself shall not relieve a Party of liability for a breach prior to the date of such termination. For the avoidance of doubt, in the event of any termination of one or more Services, the Fees applicable to such Services, in accordance with Section 2.2 above, shall no longer be charged or due after the effective date of such termination and in the event of a material reduction by a Service Recipient of the amount of the Services it elects to continue to receive, the Fees applicable to such Services shall be appropriately reduced thereafter if costs to the Service Provider are correspondingly reduced as a result of such reduction.

ARTICLE IV

CONFIDENTIALITY

Section 4.1 General. Each Party acknowledges (i) that such Party has in its possession and, in connection with this Agreement, the Separation Agreement and the Ancillary Agreements such Party will receive, Information of the other Party that is not available to the general public, and (ii) that such Information may constitute, contain or include material non-public Information of the other Party. Subject to Section 4.3 below, as of the Distribution Date, ADP, on behalf of itself and each of its Affiliates, and Dealer, on behalf of itself and each of its Affiliates, agrees to hold, and to cause its and their respective directors, officers, employees, agents, third party contractors, vendors, accountants, counsel and other advisors and representatives to hold, in strict confidence, with at least the same degree of care that such Party applies to its own confidential and proprietary Information pursuant to its applicable policies and procedures in effect as of the Distribution Date, all Information concerning the other Party (or its Business) and such other Party’s Affiliates (or their respective Business) that is either in its possession (including Information in its possession prior to the Distribution Date) or furnished by the other Party or the other Party’s Affiliates or their respective directors, officers, employees, agents, third party contractors, vendors, accountants, counsel and other advisors and representatives at any time pursuant to this Agreement, the Separation Agreement and the Ancillary Agreements, and will not use such Information other than for such purposes as may be expressly permitted hereunder, except, in each case, to the extent that such Information:

(a) is or becomes available to the general public, other than as a result of a disclosure by such Party or its Affiliates or any of their respective directors, officers, employees, agents, third party contractors, vendors, accountants, counsel and other advisors and representatives in breach of this Agreement;

 

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(b) was available to such Party or its Affiliates, or becomes available to such Party or its Affiliates, on a non-confidential basis from a source other than the other Party hereto, provided, that, the source of such Information was not bound by a confidentiality obligation with respect to such Information, or otherwise prohibited from transmitting the Information to such Party or its Affiliates by a contractual, legal or fiduciary obligation; or

(c) is independently generated by such Party without use of or reference to any proprietary or confidential Information of the other Party.

Section 4.2 No Disclosure, Compliance with Law, Return or Destruction. Each Party agrees not to release or disclose, or permit to be released or disclosed, any Information with respect to the other Party to any other Person, except its and its Affiliates’ respective directors, officers, employees, agents, third party contractors, vendors, accountants, counsel, lenders and other advisors and representatives who need to know such Information in connection with this Agreement, the Separation Agreement or the Ancillary Agreements or for valid business reasons relating thereto, and except in compliance with Section 4.3 below. Each Party shall advise its and its Affiliates’ respective directors, officers, employees, agents, third party contractors, vendors, accountants, counsel, lenders and other advisors and representatives who have been provided with such Information of such Party’s confidentiality obligations hereunder and that such Information may constitute, contain or include material non-public Information of the other Party. Each Party shall, and shall cause its and its Affiliates’ respective directors, officers, employees, agents, third party contractors, vendors, accountants, counsel, lenders and other advisors and representatives who have been provided with such Information to use such Information only in accordance with (i) the terms of this Agreement, the Separation Agreement or the Ancillary Agreements and (ii) applicable Law (including federal and state securities Laws). Each Party shall promptly, after receiving a written request of the other Party, return to the other Party all such Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or certify to the other Party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon), as directed by the other Party; provided, however, that in no event shall either Party be required to destroy any hardware that includes Information if such Information is only accessible to highly skilled computer experts and cannot otherwise be deleted or destroyed without undue cost or effort (provided that such Information will remain subject to the confidentiality protection provisions herein).

Section 4.3 Protective Arrangements. Notwithstanding anything herein to the contrary, in the event that either Party or any of its directors, officers, employees, agents, third party contractors, vendors, accountants, counsel, lenders or other advisors or representatives either determines on the advice of its counsel that it is required to disclose any Information pursuant to applicable Law or the rules or regulations of a Governmental Authority or receives any demand under lawful process or from any Governmental Authority to disclose or provide Information of the other Party that is subject to the confidentiality provisions hereof, such Party shall, if possible, notify the other Party prior to disclosing or providing such Information and shall cooperate at the expense of the

 

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other Party in seeking any reasonable protective arrangements requested by such other Party. In the event that a protective arrangement is not obtained, the Party that received such request (i) may thereafter disclose or provide such Information to the extent required by such Law (as so advised by counsel) or by lawful process or such Governmental Authority, without liability therefor and (ii) shall exercise its commercially reasonable efforts to have confidential treatment accorded any such Information so furnished.

Section 4.4 Survival. The obligations of confidentiality in this Article IV shall remain in effect during the Term and thereafter.

Section 4.5 Ownership of Data. To the extent related to a particular Business, the related Service Recipient shall own all right, title and interest in and to all data generated for such Service Recipient by the Service Provider, its Affiliates and any Third Party Service Providers in providing the applicable Services.

ARTICLE V

INDEMNIFICATION

Section 5.1 Indemnification for Third Party Claims.

(a) From and after the Distribution Date, ADP, on the one hand, and Dealer, on the other hand (as applicable, an “Indemnifying Party”), shall indemnify the other Party, the other Party’s Affiliates and their respective officers, directors and employees (each, an “Indemnified Party”), against and hold them harmless from any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties (including reasonable fees for outside counsel, accountants and other outside consultants) (collectively, “Losses”) suffered or incurred by the Indemnified Party in connection with a third party claim against such Indemnified Party, which Losses result from (1) a breach of this Agreement by the Indemnifying Party, or (2) the negligence or willful misconduct of the Indemnifying Party in its performance of its obligations hereunder; provided, however, that the Indemnifying Party shall not be deemed to have breached the Agreement, or been negligent or to have engaged in willful misconduct, to the extent that Losses arise as a result of information provided by or on behalf of the Indemnified Party to the Indemnifying Party or any actions taken or omitted to be taken by the Indemnifying Party upon the written direction or instruction of the Indemnified Party. For avoidance of doubt, this Article V applies solely to the specific matters and activities covered by this Agreement (and not to matters specifically covered by the Separation Agreement or the Ancillary Agreements).

(b) The amount of any Losses payable under Section 5.1(a) by the Indemnifying Party shall be net of any amounts actually recovered by the Indemnified Party from any other Person alleged to be responsible therefor. If the Indemnified Party receives any amounts from any other Person alleged to be responsible for any Losses subsequent to an indemnification payment by the Indemnifying Party, then the Indemnified Party shall promptly reimburse the Indemnifying Party for the amount actually paid by the Indemnifying Party to the Indemnified Party in respect of such indemnification payment up to the amount received by the Indemnified Party, net of any expenses incurred by the Indemnified Party in collecting such amount.

 

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Section 5.2 Procedures for Indemnification of Third Party Claims.

(a) If an Indemnified Party shall receive notice or otherwise learn of the assertion by any Person who is not a member of the ADP Group or the Dealer Group of any claim, or of the commencement by any such Person of any Action, with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnified Party pursuant to Section 5.1 of this Agreement (collectively, a “Third Party Claim”), such Indemnified Party shall give such Indemnifying Party prompt written notice thereof and, in any event, within ten (10) days after such Indemnified Party received notice of such Third Party Claim. Any such notice shall describe the Third Party Claim in reasonable detail, including, if known, the amount of the liability for which indemnification may be available. Notwithstanding the foregoing, the failure of any Indemnified Party or other Person to give notice as provided in this Section 5.2(a) shall not relieve the related Indemnifying Party of its obligations under this Article V, except to the extent that such Indemnifying Party is actually prejudiced by such failure to give notice.

(b) An Indemnifying Party may elect (but is not required) to assume the defense of and defend, at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel, any Third Party Claim. Within thirty (30) days after the receipt of notice from an Indemnified Party in accordance with Section 5.2(a) (or sooner, if the nature of such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnified Party of its election whether the Indemnifying Party will assume control of the defense of such Third Party Claim, which election shall specify any reservations or exceptions. If, in such notice, the Indemnifying Party elects to assume the defense of a Third Party Claim, the Indemnified Party shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, but the fees and expenses of such counsel shall be the expense solely of such Indemnified Party.

(c) If, in such notice, an Indemnifying Party elects not to assume responsibility for defending a Third Party Claim, or fails to notify an Indemnified Party of its election as provided in Section 5.2(b), such Indemnified Party may defend such Third Party Claim at the cost and expense of the Indemnifying Party (subject to the terms and conditions of this Agreement).

(d) The Indemnifying Party shall not have the right to compromise or settle a Third Party Claim the defense of which it shall have assumed pursuant to Section 5.2(b) except with the consent of the Indemnified Party (such consent not to be unreasonably withheld, delayed or conditioned). Any such settlement or compromise made or caused to be made of a Third Party Claim in accordance with this Article V shall be binding on the Indemnified Party in the same manner as if a final judgment or decree had been entered by a court of competent jurisdiction in the amount of such settlement or compromise. For the avoidance of doubt, the Indemnified Party’s

 

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failure to consent to any such settlement or compromise shall be deemed unreasonable if such settlement or compromise (1) provides for an unconditional release of the Indemnified Party from liability with respect to such Third Party Claim and (2) does not require the Indemnified Party to make any payment that is not fully indemnified under this Agreement or to be subject to any non-monetary remedy. If the Indemnified Party unreasonably withholds a consent required by this Section 5.2(d) to the terms of a compromise or settlement of a Third Party Claim proposed to the Indemnified Party by the Indemnifying Party, the Indemnifying Party’s obligation to indemnify the Indemnified Party for such Third Party Claim (if applicable) shall not exceed the total amount that had been proposed in such compromise or settlement offer plus the amount of all expenses incurred by the Indemnified Party with respect to such Third Party Claim through the date on which such consent was requested.

(e) In the event of payment by or on behalf of any Indemnifying Party to any Indemnified Party in connection with any Third Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnified Party as to any events or circumstances in respect of which such Indemnified Party may have any right, defense or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other Person. Such Indemnified Party shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

(f) All amounts required to be paid pursuant to this Article V shall be paid promptly in immediately available funds by wire transfer to a bank account designated by the Indemnified Party.

Section 5.3 Limitation on Damages. IN NO EVENT SHALL EITHER PARTY AND/OR ITS AFFILIATES OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE REGARDLESS OF THE FORM OF ACTION OR LEGAL THEORY FOR (A) INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND RELATED TO THE PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT, INCLUDING LOST PROFITS, LOSS OF DATA OR BUSINESS INTERRUPTION, (B) IN THE CASE WHERE ADP IS THE SERVICE PROVIDER, LOSSES RELATED TO THIS AGREEMENT IN EXCESS OF AN AGGREGATE AMOUNT EQUAL TO $[            ] AND (C) IN THE CASE WHERE DEALER IS THE SERVICE PROVIDER, LOSSES RELATED TO THIS AGREEMENT IN EXCESS OF AN AGGREGATE AMOUNT EQUAL TO $[            ].

Section 5.4 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES, AND EACH PARTY EXPRESSLY DISCLAIMS, ANY AND ALL REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WRITTEN OR ORAL, WITH RESPECT TO THE SERVICES TO BE PROVIDED UNDER THIS AGREEMENT, INCLUDING WARRANTIES WITH RESPECT TO MERCHANTABILITY, OR SUITABILITY OR FITNESS FOR A

 

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PARTICULAR PURPOSE, AND ANY WARRANTIES ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE OR TRADE USAGE. NOTHING IN THIS AGREEMENT IS INTENDED TO LIMIT ANY RIGHTS OR REMEDIES OF EITHER PARTY UNDER THE SEPARATION AGREEMENT OR ANY ANCILLARY AGREEMENT.

ARTICLE VI

MISCELLANEOUS

Section 6.1 Cooperation. Each Party shall, and shall cause its Affiliates to, use good faith efforts to cooperate with the other Party in all matters relating to the provision and receipt of Services, including providing information and documentation sufficient for the other Party to provide the Services and making available, as reasonably requested by the other Party, timely decisions, approvals and acceptances in order that the other Party and its Affiliates may perform their respective obligations under this Agreement in a timely manner.

Section 6.2 Negotiation. In the event that any dispute arises between the Parties that cannot be resolved, either Party shall have the right to refer the dispute for resolution to the chief financial officers of the Parties by delivering to the other Party a written notice of such referral (a “Dispute Escalation Notice”). Following receipt of a Dispute Escalation Notice, the chief financial officers of the Parties shall negotiate in good faith to resolve such dispute. In the event that the chief financial officers of the Parties are unable to resolve such dispute within fifteen (15) Business Days after receipt of the Dispute Escalation Notice, either Party shall have the right to refer the dispute to the chief executive officers of the Parties, who shall negotiate in good faith to resolve such dispute. In the event that the chief executive officers of the Parties are unable to resolve such dispute within thirty (30) Business Days after the date of the Dispute Escalation Notice, either Party shall have the right to commence litigation in accordance with Section 6.3. The Parties agree that all discussions, negotiations and other Information exchanged between the Parties during the foregoing escalation proceedings shall be without prejudice to the legal position of a Party in any subsequent Action.

Section 6.3 Consent to Jurisdiction; Forum; Service of Process; Waiver of Jury Trial.

(a) Subject to the prior exhaustion of the procedures set forth in Section 6.2, each of the Parties agrees that, notwithstanding anything herein, all Actions arising out of or in connection with this Agreement, or for recognition and enforcement of any judgment arising out of or in connection with this Agreement, shall be tried and determined exclusively in the state or federal courts in the State of New York, County of New York, and each of the Parties hereby irrevocably submits with regard to any such Action for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of the Parties hereby expressly waives any right it may have to assert, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any such Action (i) any claim that

 

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it is not subject to personal jurisdiction in the aforesaid courts for any reason; (ii) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts; and (iii) any claim that (A) any of the aforesaid courts is an inconvenient or inappropriate forum for such Action, (B) venue is not proper in any of the aforesaid courts and (C) this Agreement or the subject matter hereof may not be enforced in or by any of the aforesaid courts. Each of the Parties agrees that mailing of process or other papers in connection with any such Action in the manner provided in Section 6.4 or any other manner as may be permitted by Law shall be valid and sufficient service thereof.

(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE WAIVER IN SECTION 6.3(b), (II) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) SUCH PARTY MAKES SUCH WAIVER VOLUNTARILY AND (IV) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS, AGREEMENTS AND CERTIFICATIONS HEREIN.

(c) The covenant of each Service Provider to provide the applicable Services is independent of each Service Recipient’s covenants under this Agreement and the Separation Agreement, and each Service Provider, during any dispute or otherwise, shall continue to provide the Services to the applicable Service Recipient so long as such Service Recipient is not in material and ongoing breach of its obligations under Section 4.1 hereof for which breach such Service Recipient, after becoming aware of or receiving notice of such breach, has not promptly commenced and continued commercially reasonable efforts to remedy.

Section 6.4 Notices. All notices, requests, claims, demands and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) to the Parties at the following addresses or facsimile numbers:

(a) if to Dealer or any member of the Dealer Group, to:

CDK Global, Inc. 1

950 Hassell Road Suite 1000

Hoffman Estates, IL 60169-6308

Attention: General Counsel

Fax: (847) 781-9873

 

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(b) if to ADP or any member of the ADP Group, to:

Automatic Data Processing, Inc.

One ADP Boulevard

Roseland, NJ 07068-1728

Attention: General Counsel

Facsimile: (973) 974-3399

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this section, be deemed given upon receipt and (iii) if delivered by mail in the manner described above to the address as provided in this section, be deemed given upon receipt. Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party.

Section 6.5 Entire Agreement. This Agreement, together with the Service Schedules hereto, constitutes the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.

Section 6.6 Waivers and Amendments. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by Dealer and ADP or, in the case of a waiver, by the Party waiving compliance. No delay on the part of either Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of either Party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege.

Section 6.7 Governing Law. This Agreement and any dispute arising out of, in connection with or relating to this Agreement shall be governed by and construed in accordance with the Laws of the State of New York, without giving effect to the conflicts of laws principles thereof; provided, however, that the parties’ remedies with respect to the Services contemplated by Service Schedule [    ] and relating to matters mandatorily governed by the laws of India, shall be governed by the laws of India.

Section 6.8 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. This Agreement is not assignable by either Party without the prior written consent of the other Party; provided, that either Dealer or ADP, as the case may be, may assign any of its rights under this Agreement to any of its respective Affiliates (it being understood that no such assignment shall effect a novation or otherwise relieve the assigning Party of any of its obligations hereunder nor in any way increase the obligations of the non-assigning Party under this Agreement); provided, further, that either Party may assign its rights and obligations under this Agreement in connection with a sale of all or substantially all of its business, whether by sale of assets, merger or otherwise.

 

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Section 6.9 Monetary Amounts. Unless otherwise expressly provided, monetary amounts are in U.S. dollars.

Section 6.10 Articles and Sections. The Article and Section headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

Section 6.11 Interpretation. The Parties acknowledge and agree that (i) each Party reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision, (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement and (iii) the terms and provisions of this Agreement shall be construed fairly as to each of the Parties, regardless of which Party was generally responsible for the preparation of this Agreement.

Section 6.12 Severability of Provisions. If any provision or any portion of any provision of this Agreement shall be held invalid or unenforceable, the remaining portion of such provision and the remaining provisions of this Agreement shall not be affected thereby. If the application of any provision or any portion of any provision of this Agreement to any Person or circumstance shall be held invalid or unenforceable, the application of such provision or portion of such provision to Persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby.

Section 6.13 Counterparts. This Agreement may be executed by the Parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts together shall constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, of the Parties.

Section 6.14 No Personal Liability. This Agreement (and each agreement, certificate and instrument delivered pursuant hereto) shall not create or be deemed to create or permit any personal liability or obligation on the part of any officer, director, employee, agent, representative or investor of either Party.

Section 6.15 No Third Party Beneficiaries. Except as otherwise provided in Article V, no provision of this Agreement is intended to, or shall, confer any third party beneficiary or other rights or remedies upon any Person other than the Parties.

Section 6.16 Force Majeure. Neither Party shall be liable for any expense, loss or damage whatsoever arising out of any delay or failure in the performance of its obligations pursuant to this Agreement to the extent such delay or failure results from events beyond the reasonable control of that Party (“Force Majeure”), including acts of God, acts or regulations of any Governmental Authority, war, riots, insurrection, terrorism or other hostilities, accident, fire, flood, strikes, lockouts, labor disputes,

 

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pandemics or shortages of fuel; provided, that: (a) each Service Provider gives the applicable Service Recipient, as soon as reasonably practicable, written notice describing the occurrence, including, to the extent reasonably possible, a non-binding estimation of its expected duration and probable impact on the performance of its obligations hereunder, (b) the suspension of performance is of a scope and duration reasonably related to the Force Majeure and (c) each Service Provider uses commercially reasonable efforts to mitigate the effects of the Force Majeure. Neither Party shall be entitled to terminate this Agreement due to a Force Majeure or any failure resulting from any such event.

Section 6.17 Independent Contractors. Except as otherwise agreed in writing by the Parties, in the performance of the Services to be rendered hereunder, each Service Provider and its Affiliates shall at all times act as independent contractors, and none is in any respect an agent, attorney, employee, representative, joint venturer or fiduciary of a Service Recipient, and no Service Recipient shall declare or represent to any third party that such Service Provider or any of its Affiliates is acting in any respect as agent, attorney, employee representative, joint venturer or fiduciary of such Service Recipient. Neither ADP or its Affiliates, on the one hand, nor Dealer or its Affiliates, on the other, shall have any power or authority to negotiate or conclude any agreement, or to make any representation or to give any understanding on behalf of the other in any way whatsoever.

Section 6.18 Employees. Individuals employed by a Service Provider or its Affiliates who provide Services pursuant to this Agreement shall in no respect be considered employees of the applicable Service Recipient. Each Service Provider or one of its Affiliates shall act as the sole employer of the individuals it employs and shall not delegate any employment functions to the Service Recipient.

Section 6.19 No Set-Off. Each Party’s obligation to pay fees or make any other required payments under this Agreement shall not be subject to any right of offset, set-off, deduction or counterclaim, however arising, including, without limitation, pursuant to any claims under the Separation Agreement or any of the other Ancillary Agreements.

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IN WITNESS WHEREOF, the Parties have executed this Transition Services Agreement as of the date first above written.

 

AUTOMATIC DATA PROCESSING, INC.
By:    
  Name:
  Title:

 

CDK GLOBAL HOLDINGS, LLC
By:    
  Name:
  Title:
EX-10.3

Exhibit 10.3

INTELLECTUAL PROPERTY TRANSFER AGREEMENT

INTELLECTUAL PROPERTY TRANSFER AGREEMENT (the “Agreement”), dated as of [], 2014 between Automatic Data Processing, Inc., a Delaware corporation (“ADP”), and CDK Global Holdings, LLC, a Delaware [limited liability company] (each, a “Party” and collectively, the “Parties”).

WHEREAS, ADP and Dealer (as defined below) desire to establish the rights each enjoys in certain Intellectual Property;

WHEREAS, ADP desires to assign and transfer to Dealer all of its right, title and interest in and to only those certain items of Intellectual Property owned by ADP specifically identified in the Copyright Assignment, the Internet Asset Assignment, Patent Assignment and the Trademark and Service Mark Assignment, effective as of the Effective Time (as defined below); and

WHEREAS, the Parties desire to enter into this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:

 

1. DEFINITIONS

1.1 Definitions. As used in the Agreement, the following terms shall have the meanings set forth below:

Action” means any claim, demand, action, cause of action, suit, countersuit, arbitration, litigation, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal or authority.

