Sample Business Contracts


Master Separation Agreement - Daisytek International Corp., Daisytek Inc., Priority Fulfillment Services Inc. and PFSweb Inc.


                           MASTER SEPARATION AGREEMENT

                                   dated as of

                                December 7, 1999

                                      among

                       DAISYTEK INTERNATIONAL CORPORATION,

                             DAISYTEK, INCORPORATED,

                       PRIORITY FULFILLMENT SERVICES, INC.

                                       and

                                  PFSWEB, INC.




<PAGE>   2



                           MASTER SEPARATION AGREEMENT

         This Master Separation Agreement ("Agreement") is entered into on
December 7, 1999 among Daisytek International Corporation, a Delaware
corporation ("Daisytek International"), Daisytek, Incorporated, a Delaware
corporation ("Daisytek") and a wholly-owned subsidiary of Daisytek
International, Priority Fulfillment Services, Inc., a Delaware corporation
("PFS") and a wholly-owned subsidiary of Daisytek, and PFSweb, Inc., a Delaware
corporation ("PFSweb"). Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in Article 1 hereof.

                                    RECITALS

         WHEREAS, the Boards of Directors of Daisytek International and Daisytek
have determined that it would be appropriate and desirable to separate the PFS
Business from Daisytek; and

         WHEREAS, Daisytek has caused PFSweb to be incorporated in order to
effect such separation, Daisytek currently owns all of the issued and
outstanding common stock of PFSweb, and PFSweb currently conducts no business
operations and has no significant assets or liabilities;

         WHEREAS, the Boards of Directors of Daisytek and PFSweb have each
determined that it would be appropriate and desirable for Daisytek to contribute
and transfer to PFSweb, and for PFSweb to receive and assume, directly or
indirectly, substantially all of the assets and liabilities currently associated
with the PFS Business, including the stock currently held by Daisytek in PFS and
the PFS Subsidiaries, and in connection therewith, for PFSweb to (i) pay to
Daisytek the net book value of certain assets to be so transferred to it and
(ii) contribute certain assets to PFS; and

         WHEREAS, Daisytek and PFSweb intend that the contribution and
assumption of assets and liabilities and payment, together with the Distribution
(defined below) will qualify as a tax-free reorganization under Section
368(a)(1)(D) of the Code; and

         WHEREAS, Daisytek and PFSweb currently contemplate that, concurrently
with the contribution and assumption of assets and liabilities, PFSweb will
consummate an initial public offering (the "IPO") of an amount of its Common
Stock (the "PFSweb Common Stock") that will reduce Daisytek's ownership of
PFSweb to not less than 80%; and

         WHEREAS, Daisytek plans that, as soon as practicable following the
satisfaction of applicable conditions, and in no event later than 12 months
following the IPO Closing Date, Daisytek will distribute to Daisytek
International all of the shares of PFSweb common stock owned by Daisytek, and
Daisytek International will, in turn, distribute such shares to the holders of
its common stock, $.01 par value, by means of a pro rata distribution, (the
"Distribution"); and
<PAGE>   3

         WHEREAS, Daisytek, Daisytek International and PFSweb intend that the
Distribution will be tax-free to Daisytek, Daisytek International and its
stockholders under the Code; and

         WHEREAS, the parties intend in this Agreement to set forth the
principal arrangements between them regarding the separation of the PFS Business
from Daisytek.

         NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

         Section 1.01. Defined Terms. The following terms, as used herein, shall
have the following meanings:

         "Affiliate" of any specified Person means any other Person directly or
indirectly Controlling, Controlled by, or under common Control with, such
specified Person; provided, however, that for purposes of this Agreement, (i)
Daisytek and its subsidiaries (other than PFSweb, PFS and the PFS Subsidiaries)
shall not be considered Affiliates of PFSweb and (ii) PFSweb, PFS and the PFS
Subsidiaries shall not be considered Affiliates of Daisytek.

         "Ancillary Agreements" means each of the agreements to be entered into
by and among Daisytek International, Daisytek, PFSweb and/or PFS in connection
with the Distribution, including any exhibits, schedules, attachments, tables or
other appendices thereto, and each agreement and other instrument contemplated
therein.

