PLAN OF REORGANIZATION AND DISTRIBUTION AGREEMENT
THIS PLAN OF REORGANIZATION AND DISTRIBUTION AGREEMENT (the
"Agreement") is made and entered into this 20th day of July, 1998, by and
between CINCINNATI ▇▇▇▇ INC., an Ohio corporation ("CBI"), and CONVERGYS
CORPORATION, an Ohio corporation ("CONVERGYS").
PRELIMINARY STATEMENT
CBI is the sole shareholder of CONVERGYS. The Board of Directors of CBI
has determined that it is in the best interest of CBI and its shareholders to
separate the billing and information services segment and the customer
management solutions segment of its business from the telephone operations
segment of its business. It is the intention of CBI to contribute to CONVERGYS
all of the outstanding shares of Cincinnati ▇▇▇▇ Information Systems Inc.
("CBIS"), a wholly owned subsidiary of CBI, and of MATRIXX Marketing Inc.
("MATRIXX"), a wholly owned subsidiary of CBI, and certain assets and to assign
certain liabilities, and to make other arrangements to establish CONVERGYS as a
separate enterprise for the purpose of engaging in the billing and information
services and the customer management solutions businesses (the "Business").
CBI's Board of Directors has determined that CBI will cause CONVERGYS
to make an initial public offering (the "IPO") of up to 19.9% of its outstanding
common shares, without par value (the "Common Shares"), and, subsequent to the
IPO and subject to certain conditions, distribute to CBI's shareholders all of
the outstanding shares of CONVERGYS owned by CBI through a spinoff (the
"Distribution"). The IPO and the Distribution are together referred to herein as
the "Separation" and will result in the total and complete separation of the
Business and CONVERGYS from CBI at the time of the Distribution (the
"Distribution Date"); provided, however, that CONVERGYS may continue to provide
services to CBI and CBI may provide services to CONVERGYS pursuant to a services
agreement, after the Distribution Date.
The parties hereto have determined that it is necessary and
desirable to set forth in this Agreement and in other agreements,
instruments, understandings and assignments entered into in
connection with the transactions contemplated hereby, including, without
limitation, a Services Agreement (the "Services Agreement"), a Tax Separation
and Allocation Agreement (the "Tax Allocation Agreement") and an Employee
Benefits Agreement ("the Employee Benefits Agreement") (collectively, the
"Ancillary Agreements"), all such agreements being between CONVERGYS and CBI,
the principal corporate transactions determined by CBI and CONVERGYS to be
appropriate to effect the Separation and that will govern certain other
matters between the date hereof and the Distribution and following the
Distribution.
Simultaneously with the execution of this Agreement, CBI and CONVERGYS
are entering into the Ancillary Agreements.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements contained herein,
other good and valuable consideration, the sufficiency and receipt of which is
hereby acknowledged, the parties do hereby agree as follows:
ARTICLE 1
THE TRANSFER
1.1 TRANSFER OF ASSETS. On the terms and subject to the conditions set
forth in this Agreement, and the other agreements and instruments of conveyance
contemplated hereunder, simultaneously with the execution and delivery of this
Agreement, CBI has heretofore transferred, assigned and conveyed to CONVERGYS
all of CBI's right, title, and interest in the CONVERGYS Assets, and CONVERGYS
hereby acknowledges its receipt of the CONVERGYS Assets. CONVERGYS Assets means
any:
(a) All of the issued and outstanding shares of CBIS and MATRIXX;
(b) Any and all assets that are expressly contemplated by this
Agreement or any other agreement or document contemplated by this Agreement (or
any Schedule hereto or thereto) as assets to be transferred to CONVERGYS; and
(c) All assets reflected in the CONVERGYS balance sheet dated March
31, 1998 as assets of CONVERGYS, subject to any dispositions of such assets
subsequent to the date of such balance sheet.
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1.2 ASSUMPTION OF LIABILITIES. On the terms and subject to the
conditions set forth in this Agreement and the other agreements and instruments
of conveyance contemplated hereunder, simultaneous with the execution and
delivery of this Agreement, CONVERGYS hereby assumes and agrees faithfully to
perform and fulfill all of the CONVERGYS Liabilities, in accordance with their
respective terms. CONVERGYS shall be responsible for all the CONVERGYS
Liabilities, regardless of when or where such liabilities arose or arise, or
whether the facts on which they are based occurred prior to or subsequent to the
date hereof, regardless of where or against whom such liabilities are asserted
or determined or whether asserted or determined prior to the date hereof.
CONVERGYS Liabilities means:
(a) Any and all liabilities set forth on Schedule 1.2 attached
hereto, including those liabilities reflecting any inter-company indebtedness;
(b) Any and all liabilities that are expressly contemplated by
this Agreement or any other agreement or document contemplated by this
Agreement or otherwise (or the Schedules hereto or thereto) as liabilities to
be assumed by CONVERGYS; and
(c) All liabilities reflected as liabilities or obligations of
CONVERGYS in its balance sheet dated March 31, 1998, subject to any discharge of
such liabilities subsequent to the date of such balance sheet.
1.3 FURTHER ASSURANCES. In the event that at any time or from time to
time (whether prior to or after the Distribution Date), any party hereto shall
receive or otherwise possess any asset that is allocated to any other Person
pursuant to this Agreement or any Ancillary Agreement, such party shall promptly
transfer, or cause to be transferred, such asset to the Person so entitled
thereto. Prior to any such transfer, the Person receiving such asset shall hold
such asset in trust for any such other Person.
1.4 DOCUMENTS RELATING TO TRANSFER OF REAL PROPERTY INTERESTS AND
TANGIBLE PROPERTY LOCATED THEREON.
(a) In furtherance of the assignment, transfer and conveyance of
the Assets and the assumption of Liabilities set forth in Sections 1.1 and 1.2,
simultaneously with the execution and delivery hereof or as promptly as
practicable thereafter, each of CBI and
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CONVERGYS, or their applicable subsidiaries, is executing and delivering or will
execute and deliver deeds, lease assignments and assumptions, leases or
subleases to be mutually agreed to by CBI and CONVERGYS, with such changes as
may be necessary to conform to any laws, regulations or usage applicable in the
jurisdiction in which the relevant real property is located. Set forth in or
referenced by Schedule 1.4 attached hereto is, among other things, a summary of
each property or interest therein to be conveyed, assigned, leased or subleased,
the applicable entities relevant to each property and their capacities with
respect to each property (e.g., as transferor, transferee, assignor, assignee,
lessor, lessee, sub-lessor, or sub-lessee), and any terms applicable to each
property that are not specified in the forms of deed, lease assignment and
assumption, lease or sublease (e.g., rent and term).
(b) Except as otherwise expressly provided in this Agreement, all
tenant improvements, fixtures, furniture, office equipment, servers, private
branch exchanges, and other tangible property [(other than equipment subject to
capital or operating equipment leases, which will be transferred or retained
based on whether the associated capital or operating equipment lease is or is
not held pursuant to a contract of CBI)] located as of the Closing Date on any
real property that is referred to in Section 1.4(a), including the Schedules
thereto, shall, except to the extent expressly set forth on a Schedule referred
to in Section 1.4(a), be transferred or retained as follows:
(i) Deeds And Assignments. In the case of any real property
or leasehold interests set forth on Schedule 1.4 that is covered by a deed or
lease assignment and assumption, all such tangible property will be
transferred to the transferee or assignee of the applicable real property or
leasehold interest;
(ii) Shared Facilities With Third Party Leases. In the case of
any real property or leasehold interests covered by a lease, all such tangible
property will be retained by the lessor under the applicable lease, except that
any such tangible property (other than tenant improvements, fixtures and
furniture) used exclusively by the lessee shall be transferred to, or retained
by, the lessee.
(iii) Shared Domestic Facilities With Third Party Leases. In
the case of any real property or leasehold interests covered by a sublease, all
such tangible property will be
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retained by the sub-lessor under the applicable sublease, except that any such
tangible property (other than tenant improvements and fixtures), including
furniture used exclusively by the sub-lessee shall be transferred to, or
retained by, such sub-lessee.
In the case of this Section 1.4, all determinations as to exclusive use by any
member of a Group shall be made without regard to infrequent and immaterial use
by the members of any other Group, if the transfer of such Asset to, or the
retention of such Asset by, such first Group would not interfere in any material
respect with either the business or operations of any such other Group.
(c) In the case of any real property or leasehold interest that
is covered by Section 1.4(b)(i) and any of Section 1.4(b)(ii) or (iii), all such
tangible property shall first be allocated pursuant to the provisions of Section
1.4(b)(i) and thereafter pursuant to whichever of such other clauses is
applicable.
1.5 DOCUMENTS RELATING TO OTHER TRANSFERS OF ASSETS AND ASSUMPTION
OF LIABILITIES. In furtherance of the assignment, transfer and conveyance of the
CONVERGYS Assets and the assumption of CONVERGYS Liabilities set forth in
Sections 1.1 and 1.2, simultaneously with the execution and delivery hereof or
as promptly as practicable thereafter, (i) each of CBI and CONVERGYS shall
execute and deliver, and each shall cause its respective subsidiaries to execute
and deliver, such bills of sale, stock powers, certificates of title,
assignments of contracts and other instruments of transfer, conveyance and
assignment as and to the extent necessary to evidence the transfer, conveyance
and assignment of all of CBI's and its subsidiaries' right, title and interest
in and to the Assets to CONVERGYS and (ii) CONVERGYS shall execute and deliver,
to CBI and its subsidiaries such bills of sale, stock powers, certificates of
title, assumptions of contracts and other instruments of assumption as and to
the extent necessary to evidence the valid and effective assumption of the
CONVERGYS Liabilities by CONVERGYS.
1.6 OTHER ANCILLARY AGREEMENTS. Effective as of the date hereof,
each of CBI and CONVERGYS will execute and deliver all Ancillary Agreements
to which it is a party.
1.7 CONSENTS. Each party hereto understands and agrees that no
party hereto is, in this Agreement or in any other agreement or document
contemplated by this Agreement or otherwise,
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representing or warranting in any way that the obtaining of any consents or
approvals, the execution and delivery of any agreements or the making of any
filings or applications contemplated by this Agreement will satisfy the
provisions of any or all applicable agreements or the requirements of any or all
applicable laws or judgments, it being agreed and understood that the party to
which any assets were or are transferred shall bear the economic and legal risk
that any necessary consents or approvals are not obtained or that any
requirements of laws or judgments are not complied with. Notwithstanding the
foregoing, the parties shall use reasonable best efforts to obtain all consents
and approvals, to enter into all agreements and to make all filings and
applications which may be required for the consummation of the filings and
applications which may be required for the consummation of the transactions
contemplated by this Agreement or any other agreement or document contemplated
by this Agreement or otherwise, including, without limitation, all applicable
regulatory filings or consents under federal or state laws and all necessary
consents, approvals, agreements, filings and applications.
1.8 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES.