ADP Business” means all businesses and operations of the ADP Group, other than the Dealer Business.

ADP Group” means ADP and each Person that will be a direct or indirect Subsidiary of ADP immediately after the Distribution and each Person that is or becomes a member of the ADP Group after the Distribution, including any Person that is or was merged into ADP or any such direct or indirect Subsidiary, and each other Person that would have been included in the ADP Group in connection with the Restructuring but for the delayed transfers required by Section 2.3(b) of the Separation Agreement.

ADP Patents” means (i) all Patents owned by any member or members of the ADP Group as of the Effective Time after the execution of the Separation Agreement, the Assignment Agreements and this Agreement, and (ii) all Patents invented or acquired by any member of the ADP Group during the period starting on the Effective Time and ending on the second anniversary of the Effective Time.


Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person; provided, however, that for purposes of this Agreement, no member of either Group shall be deemed to be an Affiliate of any member of the other Group. As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

Assignment Agreements” means the Copyright Assignment, the Internet Asset Assignment, the Patent Assignment and the Trademark and Service Mark Assignment.

Business Day(s)” means any day other than a Saturday, Sunday or national holiday.

Copyright Assignment” means that certain Copyright Assignment contemporaneously executed by ADP and Dealer in the form attached hereto as Exhibit B.

Dealer” means, prior to the LLC Conversion, CDK Global Holdings, LLC, a Delaware limited liability company whose sole member is ADP and, immediately after the LLC Conversion, CDK Global, Inc., a Delaware corporation whose sole stockholder is ADP.

Dealer Business” means the business and operations conducted by the Dealer Group from time to time, whether prior to, at or after the Effective Time, including, without duplication, (i) the Dealer Services Business (as defined in the Separation Agreement) conducted by ADP prior to the Restructuring (including with respect to any terminated, divested or discontinued business or operations of the Dealer Group), (ii) the Dealer Services Business conducted by ADP prior to any previous internal restructurings of ADP relating to the Dealer Services Business and (iii) the business and operations conducted by the Dealer Group, as more fully described in the Information Statement (as defined in the Separation Agreement).

Dealer Group” means Dealer and each Person that will be a direct or indirect Subsidiary of Dealer immediately prior to the Distribution (but after giving effect to the Restructuring) and each Person that is or becomes a member of the Dealer Group after the Distribution, including any Person that is or was merged into Dealer or any such direct or indirect Subsidiary, and each other Person that would have been included in the Dealer Group in connection with the Restructuring but for the delayed transfers required by Section 2.3(b) of the Separation Agreement.

Dealer Patents” means (i) all Patents owned by any member or members of the Dealer Group as of the Effective Time after the execution of the Separation Agreement, the Assignment Agreements and this Agreement, and (ii) all Patents invented or acquired by any member of the Dealer Group during the period starting on the Effective Time and ending on the second anniversary of the Effective Time.

 

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Distribution” means the distribution on a pro rata basis of a dividend of the Dealer common stock to ADP’s stockholders as contemplated by the Separation Agreement.

Distribution Date” means the date on which the Distribution shall be effected, such date to be determined by, or under the authority of, the Board of Directors of ADP in its sole and absolute discretion.

Effective Time” means the time at which the Distribution occurs on the Distribution Date.

Governmental Authority” means any federal, state, local, foreign or international court, government, department, commission, board, bureau or agency, or any other regulatory, self-regulatory, administrative or governmental organization or authority, including the NASDAQ Global Select Market.

Group” means the ADP Group and/or the Dealer Group, as the context requires.

Intellectual Property” means all intellectual property and other similar proprietary rights in any jurisdiction, whether owned or held for use under license, whether registered or unregistered, including such rights in and to: (i) trademarks, trade dress, service marks, certification marks, logos, and trade names, and the goodwill associated with the foregoing (collectively, “Trademarks”); (ii) patents and patent applications, and any and all divisions, continuations, continuations-in-part, reissues, continuing patent applications, reexaminations, and extensions thereof, any counterparts claiming priority therefrom, utility models, patents of importation/confirmation, certificates of invention, certificates of registration, design registrations or patents and like rights (collectively, “Patents”); inventions, invention disclosures, discoveries and improvements, whether or not patentable; (iii) copyrights, writings and other works of authorship (“Copyrights”); (iv) trade secrets (including, those trade secrets defined in the Uniform Trade Secrets Act and under corresponding foreign statutory Law and common law), information, business, technical and know-how information, business processes, non-public information, proprietary information and confidential information and rights to limit the use or disclosure thereof by any Person (collectively, “Trade Secrets”); (v) software, including data files, source code, object code, application programming interfaces, databases and other software-related specifications and documentation (collectively, “Software”); (vi) social media identifications, domain names, uniform resource locators, and Internet addresses; (vii) moral rights; (viii) privacy and publicity rights; (ix) any and all technical information, Software, specifications, drawings, records, documentation, works of authorship or other creative works, ideas, knowledge, invention disclosures or other data, not including works subject to Copyright, Patent or Trademark protection; (x) advertising and promotional materials, whether or not copyrightable; and (xi) claims, causes of action and defenses relating to the enforcement of any of the foregoing; in each case, including any registrations of, applications to register, and renewals and extensions of, any of the foregoing with or by any Governmental Authority in any jurisdiction.

 

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Internet Asset Assignment” means that certain Internet Asset Assignment contemporaneously executed by ADP and Dealer in the form attached hereto as Exhibit C.

Law” means any applicable foreign, federal, national, state, provincial or local law (including common law), statute, ordinance, rule, regulation, code or other requirement enacted, promulgated, issued or entered into, or act taken, by a Governmental Authority.

LLC Conversion” has the meaning assigned to such term in the Separation Agreement.

Patent Assignment” means that certain Patent Assignment contemporaneously executed by ADP and Dealer in the form attached hereto as Exhibit D.

Person” means any natural person, corporation, general or limited partnership, limited liability company or partnership, joint stock company, joint venture, association, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any Governmental Authority.

Restructuring” has the meaning assigned to such term in the Separation Agreement.

Separation” means the separation of the Dealer Business and the ADP Business into two independent companies as described in the Separation Agreement.

Separation Agreement” means the Separation and Distribution Agreement, dated as of [            ], 2014, by and among ADP and Dealer (as the same may be amended, supplemented, restated and/or modified from time to time).

Subsidiary” means, with respect to any Person, any other Person of which such first Person (either alone or through or together with any other Subsidiary of such first Person) owns, directly or indirectly, a majority of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such other Person.

Trademark and Service Mark Assignment” means that certain Trademark and Service Mark Assignment contemporaneously executed by ADP and Dealer in the form attached hereto as Exhibit E.

1.2 General Interpretive Principles. (a) Words in the singular shall include the plural and vice versa, and words of one gender shall include the other gender, in each case, as the context requires, (b) the words “hereof,” “herein,” “hereunder,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement and not to any particular provision of this Agreement, and references to Article, Section, paragraph, exhibit and schedule are references to the Articles, Sections, paragraphs, exhibits and schedules to this Agreement unless otherwise specified, (c) the word “including” and words of similar import when used in this Agreement shall mean

 

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“including, without limitation,” unless otherwise specified, (d) any reference to any federal, state, local or non-U.S. statute or Law shall be deemed to also refer to all rules and regulations promulgated thereunder, unless the context otherwise requires, and (e) references to a Person also refer to its predecessors and permitted successors and assigns.

 

2. DISTRIBUTION OF INTELLECTUAL PROPERTY

2.1 Ownership of Dealer Intellectual Property. The Parties acknowledge and agree that pursuant to the Separation Agreement, as of the Effective Time, Dealer or one or more members of the Dealer Group shall remain and be the sole owner of, and shall have exclusive right, title and interest in and to, the Intellectual Property owned by any member of the Dealer Group as of the Effective Time, including the Intellectual Property set forth in Exhibit A.

2.2 Assignment Agreements. By the Copyright Assignment, Internet Asset Assignment, Patent Assignment and the Trademark and Service Mark Assignment entered into concurrently with this Agreement, ADP shall, or shall cause the applicable members of the ADP Group to, assign, transfer and convey to Dealer or a designated member of the Dealer Group any and all right, title and interest owned by ADP and each of its Affiliates and Subsidiaries in and to only those certain items of Intellectual Property specifically identified therein.

2.3 Further Assurances. Each Party covenants to execute upon request any further documents reasonably necessary to effect the express terms and conditions of this Agreement, including such documents as are reasonably necessary to vest title in Intellectual Property rights as provided in this Agreement. All expenses incurred in connection with such actions shall be paid in accordance with Section 8.2.

2.4 No Rights in ADP Group Intellectual Property. For the avoidance of doubt, unless otherwise expressly provided in this Agreement, the Separation Agreement, the Copyright Assignment, Internet Asset Assignment, Patent Assignment or the Trademark and Service Mark Assignment, ADP and its Subsidiaries expressly reserve all other rights with respect to Intellectual Property not expressly granted thereunder.

 

3. IPR FUTURES AND ISSUES OF OWNERSHIP

3.1 Ownership Unaffected by this Agreement. All Intellectual Property created, developed or made, or, other than by operation of this Agreement, otherwise acquired or controlled, by a member of a Group after the Effective Time (“IPR Futures”) shall be owned in accordance with applicable law or agreement and such ownership is not covered or in any way provided by this Agreement, the Separation Agreement or any Assignment Agreement.

3.2 No Rights or Licenses Granted. Subject to Sections 4.2 and 4.3 below, other than as may be expressly provided in the Copyright Assignment, Internet Asset Assignment, the Patent Assignment or the Trademark and Service Mark Assignment, no rights or licenses under any IPR Futures are granted pursuant to this Agreement, the Separation Agreement or any agreement ancillary thereto.

 

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4. IP CLAIMS

4.1 Intellectual Property Rights. Notwithstanding any provision in this Agreement, the Separation Agreement or any Assignment Agreement, in no event shall any claims, disputes or controversies between the Parties which potentially concern the validity, enforceability, infringement or misappropriation of any intellectual property rights, including any rights protectable under Intellectual Property law anywhere throughout the world such as Patent, Copyright, trade secret and Trademark law, be subject to resolution by arbitration.

4.2 ADP Covenant. ADP, on behalf of itself and the ADP Group, agrees and covenants that it shall not bring or threaten to bring any Action or other form of proceeding in any jurisdiction, or commence any border detention activity (including any action before the United States International Trade Commission, in a court of law, before an administrative body or any other governmental authority) against Dealer or any member of the Dealer Group (including their respective employees, consultants, contractors, representatives and bona fide end users) alleging that any Dealer Group product, service or technology, when operated, provided or used in a manner substantially similar to the manner operated, provided, or used as of the Effective Time, infringes any of the ADP Patents.

4.3 Dealer Covenant. Dealer, on behalf of itself and the Dealer Group, agrees and covenants that it shall not bring or threaten to bring any Action or other form of proceeding in any jurisdiction, or commence any border detention activity (including any action before the United States International Trade Commission, in a court of law, before an administrative body or any other governmental authority) against ADP or any member of the ADP Group (including their respective employees, consultants, contractors, representatives and bona fide end users) alleging that any ADP Group product, service or technology, when operated, provided or used in a manner substantially similar to the manner operated, provided, or used as of the Effective Time, infringes any of the Dealer Patents.

4.4 No Enforcement Against Third Party. Notwithstanding any provision of this Agreement or the Assignment Agreements, in no event shall any member of any Group be required to enforce or otherwise assert against any Person any Intellectual Property rights.

 

5. FURTHER DUE DILIGENCE

ADP and Dealer acknowledge that following the execution of this Agreement, ADP and Dealer will be conducting further due diligence into the Intellectual Property owned by the Groups. ADP and Dealer agree to work in good faith to ensure that the Intellectual Property covered by this Agreement and the Assignment Agreements has been properly allocated and assigned to each Group according to principles set forth in this Agreement. To the extent that any assignment, transfer and conveyance of Intellectual Property pursuant to Section 2.2 is not consummated as of the Effective Time, or any assignment, transfer or conveyance of Intellectual Property is improperly consummated,

 

6


the Parties shall, and shall cause the members of their respective Groups to, use commercially reasonable efforts and cooperate to effect or to correct such assignment, transfer or conveyance as promptly following the Effective Time as is practicable.

 

6. NO REPRESENTATIONS OR WARRANTIES

ALL INTELLECTUAL PROPERTY PROVIDED AND/OR ASSIGNED UNDER THIS AGREEMENT IS FURNISHED “AS IS,” WITHOUT ANY SUPPORT, ASSISTANCE, MAINTENANCE OR WARRANTIES OF ANY KIND, WHATSOEVER.

EACH GROUP ASSUMES TOTAL RESPONSIBILITY AND RISK FOR ITS USE OF ANY INTELLECTUAL PROPERTY COVERED BY THIS AGREEMENT. NEITHER GROUP MAKES, AND EACH GROUP EXPRESSLY DISCLAIMS, ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WARRANTIES OF TITLE OR NON-INFRINGEMENT, OR ANY WARRANTY THAT SUCH INTELLECTUAL PROPERTY IS “ERROR FREE.”

 

7. TERMINATION

7.1 Term and Termination. This Agreement may be terminated by ADP in its sole discretion at any time prior to the consummation of the Distribution. This Agreement and the rights and licenses granted and retained hereunder (including Sections 4.2 and 4.3) will become effective on the Effective Time, and will continue perpetually thereafter unless otherwise expressly provided herein.

7.2 Effect of Termination. In the event of any termination of this Agreement prior to consummation of the Distribution, neither Party (nor any of its directors or officers) shall have any liability or further obligation to the other Party.

 

8. MISCELLANEOUS

8.1 Complete Agreement; Representations. The Separation Agreement, together with the exhibits, schedules and the ancillary agreements thereto, including this Agreement and Assignment Agreements hereto, constitutes the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.

8.1.2 ADP represents on behalf of itself and each other member of the ADP Group and Dealer represents on behalf of itself and each other member of the Dealer Group as follows:

8.1.2.1 each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and each Assignment Agreement and to consummate the transactions contemplated thereby; and

 

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8.1.2.2 this Agreement has been duly executed and delivered by such Person (if such Person is a Party) and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof (assuming the due execution and delivery thereof by the other Party), and each of the Assignment Agreements to which it is or will be a party is or will be duly executed and delivered by it and will constitute a valid and binding agreement of it enforceable in accordance with the terms thereof (assuming the due execution and delivery thereof by the other party or parties to such Assignment Agreements), except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other Laws relating to creditors’ rights generally and by general equitable principles.

8.2 Costs and Expenses. All costs and expenses incurred by either of the Parties or its Affiliates shall be paid as set forth in the Separation Agreement.

8.3 Governing Law. This Agreement and any dispute arising out of, in connection with or relating to this Agreement shall be governed by and construed in accordance with the Laws of the State of New York, without giving effect to the conflicts of laws principles thereof.

8.4 Notices. All notices, requests, claims, demands and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) to the Parties at the following addresses or facsimile numbers:

(a) If to ADP or any member of the ADP Group, to:

Automatic Data Processing, Inc.

One ADP Boulevard

Roseland, NJ 07068-1728

Attention: General Counsel

Facsimile: (973) 974-3399

(b) If to Dealer or any member of the Dealer Group, to:

CDK Global, Inc.

1950 Hassell Road Suite 1000

Hoffman Estates, IL 60169-6308

Attention: General Counsel

Fax: (847) 781-9873

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this section, be deemed given upon receipt and (iii) if delivered by mail in the manner described above to the address as provided in this section, be deemed given upon receipt. Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party.

 

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8.5 Amendment, Modification or Waiver.

8.5.1 Prior to the Effective Time, this Agreement may be amended, modified, waived, supplemented or superseded, in whole or in part, by ADP in its sole discretion by execution of a written amendment delivered to Dealer. Subsequent to the Effective Time, this Agreement may be amended, modified, supplemented or superseded only by an instrument signed by duly authorized signatories of both Parties.

8.5.2 Following the Effective Time, any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.

8.6 No Assignment; Binding Effect; No Third-Party Beneficiaries.

8.6.1 Neither this Agreement nor any right, interest or obligation hereunder may be assigned by either Party hereto without the prior written consent of the other Party hereto and any attempt to do so will be void, except that following the Effective Time each Party hereto may assign any or all of its rights, interests and obligations hereunder to an Affiliate, provided that any such Affiliate agrees in writing to be bound by all of the terms, conditions and provisions contained herein. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the Parties hereto and their respective successors and permitted assigns.

8.6.2 The terms and provisions of this Agreement are intended solely for the benefit of each Party hereto and their respective Affiliates, successors or permitted assigns, and it is not the intention of the Parties to confer third party beneficiary rights upon any other Person.

8.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, of the Parties.

8.8 Negotiation. In the event that any dispute arises between the Parties that cannot be resolved, either Party shall have the right to refer the dispute for resolution to the chief financial officers of the Parties by delivering to the other Party a written notice of such referral (a “Dispute Escalation Notice”). Following receipt of a Dispute Escalation Notice, the chief financial officers of the Parties shall negotiate in good faith to resolve such dispute. In the event that the chief financial officers of the Parties are unable to

 

9


resolve such dispute within fifteen (15) Business Days after receipt of the Dispute Escalation Notice, either Party shall have the right to refer the dispute to the chief executive officers of the Parties, who shall negotiate in good faith to resolve such dispute. In the event that the chief executive officers of the Parties are unable to resolve such dispute within thirty (30) Business Days after the date of the Dispute Escalation Notice, either Party shall have the right to commence litigation in accordance with Section 8.10 hereof. The Parties agree that all discussions, negotiations and other Information exchanged between the Parties during the foregoing escalation proceedings shall be without prejudice to the legal position of a Party in any subsequent Action.

8.9 Specific Performance. From and after the Distribution, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any Assignment Agreement, the Parties agree that the Party or Parties to this Agreement or such Assignment Agreement who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its or their rights under this Agreement or such Assignment Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that, from and after the Distribution, the remedies at law for any breach or threatened breach of this Agreement or any Assignment Agreement, including monetary damages, are inadequate compensation for any loss, that any defense in any action for specific performance that a remedy at law would be adequate is hereby waived, and that any requirements for the securing or posting of any bond with such remedy are hereby waived.

8.10 New York Forum. Subject to the prior exhaustion of the procedures set forth in Section 8.8, each of the Parties agrees that, notwithstanding anything herein, all Actions arising out of or in connection with this Agreement or any Assignment Agreement (except to the extent any such Assignment Agreement provides otherwise), or for recognition and enforcement of any judgment arising out of or in connection with the foregoing agreements, shall be tried and determined exclusively in the state or federal courts in the State of New York, County of New York, and each of the Parties hereby irrevocably submits with regard to any such Action for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of the Parties hereby expressly waives any right it may have to assert, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any such Action: (a) any claim that it is not subject to personal jurisdiction in the aforesaid courts for any reason; (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts; and (c) any claim that (i) any of the aforesaid courts is an inconvenient or inappropriate forum for such Action, (ii) venue is not proper in any of the aforesaid courts and (iii) this Agreement or any such Assignment Agreement, or the subject matter hereof or thereof, may not be enforced in or by any of the aforesaid courts. Each of the Parties agrees that mailing of process or other papers in connection with any such Action in the manner provided in Section 8.4 or any other manner as may be permitted by Law shall be valid and sufficient service thereof.

8.11 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS

 

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LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE WAIVER IN THIS SECTION, (ii) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) SUCH PARTY MAKES SUCH WAIVER VOLUNTARILY, AND (iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS, AGREEMENTS AND CERTIFICATIONS HEREIN.

8.12 Interpretation; Conflict With Other Agreements. The Parties acknowledge and agree that (i) each Party reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision, (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement and (iii) the terms and provisions of this Agreement shall be construed fairly as to each of the Parties, regardless of which Party was generally responsible for the preparation of this Agreement. The provisions of this Agreement shall govern in the event of any conflict between any provision of this Agreement and that of the Separation Agreement. Except as set forth in each Assignment Agreement, the provisions of each Assignment Agreement shall govern in the event of any conflict between any provision of this Agreement and that of the relevant Assignment Agreement.

8.13 Severability of Provisions. If any provision or any portion of any provision of this Agreement shall be held invalid or unenforceable, the remaining portion of such provision and the remaining provisions of this Agreement shall not be affected thereby. If the application of any provision or any portion of any provision of this Agreement to any Person or circumstance shall be held invalid or unenforceable, the application of such provision or portion of such provision to Persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be duly executed on its behalf by one of its duly authorized officers as of the date first written above.

 

AUTOMATIC DATA PROCESSING, INC.
By:  

 

  Name:
  Title:

CDK Global Holdings, LLC

By:  

 

  Name:
  Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IP Transfer Agreement – Signature Page

EX-10.5

Exhibit 10.5

EMPLOYEE MATTERS AGREEMENT

by and between

AUTOMATIC DATA PROCESSING, INC.

and

CDK GLOBAL HOLDINGS, LLC

Dated as of [], 2014


TABLE OF CONTENTS

 

     Page  
ARTICLE I DEFINITIONS      2   

Section 1.1    Definitions

     2   

Section 1.2    General Interpretive Principles

     8   

ARTICLE II GENERAL PRINCIPLES

     8   

Section 2.1    Assumption and Retention of Liabilities; Related Assets

     8   

Section 2.2    Cessation of CDK Participation in ADP Benefit Plans

     9   

Section 2.3    Service Recognition

     10   

ARTICLE III THE ADP PENSION PLAN

     10   

Section 3.1    Status of CDK Employees.

     10   

Section 3.2    ADP Retention of Liabilities With Respect to CDK Employees

     10   

ARTICLE IV TAX-QUALIFIED DEFINED CONTRIBUTION PLAN

     10   

Section 4.1    The ADP Savings Plan.