         "Business Day " means a day other than a Saturday, a Sunday or a day on
which banking institutions located in the State of New York are authorized or
obligated by law or executive order to close.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time, together with the rules and regulations promulgated thereunder.

         "Commission" means the Securities and Exchange Commission.

         "Confidential Information" means with respect to any party hereto, (i)
any Information concerning such party, its business or any of its Affiliates
that was obtained by another party hereto prior to the Contribution Date, (ii)
any Information concerning such party that is obtained by another party under
the provisions of this Agreement, or (iii) any other Information obtained by, or
furnished to, another party hereto prior to the Contribution Date, in each case
that (a) was marked "Proprietary" or "Company Private" or words of similar
import by the party owning such Information, or any Affiliate of such party, or
(b) the party owning such

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Information notified such other party in writing was confidential or secret by
the Contribution Date.

         "Contribution Date" means the IPO Closing Date.

         "Contribution Schedule" means the schedule identified by Daisytek and
PFSweb as the "Contribution Schedule" which sets forth (i) the assets, rights
and benefits to be transferred by Daisytek to PFSweb, (ii) the liabilities,
commitments and obligations of Daisytek to be assumed, discharged, paid or
performed by PFSweb, and (iii) the PFS Intercompany Obligation.

         "Control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management of the policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"controlling" and "controlled" have the corollary meanings ascribed thereto.

         "Distribution" has the meaning set forth in the preamble to this
Agreement.

         "Distribution Date" means any date or dates, as the case may be,
determined by Daisytek, in its sole and absolute discretion, to be a date on
which shares of PFSweb Common Stock held by Daisytek are distributed in
connection with the Distribution.

         "Indemnifying Party" means any party hereto which, pursuant to the
terms hereof, is obligated to indemnify any other party hereto.

         "Indemnitee" means any party hereto which, pursuant to the terms
hereof, is entitled to indemnification from any other party hereto.

         "Information" means all records, books, contracts, instruments,
computer data and other data.

         "IPO" has the meaning set forth in the preamble to this Agreement.

         "IPO Closing Date" means the date on which the consummation of the IPO
shall occur.

         "IPO Prospectus" means the Prospectus of PFSweb that forms a part of
the IPO Registration Statement, together with all amendments and supplements
thereto.

         "IPO Registration Statement" means the registration statement on Form
S-1, Registration No. 333-87657 filed by PFSweb with the Commission in
connection with the IPO, together with all amendments and supplements thereto.

         "Person" means an individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated association, any other entity,
or a government or any

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department or agency or other unit thereof.

         "PFS Business" means the business conducted by PFS and the PFS
Subsidiaries at any time on or before the Contribution Date, including (i) all
business operations of PFSweb described in the IPO Prospectus, (ii) all business
operations initiated or acquired by PFS or any of the PFS Subsidiaries after the
date of the IPO Prospectus and (iii) all business operations that were conducted
at any time in the past by PFS or any of the PFS Subsidiaries or by any
predecessor thereto (including, without limitation, Working Capital of America,
Inc.) whether or not discontinued or disposed of prior to the date of the IPO
Prospectus.

         "PFS Intercompany Obligation" means the intercompany obligation owing
by PFS to Daisytek as set forth in the Contribution Schedule.

         "PFS Liabilities" means the liabilities, commitments and obligations of
Daisytek designated as the "PFS Liabilities" in the Contribution Schedule.

         "PFS Memphis Assets" means the assets, rights and benefits designated
as the "PFS Memphis Assets" in the Contribution Schedule.

         "PFS Subsidiaries" means, collectively, PFS, Priority Fulfillment
Services Europe, B.V., a Netherlands corporation; and Priority Fulfillment
Services Canada, Inc., a Canadian corporation.

         "Prior Relationship" means the ownership relationship between Daisytek
and PFSweb at any time prior to the Contribution Date.

         "Representatives" means directors, officers, employees, agents,
consultants, advisors, accountants, attorneys and representatives.

         "Subsidiary" means with respect to any specified Person, any
corporation, any limited liability company, any partnership or other legal
entity of which such Person or any of its Subsidiaries Controls or owns,
directly or indirectly, more than 50% of the stock of other equity interest
entitled to vote on the election of the members to the board of directors or
similar governing body.