(a) Each of CBI (on behalf of itself and each member of the CBI
Group) and CONVERGYS (on behalf of itself and each member of the CONVERGYS
Group) understands and agrees that, except as expressly set forth herein or in
any Ancillary Agreement, no party to this Agreement, any Ancillary Agreement or
any other agreement or document contemplated by this Agreement, any Ancillary
Agreement or otherwise, is representing or warranting in any way as to the
assets, businesses or liabilities transferred or assumed as contemplated hereby
or thereby, as to any consents or approvals required in connection therewith, as
to the value or freedom from any security interests of, or any other matter
concerning, any assets of such party, or as to the absence of any defenses or
right of setoff or freedom from counterclaim with respect to any claim or other
asset, including any accounts receivable, of any party, or as to the legal
sufficiency of any assignment, document or instrument delivered hereunder to
convey title to any asset or thing of value upon the execution, delivery and
filing hereof or thereof. Except as may expressly be set forth herein or in any
Ancillary Agreement, all such CONVERGYS Assets are being transferred on an "as
is, where is" basis (and, in the case of any real property, by means of a
quitclaim or similar form deed or conveyance), and the respective transferees
shall bear the
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economic and legal risks that any conveyance shall prove to be insufficient to
vest in the transferee good and marketable title, free and clear of any security
interest.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CBI
2.1 POWER AND AUTHORITY; EFFECT OF AGREEMENT. CBI is a corporation duly
organized, validly existing and in good standing under the laws of Ohio and has
requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by CBI of this Agreement and the consummation by it of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on its part. This Agreement has been duly and validly executed
and delivered by CBI and constitutes its legal, valid and binding obligation
enforceable against it in accordance with its terms, except to the extent that
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally. The
execution, delivery and performance by CBI of this Agreement and the
consummation by it of the transactions contemplated by the Separation does not,
and will not, with or without the giving of notice or the lapse of time, or
both: (i) violate any provision of law, rule or regulation to which it is
subject; (ii) violate any order, judgment or decree applicable to it; (iii)
conflict with, or result in a breach or default under, its Amended Articles of
Incorporation or its Amended Regulations; or (iv) conflict with, or result in a
breach or default under, any contract to which it is a party; except, in each
case, for violations, conflicts, breaches or defaults which in the aggregate
would not materially hinder or impair the consummation of the transactions
contemplated hereby or have a material adverse effect on the Business.
2.2 STOCK OF TRANSFERRED SUBSIDIARIES. CBI is the owner, beneficially
and of record, of all of the issued and outstanding shares of CBIS and MATRIXX,
free and clear of all liens, encumbrances, security agreements, options, claims,
charges and restrictions.
2.3 GOVERNMENT CONSENTS. No consent, approval or authorization of, or
exemption from, or filing with any governmental or regulatory authority is
required in connection with the execution, delivery or performance by CBI of the
terms of this Article 2 or the taking by it of any other action required to
effectuate the Separation.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CONVERGYS
CONVERGYS represents and warrants to CBI as follows:
3.1 CONVERGYS' POWER AND AUTHORITY. CONVERGYS is a corporation duly
organized, validly existing and in good standing under the laws of Ohio, and
has all requisite corporate power and authority to carry on the Business as
it is now being conducted and as proposed to be conducted.
3.2 DUE AUTHORIZATION, EXECUTION AND DELIVERY; EFFECT OF AGREEMENT.
CONVERGYS has all requisite corporate power and authority to execute, deliver
and perform this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by CONVERGYS of this Agreement
and the consummation by CONVERGYS of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of CONVERGYS.
This Agreement has been duly and validly executed and delivered by CONVERGYS and
constitutes the legal, valid and binding obligation of CONVERGYS enforceable
against CONVERGYS in accordance with its terms, except to the extent that such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally. The
execution, delivery and performance by CONVERGYS of this Agreement and the
consummation by CONVERGYS of the transactions contemplated by the Separation
does not, and will not, with or without the giving of notice of the lapse of
time, or both: (i) violate any provision of law, rule or regulation to which
CONVERGYS is subject; (ii) violate any order, judgment or decree applicable to
CONVERGYS; (iii) conflict with, or result in a breach or default under, the
Amended Articles of Incorporation or Regulations of CONVERGYS; or (iv) conflict
with, or result in a breach or default under, any contract to which it is a
party; except, in each case, for violations, conflicts, breaches or defaults
which in the aggregate would not materially hinder or impair the consummation of
the transactions contemplated hereby or have a material adverse effect on the
Business.
3.3 CONSENTS. No consent, approval or authorization of, or exemption
from, or filing with, any governmental or regulatory authority or any other
third party is required in connection with the execution, delivery or
performance by CONVERGYS of this Agreement or the taking
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by CONVERGYS of any other action required to effectuate the Separation, except
as referred to in Article 8.
ARTICLE 4
COVENANTS OF CBI
4.1 BOOKS AND RECORDS; PERSONNEL. For a period of six years after the
Distribution Date (or such longer period as may be required by any law or
regulation, any governmental agency, any ongoing litigation or class of
litigation, or in connection with any administrative proceeding):
(a) CBI shall not dispose of or destroy any of the business records
and files of the Business retained by it or any of its subsidiaries (the
"Retained Records"). If CBI wishes to dispose of or destroy such records and
files after that time, it shall use reasonable efforts to first give 30 days'
prior written notice to CONVERGYS and CONVERGYS shall have the right, at its
option and expense, upon prior written notice to CBI within such 30 day period,
to take possession of the Retained Records within 60 days after the date of
CONVERGYS' notice to CBI.
(b) CBI shall allow CONVERGYS and its representatives reasonable
access to all Retained Records during regular business hours and upon reasonable
notice. CBI shall maintain the Retained Records in a manner and at locations
that reasonably facilitates retrieval and review by CONVERGYS. CONVERGYS shall
have the right, at its own expense, to make copies of any such records and files
and CBI shall provide convenient duplication facilities for such purpose,
provided, however, that any such access or copying shall be had or done in such
manner so as not to unreasonably interfere with the normal conduct of CBI's
business or operations.
(c) CBI shall make reasonably available to CONVERGYS, upon written
request and at CONVERGYS' expense: (i) personnel to assist in locating and
obtaining records and files maintained by it (including those created after the
date hereof, to the extent necessary and appropriate in connection with pending
and future claims against CONVERGYS relating to the Business) and (ii) any of
its personnel whose assistance or participation (including as a witness during
depositions or at trial) is reasonably required by CONVERGYS in anticipation of,
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or preparation for or during, existing or future litigation or other matters in
which CONVERGYS or any of its affiliates is involved and which is related to the
Business.
ARTICLE 5
COVENANTS OF CONVERGYS
5.1 COOPERATION. CONVERGYS agrees to cooperate with CBI, both before
and after the Distribution Date, to enable both parties to implement the
Separation, including but not limited to performing the obligations undertaken
by the parties hereunder. Such cooperation will include but not be limited to
preparing and submitting required financial reports after the Distribution Date
which may relate to periods whether before or after the Distribution Date and
executing such documents and doing such other acts and things as may be
necessary to carry out the intent of this Agreement as it relates to the
Separation.
5.2 BOOKS AND RECORDS; PERSONNEL. For a period of six years after the
Distribution Date (or such longer period as may be required by any law or
regulation, any governmental agency, any ongoing litigation or class of
litigation, or in connection with any administrative proceeding);
(a) CONVERGYS shall not dispose of or destroy any of the business
records and files of the Business that are transferred to it or any of its
subsidiaries in carrying out the transactions contemplated hereby (the
"Transferred Records"). If CONVERGYS wishes to dispose of or destroy such
records and files after that time, it shall use reasonable efforts to first give
30 days' prior written notice to CBI and CBI shall have the right at its option
and expense, upon prior written notice to CONVERGYS within such 30 day period,
to take possession of the Transferred Records within 60 days after the date of
CBI's notice to CONVERGYS.
(b) CONVERGYS shall allow CBI and its representatives reasonable
access to all Transferred Records during regular business hours and upon
reasonable notice. CONVERGYS shall maintain the Transferred Records in a manner
and at locations that reasonably facilitates retrieval and review by CBI. CBI
shall have the right, at its own expense, to make copies of any such records and
files and CONVERGYS shall provide convenient duplication facilities for such
purposes provided, however, that any such access or copying shall
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be had or done in such a manner so as not to unreasonably interfere with the
normal conduct of CONVERGYS' business or operations.
(c) CONVERGYS shall make reasonably available to CBI upon written
request and at CBI's expense: (i) CONVERGYS' personnel to assist in locating and
obtaining records and files maintained by it (including those created after the
date hereof, to the extent necessary and appropriate in connection with pending
and future claims against CBI relating to the Business), and (ii) any of its
personnel whose assistance or participation (including as a witness during
depositions or at trial) is reasonably required by CBI in anticipation of, or
preparation for or during, existing or future litigation or other matters in
which CBI or any of its affiliates is involved.
ARTICLE 6
INTER-COMPANY LENDING
6.1 CONTRIBUTION. As to inter-company debt payable to CBI by CONVERGYS,
CONVERGYS' obligation will be to repay to CBI on or before the Distribution Date
the amount reflected in its balance sheet dated March 31, 1998 ($724.7 million)
adjusted for the net cash flows resulting from CONVERGYS' operating and
investing activities for the period April 1, 1998 to the date of repayment and
for any other indebtedness incurred by CONVERGYS or for any other repayments
made to CBI in that period. Upon the Closing Date, CONVERGYS shall apply all
the net proceeds of the IPO to reduce CONVERGYS' portion of its inter-company
debt.
6.2 ON-GOING FUNDING. For the period between the Closing Date through
the day preceding the Distribution Date, CBI shall continue to provide CONVERGYS
with working capital funding pursuant to the existing inter-company arrangements
at an interest rate equal to CBI's average short-term borrowing cost or through
external short- or long-term financing to be arranged by CBI; provided, however,
that CONVERGYS may obtain and procure its own separate funding with such third
parties as it deems in its sole discretion appropriate and at its own expense.
CBI shall cooperate with CONVERGYS in its efforts to obtain such financing.
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ARTICLE 7
CONTINGENT GAINS AND CONTINGENT LIABILITIES
7.1 DEFINITIONS RELATING TO CONTINGENT GAINS AND CONTINGENT
LIABILITIES. For the purpose of this Agreement, the following terms shall have
the following meanings:
(a) AFFILIATE of any Person means a Person that controls, is
controlled by, or is under common control with such Person. 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.
(b) ACTION means any demand, action, suit, countersuit,
arbitration, inquiry, proceeding or investigation by or before any federal,
state, local, foreign or international governmental authority or any arbitration
or mediation tribunal.
(c) CBI GROUP means CBI and each Person (other than any member of
the CONVERGYS Group) that is an Affiliate of CBI immediately after the Closing
Date.
(d) CLOSING DATE means the first time at which any Common Shares of
CONVERGYS are sold to the Underwriters pursuant to the IPO in accordance with
the terms of the Underwriting Agreement.
