Distribution Agreement - The Advisory Board Co. and The Corporate Advisory Board Co.
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT, dated as of October 31, 1997 (the
"Agreement"), is made by and between THE ADVISORY BOARD COMPANY, a Maryland
corporation ("ABC") and THE CORPORATE ADVISORY BOARD COMPANY, a Delaware
corporation ("New AB").
RECITALS
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A. Corporate Structure. New AB is a wholly-owned subsidiary of ABC.
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B. The Contribution. ABC intends to contribute to New AB the Transferred
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Business (the "Contribution").
C. The Distribution. Following the Contribution, subject to the
----------------
conditions set forth in this Distribution Agreement, all issued and outstanding
shares of capital stock of New AB will be distributed (the "Distribution") to
the Sole Stockholder.
D. The Intention of the Parties. It is the intention of the parties to
----------------------------
this Distribution Agreement that, for United States federal income tax purposes,
the Contribution and the Distribution shall qualify as tax-free transactions
under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as
amended (the "Code").
The parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 As used in this Distribution Agreement, the following terms shall have
the following meanings (these meanings shall be equally applicable to the
singular and plural forms of the terms defined):
"Affiliate" of a specified person is a person that directly or indirectly
controls or is controlled by, or is under common control with, the person
specified.
"Agreement" means this Distribution Agreement together with all Schedules
attached hereto, as modified, amended or extended from time to time. References
to Articles, Sections and Schedules refer to Articles, Sections and Schedules of
this Distribution Agreement unless otherwise indicated.
"Ancillary Agreements" means, collectively, all of the written agreements,
instruments, understandings, assignments or other arrangements (other than this
Distribution Agreement) entered or to be entered into in connection with the
transactions contemplated hereby, including without limitation the Transfer and
Assumption Instruments and the Services Agreements, all in the respective forms
attached hereto as exhibits, and as any of such agreements may be subsequently
modified or amended, together with any additional or supplemental agreement
entered into by the parties in connection with or to facilitate the
Distribution; provided, however, that in no event shall any agreement constitute
an Ancillary Agreement or be further modified or amended unless consented to by
each of ABC and New AB.
"Business Day" means a day on which New AB is open for business in Delaware
and which is not a Saturday or Sunday.
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"Code" shall have the meaning as defined in Recital D hereof.
"Contribution" shall have the meaning as defined in Recital B hereof.
"Distribution" shall have the meaning as defined in Recital C hereof.
"Distribution Date" means such date as may hereafter be determined by ABC's
Board of Directors as the date on which the Distribution shall be effected.
"Indemnifiable Losses" means any and all losses, liabilities, claims,
damages, penalties, fines, demands, awards and judgments, including reasonable
costs and expenses (including, without limitation, attorneys' fees and any and
all out-of-pocket expenses whatsoever reasonably incurred in investigating,
preparing for or defending against any action, suit, claim, arbitration,
inquiry, proceeding or investigation involving an Indemnifiable Loss, incurred
by an Indemnitee.
"Indemnifying Party" shall have the meaning set forth in Section 4.4.
"Indemnitee" shall have the meaning set forth in Section 4.4.
"Member Contracts" means the agreements between ABC and its clients
relating to the Transferred Business, pursuant to which such clients are
entitled to receive certain services and publications from ABC for the
applicable term.
"Records" shall have the meaning set forth in Section 5.1.
"Services Agreements" means the Management Services Agreement, Member
Contracts Agreement, Vendor Contracts Agreement, all to be dated as of the
Distribution Date by and between ABC and New AB.
"Sole Stockholder" means David G. Bradley, the sole holder of outstanding
capital stock of ABC.
"Third Party Claim" shall have the meaning set forth in Section 4.5.
"Transferred Business" means the corporate-related consulting business of
ABC, which provides strategic analysis of industry trends and other high level
information services to financial services and Fortune 1000 companies, and all
assets and liabilities relating to such business as set forth in Schedule 1.1
(including but not limited to (i) all rights to intellectual property as set
forth herein and all Member Contracts, (ii) Amended and Restated "Liquid
Markets" Agreements with certain employees, and (iii) a portion of a note from
David G. Bradley).
"Transactions" means the Contribution and the Distribution and all
transactions and actions contemplated thereby or incident thereto.
"Transition Period" means the period commencing on the Distribution Date
and ending on the date that is the first anniversary of the Distribution Date.
"Transfer and Assumption Instruments" mean, collectively, the various
agreements, instruments and other documents to be entered into among or between
ABC and New AB to effect the transfer of assets and the assumption of
liabilities relating to the Transferred Business in the manner contemplated by
this Distribution Agreement, including, without limitation, real estate transfer
documents and leases and all other instruments, documents and agreements
delivered in accordance with Section 2.3 hereof.
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<PAGE>
ARTICLE II
DISTRIBUTION AND OTHER TRANSACTIONS
2.1 Transfer of Assets and Liabilities.
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(a) Procedure for Transactions. The Transactions shall take place
--------------------------
upon the terms and subject to the conditions of this Distribution Agreement, and
in accordance with the provisions of the General Business Law of the State of
Delaware ("GBL") and any plan of reorganization pursuant to which, on the
Distribution Date the Distribution shall be effective.
(b) Contribution. ABC will transfer to New AB before the Distribution
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all of ABC's right, title and interest in and to the Transferred Business in the
manner contemplated by the internal plan of reorganization attached hereto as
Exhibit A and incorporated herein by reference.
(c) Transfer of Agreements. On or before the Distribution Date,
----------------------
subject to the limitations set forth in this Section 2.1(c), ABC will assign,
transfer and convey to New AB all of ABC's right, title and interest in and to
any and all agreements that relate primarily to the Transferred Business
(including Member Contracts), to the extent such agreements were not previously
transferred in connection with the transactions contemplated by Sections 2.1(a)
and (b) hereof. As assignee of any agreement assigned in whole or in part
hereunder, New AB shall assume and agree to pay, perform and fully discharge all
obligations of the assignor under such agreement. Notwithstanding anything in
this Distribution Agreement to the contrary, this Distribution Agreement shall
not constitute an agreement to assign any agreement, in whole or in part, or any
rights thereunder, if the agreement to assign or any attempted assignment,
without the consent of a third party, would constitute a breach thereof or in
any way adversely affect the rights of the assignee thereof; provided, however,
the provisions of Section 2.3 shall be applicable thereto.
(d) Services Agreements. On or before the Distribution Date, ABC and
-------------------
New AB shall execute and deliver the Services Agreements setting forth the terms
upon which ABC and New AB shall, after the Distribution Date, provide such
services to the other party as set forth therein and as may be requested by from
time to time during the Transition Period.
(e) Delivery of Shares. On or before the Distribution Date, ABC shall
------------------
deliver to the Sole Stockholder the share certificates representing all issued
and outstanding shares of New AB capital stock.
(f) Other Transactions. On or before the Distribution Date, ABC shall
------------------
assign, transfer and convey to New AB all of ABC's right, title and interest in
and to (i) all items of intellectual property relating to the Transferred
Business except for those items listed on Schedule 2.1(f), which shall be
retained by ABC, and (ii) all real estate leases, utility accounts, trade
organization memberships, vendor service contracts, warranty contracts and items
of a similar nature except for those items listed on Schedule 2.1(f) which shall
be retained by ABC.
