Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) September 29, 2014

 

 

CDK Global, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

(State or other jurisdiction of incorporation)

 

1-36486   46-5743146
(Commission File Number)   (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)

CDK Global Holdings, LLC

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

  ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 1.01. Entry into a Material Definitive Agreement.

On September 30, 2014, Automatic Data Processing, Inc. (“ADP”) completed the distribution to its stockholders of all of the outstanding shares of common stock of CDK Global, Inc. (the “Company”) in a tax free spin-off. The distribution was paid in the amount of one share of the Company’s common stock for every three shares of ADP common stock owned by ADP’s stockholders as of 5:00 p.m. New York City time on September 24, 2014, the record date for the distribution.

A registration statement on Form 10 describing the spin-off was filed by the Company with the Securities and Exchange Commission (the “SEC”) and has been declared effective. An information statement (the “Information Statement”) regarding the Company and the spin-off was sent to all holders of record of ADP stock on September 24, 2014.

In connection with the distribution, the Company entered into certain agreements with ADP as of September 29, 2014, prior to its conversion from a limited liability company to a corporation, to govern the terms of the spin-off and to define its ongoing relationship with ADP, including obligations with respect to liabilities relating to the Company’s business and to ADP’s business and obligations with respect to each company’s employees, certain transition services, intellectual property and taxes.

Separation and Distribution Agreement

The Company entered into a separation and distribution agreement with ADP, which contains the key provisions relating to the separation of ADP’s Dealer Services business unit (to be carried on after the separation by the Company) from that of ADP and the distribution of the Company’s common stock to the stockholders of ADP. The separation and distribution agreement identifies the assets transferred and liabilities assumed by each of the Company and ADP in the separation, and it describes when and how these transfers and assumptions occur. In addition, it includes the procedures by which ADP and the Company became separate and independent companies. It also contains the conditions that were required to be satisfied, or waived by ADP, prior to completion of the separation and distribution.

Pre-Distribution Occurrences. The separation and distribution agreement provides, subject to the terms and conditions contained in the agreement and prior to the distribution, that the following will occur:

 

    the consolidation of the Company’s international and domestic subsidiaries that are engaged in ADP’s Dealer Services business under the Company, a wholly owned subsidiary of ADP;

 

    the Company’s conversion from a Delaware limited liability company to a Delaware corporation; and

 

    the Company’s entry into a credit agreement with JPMorgan Chase Bank, N.A., as Administrative Agent, providing for a senior unsecured revolving credit facility and a senior unsecured term loan facility, and the Company’s payment of a cash dividend to ADP.

 

1


Distribution. The separation and distribution agreement provides that the completion of the separation and distribution was subject to several conditions that were required to be satisfied, or waived by ADP, including:

 

    the board of directors of ADP shall have given final approval of the separation and distribution, which approval the board of directors of ADP may give in its sole and absolute discretion;

 

    the SEC shall have declared effective the registration statement relating to the separation and distribution, and no stop order shall be in effect with respect to the registration statement;

 

    the actions and filings necessary or appropriate to comply with federal and state securities and blue sky laws and any comparable foreign laws shall have been taken and where applicable become effective or been accepted;

 

    The NASDAQ Stock Market LLC (the “NASDAQ”) shall have accepted for listing the shares of the Company’s common stock distributed in the distribution, subject to official notice of issuance;

 

    no order by any court or other legal or regulatory restraint preventing completion of the separation or the distribution shall have been threatened or in effect;

 

    ADP shall have received an opinion from its counsel, Paul, Weiss, Rifkind, Wharton & Garrison LLP, satisfactory to ADP, to the effect that the distribution of the Company’s shares by ADP to its stockholders will qualify as a distribution that is tax-free under Section 355 and other related provisions of the Internal Revenue Code of 1986, as amended;

 

    all consents and governmental or other regulatory approvals required in connection with the transactions contemplated by the separation and distribution agreement shall have been received;

 

    each of the tax matters agreement, transition services agreement, data center services agreement, intellectual property transfer agreement and employee matters agreement shall have been entered into prior to the distribution and remain in full force and effect;

 

    ADP shall have established the record date for determining stockholders of ADP entitled to receive shares of the Company’s common stock pursuant to the distribution;

 

    the distribution shall not have violated or resulted in a breach of law or any material agreement;

 

    each of the other pre-distribution occurrences shall have occurred; and

 

    the board of directors of ADP shall not have determined that any event or development has occurred or exists that makes it inadvisable to effect the distribution.

 

2


Assumption of Liabilities and Indemnification. In general, under the separation and distribution agreement, the Company will indemnify ADP and its representatives and affiliates against certain liabilities to the extent relating to, arising out of or resulting from:

 

    the Company’s failure to pay, perform or otherwise promptly discharge any of its liabilities or any of its contracts or agreements in accordance with their respective terms;

 

    any of the Company’s liabilities, any of its assets or the operation of its business or prior businesses, whether arising prior to or after the distribution;

 

    any breach by the Company of the separation and distribution agreement;

 

    any untrue statement or alleged untrue statement of a material fact or material omission or material alleged omission to state a material fact required to be stated in the registration statement relating to the separation and distribution or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case, other than certain information relating to ADP and the distribution;

 

    the Company’s failure to substitute a subsidiary or affiliate, owned by the Company immediately prior to the distribution but after the reorganization, for any subsidiary or affiliate of ADP, owned by ADP immediately after the distribution, as guarantor or primary obligor for any of the Company’s agreements or liabilities; and

 

    the Company’s failure to perform in connection with any contribution, assignment, transfer, conveyance, delivery or assumption related to the distribution that has (i) not been consummated as of the time and date of the distribution and (ii) is held by ADP for the Company’s benefit or account.

In general, under the separation and distribution agreement, ADP will indemnify the Company and its representatives and affiliates against certain liabilities to the extent relating to, arising out of or resulting from:

 

    the failure of ADP to pay, perform or otherwise promptly discharge any liability of ADP or any ADP contract or agreement in accordance with its respective terms;

 

    any of ADP’s liabilities, any of its assets or the operation of its retained business, whether arising prior to or after the distribution;

 

    any breach by ADP of the separation and distribution agreement;

 

    any untrue statement or alleged untrue statement of a material fact or material omission or material alleged omission to state a material fact required to be stated in the registration statement relating to the separation and distribution or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case, only for certain information relating to ADP and the distribution;

 

3


    the failure by ADP to substitute a subsidiary or affiliate of ADP, owned by ADP immediately after the distribution, for any of the Company’s subsidiaries or affiliates, owned by the Company immediately prior to the distribution but after the reorganization, as guarantor or primary obligor for any agreement or liability of ADP; and

 

    the failure by ADP to perform in connection with any contribution, assignment, transfer, conveyance, delivery or assumption related to the distribution that has (i) not been consummated as of the time and date of the distribution and (ii) is held by the Company for the benefit or account of ADP.

Indemnification with respect to taxes will be governed by the tax matters agreement described below.

Further Action and Delayed Transfers. The separation and distribution agreement provides that the Company and ADP will cooperate to effect any contributions, assignments, transfers or assumptions not completed on the distribution date, due to approval, consent or other issues, as promptly following that date as is practicable. Until these contributions, assignments, transfers or assumptions can be completed, the party retaining the assets, liabilities or contracts to be contributed, assigned, transferred or assumed will hold in trust for the benefit of the other party any such assets, liabilities or contracts. In an effort to place each party, insofar as reasonably possible, in the same position as that party would have been in had the contributions, assignments, transfers or assumptions occurred at the time contemplated by the separation and distribution agreement, the separation and distribution agreement provides that the economic benefit or detriment associated with those assets, liabilities or contracts will generally be passed on to the party that would have received the assets, liabilities or contracts if the contributions, assignments, transfers or assumptions had occurred as contemplated.

Access to Information. Under the separation and distribution agreement, the following terms govern access to information:

 

    after the distribution, subject to applicable confidentiality provisions and other restrictions, the Company and ADP will each give the other any information within that company’s possession that the requesting party reasonably needs (a) to comply with the requirements imposed on the requesting party by a governmental authority, (b) for use in any proceeding to satisfy audit, accounting, insurance claims, regulatory, litigation or other similar requirements, (c) to comply with its obligations under the separation and distribution agreement or certain of the ancillary agreements or (d) to enable the requesting party’s auditors to be able to complete their audit and preparation of financial statements and to meet the requesting party’s timetable for dissemination of its financial statements;

 

    the Company and ADP will retain certain significant information owned or in their respective possession in accordance with their respective practices from time to time; and

 

    the Company and ADP will, subject to applicable confidentiality provisions and other restrictions, use reasonable best efforts to make available to the other party, their respective past and present directors, officers, employees and other personnel and agents to the extent reasonably required in connection with any proceedings in which the other party may become involved.

 

4


Limited Representations and Warranties. Pursuant to the separation and distribution agreement, the Company and ADP made customary representations and warranties only with respect to their capacity to enter into and the validity and enforceability of the separation and distribution agreement and the ancillary agreements. Except as otherwise agreed, the Company and ADP both took all assets and liabilities “as is, where is” and bore the economic risk relating to conveyance of, title to or the assumption of the assets and liabilities conveyed to one another.

Expenses. In general, ADP will be responsible for expenses incurred in connection with the transactions contemplated in the separation and distribution agreement prior to the distribution.

The foregoing does not purport to be a full and complete description of the separation and distribution agreement. A copy of the separation and distribution agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

Tax Matters Agreement

The Company entered into a tax matters agreement with ADP, which governs both the Company’s and ADP’s rights and obligations after the distribution with respect to taxes for both pre- and post-distribution periods. Under the tax matters agreement, ADP generally will be required to indemnify the Company for any income taxes attributable to its operations or the Company’s operations and for any non-income taxes attributable to its operations, in each case for all pre-distribution periods as well as any taxes arising from transactions effected to consummate the separation and distribution, and the Company generally will be required to indemnify ADP for any non-income taxes attributable to the Company’s operations for all pre-distribution periods and for any taxes attributable to its operations for post-distribution periods.

The Company is generally required to indemnify ADP against any tax resulting from the distribution (and against any claims made against ADP in respect of any tax imposed on its stockholders), in each case if that tax results from (i) an issuance of a significant amount of the Company’s equity securities, a redemption of a significant amount of its equity securities or involvement in other significant acquisitions of its equity securities (excluding the distribution described in the Information Statement), (ii) other actions or failures to act by the Company (such as those described in the following paragraph) or (iii) any of the Company’s representations or undertakings referred to in the tax matters agreement being incorrect or violated. ADP will generally be required to indemnify the Company for any tax resulting from the distribution if that tax results from (a) ADP’s issuance of its equity securities, redemption of its equity securities or involvement in other acquisitions of its equity securities, (b) other actions or failures to act by ADP or (c) any of ADP’s representations or undertakings referred to in the tax matters agreement being incorrect or violated.

In addition, to preserve the tax-free treatment to ADP of the distribution, for specified periods of up to 24 months following the distribution, the Company will generally be prohibited, except in specified circumstances, from:

 

    issuing, redeeming or being involved in other significant acquisitions of the Company’s equity securities (excluding the distribution described in the Information Statement);

 

5


    transferring significant amounts of the Company’s assets;

 

    amending the Company’s certificate of incorporation or by-laws in any material respect;

 

    failing to comply with the tax requirement for a spin-off that the Company engages in the active conduct of a trade or business after the spin-off; or

 

    engaging in other actions or transactions that could jeopardize the tax-free status of the distribution.

Though valid as between the parties, the tax matters agreement is not binding on the IRS and does not affect the several liability of ADP and the Company for all U.S. federal taxes of the consolidated group relating to periods before the distribution date.

The foregoing does not purport to be a full and complete description of the tax matters agreement. A copy of the tax matters agreement is attached hereto as Exhibit 10.2 and is incorporated herein by reference.

Transition Services Agreement

The Company entered into a transition services agreement with ADP prior to the distribution under which ADP and the Company, and each company’s affiliates or third-party service providers, will provide each other with certain specified services on an interim basis. Among the principal services to be provided by ADP to the Company are operational and administrative infrastructure-related services, such as the Company’s use of the e-mail domain “adp.com,” facilities sharing, procurement support, tax, human resources administrative services and services related to back office support and software development in the Company’s Indian facilities. Among the principal services to be provided by the Company to ADP are operational and administrative infrastructure-related services, such as facilities sharing and human resources administrative services.