         "Third-Party Claim" means any claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, governmental or other
regulatory or administrative agency or commission or any arbitration tribunal
asserted by a Person other than any party hereto or their respective Affiliates
which gives rise to a right of indemnification hereunder.

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<PAGE>   6


                                    ARTICLE 2

                           CONTRIBUTION AND ASSUMPTION

         Section 2.01. Contribution of PFS Assets.

         (a) On the Contribution Date, Daisytek shall contribute and transfer to
PFSweb, all of Daisytek's right, title and interest in, to and under the
following (collectively, the "PFS Assets"): (i) the PFS Memphis Assets, (ii) all
of the issued and outstanding shares of capital stock or other equity interests
in each of the PFS Subsidiaries, whereupon each of the PFS Subsidiaries shall
become wholly-owned Subsidiaries of PFSweb and (iii) the sole outstanding
limited liability company membership interest (the "Membership Interest") in PFS
Texas, L.L.C., a Delaware limited liability company. PFSweb acknowledges and
agrees that, except as set forth herein or in any of the Ancillary Agreements,
the foregoing transfers are made "AS IS WHERE IS" and Daisytek has not made nor
will make any warranty, express or implied, including without limitation any
warranty of merchantability of fitness for a particular purpose, with respect to
any PFS Asset.

         (b) Immediately following the contribution and transfer of the PFS
Assets as provided above, PFSweb shall contribute and transfer to PFS the PFS
Memphis Assets and the Membership Interest.

         Section 2.02. Assumption of Liabilities; Payment to Daisytek. As part
of the Contribution, effective as of the Contribution Date, PFSweb and/or the
PFS Subsidiaries, as directed by PFSweb, shall assume and on a timely basis
shall pay, perform, satisfy and discharge in accordance with their terms the PFS
Liabilities. As part of the Contribution, on the IPO Closing Date, or as soon
thereafter as practicable, PFSweb shall pay to Daisytek the net book value of
the PFS Assets as set forth in the Contribution Schedule. As part of the
Contribution, on the IPO Closing Date, or as soon thereafter as practicable,
PFSweb shall contribute to PFS sufficient funds for PFS to repay the then
outstanding balance, both principal and interest, of the PFS Intercompany
Obligation.

         Section 2.03. Methods of Transfer and Assumption.

         (a) The parties intend to complete the transfer of all PFS Assets and
the assumption of all PFS Liabilities effective as of the Contribution Date;
provided, however, that to the extent any such transfers or assumptions are not
completed as of the Contribution Date, each party shall take all actions
reasonably necessary or appropriate to complete such transactions as promptly
thereafter as possible. In addition, the parties acknowledge that there may
exist (i) PFS Assets or other assets that the parties discover were, by mistake
or omission, transferred to PFSweb or retained by Daisytek, respectively, or
(ii) PFS Liabilities or other liabilities that the parties discover were, by
mistake or omission, assumed by PFSweb or not assumed by PFSweb, respectively.
The parties shall, between the Contribution Date and the Distribution Date,

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<PAGE>   7

cooperate in good faith to effect the transfer or re-transfer of such PFS Assets
or other assets, and/or the assumption or re-assumption of such PFS Liabilities
or other liabilities, to or by the appropriate party and shall not use such
mistake or omission to alter the original intent of the parties hereto with
respect to the PFS Assets to be transferred to or PFS Liabilities to be assumed
by PFSweb. Each party shall reimburse the other or make such other financial or
other adjustments as may be equitable to remedy any mistakes or omissions
relating to any of the PFS Assets transferred hereby or any of the PFS
Liabilities assumed hereby.

         (b) Each party shall execute and deliver to the relevant other party
all such documents, instruments, certificates and agreements in appropriate
form, and make all filings and recordings and take all such other actions, as
shall be necessary or reasonably requested by such other party, whether before
or after the Contribution Date, in order to give full effect to and evidence and
perfect the transfer and contribution of the PFS Assets and assumption of the
PFS Liabilities as contemplated hereby. However, the parties acknowledge and
agree that no party shall be required to comply with the provisions of any bulk
transfer law of any jurisdiction in connection with the transfer of any PFS
Asset.

         (c) Any Subsidiary of PFSweb that will receive any PFS Asset or assume
any PFS Liability shall for all purposes be deemed to be a party to this
Agreement.