     10   

Section 4.2    Contributions as of the Distribution Date

     11   

ARTICLE V HEALTH, WELFARE AND SIMILAR PLANS

     11   

Section 5.1    Plans Maintained by ADP Prior to the Distribution Date

     11   

Section 5.2    ADP VEBA

     13   

Section 5.3    Time-Off Benefits

     13   

ARTICLE VI SUPPLEMENTAL OFFICERS RETIREMENT PLAN

     13   

Section 6.1    Establishment of CDK Retirement and Savings Restoration Plan

     13   

Section 6.2    ADP Plan

     14   

ARTICLE VII DEFERRED COMPENSATION PLAN

     14   

Section 7.1    CDK Deferred Compensation Plan

     14   

Section 7.2    Continuation of Elections.

     14   

ARTICLE VIII EQUITY AWARDS

     14   

Section 8.1    Treatment of Outstanding ADP Options Held by CDK Employees

     14   

Section 8.2    Treatment of Outstanding Shares of ADP Restricted Stock Held by CDK Employees

     15   

Section 8.3    Treatment of Outstanding ADP Restricted Stock Units Held by CDK Employees

     15   

 

(i)


ARTICLE IX ADDITIONAL COMPENSATION MATTERS; SEVERANCE

     15   

Section 9.1     CDK Assumption of Annual Incentive and Bonus Liability

     15   

Section 9.2     Severance Benefits

     15   

Section 9.3     Workers’ Compensation Liabilities

     16   

ARTICLE X GENERAL AND ADMINISTRATIVE

     16   

Section 10.1     Sharing of Information

     16   

Section 10.2     Reasonable Efforts/Cooperation

     17   

Section 10.3     Employer Rights

     17   

Section 10.4     Non-Termination of Employment; No Third-Party Beneficiaries

     17   

Section 10.5     Consent of Third Parties

     17   

Section 10.6     Access to Employees

     18   

Section 10.7     Beneficiary Designation/Release of Information/Right to Reimbursement

     18   

Section 10.8     Not a Change in Control

     18   

ARTICLE XI MISCELLANEOUS PROVISIONS

     18   

Section 11.1     Complete Agreement; Representations; No Set-Off.

     18   

Section 11.2     Costs and Expenses

     19   

Section 11.3     Governing Law

     19   

Section 11.4     Notices

     19   

Section 11.5     Amendment, Modification or Waiver.

     20   

Section 11.6     No Assignment; Binding Effect; No Third-Party Beneficiaries

     20   

Section 11.7     Counterparts

     20   

Section 11.8     Negotiation

     21   

Section 11.9     Specific Performance

     21   

Section 11.10   New York Forum

     21   

Section 11.11   WAIVER OF JURY TRIAL

     22   

Section 11.12   Interpretation

     22   

Section 11.13   Severability

     22   

SCHEDULE A         ADP Health, Welfare and Similar Plans

  

 

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EMPLOYEE MATTERS AGREEMENT dated as of [            ], 2014 (this “Agreement”), by and between Automatic Data Processing, Inc., a Delaware corporation (“ADP”), and CDK Global Holdings, LLC, a Delaware limited liability company whose sole member is ADP (each, a “Party” and collectively, the “Parties”).

WHEREAS, as of the date of this Agreement, the ADP affiliated group includes CDK (as defined below) and its subsidiaries;

WHEREAS, it is the intention of the Parties that, following the Restructuring and the Separation (each as defined in the Separation and Distribution Agreement (as defined below) but prior to the Distribution (as defined in the Separation and Distribution Agreement), CDK will be converted from a Delaware limited liability company into a Delaware corporation pursuant to Section 18-216 of the Delaware Limited Liability Company Act (the “LLC Conversion”), and will be recapitalized such that all of the shares of common stock of CDK, par value $0.01 per share (the “CDK Common Stock”), then outstanding will be owned by ADP;

WHEREAS, the Parties (or their predecessors-in-interest) have entered into the Separation and Distribution Agreement, pursuant to which ADP has contributed to CDK the stock and assets associated with the CDK Business (as defined below) in exchange for membership interests in CDK, cash and the assumption by CDK of certain liabilities related to the CDK Business;

WHEREAS, following the Restructuring, Separation and LLC Conversion, ADP intends to distribute on a pro-rata basis to its shareholders all of the shares of CDK Common Stock (the “Distribution”);

WHEREAS, the Parties believe that the Distribution will provide greater flexibility for management, capital requirements and growth of the CDK Business while ensuring that ADP senior management can focus its time and resources on the development of the businesses retained by ADP; and

WHEREAS, in connection with effecting the Distribution, ADP and CDK have agreed to enter into this Agreement for the purpose of allocating assets, liabilities and responsibilities with respect to certain employee benefit plans and programs between them.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Parties (each on behalf of itself and each of its Affiliates) hereby agree as follows:


ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

Action” means any claim, demand, action, cause of action, suit, countersuit, arbitration, litigation, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal or authority.

ADP Benefit Plan” means any Benefit Plan sponsored, maintained or contributed to by ADP or any of its Affiliates.

ADP Common Stock” means shares of common stock, par value $0.10 per share, of ADP.

ADP Employee” means any individual who, immediately following the Distribution Date, will be employed by ADP or any member of the ADP Group in a capacity considered by ADP to be common law employment, including any active employee and any employee on vacation or approved leave of absence (including maternity, paternity, family, sick, short-term or long-term disability leave, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, leave under the Family Medical Leave Act and other approved leaves).

ADP Deferred Compensation Plan” means the Automatic Data Processing, Inc. Deferred Compensation Program.

ADP Group” means ADP and each Person that will be a direct or indirect Subsidiary of ADP immediately after the Distribution and each Person that is or becomes a member of the ADP Group after the Distribution, including any Person that is or was merged into ADP or any such direct or indirect Subsidiary, and each other Person that would have been included in the ADP Group in connection with the Restructuring but for the delayed transfers required by Section 2.3(b) of the Separation and Distribution Agreement.

ADP Option” means an option to purchase ADP Common Stock issued under the ADP Stock Option Plans.

ADP Pension Plan” means the Automatic Data Processing, Inc. Pension Retirement Plan.

ADP Pre-Distribution Stock Value” means the official NASDAQ only “regular way” closing price of ADP Common Stock on [September 30], 2014 as reported by the NASDAQ.

ADP Restricted Stock” means restricted shares of ADP Common Stock outstanding under the Automatic Data Processing, Inc. Key Employees’ Restricted Stock Plan or the Automatic Data Processing, Inc. 2008 Omnibus Award Plan.

ADP Restricted Stock Unit” means a restricted stock unit (in respect of a share of ADP common stock) outstanding under the Automatic Data Processing, Inc. 2008 Omnibus Award Plan.

 

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ADP Savings Plan” means the Automatic Data Processing, Inc. Retirement and Savings Plan.

ADP Severance Policy” means the Automatic Data Processing, Inc. Severance Pay Policy.

ADP SORP” means the Automatic Data Processing, Inc. Supplemental Officers Retirement Plan.

ADP Stock Option Plans” means, collectively, the Automatic Data Processing, Inc. Stock Option Plan and the Automatic Data Processing, Inc. 2008 Omnibus Award Plan.

ADP VEBA” means the Automatic Data Processing, Inc. and Subsidiaries Employee Welfare Benefit Trust.

Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such specified Person; provided, however, that for purposes of this Agreement, no member of either Group shall be deemed an Affiliate of any member of the other Group. As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

Benefit Plan” means, with respect to an entity, any plan, program, arrangement, agreement or commitment that is an employment, consulting, non-competition or deferred compensation agreement, or an executive compensation, incentive bonus or other bonus, employee pension, profit-sharing, savings, retirement, supplemental retirement, stock option, stock purchase, stock appreciation rights, restricted stock, other equity-based compensation, severance pay, salary continuation, life, health, hospitalization, sick leave, vacation pay, disability or accident insurance, corporate-owned or key-man life insurance or other employee benefit plan, program, arrangement, agreement or commitment, including any “employee benefit plan” (as defined in Section 3(3) of ERISA), sponsored or maintained by such entity (or to which such entity contributes or is required to contribute).

CDK” means, prior to the LLC Conversion, CDK Global Holdings, LLC, a Delaware limited liability company whose sole member is ADP and, immediately after the LLC Conversion, CDK Global, Inc., a Delaware corporation whose sole stockholder is ADP.

CDK Benefit Plan” means any Benefit Plan sponsored, maintained or contributed to by any member of the CDK Group on or after the Distribution Date.

CDK Business” means the business and operations conducted by the CDK Group from time to time, whether prior to, at or after the Effective Time, including,

 

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without duplication, (i) the Dealer Services Business conducted by ADP prior to the Restructuring (including with respect to any terminated, divested or discontinued business or operations of the CDK Group), (ii) the Dealer Services Business conducted by ADP prior to any previous internal restructurings of ADP relating to the Dealer Services Business and (iii) the business and operations conducted by the CDK Group, as more fully described in the Information Statement.

CDK Common Stock” has the meaning assigned to such term in the Recitals hereto.

CDK Employee” means any individual who, immediately following the Distribution Date, will be employed by CDK or any member of the CDK Group in a capacity considered by CDK to be common law employment, including any active employee and any employee on vacation or approved leave of absence (including maternity, paternity, family, sick, short-term disability leave, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, leave under the Family Medical Leave Act and other approved leaves).

CDK Group” means CDK and each Person that will be a direct or indirect Subsidiary of CDK immediately prior to the Distribution (but after giving effect to the Restructuring) and each Person that is or becomes a member of the CDK Group after the Distribution, including any Person that is or was merged into CDK or any such direct or indirect Subsidiary, and each other Person that would have been included in the CDK Group in connection with the Restructuring but for the delayed transfers required by Section 2.3(b) of the Separation and Distribution Agreement.

CDK Option” means an option to purchase shares of CDK Common Stock.

CDK Equity Conversion Ratio” means the quotient obtained by dividing the ADP Pre-Distribution Stock Value by the CDK Stock Value.

CDK Participant” means any individual who, immediately following the Distribution Date, is a CDK Employee, or a beneficiary, dependent or alternate payee thereof.

CDK Stock Plan” means the CDK Global, Inc. 2014 Omnibus Award Plan.

CDK Stock Value” means the official NASDAQ only “regular way” first trading price of CDK Common Stock on [October 1, 2014], as reported by the NASDAQ.

COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code Section 4980B and Sections 601 through 608 of ERISA, and any similar state group health plan continuation Law, together with all regulations and proposed regulations promulgated thereunder.

 

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Code” means the U.S. Internal Revenue Code of 1986, as amended.

Dealer Services Business” means all of the ADP Dealer Services’ business and operations, as more fully described in ADP’s Annual Report on Form 10-K for the fiscal year ended June 30, 2014.

Distribution Date” means the date on which the Distribution shall be effected, such date to be determined by, or under the authority of, the Board of Directors of ADP in its sole and absolute discretion.

DOL” means the Department of Labor.

Effective Time” means 11:59 pm (Eastern Time) on the Distribution Date.

ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

Former ADP Employee” means, as of the Distribution Date, any former employee of ADP or an Affiliate, including retired, deferred vested, non-vested and other inactive terminated individuals, whose most recent active employment with ADP or an Affiliate was with a member of the ADP Group, but in all events excluding any person who is a CDK Employee.

Former CDK Employee” means, as of the Effective Time:

(a) any former employee of ADP or an Affiliate, including retired, deferred vested, non-vested and other inactive terminated individuals, whose most recent active employment with ADP or an Affiliate was with a member of the CDK Group and whose active employment has ended before the Effective Time,

(b) any individual who is on long-term disability leave and whose most recent active employment with ADP or an Affiliate prior to the Effective Time was with a member of the CDK Group, and

(c) any former service provider (including any individual who was an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker of ADP or an Affiliate) with respect to whom (x) such service provider’s employment, service, retainer arrangement, or relationship with ADP or an Affiliate ended before the Effective Time and (y) such service provider’s most recent employment, service, retainer arrangement, or relationship prior to the Effective Time was with a member of the CDK Group.

Governmental Authority” means any federal, state, local, foreign or international court, government, department, commission, board, bureau or agency, or any other regulatory, self-regulatory, administrative or governmental organization or authority, including the NASDAQ.

 

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Group” means the ADP Group and/or the CDK Group, as the context requires.

HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended.

Information” means all information of either the ADP Group or the CDK Group, as the context requires, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including non-public financial information, studies, reports, records, books, accountants’ work papers, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other Software (as defined in the definition of “Intellectual Property”), marketing plans, customer data, communications by or to attorneys, memos and other materials prepared by attorneys and accountants or under their direction (including attorney work product), and other technical, financial, legal, employee or business information or data.

Information Statement” means the information statement and any related documentation distributed to holders of ADP Common Stock in connection with the Distribution, including any amendments or supplements thereto.

Intellectual Property” means all intellectual property and other similar proprietary rights in any jurisdiction, whether owned or held for use under license, whether registered or unregistered, including any and all such rights in and to: (i) trademarks, trade dress, service marks, certification marks, logos, and trade names, and the goodwill associated with the foregoing (collectively, “Trademarks”); (ii) patents and patent applications, and any and all divisions, continuations, continuations-in-part, reissues, continuing patent applications, reexaminations, and extensions thereof, any counterparts claiming priority therefrom, utility models, patents of importation/confirmation, certificates of invention, certificates of registration, design registrations or patents and like rights (collectively, “Patents”); (iii) inventions, invention disclosures, discoveries and improvements, whether or not patentable; (iv) copyrights, writings and other works of authorship (“Copyrights”); (v) trade secrets (including, those trade secrets defined in the Uniform Trade Secrets Act and under corresponding foreign statutory Law and common law), Information, business, technical and know-how information, business processes, non-public information, proprietary information and confidential information and rights to limit the use or disclosure thereof by any Person (collectively, “Trade Secrets”); (vi) software, including data files, source code, object code, application programming interfaces, databases and other software-related specifications and documentation (collectively, “Software”); (vii) domain names and uniform resource locators; (viii) moral rights; (ix) privacy and publicity rights; (x) any and all technical information, Software, specifications, drawings, records, documentation, works of authorship or other creative works, ideas, knowledge, invention disclosures or other data, not including works subject to Copyright, Patent or Trademark protection; (xi) advertising and promotional materials, whether or not copyrightable; and (xii) claims,

 

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causes of action and defenses relating to the enforcement of any of the foregoing; in each case, including any registrations of, applications to register, and renewals and extensions of, any of the foregoing with or by any Governmental Authority in any jurisdiction.

IRS” means the Internal Revenue Service.

Law” means any applicable foreign, federal, national, state, provincial or local law (including common law), statute, ordinance, rule, regulation, code or other requirement enacted, promulgated, issued or entered into, or act taken, by a Governmental Authority.

Liabilities” means all debts, liabilities, obligations, responsibilities, response actions, losses, damages (whether compensatory, punitive, consequential, treble or other), fines, penalties and sanctions, absolute or contingent, matured or unmatured, liquidated or unliquidated, foreseen or unforeseen, on- or off-balance sheet, joint, several or individual, asserted or unasserted, accrued or unaccrued, known or unknown, whenever arising, including those arising under or in connection with any Law or other pronouncements of Governmental Authorities constituting an Action, order or consent decree of any Governmental Authority or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking, whether sought to be imposed by a Governmental Authority, private party, or a Party, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, and including any costs, expenses, interest, attorneys’ fees, disbursements and expense of counsel, expert and consulting fees, fees of third-party administrators, and costs related thereto or to the investigation or defense thereof.

NASDAQ” means the NASDAQ Global Select Market.

Participating Company” means ADP and any Affiliate or any other entity (other than an individual) participating in an ADP Benefit Plan.

Person” means any natural person, corporation, general or limited partnership, limited liability company or partnership, joint stock company, joint venture, association, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any Governmental Authority.

Restructuring” has the meaning assigned to such term in the Separation and Distribution Agreement.

Separation and Distribution Agreement” means the Separation and Distribution Agreement, as amended from time to time, by and between ADP and CDK (or their predecessors-in-interest) dated as of [                    ], 2014.

Subsidiary” means, with respect to any Person, any other Person of which such first Person (either alone or through or together with any other Subsidiary of such first Person) owns, directly or indirectly, a majority of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such other Person.

 

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Section 1.2 General Interpretive Principles. (a) Words in the singular shall include the plural and vice versa, and words of one gender shall include the other gender, in each case, as the context requires, (b) the words “hereof,” “herein,” “hereunder,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement and not to any particular provision of this Agreement, and references to Article, Section, paragraph, Exhibit and Schedule are references to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise specified, (c) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified, and (d) any reference to any federal, state, local or non-U.S. statute or Law shall be deemed to also refer to all rules and regulations promulgated thereunder, in each case as amended from time to time, unless the context otherwise requires.

ARTICLE II

GENERAL PRINCIPLES

Section 2.1 Assumption and Retention of Liabilities; Related Assets.

(a) As of the Effective Time, except as otherwise expressly provided for in this Agreement, ADP shall, or shall cause one or more members of the ADP Group to, assume or retain, as applicable, and ADP hereby agrees to pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all ADP Benefit Plans, (ii) all Liabilities with respect to the employment, service, termination of employment or termination of service of all ADP Employees, Former ADP Employees, their respective dependents and beneficiaries, and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker of any member of the ADP Group or in any other employment, service, retainer arrangement, or relationship with any member of the ADP Group), in each case to the extent arising in connection with or as a result of employment with or the performance of services for any member of the ADP Group, (iii) all Liabilities with respect to the employment, service, termination of employment or termination of service of all Former CDK Employees, their respective dependents and beneficiaries and (iv) all other Liabilities or obligations expressly assigned to ADP or any of its Affiliates under this Agreement. For purposes of clarification, the Liabilities assumed or retained by the ADP Group as provided for in this Section 2.1(a) are intended to be ADP Liabilities as such term is defined in the Separation and Distribution Agreement.

(b) As of the Effective Time, except as otherwise expressly provided for in this Agreement, CDK shall, or shall cause one or more members of the CDK Group to, assume and CDK hereby agrees to pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all CDK Benefit Plans, (ii) all Liabilities with respect to the employment, service, termination of employment or termination of service

 

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of all CDK Employees, their dependents and beneficiaries and other persons who provide services to the CDK Group (including any individual who is an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker of any member of the CDK Group or in any other employment, service, or retainer arrangement, or relationship with any member of the CDK Group), and (iii) all other Liabilities or obligations expressly assigned to CDK or any of its Affiliates under this Agreement. For purposes of clarification, the Liabilities assumed by the CDK Group as provided for in this Section 2.1(b) are intended to be Dealer Liabilities as such term is defined in the Separation and Distribution Agreement.

(c) From time to time after the Distribution, CDK shall promptly reimburse ADP, upon ADP’s reasonable request and the presentation by ADP of such substantiating documentation as CDK shall reasonably request, for the cost of any obligations or Liabilities satisfied by ADP or its Affiliates that are, or that have been made pursuant to this Agreement, the responsibility of CDK or any of its Affiliates.

(d) From time to time after the Distribution, ADP shall promptly reimburse CDK, upon CDK’s reasonable request and the presentation by CDK of such substantiating documentation as ADP shall reasonably request, for the cost of any obligations or Liabilities satisfied by CDK or its affiliates that are, or that have been made pursuant to this Agreement, the responsibility of ADP or its Affiliates.

Section 2.2 Cessation of CDK Participation in ADP Benefit Plans. Except as otherwise expressly provided for in this Agreement or as otherwise expressly agreed to in writing between the Parties, (i) effective as of the Effective Time, CDK and each member of the CDK Group shall cease to be a Participating Company in any ADP Benefit Plan, and (ii) each CDK Participant and each other service providers who provide services to any member of the CDK Group on or after the Effective Time (including each individual who is an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker of any member of the CDK Group or in any other employment, service, or retainer arrangement, or relationship with any member of the CDK Group), effective as of the Effective Time, shall cease to participate in, be covered by, accrue benefits under, be eligible to contribute to or have any rights under any ADP Benefit Plan, and ADP and CDK shall take all necessary action to effectuate each such cessation.

 

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Section 2.3 Service Recognition (i) . CDK shall give each CDK Participant full credit for purposes of eligibility, vesting, and determination of level of benefits under any CDK Benefit Plan for such CDK Participant’s service with any member of the ADP Group prior to the Effective Time to the same extent such service was recognized by the applicable ADP Benefit Plans immediately prior to the Effective Time; provided, however, that such service shall not be recognized to the extent that such recognition would result in the duplication of benefits.

ARTICLE III

THE ADP PENSION PLAN

Section 3.1 Status of CDK Employees. Effective as of the Effective Time, each CDK Employee and Former CDK Employee shall, for all purposes of the ADP Pension Plan, be treated as having terminated employment with ADP and with all of its Affiliates as of the Effective Time (or, if earlier, as of the date of such person’s actual termination of employment with ADP and all Affiliates). Also effective as of the Effective Time, each CDK Employee shall become fully vested in such person’s entire accrued benefit under the ADP Pension Plan.

Section 3.2 ADP Retention of Liabilities With Respect to CDK Employees (a) . Notwithstanding anything herein to the contrary, the legal responsibility and obligation to pay (or continue to pay, as the case may be) all benefits otherwise accrued under the ADP Pension Plan with respect to CDK Employees and Former CDK Employees shall at all times remain the legal responsibility and obligation of ADP and the ADP Pension Plan. In connection therewith, there shall be no transfer of Assets from the ADP Pension Plan to any CDK Benefit Plan.

ARTICLE IV

TAX-QUALIFIED DEFINED CONTRIBUTION PLAN

Section 4.1 The ADP Savings Plan.