Each company will pay fees to the other for any services provided, which fees are generally intended to be equal to the applicable allocable cost of such service provider’s services to the Dealer Services business or ADP’s business, as applicable, prior to the distribution.

The foregoing does not purport to be a full and complete description of the transition services agreement. A copy of the transition services agreement is attached hereto as Exhibit 10.3 and is incorporated herein by reference.

Data Center Services Agreement

The Company entered into a data center services agreement with ADP prior to the distribution under which ADP will provide the Company with certain data center services relating to the provision of information technology, platform support, hosting and network services. The term of the agreement will expire two years after the distribution.

 

6


The foregoing does not purport to be a full and complete description of the data center services agreement. A copy of the data center services agreement is attached hereto as Exhibit 10.4 and is incorporated herein by reference.

Intellectual Property Transfer Agreement

The Company entered into an intellectual property transfer agreement with ADP prior to the distribution. Under the agreement, ADP will assign to the Company certain patents, trademarks, copyrights and other intellectual property developed or owned by ADP or certain of its subsidiaries and with respect to which the Company is the primary or exclusive user today or the anticipated primary or exclusive user in the future.

The foregoing does not purport to be a full and complete description of the intellectual property transfer agreement. A copy of the intellectual property transfer agreement is attached hereto as Exhibit 10.5 and is incorporated herein by reference.

Employee Matters Agreement

The Company entered into an employee matters agreement with ADP prior to the distribution pursuant to which certain employee benefits matters will be addressed, such as the treatment of ADP options held by the Company’s employees after the spin-off and the treatment of benefits for the Company’s management employees who participate in and have accrued benefits under the ADP Supplemental Officers Retirement Plan. The agreement will also, to the extent provided therein, delineate the benefit plans and programs in which the Company’s employees will participate following the spin-off. ADP will remain responsible for the payment of all benefits under the ADP benefit plans.

The foregoing does not purport to be a full and complete description of the employee matters agreement. A copy of the employee matters agreement is attached hereto as Exhibit 10.6 and is incorporated herein by reference.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

As previously reported, on September 16, 2014, the Company entered into a Credit Agreement among the Company, the borrowing subsidiaries from time to time party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Credit Agreement”), providing for a senior unsecured revolving credit facility with up to $300 million of borrowing capacity (the “Revolving Loan Facility”) and a senior unsecured term loan facility with up to $250 million of borrowing capacity (the “Term Loan Facility” and together with the Revolving Loan Facility, the “Credit Facilities”). Also as previously reported, on September 16, 2014, the Company entered into a Bridge Credit Agreement among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Bridge Agreement”), providing for a bridge loan facility with $750 million of borrowing availability (the “Bridge Loan Facility”).

On September 30, 2014, the initial funding conditions under the Credit Agreement with respect to the Term Loan Facility and the Bridge Agreement with respect to the Bridge Loan Facility were satisfied, and the Company borrowed an aggregate principal amount of $1 billion under the Term Loan Facility and the Bridge Loan Facility (the “Borrowings”). The proceeds of the Borrowings were used to pay to ADP a cash dividend of $825 million prior to the spin-off and also to pay fees and expenses in connection with the spin-off and the Company’s entry into the Credit Facilities and the Bridge Loan Facility.

 

7


Item 3.02. Unregistered Sales of Equity Securities.

On September 29, 2014, in connection with its separation from ADP, the Company issued approximately 160.6 million shares of common stock to ADP. The common stock was issued in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 because the common stock was issued in a transaction not involving a public offering. The common stock has been registered under the Securities Exchange Act of 1934, as amended.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Prior to the Distribution, ADP, as sole stockholder of the Company, elected the persons set forth in the table below to the Company’s Board of Directors (the “Board”). On September 30, 2014, the Board appointed Mr. Sowinski (Chair), Mr. Deese and Mr. Radway as members of the Audit Committee; Mr. Deese (Chair), Mr. Miles and Mr. Radway as members of the Compensation Committee; and Ms. Hillman (Chair), Mr. Miles and Mr. Sowinski as members of the Nominating and Governance Committee. Each director will hold office until a successor is elected and qualified or until the director’s death, resignation or removal.

 

Name

   Age   

Committee Appointment

Steven J. Anenen

   62    N/A

Leslie A. Brun

   62    N/A

Willie A. Deese

   59    Audit; Compensation (Chair)

Amy J. Hillman

   49    Nominating and Governance (Chair)

Stephen A. Miles

   46    Compensation; Nominating and Governance

Robert E. Radway

   54    Audit; Compensation

Frank S. Sowinski

   58    Audit (Chair); Nominating and Governance

Prior to the Distribution, the following persons were appointed to the offices of the Company set forth beside each person’s name:

 

Name

   Age   

Position(s)

Steven J. Anenen

   62    President and Chief Executive Officer

Alfred A. Nietzel

   52    Vice President and Chief Financial Officer

Robert N. Karp

   53    Vice President and President, Automotive Retail North America

Andrew Dean

   57    Vice President and President, Automotive Retail International

Scott L. Mathews

   56    Vice President and President, Digital Marketing

Yvonne M. Surowiec

   53    Vice President and Chief Human Resources Officer

Malcolm Thorne

   42    Vice President and Global Chief Strategy Officer

Lee J. Brunz

   45    Vice President, General Counsel and Secretary

 

8


Information regarding the background of the Company’s directors and executive officers is included in the Information Statement under the caption “Management” and information regarding director and officer compensation arrangements, including the CDK Global, Inc., 2014 Omnibus Award Plan, is included in the Information Statement under the caption “Executive Compensation.” Copies of the Company’s Change in Control Severance Plan for Corporate Officers, CDK Global, Inc., 2014 Omnibus Award Plan and CDK Global, Inc., Deferred Compensation Plan are filed as Exhibits 10.7, 10.8, and 10.9, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

In connection with the Distribution and its conversion from a limited liability company to a corporation, on September 29, 2014, the Company filed a Certificate of Incorporation with the Secretary of State of the State of Delaware. In connection with the Distribution, the Company also approved and adopted By-laws.

Copies of the Company’s Certificate of Incorporation and By-laws are filed hereto as Exhibits 3.1 and 3.2 to this Current Report on Form 8-K, respectively, and are incorporated herein by reference.

 

Item 5.05. Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

In connection with the Distribution, the Board adopted Corporate Governance Guidelines and a Code of Business Conduct and Ethics for employees and directors. Copies of the Company’s Corporate Governance Guidelines and Code of Business Conduct and Ethics are available in the “Investor Relations” section of the Company’s website, www.cdkglobal.com.

 

Item 8.01. Other Events.

A copy of the press release announcing the completion of the separation from ADP and announcing the beginning of trading of the Company’s common stock on NASDAQ is furnished as Exhibit 99.1 to the Current Report on Form 8-K and is incorporated herein by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

  (d) Exhibits.

 

EXHIBIT
NO.

  

DESCRIPTION

  3.1    Certificate of Incorporation of the Company.
  3.2    By-laws of the Company.
10.1    Separation and Distribution Agreement, dated September 29, 2014, by and between ADP and CDK Global Holdings, LLC.
10.2    Tax Matters Agreement, dated September 29, 2014, by and between ADP and the Company.

 

9


10.3    Transition Services Agreement, dated September 29, 2014, by and between ADP and CDK Global Holdings, LLC.
10.4    Data Center Services Agreement, dated September 29, 2014, by and between ADP and CDK Global Holdings, LLC.
10.5    Intellectual Property Transfer Agreement, dated September 29, 2014, by and between ADP and CDK Global Holdings, LLC.
10.6    Employee Matters Agreement, dated September 29, 2014, by and between ADP and CDK Global Holdings, LLC.
10.7    Change in Control Severance Plan for Corporate Officers of the Company.
10.8    CDK Global, Inc., 2014 Omnibus Award Plan.
10.9    CDK Global, Inc., Deferred Compensation Plan.
99.1    Press Release dated October 1, 2014, issued by the Company.

 

10


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: October 1, 2014

 

CDK Global, Inc.
By:  

/s/ Steven J. Anenen

Name:   Steven J. Anenen
Title:   President and Chief Executive Officer

 

11

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 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware 19801; and the name of its registered agent at such address is the Corporation Trust 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 700,000,000 shares, divided into (A) 650,000,000 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.

 

2


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

 

3


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. 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.

12. Effective Time. This Certificate of Incorporation shall become effective on September 29, 2014 at 6:00 p.m. (Eastern Time).

[Remainder of the page left intentionally blank]

 

4


WITNESS the signature of this Certificate of Incorporation this 29th day of September, 2014.

 

/s/ Lee Brunz

Incorporator
Name: Lee Brunz
EX-3.2

Exhibit 3.2

 

 

BY-LAWS

of

CDK GLOBAL, INC.

(A Delaware Corporation)

 

 

Effective September 30, 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

 

2


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

 

3


  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.

 

4


(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.

 

5


(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

 

6


(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.

 

7


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

 

8


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.”

 

10


(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.

 

11


(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

 

12


  (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.

 

13


(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.

 

14


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.

 

15


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.

 

16


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.

 

19


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.

 

20

EX-10.1

Exhibit 10.1

SEPARATION AND DISTRIBUTION AGREEMENT

by and between

AUTOMATIC DATA PROCESSING, INC.

and

CDK GLOBAL HOLDINGS, LLC

Dated as of September 29, 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 September 29, 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” in a transaction intended to qualify as a tax-free reorganization pursuant to Section 368(a) of the Code, 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 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 $825 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.

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) that certain term loan facility, in the amount not to exceed $250 million (the “Term Loan Facility”), and a revolving credit facility, in the amount not to exceed $300 million (the “Revolving Credit Facility”), in each case to be entered into

 

9


prior to the Distribution and in connection with the Separation, by and among Dealer, an administrative agent, certain arrangers, and each of the financial institutions from time to time party thereto, and (ii) $750 million of additional new indebtedness, which may include bank debt, long-term notes or a combination thereof, which may be entered into prior to the Distribution by and among Dealer and certain administrative agents, arrangers, underwriters or financial institutions, each as may be necessary.

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”), the shares of which will have been transferred 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.

 

10


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.

 

11


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).

 

12


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.

 

13


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.

 

14


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 three (3) 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

 

15


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

 

16


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.

 

17


(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

 

18


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

 

19


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 Leslie A. Brun, (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.

 

20


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.

 

21


(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 three (3) 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.

 

22


(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;

 

23


(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.

 

24


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).

 

25


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.

 

26


(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

 

27


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.

 

28


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

 

29


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.

 

30


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.

 

31


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.

 

32


(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

 

33


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

 

34


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.

 

35


(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

 

36


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

 

37


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

 

38


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,

 

39


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

 

40


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

 

41


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

 

42


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

 

43


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.

 

44


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

 

45


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]

 

46


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:  

/s/ Michael A. Bonarti

  Name:   Michael A. Bonarti
  Title:   Vice President

CDK Global Holdings, LLC

By:  

/s/ Jan Siegmund

  Name:   Jan Siegmund
  Title:   Vice President and Controller

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page – Separation and Distribution Agreement]


Schedule 2.3(c)(i)

ADP Assigned Agreements

All contracts with third parties entered into prior to the date of the foregoing Separation Agreement that were executed by a member of the ADP Group, but which relate solely to the Dealer Business, shall be deemed assigned by such ADP Group member to the Dealer Group, notwithstanding that such contracts are not identified on this Schedule.


Schedule 2.3(c)(ii)

Dealer Assigned Agreements

All contracts with third parties entered into prior to the date of the foregoing Separation Agreement that were executed by an entity that is now (or pursuant to the Separation and Distribution, will become) a member of the Dealer Group, but which relate solely to the ADP Business, shall be deemed to be assigned by such entity to the ADP Group, notwithstanding that such contracts are not identified on this Schedule.


Schedule 2.3(d)

Surviving ADP Group and

Dealer Group Agreements

Leases

 

  1. Guaranty given by Automatic Data Processing, Inc., commencing as of September 13, 2002 and expiring on September 30, 2017,1 with respect to the real property lease between Digital Motorwork L.P. and TPG-Park 22 LLC (successor in interest to Walton Stacy Investors III, L.P.) for 8601 Ranch Road 2222, Austin, TX.

 

  2. Indemnity Agreement made by Automatic Data Processing, Inc., commencing as of September 1, 2013 and expiring on August 31, 2018, with respect to the real property lease between ADP Canada Co. (successor in interest to ADP Dealer Services, Ltd. and Amexon Property Management Inc. (successor in interest to 1200/1210/1220 Sheppard Avenue East Limited).