         Section 2.04. Nonassignable Contracts. Anything contained herein to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any PFS Asset or PFS Liability if an assignment or attempted assignment
of the same without the consent of another Person would constitute a breach
thereof or in any way impair the rights of a party thereunder or give to any
third party any rights with respect thereto. If any such consent is not obtained
or if an attempted assignment would be ineffective or would impair such party's
rights under any such PFS Asset or PFS Liability so that the party entitled to
the benefits and responsibilities of such purported transfer (the "Intended
Transferee") would not receive all such rights and responsibilities, then (i)
the party purporting to make such transfer (the "Intended Transferor") shall use
commercially reasonable efforts to provide or cause to be provided to the
Intended Transferee, to the extent permitted by law, the benefits of any such
PFS Asset or PFS Liability and the Intended Transferor shall promptly pay or
cause to be paid to the Intended Transferee when received all moneys received by
the Intended Transferor with respect to any such PFS Asset and (ii) in
consideration thereof the Intended Transferee shall pay, perform and discharge
on behalf of the Intended Transferor all of the Intended Transferor's
liabilities thereunder in a timely manner and in accordance with the terms
thereof which it may do without breach. In addition, the Intended Transferor
shall take such other actions as may reasonably be requested by the Intended
Transferee in order to place the Intended Transferee, insofar as reasonably
possible, in the same position as if such PFS Asset had been transferred as
contemplated hereby and so all the benefits and burdens relating thereto,
including possession, use, risk of loss, potential for gain and dominion,
control and command, shall inure to the Intended Transferee. If and when such
consents and approvals are obtained, the transfer of the applicable PFS Asset
shall be effected in accordance with the terms of this Agreement. To the extent
that the PFS Liabilities include liabilities, obligations or commitments
pursuant to any


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<PAGE>   8

contract, permit, license, franchise or other right, Daisytek shall, to the
extent such contract, permit, license, franchise or other right is not a PFS
Asset, upon request by PFSweb either assign the same to PFSweb or assert and
seek to enforce the same for the benefit of PFSweb.

                                    ARTICLE 3

                              ANCILLARY AGREEMENTS

         Section 3.01. Ancillary Agreements. Daisytek and PFSweb shall, and
shall take all steps reasonably necessary to cause their respective Subsidiaries
and Affiliates to, enter into and perform all Ancillary Agreements in accordance
with their terms. To the extent that any Ancillary Agreement expressly addresses
any matters addressed by this Agreement, the terms and conditions of such
Ancillary Agreement shall govern the rights and obligations of the parties with
respect to such matters.

                                    ARTICLE 4

                                 INDEMNIFICATION

         Section 4.01. Indemnification by PFSweb. PFSweb and each Subsidiary of
PFSweb which shall receive any PFS Asset or PFS Liability transferred pursuant
to the terms of this Agreement and their respective successors-in-interest and
assigns shall jointly and severally indemnify, defend and hold harmless Daisytek
and each of its Subsidiaries and their respective successors-in-interest, and
each of their respective past and present Representatives against any loss,
claim, damage, liability or action, including any reasonable attorneys' fees or
any other expenses reasonably incurred by any of them in connection with
investigating and/or defending any such loss, claim, damage, liability or
action, resulting from, relating to or arising, out of or in connection with the
PFS Business, including without limitation, the PFS Liabilities, to the extent
that any such loss, claim, damage, liability or action shall arise from and
after the Contribution Date or shall relate to any period from and after the
Contribution Date.

         Section 4.02. Indemnification by Daisytek. Daisytek and each Subsidiary
of Daisytek which shall transfer any PFS Asset or PFS Liability pursuant to the
terms of this Agreement and their respective successors-in-interest and assigns
shall jointly and severally indemnify, defend and hold harmless PFSweb and each
of its Subsidiaries and their respective successors-in-interest, and each of
their respective past and present Representatives against any loss, claim,
damage, liability or action, including any reasonable attorneys' fees or any
other expenses reasonably incurred by any of them in connection with
investigating and/or defending any such loss, claim, damage, liability or
action, resulting from, relating to or arising, out of or in connection with the
PFS Business, including without limitation, the PFS Liabilities, to the extent
that any such loss, claim, damage, liability or action shall arise prior to the
Contribution Date or shall relate to any period prior to the Contribution Date.