2.2 Certain Financial and Other Arrangements.
----------------------------------------
(a) Intercompany Accounts. At the time of the Distribution, all
---------------------
intercompany receivables, payables and loans (other than receivables, payables,
loans, debits and credits otherwise specifically provided for in any of the
Ancillary Agreements or hereunder), if any, shall be netted out, in each case in
such manner and amount as may be agreed in writing by the
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duly authorized representatives of ABC and New AB; and (i) the resulting net
balance due, if any, from New AB to ABC shall be distributed to ABC as a
dividend; and (ii) the resulting net balance due, if any, from ABC to New AB
shall be contributed to New AB as additional capital.
(b) Operations in the Ordinary Course. Each of ABC and New AB
---------------------------------
covenants and agrees that, except as otherwise provided in this Distribution
Agreement or any Ancillary Agreement, during the period from the date of this
Distribution Agreement through the Distribution Date, it will conduct its
business in a manner substantially consistent with the current and past
operating practices and in the ordinary course, including, without limitation,
with respect to the payment and administration of accounts payable and the
collection and administration of accounts receivable, the purchase of capital
assets and equipment, cash management practices, the allocation of interest,
corporate overhead and costs of legal, insurance and other centralized
functions.
(c) Assumption of Indebtedness; Payment or Provision for Certain
------------------------------------------------------------
Debts; Settlement of Expenses and Other Items.
---------------------------------------------
(i) ABC and New AB shall take such action as shall be necessary
and appropriate to cause New AB to assume all indebtedness relating to the
Transferred Business, if any.
(ii) ABC shall pay or cause to be paid, or otherwise provide for
by bond, indemnification or other appropriate assurances, to the extent
that ABC or New AB is unable to effect releases of ABC from liability
thereunder, all ABC indebtedness or other non-contingent liabilities
relating to the Transferred Business as to which ABC is a direct obligor,
if any.
2.3 Assumption and Satisfaction of Liabilities. Except as otherwise
------------------------------------------
specifically set forth in any Ancillary Agreement, at all times from and after
the Distribution Date, New AB shall, and shall cause any and all successors and
assigns to assume, pay, perform and discharge all liabilities relating to the
Transferred Business as and when due.
2.4 Further Assurances.
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(a) In case at any time after the Distribution Date any further action
is reasonably necessary or desirable to carry out the purposes of this
Distribution Agreement and the Ancillary Agreements, the proper officers of each
party to this Distribution Agreement shall take all such action. Without
limiting the foregoing, ABC and New AB shall use their commercially reasonable
efforts to obtain all required consents and approvals of third parties, to enter
into all amendatory agreements and to make all filings and applications that may
be required for the consummation of the transactions contemplated by this
Distribution Agreement and the Ancillary Agreements.
(b) In the event that after the Distribution Date, ABC shall (i)
receive notice from New AB that certain assets or liabilities which properly
relate to the Transferred Business were not transferred to New AB on or before
the Distribution Date, or (ii) determine that certain assets or liabilities of
ABC that constitute assets or liabilities that do not properly relate to the
Transferred Business were transferred in error to New AB on the Distribution
Date, then as promptly as practical thereafter ABC shall transfer and assign
such assets or liabilities to New AB or New AB shall transfer and assign such
assets or liabilities to ABC, as the case may be, without, in any case, the
payment by either party of any consideration therefor.
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<PAGE>
(c) Nothing in this Distribution Agreement shall be deemed to require
the transfer of any assets or the assumption of any liabilities which by their
terms or operation of law cannot be transferred; provided, however, that the
parties hereto shall cooperate to seek to obtain any necessary consents or
approvals for the transfer of all assets and liabilities contemplated to be
transferred pursuant to this Distribution Agreement. In the event that any such
transfer of assets or liabilities has not been consummated as of the
Distribution Date, from and after the Distribution Date the party retaining such
asset shall hold such asset in trust for the use and benefit of the party
entitled thereto (at the expense of the party entitled thereto, with the party
retaining such asset to be promptly reimbursed all reasonable expenses incurred
in holding such asset) or retain such liability for the account of the party by
whom such liability is to be assumed pursuant hereto, as the case may be (at the
expense of the party by which such liability is to be assessed, with the party
retaining such liability to be promptly reimbursed all reasonable expenses
incurred in retaining such liability), and take such other action as may be
reasonably requested by the party to whom such asset is to be transferred, or by
whom such liability is to be assumed, as the case may be, in order to place such
party, insofar as is reasonably possible, in the same position as would have
existed has such asset or liability been transferred as contemplated hereby. As
and when any such asset or liability becomes transferable, such transfer shall
be effected forthwith. As of the Distribution Date, each party hereto shall be
deemed to have acquired complete and sole beneficial ownership over all of the
assets held by it, together with all rights, powers and privileges incident
thereto, and shall be deemed to have assumed in accordance with the terms of
this Distribution Agreement all of the liabilities, and all duties, obligations
and responsibilities incident thereto, which such party is entitled to acquire
or required to assume pursuant to the terms of this Distribution Agreement.
2.5 No Representations or Warranties. Each of the parties hereto
--------------------------------
understands and agrees that no party hereto is in this Distribution Agreement or
in any other agreement or document contemplated by this Distribution Agreement
or otherwise, making any representation or warranty whatsoever, including,
without limitation, as to title, value or legal sufficiency. It is also agreed
and understood that all assets either transferred to or retained by the parties,
as the case may be, shall be "as is, where is" and that the party to which such
assets are to be transferred hereunder shall (subject to Section 2.3) bear
economic and legal risk that any conveyances of such assets shall prove to be
insufficient or that such party's title to any such assets shall be other than
good and marketable and free from encumbrances.
2.6 Guarantees. Except as may be specified in any Ancillary Agreement,
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each of ABC and New AB shall use is best reasonable effort to have, on the
Distribution Date, or as soon as practicable thereafter, ABC removed as
guarantor of or obligor for any liabilities relating to the Transferred
Business.
2.7 Certain Post-Distribution Transactions. Each of ABC and New AB shall
--------------------------------------
comply and otherwise not take any action inconsistent with each representation,
covenant and statement made, or to be made, to tax counsel in connection with
such counsel's rendering of an opinion as to certain tax aspects of the
Distribution.
2.8 Ancillary Agreements. Effective as of the Distribution Date, each of
--------------------
ABC and New AB shall enter into the Ancillary Agreements and any other
agreements in respect of the Distribution reasonably necessary or appropriate in
connection with the transactions contemplated thereby and hereby.
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<PAGE>
ARTICLE III
THE DISTRIBUTION
3.1 Distribution Date. Subject to the satisfaction of the conditions set
-----------------
forth in Section 6.1, the Board of Directors of ABC, in its sole discretion,
shall establish the Distribution Date and any appropriate procedures in
connection with the Distribution.
3.2 Procedure. Subject to the terms and conditions of this Distribution
---------
Agreement, as of the Distribution Date ABC shall deliver to the Sole Stockholder
one or more share certificates representing all of the outstanding shares of New
AB capital stock, to be distributed in connection with the payment of the
Distribution.
ARTICLE IV
SURVIVAL AND INDEMNIFICATION
4.1 Survival of Agreements. All covenants and agreements of the parties
----------------------
hereto contained in this Distribution Agreement shall survive the Distribution
Date.