 

  3. Guaranty given by Automatic Data Processing, Inc., commencing as of December 3, 2010 and expiring on March 31, 2015, with respect to the real property lease between ADP Dealer Services Deutschland GmbH. and IAK Dritte Immobilienfonds Koln GmbH & Co. Projekte Ludwigshafen/ Wulfrath KG for 1 ADP Strasse 42489 Wulfrath, Germany.

 

  4. Standard Industrial Lease dated as of May 15, 2012 and expiring on October 31, 2017, between TA/Western, LLC (as predecessor-in-interest to Teachers Insurance and Annuity Association of America, For the Benefit of The Real Estate Account, as landlord, and ADP, Inc. relating to the leasing of premises located at 13926 Equitable Road, Cerritos, California 90703.

 

  5. Lease Agreement dated as of September 17, 2013 and expiring on March 31, 2019, between 500 Woodward LLC, as landlord, and ADP, Inc., as amended by that certain First Amendment to Lease Agreement dated as of February 24, 2014 relating to the leasing of premises located at 500 Woodward Avenue, Detroit, MI.

 

  6. Agreement of Lease dated August 29, 2013 and expiring on October 14, 2016, between 2000 Ponce De Leon Square, Inc., as landlord, and ADP, Inc., as tenant, relating to the leasing of premises located at 2000 Ponce De Leon Boulevard, Suite 103, Coral Gables, Florida, 33134.

 

 

1  Expiration dates reflect the expiration of the current lease terms.


Schedule 2.3(d)

(Cont’d)

 

  7. Office Lease dated as of July 30, 1997 and expiring on June 30, 2015, between 2550 Gray Falls, Inc. (predecessor-in-interest to LandPark Commercial, LLC), as landlord, and Traver Technologies, Inc. (predecessor-in-interest to ADP, Inc., as tenant, as amended by that certain Landlord Consent to Assignment and Assumption and Amendment to Lease dated November 30, 2000, as amended by that certain Second Amendment to Lease dated December 23, 2004, as amended by that certain Third Amendment to Lease dated June 28, 2005, as amended by that certain Fourth Amendment to Lease dated November 19, 2010, as amended by that certain Amendment No. 5 to Lease dated August 4, 2011, and as amended by that certain Amendment No. 6 to Lease dated July 10, 2012, relating to that certain premises located at 2550 Gray Falls, Suite 400, Houston, TX 77077.

 

  8. Lease dated October 31, 2003 and expiring on February 28, 2015, between Highlands Group of Madison, LLC, as landlord, and ADP, Inc., as tenant, as amended by that certain Letter Agreement dated November 5, 2008, and that certain Lease Extension Notice and Agreement dated September 28, 2011, relating to the leasing of premises located at 2985 Triverton Pike Drive, Fitchburg, Wisconsin 53711.

 

  9. Lease dated as of October 25, 2007 and expiring on November 30, 2016, by and between Paino Associates, LLC, as landlord, and ADP, Inc., as tenant, as amended by that certain First Amendment and Modification of Lease dated as of August 6, 2010, and as amended by that certain Second Amendment and Modification of Lease dated as of September 12, 2013, relating to that certain premises located at 23 Midstate Drive., Auburn, MA 01501.

 

  10. Standard Office Lease Agreement dated as of July 10, 1996 and expiring February 29, 2016, by and between Mid-Cities Partners, Ltd. (predecessor-in-interest to MLMT 2005-LC1 Freeway Offices, LLC), as landlord, and ADP, Inc., as tenant, as amended by that certain First Amendment to Lease Agreement dated as of March 1, 2000, as amended by that certain Second Amendment to Lease Agreement dated as of April 1, 2004, as amended by that certain Third Amendment to Lease Agreement dated as of May 19, 2005, as amended by that certain Fourth Amendment to Lease dated November 10, 2011, and as amended by that certain Fifth Amendment to Lease dated as of October 29, 2012, relating to that certain premises located at 4001 Airport Freeway, Suite 300 & 400 Bedford, TX 76061.

 

  11. Limited Delegation of Financial Obligations given by Automatic Data Processing, Inc. covering the period commencing as of July 1, 1997 and expiring on September 30, 2014, with respect to those certain Agreements for Guarantee of Deductible Reimbursement & Premium Payments (numbered respectively 2145, 2781, 3475, 3960, 6810, 7149, 0504), by and between Liberty Mutual Insurance Company, its parents, subsidiaries and affiliates, on the one hand, and Automatic Data Processing, Inc., on the other hand.


Schedule 2.3(f)

Guaranty Fees

 

Agreement Description

   Monthly fee*  

I. Leases

  

1.

   Guaranty given by Automatic Data Processing, Inc., commencing as of September 13, 2002 and expiring on September 30, 2017, with respect to the real property lease between Digital Motorwork L.P. and TPG-Park 22 LLC (successor in interest to Walton Stacy Investors III, L.P.) for 8601 Ranch Road 2222, Austin, TX.    $ 1,279.74   

2.

   Indemnity Agreement made by Automatic Data Processing, Inc., commencing as of September 1, 2013 and expiring on August 31, 2018, with respect to the real property lease between ADP Canada Co. (successor in interest to ADP Dealer Services, Ltd. And Amexon Property Management Inc. (successor in interest to 1200/1210/1220 Sheppard Avenue East Limited).    $ 223.30   

3.

   Guaranty given by Automatic Data Processing, Inc., commencing as of December 3, 2010 and expiring on March 31, 2015, with respect to the real property lease between ADP Dealer Services Deutschland GmbH. and IAK Dritte Immobilienfonds Koln GmbH & Co. Projekte Ludwigshafen/ Wulfrath KG for 1 ADP Strasse 42489 Wulfrath, Germany.    $ 397.25   

4.

   Standard Industrial Lease dated as of May 15, 2012 and expiring on October 31, 2017, between TA/Western, LLC (as predecessor-in-interest to Teachers Insurance and Annuity Association of America, For the Benefit of The Real Estate Account, as landlord, and ADP, Inc. relating to the leasing of premises located at 13926 Equitable Road, Cerritos, California 90703.    $ 90.49   

 

 

*  Fees to be invoiced on a quarterly basis, with payment due within 30 days of invoice, and payable so long as the guaranty remains in effect.


Schedule 2.3(f)

(Cont’d)

 

Agreement Description

   Monthly fee*  
5.    Lease Agreement dated as of September 17, 2013 and expiring on March 31, 2019, between 500 Woodward LLC, as landlord, and ADP, Inc., as amended by that certain First Amendment to Lease Agreement dated as of February 24, 2014 relating to the leasing of premises located at 500 Woodward Avenue, Detroit, MI.    $ 559.65   
6.    Agreement of Lease dated August 29, 2013 and expiring on October 14, 2016, between 2000 Ponce De Leon Square, Inc., as landlord, and ADP, Inc., as tenant, relating to the leasing of premises located at 2000 Ponce De Leon Boulevard, Suite 103, Coral Gables, Florida, 33134.    $ 70.26   
7.    Office Lease dated as of July 30, 1997 and expiring on June 30, 2015, between 2550 Gray Falls, Inc. (predecessor-in-interest to LandPark Commercial, LLC), as landlord, and Traver Technologies, Inc. (predecessor-in-interest to ADP, Inc., as tenant, as amended by that certain Landlord Consent to Assignment and Assumption and Amendment to Lease dated November 30, 2000, as amended by that certain Second Amendment to Lease dated December 23, 2004, as amended by that certain Third Amendment to Lease dated June 28, 2005, as amended by that certain Fourth Amendment to Lease dated November 19, 2010, as amended by that certain Amendment No. 5 to Lease dated August 4, 2011, and as amended by that certain Amendment No. 6 to Lease dated July 10, 2012, relating to that certain premises located at 2550 Gray Falls, Suite 400, Houston, TX 77077.    $ 45.50   
8.    Lease dated October 31, 2003 and expiring on February 28, 2015, between Highlands Group of Madison, LLC, as landlord, and ADP, Inc., as tenant, as amended by that certain Letter Agreement dated November 5, 2008, and that certain Lease Extension Notice and Agreement dated September 28, 2011, relating to the leasing of premises located at 2985 Triverton Pike Drive, Fitchburg, Wisconsin 53711.    $ 25.64   

 

 

*  Fees to be invoiced on a quarterly basis, with payment due within 30 days of invoice, and payable so long as the guaranty remains in effect.


Schedule 2.3(f)

(Cont’d)

 

Agreement Description

   Monthly fee*  

9.

   Lease dated as of October 25, 2007 and expiring on November 30, 2016, by and between Paino Associates, LLC, as landlord, and ADP, Inc., as tenant, as amended by that certain First Amendment and Modification of Lease dated as of August 6, 2010, and as amended by that certain Second Amendment and Modification of Lease dated as of September 12, 2013, relating to that certain premises located at 23 Midstate Drive., Auburn, MA 01501.    $ 20.27   

10.

   Standard Office Lease Agreement dated as of July 10, 1996 and expiring February 29, 2016, by and between Mid-Cities Partners, Ltd. (predecessor-in-interest to MLMT 2005-LC1 Freeway Offices, LLC), as landlord, and ADP, Inc., as tenant, as amended by that certain First Amendment to Lease Agreement dated as of March 1, 2000, as amended by that certain Second Amendment to Lease Agreement dated as of April 1, 2004, as amended by that certain Third Amendment to Lease Agreement dated as of May 19, 2005, as amended by that certain Fourth Amendment to Lease dated November 10, 2011, and as amended by that certain Fifth Amendment to Lease dated as of October 29, 2012, relating to that certain premises located at 4001 Airport Freeway, Suite 300 & 400 Bedford, TX 76061.    $ 357.99   

11.

   Limited Delegation of Financial Obligations given by Automatic Data Processing, Inc. covering the period commencing as of July 1, 1997 and expiring on September 30, 2014, with respect to those certain Agreements for Guarantee of Deductible Reimbursement & Premium Payments (numbered respectively 2145, 2781, 3475, 3960, 6810, 7149, 0504), by and between Liberty Mutual Insurance Company, its parents, subsidiaries and affiliates, on the one hand, and Automatic Data Processing, Inc., on the other hand.    $ 3,125.00   

 

 

*  Fees to be invoiced on a quarterly basis, with payment due within 30 days of invoice, and payable so long as the guaranty remains in effect.


Schedule 4.3(d)

ADP Statements in

Information Statement

 

1. Letter to ADP stockholders from Carlos A. Rodriguez.

 

2. The information set forth under the first through the thirteenth, the penultimate sentence of the fourteenth, the seventeenth and the twenty-first questions and answers under “Summary—Questions and Answers About the Distribution.”

 

3. The information set forth under the first through the ninth and the thirteenth line items under “Summary—Distribution.”

 

4. The information set forth under the following headings:

“Distribution—General”

“Distribution—Reasons for the Distribution”

“Distribution—The Number of Shares You Will Receive”

“Distribution—When and How You Will Receive the Dividend”

“Distribution—Material U.S. Federal Income Tax Consequences of the Distribution”

 

5. The information set forth under the heading “Executive Compensation—Compensation Discussion and Analysis.”


Schedule 10.2

Transaction Expenses

Dealer shall be responsible for (i) all financing, commitment or other fees payable in connection with the Term Loan Facility and the Revolving Credit Facility, each entered into in connection with the Dealer Cash Dividend and (ii) any legal and administrative expenses incurred in connection therewith.

EX-10.2

Exhibit 10.2

TAX MATTERS AGREEMENT

by and between

AUTOMATIC DATA PROCESSING, INC.

and

CDK GLOBAL, INC.

Dated as of September 29, 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.

 

1


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.

 

2


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.

 

3


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.

 

4


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.

 

5


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.

 

6


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 September 29, 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.

 

7


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.

 

8


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.

 

9


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.

 

11


(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.

 

13


(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).

 

14


(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.

 

15


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

 

16


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

 

17


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

 

18


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

 

19


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;

 

20


(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.

 

21


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.

 

22


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.