(a) Establishment of the CDK Savings Plan. Effective as of the Effective Time, CDK shall, or shall have caused one of its Affiliates to, establish a defined contribution plan and trust for the benefit of CDK Employees (the “CDK Savings Plan”). CDK shall be responsible for taking all necessary, reasonable and appropriate action to establish, maintain and administer the CDK Savings Plan so that it is qualified under Section 401(a) of the Code and that the related trust thereunder is exempt under Section 501(a) of the Code. CDK (acting directly or through its Affiliates) shall be responsible for any and all Liabilities (including Liability for funding) and other obligations with respect to the CDK Savings Plan.

(b) Full Vesting Under ADP Savings Plan. Effective as of the Effective Time, each CDK Employee shall become fully vested in such person’s entire account balance under the ADP Savings Plan.

 

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(c) Prorated Matching Contribution. As soon as practicable on or after the Distribution Date, ADP shall contribute to the ADP Savings Plan on behalf of each CDK Employee a prorated portion of the employer matching contribution that would otherwise have been contributed on behalf of such person if no end-of-year employment requirement applied for purposes of receiving such matching contribution.

(d) Transfer of ADP Savings Plan Assets. On or as soon as reasonably practicable following the Distribution Date, ADP shall cause the account balances (including any outstanding loan balances) in the ADP Savings Plan attributable to CDK Employees, together with an amount of cash equal to the aggregate of such account balances to be transferred to the CDK Savings Plan, and CDK shall cause the CDK Savings Plan to accept such transfer of accounts and cash and, effective as of the date of such transfer, to assume and to fully perform, pay and discharge all obligations of the ADP Savings Plan relating to the accounts of CDK Employees. Such transfer of cash shall be done in accordance with the requirements of Section 414(l) of the Code, Treasury Regulation Section 1.414(1)-1, and Section 208 of ERISA.

(e) Form 5310-A. No later than thirty (30) days prior to the date of such aforementioned transfer from the ADP Savings Plan to the CDK Savings Plan, ADP and CDK (each acting directly or through their respective Affiliates) shall, to the extent necessary, each file an IRS Form 5310-A regarding such transfer.

Section 4.2 Contributions as of the Distribution Date. All contributions payable to the ADP Savings Plan with respect to employee deferrals, matching contributions and any other required contributions for CDK Employees through the Distribution Date shall be paid by ADP to the ADP Savings Plan prior to the date of the cash transfer described in Section 4.1(d) above.

ARTICLE V

HEALTH, WELFARE AND SIMILAR PLANS

Section 5.1 Plans Maintained by ADP Prior to the Distribution Date.

(a) Establishment of the CDK Plans. ADP or one or more of its Affiliates maintain each of the health, welfare and similar plans set forth on Schedule A attached hereto (the “ADP Welfare Plans”) in part for the benefit of eligible individuals who, as of the Effective Time, will be CDK Participants. Effective as of the Effective Time, CDK shall, or shall cause a CDK Affiliate to, adopt, for the benefit of eligible CDK Participants, health, welfare and similar plans (collectively, the “CDK Welfare Plans”), the terms of which are substantially comparable, in the aggregate, to the terms of the ADP Welfare Plans as in effect immediately prior to the Effective Time.

(b) Terms of Participation in CDK Welfare Plans. CDK (acting directly or through its Affiliates) shall cause all CDK Welfare Plans to (i) waive all limitations as to exclusions, and service conditions with respect to participation and coverage requirements applicable to CDK Participants, other than limitations that were in

 

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effect with respect to any such person as of the Distribution Date under the ADP Welfare Plans, (ii) honor all deductibles and out-of-pocket maximums incurred by CDK Participants under the ADP Welfare Plans in which they participated immediately prior to the Effective Time in satisfying any applicable deductible or out-of-pocket requirements under any CDK Welfare Plans during the same plan year in which such deductible and out-of-pocket maximums were made, and (iii) waive all waiting period limitations and evidence of insurability requirements that would otherwise be applicable to a CDK Participant following the Distribution Date, to the extent that such CDK Participant had satisfied any similar limitation under the analogous ADP Welfare Plan.

(c) Reimbursement Account Plan. Effective as of the Effective Time, CDK (acting directly or through its Affiliates) shall have established a health care, limited purpose health care and dependent care reimbursement account plan (the “CDK Reimbursement Account Plan”) with features that are comparable to those contained in the Automatic Data Processing, Inc. Health Care, Limited Purpose Health Care and Dependent Care Flexible Spending Accounts Plan (the “ADP Reimbursement Account Plan”). With respect to CDK Participants, effective as of the Effective Time, CDK (acting directly or through its Affiliates) shall assume responsibility for administering all reimbursement claims of CDK Participants with respect to calendar year 2014, whether arising before, on, or after the Distribution Date, under the CDK Reimbursement Account Plan and, for the avoidance of doubt, on and after the Distribution Date, no additional claims shall be reimbursed with respect to CDK Participants under the ADP Reimbursement Account Plan. ADP shall, as soon as practicable following the Distribution Date, determine (i) the sum of all contributions to the ADP Reimbursement Account Plan made with respect to calendar year 2014 by or on behalf of all CDK Participants, as a whole, prior to the Effective Time (the “Aggregate Pre-Effective Time Contributions”) and (ii) the sum of all claims incurred in calendar year 2014 and paid by the ADP Reimbursement Account Plan with respect to such CDK Participants, as a whole, prior to the Effective Time (the “Aggregate Pre-Effective Time Disbursements”). If the Aggregate Pre-Effective Time Contributions exceed the Aggregate Pre-Effective Time Disbursements, ADP shall, as soon as practicable following ADP’s determination of the Aggregate Pre-Effective Time Contributions and Pre-Effective Time Disbursements, transfer to CDK an amount in cash equal to such difference. If the Aggregate Pre-Effective Time Disbursements exceed the Aggregate Pre-Effective Time Contributions, CDK shall, upon ADP’s reasonable request and the presentation of such substantiating documentation as CDK shall reasonably request, transfer to ADP an amount in cash equal to such difference.

(d) Continuation of Elections. With respect to CDK Participants, as of the Effective Time, CDK (acting directly or through its Affiliates) shall cause the CDK Welfare Plans to recognize and maintain all elections and designations (including, without limitation, all coverage and contribution elections and beneficiary designations (other than beneficiary designations under the voluntary employee-pay Group Universal Life Insurance program)) made by CDK Participants under, or with respect to, the ADP Welfare Plans and apply such elections and designations under the CDK Welfare Plans for the remainder of the period or periods for which such elections or designations are by their original terms applicable, to the extent that such election or

 

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designation is available under the corresponding CDK Welfare Plan. As of the Effective Time, CDK shall cause any CDK Welfare Plan that constitutes a cafeteria plan under Section 125 of the Code to recognize and give effect to all non-elective employer contributions payable and paid toward coverage of a CDK Participant under the corresponding ADP Welfare Plan that constitutes a cafeteria plan under Section 125 of the Code for the applicable cafeteria plan year.

(e) COBRA and HIPAA. ADP (acting directly or through its Affiliates) shall be responsible for administering compliance with the certificate of creditable coverage requirements of HIPAA applicable to the ADP Welfare Plans with respect to CDK Participants. The Parties hereto agree that the Distribution shall not constitute a COBRA qualifying event for any purposes of COBRA. ADP shall, or shall cause one or more members of the ADP Group to, assume or retain, as applicable, all Liabilities in respect of COBRA for Former CDK Employees or a beneficiary, dependent or alternate payee thereof who are receiving COBRA coverage on the Distribution Date.

(f) Liabilities. CDK (acting directly or through its Affiliates) shall fully perform, pay and discharge, under the CDK Welfare Plans, all claims of CDK Participants from and after the Effective Time that are incurred on or after the Effective Time. ADP (acting directly or through its Affiliates) shall fully perform, pay and discharge, under the ADP Welfare Plans, all claims of CDK Participants that are incurred prior to the Effective Time. For purposes of this Section 5.1(f), a claim is deemed incurred (A) with respect to medical, dental, vision and prescription drug benefits, upon the rendering of health services giving rise to such claim; (B) with respect to life insurance, accidental death and dismemberment insurance and business travel accident insurance, upon the occurrence of the event giving rise to such claim; (C) with respect to disability benefits, upon the date of an individual’s disability giving rise to such claim, as determined by the disability benefit insurance carrier or claim administrator; and (D) with respect to a period of continuous hospitalization, upon the date of admission to the hospital.

Section 5.2 ADP VEBA. In no event shall any of the assets held under the ADP VEBA be transferred to CDK (or any of its Affiliates) or to any CDK Benefit Plan.

Section 5.3 Time-Off Benefits. CDK shall credit each CDK Participant with the amount of accrued but unused vacation time, sick time and other time-off benefits as such CDK Participant had with ADP (or with any Affiliate) as of the Effective Time.

ARTICLE VI

SUPPLEMENTAL OFFICERS RETIREMENT PLAN

Section 6.1 Establishment of CDK Retirement and Savings Restoration Plan. Effective as of the Effective Time, CDK shall, or shall cause one of its Affiliates to, establish a plan to be known as the “CDK Retirement and Savings Restoration Plan.”

 

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Section 6.2 ADP Plan. ADP shall remain responsible for the payment of all benefits under the ADP SORP that are otherwise due and owing to all CDK Participants. Other than as specifically agreed to in writing by ADP, each CDK Employee shall, for all purposes of the ADP SORP, be treated as terminating employment with ADP and with all of its Affiliates at the Effective Time. For purposes of clarification, the amounts that ADP is required to pay to CDK Participants are intended to be ADP Liabilities as such term is defined in the Separation and Distribution Agreement.

ARTICLE VII

DEFERRED COMPENSATION PLAN

Section 7.1 CDK Deferred Compensation Plan. Effective as of the Effective Time, CDK shall, or shall cause one of its Affiliates to, establish a nonqualified deferred compensation plan to benefit CDK Participants who prior to the Effective Time had deferred bonus amounts under the ADP Deferred Compensation Plan (the “CDK Deferred Compensation Plan”). Effective as of the Effective Time, CDK hereby agrees to cause the CDK Deferred Compensation Plan to assume responsibility for all Liabilities and fully perform, pay and discharge all obligations, when such obligations become due, of the ADP Deferred Compensation Plan with respect to all CDK Participants therein. CDK (acting directly or through its Affiliates) shall be responsible for any and all Liabilities and other obligations with respect to the CDK Deferred Compensation Plan. The CDK Deferred Compensation Plan shall have substantially similar terms and conditions as the ADP Deferred Compensation Plan, except that the CDK Deferred Compensation Plan need not provide for any company matching contributions.

Section 7.2 Continuation of Elections. As of the Effective Time, CDK (acting directly or through an Affiliate) shall cause the CDK Deferred Compensation Plan to recognize and maintain all elections (including deferral, distribution and investment elections) and beneficiary designations with respect to CDK Participants under the ADP Deferred Compensation Plan.

ARTICLE VIII

EQUITY AWARDS

Section 8.1 Treatment of Outstanding ADP Options Held by CDK Employees. Each ADP Option held by a CDK Employee as of the Distribution Date shall be substituted with a CDK Option issued under the CDK Stock Plan and subject to terms and conditions after the Distribution that are substantially similar to the terms and conditions applicable to the corresponding ADP Option immediately prior to the Distribution; provided that (i) the number of shares of CDK Common Stock subject to each such CDK Option shall be equal to the product of (x) the number of shares of ADP Common Stock subject to the corresponding ADP Option immediately prior to the Distribution Date and (y) the CDK Equity Conversion Ratio, with fractional shares rounded down to the nearest whole share and (ii) the per-share exercise price of each

 

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such CDK Option shall be equal to the quotient of (x) the per-share exercise price of the corresponding ADP Option immediately prior to the Distribution Date divided by (y) the CDK Equity Conversion Ratio, rounded up to the nearest whole cent.

Section 8.2 Treatment of Outstanding Shares of ADP Restricted Stock Held by CDK Employees. Each share of ADP Restricted Stock held by a CDK Employee as of the Distribution Date shall be substituted with restricted shares of CDK Common Stock (“CDK Restricted Stock”) issued under the CDK Stock Plan and subject to terms and conditions after the Distribution that are substantially similar to the terms and conditions applicable to the corresponding ADP Restricted Stock immediately prior to the Distribution. The number of shares of CDK Restricted Stock to which a CDK Employee is entitled pursuant to this Section 8.2 shall equal the product of (x) the number of shares of ADP Restricted Stock held by such CDK Employee immediately prior to the Distribution Date and (y) the CDK Equity Conversion Ratio, with fractional shares (after aggregation) rounded down to the nearest whole share.

Section 8.3 Treatment of Outstanding ADP Restricted Stock Units Held by CDK Employees. Each ADP Restricted Stock Unit held by a CDK Employee as of the Distribution Date shall be substituted with restricted stock units to be settled in CDK Common Stock (“CDK Restricted Stock Units”) issued under the CDK Stock Plan and subject to terms and conditions after the Distribution that are substantially similar to the terms and conditions applicable to the corresponding ADP Restricted Stock Units immediately prior to the Distribution. The number of CDK Restricted Stock Units to which a CDK Employee is entitled pursuant to this Section 8.3 shall equal the product of (x) the number of ADP Restricted Stock Units held by such CDK Employee immediately prior to the Distribution Date and (y) the CDK Equity Conversion Ratio, with fractional shares (after aggregation) rounded down to the nearest whole share.

ARTICLE IX

ADDITIONAL COMPENSATION MATTERS; SEVERANCE

Section 9.1 CDK Assumption of Annual Incentive and Bonus Liability. Effective as of the Effective Time, CDK shall assume or retain, as applicable, responsibility for all Liabilities and fully perform, pay and discharge all obligations, when such obligations become due, relating to any annual incentive awards and bonuses that any CDK Employee is eligible to receive with respect to the fiscal year ending June 30, 2015, and, effective as of the Effective Time, ADP shall have no obligation with respect to any such annual incentive award.

Section 9.2 Severance Benefits.

(a) Assumption of Severance Liabilities. Following the Effective Time, ADP shall have no Liability or responsibility to pay any benefits to any CDK Employee pursuant to the terms of the ADP Severance Policy. In addition, notwithstanding the provisions of Section 2.1, following the Effective Time, CDK shall assume or retain, as applicable, and agrees to pay, perform, fulfill and discharge, in due

 

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course, all Liabilities with respect to the outstanding and unpaid severance pay and benefits in respect of each Former CDK Employee who as of the Effective Time is receiving severance pay and benefits (whether pursuant to the ADP Severance Policy or an agreement between such Former CDK Employee and any member of the ADP Group or the CDK Group, as applicable).

(b) Effect of the Separation on Severance. ADP and CDK acknowledge and agree that the transactions contemplated by the Separation and Distribution Agreement shall not constitute a termination of employment of any CDK Employee for purposes of any policy, plan, program or agreement of ADP or CDK or any member of the ADP Group or the CDK Group that provides for the payment of severance, separation pay, salary continuation or similar benefits in the event of a termination of employment.

Section 9.3 Workers’ Compensation Liabilities.

(a) Pre-Distribution Date Claims. Effective as of the Effective Time, all workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by a CDK Employee that results from an accident, incident or event occurring, or from an occupational disease that becomes manifest, before the Effective Time shall be the sole and exclusive liability of CDK.

(b) Post-Distribution Date Claims. All workers’ compensation Liabilities relating to, arising out of, or resulting from any claim by a CDK Employee that results from an accident, incident or event occurring, or from an occupational disease that becomes manifest, on or after the Effective Time shall be the sole and exclusive Liability of CDK.

(c) General. ADP and CDK shall cooperate in good faith with respect to notifying the appropriate governmental agencies of the Distribution and issuing new, or transferring existing, workers’ compensation insurance policies and claims handling contracts.

ARTICLE X

GENERAL AND ADMINISTRATIVE

Section 10.1 Sharing of Information. ADP and CDK (acting directly or through their respective Affiliates) shall provide to the other and their respective agents and vendors all Information as the other may reasonably request to enable the requesting Party to administer efficiently and accurately each of its Benefit Plans and to determine the scope of, as well as fulfill, its obligations under this Agreement. Such Information shall, to the extent reasonably practicable, be provided in the format and at the times and places requested, but in no event shall the Party providing such Information be obligated to incur any out-of-pocket expenses not reimbursed by the Party making such request or make such Information available outside of its normal business hours and premises. Any Information shared or exchanged pursuant to this Agreement shall be subject to the same

 

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confidentiality requirements set forth in the Separation and Distribution Agreement. The Parties also hereby agree to enter into any business associate agreements that may be required for the sharing of any Information pursuant to this Agreement to comply with the requirements of HIPAA.

Section 10.2 Reasonable Efforts/Cooperation. Each of the Parties hereto shall use its commercially reasonable efforts to promptly take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws and regulations to consummate the transactions contemplated by this Agreement, including, without limitation, adopting plans or plan amendments. Each of the Parties hereto shall cooperate fully on any issue relating to the transactions contemplated by this Agreement for which the other Party seeks a determination letter or private letter ruling from the IRS, an advisory opinion from the DOL or any other filing, consent or approval with respect to or by a Governmental Authority.

Section 10.3 Employer Rights. Subject to CDK’s obligations under this Agreement, nothing in this Agreement shall prohibit CDK or any CDK Affiliate from amending, modifying or terminating any CDK Benefit Plan at any time within its sole discretion. In addition, subject to ADP’s obligations under this Agreement, nothing in this Agreement shall prohibit ADP or any ADP Affiliate from amending, modifying or terminating any ADP Benefit Plan at any time within its sole discretion.

Section 10.4 Non-Termination of Employment; No Third-Party Beneficiaries. Except as expressly provided for in this Agreement or the Separation and Distribution Agreement, no provision of this Agreement or the Separation and Distribution Agreement shall be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part of any ADP Employee or CDK Employee or other future, present, or former employee of any member of the ADP Group or the CDK Group under any ADP Benefit Plan or CDK Benefit Plan or otherwise. Without limiting the generality of the foregoing, except as expressly provided in this Agreement, the occurrence of the Distribution alone shall not cause any employee to be deemed to have incurred a termination of employment that entitles such individual to the commencement of benefits under any of the ADP Benefit Plans. Furthermore, this Agreement is solely for the benefit of the Parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other person or persons any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. Furthermore, nothing in this Agreement is intended to confer upon any employee or former employee of ADP, CDK or either of their respective Affiliates any right to continued employment, or any recall or similar rights to an individual on layoff or any type of approved leave.

Section 10.5 Consent of Third Parties. If any provision of this Agreement is dependent on the consent of any third party and such consent is withheld, the Parties hereto shall use their reasonable best efforts to implement the applicable provisions of this Agreement to the fullest extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, the Parties hereto shall negotiate in good faith to implement the provision in a mutually satisfactory manner.

 

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Section 10.6 Access to Employees. Following the Distribution Date, each Party shall, or shall cause its Affiliates to, make available to the other Party those of their employees who may reasonably be needed in order to defend or prosecute any legal or administrative action (other than a legal action between ADP and CDK) to which any employee, director or Benefit Plan of the ADP Group or the CDK Group is a party and that relates to the ADP Benefit Plans prior to the Distribution Date or the CDK Benefit Plans on or after the Distribution Date.

Section 10.7 Beneficiary Designation/Release of Information/Right to Reimbursement. To the extent permitted by applicable Law and except as otherwise provided for in this Agreement, all beneficiary designations (other than beneficiary designations under the voluntary employee-pay Group Universal Life Insurance program), authorizations for the release of Information and rights to reimbursement made by or relating to CDK Participants under ADP Benefit Plans shall be transferred to and be in full force and effect under the corresponding CDK Benefit Plans until such beneficiary designations, authorizations or rights are replaced or revoked by, or no longer apply, to the relevant CDK Participant.

Section 10.8 Not a Change in Control. The Parties hereto acknowledge and agree that the transactions contemplated by the Separation and Distribution Agreement and this Agreement do not constitute a “change in control” for purposes of any ADP Benefit Plan or CDK Benefit Plan.

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 11.1 Complete Agreement; Representations; No Set-Off.

(a) Except as explicitly stated herein, this Agreement, together with the Exhibits and Schedules hereto constitutes the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.

(b) ADP represents on behalf of itself and each other member of the ADP Group, and CDK represents on behalf of itself and each other member of the CDK Group as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated by this Agreement; and

(ii) this Agreement has been duly executed and delivered by such Person (if such Person is a Party) and constitutes a valid and binding

 

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agreement of it enforceable in accordance with the terms thereof (assuming the due execution and delivery thereof by the other Party), except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other Laws relating to creditors’ rights generally and by general equitable principles.

(c) No obligation of either Party to pay fees or make any other required payments under this Agreement shall be subject to any right of offset, set-off, deduction, or counterclaim, however arising, including, without limitation, pursuant to any claims under the Separation and Distribution Agreement or the Ancillary Agreements (as defined in the Separation and Distribution Agreement).

Section 11.2 Costs and Expenses. All costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement and the transactions contemplated hereby shall be borne as provided in the Separation and Distribution Agreement.

Section 11.3 Governing Law. This Agreement and any dispute arising out of, in connection with or relating to this Agreement shall be governed by and construed in accordance with the Laws of the State of New York, without giving effect to the conflicts of laws principles thereof.

Section 11.4 Notices. All notices, requests, claims, demands and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) to the Parties at the following addresses or facsimile numbers:

If to ADP or any member of the ADP Group, to:

Automatic Data Processing, Inc.

One ADP Boulevard

Roseland, New Jersey 07068

Attn: General Counsel

Fax: (973) 974-3399

If to CDK or any member of the CDK Group, to:

CDK Global Holdings, LLC (before the LLC Conversion)

CDK Global, Inc. (after the LLC Conversion)]

1950 Hassell Road Suite 1000

Hoffman Estates, IL 60169-6308

Attn: General Counsel

Fax: (847) 781-9873

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this section,

 

19


be deemed given upon receipt and (iii) if delivered by mail in the manner described above to the address as provided in this section, be deemed given upon receipt. Any Party from time to time may change its address, facsimile number or other information for the purpose of notices to that Party by giving notice specifying such change to the other Party.