(e) CONTINGENT CLAIM COMMITTEE means a committee composed of one
representative designated from time to time by each of CBI and CONVERGYS that
shall be established in accordance with Section 7.6.
(f) CONTINGENT GAIN means any claim or other right of CBI,
CONVERGYS or any of their respective Affiliates, whenever arising, against any
Person other than CBI, CONVERGYS or any of their respective Affiliates, if and
to the extent that (i) such claim or right has accrued as of the Closing Date
(based on then existing law) and (ii) the existence or scope of the obligation
of such other Person as of the Closing Date was not acknowledged, fixed or
determined in any material respect, due to a dispute or other uncertainty as of
the Closing Date or as a result of the failure of such claim or other right to
have been discovered or asserted as of the Closing Date. A claim or right
meeting the foregoing definition shall be considered a Contingent Gain
regardless of whether there was any Action pending, threatened or contemplated
as of the Closing Date with respect thereto. For purposes of the
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foregoing, a claim or right shall be deemed to have accrued as of the Closing
Date if all the elements of the claim necessary for its assertion shall have
occurred on or prior to the Closing Date, such that the claim or right, were
it asserted in an Action on or prior to the Closing Date, would not be
dismissed by a court on ripeness or similar grounds. Notwithstanding the
foregoing, none of (i) any insurance proceeds, (ii) any reversal of any
litigation or other reserve, or (iii) any matters relating to taxes (which
are governed by the Tax Allocation Agreement) shall be deemed to be a
Contingent Gain.
(g) CONTINGENT LIABILITY means any liability, other than
liabilities for taxes (which are governed by the Tax Allocation Agreement), of
CBI, CONVERGYS or any of their respective Affiliates, whenever arising, to any
Person other than CBI, CONVERGYS or any of their respective Affiliates, if and
to the extent that (i) such liability has accrued as of the Closing Date (based
on then existing law) and (ii) the existence or scope of the obligation of CBI,
CONVERGYS or any of their respective Affiliates as of the Closing Date with
respect to such liability was not acknowledged, fixed or determined in any
material respect, due to a dispute or other uncertainty as of the Closing Date
or as a result of the failure of such liability to have been discovered or
asserted as of the Closing Date (it being understood that the existence of a
litigation or other reserve with respect to any liability shall not be
sufficient for such liability to be considered acknowledged, fixed or
determined). In the case of any liability a portion of which had accrued as of
the Closing Date and a portion of which accrues after the Closing Date, only
that portion that had accrued as of the Closing Date shall be considered a
Contingent Liability. For purposes of the foregoing, a liability shall be deemed
to have accrued as of the Closing Date if all the elements necessary for the
assertion of a claim with respect to such liability shall have occurred on or
prior to the Closing Date, such that the claim, were it asserted in an Action on
or prior to the Closing Date, would not be dismissed by a court on ripeness or
similar grounds. For purposes of clarification of the foregoing, the parties
agree that no liability relating to, arising out of or resulting from any
obligation of any Person to perform the executory portion of any contract or
agreement existing as of the Closing Date, or to satisfy any obligation accrued
under any Plan (as defined in the Employee Benefits Agreement) as of the Closing
Date, shall be deemed to be a Contingent Liability.
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(h) CONVERGYS GROUP means CONVERGYS and each Person (other than any
member of the CBI Group) that is an Affiliate of CONVERGYS immediately after the
Closing Date.
(i) EXCLUSIVE CBI CONTINGENT GAIN means any Contingent Gain if such
Contingent Gain primarily relates to any business of any CBI Group Member or if
such Contingent Gain is expressly assigned to CBI pursuant to this Agreement or
any Ancillary Agreement.
(j) EXCLUSIVE CBI CONTINGENT LIABILITY means any Contingent
Liability if such Contingent Liability primarily relates to any business of any
CBI Group Member, or if such Contingent Liability is expressly assigned to CBI
pursuant to this Agreement or any Ancillary Agreement.
(k) EXCLUSIVE CONTINGENT LIABILITY means any Exclusive CBI
Contingent Liability or Exclusive CONVERGYS Contingent Liability.
(l) EXCLUSIVE CONVERGYS CONTINGENT GAIN means any Contingent Gain
if such Contingent Gain primarily relates to any business of any CONVERGYS Group
Member, or if such Contingent Gain is expressly assigned to CONVERGYS pursuant
to this Agreement or any Ancillary Agreement.
(m) EXCLUSIVE CONVERGYS CONTINGENT LIABILITY means any Contingent
Liability if such Contingent Liability primarily relates to any business of any
CONVERGYS Group Member or such Contingent Liability is expressly assigned to
CONVERGYS pursuant to this Agreement or any Ancillary Agreement.
(n) GROUP means any of the CBI Group or the CONVERGYS Group, as the
context requires.
(o) PERSON means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability entity, any other entity or any governmental authority.
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(p) SHARED CONTINGENT GAIN means any Contingent Gain that is not an
Exclusive CBI Contingent Gain or an Exclusive CONVERGYS Contingent Gain.
(q) SHARED CONTINGENT LIABILITY means, without duplication, any
Contingent Liability that is not an Exclusive CBI Contingent Liability or an
Exclusive CONVERGYS Contingent Liability.
(r) VALUE means the aggregate amount of all cash payments, the fair
market value of all non-cash payments and the incremental cost of providing any
goods or services made or provided in respect of any Exclusive Contingent
Liability whether in satisfaction of any judgment, in settlement of any Action
or threatened Action or otherwise (including all costs and expenses of defending
or investigating any Action or threatened Action), net of: (i) any insurance
proceeds received or realized in respect of the applicable Exclusive Contingent
Liability, (ii) any tax benefits associated with such payments or the provision
of such goods or services (based on an assumed effective tax rate equal to the
effective tax rate of the applicable party for the fiscal year immediately
preceding the year in which such payments are made or goods or services provided
(it being understood that the effective tax rate of any party whose earnings for
such immediately preceding fiscal year are consolidated for federal income tax
purposes with another corporation shall be the effective tax rate of the
corporation filing such federal income tax return for such immediately preceding
fiscal year)), (iii) any other amounts recovered (including by way of set off)
from a third party in connection with any such Action or threatened Action and
(iv) the amount of any reserve, account payable or similar accrual in respect of
the Exclusive Contingent Liability, net of any offsetting receivables in respect
of such Exclusive Contingent Liability, in each case as reflected on the
CONVERGYS balance sheet or the audited consolidated balance sheet of CBI,
including the notes thereto, as of December 31, 1997 (and without giving effect
to any subsequent adjustment of any such reserve, account payable, accrual or
offsetting receivable).
7.2 CONTINGENT GAINS.
(a) Each of CBI and CONVERGYS shall have sole and exclusive right
to any benefit received with respect to any Exclusive CBI Contingent Gain or
Exclusive CONVERGYS Contingent Gain, respectively. Each of CBI and CONVERGYS
shall have sole and exclusive
15
authority to commence, prosecute, settle, manage, control, conduct, waive,
forego, release, discharge, forgive and otherwise determine all matters
whatsoever with respect to any Exclusive CBI Contingent Gain or Exclusive
CONVERGYS Contingent Gain, respectively.
(b) Any benefit that may be received from any Shared Contingent
Gain shall be shared among CBI and CONVERGYS in proportion to CBI receiving 50%
and CONVERGYS receiving 50%, respectively (the "Shared Percentage"), and shall
be paid in accordance with Section 7.5. Notwithstanding the foregoing, CBI shall
have sole and exclusive authority to commence, prosecute, settle, manage,
control, conduct, waive, forego, release, discharge, forgive and otherwise
determine all matters whatsoever with respect to any Shared Contingent Gain.
CONVERGYS shall not take, or permit any member of its Group to take, any action
(including commencing any claim) that would interfere with such rights and
powers of CBI. CBI shall use its reasonable efforts to notify CONVERGYS in the
event that it commences an Action with respect to a Shared Contingent Gain;
provided that the failure to provide such notice shall not give rise to any
rights on the part of CONVERGYS against CBI or affect any other provision of
this Section 7.2. CONVERGYS acknowledges that CBI may elect not to pursue any
Shared Contingent Gain for any reason whatsoever (including a different
assessment of the merits of any Action, claim or right than CONVERGYS or any
business reasons that are in the best interests of CBI or a member of the CBI
Group, without regard to the best interests of any member of the CONVERGYS
Group) and that no member of the CBI Group shall have any liability to any
Person (including any member of the CONVERGYS Group) as a result of any such
determination.
(c) In the event of any dispute as to whether any claim or right is
a Contingent Gain or whether any Contingent Gain is a Shared Contingent Gain, an
Exclusive CBI Contingent Gain or an Exclusive CONVERGYS Contingent Gain, CBI
may, but shall not be obligated to, commence prosecution or other assertion of
such claim or right pending resolution of such dispute. In the event that CBI
commences any such prosecution or assertion and, upon resolution of the dispute,
a party other than CBI is determined hereunder to have the exclusive right to
such claim, CBI shall, promptly upon the request of such other party,
discontinue the prosecution or assertion of such right or claim and transfer the
control thereof to the party so determined to have the right thereto. In such
event, the party having the right to such a claim or
16
right will reimburse CBI for all costs and expenses reasonably incurred prior to
resolution of such dispute in the prosecution or assertion of such claim or
right.
7.3 EXCLUSIVE CONTINGENT LIABILITIES. Except as otherwise provided in
this Section 7.3, each Exclusive Contingent Liability shall constitute a
liability for which indemnification is provided by CBI or CONVERGYS, as the case
may be, pursuant to Article 10 hereof and shall be subject to the procedures set
forth in Article 10 with respect thereto.
7.4 SHARED CONTINGENT LIABILITIES.
(a) As set forth in Section 10.5(c), CBI shall assume the defense
of, and may seek to settle or compromise, any Third Party Claim (as defined
herein) that is a Shared Contingent Liability, and the costs and expenses
thereof shall be included in the calculation of the amount of the applicable
Shared Contingent Liability in determining the reimbursement obligations of the
other parties with respect thereto pursuant to this Section 7.4.
(b) Each of CBI and CONVERGYS shall be responsible for its Shared
Percentage of any Shared Contingent Liability. It shall not be a defense to any
obligation by any party to pay any amount in respect of any Shared Contingent
Liability that such party was not consulted in the defense thereof, that such
party's views or opinions as to the conduct of such defense were not accepted or
adopted, that such party does not approve of the quality or manner of the
defense thereof or that such Shared Contingent Liability was incurred by reason
of a settlement rather than by a judgment or other determination of liability
(even if, subject to Section 10.5(g), such settlement was effected without the
consent or over the objection of such party).
7.5 PAYMENTS.
(a) Any amount owed in respect of any Shared Contingent Liabilities
(including reimbursement for the cost or expense of defense) of (i) any Third
Party Claim that is a Shared Contingent Liability or (ii) any Shared Contingent
Gain pursuant to this Article 6 shall be remitted promptly after the party
entitled to such amount provides an invoice (including reasonable supporting
information with respect thereto) to the party owing such amount.