 

23


(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

 

24


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]

 

32


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:  

/s/ Michael A. Bonarti

  Name:   Michael A. Bonarti
  Title:   Vice President
CDK GLOBAL, INC.
By:  

/s/ Steven J. Anenen

  Name:   Steven J. Anenen
  Title:   Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EX-10.3

Exhibit 10.3

 

 

TRANSITION SERVICES AGREEMENT

between

AUTOMATIC DATA PROCESSING, INC.

and

CDK GLOBAL HOLDINGS, LLC

Dated as of September 29, 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

 

Transition

     8   

ARTICLE III TERM AND TERMINATION

     9   

Section 3.1

 

Term

     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   

 

-i-


             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   
 

Section 6.19

 

No Set-Off

     19   

Service Schedules

 

1.   

India Services

2.   

ADP Facilities Services

3.   

Dealer Facilities Services

4.   

IT Infracture Services

5.   

Vendor Services

6.   

Tax Services

7.   

Statutory Research Services

 

 

-ii-


TRANSITION SERVICES AGREEMENT

TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of September 29, 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 September 29, 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

 

-2-


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.

 

-3-


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.

 

-4-


Service Provider” means (i) with respect to Service Schedules 1, 2 and 4 through 7, ADP, and (ii) with respect to Service Schedule 3, Dealer.

Service Recipient” means (i) with respect to Service Schedules 1, 2 and 4 through 3, 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 Schedule 3, 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.

 

-5-


ARTICLE II

SERVICES

Section 2.1 Services.

(a) The term “Services” shall mean and refer solely to those services listed on Schedules 1 through 7 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. This Section 2.1(b) does not apply to the Type 2 Services set forth on Service Schedule 1 hereof.

(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 reasonable 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

 

-6-


agrees that a 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 a 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, or at any price, 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 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.

 

-7-


(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 Transition. During the Term, each of ADP and Dealer shall cooperate with each other with respect to the Transition and to use their respective commercially reasonable efforts to timely complete the Transition.

 

-8-


ARTICLE III

TERM AND TERMINATION

Section 3.1 Term.

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 I, Section B of Service Schedule 4, 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.

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.

 

-9-


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;

 

-10-


(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

 

-11-


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.

 

-12-


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

 

-13-


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 $500,000.00 AND (C) IN THE CASE WHERE DEALER IS THE SERVICE PROVIDER, LOSSES RELATED TO THIS AGREEMENT IN EXCESS OF AN AGGREGATE AMOUNT EQUAL TO $100,000.00.

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

 

-14-


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

 

-15-


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

 

-16-


(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 I 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.

 

-17-


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,

 

-18-


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.

[Remainder of page intentionally left blank]

 

-19-


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

 

AUTOMATIC DATA PROCESSING, INC.
By:   /s/ Michael A. Bonarti
  Name: Michael A. Bonarti
  Title: Vice President

 

CDK GLOBAL HOLDINGS, LLC
By:   /s/ Jan Siegmund
  Name: Jan Siegmund
  Title: Vice President and Controller


Schedules to Transition Services Agreement

SERVICE SCHEDULES

NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE SERVICE SCHEDULES THAT FOLLOW, IN NO EVENT SHALL A SERVICE PROVIDER BE DEEMED TO BE REQUIRED TO PROVIDE ANY SERVICES BEYOND THE TERM.

TO THE EXTENT THAT A BUSINESS, PRIOR TO THE DISTRIBUTION, HAS ALREADY SATISFIED ANY CROSS-CHARGE OBLIGATIONS THROUGH THE END OF THE APPLICABLE SERVICE PROVIDER’S 2015 FISCAL YEAR FOR ANY OF THE SERVICES SPECIFIED ON THE FOLLOWING SERVICE SCHEDULES (THAT ARE NOT BEING REIMBURSED OR REVERSED PURSUANT TO ANY INTERCOMPANY RECONCILIATIONS IN CONNECTION WITH THE DISTRIBUTION), THE STATED FEES SET FORTH FOR SUCH SERVICES IN THE SERVICE SCHEDULES SHALL NOT APPLY WITH RESPECT TO PERIODS PRIOR TO THE END OF SUCH FISCAL YEAR.


Service Schedule 1

India Services

Preface to Service Schedule 1:

Approximately 800 ADP Private Limited associates provide services on a full time basis to the Dealer Group (the “ADP PL Dealer Associates”), and the remainder of ADP Private Limited’s associates provide services either (1) to the ADP Group or (2) to the ADP Private Limited associates generally (e.g., human resource support). The ADP PL Dealer Associates (1) provide a variety of services to the Dealer Group, primarily involving support of the Dealer Group finance organization, and information technology services to the Dealer Group, and (2) operate under the day to day instruction and supervision of other associates of the Dealer Group. As such, ADP Private Limited and members of the ADP Group do not supervise or manage ADP PL Dealer Associates and do not influence the quality or timeliness of the work product produced by the ADP PL Dealer Associates.

As used in this Service Schedule 1 the term “Service” means both:

 

  a. services provided by ADP Private Limited as employer of the ADP PL Dealer Associates (“Type 1 Services”); and

 

  b. services provided by ADP PL Dealer Associates to members of the Dealer Group (“Type 2 Services”).

Notwithstanding anything to the contrary in the Agreement, the obligation to provide the Type 1 Services and Type 2 Services shall terminate on the earlier of (i) such date that the ADP PL Associates are transferred to or otherwise become employees of the Dealer Group and (ii) May 31, 2015, and such Services shall cease to be provided following such termination date.

The Services covered by this Service Schedule 1 include both the Fortune 9 facility located in Hyderabad and S P Infocity facility in Pune.

Type 1 Services

 

    Facilities and maintenance

 

    Access to common areas (including reception, front office, cafeteria).

 

    Ensuring that the interim allocated Dealer space operates in the ordinary course by providing housekeeping services, electrical and security.

 

    Administration (including travel)

 

    Front office support (reception and general administrative support)

 

    Travel arrangements for business visits

 

    Assisting associates in obtaining appropriate visas

 

    Travel booking (tickets, accommodation and taxis)

 

    Office stationery (including business cards and letter head) and supplies


    Associate transport: Local transport to work-place as per applicable transport policy

 

    Human resources

 

    Talent acquisition (including sourcing, screening, candidate management, interviewing, selection, offer management, “on-boarding” and induction)

 

    Human resources shared services (including payroll, compensation and benefits administration, leaves, exits, setting up HRMS tools and personnel file management)

 

    Business human resources (including employee engagement, performance management, grievance handling, employees relations and culture augmentation)

 

    Learning and development (including training administration, leadership development and budget management)

 

    Assistance with maintaining current certifications: ADP to support and maintain ADP Information Security Management System for Dealer.

 

    iKare: ADP will create a Dealer-only instance of ADP’s iKare system and provide support in customizing iKare to Dealer’s needs.

 

    Provide access to India share point portal and shared services service desk applications

Type 2 Services

 

    Finance (including creation of separate accounts and reports consistent with ones currently in use), as follows:

 

    Maintenance and reporting of financial information for Indian statutory needs and Dealer finance organization reporting needs.

 

    Replication of reporting that is currently provided for ADP Group, including income summaries, setup of similar account structure, forecasting, plan review process, AP approval structure, payroll processing, procurement framework and book closing. Such reports are used for management reporting and decision making and will be generated by the FP&A and accounting teams.

 

    Support of the transition of the move to a new financial system for Dealer Services.

 

    Information technology services, including application development and testing

 

    Invoicing

 

    Invoices for intra-Group services rendered by associates in India (associated with the Dealer Group) to other Dealer Group members will be generated for the various Dealer Group business units in line with current pricing and processes.

 

    Procurement support (RFP process, tendering, evaluation, agreement negotiation, Purchase Order releases, etc…)


Fee: Per associate, per month, an amount equal to: (i) fully-loaded direct cost, plus (ii) allocated indirect overhead costs.

Rebates on previously invoiced amounts will be calculated for Dealer when calculated for ADP Group companies, and applied to Dealer when applied to ADP Group companies (currently, monthly).


Service Schedule 2

ADP Facilities Services

Section 1. Shared Facilities.

ADP shall permit each applicable member of Dealer Group to use each of the premises situated at the locations set forth on Tables 2.1, 2.2 and 2.3 below (each such premises, a “Premises”) in the same manner as said Premises was used by such member of Dealer Group prior to the date hereof for the operation of the Dealer Business. ADP shall allow Dealer Group and its employees, agents and invitees access to and use of common facilities within its facilities located in the Premises (each such facility, a “Facility”), including but not limited to, any cafeterias, lavatories, kitchens, elevators and corridors during the Facilities Term (as defined below) in the same manner as used by Dealer Group prior to the Distribution Date.

Section 2. Furniture, Fixtures and Equipment.

The furniture, fixtures and equipment (“FF&E”) owned by ADP Group and located in the Premises shall remain ADP Group’s property. Dealer Group shall have the non-exclusive right to use the FF&E located in the Premises from time to time, if any, during all times in which Dealer Group has access to the Premises. Upon the expiration of the Facilities Term or the earlier termination of this Agreement pursuant to Section 3.2, Dealer Group’s right to use the FF&E shall terminate automatically, without any requirement for notice from ADP and Dealer Group shall be responsible for any damage to the FF&E beyond normal wear and tear. ADP shall be required to maintain, repair or replace the FF&E on the Premises in the ordinary course and consistent with past practices, it being acknowledged and agreed that ADP shall have the right, but not the obligation, in its sole discretion, to replace the FF&E, if any, with comparable FF&E.

Section 3. Condition of the Premises and the FF&E.

Dealer acknowledges and agrees on behalf of Dealer Group that the Premises, the Facilities and the FF&E are being made available in their “AS IS” condition as of the date of this Agreement and ADP makes no representations or warranties as to their quality or suitability for their proposed use or purpose by Dealer Group. ADP shall maintain, repair or replace the Premises and the Facilities in the ordinary course and consistent with past practices at no additional cost or expense to Dealer.

Section 4. Term.

Subject to earlier termination of this Agreement pursuant to Section 3.2 (in which case this Service Schedule 2 shall terminate automatically in accordance with the terms of this Agreement), the term of this Service Schedule 2 shall be for a period not to exceed (i) 180 days from the Distribution Date for the locations listed in Table 2.1; (ii) 30 days from the Distribution Date for the locations listed in Table 2.2; and (iii) two years from the Distribution Date for the locations listed in Table 2.3 (each a “Facilities Term”).


Section 5. Use.

Dealer Group shall use the Premises for the same purposes as they currently are used in connection with the operation of the Dealer Business and for no other purpose without ADP’s prior written consent (in its sole discretion). Dealer Group shall conduct its business in the Premises in a manner consistent with Dealer Group’s prior use of the Facilities. Dealer Group shall not be permitted to make any alterations, modifications or additions to the Premises.

Table 2.1 Premises.

 

Location

  

Monthly Rent

  

IT Infrastructure

7000 Village Drive

Suite 100, 105 & 200

Buena Park, CA 90621

   $20,146.67    Dealer to use ADP wireless network.

5355 Orangethorpe Avenue

La Palma, CA 90623-1095

   $9,887.67    No shared IT infrastructure.

5800 Windward Parkway

Alpharetta, GA 30005

   $26,562.69    Dealer to use ADP wireless network.

One ADP Drive

Augusta, GA 30909

   $21,220.94    Dealer to use ADP network switch.

15 Waterview Blvd.

Parsippany, NJ 07054

   $8,964.67    No shared IT infrastructure

Table 2.2 Premises.

 

Location

  

Monthly Rent

  

IT Infrastructure

3665 Priority Way

Indianapolis, IN 46240

   $2,464.10    No shared IT infrastructure

1125 Virginia Drive

Ft. Washington, PA 19034

   $7,502.39    No shared IT infrastructure

Table 2.3 Premises.

 

Location

  

Monthly Rent

  

IT Infrastructure

100 Northwest Point Road

Elk Grove Village, IL 60007

   $17,091.29    No shared IT infrastructure


Service Schedule 3

Dealer Facilities Services

Section 1. Shared Facilities.

Dealer shall permit each applicable member of ADP Group to use each of the premises situated at the locations set forth on Table 3.1 below (each such premises, a “Premises”) in the same manner as said Premises was used by such member of ADP Group prior to the date hereof for the operation of the ADP Business. Dealer shall allow ADP Group and its employees, agents and invitees access to and use of common facilities within its facilities located in the Premises (each such facility, a “Facility”), including but not limited to, any cafeterias, lavatories, kitchens, elevators and corridors during the Facilities Term (as defined below) in the same manner as used by ADP Group prior to the Distribution Date.