4.2 Indemnification by ABC. After the Distribution Date, except as
----------------------
otherwise specifically set forth in any provision of this Distribution Agreement
or of any Ancillary Agreement, ABC shall indemnify, defend and hold harmless New
AB and its directors, officers, successors and assigns, from and against any and
all Indemnifiable Losses arising out of, by reason of or otherwise in connection
with (a) liabilities other than liabilities relating to the Transferred
Business, or (b) the breach, whether before or after the Distribution Date, by
ABC of any provision of this Distribution Agreement or any Ancillary Agreement.
4.3 Indemnification by New AB. After the Distribution Date, except as
-------------------------
otherwise specifically set forth in any provision of this Distribution Agreement
or of any Ancillary Agreement, New AB shall indemnify, defend and hold harmless
ABC and its directors, officers, successors and assigns, from and against any
and all Indemnifiable Losses arising out of, by reason of or otherwise in
connection with (a) liabilities relating to the Transferred Business, or (b) the
breach, whether before or after the Distribution Date, by New AB of any
provision of this Distribution Agreement or any Ancillary Agreement.
4.4 Limitations on Indemnification Obligations. The amount that any party
------------------------------------------
(an "Indemnifying Party") is or may be required to pay to any other person (an
"Indemnitee") pursuant to Section 4.2 or Section 4.3, as applicable, shall be
reduced (retroactively or prospectively) by an insurance proceeds or other
amounts actually recovered by or on behalf of such Indemnitee in respect of the
related Indemnifiable Loss. Notwithstanding anything herein to the contrary,
indemnification relating to any arrangements between ABC and New AB for the
provision after the Distribution of goods and services in the ordinary course
shall be governed by the terms of such arrangements and not by this Article or
as otherwise set forth in this Distribution Agreement and the Ancillary
Agreements.
4.5 Procedures for Indemnification.
------------------------------
(a) If a claim or demand is made against an Indemniteee by any person
who is not a party to this Distribution Agreement (a "Third Party Claim") as to
which such Indemnitee is entitled to indemnification pursuant to this
Distribution Agreement, such Indemnitee shall notify the Indemnifying Party in
writing and in reasonable detail of the Third Party Claim promptly (and in any
event within 20 business days) after receipt by such Indemnitee of written
notice of the
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Third Party Claim. Thereafter, the Indemnitee shall deliver to the Indemnifying
Party, promptly (and in any event within 20 business days) after Indemnitee's
receipt thereof, copies of all notices and documents received by the Indemnitee
relating to the Third Party Claim.
(b) If a Third Party Claim is made against an Indemnitee, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges in writing its obligation to indemnify the
Indemnitee therefor, to assume the defense thereof with counsel selected by the
Indemnifying Party. Should the Indemnifying Party so elect to assume the
defense of a Third Party Claim the Indemnifying Party shall not be liable to the
Indemnitee for legal or other expenses subsequently incurred by the Indemnitee
in connection with the defense thereof.
(c) If the Indemnifying Party acknowledges in writing liability for
indemnification of a Third Party Claim, then in no event will the Indemnitee
admit any liability with respect to, or settle, compromise or discharge, any
Third Party Claim without the Indemnifying Party's prior written consent.
4.6 Indemnification Payments. Indemnification required by this Article IV
------------------------
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or loss, liability,
claim, damage or expense is incurred.
4.7 Other Adjustments. The amount of any indemnification payments shall
-----------------
be (i) increased to take into account any net tax cost actually incurred by the
Indemnitee arising from any payments received from the Indemnifying Party
(grossed up for such increase), and (ii) reduced to take account of any tax
benefit or recovery of insurance proceeds actually realized by the Indemnitee
arising from the such indemnification payment. In computing the amount of such
tax cost or tax benefit, the Indemnitee shall be deemed to recognize all other
items of income, gain, loss, deduction or credit before recognizing any item
arising from the receipt of any payment with respect to any indemnification
payments pursuant to this Distribution Agreement. In addition, if the amount of
any losses subject to indemnification under this Distribution Agreement, at any
time after payment of such indemnification, be reduced by recovery, settlement
or otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party, up to the aggregate amount of any payments received from
such Indemnifying Party pursuant to this Distribution Agreement with respect to
such losses.
4.8 Survival of Indemnities. The rights and obligations of each of ABC
-----------------------
and New AB and their respective Indemnitees under this Article IV shall survive
the sale or other transfer by any party of any assets or businesses or the
assignment by either of them of any liabilities.
ARTICLE V
CERTAIN ADDITIONAL COVENANTS
5.1 Provision of Records. After the Distribution Date, upon the prior
--------------------
written request by one of the parties to this Distribution Agreement for
specific and identified agreements, documents, books, record or files
(collectively, "Records") relating to or affecting the other party, the
recipient of the request shall arrange, as soon as reasonably practicable
following the receipt of such request, for the provision of appropriate copies
of such Records (or the original thereof if there is a reasonable need for such
originals) in the possession of the party receiving such
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<PAGE>
request, but only to the extent such items are not already in the possession of
the requesting party.
5.2 Access to Information. From and after the Distribution Date, each of
---------------------
ABC and New AB shall afford to the other and its authorized accountants, counsel
and other designated representatives reasonable access during normal business
hours, subject to appropriate restrictions for classified, privileged or
confidential information, to the personnel, properties, books and records of
such party insofar as such access is reasonably required by the other party.
5.3 Further Assurances. In addition to the actions specifically provided
------------------
for elsewhere in this Distribution Agreement, each of ABC and New AB will
execute, acknowledge and deliver such instruments (including instruments of
conveyance, assignment and transfer) and take or cause to be taken such other
actions, and do or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws, regulations and agreements to consummate the
make effective the transactions contemplated by this Distribution Agreement and
the Ancillary Agreements.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Both Parties. The respective obligations
-----------------------------------------
of each of ABC and New AB to consummate the transactions contemplated by this
Distribution Agreement are subject to the satisfaction of each of the following
conditions precedent:
a) Compliance. ABC and New AB shall have performed and complied in
----------
all material respects with each of its respective covenants and agreements
contained herein, if any, that are required to be performed or complied with by
it on or before the Distribution Date.
b) Ancillary Agreements. The applicable parties shall have entered
--------------------
into each of the Ancillary Agreements.
d) Authorization. The execution, delivery and performance of this
-------------
Distribution Agreement and the consummation of the transactions contemplated
hereby shall have been duly and validly authorized and approved by all requisite
corporate action on the part of each of ABC and New AB.
e) No Violations of Law, Litigation. The transactions contemplated
--------------------------------
by this Distribution Agreement shall not violate any Applicable Law. No suit,
action, investigation, inquiry or other legal or administrative proceeding by
any governmental body or other person or entity shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby, or in any manner seeking to restrict or prohibit the
transactions contemplated hereby or seeking to obtain any material damaged
against any person as a result of the transactions contemplated hereby.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement and the obligations of the parties
-----------
hereunder may be terminated at any time before the Distribution Date by ABC.