Section 11.5 Amendment, Modification or Waiver.

(a) Prior to the Distribution, this Agreement may be amended, modified, waived, supplemented or superseded, in whole or in part, by ADP in its sole discretion by execution of a written amendment delivered to CDK. Subsequent to the Distribution, this Agreement may be amended, modified, supplemented or superseded only by an instrument signed by duly authorized signatories of both Parties.

(b) Following the Distribution, any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.

Section 11.6 No Assignment; Binding Effect; No Third-Party Beneficiaries.

(a) Neither this Agreement nor any right, interest or obligation hereunder may be assigned by either Party hereto without the prior written consent of the other Party hereto and any attempt to do so will be void, except that following the Effective Time each Party hereto may assign any or all of its rights, interests and obligations hereunder to an Affiliate; provided that any such Affiliate agrees in writing to be bound by all of the terms, conditions and provisions contained herein; provided, further, that no such assignment shall relieve the assigning Party of its obligations or liabilities hereunder. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the Parties hereto and their respective successors and permitted assigns.

(b) Except for the provisions of Article IV of the Separation and Distribution Agreement relating to indemnification, the terms and provisions of this Agreement are intended solely for the benefit of each Party hereto and their respective Affiliates, successors or permitted assigns, and it is not the intention of the Parties to confer third-party beneficiary rights upon any other Person.

Section 11.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by fewer than all, but together signed by all, of the Parties.

 

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Section 11.8 Negotiation. Except as otherwise provided for herein, in the event that any dispute arises between the Parties that cannot be resolved, either Party shall have the right to refer the dispute for resolution to the chief financial officers of the Parties by delivering to the other Party a written notice of such referral (a “Dispute Escalation Notice”). Following receipt of a Dispute Escalation Notice, the chief financial officers of the Parties shall negotiate in good faith to resolve such dispute. In the event that the chief financial officers of the Parties are unable to resolve such dispute within fifteen (15) business days after receipt of the Dispute Escalation Notice, either Party shall have the right to refer the dispute to the chief executive officers of the Parties, who shall negotiate in good faith to resolve such dispute. In the event that the chief executive officers of the Parties are unable to resolve such dispute within thirty (30) business days after the date of the Dispute Escalation Notice, either Party shall have the right to commence litigation in accordance with Section 11.10. The Parties agree that all discussions, negotiations and other Information exchanged between the Parties during the foregoing escalation proceedings shall be without prejudice to the legal position of a Party in any subsequent Action.

Section 11.9 Specific Performance. From and after the Distribution, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Parties agree that the Party or Parties to this Agreement who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that, from and after the Distribution, the remedies at law for any breach or threatened breach of this Agreement, including monetary damages, are inadequate compensation for any loss, that any defense in any action for specific performance that a remedy at law would be adequate is hereby waived, and that any requirements for the securing or posting of any bond with such remedy are hereby waived.

Section 11.10 New York Forum. Subject to the prior exhaustion of the procedures set forth in Section 11.08, each of the Parties agrees that, except as otherwise provided herein, all Actions arising out of or in connection with this Agreement, or for recognition and enforcement of any judgment arising out of or in connection with this Agreement, shall be tried and determined exclusively in the state or federal courts in the State of New York, County of New York, and each of the Parties hereby irrevocably submits with regard to any such Action for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of the Parties hereby expressly waives any right it may have to assert, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any such Action: (a) any claim that it is not subject to personal jurisdiction in the aforesaid courts for any reason; (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts; and (c) any claim that (i) any

 

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of the aforesaid courts is an inconvenient or inappropriate forum for such Action, (ii) venue is not proper in any of the aforesaid courts and (iii) this Agreement, or the subject matter hereof, may not be enforced in or by any of the aforesaid courts. Each of the Parties agrees that mailing of process or other papers in connection with any such Action in the manner provided in Section 11.04 or any other manner as may be permitted by Law shall be valid and sufficient service thereof.

Section 11.11 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE WAIVER IN THIS SECTION, (B) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) SUCH PARTY MAKES SUCH WAIVER VOLUNTARILY AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS, AGREEMENTS AND CERTIFICATIONS HEREIN.

Section 11.12 Interpretation. The language of this Agreement shall be construed according to its fair meaning and shall not be strictly construed for or against any Party. The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not in any way affect the meaning or interpretation of this Agreement.

Section 11.13 Severability. If any provision or any portion of any provision of this Agreement shall be held invalid or unenforceable, the remaining portion of such provision and the remaining provisions of this Agreement shall not be affected thereby. If the application of any provision or any portion of any provision of this Agreement to any Person or circumstance shall be held invalid or unenforceable, the application of such provision or portion of such provision to other Persons or circumstances shall not be affected thereby.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first above written.

 

AUTOMATIC DATA PROCESSING, INC.
By:  

 

  Name:
  Title:
CDK GLOBAL HOLDINGS, LLC
By:   Automatic Data Processing, Inc.,
Managing Member
By:  

 

  Name:
  Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee Matters Agreement – Signature Page


SCHEDULE A

ADP Health, Welfare, and Similar Plans

Medical Plan

Prescription Plan

Dental Plan

Life Insurance Plan

Accidental Death and Dismemberment Plan

Long Term Disability Plan

Health and Dependent Care Flexible Spending Accounts

Automatic Data Processing, Inc. Vision Care Plan

Automatic Data Processing, Inc. Business Travel Accident Plan

Automatic Data Processing, Inc. Short Term Disability Salary Continuation Policy

Automatic Data Processing, Inc. Personal Accident Insurance

Automatic Data Processing, Inc. Employee Assistance Program

Automatic Data Processing, Inc. Tuition Reimbursement Program

Voluntary Employee pay all non-ERISA Plans include:

Group Universal Life Insurance and

Auto and Home Insurance

EX-10.6

Exhibit 10.6

CDK GLOBAL, INC.

CHANGE IN CONTROL SEVERANCE PLAN

FOR

CORPORATE OFFICERS

The purpose of this Change in Control Severance Plan for Corporate Officers (the “Plan”) is to enable CDK Global, Inc., a Delaware corporation (the “Company”), to offer a form of income protection to “Participants” (as defined in Section 7.5 below) in the event their employment with the Company terminates under certain circumstances due to a “Change in Control” (as defined in Section 7.2 below).

ARTICLE I: BENEFITS

 

1.1 Eligibility for Benefits; Benefits; Payment; and Rights of Participants.

 

  (a) If a Change in Control occurs prior to the date a Participant’s employment with the Company terminates, then upon the termination of the Participant’s employment by the Company without “Cause” (as defined in Section 7.1 below) or by the Participant for “Good Reason” (as defined in Section 7.4 below), in either case during the two-year period following the Change in Control (individually, a “Qualifying Termination”), such Participant shall be paid an amount (the “Severance Benefit”) equal to 150% (or in the case of the Company’s Chief Executive Officer, 200%) of the Participant’s “Current Total Annual Compensation” (as defined in Section 7.3 below).

 

  (b) Any Participant entitled to a Severance Benefit (in accordance with Section 1.1(a) above) shall receive his Severance Benefit in the form of a lump-sum payment within 60 business days, or at such earlier time as required by applicable law, after his employment with the Company terminates.

 

1.2 Additional Benefits. A Participant entitled to receive a Severance Benefit shall also receive the following additional benefits:

 

  (a) The Company shall cause options to purchase Company stock (“Stock Options”) held by a Participant that are not fully vested and exercisable on the date of the Qualifying Termination to become fully vested and exercisable as of the date of such Qualifying Termination.

 

  (b) The Company shall cause unvested restricted shares of Company stock (the “Restricted Shares”) and unvested restricted stock units (the “RSUs”) held by a Participant on the date of the Qualifying Termination, that, in either case, are subject to vesting based solely on the Participant’s continued service to the Company, to become fully vested (and in the case of RSUs, settled) as of the date of such Qualifying Termination.


  (c) The number of shares of Company stock a Participant would have been entitled to receive had the performance goals been achieved at the 100% target rate in each of the then-ongoing performance-based restricted stock programs (PBRS) and performance stock unit programs (PSU), and/or any successor programs to the PBRS and PSU programs, shall be granted by the Company to such Participant on the date of the Qualifying Termination without any further vesting conditions.

 

  (d) The cash amount a Participant would have been entitled to receive had the performance goals been achieved at the 100% target rate in each of the then-ongoing performance-based restricted unit programs (PBRU), and/or any successor programs to the PBRU programs, shall be paid by the Company to such Participant on the date of the Qualifying Termination.

 

1.3 Reduction of Payments. If a Participant’s receipt of any payment and/or non-monetary benefit under this Plan (including, without limitation, the accelerated vesting of Stock Options, Restricted Shares, and/or awards under the PBRS, PBRU, and/or PSU programs, and any successor programs) (collectively, the “Payments”) would, in the determination of the Company, cause him to become subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Company shall reduce his Payments in the manner and in the amounts determined by the Company to be necessary to avoid the application of such excise tax (the “Reduced Amount”); provided, that the foregoing shall not apply if the Company determines that, if such Payments were not so reduced, the net amount of Payments that the Participant would receive after payment of such excise tax would be greater than the Reduced Amount. Any determinations by the Company pursuant to this Section 1.3 shall be binding upon the Company and the Participant.

 

1.4 Rights of Participants. Nothing contained herein shall be held or construed to create any liability or obligation on the Company to retain any Participant in its service or in a corporate officer position. All Participants shall remain subject to discharge or discipline to the same extent as if the Plan did not exist.

 

1.5 Release of Claims. All payments and benefits hereunder shall be delayed until the Participant executes and delivers to the Company within 45 days following his Qualifying Termination an irrevocable general release of all claims against the Company and its subsidiaries, affiliates, and related persons in a form provided by the Company. If a Participant fails to timely execute such release or timely revokes his acceptance of such release, the Participant shall not be entitled to any severance payments or benefits hereunder.

 

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ARTICLE II: FUNDING

2.1 Funding. The Plan shall be funded out of the general assets of the Company as and when benefits are payable under the Plan. All Participants shall be solely general creditors of the Company.

ARTICLE III: ADMINISTRATION OF THE PLAN

 

3.1 Plan Administrator. The general administration of the Plan shall be placed with the Compensation Committee of the Board of Directors of the Company (the “Board”) or an administrative committee appointed by the Board (the “Committee”).

 

3.2 Reimbursement of Expenses of Committee. The Company shall pay or reimburse the members of the Committee for all reasonable expenses incurred in connection with their duties hereunder.

 

3.3 Action by the Plan Committee. Decisions of the Committee shall be made by a majority of its members attending a meeting at which a quorum is present (which meeting may be held telephonically), or by written action in accordance with applicable law. No member of the Committee may act with respect to a matter which involves only that member.

 

3.4 Delegation of Authority. The Committee may delegate any and all of its powers and responsibilities hereunder to other persons by formal resolution filed with and accepted by the Board. Any such delegation shall not be effective until it is accepted by the Board and the persons designated and may be rescinded at any time by written notice from the Committee to the person to whom the delegation is made.

 

3.5 Retention of Professional Assistance. The Committee may employ such legal counsel, accountants and other persons as may be required in carrying out its work in connection with the Plan, and the Company shall pay the fees and expenses of such persons.

 

3.6 Accounts and Records. The Committee shall maintain such accounts and records regarding the fiscal and other transactions of the Plan, and such other data as may be required to carry out its functions under the Plan and to comply with all applicable laws.

 

3.7 Compliance with Applicable Law. The Company shall be deemed the administrator of the Plan for the purposes of any applicable law and shall be responsible for the preparation and filing of any required returns, reports, statements or other filings with appropriate governmental agencies. The Company shall also be responsible for the preparation and delivery of information to persons entitled to such information under any applicable law.

 

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3.8 Reimbursement of Expenses. If any contest or dispute shall arise under this Plan involving termination of a Participant’s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall, immediately after the date a court issues a final order from which no appeal can be taken, or with respect to which the time period to appeal has expired, reimburse such Participant for all reasonable legal fees and expenses, if any, paid by the Participant in connection with such contest or dispute (together with interest in an amount equal to the JP Morgan Chase & Co. prime rate from time to time in effect, such interest to begin to accrue on the dates Participant actually paid such fees and expenses through the date of payment thereof); provided, however, the Participant shall not be entitled to any reimbursement for his legal fees and expenses if a court has made a final determination that the Participant’s position was without merit.

ARTICLE IV: AMENDMENT AND TERMINATION

 

4.1 Amendment and Termination. The Company reserves the right to amend or terminate, in whole or in part, any or all of the provisions of this Plan by action of the Board at any time; provided, that, during the two-year period following a Change in Control, the Company shall no longer have the power to amend or terminate the Plan in any manner adverse to Participants, except for amendments to comply with changes in applicable law which do not reduce the benefits and payments due hereunder in the event of a Qualifying Termination; provided, further, that, in no event shall any amendment reducing the benefits provided hereunder or any Plan termination be effective until at least six months after the date of the applicable action by the Board.

ARTICLE V: SUCCESSORS

 

5.1 Successors. The Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Company, expressly and unconditionally to assume and agree to perform the Company’s obligations under this Plan, in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. In such event, the term “Company,” as used in this Plan, shall mean the Company, as applicable, as hereinbefore defined and any successor or assignee to the business or assets which by reason hereof becomes bound by the terms and provisions of this Plan.

ARTICLE VI: MISCELLANEOUS

 

6.1

No Duty to Mitigate/Set-off. No Participant entitled to receive a Severance Benefit shall be required to seek other employment or to attempt in any way to reduce any amounts payable to him pursuant to this Plan. The Severance Benefit payable hereunder shall not be reduced by any compensation earned by the Participant as a result of employment by another employer or otherwise. The

 

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  Company’s obligations to pay the Severance Benefits and to perform its obligations hereunder shall not be affected by any circumstances including without limitation, any set off, counterclaim, recoupment, defense or other right which the Company may have against the Participant.

 

6.2 Headings. The headings of the Plan are inserted for convenience of reference only and shall have no effect upon the meaning of the provisions hereof.

 

6.3 Use of Words. Whenever used in this instrument, a masculine pronoun shall be deemed to include the masculine and feminine gender, and a singular word shall be deemed to include the singular and plural, in all cases where the context so requires.

 

6.4 Controlling Law. The construction and administration of the Plan shall be governed the laws of the State of New York (without reference to rules relating to conflicts of law).

 

6.5 Withholding. The Company shall have the right to make such provisions as it deems necessary or appropriate to satisfy any obligations it reasonably believes it may have to withhold federal, state or local income or other taxes incurred by reason of payments pursuant to this Plan.

 

6.6 Severability. Should any provision of the Plan be deemed or held to be unlawful or invalid for any reason, such fact shall not adversely affect the other provisions of the Plan unless such determination shall render impossible or impracticable the functioning of the Plan, and in such case, an appropriate provision or provisions shall be adopted so that the Plan may continue to function properly.

 

6.7 Rights Under Other Plans, Policies, Practices and Agreements.

 

  (a) Other than as expressly provided herein, the Plan does not supersede any other plans, policies, and/or practices of the Company.

 

  (b) The Plan supersedes any other change in control severance plans, policies and/or practices of the Company as to the Participants; provided, that, the Plan shall not supersede any individual executed agreement or arrangement between a single Participant and the Company in effect on March 21, 2001 or thereafter, which agreement specifically addresses payments or benefits made or provided upon termination of employment or in connection with a Change in Control including, but not limited to, the agreements set out on Appendix “A” hereto (an “Additional Agreement”). If a Participant is due benefits or payments under both an Additional Agreement and the Plan and/or where the Plan and the applicable Additional Agreement have inconsistent or conflicting terms and conditions, the Participant shall receive the greater of the benefits and payments, and the more favorable terms and conditions to him, under the Additional Agreement and the Plan, determined on an item-by-item basis.

 

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6.8 Insurance. The Company shall continue to cover the Participants, or cause the Participants to be covered, under any director and officer insurance maintained after a Change in Control for directors and officers of the Company or its successor (whether by the Company or another entity) at no less of a level as that maintained by the Company or its successor for its directors and officers. Such coverage shall continue for any period during which the Participant may have any liability for his actions or omissions. Following a Change in Control and in addition to any rights under any other indemnification agreement, the Company or its successor shall indemnify the Participant to the fullest extent permitted by law against any claims, suits, judgments, expenses arising from, out of, or in connection with the Participant’s services as an officer or director of the Company, or as a fiduciary of any benefit plan of the Company.

 

6.9 Effectiveness of Plan. This Plan is effective as of [insert effective date of spin-off distribution].

ARTICLE VII: DEFINITIONS.

 

7.1 “Cause” shall mean: (A) gross negligence or willful misconduct by a Participant which is materially injurious to the Company, monetarily or otherwise; (B) misappropriation or fraud with regard to the Company or its assets; (C) conviction of, or the pleading of guilty or nolo contendere to, a felony involving the assets or business of the Company; or (D) willful and continued failure to substantially perform his duties after written notice by the Board. For purpose of the preceding sentence, no act or failure to act by a Participant shall be considered “willful” unless done or omitted to be done by such Participant in bad faith and without reasonable belief that the Participant’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, or based upon the advice of counsel for the Company, shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Company.

 

7.2

“Change in Control” shall mean the consummation of any of the following: (A) any “Person” (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), excluding the Company, any subsidiary of the Company, or any employee benefit plan sponsored or maintained by the Company (including any trustee of any such plan acting in his capacity as trustee), becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing 35% or more of the total combined voting power of the Company’s then outstanding securities; (B) the merger, consolidation or other business combination of the Company (a “Transaction”), other than a Transaction immediately following which the stockholders of the Company immediately prior to the Transaction continue to be

 

6


  the beneficial owners of securities of the resulting entity representing more than 65% of the voting power in the resulting entity, in substantially the same proportions as their ownership of Company voting securities immediately prior to the Transaction; or (C) the sale of all or substantially all of the Company’s assets, other than a sale immediately following which the stockholders of the Company immediately prior to the sale are the beneficial owners of securities of the purchasing entity representing more than 65% of the voting power in the purchasing entity, in substantially the same proportions as their ownership of Company voting securities immediately prior to the Transaction.

 

7.3 “Current Total Annual Compensation” shall be the sum of the following amounts: (A) the greater of a Participant’s highest rate of annual salary during the calendar year in which his employment terminates or such Participant’s highest rate of annual salary during the calendar year immediately prior to the year of such termination; and (B) the average of a Participant’s annual bonus compensation (prior to any bonus deferral election) earned in respect of the two most recent calendar years immediately preceding the calendar year in which the Participant’s employment terminated.

 

7.4 “Good Reason” shall mean the occurrence of any of the following events after a Change in Control without the Participant’s express written consent: (A) material diminution in the Participant’s position, duties, responsibilities or authority as of the date immediately prior to the Change in Control; or (B) a reduction in a Participant’s base compensation or a failure to provide incentive compensation opportunities at least as favorable in the aggregate as those provided immediately prior to the Change in Control; or (C) failure to provide employee benefits at least as favorable in the aggregate as those provided immediately prior to the Change in Control; or (D) a failure of any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) of the Company to assume in writing the obligations hereunder. A termination for Good Reason shall mean a termination by a Participant effected by written notice given by the Participant to the Company within 30 days after the occurrence of the Good Reason event, unless the Company shall, within 15 days after receiving such notice, take such action as is necessary to fully remedy such Good Reason event in which case the Good Reason event shall be deemed to have not occurred.

 

7.5 “Participant” shall mean an employee who is a corporate officer of the Company on the date of a Change in Control as a result of his election by the Board. Notwithstanding the foregoing, if an employee who is not a corporate officer on the date of a Change in Control reasonably demonstrates that, in contemplation of the Change in Control or at the request of a party which subsequently causes a Change in Control, the Company removed him from such office, such employee shall also be a Participant.

* * *

 

7

EX-10.7

Exhibit 10.7

CDK Global, Inc.

2014 Omnibus Award Plan

1. Purpose. The purpose of the CDK Global, Inc., 2014 Omnibus Award Plan is to provide a means through which the Company and its Affiliates may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors (and prospective directors, officers, employees, consultants and advisors) of the Company and its Affiliates can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company and its Affiliates and aligning their interests with those of the Company’s stockholders. This Plan document is an omnibus document which includes, in addition to the Plan, separate sub-plans (“Sub Plans”) that permit offerings of grants to employees of certain Designated Foreign Subsidiaries and other special purpose grants in connection with certain transactions. Offerings under the Sub Plans may be made in particular locations outside the United States of America and shall comply with local laws applicable to offerings in such foreign jurisdictions. The Plan shall be a separate and independent plan from the Sub Plans, but the total number of shares of Common Stock authorized to be issued under the Plan applies in the aggregate to both the Plan and the Sub Plans.

2. Definitions. The following definitions shall be applicable throughout the Plan.

(a) “Absolute Share Limit” has the meaning given such term in Section 5(b).

(b) “Account” means the bookkeeping account established and maintained by the Company for each Participant under Section 10(b) of the Plan.

(c) “Affiliate” means (i) any person or entity that directly or indirectly controls, is controlled by or is under common control with the Company and/or (ii) to the extent provided by the Committee, any person or entity in which the Company has a significant interest. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any person or entity, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person or entity, whether through the ownership of voting or other securities, by contract or otherwise.

(d) “Annual Retainer” means the annual retainer for Non-Employee Directors, as set from time to time by the Board.

(e) “Annual Retainer Dollar Amount” means a dollar amount established by the Board from time to time as the amount of the Annual Retainer that shall be paid in the form of Deferred Stock Units.

(f) “Award” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-Based Award and Performance Compensation Award granted under the Plan.

(g) “Board” means the Board of Directors of the Company.