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         Section 4.03. Indemnification Procedures.

         (a) If any Indemnitee receives notice of the assertion of any
Third-Party Claim with respect to which an Indemnifying Party is obligated under
this Agreement to provide indemnification, such Indemnitee shall promptly give
such Indemnifying Party notice thereof (together with a copy of such Third-Party
Claim, process or other legal pleading) promptly after becoming aware of such
Third-Party Claim; provided, however, that the failure of any Indemnitee to give
notice as provided in this Section shall not relieve any Indemnifying Party of
its obligations, except to the extent that such Indemnifying Party is actually
prejudiced by such failure to give notice. Such notice shall describe such
Third-Party Claim in reasonable detail.

         (b) An Indemnifying Party, at such Indemnifying Party's own expense and
through counsel chosen by such Indemnifying Party (which counsel shall be
reasonably acceptable to the Indemnitee), may elect to defend any Third-Party
Claim. If an Indemnifying Party elects to defend a Third-Party Claim, then,
within ten Business Days after receiving notice of such Third-Party Claim (or
sooner, if the nature of such Third Party claim so requires), such Indemnifying
Party shall notify the Indemnitee of its intent to do so, and such Indemnitee
shall cooperate in the defense of such Third-Party Claim. Such Indemnifying
Party shall pay such Indemnitee's reasonable out-of-pocket expenses incurred in
connection with such cooperation. Such Indemnifying Party shall keep the
Indemnitee reasonably informed as to the status of the defense of such
Third-Party Claim. After notice from an Indemnifying Party to an Indemnitee of
its election to assume the defense of a Third-Party Claim, such Indemnifying
Party shall not be liable to such Indemnitee under this Section for any
attorneys' fees or other expenses subsequently incurred by such Indemnitee in
connection with the defense thereof; provided, however, that such Indemnitee
shall have the right to employ one law firm as counsel ("Separate Counsel"), to
represent such Indemnitee in any action or group of related actions (which firm
or firms shall be reasonably acceptable to the Indemnifying Party) if, in such
Indemnitee's reasonable judgment at any time, either a conflict of interest
between such Indemnitee and such Indemnifying Party exists in respect of such
claim, or there may be defenses available to such Indemnitee which are
significantly different from or in addition to those available to such
Indemnifying Party and the representation of both parties by the same counsel
would, in the reasonable judgment of the Indemnitee, be inappropriate, and in
that event (i) the reasonable fees and expenses of such Separate Counsel shall
be paid by such Indemnifying Party (it being understood, however, that the
Indemnifying Party shall not be liable for the expenses of more than one
Separate Counsel with respect to any Third-Party Claim (even if against multiple
Indemnitees)) and (ii) each of such Indemnifying Party and such Indemnitee shall
have the right to conduct its own defense in respect of such claim. If an
Indemnifying Party elects not to defend against a Third-Party Claim, or fails to
notify an Indemnitee of its election as provided in this Section within the
period of ten Business Days described above, the Indemnitee may defend,
compromise, and settle such Third-Party Claim and shall be entitled to
indemnification hereunder (to the extent permitted hereunder); provided,
however, that no such Indemnitee may compromise or settle any such Third-Party
Claim without the prior written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed. Notwithstanding the foregoing,
the Indemnifying Party shall not, without the prior written consent of the
Indemnitee, (i) settle or compromise any Third-Party

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Claim or consent to the entry of any judgment which does not include as an
unconditional term thereof the delivery by the claimant or plaintiff to the
Indemnitee of a written release from all liability in respect of such
Third-Party Claim or (ii) settle or compromise any Third-Party Claim in any
manner that would be reasonably likely to have a material adverse effect on the
Indemnitee.

         Section 4.04. Certain Limitations.