7.2 Effect of Termination. In the event of termination of this
---------------------
Distribution Agreement and abandonment of the transactions contemplated hereby
pursuant to this Article VIII, no party
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hereto (or any of its directors, officers, employees, agents or affiliates)
shall have any liability or further obligation to any other party, except that
nothing herein will relieve any party from liability for any breach of this
Distribution Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Assignment: Successors and Assigns. Each party hereto agrees that it
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will not assign, sell, transfer, delegate, or otherwise dispose of, whether
voluntarily or involuntarily or by operation of law, any right or obligation
under this Distribution Agreement without the written consent of the other
parties hereto. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Except as expressly provided in this
Distribution Agreement, this Distribution Agreement does not create, and shall
not be construed as creating, any rights or claims enforceable by any person or
entity not a party to this Distribution Agreement.
9.2 Notices. All notices, requests, demands, consents and other
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communications required or permitted to be given under this Distribution
Agreement and under the related documents shall be made in writing and shall be
deemed to have been duly given if delivered by hand or mailed, postage prepaid
or by certified or registered mail, and addressed to the applicable party as
indicated below:
If to ABC: David G. Bradley
The Advisory Board Company
600 New Hampshire Avenue, N.W.
Washington, D.C. 20037
If to New AB: Jeffrey D. Zients
c/o The Corporate Advisory Board Company
600 New Hampshire Avenue, N.W.
Washington, D.C. 20037
Notice of change of address shall be effective only when done in accordance
with this Section. All notices complying with this Section shall be deemed to
have been received on the date of delivery or on the third Business Day after
mailing.
9.3 Governing Law. The validity, enforceability and performance of this
-------------
Distribution Agreement shall be governed by and construed in accordance with the
laws of the State of Maryland (excluding its choice of law rules).
9.4 Entire Agreement. The parties intend that the terms of this
----------------
Distribution Agreement, including the attached schedules, shall be the final
expression of their agreement with respect to the subject matter hereof and may
not be contradicted by evidence of any prior or contemporaneous agreement. The
parties further intend that this Distribution Agreement shall constitute the
complete and exclusive statement of its terms and that no extrinsic evidence
whatsoever may be introduced in any judicial, administrative, or other legal
proceedings involving this Distribution Agreement.
9.5 Counterparts. This Distribution Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
9
<PAGE>
9.6 Headings. The headings used in this Distribution Agreement are
--------
inserted for convenience of reference only and shall not affect the meaning or
interpretation of any provision of this Distribution Agreement.
9.7 Amendments and Waivers. This Distribution Agreement may not be
----------------------
amended except upon the written consent of all of the parties. By an instrument
in writing, any party may waive compliance by any other party with any term or
provision of this Distribution Agreement that such other party was or is
obligated to comply with or perform, provided, however, that such waiver shall
not operate as a waiver of, or estoppel with respect to, any other or subsequent
failure. No failure to exercise and no delay in exercising any right, remedy, or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, or power hereunder preclude any other or
further exercise thereof or the exercise of any other right remedy, or power
provided herein or by law or in equity. The waiver by any party of the time for
performance of any act or condition hereunder does not constitute a waiver of
the act or condition itself.
9.8 Expenses. Whether or not the transactions contemplated in this
--------
Distribution Agreement are consummated, unless specifically provided otherwise
in this Distribution Agreement (including all Schedules hereto), each party
shall bear and pay all expenses incurred by it or on its behalf in connection
with the preparation of this Distribution Agreement and consummation of the
transactions described herein.
9.9 Severability. If any provision of this Distribution Agreement, or the
------------
application thereof to any person, place or circumstance, shall be held by a
court of competent jurisdiction to be void, invalid or unenforceable, the
remainder of this Distribution Agreement and such provisions as applied to other
persons, places or circumstances shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Distribution
Agreement to be executed by their duly authorized officers as of the date first
above written.
THE ADVISORY BOARD COMPANY,
a Maryland corporation
By:
-----------------------------
Its:
------------------------------
THE CORPORATE ADVISORY BOARD
COMPANY, a Delaware corporation
By:
-------------------------------
Its:
------------------------------
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<PAGE>
INDEX TO EXHIBITS AND SCHEDULES
Schedule 1.1 Assets and Liabilities to be Transferred
Schedule 2.1(f) Retained Intellectual Property and Contracts
Exhibit A Plan of Reorganization
Exhibit B Management Services Agreement
Exhibit C Member Contracts Agreement
Exhibit D Vendor Contracts Agreement
<PAGE>
THE ADVISORY BOARD COMPANY
BALANCE SHEET (BOOK)
SEPTEMBER 30, 1997 *
<TABLE>
<CAPTION>
DESCRIPTION Total ABC Corporate Advisory
Board Company
--------------------------------------------------------------
<S> <C> <C> <C>
Cash 14,102 7,079 7,023
Membership 26,921 17,315 9,606
Misc. A/R 13,288 6,788 6,500
Prepaid Expenses 203 148 55
Fixed Assets, net 7,927 5,053 2,874
Other Assets 2,859 2,652 208
--------------------------------------------------------------
Total Assets 65,301 39,036 26,266
Current Liabilities 9,287 6,027 3,208
Option Repurchase Liability 15,376 6,200 9,176
Deferred Incentives (1,123) (292) (831)
Deferred Revenue 51,786 29,546 22,240
Prepaid Members/Refunds 116 72 44
--------------------------------------------------------------
Total Liabilities 75,442 41,553 33,837
Equity (10,141) (2,517) (7,571)
--------------------------------------------------------------
Total Liabilities and Equity 65,301 39,036 26,266
</TABLE>
* preliminary; to be updated as of October 31, 1997
<PAGE>
Schedule 2.1(f)
Retained Intellectual Property and Contracts
<TABLE>
<CAPTION>
Mark/Reg. No. Declaration of Use Due
------------- -----------------------
<S> <C>
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Class 42 Services
CORPORATE STRATEGY BOARD 7/22/2002-2003
2082639
Class 16 Publications
CORPORATE STRATEGY BOARD 7/29/2002-2003
2085109
Class 42 Planning Services
BUSINESS BANKING BOARD 10/14/2002-2003
2104838
Class 16 Publications
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Mark/Reg. No. Declaration of Use Due
------------- -----------------------
<S> <C>
BANK BUSINESS BOARD 7/15/2002-2003
2080406
Class 42 Research Services
INSURANCE ADVISORY BOARD 10/14/2002-2003
2104863
Class 16 Publications
INSURANCE ADVISORY BOARD 7/15/2002-2003
2080407
Class 42 Research Services
</TABLE>
2
<PAGE>
EXHIBIT A
PLAN OF REORGANIZATION
The following sets forth the reorganization and related restructuring
action (the "Reorganization") that will be taken before and to facilitate the
Distribution. Capitalized terms used in this Plan and not otherwise defined
shall have the meanings given to them in the Distribution Agreement between The
Advisory Board Company ("ABC") and The Corporate Advisory Board Company ("New
AB") dated as of October 31, 1997 (the "Distribution Agreement").
1. New AB shall be authorized to provide for the issuance and sale to ABC
of shares of its capital stock such that New AB shall be a wholly-owned
subsidiary of ABC. New AB's capital structure also shall provide for
sufficient additional authorized classes or series within any class of
capital stock or other rights or interests therein, as may be deemed
appropriate by the Boards of Directors of ABC and New AB and the sole
stockholder of ABC.
2. ABC will transfer to New AB all assets and liabilities relating to the
Transferred Business before the Distribution.
3. ABC will distribute all of the issued and outstanding stock of New AB
to the sole stockholder of ABC.