(h) “Cause” means, in the case of a particular Award, unless the applicable Award agreement states otherwise, (i) the Company or an Affiliate having “cause” to terminate a Participant’s employment or service, as defined in any employment or consulting agreement between the Participant and the Company or an Affiliate in effect at the time of such termination or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “Cause” contained therein), (A) the good faith determination by the Committee that the Participant has ceased to perform his or her duties to the Company or an Affiliate (other than as a result of his or her incapacity due to physical or mental illness or injury), which failure amounts to an intentional and extended neglect of his or her duties to such party, provided that no such failure shall constitute Cause unless the Participant has been given notice of such failure and (if cure is reasonably possible) has not cured such act or omission within 15 days following receipt of such

 

1


notice, (B) the Committee’s good faith determination that the Participant has engaged or is about to engage in conduct injurious to the Company or an Affiliate, (C) the Participant having been convicted of, or plead guilty or no contest to, a felony or any crime involving as a material element fraud or dishonesty, (D) the consistent failure of the Participant to follow the lawful instructions of the Board or his or her direct superiors, which failure amounts to an intentional and extended neglect of his or her duties to the Company or an Affiliate thereof, or (E) in the case of a Participant who is a Non-Employee Director, the Participant engaging in any of the activities described in clauses (A) through (D) above. Any determination of whether Cause exists shall be made by the Committee in its sole discretion.

(i) “Change in Control” shall, in the case of a particular Award, unless the applicable Award agreement states otherwise or contains a different definition of “Change in Control,” be deemed to occur upon: (A) any “Person” (as defined in Section 3(a)(9) of the Exchange Act), excluding the Company, any Subsidiary of the Company, or any employee benefit plan sponsored or maintained by the Company (including any trustee of any such plan acting in his or her capacity as trustee), becoming the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing 35% or more of the total combined voting power of the Company’s then outstanding securities; (B) the consummation of a merger, consolidation or other business combination of the Company (a “Transaction”), other than a Transaction immediately following which the stockholders of the Company immediately prior to the Transaction continue to be the beneficial owners of securities of the resulting entity representing more than 65% of the voting power in the resulting entity, in substantially the same proportions as their ownership of Company voting securities immediately prior to the Transaction; or (C) the consummation of a sale of all or substantially all of the Company’s assets, other than a sale immediately following which the stockholders of the Company immediately prior to the sale are the beneficial owners of securities of the purchasing entity representing more than 65% of the voting power in the purchasing entity, in substantially the same proportions as their ownership of Company voting securities immediately prior to the Transaction.

(j) “Code” means the Internal Revenue Code of 1986, as amended, and any successor thereto. Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations or guidance.

(k) “Committee” means a committee of at least two people as the Board may appoint to administer the Plan or, if no such committee has been appointed by the Board, the Board.

(l) “Committee Retainer” means the retainer paid to Non-Employee Directors in respect of service on a committee of the Board.

(m) “Common Stock” means the common stock, par value $0.01 per share, of the Company (and any stock or other securities into which such common stock may be converted or into which it may be exchanged).

(n) “Company” means CDK Global, Inc., a Delaware corporation, and any successor thereto.

(o) “Date of Grant” means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization.

(p) “Deferred Stock Units” has the meaning given such term in Section 10(b)(i) of the Plan.

(q) “Designated Foreign Subsidiaries” means all Affiliates organized under the laws of any jurisdiction or country other than the United States of America that may be designated by the Board or the Committee from time to time.

(r) “Disability” means, unless in the case of a particular Award the applicable Award agreement states otherwise, the Company or an Affiliate having cause to terminate a Participant’s employment or service on account of “disability,” as defined in any then-existing employment, consulting or other similar agreement between the Participant and the Company or an Affiliate or, in the absence of such an employment, consulting or other similar agreement, a condition entitling the Participant to receive benefits under a long-term

 

2


disability plan of the Company or an Affiliate, or, in the absence of such a plan, the complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which a Participant was employed or served when such disability commenced, as determined by the Committee based upon medical evidence acceptable to it.

(s) “Distribution Date” means, with respect to each Participant (or his beneficiary, if the Participant dies before distribution of his Account), the date on which distribution in respect of his Account interests in accordance with Section 10(b)(viii) commences. Unless otherwise provided by the Committee in a manner that complies with Section 409A of the Code, a Participant’s Distribution Date shall be on the thirtieth day following the date of such Participant’s Separation From Service.

(t) “Dividend Equivalents” means, with respect to each Deferred Stock Unit, an amount equal to the cash dividends, if any, which would have been paid with respect to such Deferred Stock Unit, if such Deferred Stock Unit were a share of Common Stock.

(u) “Effective Date” means [insert effective date of spin-off of the Company from ADP].

(v) “Elective Amount” means the portion or portions of the Annual Retainer and/or the Committee Retainer determined under Section 10(b)(ii) of the Plan in respect of services for any particular year which may be paid to the Non-Employee Director either in cash or in Deferred Stock Units at the election of the Non-Employee Director.

(w) “Eligible Director” means a person who is (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, (ii) an “outside director” within the meaning of Section 162(m) of the Code and (iii) an “independent director” under the rules of the NASDAQ or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted, or a person meeting any similar requirement under any successor rule or regulation.

(x) “Eligible Person” means any (i) individual employed by the Company or an Affiliate, or any former employee of the Company or an Affiliate who was an employee of the Company or an Affiliate at the time a Performance Compensation Award was granted and at the conclusion of the corresponding Performance Period; provided, however, that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director or officer of the Company or an Affiliate; (iii) consultant or advisor to the Company or an Affiliate who may be offered securities registrable pursuant to a registration statement on Form S-8 under the Securities Act; or (iv) any prospective employees, directors, officers, consultants or advisors who have accepted offers of employment or consultancy from the Company or its Affiliates (and would satisfy the provisions of clauses (i) through (iii) above once he or she begins employment with or providing services to the Company or its Affiliates), who, in the case of each of clauses (i) through (iv) above has entered into an Award agreement or who has received written notification from the Committee or its designee that they have been selected to participate in the Plan.

(y) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.

(z) “Exercise Price” has the meaning given such term in Section 7(b) of the Plan.

(aa) “Fair Market Value” means, on a given date, (i) if the Common Stock is listed on a national securities exchange, the closing sales price of the Common Stock reported on the primary exchange on which the Common Stock is listed and traded on such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported; (ii) if the Common Stock is not listed on any national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the average between the closing bid price and ask price reported on such date, or, if there is no such sale on that date,

 

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then on the last preceding date on which a sale was reported; or (iii) if the Common Stock is not listed on a national securities exchange or quoted in an inter-dealer quotation system on a last sale basis, the amount determined by the Committee in good faith to be the fair market value of the Common Stock.

(bb) “Immediate Family Members” shall have the meaning set forth in Section 14(b).

(cc) “Incentive Stock Option” means an Option which is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan.

(dd) “Indemnifiable Person” shall have the meaning set forth in Section 4(e) of the Plan.

(ee) “Meeting Fees” shall mean fees a Non-Employee Director earns for attendance at Board meetings and committee meetings, as well as fees a Non-Employee Director earns for serving as the chairperson of a committee of the Board.

(ff) “NASDAQ” means the NASDAQ Global Select Market.

(gg) “Negative Discretion” shall mean the discretion authorized by the Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award consistent with Section 162(m) of the Code.

(hh) “Nonqualified Stock Option” means an Option which is not designated by the Committee as an Incentive Stock Option.

(ii) “Non-Employee Director” means a member of the Board who is not an employee of the Company or any Affiliate.

(jj) “Option” means an Award granted under Section 7 of the Plan.

(kk) “Option Period” has the meaning given such term in Section 7(c) of the Plan.

(ll) “Other Stock-Based Award” means an Award granted under Section 10 of the Plan.

(mm) “Participant” means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award.

(nn) “Payment Date” means an annual date established by the Board from time to time for the crediting of the annual retainer to Non-Employee Directors in the form of Deferred Stock Units.

(oo) “Performance Compensation Award” shall mean any Award designated by the Committee as a Performance Compensation Award pursuant to Section 11 of the Plan.

(pp) “Performance Criteria” shall mean the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any Performance Compensation Award under the Plan.

(qq) “Performance Formula” shall mean, for a Performance Period, the one or more objective formulae applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.

(rr) “Performance Goals” shall mean, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria.

(ss) “Performance Period” shall mean the one or more periods of time of not less than 12 months, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Compensation Award.

 

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(tt) “Permitted Transferee” shall have the meaning set forth in Section 14(b) of the Plan.

(uu) “Person” has the meaning given such term in the definition of “Change in Control”.

(vv) “Plan” means this CDK Global, Inc., 2014 Omnibus Award Plan.

(xx) “Restricted Period” means the period of time determined by the Committee during which an Award is subject to restrictions or, as applicable, the period of time within which performance is measured for purposes of determining whether an Award has been earned.

(yy) “Restricted Stock” means Common Stock, subject to certain specified restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.

(zz) “Restricted Stock Unit” means an unfunded and unsecured promise to deliver shares of Common Stock, cash, other securities or other property, subject to certain restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.

(aaa) “SAR Period” has the meaning given such term in Section 8(c) of the Plan.

(bbb) “Securities Act” means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.

(ccc) “Separation From Service” shall have the meaning set forth in Section 409A(a)(2)(A)(i) of the Code.

(ddd) “Specified Employee” means a Participant who meets the definition of “specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code.

(eee) “Stock Appreciation Right” or “SAR” means an Award granted under Section 8 of the Plan.

(fff) “Strike Price” has the meaning given such term in Section 8(b) of the Plan.

(ggg) “Subsidiary” means, with respect to any specified Person:

(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Company voting securities (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2) any partnership (or any comparable foreign entity) (a) the sole general partner (or functional equivalent thereof) or the managing general partner of which is such Person or Subsidiary of such Person or (b) the only general partners (or functional equivalents thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

(hhh) “Substitute Award” has the meaning given such term in Section 5(e).

(iii) “Sub Plans” has the meaning given such term in Section 1.

(jjj) “Transaction” has the meaning given such term in the definition of “Change in Control”.

 

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3. Effective Date; Duration. The Plan shall be effective as of the Effective Date. The expiration date of the Plan, on and after which date no Awards may be granted hereunder, shall be the tenth anniversary of the Effective Date; provided, however, that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards.

4. Administration. (a) The Committee shall administer the Plan. To the extent required to comply with the rules of the NASDAQ or any other securities exchange or inter-dealer system on which the Common Stock is listed or quoted, the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan) or necessary to obtain the exception for performance-based compensation under Section 162(m) of the Code, as applicable, it is intended that each member of the Committee shall, at the time he or she takes any action with respect to an Award under the Plan, be an Eligible Director. However, the fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.

(b) Subject to the provisions of the Plan and applicable law, the Committee shall have the sole and plenary authority, in addition to other express powers and authorizations conferred on the Committee by the Plan, to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of shares of Common Stock to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant or of the Committee; (vii) compute the number of Deferred Stock Units to be credited to the Accounts of Participants; (viii) interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; (ix) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan; (x) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards (including previously deferred Awards), and accelerate and determine payouts, if any, in respect of Awards with incomplete Performance Periods, in each case upon a Change in Control, death, Disability or retirement (or on any other termination of employment) of a Participant; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.

(c) Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. Without limiting the generality of the foregoing, the Committee may delegate to one or more officers of the Company or any Affiliate the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Committee herein, and which may be so delegated as a matter of law, except for grants of Awards to persons (i) subject to Section 16 of the Exchange Act or (ii) who are, or who are reasonably expected to be, “covered employees” for purposes of Section 162(m) of the Code.

(d) Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award or any documents evidencing Awards granted pursuant to the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all persons or entities, including, without limitation, the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company.

 

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(e) No member of the Board, the Committee or any employee or agent of the Company (each such person, an “Indemnifiable Person”) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting bad faith, fraud or a willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken or determination made under the Plan or any Award agreement and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, provided that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts or omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s bad faith, fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Company’s Certificate of Incorporation or Bylaws. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such Indemnifiable Persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold them harmless.

(f) Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer the Plan with respect to such Awards. In any such case, the Board shall have all the authority granted to the Committee under the Plan.

5. Grant of Awards; Shares Subject to the Plan; Limitations. (a) The Committee may, from time to time, grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Other Stock-Based Awards and/or Performance Compensation Awards to one or more Eligible Persons.

(b) Awards granted under the Plan shall be subject to the following limitations: (i) subject to Section 12 of the Plan, no more than [                ] shares of Common Stock may be delivered in the aggregate pursuant to Awards granted under the Plan (such aggregate total, the “Absolute Share Limit”); (ii) subject to Section 12 of the Plan, grants of Options or SARs under the Plan in respect of no more than [                ] shares of Common Stock may be made to any single Participant during any consecutive 36-month period; (iii) subject to Section 12 of the Plan, no more than the number of shares of Common Stock equal to the Absolute Share Limit may be delivered in the aggregate pursuant to the exercise of Incentive Stock Options granted under the Plan; (iv) subject to Section 12 of the Plan, no more than [                ] shares of Common Stock may be delivered in respect of Performance Compensation Awards granted pursuant to Section 11 of the Plan to any single Participant for a single fiscal year during a Performance Period, or in the event such Performance Compensation Award is paid in cash, other securities, other Awards or other property, no more than the Fair Market Value of such shares of Common Stock on the last day of the Performance Period to which such Award relates; [and] (v) the maximum amount that can be paid to any single Participant for a single fiscal year during a Performance Period pursuant to a cash bonus Award described in Section 11(a) of the Plan shall be $[        ] [; and (vi) the maximum amount (based on the Fair Market Value of shares of Common Stock on the date of grant) of Awards that may be granted in any single fiscal year to any Eligible Director shall be $[        ]].

(c) Shares of Common Stock shall be deemed to have been used in settlement of Awards whether or not they are actually delivered; provided, however, that in the case of a SAR settled in shares of Common Stock, only the net shares actually delivered in respect of an Award shall be deemed to have been used in settlement of the Award; provided, further, that if shares of Common Stock issued upon exercise, vesting or settlement of an Award, or shares of Common Stock owned by a Participant are withheld by, or surrendered or tendered to the Company (either directly or by means of attestation) in payment of the

 

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Exercise Price of an Award or any taxes required to be withheld in respect of an Award, in each case, in accordance with the terms and conditions of the Plan and any applicable Award agreement, such withheld, surrendered or tendered shares shall again become available for other Awards under the Plan; provided, further, that in no event shall such shares increase the number of shares of Common Stock that may be delivered pursuant to Incentive Stock Options granted under the Plan. If and to the extent an Award under the Plan expires, terminates or is canceled or forfeited for any reason whatsoever, or is settled in cash, the shares covered by such Award shall again become available for other Awards under the Plan.

(d) Shares of Common Stock delivered by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase, or a combination of the foregoing.

(e) Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired directly or indirectly by the Company or with which the Company combines (“Substitute Awards”). Substitute Awards shall not be counted against the Absolute Share Limit; provided, that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of shares of Common Stock available for Awards of Incentive Stock Options under the Plan.

6. Eligibility. Participation shall be limited to Eligible Persons.

7. Options. (a) Generally. Each Option granted under the Plan shall be evidenced by an Award agreement. Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award agreement expressly states that the Option is intended to be an Incentive Stock Option. Incentive Stock Options shall be granted only to Eligible Persons who are employees of the Company and its Affiliates, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code, provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan.

(b) Exercise Price. Except as otherwise provided by the Committee in the case of Substitute Awards, the exercise price (“Exercise Price”) per share of Common Stock for each Option shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant); provided, however, that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Affiliate, the Exercise Price per share shall be no less than 110% of the Fair Market Value per share on the Date of Grant.

(c) Vesting and Expiration. Options shall vest and become exercisable in such manner and on such date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the “Option Period”); provided, however, that the Option Period shall not exceed five years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Affiliate; provided, further, that notwithstanding any vesting dates set by the Committee, and consistent with the Committee’s power under Section 4(b), the Committee may, in its sole discretion, accelerate the exercisability of any Option upon a Change in Control, death, Disability or retirement (or on any other termination of employment) of a Participant, which acceleration shall not affect the terms and conditions of such Option other than with respect to exercisability.

 

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(d) Method of Exercise and Form of Payment. No shares of Common Stock shall be delivered pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any Federal, state, local and non-U.S. income and employment taxes required to be withheld. Options which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Option accompanied by payment of the Exercise Price. The Exercise Price shall be payable (i) in cash, check, cash equivalent and/or shares of Common Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual delivery of such shares to the Company); provided, that such shares of Common Stock are not subject to any pledge or other security interest; (ii) a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise deliverable in respect of an Option that are needed to pay the Exercise Price and all applicable required withholding taxes; (iii) by such other method as the Committee may permit in its sole discretion, including without limitation: (A) in other property having a fair market value on the date of exercise equal to the Exercise Price or (B) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price. Notwithstanding the foregoing, if on the last day of the Option Period, the Fair Market Value exceeds the Exercise Price, the Participant has not exercised the Option, and the Option has not expired, such Option shall be deemed to have been exercised by the Participant on such last day by means of a net exercise and the Company shall deliver to the Participant the number of shares of Common Stock for which the Option was deemed exercised less such number of shares of Common Stock required to be withheld to cover the payment of the Exercise Price and all applicable required withholding taxes. Any fractional shares of Common Stock shall be settled in cash.

(e) Notification upon Disqualifying Disposition of an Incentive Stock Option. Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date he or she makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (A) two years after the Date of Grant of the Incentive Stock Option or (B) one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Common Stock.

(f) Compliance With Laws, etc. Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner which the Committee determines would violate the Sarbanes-Oxley Act of 2002, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded.

8. Stock Appreciation Rights. (a) Generally. Each SAR granted under the Plan shall be evidenced by an Award agreement. Each SAR so granted shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. Any Option granted under the Plan may include tandem SARs. The Committee also may award SARs to Eligible Persons independent of any Option.

(b) Strike Price. Except as otherwise provided by the Committee in the case of Substitute Awards, the strike price (“Strike Price”) per share of Common Stock for each SAR shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant). Notwithstanding the foregoing, a SAR granted in tandem with (or in substitution for) an Option previously granted shall have a Strike Price at least equal to the Exercise Price of the corresponding Option.

 

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(c) Vesting and Expiration. A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option shall vest and become exercisable and shall expire in such manner and on such date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the “SAR Period”); provided, however, that notwithstanding any vesting dates set by the Committee, and consistent with the Committee’s power under Section 4(b) the Committee may, in its sole discretion, accelerate the exercisability of any SAR upon a Change in Control, death, Disability or retirement (or on any other termination of employment) of a Participant, which acceleration shall not affect the terms and conditions of such SAR other than with respect to exercisability.

(d) Method of Exercise. SARs which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded. Notwithstanding the foregoing, if on the last day of the Option Period (or in the case of a SAR independent of an option, the SAR Period), the Fair Market Value exceeds the Strike Price, the Participant has not exercised the SAR or the corresponding Option (if applicable), and neither the SAR nor the corresponding Option (if applicable) has expired, such SAR shall be deemed to have been exercised by the Participant on such last day and the Company shall make the appropriate payment therefor.

(e) Payment. Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of shares subject to the SAR that are being exercised multiplied by the excess, if any, of the Fair Market Value of one share of Common Stock on the exercise date over the Strike Price, less an amount equal to any Federal, state, local and non-U.S. income and employment taxes required to be withheld. The Company shall pay such amount in cash, in shares of Common Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee. Any fractional shares of Common Stock shall be settled in cash.

(f) Substitution of SARs for Nonqualified Stock Options. The Committee shall have the authority in its sole discretion to substitute, without the consent of the affected Participant or any holder or beneficiary of SARs, SARs settled in shares of Common Stock (or settled in shares or cash in the sole discretion of the Committee) for outstanding Nonqualified Stock Options, provided that (i) the substitution shall not otherwise result in a modification of the terms of any such Nonqualified Stock Option, (ii) the number of shares of Common Stock underlying the substituted SARs shall be the same as the number of shares of Common Stock underlying such Nonqualified Stock Options and (iii) the Strike Price of the substituted SARs shall be equal to the Exercise Price of such Nonqualified Stock Options; provided, however, that if, in the opinion of the Company’s independent public auditors, the foregoing provision creates adverse accounting consequences for the Company, such provision shall be considered null and void.

9. Restricted Stock and Restricted Stock Units. (a) Generally. Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award agreement. Each Restricted Stock and Restricted Stock Unit grant shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement.

(b) Stock Certificates and Book Entry; Escrow or Similar Arrangement. Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to be issued or shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Company’s directions and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable, and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute an agreement evidencing an Award of Restricted Stock and, if applicable,

 

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an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 9 and the applicable Award agreement, the Participant generally shall have the rights and privileges of a stockholder as to such Restricted Stock, including without limitation the right to vote such Restricted Stock. To the extent shares of Restricted Stock are forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company.

(c) Vesting; Acceleration of Lapse of Restrictions. The Restricted Period with respect to Restricted Stock and Restricted Stock Units shall lapse in such manner and on such date or dates determined by the Committee and the Committee shall determine the treatment of the unvested portion of Restricted Stock and Restricted Stock Units upon termination of employment or service of the Participant granted the applicable Award. Consistent with the Committee’s power under Section 4(b), the Committee may in its sole discretion accelerate the lapse of any or all of the restrictions on the Restricted Stock and Restricted Stock Units upon a Change in Control, death, Disability or retirement (or on any other termination of employment) of a Participant, which acceleration shall not affect any other terms and conditions of such Awards.

(d) Delivery of Restricted Stock and Settlement of Restricted Stock Units. (i) Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his or her beneficiary, without charge, the stock certificate (or, if applicable, a notice evidencing a book entry notation) evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.