         (a) The amount of any indemnifiable losses or other liability for which
indemnification is provided under this Agreement shall be net of any amounts
actually recovered by the Indemnitee from third parties (including, without
limitation, amounts actually recovered under insurance policies) with respect to
such indemnifiable losses or other liability. Any Indemnifying Party hereunder
shall be subrogated to the rights of the Indemnitee upon payment in full of the
amount of the relevant indemnifiable loss. 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 provision hereof,
have any subrogation rights with respect thereto. If any Indemnitee recovers an
amount from a third party in respect of an indemnifiable loss for which
indemnification is provided in this Agreement after the full amount of such
indemnifiable loss has been paid by an Indemnifying Party or after an
Indemnifying Party has made a partial payment of such indemnifiable loss and the
amount received from the third party exceeds the remaining unpaid balance of
such indemnifiable loss, then the Indemnitee shall promptly remit to the
Indemnifying Party the excess (if any) of (i) the sum of the amount theretofore
paid by such Indemnifying Party in respect of such indemnifiable loss plus the
amount received from the third party in respect thereof, less (ii) the full
amount of such indemnifiable loss or other liability.

         (b) The amount of any loss or other liability for which indemnification
is provided under this Agreement shall be (i) increased to take account of any
net tax cost incurred by the Indemnitee arising from the receipt or accrual of
an indemnification payment hereunder (grossed up for such increase) and (ii)
reduced to take account of any net tax benefit realized by the Indemnitee
arising from incurring or paying such loss or other liability. In computing the
amount of any 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 or accrual of any indemnification
payment hereunder or incurring or paying any indemnified loss. Any
indemnification payment hereunder shall initially be made without regard to this
Section and shall be increased or reduced to reflect any such net tax cost
(including gross-up) or net tax benefit only after the Indemnitee has actually
realized such cost or benefit. For purposes of this Agreement, an Indemnitee
shall be deemed to have "actually realized" a net tax cost or a net tax benefit
to the extent that, and at such time as, the amount of taxes payable by such
Indemnitee is increased above or reduced below, as the case may be, the amount
of taxes that such Indemnitee would be required to pay but for the receipt or
accrual of the indemnification payment or the incurrence or payment of such
loss, as the case may be. Following such determination, the Indemnifying Party
shall pay any underpayment to the Indemnitee and the Indemnitee shall reimburse
the Indemnifying Party for any overpayment, respectively, as may arise from the
foregoing adjustment.

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         (c) Any indemnification payment made under this Agreement shall be
characterized for tax purposes as if such payment were made immediately prior to
the Contribution Date.

                                    ARTICLE 5

                              ACCESS TO INFORMATION

         Section 5.01  Restrictions on Disclosure of Information.

         (a) Without limiting any rights or obligations under any other
agreement between or among the parties hereto and/or any of their respective
Affiliates relating to confidentiality, for a period of three years following
the Contribution Date, each of the parties hereto agrees that it shall not, and
shall not permit any of its Affiliates or Representatives to, disclose any
Confidential Information to any Person, other than to such Affiliates or
Representatives on a need-to-know basis in connection with the purpose for which
the Confidential Information was originally disclosed. Notwithstanding the
foregoing, each of the parties hereto and its respective Affiliates and
Representatives may disclose such Confidential Information, and such Information
shall no longer be deemed Confidential Information, to the extent that such
party can demonstrate that such Confidential Information is or was (i) available
to such party outside the context of the Prior Relationship on a nonconfidential
basis prior to its disclosure by the other party, (ii) in the public domain
other than by the breach of this Agreement or by breach of any other agreement
between or among the parties hereto and/or any of their respective Affiliates
relating to confidentiality, or (iii) lawfully acquired outside the context of
the Prior Relationship on a nonconfidential basis or independently developed by,
or on behalf of, such party by Persons who do not have access to, or
descriptions of, any such Confidential Information. Additionally,
notwithstanding anything to the contrary herein, any Information provided by
Daisytek to PFSweb or by PFSweb to Daisytek shall, except as otherwise set forth
in any of the Ancillary Agreements, not be deemed Confidential Information with
respect to the use of such Information by PFSweb in the ordinary course of the
PFS Business or by Daisytek in the ordinary course of Daisytek's business,
respectively.

         (b) Each of the parties hereto shall maintain, and shall cause their
respective Affiliates to maintain, policies and procedures, and develop such
further policies and procedures as shall from time to time become necessary or
appropriate, to ensure compliance with this Section.