A-1
<PAGE>
EXHIBIT B
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT, dated as of October 31, 1997 (the
"Agreement"), is made by and between THE ADVISORY BOARD COMPANY, a Maryland
corporation ("ABC") and THE CORPORATE ADVISORY BOARD COMPANY, a Delaware
corporation ("New AB").
RECITALS
--------
A. ABC and New AB have entered into a Distribution Agreement dated as of
October 31, 1997 (the "Distribution Agreement"), providing for the contribution
by ABC of the Transferred Business (as defined therein) to New AB.
B. Following the Contribution, subject to the conditions set forth in the
Distribution Agreement, all issued and outstanding shares of capital stock of
New AB will be distributed (the "Distribution") to the Sole Stockholder.
C. During the Transition Period, ABC desires to provide, and New AB
desires to receive, certain management and other corporate services from ABC, as
hereinafter specifically provided (collectively, the "Management Services" and,
individually, a "Management Service"), and the parties desire to set forth
herein the basis on which the Management Services shall be provided to New AB.
The parties agree as follows:
1. Definitions. Unless the context otherwise requires, capitalized
-----------
terms not otherwise defined herein shall have the respective meanings given to
them in the Distribution Agreement.
2. Management Services. The specific Management Services to be provided
-------------------
by ABC to New AB are comprised of the services more particularly set forth on
Attachment 1 hereto. Subject to the terms of this Agreement, upon the written
request setting forth additional or amended Management Services to be provided
to New AB made by an Executive Vice President of New AB or a person designated
to act on his behalf in an instrument executed by such New AB Executive Vice
President and delivered to ABC, ABC shall provide each of such additional or
amended Management Services with respect to the Transferred Business in the
manner and to the same general extent as such Management Services have been
provided by ABC in connection with the Transferred Business before the
Contribution.
3. Term. Except with respect to Section 12, the term of this Agreement
----
shall commence on the date hereof and terminate (a) at the end of the Transition
Period or (b) on such other date as the parties hereto shall mutually agree in
writing to terminate this Agreement (the "Term"). Services shall be provided
only as specified in Attachment 1 hereto, unless otherwise agreed to by the
parties. In addition, New AB shall have the right to terminate a Management
Service or Management Services upon sixty (60) days prior written notice to ABC.
Termination of one or more Management Services by New AB shall not affect the
obligation of ABC to furnish all other Management Services for the remainder of
the Term.
B-1
<PAGE>
4. Cost. Unless otherwise expressly agreed in writing executed by a duly
----
authorized officer of ABC and New AB, the Management Services shall be provided
to New AB in consideration for payment to ABC of the management fees set forth
on Attachment 1.
5. Delegation. ABC may retain the services of such third parties,
----------
either by oral or written contract, as ABC may, from time to time, deem
necessary or appropriate to facilitate the expeditious discharge of ABC's
responsibilities hereunder.
6. Independence. All employees and representatives of ABC providing
------------
Management Services to New AB will be deemed for purposes of all compensation
and employee benefits to be employees or representatives of ABC and not
employees or representatives of New AB. In performing such Management Services,
such employees or representatives will be under the direction, control and
supervision of ABC (and not New AB) and ABC will have the sole right to exercise
all authority with respect to the employment (including termination of
employment), assignment and compensation of such employees and representatives.
ABC shall be solely responsible for the payment of all payroll and withholding
taxes relating to its employees for services provided to New AB during the Term.
7. Impracticability. ABC shall not be required to provide any Management
----------------
Service to the extent the performance or the provision of such Management
Service becomes impracticable as a result of a cause or causes outside of the
reasonable control of ABC, or to the extent the performance of such Management
Service would require ABC to violate applicable laws, rules or regulations or
result in the breach of any license, permit or applicable contract.
8. Additional Resources. In providing the Management Services, ABC
--------------------
shall not be obligated to: (i) hire any additional employees, (ii) maintain the
employment of any specific employee, or (iii) purchase, lease or license any
additional equipment or software.
9. Force Majeure. The obligations of ABC under this Agreement are
-------------
subject to conditions of force majeure, including an act of God, strike or
walkout or other labor dispute, act of a public enemy, war, revolution, riot,
fire, storm, flood, earthquake, embargo and any other cause which is not
reasonably within the control of the party affected thereby.
10. Nondisclosure. In the event that, during the Term and in connection
-------------
with a party's performance of its obligations hereunder, either party shall
receive information concerning the other party hereto which the receiving party
knows, or has reason to believe, is confidential or proprietary to the party to
whom such information relates, the party receiving such information shall take
all reasonable steps to (a) protect and hold such information in confidence and
prevent its disclosure to third parties unless such third parties are under a
duty of confidentiality to the party to which such information relates; and (b)
restrict its use to those purposes consent to in writing by the party to whom
such information relates; provided, however, that the party receiving such
information shall not be required to protect or hold in confidence any
information or data which (i) is or becomes available to the public without the
fault of the receiving party, (ii) is independently developed by the receiving
party, (iii) is disclosed to the receiving party by a third party known to the
receiving party not to be under any duty of confidentiality to the party to whom
such information relates with respect to such information or (iv) except as may
otherwise be required by law. This Section 10 shall not limit the obligation of
the parties under the Distribution Agreement to provide access to records after
the date hereof.
B-2
<PAGE>
11. Limitation on Liability. ABC's liability to New AB in connection
-----------------------
with this Agreement and the Management Services to be provided by ABC shall be
limited to actual damages arising from ABC's gross negligence or willful
misconduct in the performance of its duties and responsibilities hereunder;
provided, however, that, in no event shall ABC be liable for any incidental or
consequential damages.
12. Indemnity.
---------
(a) ABC agrees to defend, indemnify and hold New AB and its officers,
directors, employees and agents harmless from and against all liabilities,
losses, claims, damages and expenses of any nature, including reasonable
attorneys' fees, that are reasonably incurred by New AB arising out of the
performance of the Management Services hereunder, except where such liability,
loss, claim, damage or expense shall have been caused by New AB's gross
negligence or willful misconduct in the performance of its duties and
responsibilities hereunder.
(b) New AB agrees to defend, indemnify and hold ABC and its officers,
directors, employees and agents harmless from and against all liabilities,
losses, claims, damages and expenses of any nature, including reasonable
attorneys' fees, that are reasonably incurred by ABC arising out of the
performance of the Management Services hereunder, except where such liability,
loss, claim, damage or expense shall have been caused by ABC's gross negligence
or willful misconduct in the performance of its duties and responsibilities
hereunder.
13. Mutual Cooperation. ABC and New AB will provide each other with
------------------
information and assistance reasonably necessary to investigate, defend or
prosecute any claims, suits, charges, including but not limited to equal
employment opportunity, workers compensation, insurance and similar claims
brought by or against ABC or New AB relating to either of their businesses.
This provision shall survive termination of this Agreement.
14. Third Party Rights. Nothing in this Agreement, express or implied, is
------------------
intended to confer upon any person (including, without limitation, employees),
other than the parties hereto and their respective successors and assigns, any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
15. Relationship of Parties. Nothing in this Agreement shall be deemed or
-----------------------
construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship of independent contractor nor be deemed to vest any
rights, interest or claims in any third parties.