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(b) In case of any Shared Contingent Liability, CBI shall be
entitled to reimbursement from CONVERGYS in advance of a final determination of
any Action for amounts paid in respect of costs and expenses related thereto,
from time to time as such costs and expenses are incurred. In the case of any
Shared Contingent Gain, CBI shall be entitled to retain from the amount of the
Shared Contingent Gain otherwise payable to CONVERGYS, CONVERGYS' Shared
Percentage of the costs and expenses paid or incurred by or on behalf of any
member of the CBI Group in connection with such Shared Contingent Gain.
(c) Any amounts billed and properly payable in accordance with this
Article 7 that are not paid within 30 days of such ▇▇▇▇ shall bear interest at
the Prime Rate plus 2% per annum.
7.6 PROCEDURES TO DETERMINE STATUS OF CONTINGENT LIABILITY OR
CONTINGENT GAIN.
(a) As of the Closing Date, CBI and CONVERGYS will form the
Contingent Claim Committee for the purpose of resolving any disagreement among
the parties as to whether:
(i) any claim or right is a Contingent Gain;
(ii) any Contingent Gain is a Shared Contingent Gain, an
Exclusive CBI Contingent Gain or an Exclusive CONVERGYS Contingent Gain;
(iii) any liability is a Contingent Liability; or
(iv) any Contingent Liability is a Shared Contingent
Liability, an Exclusive CBI Contingent Liability, or an Exclusive CONVERGYS
Contingent Liability.
(b) Any of the parties may refer any potential Contingent Gains or
Contingent Liabilities to the Contingent Claim Committee for resolution of a
disagreement described in Section 7.6(a) and the Contingent Claim Committee's
determination (which shall be made within 30 days of such referral), if
unanimous, shall be binding on all of the parties and their respective
successors and assigns. In the event that the Contingent Claim Committee cannot
reach a unanimous determination as to the nature or status of any such
Contingent Liabilities or Contingent Gains within 30 days after such referral,
the issue will be submitted for arbitration
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pursuant to the procedures set forth in Article 12 of this Agreement. The
outcome of the arbitration pursuant to Article 12 shall be final and binding on
all parties and their respective successors and assigns. The Contingent Claim
Committee shall consist of one member of the CBI Group and one member of the
CONVERGYS Group.
ARTICLE 8
THE IPO AND ACTIONS PENDING THE IPO
8.1 Transactions Prior to the IPO.
(a) Subject to the conditions specified in Section 8.2 hereof, CBI
and CONVERGYS shall use their reasonable best efforts to consummate the IPO.
Such actions shall include, but shall not necessarily be limited to, those
specified in this Section 8.1.
(b) CONVERGYS shall file with the Securities and Exchange
Commission (the "Commission") the IPO registration statement, and such
amendments or supplements thereto, as may be necessary in order to cause the
same to become and remain effective as required by law or by the Underwriters,
including, but not limited to, filing such amendments to the IPO registration
statement as may be required by the Underwriting Agreement, the Commission or
federal, state or foreign securities laws. CBI and CONVERGYS shall also
cooperate in preparing, filing with the Commission and causing to become
effective a registration statement registering the Common Shares under the
Exchange Act, and any registration statements or amendments thereof which are
required to reflect the establishment of, or amendments to, any employee benefit
and other plans necessary or appropriate in connection with the IPO, the
Separation, the Distribution or the other transactions contemplated by this
Agreement and the Ancillary Agreements.
(c) CONVERGYS, CBI, CBIS and MATRIXX shall enter into an
Underwriting Agreement (the "Underwriting Agreement"), with underwriters
selected jointly by CBI and CONVERGYS (the "Underwriters") in form and substance
reasonably satisfactory to CONVERGYS, CBI, CBIS and MATRIXX and shall comply
with their respective obligations thereunder.
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(d) CBI and CONVERGYS shall consult with each other and the
Underwriters regarding the timing, pricing and other material matters with
respect to the IPO.
(e) CONVERGYS shall use its reasonable best efforts to take all
such action as may be necessary or appropriate under state securities and blue
sky laws of the United States (and any comparable laws under any foreign
jurisdictions) in connection with the IPO.
(f) CONVERGYS shall prepare, file and use its reasonable best
efforts to seek to make effective an application for listing of the Common
Shares issued in the IPO on the New York Stock Exchange, subject to official
notice of issuance.
(g) CONVERGYS shall participate in the preparation of materials and
presentations as the Underwriters shall deem necessary or desirable.
(h) CONVERGYS shall pay all third party costs, fees and expenses
relating to the IPO, all of the reimbursable expenses of the Underwriters
pursuant to the Underwriting Agreement, all of the costs of producing, printing,
mailing and otherwise distributing the Prospectus, as well as the Underwriters'
discount as provided in the Underwriting Agreement.
8.2 CONDITIONS PRECEDENT TO CONSUMMATION OF THE IPO. As soon as
practicable after the date of this Agreement, the parties hereto shall use their
reasonable best efforts to satisfy the following conditions to the consummation
of the IPO. The obligations of the parties to consummate the IPO shall be
conditioned on the satisfaction, or waiver by CBI, of the following conditions:
(a) The IPO registration statement shall have been declared
effective by the Commission, and there shall be no stop-order in effect with
respect thereto.
(b) The actions and filings with regard to state securities and
blue sky laws of the United States (and any comparable laws under any foreign
jurisdictions) described in Section 8.1 shall have been taken and, where
applicable, have become effective or been accepted.
(c) The Common Shares to be issued in the IPO shall have been
accepted for listing on the New York Stock Exchange, on official notice of
issuance.
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(d) CONVERGYS, CBI, CBIS and MATRIXX shall have entered into the
Underwriting Agreement and all conditions to the obligations of CONVERGYS, CBI,
CBIS and MATRIXX and the Underwriters shall have been satisfied or waived.
(e) CBI shall be satisfied in its sole discretion that it will own
at least 80.0% of the outstanding CONVERGYS voting stock following the IPO, and
all other conditions to permit the Distribution (to qualify as a tax free
distribution to CBI's shareholders) shall, to the extent applicable as of the
time of the IPO, be satisfied, and there shall be no event or condition that is
likely to cause any of such conditions not to be satisfied as of the time of the
Distribution or thereafter.
(f) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the IPO or the Distribution or any of the other transactions
contemplated by this Agreement or any Ancillary Agreement shall be in effect.
(g) Such other actions as the parties hereto may, based upon the
advice of counsel, reasonably request to be taken prior to the Separation in
order to assure the successful completion of the IPO and the Distribution and
the other transactions contemplated by this Agreement shall have been taken.
(h) This Agreement shall not have been terminated.
(i) A pricing committee of CONVERGYS directors designated by the
Board of Directors of CONVERGYS shall have determined that the terms of the IPO
are acceptable to CONVERGYS.
ARTICLE 9
THE DISTRIBUTION
9.1 THE DISTRIBUTION.
(a) Subject to the conditions specified in Section 9.3 hereof, on
or prior to the Distribution Date, CBI will deliver to an agent designated by
its Board of Directors ("the Agent") for the benefit of holders of record of CBI
common shares on the Record Date, a single
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stock certificate, endorsed by CBI in blank, representing all of the outstanding
shares of CONVERGYS then owned by CBI, and shall cause the transfer agent for
the shares of CBI common shares to instruct the Agent to distribute on the
Distribution Date such number of CONVERGYS Common Share to each such holder or
designated transferee or transferees of such holder for each CBI common share
then held by each such holder or designated transferee or transferees as
determined by the CBI Board of Directors.
(b) CONVERGYS and CBI, as the case may be, will provide to the
Agent all share certificates and any information required in order to complete
the Distribution on the basis specified above.
9.2 ACTIONS PRIOR TO THE DISTRIBUTION.
(a) CBI and CONVERGYS shall prepare and mail, prior to the
Distribution Date, to the holders of CBI common shares, such information
concerning CONVERGYS, its business, operations and management, the Distribution
and such other matters as CBI shall reasonably determine and as may be required
by law. CBI and CONVERGYS will prepare, and CONVERGYS will, to the extent
required under applicable law, file with the Commission any such documentation
and any requisite no-action letters which CBI determines are necessary or
desirable to effectuate the Distribution and CBI and CONVERGYS shall each use
its reasonable best efforts to obtain all necessary approvals from the
Commission with respect thereto as soon as practicable.
(b) CBI and CONVERGYS shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.
(c) CBI and CONVERGYS shall take all reasonable steps necessary and
appropriate to cause the conditions set forth in Section 9.3(d) to be satisfied
and to effect the Distribution on the Distribution Date.
(d) CONVERGYS shall prepare and file, and shall use its reasonable
best efforts to have approved, an application for the listing of the Common
Shares to be distributed in the Distribution on the New York Stock Exchange,
subject to official notice of distribution.
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9.3 CONDITIONS TO DISTRIBUTION. Subject to any restrictions contained
in the Underwriting Agreement, the CBI Board shall have the sole discretion to
determine the date of consummation of the Distribution at any time after the
Closing Date and on or prior to the date that is six months after the Closing
Date. CBI shall be obligated to consummate the Distribution no later than the
date that is six months after the Closing Date, subject to the satisfaction, or
waiver by the CBI Board, in its sole discretion, of the conditions set forth
below. In the event that any such condition shall not have been satisfied or
waived on or before the date that is six months after the Closing Date, CBI
shall consummate the Distribution as promptly as practicable following the
satisfaction or waiver of all such conditions:
(a) a private letter ruling from the Internal Revenue Service shall
have been obtained and shall continue in effect, to the effect that, among other
things, the Distribution will qualify as a tax free distribution for federal
income tax purposes under Section 355 of the Code and will not result in the
recognition of any gain to CBI or CBI's shareholders, and such ruling shall be
in form and substance satisfactory to CBI in its sole discretion;
(b) any material governmental approvals and consents necessary to
consummate the Distribution shall have been obtained and be in full force and
effect;
(c) no order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Distribution shall be in effect and no other event outside
the control of CBI shall have occurred or failed to occur that prevents the
consummation of the Distribution; and
(d) no other event or developments shall have occurred subsequent
to the date hereof that, in the judgment of the Board of Directors of CBI, would
result in the Distribution having a material adverse effect on CBI or on the
shareholders of CBI.
(e) Each of CBI and CONVERGYS shall have received such consents,
and shall have received executed copies of such agreements or amendments of
agreements, as they shall deem necessary in connection with the completion of
the transactions contemplated by this Agreement or any other agreement or
document contemplated by this Agreement or otherwise.
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(f) All action and other documents and instruments deemed
necessary or advisable in connection with the transactions contemplated hereby
shall have been taken or executed, as the case may be, in form and substance
satisfactory to CBI and CONVERGYS.
The foregoing conditions are for the sole benefit of CBI and shall not give rise
to or create any duty on the part of CBI or the CBI Board of Directors to waive
or not waive any such condition.