Section 2. Furniture, Fixtures and Equipment.

The furniture, fixtures and equipment (“FF&E”) owned by Dealer Group and located in the Premises shall remain Dealer Group’s property. ADP Group shall have the non-exclusive right to use the FF&E located in the Premises from time to time, if any, during all times in which ADP Group has access to the Premises. Upon the expiration of the Facilities Term or the earlier termination of this Agreement pursuant to Section 3.2, ADP Group’s right to use the FF&E shall terminate automatically, without any requirement for notice from Dealer and ADP Group shall be responsible for any damage to the FF&E beyond normal wear and tear. Dealer shall be required to maintain, repair or replace the FF&E on the Premises in the ordinary course and consistent with past practices, it being acknowledged and agreed that Dealer shall have the right, but not the obligation, in its sole discretion, to replace the FF&E, if any, with comparable FF&E.

Section 3. Condition of the Premises and the FF&E.

ADP acknowledges and agrees on behalf of ADP Group that the Premises, the Facilities and the FF&E are being made available in their “AS IS” condition as of the date of this Agreement and Dealer makes no representations or warranties as to their quality or suitability for their proposed use or purpose by ADP Group. Dealer shall maintain, repair or replace the Premises and the Facilities in the ordinary course and consistent with past practices at no additional cost or expense to ADP.

Section 4. Term.

Subject to earlier termination of this Agreement pursuant to Section 3.2 (in which case this Service Schedule 3 shall terminate automatically in accordance with the terms of this Agreement), the term of this Service Schedule 3 shall be for a period not to exceed 180 days from the Distribution Date (“Facilities Term”).


Section 5. Use.

ADP Group shall use the Premises for the same purposes as they currently are used in connection with the operation of the ADP Business and for no other purpose without Dealer’s prior written consent (in its sole discretion). ADP Group shall conduct its business in the Premises in a manner consistent with ADP Group’s prior use of the Facilities. ADP Group shall not be permitted to make any alterations, modifications or additions to the Premises.

Table 3.1 Premises.

 

Location

  

Monthly Rent

  

IT Infrastructure

8601 Ranch Road 2222 Suites 300 & 400 Austin, TX 78730    $24,853.48    ADP to use Dealer network switch, analog voice and analog cabling.


Service Schedule 4

IT Infrastructure Services

PART I

ADP shall provide the following infrastructure-related services to Dealer Group:

SECTION A:

Utilization of adp.com for email.

 

  a. ADP will forward all emails to Dealer Group employees for a period of no more than twelve (12) months after the Distribution Date.

 

  b. For the period from September 1, 2015 through September 30, 2015, ADP will send notification to the sender when it receives an email for a Dealer Group associate. The notification will inform the sender that the recipient’s email address has changed to user@cdk.com and that the forwarding will no longer be in effect after September 30, 2015.

SECTION B:

Use of hostnames located in the adp.com domain name server zone file.

 

  a. Any Dealer Group hosted websites utilizing the adp.com parent domain will have use of those DNS A records during the duration of the use of hostnames pursuant to this Service Schedule 4. Furthermore if there is a need to host a redirect page for any of these web pages, ADP shall deploy the redirect and host it during the Term until Dealer stipulates it no longer has a need for it.

 

  i. ds.adp.com

 

  ii. dsi.adp.com

 

  iii. ds.ad.adp.com

 

  iv. dsi.ad.adp.com

 

  v. iscat.ds.adp.com

 

  vi. stag.ds.adp.com

Fees: No charge for the Services set forth in Part I on this Service Schedule 4.


PART II

As soon as possible after the Effective Time, Dealer shall take such actions as may be necessary or appropriate to change the organization name, organization handle, and appropriate other fields, on the following address ranges to an organization handle that is not related to ADP, does not use the ADP name, and uses only the name CDK, Global, Inc. (or similar name):

 

Network Handle

  

Network Prefix

ADP-ASP-EGV-WEBFARM (NET-192-110-66-0-1)    192.110.66.0/24
ADP-ASP-AA-INET (NET-192-191-254-0-1)    192.191.254.0/24
ADP-ASP-HOSTED (NET-207-186-0-0-1)    207.186.0.0/15
ADP-ASP-REVERSE-01 (NET-192-110-235-0-1)    192.110.235.0/24
NETBLK-ADP-C2 (NET-198-249-0-0-1)    198.249.0.0/16
ADPNETS2 (NET-204-125-0-0-1)    204.125.0.0/16
ADP3 (NET-204-224-0-0-1)    204.224.0.0/16
ADP4 (NET-205-190-0-0-1)    205.190.0.0/16
NETBLK-ADP2 (NET-199-194-0-0-1)    199.194.0.0/16
ADP5 (NET-206-22-0-0-1)    206.22.0.0/16
ADP-DS-IPV6 (NET6-2620-1F8-1)    2620:1F8::/29
ADPNETS (NET-192-110-1-0-1)    192.110.1.0 - 192.110.143.0
ADPNETS1 (NET-192-110-223-0-1)    192.110.223.0 - 192.110.250.0
ADP-C (NET-192-191-0-0-1)    192.191.0.0/16
NETBLK-ADP (NET-198-42-0-0-1)    198.42.0.0/16
ADP-AUTONET96 (NET-207-184-0-0-1)    207.184.0.0/14
ADP (NET-139-126-0-0-1)    139.126.0.0/16
Q0713-207-109-69-0 (NET-207-109-69-0-1)    207.106.69.0/24
COBALTGROUP-NET1 (NET-207-149-72-0-1)    207.149.72.0/23
NETBLK-CADP (NET-192-224-0-0-1)    192.224.0.0/16
ADP-DS-ROUTE1 (NET-198-133-214-0-1)    198.133.214.0/24
NET-209-67-79-0-1    209.67.79.0/24
NET-216-241-208-0-1    216.241.208.0/20
NET-216-231-224-0-1    216.231.224.0/20
MBSI-ADP (NET-209-42-30-0-1)    209.42.30.0/23
NET-209-181-201-120-1    209.181.201.120/29
NET-63-233-84-232-1    63.233.84.232/29

NET-206-129-124-0-1

NET-209-102-62-0-1

NET-216-88-212-0-1

  

206.129.124.0/22

209.102.62.0/22

216.88.212.0/22

Fees: No charge for the Services set forth in Part II on this Service Schedule 4.


Service Schedule 5

Vendor Services

PART I

For a period of 90 days following the Distribution Date, ADP’s global procurement group will use its reasonable best efforts to assist Dealer with respect to (1) bifurcation of contracts held in the name of ADP but under which Dealer received products or services prior to the Distribution Date, (2) administrative clean-up of vendor contract issues, and (3) assignment of vendor contracts held by ADP but which were used exclusively by, or held exclusively for the benefit of, Dealer or its affiliates prior to the Distribution.

Fees: The fees associated with the Services set forth on Part I of this Service Schedule 5 shall be $25,000 per month.

PART II

The parties currently expect that, following the Effective Time, the following contracts will constitute Mixed Contracts (as such term is defined in the Separation Agreement). In furtherance and not limitation of the provisions of Section 2.3(g)(i) of the Separation Agreement: (1) each of Dealer and ADP shall promptly reimburse the other party for any fees paid by ADP or Dealer, as the case may be, under the Mixed Contract for goods or services purchased, used or consumed by the other party; (2) Dealer shall indemnify ADP for any Losses incurred by ADP resulting from any act or omission of Dealer that breaches any term of the Mixed Contract (which indemnification shall not be subject to the limitation set forth in Section 5.3 of the Transition Services Agreement); and (3) ADP shall indemnify Dealer for any Losses incurred by Dealer resulting from any act or omission of ADP that breaches any term of the Mixed Contract (which indemnification shall not be subject to the limitation set forth in Section 5.3 of the Transition Services Agreement). The arrangements set forth herein with respect to the Mixed Contracts set forth below shall terminate as soon as possible after the Effective Date, and no later than 180 days following the Effective Date, at which time, the parties shall ensure that Dealer is no longer operating under, or receiving any benefit with respect to, any such Mixed Contract.

Mixed Contracts:

AirWatch

Bank of the West (with ADP Commercial Leasing)

BMC Software Inc.

EMC Corporation

Google Maps

Hewlett Packard (formerly Mercury)

Microsoft - Crosscharge

SalesForce.com

Symantec

Verisign, Inc.

VMware


Service Schedule 6

Tax Services

 

Service:    Tax Compliance (Income, Sales, Use and Property) and Tax U.S. GAAP Accounting
Providing Company:   

ADP

Point of contact:

Dave Curto, VP, Federal Tax & Accounting

One ADP Boulevard

Roseland, NJ 07068

973-974-5116

dave.curto@adp.com

Receiving Company:   

Dealer

Point of contact:

Phil Seabrease

1950 Hassel Road, Suite 1000

Hoffman Estates, IL 60169-6308

847-485-4014

phil.seabrease@cdk.com

Description of Service:    ADP shall also use commercially reasonable efforts to provide Dealer reasonably requested tax related services.
Process and Fees:   

Where services are desired by Dealer, including the preparation of tax returns the preparation of which would otherwise be the responsibility of Dealer, it will make a written request for such service in each instance. ADP shall respond with a written non-binding estimate of its costs for such Services, including internal allocated costs and any third party costs associated therewith. If Dealer elects to use ADP for the desired service, it shall pay ADP for all costs incurred by ADP to provide such service (whether internal allocated costs or third party costs). If deemed necessary by ADP (acting reasonably), the parties shall enter into an engagement contract for such Services.

 

Except as otherwise set forth in the Tax Matters Agreement, ADP shall be reimbursed for taxes, interest and penalties related to any tax returns prepared by ADP pursuant to a request from Dealer.


Service Schedule 7

Statutory Research Services

For a period of nine (9) months following the Effective Time, ADP shall provide the following Services to Dealer (which period may be extended an additional six (6) months from the end of the nine (9) month period by written notice delivered by Dealer to ADP not less than eight (8) months after the Effective Time):

 

  (1) ADP shall to provide Dealer (via posting to a Sharepoint or similar site owned and controlled by Dealer, or to a third party provider of data room services (including a “drop box” provider engaged by Dealer for such purpose) with the same statutory change forms (reflecting US and Canadian payroll and payroll tax changes, and payroll reporting changes), including documentation associated with the applicable change, produced by ADP’s Statutory Research Shared Services (“SRSS”) group, at the same time such forms (and documentation, if any) are distributed by SRSS to other ADP payroll system groups;

 

  (2) Consistent with practice prior to the Effective Time, ADP will continue to make available associates from SRSS, including (x) access to appropriate tax research analysts for the purposes of obtaining guidance on payroll statutory issues, (y) to the extent permitted by law, serving as a point of contact for government agency research, and (z) assistance in the generation of requirements for Dealer’s U.S. Drive payroll solution; and

 

  (3) Consistent with practice prior to the Effective Time, ADP will continue to make available Canadian payroll experts from SRSS including (x) for the purpose of obtaining guidance on Canadian regulatory compliance rules and (y) to the extent permitted by law, serving as a point of contact for government agency research, and (z) assistance in the generation of requirements for Dealer’s Canadian Drive payroll solution.

Fees: The fees associated with the Services set forth this Service Schedule 7 shall be $20,000 per month.

Notwithstanding any provision to the contrary in the Transition Services Agreement, in respect of the Services provided pursuant to this Service Schedule 7 (a) ADP’s indemnification obligations under Section 5.1(a)(2) of the Transition Services Agreement shall apply only in cases of gross negligence or willful misconduct, and (b) ADP’s total liability shall be equal to the fees actually paid by Dealer in respect of such Services.

All statutory change forms and payroll reporting changes are confidential and proprietary intellectual property of ADP. ADP hereby grants Dealer a non-transferrable (including by sublicense) and non-exclusive license to use the statutory change forms and changes solely for the purpose of supporting Dealer’s Drive payroll solution. Statutory change forms and changes shall be deemed “Information” for purposes of Section 4 of the


Transition Services Agreement; following such time as Dealer no longer is in need of the statutory change forms or changes (following shut down of the Drive payroll solution) it shall promptly destroy all copies of such documents; provided, however, that Dealer may continue to use such documents as source documents for change issues for so long as such issues remain in the defect tracking system (even if such time period goes beyond the shut down of the Drive payroll solution).