16. Successor and Assigns. This Agreement shall inure to the benefit of
---------------------
and be binding upon the respective successors and assigns of the parties hereto,
provided that this Agreement may not be assigned by either of the parties hereto
without the prior written consent of the other.
17. Notices. All notices and other communications required or permitted
-------
to be given under this Agreement shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed, postage prepaid or by certified
or registered mail, and addressed to the applicable party at the respective
addresses set forth in the Distribution Agreement (or at such other address for
a party as shall be specified by a like notice).
B-3
<PAGE>
18. Governing Law. The validity, enforceability and performance of this
-------------
Agreement shall be governed by and construed in accordance with the laws of the
State of Maryland (excluding its choice of law rules).
19. Entire Agreement. The parties intend that the terms of this
----------------
Agreement, including the attached schedules, shall be the final expression of
their agreement with respect to the subject matter hereof and may not be
contradicted by evidence of any prior or contemporaneous agreement. The parties
further intend that this Agreement shall constitute the complete and exclusive
statement of its terms and that no extrinsic evidence whatsoever may be
introduced in any judicial, administrative or other legal proceedings involving
this Agreement.
20. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
21. Headings. The headings used in this Agreement are inserted for
--------
convenience of reference only and shall not affect the meaning or interpretation
of any provision of this Agreement.
22. Amendments and Waivers. This Agreement may not be amended except
----------------------
upon the written consent of all of the parties. By an instrument in writing, any
party may waive compliance by any other party with any term or provision of this
Agreement that such other party was or is obligated to comply with or perform,
provided, however, that such waiver shall not operate as a waiver of, or
estoppel with respect to, any other or subsequent failure. No failure to
exercise and no delay in exercising any right, remedy, or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, or power hereunder preclude any other or further exercise thereof
or the exercise of any other right remedy, or power provided herein or by law or
in equity. The waiver by any party of the time for performance of any act or
condition hereunder does not constitute a waiver of the act or condition itself.
23. Expenses. Whether or not the transactions contemplated in this
--------
Agreement are consummated, unless specifically provided otherwise in this
Agreement (including all Schedules hereto), each party shall bear and pay all
expenses incurred by it or on its behalf in connection with the preparation of
this Agreement and consummation of the transactions described herein.
24. Severability. If any provision of this Agreement, or the application
------------
thereof to any person, place or circumstance, shall be held by a court of
competent jurisdiction to be void, invalid or unenforceable, the remainder of
this Agreement and such provisions as applied to other persons, places or
circumstances shall remain in full force and effect.
B-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THE ADVISORY BOARD COMPANY,
a Maryland corporation
By:
-----------------------------
Its:
----------------------------
THE CORPORATE ADVISORY BOARD
COMPANY, a Delaware corporation
By:
-----------------------------
Its:
----------------------------
B-5
<PAGE>
ATTACHMENT 1
MANAGEMENT SERVICES AND FEES
1
<PAGE>
EXHIBIT C
MEMBER CONTRACTS AGREEMENT
THIS MEMBER CONTRACTS AGREEMENT, dated as of October 31, 1997 (the
"Agreement"), is made by and between THE ADVISORY BOARD COMPANY, a Maryland
corporation ("ABC") and THE CORPORATE ADVISORY BOARD COMPANY, a Delaware
corporation ("New AB").
RECITALS
--------
A. ABC and New AB have entered into a Distribution Agreement dated as of
October 31, 1997 (the "Distribution Agreement"), providing for the contribution
by ABC of the Transferred Business (as defined therein) to New AB (including
specifically assignment of the Member Contracts to New AB).
B. Following the Contribution, subject to the conditions set forth in the
Distribution Agreement, all issued and outstanding shares of capital stock of
New AB will be distributed (the "Distribution") to the Sole Stockholder.
C. In the interest of an orderly transition with respect to the transfer
of the Transferred Business to New AB and the continued administration of the
Member Contracts during the Pre-Renewal Period (as defined herein), New AB
desires to appoint ABC as its agent as hereinafter specifically provided for
certain purposes in connection with the Member Contracts and to receive certain
related services from ABC.
The parties agree as follows:
1. Definitions. Unless the context otherwise requires, capitalized terms
-----------
not otherwise defined herein shall have the respective meanings given to them in
the Distribution Agreement.
2. Agency. New AB hereby appoints ABC as its agent to provide such
------
administrative and accounting-related services and take all administrative and
accounting-related actions on behalf of New AB in connection with the Member
Contracts during the Term as may be necessary or advisable, including without
limitation, provision of such administrative services relating to the Member
Contracts as may be necessary or advisable (including processing of new Member
Contracts and renewals of existing Member Contracts), collection of payments
relating to Member Contracts and transmittal of such payments to New AB
(collectively, the "Agency Services"). ABC hereby accepts its appointment as
agent of New AB and agrees to provide the Agency Services as provided herein.
ABC shall provide each of the Agency Services with respect to the Member
Contracts in the manner and to the same general extent as such services have
been provided by ABC in connection with the Member Contracts before the
Contribution, except that all new Member Contracts and renewals of existing
Member Contracts shall processed in the name of New AB.
3. Term. Except with respect to Section 12, the term of this Agreement
----
shall commence on the date hereof and terminate upon the earlier of (a) the last
date of the renewal or expiration of each Member Contract existing on the date
hereof or (b) at the end of the Transition Period. In addition, New AB shall
have the right to terminate an Agency Service or Agency Services upon sixty (60)
days prior written notice to ABC. Termination of one or more Agency
C-1
<PAGE>
Services by New AB shall not affect the obligation of ABC to furnish all other
Agency Services for the remainder of the Term.
4. Cost. Unless otherwise expressly agreed in writing executed by a duly
----
authorized officer of ABC and New AB, the Agency Services shall be provided to
New AB at the costs specified for such services on Attachment 1 of the
Management Services Agreement.
5. Delegation. ABC may retain the services of such third parties, either
----------
by oral or written contract, as ABC may, from time to time, deem necessary or
appropriate to facilitate the expeditious discharge of ABC's responsibilities
hereunder.
6. Independence. All employees and representatives of ABC providing
------------
Agency Services to New AB will be deemed for purposes of all compensation and
employee benefits to be employees of ABC and not employees of New AB. In
performing such Agency Services, such employees or representatives will be under
the direction, control and supervision of ABC (and not New AB) and ABC will have
the sole right to exercise all authority with respect to the employment
(including termination of employment), assignment and compensation of such
employees and representatives. ABC shall be solely responsible for the payment
of all payroll and withholding taxes relating to its employees for services
provided to New AB during the Term.
7. Impracticability. ABC shall not be required to provide any Agency
----------------
Service to the extent the performance or the provision of such Agency Service
becomes impracticable as a result of a cause or causes outside of the reasonable
control of ABC, or to the extent the performance of such Agency Service would
require ABC to violate applicable laws, rules or regulations or result in the
breach of any license, permit or applicable contract.
8. Additional Resources. In providing the Agency Services, ABC shall not
--------------------
be obligated to: (i) hire any additional employees, (ii) maintain the employment
of any specific employee, or (iii) purchase, lease or license any additional
equipment or software.
9. Force Majeure. The obligations of ABC under this Agreement are subject
-------------
to conditions of force majeure, including an act of God, strike or walkout or
other labor dispute, act of a public enemy, war, revolution, riot, fire, storm,
flood, earthquake, embargo and any other cause which is not reasonably within
the control of the party affected thereby.