         Section 5.02. Legally Required Disclosure of Confidential Information.
If any of the parties to this Agreement or any of their respective Affiliates or
Representatives becomes legally required to disclose any Confidential
Information, such disclosing party shall promptly notify the party owning the
Confidential Information (the "Owning Party") and shall use all commercially
reasonable efforts to cooperate with the Owning Party so that the Owning Party
may seek a protective order or other appropriate remedy and/or waive compliance
with Section 5.01. All expenses reasonably incurred by the disclosing party in
seeking a protective order or

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other remedy shall be borne by the Owning Party. If such protective order or
other remedy is not obtained, or if the Owning Party waives compliance with
Section 5.01, the disclosing party or its Affiliate or Representative, as
applicable, shall (a) disclose only that portion of the Confidential Information
which its legal counsel advises it is compelled to disclose or else stand liable
for contempt or suffer other similar significant corporate censure or penalty,
(b) use all commercially reasonable efforts, at the Owning Party's expense, to
obtain such reliable assurance as may be reasonably requested by the Owning
Party that confidential treatment will be accorded such Confidential
Information, and (c) promptly provide the Owning Party with a copy of the
Confidential Information so disclosed, in the same form and format so disclosed,
together with a description of all Persons to whom such Confidential Information
was disclosed.

         Section 5.03. Record Retention. To the extent that books and records of
Daisytek or any of its Affiliates contain information relating to the PFS
Business and the same are not included in the PFS Assets, Daisytek agrees to
cooperate with PFSweb in providing PFSweb with any such information upon
PFSweb's reasonable request to the extent that any such information exists and
is reasonably separable from Daisytek information unrelated to the PFS Business.
PFSweb shall reimburse Daisytek for all of its reasonable out-of-pocket costs
incurred in connection with any such request. PFSweb shall preserve and keep all
books and records included in the PFS Assets, whether in electronic form or
otherwise, for no less than the period of time from the Contribution Date as may
be required by any governmental authority or agency or as may be considered good
business practice (the "Retention Period"). If PFSweb wishes to dispose of any
books and records or other documents which it is obligated to retain under this
Section after the Retention Period, then PFSweb shall first provide 90 days'
written notice to Daisytek and Daisytek shall have the right, at its option and
expense, upon prior written notice within such 90-day period, to take possession
of such books or records or other documents. Written notice of intent to dispose
of such books and records shall include a description of the books and records
in detail sufficient to allow Daisytek to reasonably assess its potential need
to retain such materials. In the event PFSweb enters into an agreement with a
third party to sell a portion of the PFS Business, together with the books and
records related thereto, Daisytek shall have the right to duplicate such books
and records prior to any such disposition and, should the purchaser of the PFS
Business be a competitor of Daisytek, Daisytek shall have the right to prohibit
the transfer or disclosure to such party of that portion of the former books and
records of Daisytek which Daisytek notifies PFSweb then contains Confidential
Information.

         Section 5.04. Production of Witnesses. Until the six-year anniversary
of the Contribution Date, each of the parties hereto shall use all commercially
reasonable efforts, and shall cause each of their respective Affiliates to use
all commercially reasonable efforts, to make available to each other, upon
written request, its directors, officers, employees and other Representatives as
witnesses to the extent that any such Person may reasonably be required (giving
consideration to the business demands upon such Persons) in connection with any
legal, administrative or other proceedings in which the requesting party may
from time to time be involved; provided, however, that with respect to any legal
or administrative proceedings relating to the tax liability of any of the
parties hereto or any of their respective Affiliates, each of the parties hereto
shall, and shall cause each of their respective Affiliates to, make their
directors,


                                       11
<PAGE>   13

officers, employees and other Representatives available as witnesses until such
time as the statute of limitations have expired with respect to all tax years
prior to and including the year in which the asset transfers contemplated by
this Agreement are consummated.

         Section 5.05. Reimbursement. Unless otherwise provided in this Article,
each party to this Agreement providing access, information or witnesses to
another party pursuant to this Agreement shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payment for all
reasonable out-of-pocket costs and expenses (excluding allocated compensation,
salary and overhead expense) as may be reasonably incurred in providing such
information or witnesses.

                                    ARTICLE 6

                                  MISCELLANEOUS

         Section 6.01. Entire Agreement. This Agreement, including all the
Ancillary Agreements, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior written and oral
and all contemporaneous oral agreements and understandings with respect to the
subject matter hereof.