9.4 FRACTIONAL SHARES. As soon as practicable after the Distribution
Date, CBI shall direct the Agent to determine the number of whole shares and
fractional shares of Common Shares allocable to each holder of record or
beneficial owner of CBI common shares as of the Record Date, to aggregate all
such fractional shares and sell the whole shares obtained thereby at the
direction of CBI in open market transactions or otherwise, in each case at then
prevailing trading prices, and to cause to be distributed to each such holder or
for the benefit of each such beneficial owner, in lieu of any fractional share,
such holder's or owner's ratable share of the proceeds of such sale, after
making appropriate deductions of any amount 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. CBI and the
Agent shall use their reasonable best efforts to aggregate the CBI common shares
that may be held by any beneficial owner thereof through more than one account
in determining the fractional share allocable to such beneficial owner.
ARTICLE 10
MUTUAL RELEASES; INDEMNIFICATIONS
10.1 RELEASE OF PRE-CLOSING CLAIMS.
(a) Except as provided in Section 10.1(c), effective as of the
Closing Date, CONVERGYS does hereby, for itself and each of its Affiliates,
successors and assigns, and all persons who at any time prior to the Closing
Date have been shareholders, directors, officers, agents or employees of
CONVERGYS (in each case, in their respective capacities as such), remise,
release and forever discharge each of CBI and its Affiliates, successors and
assigns, and all persons who at any time prior to the Closing Date have been
shareholders, directors, officers, agents or employees of CBI (in each case, in
their respective capacities as such), and their respective heirs, executors,
administrators, successors and assigns, from any and all liabilities
24
whatsoever, whether at law or in equity (including any right of contribution),
whether arising under any contract or agreement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Closing Date, including in
connection with the transactions and all other activities to implement any of
the Separation, the IPO and the Distribution.
(b) Except as provided in Section 10.1(c), effective as of the
Closing Date, CBI does hereby, for itself and its Affiliates, successors and
assigns, and all persons who at any time prior to the Closing Date have been
shareholders, directors, officers, agents or employees of CBI (in each case, in
their respective capacities as such), remise, release and forever discharge
CONVERGYS, and its Affiliates, successors and assigns, and all persons who at
any time prior to the Closing Date have been shareholders, directors, officers,
agents or employees of CONVERGYS (in each case, in their respective capacities
as such), and their respective heirs, executors, administrators, successors and
assigns, from any and all liabilities whatsoever, whether at law or in equity
(including any right of contribution), whether arising under any contract or
agreement, by operation of law or otherwise, existing or arising from any acts
or events occurring or failing to occur or alleged to have occurred or to have
failed to occur or any conditions existing or alleged to have existed on or
before the Closing Date, including in connection with the transactions and all
other activities to implement any of the Separation, the IPO and the
Distribution.
(c) Nothing contained in Section 10.1(a) or (b) shall impair any
right of any Person to enforce this Agreement, any Ancillary Agreement or any
agreements, arrangements, commitments or understandings that are specified
herein or in the Schedules and Exhibits hereto not to terminate as of the
Closing Date, in each case in accordance with its terms. Nothing contained in
Section 10.1(a) or (b) shall release any Person from:
(i) any liability provided in or resulting from any agreement
between CBI and CONVERGYS that is specified herein or the Ancillary Agreements
hereto specified as not to terminate as of the Closing Date, or any other
liability specified as not to terminate as of the Closing Date;
25
(ii) any liability, contingent or otherwise, assumed,
transferred, assigned or allocated to such person;
(iii) any liability that the parties may have with respect to
indemnification or contribution pursuant to this Agreement for claims brought
against the parties by third persons, which liability shall be governed by this
Article 10 and, if applicable, the appropriate provisions of the Ancillary
Agreements.
(d) CONVERGYS shall not make any claim or demand, or commence any
action asserting any claim or demand, including any claim of contribution or any
indemnification, against CBI, or any other Person released pursuant to Section
10.1(a), with respect to any liabilities released pursuant to Section 10.1(a).
CBI shall not make any claim or demand, or commence any action asserting any
claim or demand, including any claim of contribution or any indemnification,
against CONVERGYS or any other Person released pursuant to Section 10.1(b), with
respect to any liabilities released pursuant to Section 10.1(b).
(e) It is the intent of each of CBI and CONVERGYS by virtue of the
provisions of this Section 10.1 to provide for a full and complete release and
discharge of all liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or before the
Closing Date, between or among CONVERGYS and its Affiliates on the one hand, and
CBI and its Affiliates on the other hand (including any contractual agreements
or arrangements existing or alleged to exist between or among any such Persons
on or before the Closing Date), except as expressly set forth in Section
10.1(c). At any time, at the request of any other party, each party shall
execute and deliver releases reflecting the provisions hereof.
10.2 INDEMNIFICATION BY CONVERGYS. Except as provided in Section 10.4,
CONVERGYS shall indemnify, defend and hold harmless CBI, and each of its
directors, officers and employees, and each of the heirs, executors, successors
and assigns of any of the foregoing (collectively, the "CBI Indemnitees"), from
and against any and all liabilities of the CBI Indemnitees relating to, arising
out of or resulting from any of the following items:
26
(a) the failure of CONVERGYS or any other person to pay, perform
or otherwise promptly discharge any CONVERGYS Liabilities, whether prior to or
after the Closing Date or the date hereof;
(b) the business of CONVERGYS or any CONVERGYS Liabilities;
(c) any breach by CONVERGYS or its Affiliates of this Agreement or
any of the Ancillary Agreements; and
(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, with
respect to all information contained in any IPO Registration Statement or
Prospectus.
10.3 INDEMNIFICATION BY CBI. Except as provided in Section 10.4, CBI
shall indemnify, defend and hold harmless CONVERGYS, and each of its directors,
officers and employees, and each of the heirs, executors, successors and assigns
of any of the foregoing (collectively, the "CONVERGYS Indemnitees"), from and
against any and all liabilities of the CONVERGYS Indemnitees relating to,
arising out of or resulting from any of the following items:
(a) the failure of CBI or any other person to pay, perform or
otherwise promptly discharge any liabilities of CBI other than the CONVERGYS
liabilities whether prior to or after the Closing Date or the date hereof;
(b) the business of CBI or any liability of CBI other than the
CONVERGYS liabilities;
(c) any breach by CBI or any of its affiliates of this Agreement
or any of the Ancillary Agreements; and
(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
27
make the statements therein not misleading, with respect to all information
about CBI contained in any IPO Registration Statement or Prospectus.
10.4 INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS AND OTHER
AMOUNTS.
(a) The parties intend that any liability subject to
indemnification or reimbursement pursuant to this Article 9 will be net of
insurance proceeds that actually reduce the amount of the liability.
Accordingly, the amount which any party (an "Indemnifying Party") is required
to pay to any person entitled to indemnification hereunder (an "Indemnitee")
will be reduced by any insurance proceeds theretofore actually recovered by
or on behalf of the Indemnitee in reduction of the related liability. If an
Indemnitee receives a payment (an "Indemnity Payment") required by this
Agreement from an Indemnifying Party in respect of any liability and
subsequently receives insurance proceeds, then the Indemnitee will pay to the
Indemnifying Party an amount equal to the excess of the Indemnity Payment
received over the amount of the Indemnity Payment that would have been due if
the insurance proceeds recovery had been received, realized or recovered
before the Indemnity Payment was made.
(b) In the case of any Shared Contingent Liability, any insurance
proceeds actually received, realized or recovered by any party in respect of the
Shared Contingent Liability will be shared among the parties in such manner as
may be necessary so that the obligations of the parties for such Shared
Contingent Liability, net of such insurance proceeds, will remain in proportion
to their respective Shared Percentages, regardless of which party or parties may
actually receive, realize or recover such insurance proceeds.
(c) An insurer who would otherwise be obligated to pay any claim
shall not be relieved of the responsibility with respect thereto or, solely by
virtue of the indemnification provisions hereof, have any subrogation rights
with respect thereto, it being expressly understood and agreed that no insurer
or any other third party shall be entitled to receive a benefit that they would
not be entitled to receive in the absence of the indemnification provisions by
virtue of the indemnification provisions hereof.
10.5 PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS.
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(a) If an Indemnitee shall receive notice or otherwise learn of
the assertion by any Person other than the parties hereto (a "Third Party
Claim") with respect to which an Indemnifying Party may be obligated to provide
indemnification to such Indemnitee pursuant to Section 10.2 or 10.3, or any
other Section of this Agreement or any Ancillary Agreement, such Indemnitee
shall give such Indemnifying Party written notice thereof within 20 days after
becoming aware of such Third Party Claim. If any Person shall receive notice or
otherwise learn of the assertion of a Third Party Claim which may reasonably be
determined to be a Shared Contingent Liability, such Person (if other than CBI)
shall give CBI and any other party to this Agreement written notice thereof
within 20 days after becoming aware of such Third Party Claim. Any such notice
shall describe the Third Party Claim in reasonable detail. Notwithstanding the
foregoing, the failure of any Indemnitee or other Person to give notice as
provided in this Section 10.5(a) shall not relieve the related Indemnifying
Party of its obligations under this Article 10, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice.
(b) If the Indemnitee, the party receiving any notice pursuant
to Section 10.5(a) or any other party to this Agreement believes that the
Third Party Claim is or may be a Shared Contingent Liability, such Indemnitee
or other party may make a request for a determination of such matter to the
Contingent Claim Committee (a "Determination Request") at any time following
any notice given by the Indemnitee to an Indemnifying Party or given by any
other Person to CBI pursuant to Section 10.5(a). CBI may make such a
Determination Request at any time. Unless all parties have acknowledged that
the applicable Third Party Claim is not a Shared Contingent Liability or
unless a determination to such effect has been made in accordance with
Section 7.6, CBI shall be entitled (but not obligated) to assume the defense
of such Third Party Claim as if it were the Indemnifying Party hereunder. In
any such event, CBI shall be entitled to reimbursement of all the costs and
expenses of such defense once a final determination or acknowledgement is
made as to the status of the Third Party Claim from the applicable party or
parties that would have been required to pay such amounts if the status of
the Third Party Claim had been determined immediately; provided that, if such
Third Party Claim is determined to be a Shared Contingent Liability, such
costs and expenses shall be shared as provided in Section 7.4.
29
(c) CBI shall assume the defense of, and may seek to settle or
compromise, any Third Party Claim that is a Shared Contingent Liability, and the
costs and expenses thereof shall be included in the calculation of the amount of
the applicable Shared Contingent Liability in determining the reimbursement
obligations of the other parties with respect thereto pursuant to Section 7.4.
Any Indemnitee in respect of a Shared Contingent Liability shall have the right
to employ separate counsel and to participate in (but not control) the defense,
compromise, or settlement thereof, but all fees and expenses of such counsel
shall be the expense of such Indemnitee.