10. Nondisclosure. In the event that, during the Term and in connection
-------------
with a party's performance of its obligations hereunder, either party shall
receive information concerning the other party hereto which the receiving party
knows, or has reason to believe, is confidential or proprietary to the party to
whom such information relates, the party receiving such information shall take
all reasonable steps to (a) protect and hold such information in confidence and
prevent its disclosure to third parties unless such third parties are under a
duty of confidentiality to the party to which such information relates; and (b)
restrict its use to those purposes consent to in writing by the party to whom
such information relates; provided, however, that the party receiving such
information shall not be required to protect or hold in confidence any
information or data which (i) is or becomes available to the public without the
fault of the receiving party, (ii) is independently developed by the receiving
party, (iii) is disclosed to the receiving party by a third party known to the
receiving party not to be under any duty of confidentiality to the party to whom
such information relates with respect to such information or (iv) except as may
otherwise
C-2
<PAGE>
be required by law. This Section 10 shall not limit the obligation of the
parties under the Distribution Agreement to provide access to records after the
date hereof.
11. Limitation on Liability. ABC's liability to New AB in connection
-----------------------
with this Agreement and the Agency Services to be provided by ABC shall be
limited to actual damages arising from ABC's gross negligence or willful
misconduct in the performance of its duties and responsibilities hereunder;
provided, however, that, in no event shall ABC be liable for any incidental or
consequential damages.
12. Indemnity.
---------
(a) ABC agrees to defend, indemnify and hold New AB and its officers,
directors, employees and agents harmless from and against all liabilities,
losses, claims, damages and expenses of any nature, including reasonable
attorneys' fees, that are reasonably incurred by New AB arising out of the
performance of the Agency Services hereunder, except where such liability, loss,
claim, damage or expense shall have been caused by New AB's gross negligence or
willful misconduct in the performance of its duties and responsibilities
hereunder.
(b) New AB agrees to defend, indemnify and hold ABC and its officers,
directors, employees and agents harmless from and against all liabilities,
losses, claims, damages and expenses of any nature, including reasonable
attorneys' fees, that are reasonably incurred by ABC arising out of the
performance of the Agency Services hereunder, except where such liability, loss,
claim, damage or expense shall have been caused by ABC's gross negligence or
willful misconduct in the performance of its duties and responsibilities
hereunder.
13. Mutual Cooperation. ABC and New AB will provide each other with
------------------
information and assistance reasonably necessary to investigate, defend or
prosecute any claims, suits, charges, including but not limited to equal
employment opportunity, workers compensation, insurance and similar claims
brought by or against ABC or New AB relating to either of their businesses.
This provision shall survive termination of this Agreement.
14. Third Party Rights. Nothing in this Agreement, express or implied, is
------------------
intended to confer upon any person (including, without limitation, employees),
other than the parties hereto and their respective successors and assigns, any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
15. Successor and Assigns. This Agreement shall inure to the benefit
---------------------
of and be binding upon the respective successors and assigns of the parties
hereto, provided that this Agreement may not be assigned by either of the
parties hereto without the prior written consent of the other.
16. Notices. All notices and other communications required or permitted
-------
to be given under this Agreement shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed, postage prepaid or by certified
or registered mail, and addressed to the applicable party at the respective
addresses set forth in the Distribution Agreement (or at such other address for
a party as shall be specified by a like notice).
17. Governing Law. The validity, enforceability and performance of this
-------------
Agreement shall be governed by and construed in accordance with the laws of the
State of Maryland (excluding its choice of law rules).
C-3
<PAGE>
18. Entire Agreement. The parties intend that the terms of this
----------------
Agreement, including the attached schedules, shall be the final expression of
their agreement with respect to the subject matter hereof and may not be
contradicted by evidence of any prior or contemporaneous agreement. The parties
further intend that this Agreement shall constitute the complete and exclusive
statement of its terms and that no extrinsic evidence whatsoever may be
introduced in any judicial, administrative or other legal proceedings involving
this Agreement.
19. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
20. Headings. The headings used in this Agreement are inserted for
--------
convenience of reference only and shall not affect the meaning or interpretation
of any provision of this Agreement.
21. Amendments and Waivers. This Agreement may not be amended except
----------------------
upon the written consent of all of the parties. By an instrument in writing, any
party may waive compliance by any other party with any term or provision of this
Agreement that such other party was or is obligated to comply with or perform,
provided, however, that such waiver shall not operate as a waiver of, or
estoppel with respect to, any other or subsequent failure. No failure to
exercise and no delay in exercising any right, remedy, or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, or power hereunder preclude any other or further exercise thereof
or the exercise of any other right remedy, or power provided herein or by law or
in equity. The waiver by any party of the time for performance of any act or
condition hereunder does not constitute a waiver of the act or condition itself.
22. Expenses. Whether or not the transactions contemplated in this
--------
Agreement are consummated, unless specifically provided otherwise in this
Agreement (including all Schedules hereto), each party shall bear and pay all
expenses incurred by it or on its behalf in connection with the preparation of
this Agreement and consummation of the transactions described herein.
23. Severability. If any provision of this Agreement, or the application
------------
thereof to any person, place or circumstance, shall be held by a court of
competent jurisdiction to be void, invalid or unenforceable, the remainder of
this Agreement and such provisions as applied to other persons, places or
circumstances shall remain in full force and effect.
C-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THE ADVISORY BOARD COMPANY,
a Maryland corporation
By:
----------------------------------
Its:
---------------------------------
THE CORPORATE ADVISORY BOARD
COMPANY, a Delaware corporation
By:
----------------------------------
Its:
---------------------------------
C-5
<PAGE>
EXHIBIT D
VENDOR CONTRACTS AGREEMENT
THIS VENDOR CONTRACTS AGREEMENT, dated as of October 31, 1997 (the
"Agreement"), is made by and between THE ADVISORY BOARD COMPANY, a Maryland
corporation ("ABC") and THE CORPORATE ADVISORY BOARD COMPANY, a Delaware
corporation ("New AB").
RECITALS
--------
A. ABC and New AB have entered into a Distribution Agreement dated as of
October 31, 1997 (the "Distribution Agreement"), providing for the contribution
by ABC of the Transferred Business (as defined therein) to New AB.
B. Following the Contribution, subject to the conditions set forth in the
Distribution Agreement, all issued and outstanding shares of capital stock of
New AB will be distributed (the "Distribution") to the Sole Stockholder.
C. In the interest of an orderly transition with respect to the transfer
of the Transferred Business to New AB and certain third-party vendor contracts
relating thereto (the "Vendor Contracts"), the parties desire to provide for (i)
the provision during the Transition Period of services pursuant to the Vendor
Contracts (the "Vendor Services") to New AB or ABC as appropriate and (ii) the
appropriate allocation of related costs and expenses relating to such Vendor
Services.
The parties agree as follows:
1. Definitions. Unless the context otherwise requires, capitalized terms
-----------
not otherwise defined herein shall have the respective meanings given to them in
the Distribution Agreement.