(ii) Unless otherwise provided by the Committee in an Award agreement, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or his or her beneficiary, without charge, one share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit; provided, however, that the Committee may, in its sole discretion, elect to (i) pay cash or part cash and part Common Stock in lieu of delivering only shares of Common Stock in respect of such Restricted Stock Units or (ii) defer the delivery of Common Stock (or cash or part Common Stock and part cash, as the case may be) beyond the expiration of the Restricted Period. If a cash payment is made in lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units. To the extent provided in an Award agreement, the holder of outstanding Restricted Stock Units shall be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock) either in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends (and, with respect to Restricted Stock Units the vesting of which is based on the achievement of performance goals, such dividend equivalent payments shall be payable upon the release of restrictions on such Restricted Stock Units, and, if such Restricted Stock Units are forfeited, the Participant shall have no right to such dividend equivalent payments).

(e) Legends on Restricted Stock. Each certificate representing Restricted Stock awarded under the Plan, if any, shall bear a legend substantially in the form of the following, in addition to any other information the Company deems appropriate, until the lapse of all restrictions with respect to such Common Stock:

TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE CDK GLOBAL, INC., 2014 OMNIBUS

 

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AWARD PLAN AND A RESTRICTED STOCK AWARD AGREEMENT, BETWEEN CDK GLOBAL, INC., AND PARTICIPANT. A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF CDK GLOBAL, INC.

10. Other Stock-Based Awards. (a) Generally. The Committee may issue unrestricted Common Stock, rights under the Company’s Performance-Based Restricted Stock Program or other incentive programs that, subject to the terms and conditions thereof, provide for the right to receive grants of Awards at a future date, or other Awards denominated in Common Stock, under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts as the Committee shall from time to time in its sole discretion determine. Each Other Stock-Based Award granted under the Plan shall be evidenced by an Award agreement. Each Other Stock-Based Award so granted shall be subject to such conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement.

(b) Non-Employee Director Deferrals. (i) Generally. Non-Employee Directors may be granted Other Stock-Based Awards in the form of deferred stock units (“Deferred Stock Units”) in accordance with the provisions of this Section 10, and references to “Participant” in this Section 10(b) shall be deemed to refer only to Non-Employee Directors. Pursuant to this Section 10(b), Participants (A) shall receive non-elective payment of the Annual Retainer Dollar Amount in the form of Deferred Stock Units that entitle the Participants to receive, under the terms and conditions described herein, shares of Common Stock, (B) may defer receipt of all or part of the Elective Amount and (C) may defer receipt of all or a part of the Meeting Fees.

(ii) Elections to Defer Annual Retainer and Committee Retainer. The Board shall determine the Elective Amount in its sole discretion from time to time. A Participant who wishes to have any part of the Elective Amount for any given calendar year paid as Deferred Stock Units on his or her Distribution Date shall irrevocably elect such medium of payment prior to the commencement of the calendar year during which the Elective Amount is to be earned. Such election shall be made in accordance with procedures and rules promulgated by the Board or its delegee for such purpose. Any election made under this Section 10(b)(ii) shall apply to the Participant’s Elective Amount earned in future calendar years unless and until the Participant makes a later election in accordance with the terms of this Section 10(b)(ii).

(iii) Elections to Defer Meeting Fees. A Participant who wishes to have all or any part of his Meeting Fees for a given calendar year deferred and paid to him on his Distribution Date shall irrevocably elect payment of such Meeting Fees on a deferred basis prior to the commencement of the calendar year during which the Meeting Fees are to be earned. Such election shall be made in accordance with procedures established by the Board or its delegee for such purpose. Any election made under this Section 10(b)(iii) shall apply to Meeting Fees earned in future calendar years unless and until the Participant makes a later election in accordance with the terms of this Section 10(b)(iii). Such election shall indicate the portion, if any, of deferred Meeting Fees to be paid in cash and the portion, if any, to be paid as Deferred Stock Units and shall also include an irrevocable designation of the form of payment to be used when such deferred Meeting Fees that are to be payable in cash are distributed on the Distribution Date. A Participant shall elect distribution of any deferred Meeting Fees payable in cash either in the form of a single lump sum payment or in the form of substantially equal annual payments to be made over a period of two to ten years. If the Participant has not designated a form of payment prior to the beginning of the calendar year in which the Meeting Fees subject to such election are earned, such Participant shall be deemed to have irrevocably elected to receive payment of such deferred Meeting Fees in a single lump sum on his Distribution Date.

(iv) Crediting of Deferred Stock Units. On each Payment Date, the Account of each Participant shall be credited with that number of Deferred Stock Units (rounded down to the nearest whole share) in respect of a number of shares of Common Stock with a Fair Market Value equal to (A) the Participant’s Annual Retainer Dollar Amount and (B) the portion of the Participant’s Elective Amount payable in Deferred Stock Units, determined as of the relevant Payment Date. As soon as administratively practicable following the Board or applicable committee meeting at which Meeting Fees are earned, the Account of each Participant who has elected to have a portion of his Meeting Fees paid in Deferred Stock Units shall be credited with that number of Deferred Stock Units (rounded down to the nearest whole share) in respect of a number of

 

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shares of Common Stock with a Fair Market Value equal to the dollar amount of the portion of such Meeting Fees that such Participant has elected to receive in Deferred Stock Units, determined as of the date of the relevant meeting in respect of which the Meeting Fees were earned.

(v) Vesting. The interest of each Participant in any benefit payable with respect to an Account hereunder shall be at all times fully vested and non-forfeitable. Notwithstanding the previous sentence, a Participant’s interest in his Account constitutes an unsecured promise of the Company, and a Participant shall have only the rights of a general unsecured creditor of the Company with respect to his Account.

(vi) Dividend Equivalents. Each Account shall be credited with Dividend Equivalents on each date a dividend is paid on Common Stock, in respect of the Deferred Stock Units credited to such Account on such payment date. Dividend Equivalents credited to an Account shall accrue interest (compounding annually) from the date of such crediting through the Distribution Date, with the applicable interest rate for each twelve month period beginning on November 1 during such period, or any applicable portion thereof, being the rate for five-year U.S. Treasury Notes published in The Wall Street Journal (or, in the absence of such reference, such alternate publication as the Board may select from time to time) on the first business day of November of such twelve month period plus 0.50%, rounded up to the nearest 0.25%.

(vii) Crediting of Meeting Fees Payable in Cash. Deferrals of Meeting Fees to be paid in cash shall be credited to the Account of the Participant as soon as administratively practicable following the Board or applicable committee meeting at which such Meeting Fees were earned. The portion of a Participant’s Account attributable to deferrals of Meeting Fees with respect to which the Participant elected under Section 10(b)(iii) a distribution in cash on his Distribution Date shall be adjusted by crediting such portion of the Account with interest quarterly in the manner set forth in Section 10(b)(vi).

(viii) Distributions. Except as otherwise provided in this Section 10(b)(viii), on his Distribution Date, each Participant shall receive (i) a number of shares of Common Stock equal to the number of Deferred Stock Units in such Participant’s Account, (ii) a cash payment equal to the accrued Dividend Equivalents, plus interest thereon as of the Distribution Date and (iii) a cash payment (or series of payments as determined in accordance with Section 10(b)(iii)) equal to the credited Meeting Fees with respect to which the Participant elected under Section 10(b)(iii) a distribution in cash on his Distribution Date plus interest thereon as of the Distribution Date. Solely to the extent required by Section 409A of the Code, a distribution in respect of an Account to a Participant who is determined to be a Specified Employee shall not be actually paid before the date which is 6 months after the Specified Employee’s Separation From Service (or, if earlier, the date of death of the Specified Employee). Any distribution to any Participant or beneficiary in accordance with the provisions of this Section 10(b)(viii) shall be in full satisfaction of all claims under the Plan against the Company and the Board. The Board may require any Participant or beneficiary, as a condition to payment, to execute a receipt and release to such effect.

11. Performance Compensation Awards. (a) Generally. The Committee shall have the authority, at the time of grant of any Award described in Sections 9 and 10 of the Plan, to designate such Award as a Performance Compensation Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code. The Committee shall also have the authority to make an award of a cash bonus to any Participant and designate such Award as a Performance Compensation Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code. Notwithstanding anything in the Plan to the contrary, if the Company determines that a Participant who has been granted an Award designated as a Performance Compensation Award is not (or is no longer) a “covered employee” (within the meaning of Section 162(m) of the Code), the terms and conditions of such Award may be modified without regard to any restrictions or limitations set forth in this Section 11 (but subject otherwise to the provisions of Section 13 of the Plan).

(b) Discretion of Committee with Respect to Performance Compensation Awards. With regard to a particular Performance Period, the Committee shall have sole discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) that is (are) to apply and the Performance Formula. Within the first 90 days of a

 

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Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence and record the same in writing.

(c) Performance Criteria. The Performance Criteria that will be used to establish the Performance Goal(s) may be based on the attainment of specific levels of performance of the Company (and/or one or more Affiliates, divisions or operational units, or any combination of the foregoing) and shall be limited to the following: (i) net earnings or net income (before or after taxes); (ii) basic or diluted earnings per share (before or after taxes); (iii) net revenue or net revenue growth; (iv) gross revenue, gross revenue growth, gross profit or gross profit growth; (v) net operating profit (before or after taxes); (vi) return measures (including, but not limited to, return on investment, assets, capital, invested capital, equity, or sales); (vii) cash flow measures (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital); (viii) earnings before or after taxes, interest, depreciation and/or amortization; (ix) gross or operating margins; (x) productivity ratios; (xi) share price (including, but not limited to, growth measures and total stockholder return); (xii) expense targets; (xiii) operating efficiency; (xiv) objective measures of customer satisfaction; (xv) working capital targets; (xvi) measures of economic value added; (xvii) inventory control; (xviii) enterprise value; (xix) sales; (xx) stockholder return; (xxi); client retention; (xxii) competitive market metrics; (xxiii) employee retention; (xxiv) timely completion of new product rollouts; (xxv) timely launch of new facilities; (xxvi) objective measures of personal targets, goals or completion of projects (including, but not limited to, succession and hiring projects, completion of specific acquisitions, reorganizations or other corporate transactions, expansions of specific business operations and meeting divisional or project budgets); or (xxvii) any combination of the foregoing. Any one or more of the Performance Criteria may be used on an absolute or relative basis to measure the performance of the Company and/or one or more Affiliates as a whole or any divisional or operational unit(s) of the Company and/or one or more Affiliates or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph. To the extent required under Section 162(m) of the Code, the Committee shall, within the first 90 days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period.

(d) Modification of Performance Goal(s). In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such alterations, the Committee shall have sole discretion to make such alterations without obtaining stockholder approval. Unless otherwise determined by the Committee at the time a Performance Compensation Award is granted, the Committee shall, during the first 90 days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), or at any time thereafter to the extent the exercise of such authority at such time would not cause the Performance Compensation Awards granted to any Participant for such Performance Period to fail to qualify as “performance-based compensation” under Section 162(m) of the Code, adjust or modify the calculation of a Performance Goal for such Performance Period, based on and in order to appropriately reflect the following events: (i) asset write-downs; (ii) litigation or claim judgments or settlements; (iii) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring programs; (v) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 (or any successor pronouncement thereto) and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year; (vi) acquisitions or divestitures; (vii) any other specific unusual or nonrecurring events, or objectively determinable category thereof; (viii) foreign exchange gains and losses; and (ix) a change in the Company’s fiscal year.

(e) Payment of Performance Compensation Awards. (i) Condition to Receipt of Payment. Unless otherwise provided in the applicable Award agreement, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.

 

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(ii) Limitation. Unless otherwise provided in the applicable Award agreement, a Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that: (A) the Performance Goals for such period are achieved; and (B) all or some of the portion of such Participant’s Performance Compensation Award has been earned for the Performance Period based on the application of the Performance Formula to such achieved Performance Goals.

(iii) Certification. Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the amount of each Participant’s Performance Compensation Award actually payable for the Performance Period and, in so doing, may apply Negative Discretion.

(iv) Use of Negative Discretion. In determining the actual amount of an individual Participant’s Performance Compensation Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion if, in its sole judgment, such reduction or elimination is appropriate. Unless otherwise provided in the applicable Award agreement, the Committee shall not have the discretion to (A) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained; or (B) increase a Performance Compensation Award above the applicable limitations set forth in Section 5 of the Plan.

(f) Timing of Award Payments. Unless otherwise provided in the applicable Award agreement, Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 11. Any Performance Compensation Award that has been deferred shall not (between the date as of which the Award is deferred and the payment date) increase (i) with respect to a Performance Compensation Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Committee or (ii) with respect to a Performance Compensation Award that is payable in shares of Common Stock, by an amount greater than the appreciation of a share of Common Stock from the date such Award is deferred to the payment date. Unless otherwise provided in an Award agreement, any Performance Compensation Award that is deferred and is otherwise payable in shares of Common Stock shall be credited (during the period between the date as of which the Award is deferred and the payment date) with dividend equivalents (in a manner consistent with the methodology set forth in the last sentence of Section 9(d)(ii)).

12. Changes in Capital Structure and Similar Events. In the event of (a) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire shares of Common Stock or other securities of the Company, or other similar corporate transaction or event (including, without limitation, a Change in Control) that affects the shares of Common Stock, or (b) unusual or nonrecurring events (including, without limitation, a Change in Control) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange or inter-dealer quotation system, accounting principles or law, such that in either case an adjustment is determined by the Committee in its sole discretion to be necessary or appropriate, then the Committee shall make any such adjustments in such manner as it may deem equitable, including without limitation, any or all of the following:

(i) adjusting any or all of (A) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) which may be delivered in respect

 

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of Awards or with respect to which Awards may be granted under the Plan (including, without limitation, adjusting any or all of the limitations under Section 5 of the Plan) and (B) the terms of any outstanding Award, including, without limitation, (1) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate, (2) the Exercise Price or Strike Price with respect to any Award or (3) any applicable performance measures (including, without limitation, Performance Criteria and Performance Goals);

(ii) providing for a substitution or assumption of Awards, accelerating the exercisability of, lapse of restrictions on, or termination of, Awards or providing for a period of time for exercise prior to the occurrence of such event; and

(iii) cancelling any one or more outstanding Awards and causing to be paid to the holders thereof, in cash, shares of Common Stock, other securities or other property, or any combination thereof, the value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per share of Common Stock received or to be received by other stockholders of the Company in such event), including without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the shares of Common Stock subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR, respectively (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor);

provided, however, that in the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board ASC Topic 718), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. Any adjustment in Incentive Stock Options under this Section 12 (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 12 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Any such adjustment shall be conclusive and binding for all purposes.

13. Amendments and Termination. (a) Amendment and Termination of the Plan. The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided, that no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is necessary to comply with any regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company may be listed or quoted); provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary. Notwithstanding the foregoing, no amendment shall be made to the last proviso of Section 13(b) without stockholder approval.

(b) Amendment of Award Agreements. The Committee may, to the extent consistent with the terms of any applicable Award agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award agreement, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant; provided, further, that without stockholder approval, except as otherwise permitted under Section 12 of the Plan, (i) no amendment or modification may reduce the Exercise Price of any Option or the Strike Price of any SAR, (ii) the Committee may not cancel any outstanding Option or SAR and replace it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash in a manner which would result in any “repricing” for

 

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financial statement reporting purposes (or otherwise cause the Award to fail to qualify for equity accounting treatment) and (iii) the Committee may not take any other action which is considered a “repricing” for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted.

14. General. (a) Award Agreements. Each Award under the Plan shall be evidenced by an Award agreement, which shall be delivered to the Participant and shall specify the terms and conditions of the Award and any rules applicable thereto, including without limitation, the effect on such Award of the death, Disability or termination of employment or service of a Participant, or of such other events as may be determined by the Committee. For purposes of the Plan, an Award agreement may be in any such form (written or electronic) as determined by the Committee (including, without limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate or a letter) evidencing the Award. The Committee need not require an Award agreement to be signed by the Participant or a duly authorized representative of the Company.

(b) Nontransferability. (i) Each Award shall be exercisable only by a Participant during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

(ii) Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award agreement to preserve the purposes of the Plan, to: (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant and his or her Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and his or her Immediate Family Members; or (D) any other transferee as may be approved either (I) by the Board or the Committee in its sole discretion, or (II) as provided in the applicable Award agreement;

(each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a “Permitted Transferee”); provided that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.

(iii) The terms of any Award transferred in accordance with the immediately preceding sentence shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the shares of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award agreement, that such a registration statement is necessary or appropriate; (C) the Committee or the Company shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the consequences of the termination of the Participant’s employment by, or services to, the Company or an Affiliate under the terms of the Plan and the applicable Award agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award agreement.

(c) Dividends and Dividend Equivalents. In addition to Dividend Equivalents awarded under Section 10(b) of the Plan, the Committee in its sole discretion may provide a Participant as part of an Award with

 

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dividends or dividend equivalents, payable in cash, shares of Common Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee in its sole discretion, including without limitation, payment directly to the Participant, withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional shares of Common Stock, Restricted Stock or other Awards; provided, that with respect to Awards the vesting of which is subject to the achievement of performance goals, any such dividends or dividend equivalents shall not be payable unless and only to the extent that the Award is earned and vested.

(d) Tax Withholding. (i) A Participant shall be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to withhold, from any cash, shares of Common Stock, other securities or other property deliverable under any Award or from any compensation or other amounts owing to a Participant, the amount (in cash, Common Stock, other securities or other property) of any required withholding taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding and taxes.

(ii) Without limiting the generality of clause (i) above, the Committee may, in its sole discretion, permit a Participant to satisfy, in whole or in part, the foregoing withholding liability (but no more than the minimum required statutory withholding liability) by (A) the delivery of shares of Common Stock (which are not subject to any pledge or other security interest) owned by the Participant having a Fair Market Value equal to such withholding liability or (B) having the Company withhold from the number of shares of Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a Fair Market Value equal to such withholding liability.

(e) No Claim to Awards; No Rights to Continued Employment; Waiver. No employee of the Company or an Affiliate, or other person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company or an Affiliate, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Company or any of its Affiliates may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or any Award agreement. By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under the Plan or any Award agreement, notwithstanding any provision to the contrary in any written employment contract or other agreement between the Company and its Affiliates and the Participant, whether any such agreement is executed before, on or after the Date of Grant.

(f) International Participants. With respect to Participants who reside or work outside of the United States of America and who are not (and who are not expect to be) “covered employees” within the meaning of Section 162(m) of the Code, the Committee may in its sole discretion amend the terms of the Plan or Sub-Plans or outstanding Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant, the Company or its Affiliates.

(g) Designation and Change of Beneficiary. Each Participant may file with the Committee a written designation of one or more persons as the beneficiary(ies) who shall be entitled to receive the amounts payable with respect to an Award, if any, due under the Plan upon his or her death. A Participant may, from time to time, revoke or change his or her beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof,

 

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shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate. For the avoidance of doubt, the Committee is not obligated to honor any beneficiary designation that does not comply with applicable law.

(h) Termination of Employment. Except as otherwise provided in an Award agreement or an employment or consulting or similar agreement with a Participant, unless determined otherwise by the Committee: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence nor a transfer from employment or service with the Company to employment or service with an Affiliate (or vice-versa) shall be considered a termination of employment or service of such Participant with the Company or an Affiliate; and (ii) if a Participant’s employment with the Company and its Affiliates terminates, but such Participant continues to provide services to the Company and its Affiliates in a non-employee capacity, such change in status shall not be considered a termination of employment or service of such Participant with the Company or an Affiliate for purposes of the Plan.

(i) No Rights as a Stockholder. Except as otherwise specifically provided in the Plan or any Award agreement, no person shall be entitled to the privileges of ownership in respect of shares of Common Stock which are subject to Awards hereunder until such shares have been issued or delivered to that person.

(j) Government and Other Regulations. (i) The obligation of the Company to settle Awards in Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan. The Committee shall have the authority to provide that all shares of Common Stock or other securities of the Company or any Affiliate delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award agreement, the Federal securities laws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted and any other applicable Federal, state, local or non-U.S. laws, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on certificates representing shares of Common Stock or other securities of the Company or any Affiliate delivered under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of the Company or any Affiliate delivered under the Plan in book-entry form to be held subject to the Company’s instructions or subject to appropriate stop-transfer orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under the Plan that it in its sole discretion deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.

(ii) The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of shares of Common Stock from the public markets, the Company’s issuance of Common Stock to the Participant, the Participant’s acquisition of Common Stock from the Company and/or the Participant’s sale of Common Stock to the public markets, illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, the Company shall pay to the Participant an amount equal to the excess of (A) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or delivered, as applicable), over (B) the aggregate Exercise Price or Strike Price (in

 

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the case of an Option or SAR, respectively) or any amount payable as a condition of delivery of shares of Common Stock (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof.

(k) No Section 83(b) Elections Without Consent of Company. No election under Section 83(b) of the Code or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award agreement or by action of the Committee in writing prior to the making of such election. If a Participant, in connection with the acquisition of shares of Common Stock under the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable provision.

(l) Payments to Persons Other Than Participants. If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his or her estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his or her spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

(m) Nonexclusivity of the Plan. Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases.

(n) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate, on the one hand, and a Participant or other person or entity, on the other hand. No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law.

(o) Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of the Company and its Affiliates and/or any other information furnished in connection with the Plan by any agent of the Company or the Committee or the Board, other than himself.

(p) Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.

(q) Governing Law. The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof.

(r) Severability. If any provision of the Plan or any Award or Award agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or entity or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such

 

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provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

(s) Obligations Binding on Successors. The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.

(t) 409A of the Code. Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of this Plan comply with Section 409A of the Code, and all provisions of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with this Plan or any other plan maintained by the Company (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any Affiliate shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties.