(d) Other than in the case of a Shared Contingent Liability, an
Indemnifying Party may elect to defend (and, unless the Indemnifying Party has
specified any reservations or exceptions, to seek to settle or compromise), at
such Indemnifying Party's own expense and by such Indemnifying Party's own
counsel, any Third Party Claim. Within 30 days after the receipt of notice from
an Indemnitee in accordance with Section 10.5(a), the Indemnifying Party shall
notify the Indemnitee of its election whether the Indemnifying Party will assume
responsibility for defending such Third Party Claim, which election shall
specify any reservations or exceptions. After notice from an Indemnifying Party
to an Indemnitee of its election to assume the defense of a Third Party Claim,
such Indemnitee 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 of such
Indemnitee except as set forth in the next sentence. In the event that (i) the
Third Party Claim is not a Shared Contingent Liability and (ii) the Indemnifying
Party has elected to assume the defense of the Third Party Claim but has
specified, and continues to assert, any reservations or exceptions in such
notice, then, in any such case, the reasonable fees and expenses of one separate
counsel for all Indemnitees shall be borne by the Indemnifying Party.
(e) Other than in the case of a Shared Contingent Liability, if an
Indemnifying Party elects not to assume responsibility for defending a Third
Party Claim, or fails to notify an Indemnitee of its election as provided in
Section 10.5(d), such Indemnitee may defend such Third Party Claim at the cost
and expense of the Indemnifying Party.
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(f) Unless the Indemnifying Party has failed to assume the defense
of the Third Party Claim in accordance with the terms of this Agreement, no
Indemnitee may settle or compromise any Third Party Claim that is not a Shared
Contingent Liability without the consent of the Indemnifying Party. No
Indemnitee may settle or compromise any Third Party Claim that is a Shared
Contingent Liability without the consent of CBI.
(g) In the case of a Third Party Claim that is not a Shared
Contingent Liability, no Indemnifying Party shall consent to entry of any
judgment or enter into any settlement of the Third Party Claim without the
consent of the Indemnitee if the effect thereof is to permit any injunction,
declaratory judgment, other order or other nonmonetary relief to be entered,
directly or indirectly, against any Indemnitee. In the case of a Third Party
Claim that is a Shared Contingent Liability, CBI shall not consent to entry of
any judgment or enter into any settlement of the Third Party Claim without the
consent of the Indemnitee if the effect thereof is to permit any injunction,
declaratory judgment, other order or other non-monetary relief to be entered,
directly or indirectly, against any Indemnitee.
10.6 ADDITIONAL MATTERS.
(a) Any claim on account of a liability which does not result from
a Third Party Claim shall be asserted by written notice given by the Indemnitee
to the Indemnifying Party. Such Indemnifying Party shall have a period of 30
days after the receipt of such notice within which to respond thereto. If such
Indemnifying Party does not respond within such 30-day period, such Indemnifying
Party shall be deemed to have refused to accept responsibility to make payment.
If such Indemnifying Party does not respond within such 30-day period or rejects
such claim in whole or in part, such Indemnitee shall be free to pursue such
remedies as may be available to such party as contemplated by this Agreement and
the Ancillary Agreements.
(b) In the event of payment by or on behalf of any Indemnifying
Party to any Indemnitee in connection with any Third Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place of such
Indemnitee as to any events or circumstances in respect of which such Indemnitee
may have the right, defense or claim relating to such Third Party Claim against
any claimant or plaintiff asserting such Third Party Claim or against any
31
other person. Such Indemnitee 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; provided, however,
that CBI shall be entitled to control the prosecution of any such right,
defense or claim in respect of any Shared Contingent Liability.
(c) In the event of an Action in which the Indemnifying Party is
not a named defendant, if either the Indemnitee or Indemnifying Party shall so
request, the parties shall endeavor to substitute the Indemnifying Party for the
named defendant, or, in the case of a Shared Contingent Liability, add the
Indemnifying Party as a named defendant if at all possible. If such substitution
or addition cannot be achieved for any reason or is not requested, the named
defendant shall allow the Indemnifying Party to manage the Action as set forth
in this Section, and, subject to Section 7.4 with respect to Shared Contingent
Liabilities, the Indemnifying Party shall fully indemnify the named defendant
against all costs of defending the Action (including court costs, sanctions
imposed by a court, attorneys' fees, experts' fees and all other external
expenses), the costs of any judgment or settlement, and the cost of any interest
or penalties relating to any judgment or settlement.
10.7 REMEDIES CUMULATIVE. The remedies provided in this Article 10
shall be cumulative and shall not preclude assertion by an Indemnitee of any
other rights or the seeking of any and all other remedies against any
Indemnifying Party.
ARTICLE 11
CONFIDENTIALITY
11.1 GENERAL.
(a) Subject to Section 11.2, each of CBI and CONVERGYS, on behalf
of itself and each member of its respective Group, agrees to hold, and to cause
its respective directors, officers, employees, agents, accountants, counsel and
other advisors and representatives to hold, in strict confidence, with at least
the same degree of care that applies to CBI's confidential and proprietary
information pursuant to policies in effect as of the Closing Date, all
Information (as defined herein) concerning each such other Group that is either
in its possession (including Information in its possession prior to any of the
date hereof, the Closing
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Date or the Distribution Date) or furnished by any such other Group or its
respective directors, officers, employees, agents, accountants, counsel and
other advisors and representatives at any time pursuant to this Agreement,
any Ancillary Agreement or otherwise, and shall not use any such Information
other than for such purposes as shall be expressly permitted hereunder or
thereunder, except, in each case, to the extent that such Information has
been (i) in the public domain through no fault of such party or any member of
such Group or any of their respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives, (ii) later
lawfully acquired from other sources by such party (or any member of such
party's Group) which sources are not themselves bound by a confidentiality
obligation), or (iii) independently generated without reference to any
proprietary or confidential Information of the other party.
(b) Each party agrees not to release or disclose, or permit to be
released or disclosed, any such Information to any other Person, except its
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives who need to know such Information (who shall be advised of
their obligations hereunder with respect to such Information), except in
compliance with Section 11.2. Without limiting the foregoing, when any
Information is no longer needed for the purposes contemplated by this Agreement
or any Ancillary Agreement, each party will promptly after request of the other
party either return to the other party all 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).
11.2 In the event that any party or any member of its Group either
determines on the advice of its counsel that it is required to disclose any
Information pursuant to applicable law or receives any demand under lawful
process or from any Governmental Authority to disclose or provide Information of
any other party (or any member of any other party's Group) that is subject to
the confidentiality provisions hereof, such party shall notify the other party
prior to disclosing or providing such Information and shall cooperate at the
expense of the requesting party in seeking any reasonable protective
arrangements requested by such other party. Subject to the foregoing, the Person
that received such request may thereafter disclose or provide Information
33
to the extent required by such law (as so advised by counsel) or by lawful
process or such Governmental Authority.
11.3 Information means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, books, records,
contracts, instruments, surveys, ideas, concepts, know-how, techniques, designs,
drawings, blueprints, diagrams, models, flow charts, data, computer data, disks,
diskettes, tapes, computer programs or other software, marketing plans, customer
names, communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
ARTICLE 12
ARBITRATION; DISPUTE RESOLUTION
12.1 AGREEMENT TO ARBITRATE. Except as otherwise specifically
provided in any Ancillary Agreement, the procedures for discussion,
negotiation and arbitration set forth in this Article 12 shall apply to all
disputes, controversies or claims (whether sounding in contract, tort or
otherwise) that may arise out of or relate to, or arise under or in
connection with this Agreement or any Ancillary Agreement, or the
transactions contemplated hereby or thereby (including all actions taken in
furtherance of the transactions contemplated hereby or thereby on or prior to
the date hereof), or the commercial or economic relationship of the parties
relating hereto or thereto, between or among any member of the CBI Group and
the CONVERGYS Group. Each party agrees on behalf of itself and each member of
its respective Group that the procedures set forth in this Article 12 shall
be the sole and exclusive remedy in connection with any dispute, controversy
or claim relating to any of the foregoing matters and irrevocably waives any
right to commence any Action in or before any governmental authority, except
as expressly provided in Sections 12.7(b) and 12.8 and except to the extent
provided under the Arbitration Act in the case of judicial review of
arbitration results or awards. Each party on behalf of itself and each member
of its respective Group irrevocably waives any right to any trial by jury
with respect to any claim, controversy or dispute set forth in the first
sentence of this Section 12.1.
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12.2 ESCALATION.
(a) It is the intent of the parties to use their respective
reasonable best efforts to resolve expeditiously any dispute, controversy or
claim between or among them with respect to the matters covered hereby that may
arise from time to time on a mutually acceptable negotiated basis. In
furtherance of the foregoing, any party involved in a dispute, controversy or
claim may deliver a notice (an "Escalation Notice") demanding an in person
meeting involving representatives of the parties at a senior level of management
of the parties (or if the parties agree, of the appropriate strategic business
unit or division within such entity). A copy of any such Escalation Notice shall
be given to the General Counsel, or like officer or official, of each party
involved in the dispute, controversy or claim (which copy shall state that it is
an Escalation Notice pursuant to this Agreement). Any agenda, location or
procedures for such discussions or negotiations between the parties may be
established by the parties from time to time; provided, however, that the
parties shall use their reasonable best efforts to meet within 30 days of the
Escalation Notice.
(b) The parties may, by mutual consent, retain a mediator to aid
the parties in their discussions and negotiations by informally providing advice
to the parties. Any opinion expressed by the mediator shall be strictly advisory
and shall not be binding on the parties, nor shall any opinion expressed by the
mediator be admissible in any arbitration proceedings. The mediator may be
chosen from a list of mediators previously selected by the parties or by other
agreement of the parties. Costs of the mediation shall be borne equally by the
parties involved in the matter, except that each party shall be responsible for
its own expenses. Mediation is not a prerequisite to a demand for arbitration
under Section 12.3.
12.3 DEMAND FOR ARBITRATION.
(a) At any time after the first to occur of (i) the date of the
meeting actually held pursuant to the applicable Escalation Notice or (ii) 45
days after the delivery of an Escalation Notice (as applicable, the "Arbitration
Demand Date"), any party involved in the dispute, controversy or claim
(regardless of whether such party delivered the Escalation Notice)
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may, unless the Applicable Deadline has occurred, make a written demand (the
"Arbitration Demand Notice") that the dispute be resolved by binding
arbitration, which Arbitration Demand Notice shall be given to the parties to
the dispute, controversy or claim in the manner set forth in Section 12.3(b). In
the event that any party shall deliver an Arbitration Demand Notice to another
party, such other party may itself deliver an Arbitration Demand Notice to such
first party with respect to any related dispute, controversy or claim with
respect to which the Applicable Deadline has not passed without the requirement
of delivering an Escalation Notice. No party may assert that the failure to
resolve any matter during any discussions or negotiations, the course of conduct
during the discussions or negotiations or the failure to agree on a mutually
acceptable time, agenda, location or procedures for the meeting, in each case,
as contemplated by Section 12.2, is a prerequisite to a demand for arbitration
under Section 12.3.