2. Vendor Services.
---------------
(a) The Vendor Contracts are set forth on Attachment 1 hereto. Subject
to the terms of this Agreement, upon the written request setting forth
additional or amended Vendor Services to be provided to New AB made by an
Executive Vice President of New AB or a person designated to act on his behalf
in an instrument executed by such New AB Executive Vice President and delivered
to ABC, ABC shall provide, or cause provision, to New AB of each of the Vendor
Services with respect to the Transferred Business in the manner and to the same
general extent as such Vendor Services have been provided to ABC in connection
with the Transferred Business before the Contribution.
(b) Costs and expenses relating to Vendor Contracts shall be allocated
as shall be determined by the parties as follows or as otherwise shall be
mutually agreed in writing by the parties:
(i) Segregate Vendor Contract Invoices: If invoices relating to
Vendor Services can be divided to reflect properly the Vendor Services
provided to ABC and New AB, respectively, such invoices shall be
segregated and paid directly by the appropriate party to whom the
related Vendor Services were provided.
(ii) Reimburse ABC: In the event that invoices relating to
Vendor Services cannot be segregated and paid as described in
subparagraph (i) above, New AB shall pay its allocated share directly
or reimburse ABC for Vendor Services provided to New AB pursuant to
this Agreement as set forth in Attachment 1.
D-1
<PAGE>
3. Term. Except with respect to Section 6, the term of this Agreement
----
shall commence on the date hereof and terminate (a) at the end of the Transition
Period or (b) such other date as the parties hereto shall mutually agree in
writing to terminate this Agreement (the "Term"). New AB shall have the right
to terminate a Vendor Service or Vendor Services upon sixty (60) days prior
written notice to ABC. Termination of one or more Vendor Services by New AB
shall not affect the obligation of ABC to furnish all other Services for the
remainder of the Term.
4. Nondisclosure. In the event that, during the Term and in connection
-------------
with a party's performance of its obligations hereunder, either party shall
receive information concerning the other party hereto which the receiving party
knows, or has reason to believe, is confidential or proprietary to the party to
whom such information relates, the party receiving such information shall take
all reasonable steps to (a) protect and hold such information in confidence and
prevent its disclosure to third parties unless such third parties are under a
duty of confidentiality to the party to which such information relates; and (b)
restrict its use to those purposes consent to in writing by the party to whom
such information relates; provided, however, that the party receiving such
information shall not be required to protect or hold in confidence any
information or data which (i) is or becomes available to the public without the
fault of the receiving party, (ii) is independently developed by the receiving
party, (iii) is disclosed to the receiving party by a third party known to the
receiving party not to be under any duty of confidentiality to the party to whom
such information relates with respect to such information or (iv) except as may
otherwise be required by law. This Section 4 shall not limit the obligation of
the parties under the Distribution Agreement to provide access to records after
the date hereof.
5. Limitation on Liability. ABC's liability to New AB in connection
-----------------------
with this Agreement and the Vendor Services to be provided by ABC shall be
limited to actual damages arising from ABC's gross negligence or willful
misconduct in the performance of its duties and responsibilities hereunder;
provided, however, that, in no event shall ABC be liable for any incidental or
consequential damages.
6. Indemnity.
---------
(a) ABC agrees to defend, indemnify and hold New AB and its officers,
directors, employees and agents harmless from and against all liabilities,
losses, claims, damages and expenses of any nature, including reasonable
attorneys' fees, that are reasonably incurred by New AB arising out of the
performance of the Services hereunder, except where such liability, loss, claim,
damage or expense shall have been caused by New AB's gross negligence or willful
misconduct in the performance of its duties and responsibilities hereunder.
(b) New AB agrees to defend, indemnify and hold ABC and its officers,
directors, employees and agents harmless from and against all liabilities,
losses, claims, damages and expenses of any nature, including reasonable
attorneys' fees, that are reasonably incurred by ABC arising out of the
performance of the Services hereunder, except where such liability, loss, claim,
D-2
<PAGE>
damage or expense shall have been caused by ABC's gross negligence or willful
misconduct in the performance of its duties and responsibilities hereunder.
7. Mutual Cooperation. ABC and New AB will provide each other with
------------------
information and assistance reasonably necessary to investigate, defend or
prosecute any claims, suits, charges, including but not limited to equal
employment opportunity, workers compensation, insurance and similar claims
brought by or against ABC or New AB relating to either of their businesses. This
provision shall survive termination of this Agreement.
8. Third Party Rights. Nothing in this Agreement, express or implied, is
------------------
intended to confer upon any person (including, without limitation, employees),
other than the parties hereto and their respective successors and assigns, any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
9. Relationship of Parties. Nothing in this Agreement shall be deemed or
-----------------------
construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship of independent contractor nor be deemed to vest any
rights, interest or claims in any third parties.
10. Successor and Assigns. This Agreement shall inure to the benefit of
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and be binding upon the respective successors and assigns of the parties hereto,
provided that this Agreement may not be assigned by either of the parties hereto
without the prior written consent of the other.
11. Notices. All notices and other communications required or permitted
-------
to be given under this Agreement shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed, postage prepaid or by certified
or registered mail, and addressed to the applicable party at the respective
addresses set forth in the Distribution Agreement (or at such other address for
a party as shall be specified by a like notice).
12. Governing Law. The validity, enforceability and performance of this
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Agreement shall be governed by and construed in accordance with the laws of the
State of Maryland (excluding its choice of law rules).
13. Entire Agreement. The parties intend that the terms of this
----------------
Agreement, including the attached schedules, shall be the final expression of
their agreement with respect to the subject matter hereof and may not be
contradicted by evidence of any prior or contemporaneous agreement. The parties
further intend that this Agreement shall constitute the complete and exclusive
statement of its terms and that no extrinsic evidence whatsoever may be
introduced in any judicial, administrative or other legal proceedings involving
this Agreement.
14. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
15. Headings. The headings used in this Agreement are inserted for
--------
convenience of reference only and shall not affect the meaning or interpretation
of any provision of this Agreement.
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<PAGE>
16. Amendments and Waivers. This Agreement may not be amended except
----------------------
upon the written consent of all of the parties. By an instrument in writing, any
party may waive compliance by any other party with any term or provision of this
Agreement that such other party was or is obligated to comply with or perform,
provided, however, that such waiver shall not operate as a waiver of, or
estoppel with respect to, any other or subsequent failure. No failure to
exercise and no delay in exercising any right, remedy, or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, or power hereunder preclude any other or further exercise thereof
or the exercise of any other right remedy, or power provided herein or by law or
in equity. The waiver by any party of the time for performance of any act or
condition hereunder does not constitute a waiver of the act or condition itself.
17. Expenses. Whether or not the transactions contemplated in this
--------
Agreement are consummated, unless specifically provided otherwise in this
Agreement (including all Schedules hereto), each party shall bear and pay all
expenses incurred by it or on its behalf in connection with the preparation of
this Agreement and consummation of the transactions described herein.
18. Severability. If any provision of this Agreement, or the application
------------
thereof to any person, place or circumstance, shall be held by a court of
competent jurisdiction to be void, invalid or unenforceable, the remainder of
this Agreement and such provisions as applied to other persons, places or
circumstances shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THE ADVISORY BOARD COMPANY,
a Maryland corporation
By:
-----------------------------
Its:
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THE CORPORATE ADVISORY BOARD
COMPANY, a Delaware corporation
By:
-----------------------------
Its:
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ATTACHMENT 1
VENDOR CONTRACTS
1