EX-10.4

Exhibit 10.4

 

 

DATA CENTER SERVICES AGREEMENT

between

AUTOMATIC DATA PROCESSING, INC.

and

CDK GLOBAL HOLDINGS, LLC

Dated as of September 29, 2014

 

 


DATA CENTER SERVICES AGREEMENT

This DATA CENTER SERVICES AGREEMENT (this “Agreement”), dated as of September 29, 2014, is 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 September 29, 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 data center services to be provided by ADP (as defined below) to the Dealer Group.

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.

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” has the meaning assigned to such term in 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 Centers” means ADP’s DC1, DC2 and Elk Grove data centers as further described in the Supplements attached hereto.

Data Center Technology” means the hardware, equipment, technology, software, data, infrastructure and intellectual property that is related to, located in or used in connection with the Data Centers as further described on the Supplements attached hereto.

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.

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.

Dispute Escalation Notice” has the meaning assigned to such term in Section 7.2.

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.

Fees” has the meaning assigned to such term in Section 3.1.

Force Majeure” has the meaning assigned to such term in Section 7.16.

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 Global Select Market.

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 6.1.

 

-2-


Indemnifying Party” has the meaning assigned to such term in Section 6.1.

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.

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 6.1.

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.

Service Recipient” means 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.

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

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.

Supplement 1” means the Co-Location Services Supplement attached hereto, together with all related schedules, attachments and exhibits.

Supplement 2” means the Platform as a Service (PFW) Supplement attached hereto, together with all related schedules, attachments and exhibits.

Supplement Term” means, for each Supplement, the applicable Services term as set forth therein.

Supplements” means Supplement 1 and Supplement 2 attached hereto, together with all related schedules, attachments and exhibits.

Term” has the meaning assigned to such term in Section 4.1(a).

 

-3-


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

Transition” means the transition of the Services from ADP to the Dealer Group or Dealer’s own third party service providers.

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.

ARTICLE II

SERVICES

Section 2.1 Provision of Services.

(a) Commencing on the Distribution Date and continuing throughout the Term, ADP shall provide to the Dealer Group the services set forth on the Supplements attached hereto (collectively, the “Services”) upon the terms and conditions set forth herein and in the applicable Supplement. Unless specifically set forth elsewhere herein to the contrary, this Agreement does not apply to the services to be provided by ADP Group to Dealer Group pursuant to any Ancillary Agreements. If, after the execution of this Agreement, the Parties reasonably determine that a service (i) that was provided by the ADP Group to the Dealer Group prior to the Distribution Date and (ii) such service is reasonably necessary to the conduct the Services after the Distribution Date, was unintentionally omitted from the Supplements, then ADP shall provide such additional service (with such service becoming a Service for purposes of this Agreement), it being agreed by the Parties that the charges for such additional Services shall be their actual cost to ADP if provided by a third party or at the hourly rate set forth in the applicable Supplement.

(b) Disaster recovery services as specified in the applicable Supplement.

(c) For avoidance of doubt, the Parties acknowledge and agree that this Agreement is non-exclusive. Dealer shall not be prohibited by this Agreement from obtaining services during the Term that are identical or substantially similar to (or in lieu of) the Services from sources other than ADP. For avoidance of doubt, (i) Dealer may only utilize ADP-approved third parties to provide any such services at any of the Data Centers and any such services must be coordinated with and approved in advance by ADP, and (ii) there will be no reduction in the Fees in the event that Dealer utilizes a third party to provide any of the Services.

(d) ADP shall, and shall cause any Third Party performing Services to, perform the Services: (i) at least at the same level of accuracy, quality, completeness, timeliness, responsiveness and professionalism as was provided prior to the Distribution (except to the extent otherwise provided in a Supplement). ADP will provide anti-virus protection for the Services to the extent specified in the applicable Supplement. ADP shall promptly and prospectively correct any errors or omissions in any of the Services of which it becomes aware.

(e) All Third Party Service Providers of ADP with access to Dealer Confidential Information must agree to be bound by a non-disclosure agreement with ADP that includes protection for Dealer Confidential Information consistent with the obligations under this Agreement. ADP will be liable for actions/omissions of Third Party Services Providers to the same degree as it would have been under the Agreement if ADP itself had so acted or failed to act. Any Third Party Service Provider engaged by ADP in support of the

 

-4-


Services after the Effective Date shall be subject to the same level of due diligence and background inquiries that ADP applies to the selection of Third Party Service Providers engaged by ADP for provisions of services similar to the Services to ADP itself. ADP shall, subject to resource availability, provide Dealer Group with reasonable assistance, at no additional charge or expense (other than any amounts in addition to the Fees required to be paid to Third Party Service Providers by ADP in connection with such assistance, which amounts shall be the sole responsibility of Dealer), in the Transition of the Services described in Supplement 2 hereto to a third party provider upon Dealer’s request.

Section 2.2 Use of Data Center Services. Dealer Group shall use the Services (i) for substantially the same purpose and in substantially the same manner as the Dealer Business used such Services prior to the Distribution, and/or (ii) for the purpose of separating and migrating the Dealer Business from the ADP Business. Subject to the foregoing sentence, Dealer Group shall not resell any Services to any Person whatsoever or otherwise permit the use of the Services by any Person in any way other than in connection with the conduct of the Dealer Business in the ordinary course consistent with past practice. In no event shall the scope of any Service required to be performed hereunder exceed what is described in this Agreement unless ADP shall otherwise agree in writing in its sole discretion.

Section 2.3 Technology. ADP hereby grants to Dealer Group, during the term of this Agreement, a non-exclusive license to use or access, as the case may be, the Data Center Technology, but solely to the extent necessary for the Dealer Group to receive and utilize the Services to execute the types of transactions and business contemplated by this Agreement.

Section 2.4 Cooperation. Dealer Group shall make available on a timely basis to ADP Group all information, materials, networks and information technology systems reasonably requested by ADP Group to enable ADP to provide the applicable Services hereunder. Dealer Group shall cooperate with ADP Group and any Third Party Service Provider as is necessary to allow ADP to provide the Services to Dealer Group.

Section 2.5 Team Leaders. The Parties shall each designate an individual that will serve as such Party’s primary point of contact with respect to the Services (each, a “Team Leader”). Each of ADP and Dealer may change its Team Leader from time to time by written notice to the other Party.

Section 2.6 Ownership of Intellectual Property.

(a) The Parties acknowledge and agree that as between ADP and Dealer, ADP is the exclusive owner of all right, title and interest in and to any and all intellectual property and other proprietary rights provided, created, or developed by ADP, its Affiliates or Third Party Service Providers in connection with the Services provided hereunder (including the Data Center Technology). As such, ADP has the sole right, in its sole discretion, to authorize the use, reproduction, distribution, disclosure, publication and access to such intellectual property and Data Center Technology.

(b) The Parties acknowledge and agree that, as between the Parties, all of Dealer Group’s systems, business methods, names, logos, Confidential Information, data, software, proprietary code, scripts and related documentation used to provide the Services (including that which has been developed by the Dealer Group for the Dealer Group and used prior to the Distribution in connection with the Dealer Business and has been installed or implemented at the Data Center for ADP to operate on Dealer’s behalf), is and shall be the exclusive property of Dealer (“Dealer Information”). To the extent that ownership of any Dealer Information does not by law automatically vest in Dealer, ADP assigns to Dealer, now or upon its creation, without further consideration, all rights, title and interest in such Dealer Information, including any copyright, trademark, service mark, trade secret, and other proprietary right relating thereto.

 

-5-


ARTICLE III

FEES; PAYMENT

Section 3.1 Fees and Expenses. Dealer shall pay ADP the fees as set forth on the Supplements, (the “Fees”).

Section 3.2 Payment.

(a) ADP Group shall provide to Dealer each month an itemized statement (an “Invoice”) for the Services performed during the preceding month. All amounts due under the Invoice shall be paid in full by Dealer within thirty (30) days of receipt of an Invoice from ADP, unless Dealer in good faith disputes the amount of Fees contained in any such invoice, as provided in Section 3.2(b) below. Any payments due under this Section 3.2 that are not timely paid by Dealer shall be subject to late charges of 1.5% for each month or portion thereof that such payment is overdue.

(b) If Dealer, in good faith, disputes any Fees, it shall promptly submit to ADP written notice of such dispute specifying in reasonable detail the basis for such dispute and may withhold from its payment of the relevant Invoice only such disputed amounts (except for applicable taxes on the disputed amounts), subject to resolution in accordance with Section 7.2.

Section 3.3 Taxes. In addition to the fees and other amounts payable by Dealer to ADP under this Agreement, Dealer shall pay any applicable taxes or assessments, including without limitation any sales, use or excise taxes, that may be levied or assessed by any government or other taxing authority in connection with the provision of the Services, or any receipts therefor, other than federal, state or local income taxes (including both regular and alternative minimum taxes) or other federal, state or local taxes based upon ADP’s taxable income, alternative taxable income or net income.

Section 3.4 No Set-off. Dealer’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 the Ancillary Agreements.

ARTICLE IV

TERM AND TERMINATION

Section 4.1 Term. The term of this Agreement shall commence on the Distribution Date and end on the date that the last Supplement Term expires, unless earlier terminated in accordance with Section 4.2 below (the “Term”); provided, however, that notwithstanding anything contained herein or in any Supplement to the contrary, each outstanding Supplement shall terminate immediately upon the termination of this Agreement.

Section 4.2 Termination by Dealer or ADP. This Agreement or any Supplement 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;

 

-6-


(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 Article III hereof and such failure is not cured within ninety (90) days after written notice from ADP or its applicable Affiliate; or

(c) by Dealer at the end of any calendar month, with respect to any or all of the Services provided to it hereunder; provided, that Dealer shall give ADP 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.

Section 4.3 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 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 this Agreement or any Supplement, Dealer shall pay ADP for all applicable Services provided through the effective date of such termination on a pro rata basis.

ARTICLE V

DATA SECURITY; CONFIDENTIALITY; REPORTS

Section 5.1 Data Protection and Security

(a) Dealer Information shall be and remain, as between the Parties, the property of Dealer. ADP shall not possess or assert any lien or other right against or to Dealer Information. No Dealer Information, or any part thereof, shall be sold, assigned, leased or otherwise disposed of to third parties by ADP or commercially exploited by or on behalf of ADP.

(b) Upon the termination or expiration of this Agreement for any reason (including termination for cause) or, with respect to any particular Dealer Information, on such earlier date that such information shall no longer be required by ADP in order to render the Services hereunder, Dealer Information (including copies thereof): (i) shall be promptly returned to Dealer by ADP in a form reasonably requested by Dealer, provided that Dealer has given prior approval to any reasonable costs associated with the conversion of Dealer Information from the form maintained by ADP; or (ii) if Dealer so elects, shall be destroyed by ADP.

(c) Dealer Information shall not be utilized by ADP for any purpose other than that of rendering the Services under this Agreement.

Section 5.2 Safeguarding Dealer Data

(a) ADP shall maintain physical security at each of the Data Centers at a level commensurate with its certification level (e.g., Tier IV). Logical security for the equipment and systems for which ADP provides Services shall be as set forth in the applicable Supplement. ADP will promptly inform Dealer of any material changes in the security methods employed by ADP to safeguard Dealer Information, unless the change would have a material and adverse impact on Dealer or its clients, in which case the consent of Dealer will be required.

(b) ADP Personnel shall not attempt to access, or grant access to, any Dealer Information which they are not permitted to access under this Agreement. If ADP becomes aware that any such access is attained (or is reasonably suspected) ADP shall promptly report such incident to Dealer, describe in reasonable detail the accessed Dealer Information (to the extent ADP is able to identify such Dealer Information), and if feasible, return to Dealer any copied or removed Dealer Information.

Section 5.3 Confidentiality.

(a) 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,

 

-7-


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 5.3(c) 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:

(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. 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 5.3 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).

(c) 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 other Party in

 

-8-


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.

(d) Survival. The obligations of confidentiality in this Article V shall remain in effect during the Term and thereafter.

Section 5.4 Reports. ADP will provide any standard audit reports it obtains for the Data Centers to Dealer. These reports will be will be prepared by a nationally recognized public accounting firm which will be chosen by ADP. These standard reports will be provided to Dealer free of charge and copies thereof may be provided to Dealer clients. In the event that any such report contains a qualified opinion, ADP will consult with Dealer to review the control deficiencies that gave rise to the qualified opinion and ADP, in its sole discretion, may implement appropriate actions to remedy any such control deficiencies.