(u) Clawback/Forfeiture. Notwithstanding anything to the contrary contained herein, an Award agreement may provide that the Committee may in its sole discretion cancel such Award if the Participant, without the consent of the Company, while employed by or providing services to the Company or any Affiliate or after termination of such employment or service, violates a non-competition, non-solicitation or non-disclosure covenant or agreement or otherwise engages in activity that is in conflict with or adverse to the interest of the Company or any Affiliate, including fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion. The Committee may also provide in an Award agreement that if the Participant engages in any activity referred to in the preceding sentence, the Participant will forfeit any gain realized on the vesting or exercise of such Award, and must repay the gain to the Company.

(v) Code Section 162(m) Re-approval. If so determined by the Committee, the provisions of the Plan regarding Performance Compensation Awards shall be submitted for re-approval by the stockholders of the Company no later than the first stockholder meeting that occurs more than 12 months after the Effective Date, and thereafter in the fifth year following the year in which stockholders previously approved such provisions, in each case for purposes of exempting certain Awards granted after such time from the deduction limitations of Section 162(m) of the Code. Nothing in this subsection, however, shall affect the validity of Awards granted after such time if such stockholder approval has not been obtained.

(w) Expenses; Gender; Titles and Headings. The expenses of administering the Plan shall be borne by the Company and its Affiliates. Masculine pronouns and other words of masculine gender shall refer to both men and women. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control.

* * *

 

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EX-10.8

Exhibit 10.8

CDK GLOBAL, INC.

DEFERRED COMPENSATION PLAN

The CDK Global, Inc., Deferred Compensation Plan is intended to provide a select group of management or highly-compensated employees the ability to defer certain compensation earned by such employees. It is intended that this Plan will be supplemented by annual summaries describing the Plan and participation in the Plan for the applicable Plan Year; in the event of a conflict between the Plan and an annual summary, the terms of the Plan shall control. Eligible Employees who were participants in the Automatic Data Processing, Inc. Deferred Compensation Plan (the “ADP Plan”) immediately prior to the Effective Date (i) shall automatically become Participants in this Plan on the Effective Date, (ii) shall have initial Accounts established under this Plan in the same amounts as their corresponding Accounts under the ADP Plan (provided that the Company Stock Unit Subaccount shall be credited on the Effective Date as provided in Section 4.4) and (iii) shall have their prior elections in respect of their corresponding Accounts under the ADP Plan carryover and apply to their initial Accounts under this Plan.

ARTICLE I

DEFINITIONS

Capitalized terms used in this Plan, shall have the meanings specified below.

1.1 “Account” or “Accounts” shall mean all of the Bonus Deferral Subaccounts, Company Matching Contribution Subaccounts or Company Stock Unit Subaccounts that are specifically provided in this Plan.

1.2 “Affiliate” means (i) any person or entity that directly or indirectly controls, is controlled by or is under common control with the Company and/or (ii) to the extent provided by the Committee, any person or entity in which the Company has a significant interest. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any person or entity, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person or entity, whether through the ownership of voting or other securities, by contract or otherwise.

1.3 “Annual Bonus Payments” shall mean, with respect to any Eligible Employee who does not qualify as a sales associate, the compensation earned pursuant to any annual cash incentive plan or annual cash bonus plan or program adopted by the Company; provided, however, that the following compensation shall not qualify as “Annual Bonus Payments” hereunder: spot bonuses, hiring bonuses, separation payments, retention payments, or other special or extraordinary payments. For the sake of clarity, payments of amounts under such annual cash incentive plan or annual cash bonus plan or program in connection with such Participant’s separation from service or termination of employment from the Company are to be treated for purposes of the Plan as an Annual Bonus Payment (and not a separation payment), even if the amounts are fixed and/or


accelerated in connection with such separation or termination (provided that the timing of the payment and the extent to which the amount is substantially certain shall be taken into account in determining whether a deferral in respect of such payments shall be permitted under the Plan). Annual Bonus Payments shall only include compensation that is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to the Company’s fiscal year, and the performance criteria in respect of which was established in writing no later than 90 days after the commencement of the performance period to which such criteria relate.

1.4 “Annual Incentive Amounts” shall mean, as applicable, Annual Bonus Payments and Qualifying Sales Bonuses.

1.5 “Beneficiary” or “Beneficiaries” shall mean the person or persons designated in writing by a Participant in accordance with procedures established by the Committee or the Plan Administrator to receive the benefits specified hereunder in the event of the Participant’s death. No Beneficiary designation shall become effective until it is filed with the Committee or the Plan Administrator. If there is no such designation or if there is no surviving designated Beneficiary, then the Participant’s surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant’s estate (which shall include either the Participant’s probate estate or living trust) shall be the Beneficiary.

1.6 “Board of Directors” or “Board” shall mean the Board of Directors of CDK Global, Inc.

1.7 “Bonus Deferral Subaccount” shall mean the bookkeeping account maintained by the Company or the Plan Administrator for each Participant that is credited with amounts equal to (i) the portion of the Participant’s Annual Incentive Amounts that he or she elects to defer, and (ii) earnings and losses (based on the Investment Rate) attributable thereto.

1.8 “Code” shall mean the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations or guidance.

1.9 “Committee” shall mean a committee as the Compensation Committee may appoint to administer the Plan or, if no such committee has been appointed by the Compensation Committee, then it shall be the Compensation Committee. As of the effective date of this Plan, the Committee shall consist of (i) the person occupying the position of General Counsel of the Company, and (ii) the person occupying the position of Chief Human Resources Officer of the Company. In the event of a vacancy in either the position of General Counsel or Chief Human Resources Officer, then unless the Compensation Committee otherwise determines, the Committee shall consist of the remaining person until such vacant position is filled.

 

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1.10 “Company” shall mean CDK Global, Inc., a Delaware corporation.

1.11 “Company Common Stock” means the common stock, par value $.01 per share, of the Company.

1.12 “Company Matching Contribution” shall mean the amount, if any, contributed by the Company for a Participant with respect to a Plan Year under Section 4.2.

1.13 “Company Matching Contribution Subaccount” shall mean the bookkeeping account maintained by the Company or the Plan Administrator for each Participant that is credited with an amount equal to (i) the Company Matching Contribution, if any, and (ii) earnings and losses (based on the Investment Rate) attributable thereto.

1.14 “Company Stock Unit Subaccount” shall mean the bookkeeping account maintained by the Company or the Plan Administrator for each Participant that is credited with (i) a number of Company stock units equal to the PBRS Awards that he or she elects to defer, if any, and (ii) an amount equal to the Dividend Equivalents (and earnings and losses (based on the Investment Rate) attributable to such Dividend Equivalents).

1.15 “Compensation Committee” shall mean the Compensation Committee of the Board.

1.16 “Disability” shall mean a circumstance where the Company shall have cause to terminate a Participant’s employment or service on account of “disability,” as defined in any then-existing employment, consulting or other similar agreement between the Participant and the Company or, in the absence of such an employment, consulting or other similar agreement, a condition entitling the Participant to receive benefits under a long-term disability plan of the Company, or, in the absence of such a plan, as determined by the Committee based upon medical evidence acceptable to it; provided, however, that a Participant shall not have a Disability for purposes of the Plan unless the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or the Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering the Company’s employees.

1.17 “Distributable Amount” shall mean the vested balance in a Participant’s Accounts subject to distribution in a given Plan Year.

1.18 “Dividend Equivalents” shall mean, for any Participant who defers PBRS Awards, an amount equal to the product of (a) the dividends (including extraordinary dividends, if so determined by the Committee) declared and paid to other stockholders of the Company in respect of one share of Company Common Stock, multiplied by (b) the number of Company stock units in such Participant’s Company Stock Unit Subaccount on the date such dividends are so declared.

 

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1.19 “Effective Date” means [insert effective date of spin-off distribution].

1.20 “Eligible Employee” shall mean those employees selected by the Committee in accordance with the procedures set forth in Article II.

1.21 “Employee Matters Agreement” means that certain Employee Matters Agreement, dated as of the Effective Date, between Automatic Data Processing, Inc. and the Company.

1.22 “Enrollment Period” shall mean a period of time, as determined by the Committee with respect to each Plan Year, ending no later than the December 31 preceding the end of the performance period with respect to which the Annual Incentive Amounts or PBRS Awards, as applicable, for such Plan Years relate; provided, however, that if the relevant performance period does not end on June 30, the Enrollment Period shall end at least six months before the conclusion of the applicable performance period.

1.23 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

1.24 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.

1.25 “Fund” or “Funds” shall mean one or more of the investment funds selected by the Committee, or its designee, to which Participants may elect to make deemed investments pursuant to Section 3.3.

1.26 “In-Service Distribution Date” shall mean, in the case of a distribution to be made while the Participant is still employed by the Company, the month of September of the Plan Year elected by the Participant.

1.27 “Investment Rate” shall mean, (i) for each Fund with a fixed rate of return, the annual interest rate applicable to such Fund, as determined by the Committee from time to time, and (ii) for any Fund that does not have a fixed rate of return, any appreciation or depreciation in the value of the investment in which the Participant is deemed invested.

1.28 “Participant” shall mean any Eligible Employee who becomes a Participant in this Plan in accordance with Article II.

1.29 “PBRS Awards” shall mean, for any Plan Year, the number of shares of Company Common Stock earned by a Participant under the PBRS Program.

 

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1.30 “PBRS Program” shall mean the Company’s performance-based restricted stock program, performance-based stock unit program or any similar performance-based equity arrangement under the Company’s 2014 Omnibus Award Plan (or any successor plan), as in effect from time to time.

1.31 “Plan” shall mean this CDK Global, Inc., Deferred Compensation Plan.

1.32 “Plan Administrator” shall mean, if applicable, any record keeper appointed by the Company (which may include an Affiliate of the Company) to perform administrative and other functions associated with the Plan.

1.33 “Plan Year” shall mean the Company’s fiscal year, which runs from July 1 to June 30.

1.34 “Qualifying Sales Bonuses” shall mean, with respect to any Eligible Employee who qualifies as a sales associate and (i) receives sales bonuses on a quarterly basis, the bonus paid to such person related to the Company’s fourth fiscal quarter in any Plan Year or (ii) receives sales bonuses on a monthly basis, the bonus paid to such person related to the last month in any Plan Year.

1.35 “Scheduled Distribution Date” shall mean, as applicable, the In-Service Distribution Date or the Separation from Service Distribution Date

1.36 “Separation from Service” shall mean that the employment or service provider relationship with the Company and any entity that is to be treated as a single employer with the Company for purposes of Treasury Regulations Section 1.409A-1(h) (the “Single Employer”) terminates such that the facts and circumstances indicate it is reasonably anticipated that no further services will be performed or that the level of bona fide services the Participant would perform after the termination (whether as an employee or as an independent contractor) would permanently decrease to no more than 20 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the Single Employer if the Participant has been providing services to the Single Employer less than 36 months).

1.37 “Separation from Service Distribution Date” shall mean, in the case of a distribution on account of a Separation from Service, the seventh month following the month in which the Separation from Service occurs.

1.38 “Unforeseeable Emergency” shall mean a severe unforeseeable financial hardship as defined in Section 409A and the regulations thereunder, including a severe financial hardship resulting from (i) an illness or accident of the Participant, the Participant’s spouse, the Participant’s designated Beneficiary, or the Participant’s dependent (as defined in Section 152 of the Code, without regard to section 152(b)(1), (b)(2), and (d)(1)(B)), (ii) the loss of the Participant’s property due to casualty, or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant’s control.

 

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ARTICLE II

ELIGIBILITY FOR PARTICIPATION

2.1 Determination of Eligible Employee. Eligible Employees (with respect to both Annual Incentive Amounts and PBRS Awards) shall consist of all employees of the Company (or of any subsidiary that is incorporated in any State in the United States of America), determined as of July 1 of each Plan Year, that are (x) in executive letter grade positions, and (y) eligible to receive compensation pursuant to an annual cash incentive plan, or annual cash bonus plan or program; provided, however, that any employee whose home country is not the United States of America shall not be considered an Eligible Employee hereunder.

2.2 Participation. An Eligible Employee (who does not otherwise become a Participant on the Effective Date by reason of having been a participant in the ADP Plan immediately prior to the Effective Date) shall become a Participant in the Plan by electing to make a deferral of Annual Incentive Amounts or PBRS Awards in a Plan Year in accordance with Article III.

2.3 Amendment of Eligibility Criteria. The Committee may, in its discretion, change which employees are Eligible Employees under the Plan for any reason, including to comply with any applicable laws relating to the operation of the Plan. Eligibility for participation in one Plan Year does not guarantee eligibility to participate in any future Plan Year.

ARTICLE III

ELECTIONS

3.1 Election to Defer Annual Incentive Amounts and PBRS Awards.

(a) Timing of Election to Defer Annual Incentive Amounts and PBRS Awards. An Eligible Employee may elect to defer Annual Incentive Amounts and/or PBRS Awards only during the Enrollment Period.

(b) Amount Eligible for Deferral.

(1) An Eligible Employee may elect to defer between 0% and 100% of his Annual Incentive Amounts and/or his PBRS Awards, as may be determined by the Committee. The Committee may change the amount or percentage that may be deferred in respect of any Plan Year at any time, or from time to time.

(2) If necessary, the total amount deferred by a Participant shall be reduced in 1% increments in order to satisfy Social Security Tax (including Medicare), income tax withholding for compensation that cannot be deferred, employee benefit plan withholding requirements and any other withholding requirements.

(c) Irrevocable Elections. Elections to defer Annual Incentive Amounts and PBRS Awards shall become irrevocable as of the date for such Plan Year

 

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set by the Committee in its sole discretion, which (i) in the case of an Annual Bonus Payment shall in no event be later than six months before the conclusion of the performance period with respect to which the Annual Bonus Payment relates, (ii) in the case of a Qualifying Sales Bonus shall in no event be later than the December 31 of the calendar year preceding the calendar year in which the Qualifying Sales Bonus will be earned, and (iii) in case of a PBRS Award shall in no event be later than six months before the conclusion of the performance period with respect to which the PBRS Award relates.

(d) Duration of Election. An Eligible Employee’s election to defer Annual Incentive Amounts and/or PBRS Awards for any Plan Year is effective only for such Plan Year.

(e) Method of Election. Elections to participate may be made in writing, through an electronic medium such as a website enrollment window or an email enrollment form or through a Plan Administrator, provided that the election is binding when made and there is sufficient record of when such election is made.

3.2 Elections as to Time and Form of Payment. During the Enrollment Period, a Participant shall make an election regarding the time and form of payment of the Annual Incentive Amounts and PBRS Awards deferred for that Plan Year (and all earnings and losses (based on the Investment Rate) attributable thereto, including in respect of Dividend Equivalents).

(a) Elections as to Time. A Participant shall elect to receive a distribution of his Annual Incentive Amounts and PBRS Awards to be deferred for a Plan Year (and all earnings and losses (based on the Investment Rate) attributable thereto, including in respect of Dividend Equivalents) (i) on an In-Service Distribution Date, (ii) on a Separation from Service Distribution Date or (iii) a portion on an In-Service Distribution Date and a portion on a Separation from Service Distribution Date; provided, however, that a Participant’s In-Service Distribution Date may be no earlier than five years following the date on which the deferral of Annual Incentive Amounts and PBRS Awards, as applicable, is made.

(b) Elections as to Form. A Participant shall elect the form of the distribution of his Annual Incentive Amounts and PBRS Awards, whether in a lump sum payment or in annual installments. If no such election is made, the Participant shall be deemed to have elected to receive payment in a lump sum. A Participant may elect annual installments to be paid over a period not to exceed fifteen years. A Participant’s election to receive payment in annual installments on a Separation from Service is subject to the terms of Section 6.2(a)(2).

(c) Application of Election. An election as to time and form of payment made with respect to a given Plan Year shall apply only to the Annual Incentive Amounts and PBRS Awards deferred for such Plan Year.

 

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(d) No Changes Permitted. Except as permitted by Section 3.2(e) below, elections as to time and form of payment shall become irrevocable as of December 31 of the Plan Year for which Annual Incentive Amounts and PBRS Awards, as applicable, are deferred.

(e) Subsequent Changes in Time and Form of Payment. A Participant may delay the timing of a previously-scheduled payment or may change the form of a payment only if such subsequent deferral election meets all of the following requirements:

(i) the subsequent deferral election shall not take effect until at least 12 months after the date on which it is made;

(ii) the election must be made at least 12 months prior to the date the payment is scheduled to be made. For installment payments, the election must be made at least 12 months prior to the date the first payment in such installment was scheduled to be made; and

(iii) the subsequent deferral election must delay the payment for at least five years from the date the payment would otherwise have been made. For installment payments, the delay is measured from the date the first payment was scheduled to be made.

A Participant may make only one subsequent change with respect to deferrals made for a specific Plan Year.

(f) Initial elections and subsequent elections, if any, may be made in writing or through an electronic medium such as a website enrollment window or through an email enrollment form or through a Plan Administrator, provided that there is sufficient record of when such election is made.

3.3 Elections as to Deemed Investment Choices.

(a) Prior to the date on which the actual deferral of an Annual Incentive Amount in respect of Plan Year is made by the Company, a Participant shall make an election regarding how such Annual Incentive Amount shall be deemed to be invested for purposes of determining the amount of earnings or losses to be credited to the Participant’s Accounts. If no such election is made in respect of Annual Incentive Amounts deferred in any Plan Year, then (i) the Participant shall be deemed to have made the same election made by such Participant in respect of the most recent Plan Year in which there was a deferral of Annual Incentive Amounts, and (ii) if no election contemplated by clause (i) has been made, the deferred Annual Incentive Amounts shall be deemed invested in the most risk-free type of Fund, as determined by the Committee in its sole and absolute discretion.

(b) Dividend Equivalents shall be deemed to be invested in the Fund specified for such purpose by the Committee from time to time and communicated to the Participant, and if no such communication is made, in the most risk-free type of Fund, as determined by the Committee in its sole and absolute discretion.

 

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(c) The Committee shall select from time to time, in its sole and absolute discretion, investments of various types that shall be communicated to the Participant. The Investment Rate applicable to each Fund shall be used to determine the amount of earnings or losses to be credited to Participant’s Bonus Deferral Subaccount and Company Matching Contribution Subaccount (and the portion of the Company Stock Unit Subaccount attributable solely to Dividend Equivalents). Deemed investment choices shall not be changed unless the Committee promulgates a rule of general application permitting such changes.

ARTICLE IV

DEFERRAL ACCOUNTS

4.1 Bonus Deferral Subaccount. The Company or Plan Administrator shall establish and maintain a Bonus Deferral Subaccount for each Participant under the Plan. Each Participant’s Bonus Deferral Subaccount shall be further divided into separate subaccounts (“investment fund subaccounts”), each of which corresponds to a Fund elected by the Participant. A Participant’s Bonus Deferral Subaccount shall be credited as follows:

(a) on the day the amounts are withheld and/or deferred from a Participant’s Annual Incentive Amounts, with an amount equal to the Annual Incentive Amounts deferred by the Participant; and

(b) on a daily basis, each investment fund subaccount of a Participant’s Bonus Deferral Subaccount shall be credited with earnings or losses based on the applicable Investment Rate.

4.2 No Company Matching Contributions. Unless otherwise provided by the Committee, no Company Matching Contributions shall be made with respect to Annual Incentive Amounts earned and deferred by a Participant with respect to any Plan Year commencing after June 30, 2014. For the sake of clarity, any amounts in a Participant’s Company Matching Contribution Subaccount relate to former matching contributions received in respect of such Participant’s previous participation in the ADP Plan.

4.3 Company Matching Contribution Subaccount. The Company or Plan Administrator shall establish and maintain a Company Matching Contribution Subaccount for each Participant who receives a Company Matching Contribution under the Plan (and for each Participant who had a prior Company Matching Contribution Subaccount in respect of such Participant’s previous participation in the ADP Plan). A Participant’s Company Matching Contribution Subaccount shall be further divided into separate investment fund subaccounts, each of which corresponds to a Fund elected by the Participant. A Participant’s Company Matching Contribution Subaccount shall be credited as follows:

(a) on the day such amount is deemed contributed, with an amount equal to the Company Matching Contribution Amount, if any; and

(b) on a daily basis, each investment fund subaccount of a Participant’s Company Matching Contribution Subaccount shall be credited with earnings or losses based on the applicable Investment Rate.

 

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4.4 Company Stock Unit Subaccount. The Company or Plan Administrator shall establish and maintain a Company Stock Unit Subaccount for each Participant who elects to defer receipt of a PBRS Award. A Participant’s Company Stock Unit Subaccount shall be credited as follows:

(a) on the day shares of Company Common Stock would otherwise be issued to the Participant under the PBRS Program, with a number of Company stock units equal to the number of shares of Company Common Stock earned by the Participant under the PBRS Program; and

(b) on the day dividends are paid to stockholders of the Company in respect of shares of Company Common Stock, an amount equal to the Dividend Equivalents; and

(c) on a daily basis, the investment fund subaccount of a Participant’s Company Stock Unit Subaccount shall be credited with earnings or losses on the Dividend Equivalents based on the applicable Investment Rate.

In the case of a Participant who had a Company Stock Unit Subaccount under the ADP Plan immediately prior to the Effective Date, such Participant’s corresponding Company Stock Unit Subaccount under this Plan shall be initially credited with (x) the cash balance in such ADP Plan Company Stock Unit Subaccount as of the Effective Date and (y) a number of Company stock units equal to the number of stock units credited in such ADP Plan Company Stock Unit Subaccount multiplied by the Dealer Equity Conversion Ratio (as defined in the Employee Matters Agreement).

ARTICLE V

VESTING

5.1 Vesting. A Participant shall be 100% vested at all times in his or her Bonus Deferral Subaccount. A Participant shall vest in his or her Company Matching Contribution Account at the time such Participant either (i) attains 65 years of age, or (ii) attains ten (10) years of service credited with the Company and its subsidiaries. The Committee in its sole discretion may credit a Participant with additional periods of service solel