(b) Except as may be expressly provided in any Ancillary
Agreement, any Arbitration Demand Notice may be given until one year and 45 days
after the later of the occurrence of the act or event giving rise to the
underlying claim or the date on which such act or event was, or should have
been, in the exercise of reasonable due diligence, discovered by the party
asserting the claim (as applicable and as it may in a particular case be
specifically extended by the parties in writing, the "Applicable Deadline"). Any
discussions, negotiations or mediations between the parties pursuant to this
Agreement or otherwise will not toll the Applicable Deadline unless expressly
agreed in writing by the parties. Each of the parties agrees on behalf of itself
and each member of its Group that if an Arbitration Demand Notice with respect
to a dispute, controversy or claim is not given prior to the expiration of the
Applicable Deadline, as between or among the parties and the members of their
Groups, such dispute, controversy or claim will be barred. Subject to Sections
12.7(d) and 12.8, upon delivery of an Arbitration Demand Notice pursuant to
Section 12.3(a) prior to the Applicable Deadline, the dispute, controversy or
claim shall be decided by a sole arbitrator in accordance with the rules set
forth in this Article 12.
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12.4 ARBITRATORS
(a) Within 15 days after a valid Arbitration Demand Notice is
given, the parties involved in the dispute, controversy or claim referenced
therein shall attempt to select a sole arbitrator satisfactory to all such
parties.
(b) In the event that such parties are not able jointly to select
a sole arbitrator within such 15-day period, such parties shall each appoint an
arbitrator within 30 days after delivery of the Arbitration Demand Notice. If
one party appoints an arbitrator within such time period and the other party or
parties fail to appoint an arbitrator within such time period, the arbitrator
appointed by the one party shall be the sole arbitrator of the matter.
(c) In the event that a sole arbitrator is not selected pursuant
to paragraph (a) or (b) above and, instead, two arbitrators are selected
pursuant to paragraph (b) above, the two arbitrators will, within 30 days after
the appointment of the later of them to be appointed, select an additional
arbitrator who shall act as the sole arbitrator of the dispute. After selection
of such sole arbitrator, the initial arbitrators shall have no further role with
respect to the dispute. In the event that the arbitrators so appointed do not,
within 30 days after the appointment of the later of them to be appointed, agree
on the selection of the sole arbitrator, any party involved in such dispute may
apply to the American Arbitration Association, Cincinnati, Ohio ("AAA"), to
select the sole arbitrator, which selection shall be made by such organization
within 30 days after such application. Any arbitrator selected pursuant to this
paragraph (c) shall be disinterested with respect to any of the parties and the
matter and shall be reasonably competent in the applicable subject matter.
(d) The sole arbitrator selected pursuant to paragraph (a), (b) or
(c) above will set a time for the hearing of the matter which will commence no
later than 90 days after the date of appointment of the sole arbitrator pursuant
to paragraph (a), (b) or (c) above and which hearing will be no longer than 30
days (unless in the judgment of the arbitrator the matter is unusually complex
and sophisticated and thereby requires a longer time, in which event such
hearing shall be no longer than 90 days). The final decision of such arbitrator
will be rendered in writing to the parties not later than 60 days after the last
hearing date, unless otherwise agreed by the parties in writing.
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(e) The place of any arbitration hereunder will be Cincinnati,
Ohio, unless otherwise agreed by the parties.
12.5 HEARINGS. Within the time period specified in Section 12.4(d),
the matter shall be presented to the arbitrator at a hearing by means of
written submissions of memoranda and verified witness statements, filed
simultaneously, and responses, if necessary in the judgment of the arbitrator
or both the parties. If the arbitrator deems it to be essential to a fair
resolution of the dispute, live cross-examination or direct examination may
be permitted, but is not generally contemplated to be necessary. The
arbitrator shall actively manage the arbitration with a view to achieving a
just, speedy and cost-effective resolution of the dispute, claim or
controversy. The arbitrator may, in his or her discretion, set time and other
limits on the presentation of each party's case, its memoranda or other
submissions, and refuse to receive any proffered evidence, which the
arbitrator, in his or her discretion, finds to be cumulative, unnecessary,
irrelevant or of low probative nature. Except as otherwise set forth herein,
any arbitration hereunder will be conducted in accordance with the AAA Rules
and Regulations then prevailing (except that the arbitration will not be
conducted under the auspices of the AAA and the fee schedule of the AAA will
not apply). Except as expressly set forth in Section 12.8(b), the decision of
the arbitrator will be final and binding on the parties, and judgment thereon
may be had and will be enforceable in any court having jurisdiction over the
parties. Arbitration awards will bear interest at an annual rate of the Prime
Rate plus 2% per annum. To the extent that the provisions of this Agreement
and the prevailing rules of the AAA conflict, the provisions of this
Agreement shall govern.
12.6 DISCOVERY AND CERTAIN OTHER MATTERS.
(a) Any party involved in the applicable dispute may request
limited document production from the other party or parties of specific and
expressly relevant documents, with the reasonable expenses of the producing
party incurred in such production paid by the requesting party. Any such
discovery (which rights to documents shall be substantially less than document
discovery rights prevailing under the Federal Rules of Civil Procedure) shall be
conducted expeditiously and shall not cause the hearing provided for in Section
12.5 to be adjourned except upon consent of all parties involved in the
applicable dispute or upon an
38
extraordinary showing of cause demonstrating that such adjournment is necessary
to permit discovery essential to a party to the proceeding. Depositions,
interrogatories or other forms of discovery (other than the document production
set forth above) shall not occur except by consent of the parties involved in
the applicable dispute. Disputes concerning the scope of document production and
enforcement of the document production requests will be determined by written
agreement of the parties involved in the applicable dispute or, failing such
agreement, will be referred to the arbitrator for resolution. All discovery
requests will be subject to the proprietary rights and rights of privilege of
the parties, and the arbitrator will adopt procedures to protect such rights and
to maintain the confidential treatment of the arbitration proceedings (except as
may be required by law). Subject to the foregoing, the arbitrator shall have the
power to issue subpoenas to compel the production of documents relevant to the
dispute, controversy or claim.
(b) The arbitrator shall have full power and authority to
determine issues of arbitrability but shall otherwise be limited to
interpreting or construing the applicable provisions of this Agreement or any
Ancillary Agreement, and will have no authority or power to limit, expand,
alter, amend, modify, revoke or suspend any condition or provision of this
Agreement or any Ancillary Agreement; it being understood, however, that the
arbitrator will have full authority to implement the provisions of this
Agreement or any Ancillary Agreement, and to fashion appropriate remedies for
breaches of this Agreement (including interim or permanent injunctive
relief); provided that the arbitrator shall not have (i) any authority in
excess of the authority a court having jurisdiction over the parties and the
controversy or dispute would have absent these arbitration provisions or (ii)
any right or power to award punitive or treble damages. It is the intention
of the parties that in rendering a decision the arbitrator give effect to the
applicable provisions of this Agreement and the Ancillary Agreements and
follow applicable law (it being understood and agreed that this sentence
shall not give rise to a right of judicial review of the arbitrator's award).
(c) If a party fails or refuses to appear at and participate in an
arbitration hearing after due notice, the arbitrator may hear and determine the
controversy upon evidence produced by the appearing party.
39
(d) Arbitration costs will be borne equally by each party involved
in the matter, except that each party will be responsible for its own attorney's
fees and other costs and expenses, including the costs of witnesses selected by
such party.
12.7 CERTAIN ADDITIONAL MATTERS.
(a) Any arbitration award shall be a bare award limited to a
holding for or against a party and shall be without findings as to facts, issues
or conclusions of law and shall be without a statement of the reasoning on which
the award rests, but must be in adequate form so that a judgment of a court may
be entered thereupon. Judgment upon any arbitration award hereunder may be
entered in any court having jurisdiction thereof.
(b) Prior to the time at which an arbitrator is appointed pursuant
to Section 12.4, any party may seek one or more temporary restraining orders in
a court of competent jurisdiction if necessary in order to preserve and protect
the status quo. Neither the request for, or grant or denial of, any such
temporary restraining order shall be deemed a waiver of the obligation to
arbitrate as set forth herein and the arbitrator may dissolve, continue or
modify any such order. Any such temporary restraining order shall remain in
effect until the first to occur of the expiration of the order in accordance
with its terms or the dissolution thereof by the arbitrator.
(c) Except as required by law, the parties shall hold, and shall
cause their respective officers, directors, employees, agents and other
representatives to hold, the existence, content and result of mediation or
arbitration in confidence in accordance with the provisions of Article 12 and
except as may be required in order to enforce any award. Each of the parties
shall request that any mediator or arbitrator comply with such confidentiality
requirement.
(d) In the event that at any time the sole arbitrator shall
fail to serve as an arbitrator for any reason, the parties shall select a new
arbitrator who shall be disinterested as to the parties and the matter in
accordance with the procedures set forth herein for the selection of the
initial arbitrator. The extent, if any, to which testimony previously given
shall be repeated or as to which the replacement arbitrator elects to rely on
the stenographic record (if there is one) of such testimony shall be
determined by the replacement arbitrator.
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12.8 LIMITED COURT ACTIONS.
(a) Notwithstanding anything herein to the contrary, in the event
that any party reasonably determines the amount in controversy in any dispute,
controversy or claim (or any series of related disputes, controversies or
claims) under this Agreement or any Ancillary Agreement is, or is reasonably
likely to be, in excess of $25 million and if such party desires to commence an
Action in lieu of complying with the arbitration provisions of this Article,
such party shall so state in its Arbitration Demand Notice. If the other parties
to the arbitration do not agree that the amount in controversy in such dispute,
controversy or claim (or such series of related disputes, controversies or
claims) is, or is reasonably likely to be, in excess of $25 million, the
arbitrator selected pursuant to Section 12.4 hereof shall decide whether the
amount in controversy in such dispute, controversy or claim (or such series of
related disputes, controversies or claims) is, or is reasonably likely to be, in
excess of $25 million. The arbitrator shall set a date that is no later than ten
days after the date of his or her appointment for submissions by the parties
with respect to such issue. There shall not be any discovery in connection with
such issue. The arbitrator shall render his or her decision on such issue within
five days of such date so set by the arbitrator. In the event that the
arbitrator determines that the amount in controversy in such dispute,
controversy or claim (or such series of related disputes, controversies or
claims) is or is reasonably likely to be in excess of $25 million, the
provisions of Sections 12.4(d) and (e), 12.5, 12.6, 12.7 and 12.10 hereof shall
not apply and on or before (but, except as expressly set forth in Section
12.8(b), not after) the tenth business day after the date of such decision, any
party to the arbitration may elect, in lieu of arbitration, to commence an
Action with respect to such dispute, controversy or claim (or such series of
related disputes, controversies or claims) in any court of competent
jurisdiction. If the arbitrator does not so determine, the provisions of this
Article (including with respect to time periods) shall apply as if no
determinations were sought or made pursuant to this Section 12.8(a).