ARTICLE VI

INDEMNIFICATION

Section 6.1 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, to the extent such Losses result from (1) an actual or alleged breach of this Agreement by the Indemnifying Party, (2) any actual or alleged infringement, violation or misappropriation of the intellectual property rights of any third person by the Indemnifying Party, or (3) the gross negligence or willful misconduct of the Indemnifying Party in the performance of its obligations hereunder, (4) death, personal injury, or bodily injury negligently or intentionally caused by the Indemnifying Party, or (5) damage to tangible/physical property caused by the grossly negligent or willful misconduct of the Indemnifying Party; provided, however, that the Indemnifying Party shall not be deemed to have breached the Agreement, or been grossly 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 VI applies solely to the specific matters and activities covered by this Agreement (and not to matters specifically covered by the Separation Agreement or the other Ancillary Agreements). The infringement indemnity set forth in subsection (1) above will not apply and ADP will not be liable for any damages assessed in any cause of action to the extent resulting from (i) any change, or enhancement in Services or Data Center Technology made by Dealer, and Service Recipient or any third party, (ii) Dealer’s use of the Services or Dealer Technology except as permitted under this Agreement or in combination with any hardware, software or other materials not expressly authorized by ADP, or (iii) ADP’s use in connection with the Services of Dealer Information.

(b) The amount of any Losses payable under Section 6.1(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.

 

-9-


Section 6.2 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 6.1 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 6.2(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 6.2(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 6.2(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 6.2(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 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 6.2(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 VI shall be paid promptly in immediately available funds by wire transfer to a bank account designated by the Indemnified Party.

 

-10-


Section 6.3 Limitation on Damages.

(a) Direct Damages. Other than as expressly specified in this Section 6.3(a), ADP’s liability for direct damages under any circumstances for claims of any type or character arising from or related to the Agreement or the Services will be limited in the aggregate to an amount equal to the Fees for the Service giving rise to the claim paid by Dealer to ADP during the twelve (12) months immediately prior to the event giving rise to the claim; provided that for damages arising as a direct result of ADP’s breach of its security and/or confidentiality obligations as expressly set forth in Section 5.1 (Data Protection and Security), Section 5.2 Safeguarding Dealer Data) and/or Section 5.3 (Confidentiality), ADP’s liability shall be limited, in the aggregate, to a separate amount equal to the Fees for the Service giving rise to the claim paid by Dealer to ADP during the twelve (12) months immediately prior to the event giving rise to the claim. For the avoidance of doubt, the foregoing creates two separate and distinct sums describing ADP’s aggregate liability limits. The foregoing limitation on direct damages shall not apply to (I) ADP’s indemnification obligations under Section 6.1(a)(2) (IP Infringement), 6.1(a)(3) (Gross Negligence and Willful Misconduct), 6.1(a)(4) (Personal Injury), and Section 6.1(a)(5) (Tangible Property Damage), (II) a Party’s gross negligence or willful misconduct (including any damage to tangible property of a Party caused thereby), (III) termination of this Agreement other than as permitted herein, and/or (IV) any death or bodily injury caused by a Party. For avoidance of doubt, ADP’s liability for damage to Dealer Group tangible property shall not exceed the limitation of liability, whether a claim is made under the indemnity in Section 6.1(a)(5) or otherwise, unless such damage is caused by ADP’s gross negligence or willful misconduct. In the event of any damages to Dealer Group tangible property hereunder, Dealer will use commercially reasonable efforts to mitigate such damages including making any claims that are reasonably available under its applicable insurance policies.

(b) Consequential Damages. IN NO EVENT SHALL EITHER PARTY AND/OR ITS AFFILIATES OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR THIRD PARTY SERVICE PROVIDERS 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 (“CONSEQUENTIALS”); PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT APPLY TO A BREACH BY EITHER PARTY OF SECTION 5.1 (DATA PROTECTION AND SECURITY), SECTION 5.2 SAFEGUARDING DEALER DATA) AND/OR SECTION 5.3 (CONFIDENTIALITY) HEREOF OR EITHER PARTY’S INTENTIONAL MISCONDUCT ; BUT, PROVIDED FURTHER THAT A PARTY’S LIABILITY FOR CONSEQUENTIALS FOR A BREACH OF SUCH SECTIONS OR ITS INTENTIONAL MISCONDUCT SHALL BE SUBJECT TO THE LIMITATION ON MONETARY DAMAGES SET FORTH IN SECTION 6.3 (A). FOR THE AVOIDANCE OF CONFUSION, THE IMMEDIATELY PRECEDING SENTENCE IN THIS SECTION 6.3 (B) CREATES A LIMITED EXCEPTION TO THE NO CONSEQUENTIALS RULE WHICH EXCEPTION IS LIMITED BY THE LIMITATION ON MONETARY DAMAGES CONTAINED IN SECTION 6.3(A). FURTHER, THE PARTIES AGREE THAT PAYMENTS REQUIRED TO BE MADE BY A PARTY HEREUNDER TO A THIRD PARTY FOR DAMAGES OF A CONSEQUENTIAL NATURE SUFFERED BY THAT THIRD PARTY SHALL BE DEEMED DIRECT DAMAGES TO SUCH PARTY.

Section 6.4 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 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.

Section 6.5 Insurance. Dealer shall obtain and maintain during the Term, reasonable insurance policies covering any and all equipment owned or leased by Dealer or the Dealer Group and located in an ADP facility. Dealer shall cause such insurance policies to include a waiver of subrogation against any coverage help by ADP. Dealer will provide proof of such insurance upon ADP’s request from time to time.

 

-11-


ARTICLE VII

MISCELLANEOUS

Section 7.1 Subcontracting. Notwithstanding anything to the contrary herein, ADP may, in its sole discretion, use a Third Party Service Provider or member of the ADP Group to provide any or all of the Services.

Section 7.2 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 7.4. 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 7.3 Consent to Jurisdiction; Forum; Service of Process; Waiver of Jury Trial.

(a) Subject to the prior exhaustion of the procedures set forth in Section 7.2, 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 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 7.4 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 7.3(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 ADP to provide the Services is independent of Dealer’s covenants under this Agreement and the Separation Agreement, and ADP, during any dispute or otherwise, shall continue to provide the Services to Dealer and the other applicable Service Recipients so long as Dealer is not in material breach of its payment obligations under this Agreement.

 

-12-


Section 7.4 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.

1950 Hassell Road Suite 1000

Hoffman Estates, IL 60169-6308

Attention: General Counsel

Fax: (847) 781-9873

 

  (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 7.5 Entire Agreement. This Agreement, together with the Supplements 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 7.6 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 7.7 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.

Section 7.8 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.

Section 7.9 Articles and Sections. The Article and Section headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

 

-13-


Section 7.10 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 7.11 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 7.12 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 7.13 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 7.14 No Third Party Beneficiaries. Except as otherwise provided in Article VI, 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 7.15 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, failures of the Internet, accident, fire, flood, strikes, lockouts, industrial disputes, pandemics or shortages of fuel. Neither Party shall be entitled to terminate this Agreement due to a Force Majeure or any failure resulting from any such event.

Section 7.16 Independent Contractors. Except as otherwise agreed in writing by the Parties, in the performance of the Services to be rendered hereunder, ADP 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 Dealer, and Dealer shall not declare or represent to any third party that ADP or any of its Affiliates is acting in any respect as agent, attorney, employee representative, joint venturer or fiduciary of the Service Recipients. 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 7.17 Employees. Individuals employed by ADP or its Affiliates who provide Services pursuant to this Agreement shall in no respect be considered employees of Dealer or any other applicable Service Recipients. ADP 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 Recipients.

[Remainder of page intentionally left blank]

 

-14-


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

 

AUTOMATIC DATA PROCESSING, INC.
By:   /s/ Michael A. Bonarti
  Name: Michael A. Bonarti
  Title: Vice President
CDK GLOBAL HOLDINGS, LLC
By:   /s/ Michael C. Eberhard
  Name: Michael C. Eberhard
  Title: Vice President and Treasurer
EX-10.5

Exhibit 10.5

INTELLECTUAL PROPERTY TRANSFER AGREEMENT

INTELLECTUAL PROPERTY TRANSFER AGREEMENT (the “Agreement”), dated as of September 29, 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.

 

2


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.

 

3


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 September 29, 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

 

4


“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.

 

5


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

 

7


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.

 

8


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

 

10


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]

 

11


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:  

/s/ Michael A. Bonarti

  Name: Michael A. Bonarti
  Title: Vice President

CDK Global Holdings, LLC

By:  

/s/ Jan Siegmund

  Name: Jan Siegmund
  Title: Vice President and Controller

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IP Transfer Agreement – Signature Page


EXHIBIT A

TO THE

INTELLECTUAL PROPERTY TRANSFER AGREEMENT

Trademarks

ADMISSION®

APPOINTMENT CYCLE®

ASC®

ASWIN®

ASWIN LITE®

AUTOCHECK

AUTOLINE®

AUTOLINE CONNECT®

AUTOLINE SELECT®

AUTOMOTIVE SERVICE CONSULTANTS®

AVTOLINE®

BD BOOT CAMP®

BD COLLEGE®

BD PROCESS®

BDC®

BDC SALES ADVISOR®

BDM®

BDS®

BOU®

CALL OF THE NATION®

COBALT®

COBALT MARKET EDGESM

COLLABORATION EDGESM

CONTACT®

CREDIT & COMPLIANCE TOOLS

CUBEWARE®

CUSTOMER TOUCH®

CVR®

CVR REG AMERICASM

DAILY MARKETING PLAN®

DASHSM

DATAFRESH®

DEALERBRIDGE SM

DEALERCAP®

DEALERNET®

DEALERSHIP OPERATING PLAN®

DEALERSUITE®

DEALIX®

DIGITAL MOTORWORKS®

DLS ACCELERATOR®


DMI®

DMI DIGITAL MOTORWORKS INC.®

DMP®

DOP®

DOX®

DRACAR®

DRACAR+®

DRIVE

DRIVE XL

DSI

EVA DMS

EVA PLUS DMS

EXCHANGE

FRONT OFFICE EDGESM

GROUPES PERFORMANCE®

HIGH GEAR®

HOW TO GET THERE®

IGNITION®

INFOIQ®

ILEARNSM

INTRAVISION®

K8®

KCML®

KERRIDGE®

KESTREL®

KOMPACT®

KPRINT®

LA MIA OFFICINA®

LASERSTATION®

LEADSONDEMAND®

LIGHTSPEED®

LIGHTSPEEDEVO®

LIGHTSPEEDNXT®

MENUVANTAGE®

MNI®

OPTIMA 21®

PARTSCAN®

PARTSVOICE®

PAYROLL PLUS®

PERFORMANCE GROUPES®

PROFITPULSESM

PROFIT POINTSM

RESULTS MADE EASY®

SERVICEEDGE®

SHOP CALLS®

SKIPPER 2000


TELEPHONY IN THE CLOUD

TELEPHONY ONSITE

TRAVER BD SYSTEM®

TRAVER BDISM

TRAVER TECHNOLOGIES®

TRAVER TECHNOLOGIES DRIVING FRONT-END SOLUTIONS®

V-SEPT®

VEHICLESCAN®

WARRANTY WIZARD

WEBCOMPOSITE®

WEBEDGE®

W.E.B.MARKETING®

W.E.B.MENU®

W.E.B.SUITE®

WINDRAKKAR®

YOUR PROFIT IS OUR PRIORITY®


Patents

 

Title

  

Serial Number/Patent Number

System and Method for Electronic Document Generation and Delivery    7,941,744
Business Platform with Networked, Association-Based Business Entity Access Management and Active Content Website Configuration    7,039,704 B2
Remote Web Site Editing in a Standard Web Browser Without External Software    7,000,184 B2
Staged Publication and Management of Dynamic Webpages    7,062,506 B2
Method and Apparatus for Processing a Dynamic Web Page    7,386,786 B2
Software Business Platform with Networked, Association-based Business Entity Access Management    8,209,259 B2
Remote Web Site Editing in a Web Browser Without External Client Software    7,624,342 B2
Business Platform with Networked Association-Based Business Entity Access Management and Active Content Website Configuration    7,861,309 B2
Source- and venue-specific inventory data processing and identification system    8,055,544 B2
System and Method for Automated Access of a Data Management Server Through a Virtual Private Network    7,801,154 B2
Method and System of Integrating a Service Reminder System with a Shop Management System Using Mileage Estimates    7,672,984 B2
Method and System of Managing Service Reminders and Scheduling Service Appointments Using Mileage Estimates    7,542,833 B2
Method and System of Managing Service Reminders and Promotions Using Mileage Estimates    7,617,028 B2


Method and System of Managing Service Reminders and Scheduling Service Appointments Using Mileage Estimates and Recommended Recall Bulletins    7,636,623 B2
Systems and Methods for Aggregating User Profile Information in a Network of Affiliated Websites    7,870,253 B2
Systems and Methods for Configuring a Network of Affiliated Websites    8,051,159 B2
Source- and Venue-Specific Inventory Data Processing and Identification System    8,275,717 B2
Source- and Venue-Specific Inventory Data Processing and Identification System    8,538,894 B2
Staged Publication and Management of Dynamic Webpages    8,271,547 B2
System and Method for Targeted Webpage Advertising    13/025,019
Systems and Methods for Configuring a Website Having a Plurality of Operational Modes    12/243,852
Method and System for Furnishing of Customized Information to Venues Targeted to Selected Audiences    10/665,899
System, Process, and Computer Program Product for Evaluating Leads    12/494,973


Registered Copyrights

 

Title

  

Copyright Reg. No.