(b) In the event that an arbitration award in excess of $25
million is issued in any arbitration proceeding commenced hereunder, any party
may, within 60 days after the date of such award, submit the dispute,
controversy or claim (or series of related disputes, controversies or claims)
giving rise thereto to a court of competent jurisdiction, regardless of
41
whether such party or any other party sought to commence an Action in lieu of
proceeding with arbitration in accordance with Section 12.8(a). In such
event, the applicable court may elect to rely on the record developed in the
arbitration or, if it determines that it would be advisable in connection
with the matter, allow the parties to seek additional discovery or to present
additional evidence. Each party shall be entitled to present arguments to the
court with respect to whether any such additional discovery or evidence shall
be permitted and with respect to all other matters relating to the applicable
dispute, controversy or claim (or series of related disputes, controversies
or claims).
12.9 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Article 11 with respect
to all matters not subject to such dispute, controversy or claim.
12.10 LAW GOVERNING ARBITRATION PROCEDURES. The interpretation of the
provisions of this Article 11, only insofar as they relate to the agreement to
arbitrate and any procedures pursuant thereto, shall be governed by the
Arbitration Act and other applicable federal law. In all other respects, the
interpretation of this Agreement shall be governed by the laws of the State of
Ohio.
ARTICLE 13
FURTHER ASSURANCES AND ADDITIONAL COVENANTS
13.1 FURTHER ASSURANCES.
(a) In addition to the actions specifically provided for
elsewhere in this Agreement, each of the parties hereto shall use its reasonable
best efforts, prior to, on and after the Closing 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.
(b) Without limiting the foregoing, prior to, on and after the
Closing Date, each party hereto shall cooperate with the other parties, and
without any further consideration,
42
but at the expense of the requesting party, to execute and deliver, or use
its reasonable best efforts to cause to be executed and delivered, all
instruments, including instruments of conveyance, assignment and transfer,
and to make all filings with, and to obtain all consents, approvals or
authorizations of, any governmental authority or any other Person under any
permit, license, agreement, indenture or other instrument (including any
consents or governmental approvals), and to take all such other actions as
such party may reasonably be requested to take by any other party hereto 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 the transfers of the CONVERGYS
Assets and the assignment and assumption of the liabilities and the other
transactions contemplated hereby and thereby. Without limiting the foregoing,
each party will, at the reasonable request, cost and expense of any other
party, take such other actions as may be reasonably necessary to vest in such
other party good and marketable title, free and clear of any liens and
encumbrances, if and to the extent it is practicable to do so.
(c) On or prior to the Closing Date, CBI and CONVERGYS, in their
respective capacities as direct and indirect shareholders of their respective
subsidiaries, shall each ratify any actions which are reasonably necessary or
desirable to be taken by CBI, CONVERGYS or any other subsidiary of CBI or
CONVERGYS, as the case may be, to effectuate the transactions contemplated by
this Agreement. On or prior to the Closing Date, CBI and CONVERGYS shall take
all actions as may be necessary to approve the stock-based employee benefit
plans of CONVERGYS in order to satisfy the requirement of Rule 16b-3 under the
Exchange Act and Section 162(m) of the Code.
(d) The parties hereto agree to take any reasonable actions
necessary in order for the Distribution to qualify as a tax-free distribution
pursuant to Section 355 of the Code.
13.2 QUALIFICATION AS TAX-FREE DISTRIBUTION. After the Closing Date,
neither CBI nor CONVERGYS shall take, or permit any member of its respective
Group to take, any action which could reasonably be expected to prevent the
Distribution from qualifying as a tax-free distribution within the meaning of
Section 355 of the Code or any other transaction contemplated by this Agreement
or any Ancillary Agreement which is intended by the parties to be tax-free
43
from failing so to qualify. Without limiting the foregoing, after the Closing
Date and on or prior to the Distribution Date, CONVERGYS shall not issue or
grant, and shall not permit any member of the CONVERGYS Group to issue or grant,
directly or indirectly, any shares of CONVERGYS Common Shares or any rights,
warrants, options or other securities to purchase or acquire (whether upon
conversion, exchange or otherwise) any shares of CONVERGYS Common Shares
(whether or not then exercisable, convertible or exchangeable) if such issuance
or grant would prevent the Distribution from being tax-free under Section 355 of
the Code.
ARTICLE 14
TERMINATION
14.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated at
any time after the Closing Date and prior to the Distribution Date by the mutual
consent of CBI and CONVERGYS.
14.2 OTHER TERMINATION. This Agreement may be terminated by CBI at any
time prior to the Closing Date.
14.3 EFFECT OF TERMINATION.
(a) In the event of any termination of this Agreement prior to the
Closing Date, no party to this Agreement (or any of its directors or officers)
shall have any liability or further obligation to any other party.
(b) In the event of any termination of this Agreement on or after
the Closing Date, only the provisions of Article 8 will terminate and the other
provisions of this Agreement and each Ancillary Agreement shall remain in full
force and effect.
ARTICLE 15
MISCELLANEOUS
15.1 COUNTERPARTS; ENTIRE AGREEMENT; CORPORATE POWER.
(a) This Agreement and each Ancillary Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall
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become effective when one or more counterparts have been signed by each of the
parties and delivered to the other party.
(b) This Agreement and the Ancillary Agreements and the Exhibits,
Schedules and Appendices hereto and thereto contain the entire agreement between
the parties with respect to the subject matter hereof, supersede all previous
agreements, negotiations, discussions, writings, understandings, commitments and
conversations with respect to such subject matter and there are no agreements or
understandings between the parties other than those set forth or referred to
herein or therein.
15.2 GOVERNING LAW. This Agreement and, unless expressly provided
therein, each Ancillary Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Ohio.
15.3 ASSIGNABILITY. Except as set forth in any Ancillary Agreement,
this Agreement and each Ancillary Agreement shall be binding upon and inure to
the benefit of the parties hereto and thereto, respectively, and their
respective successors and assigns; provided, however, that no party hereto or
thereto may assign its respective rights or delegate its respective obligations
under this Agreement or any Ancillary Agreement without the express prior
written consent of the other parties hereto or thereto.
15.4 THIRD PARTY BENEFICIARIES. Except for the indemnification
rights under this Agreement of any CBI Indemnitee or CONVERGYS Indemnitee in
their respective capacities as such, (a) the provisions of this Agreement and
each Ancillary Agreement are solely for the benefit of the parties and are
not intended to confer upon any person except the parties any rights or
remedies hereunder, and (b) there are no third party beneficiaries of this
Agreement or any Ancillary Agreement, and neither this Agreement nor any
Ancillary Agreement shall provide any third person with any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement or any Ancillary Agreement. No
party hereto shall have any right, remedy or claim with respect to any
provision of this Agreement or any Ancillary Agreement to the extent such
provision relates solely to the other two parties hereto or the members of
such other two parties' respective groups. No party shall be
45
required to deliver any notice under this Agreement or under any Ancillary
Agreement to any other party with respect to any matter in which such other
party has no right, remedy or claim.
15.5 NOTICES. All notices or other communications under this Agreement
or any Ancillary Agreement shall be in writing and shall be deemed to be duly
given when (a) delivered in person or (b) deposited in the United States mail or
private express mail, postage prepaid, addressed as follows:
If to CBI, to: Cincinnati ▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
If to CONVERGYS, to: CONVERGYS CORPORATION
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Each party may change, at any time, the person or the address to which notices
should be sent hereunder by sending notice of such change as provided in this
Section 15.5
15.6 SEVERABILITY. If any provision of this Agreement or any Ancillary
Agreement or the application thereof to any person or circumstance is determined
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions hereof or thereof, or the application of such provision to
persons or circumstances or in jurisdictions other than those as to which it has
been held invalid or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated hereby or thereby,
as the case may be, is not affected in any manner adverse to any party. Upon
such determination, the parties shall negotiate in good faith in an effort to
agree upon such a suitable and equitable provision to effect the original intent
of the parties.
15.7 FORCE MAJEURE. No party shall be deemed in default of this
Agreement or any Ancillary Agreement to the extent that any delay or failure in
the performance of its obligations under this Agreement or any Ancillary
Agreement results from any cause beyond its reasonable control and without its
fault or negligence, such as acts of God, acts of civil or military authority,
46
embargoes, epidemics, wars, riots, insurrections, fires, explosions,
earthquakes, floods, unusually severe weather conditions, labor problems or
unavailability of parts, or, in the case of computer systems, any failure in
electrical or air conditioning equipment. In the event of any such excused
delay, the time for performance shall be extended for a period equal to the time
lost by reason of the delay.
15.8 PUBLICITY. Prior to the Distribution, each of CONVERGYS and CBI
shall consult with the other prior to issuing any press releases or otherwise
making public statements with respect to the IPO, the Distribution or any of the
other transactions contemplated hereby and prior to making any filings with any
governmental authority with respect thereto.
15.9 HEADINGS. The article, section and paragraph headings contained
in this Agreement and in the Ancillary Agreements are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement or any Ancillary Agreement.
15.10 SURVIVAL OF COVENANTS. Except as expressly set forth in any
Ancillary Agreement, the covenants, representations and warranties contained in
this Agreement and each Ancillary Agreement, and liability for the breach of any
obligations contained herein or therein, shall survive each of the Separation,
the IPO and the Distribution and shall remain in full force and effect
regardless of whether CBI shall consummate, delay, modify or abandon the
Distribution.
15.11 WAIVERS OF DEFAULT. Waiver by any party of any default by the
other party of any provision of this Agreement or any Ancillary Agreement shall
not be deemed a waiver by the waiving party of any subsequent or other default,
nor shall it prejudice the rights of the other party.
15.12 SPECIFIC PERFORMANCE. 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 party or parties who are or are to be
thereby aggrieved shall have the right to specific performance and injunctive or
other equitable relief of its 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 the remedies at law for any breach or threatened breach, including monetary
damages, are inadequate
47
compensation for any loss and that any defense in any action for specific
performance that a remedy at law would be adequate is waived. Any requirements
for the securing or posting of any bond with such remedy are waived.
15.13 AMENDMENTS.
(a) No provisions of this Agreement or any Ancillary Agreement
shall be deemed waived, amended, supplemented or modified by any party, unless
such waiver, amendment, supplement or modification is in writing and signed by
the authorized representative of the party against whom it is sought to enforce
such waiver, amendment, supplement or modification.
(b) Without limiting the foregoing, the parties anticipate that,
prior to the Closing Date, some or all of the Schedules to this Agreement may be
amended or supplemented and, in such event, such amended or supplemented
Schedules shall be attached hereto in lieu of the original Schedules.
IN WITNESS WHEREOF, the parties have caused this Plan of Reorganization
and Distribution Agreement to be executed by their duly authorized
representatives on this 20th day of July, 1998.
CINCINNATI ▇▇▇▇ INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
and Chief Executive Officer
CONVERGYS CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇, President
and Chief Executive Officer
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