Advanced elite 6.0    TX0006154619
Advanced elite 7.0    TX0006154550
BFILXFR2: copy P. work with Freightliner order to mini    TX0003315596
BFILXFR2: copy P. work with Freightliner order to mini    TX0003315590
Dealer management system (DMS) modules: PA112, PA116, PA800, and GL550.    TXu001159726
FRTEPC: links ROADS to Freightliner’s electronic parts catalog    TX0003315597
FRTEPC: links ROADS to Freightliner’s electronic parts catalog    TX0003315588
IESTRN: tran(s)fer parts invoice summary records to acctg.    TX0003315595
IESTRN: tran(s)fer parts invoice summary records to acctg. Transaction file    TX0003315589
INVNUM: lease invoice number maintenance    TX0003315586
INVNUM: lease invoice number maintenance    TX0003315583
INVPBL: print parts bin labels    TX0003315593
INVPBL: print parts bin labels    TX0003315592
LSESVC: service history transfers    TX0003315585
LSESVC: service history transfers    TX0003315582
RNTENT: auto rental billing entry    TX0003315587


RNTENT: auto rental billing entry    TX0003315584
WebSuite2000: Advanced Elite 8.0    TX0006154468
WebSuite2005    TX0006231911
Automotive directions customer satisfaction survey    TX0003372989
Observations & recommendations - R&R    TXu001348628
Observations & recommendations - R&R    TXu001344850
Physical inventory report    TXu001344852
Pre-inventory reconicling folder    TXu001344853
Pre-planning-ADP    TXu001344851
Pre-planning guide R&R    TX7001344849
AdWizards 2.3    TXu000747179
Auto show java 2.4    TXu000747178
Auto show perl 2.2.    TXu000747176
AutoParser 1.0    TXu000996192
Cobalt export system v1.0    TXu000996183
Cobalt web publishing system 1.0    TXu000747177
Cops 1.0    TXu000996179
Data cleansing server v1.0    TXu000994484
Data polling engine 1.0    TXu000994483
DealerNet 3.0    TXu000996181
DIS import v1.0    TXu000996180
Expand layouts 1.0    TXu000996178
FSBO 1.0    TXu000747181
Hit reports 1.0    TXu000996176
Image server v1.0    TXu000996177
Install scripts 1.0.    TXu000996182
Integralink migration tool v1.0    TXu000996191
Lead manager 1.6.    TXu000747180


LMCC    TXu001255913
Motorplace 2.0    TXu000996190
MyCarTools 1.0    TXu000747174
Secure prequal 1.0    TXu000747175
Showcase 1.0    TXu000996187
Traffic reports 1.0    TXu000996186
UsedEquipNet v1.0    TXu000996185
VAPS 1.0.    TXu000996184
Vehicle configurators framework 1.0.    TXu000996175
Auto responder 1.0.    TXu001034042
Vehicle pricing guides framework 1.0    TXu001034041

Software

The following is a non-exclusive list of Software owned by Dealer Group: Autoline; AutoMaster, Dash DMS; Dracar+; Drive DMS; Front Office Edge; Lightspeed DMS; PFW IntelliDealer DMS; Service Edge; Talisman; Tigre; WinDrakkar.


EXHIBIT B

COPYRIGHT ASSIGNMENT

COPYRIGHT ASSIGNMENT dated as of             , 2014, made by ADP, LLC, a Delaware corporation (“Assignor”), in favor of CDK Global, LLC, a Delaware corporation (“Assignee”).

WHEREAS, Assignor owns the copyrights (including all registrations and applications therefor) listed on Schedule 1 attached hereto (the “Copyrights”);

WHEREAS, pursuant to the Intellectual Property Transfer Agreement, dated as of the date hereof, between Automatic Data Processing, Inc. and Assignee, Assignor is obligated to transfer, assign, and otherwise convey to Assignee all of Assignor’s right, title, and interest in, to, and under the Copyrights; and

WHEREAS, Assignor wishes to confirm this assignment for purposes of filing the same with the Copyright Office of the United States Library of Congress.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor hereby transfers, assigns, and otherwise conveys to Assignee, all of Assignor’s right, title, and interest in and to the following:

 

  1. the Copyrights, including without limitation, renewals and extensions thereof;

 

  2. all rights to prepare derivative works, all goodwill and moral rights related to the Copyrights; and

 

  3. all rights to proceeds of the foregoing, including, without limitation, any claim by Assignor against third parties for, or any profits arising from, past, present, or future infringement or violations of licenses of the Copyrights.

Assignor has caused this Copyright Assignment to be duly executed and authorized as of the date hereof.

 

ADP, LLC
By:  

 

  Name:  
  Title:  


SCHEDULE 1

COPYRIGHTS

— NONE —

 

2


STATE OF    )   
   )    ss:
COUNTY OF    )   

On this      day of             , 2014, before me personally came             , to me known to be the person who signed the foregoing instrument and who being duly sworn by me did depose and state that [he, she] is the              of Assignor; [he, she] signed the instrument in the name of Assignor; and [he, she] had the authority to sign the instrument on behalf of Assignor.

 

 

Notary Public

 

3


EXHIBIT C

DOMAIN NAME ASSIGNMENT

DOMAIN NAME ASSIGNMENT dated as of             , 2014, made by ADP, LLC, a Delaware corporation (“Assignor”), in favor of CDK Global, LLC, a Delaware corporation (“Assignee”).

WHEREAS, Assignor is the record owner of the Internet domain names listed on Schedule 1 attached hereto (the “Domain Names”);

WHEREAS, pursuant to the Intellectual Property Transfer Agreement, dated as of the date hereof, between Automatic Data Processing, Inc. and Assignee, Assignor is obligated to transfer, assign, and otherwise convey to Assignee all of Assignor’s right, title, and interest in, to, and under the Domain Names; and

WHEREAS, Assignor, on the one hand, and Assignee, on the other hand, wish to memorialize their agreement with respect to the registration of the Domain Names.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor hereby transfers, assigns, and otherwise conveys to Assignee, all of Assignor’s right, title, and interest in and to the following:

 

  1. the Domain Names, and

 

  2. all proceeds of the foregoing, including, without limitation, any claim by Assignor against third parties for past, present, or future infringement of the Domain Names.

Immediately upon the Assignee’s request, Assignor shall take such further action and execute such additional agreements and instruments as may be necessary to effect the assignment contemplated hereby and to perfect the Assignee’s title in and to the Domain Names, including, without limitation, complying with any and all procedures and requirements of the domain name registrar(s) for transfer of the Domain Names.

Assignor has caused this Domain Name Assignment to be duly executed and authorized as of the date hereof.

 

ADP, LLC
By:  

 

  Name:  
  Title:  

 

1


SCHEDULE 1

DOMAIN NAMES

—NONE—

 

2


STATE OF    )   
   )    ss:
COUNTY OF    )   

On this      day of             , 2014, before me personally came             , to me known to be the person who signed the foregoing instrument and who being duly sworn by me did depose and state that [he, she] is the              of Assignor; [he, she] signed the instrument in the name of Assignor; and [he, she] had the authority to sign the instrument on behalf of Assignor.

 

 

Notary Public

 

3


EXHIBIT D

PATENT ASSIGNMENT

PATENT ASSIGNMENT dated as of             , 2014, made by ADP, LLC, a Delaware corporation (“Assignor”), in favor of CDK Global, LLC, a Delaware corporation (“Assignee”).

WHEREAS, Assignor owns the patent applications and issued patents listed on Schedule 1 attached hereto (the “Patents”);

WHEREAS, pursuant to the Intellectual Property Transfer Agreement, dated as of the date hereof, between Automatic Data Processing, Inc. and Assignee, Assignor is obligated to transfer, assign, and otherwise convey to Assignee all of Assignor’s right, title, and interest in, to, and under the Patents; and

WHEREAS, Assignor wishes to confirm this assignment for purposes of filing the same with the United States Patent and Trademark Office.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor hereby transfers, assigns, and otherwise conveys to Assignee, all of Assignor’s right, title, and interest in and to the following:

 

  1. the Patents, and

 

  2. all proceeds of the foregoing, including, without limitation, any claim by Assignor against third parties for past, present, or future infringement of the Patents.

Assignor has caused this Patent Assignment to be duly executed and authorized as of the date hereof.

 

ADP, LLC
By:  

 

  Name:  
  Title:  


SCHEDULE 1

—NONE—

 

2


STATE OF    )   
   )    ss:
COUNTY OF    )   

On this      day of             , 2014, before me personally came             , to me known to be the person who signed the foregoing instrument and who being duly sworn by me did depose and state that [he, she] is the              of Assignor; [he, she] signed the instrument in the name of Assignor; and [he, she] had the authority to sign the instrument on behalf of Assignor.

 

 

Notary Public

 

3


EXHIBIT E

TRADEMARK AND SERVICE MARK ASSIGNMENT

TRADEMARK AND SERVICE MARK ASSIGNMENT dated as of             , 2014, made by ADP, LLC, a Delaware corporation ( “Assignor”) in favor of CDK Global, LLC, a Delaware corporation (“Assignee”).

WHEREAS, Assignor is the owner of the trademark registrations and applications listed on Schedule 1 attached hereto for the goods and/or services identified therein (the “Marks”);

WHEREAS, Assignee desires to acquire the Marks and any and all goodwill associated with the Marks;

WHEREAS, pursuant to the Intellectual Property Transfer Agreement, dated as of the date hereof, between Automatic Data Processing, Inc. and Assignee, Assignor is obligated to assign all right, title and interest in and to the Marks and any and all goodwill associated with the Marks to Assignee; and

WHEREAS, Assignor wishes to confirm this assignment for purposes of filing the same with the United States Patent and Trademark Office.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor hereby transfers, assigns, and otherwise conveys to Assignee, all of Assignor’s right, title, and interest in and to each of the Marks, along with the following:

 

  1. the goodwill of the business symbolized by and associated with the Marks;

 

  2. that portion of Assignor’s businesses in connection with which it has a bona fide intent to use those Marks that were filed on an intent-to-use basis and for which an Amendment to Allege Use or a Statement of Use has not yet been filed and accepted by the relevant Trademark Office or other governing authority; and

 

  3. all rights to proceeds of the foregoing, including, without limitation, any claim by Assignors against third parties for past, present, or future infringement of the Marks.


Assignor has caused this Trademark and Service Mark Assignment to be duly executed and authorized as of the date hereof.

 

ADP, LLC
By:  

 

  Name:  
  Title:  

 

2


SCHEDULE 1

TRADEMARKS AND SERVICE MARKS

—NONE—

 

3


STATE OF    )   
   )    ss:
COUNTY OF    )   

On this      day of             , 2014, before me personally came             , to me known to be the person who signed the foregoing instrument and who being duly sworn by me did depose and state that [he, she] is the              of Assignor; [he, she] signed the instrument in the name of Assignor; and [he, she] had the authority to sign the instrument on behalf of Assignor.

 

 

Notary Public

 

4

EX-10.6

Exhibit 10.6

EMPLOYEE MATTERS AGREEMENT

by and between

AUTOMATIC DATA PROCESSING, INC.

and

CDK GLOBAL HOLDINGS, LLC

Dated as of September 29, 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  &nbs