         Section 6.02. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of the
laws that might otherwise govern under principles of conflicts of laws
applicable thereto.

         Section 6.03. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.

         Section 6.04. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by telecopy with answer back, by express or overnight mail delivered
by a nationally recognized air courier (delivery charges prepaid), or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at their chief executive offices, or to such other address as
the party to whom notice is given may have previously furnished to the others in
writing in the manner set forth above. Any notice or communication delivered in
person shall be deemed effective on delivery. Any notice or communication sent
by telecopy or by air courier shall be deemed effective on the first Business
Day at the place at which such notice or communication is received following the
day on which such notice or communication was sent. Any notice or communication
sent by registered or certified mail shall be deemed effective on the fifth
Business Day at the place from which such notice or communication was mailed
following the day on which such notice or communication was mailed.

         Section 6.05. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and their legal
representatives and successors, and each

                                       12
<PAGE>   14

Subsidiary and each Affiliate of the parties hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement, except as otherwise expressly provided herein. Except as otherwise
expressly set forth herein, this Agreement may not be assigned or transferred to
any other Person without the prior written consent of each of the parties
hereto.

         Section 6.06. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.

         Section 6.07. Dispute Resolution. Except as otherwise set forth in the
Ancillary Agreements, resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, or otherwise
(collectively, "Disputes"), shall be exclusively governed by and settled in
accordance with the provisions of this Section. The parties hereto shall use all
commercially reasonable efforts to settle all Disputes without resorting to
mediation, arbitration, litigation or other third party dispute resolution
mechanisms. If any Dispute remains unsettled, a party hereto may commence
proceedings hereunder by first delivering a written notice from a Senior Vice
President or comparable executive officer of such party (the "Demand") to the
other parties providing a reasonable description of the Dispute to the others
and expressly requesting mediation hereunder. The parties hereby agree to submit
all Disputes to non-binding mediation before a mediator reasonably acceptable to
all parties involved in such Dispute. If the parties are unable to agree upon a
mediator or if, after such mediation, the parties subject to such mediation
disagree regarding the mediator's recommendation, such Dispute shall be
submitted to arbitration under the terms hereof, which arbitration shall be
final, conclusive and binding upon the parties, their successors and assigns.
The arbitration shall be conducted in Dallas, Texas by three arbitrators acting
by majority vote (the "Panel") selected by agreement of the parties, or, failing
such agreement, appointed pursuant to the commercial arbitration rules of the
American Arbitration Association, as amended from time to time (the "AAA
Rules"). If an arbitrator so selected becomes unable to serve, his or her
successors shall be similarly selected or appointed. The arbitration shall be
conducted pursuant to the Federal Arbitration Act and such procedures as the
parties subject to such arbitration (each, a "Party") may agree, or, in the
absence of or failing such agreement, pursuant to the AAA Rules. Notwithstanding
the foregoing: (i) each Party shall have the right to inspect the books and
records of the other Party that are reasonably related to the Dispute; (ii) each
Party shall provide to the other, reasonably in advance of any hearing, copies
of all documents which a Party intends to present in such hearing; and (iii)
each Party shall be allowed to conduct reasonable discovery through written
requests for information, document requests, requests for stipulation of fact
and depositions, the nature and extent of which discovery shall be determined by
the Parties; provided that if the Parties cannot agree on the terms of such
discovery, the nature and extent thereof shall be determined by the Panel which
shall take into account the needs of the Parties and the desirability of making
discovery expeditious and cost effective. The award shall be in writing and
shall specify the factual and legal basis for the award. The Panel shall
apportion all costs and expenses of arbitration, including the Panel's fees and
expenses and fees and expenses of experts, between the prevailing and
non-prevailing Party as the Panel deems fair and reasonable. The parties hereto
agree that monetary damages may be


                                       13
<PAGE>   15

inadequate and that any party by whom this Agreement is enforceable shall be
entitled to seek specific performance of the arbitrators' decision from a court
of competent jurisdiction, in addition to any other appropriate relief or
remedy. Notwithstanding the foregoing, in no event may the Panel award
consequential, special, exemplary or punitive damages. Any arbitration award
shall be binding and enforceable against the parties hereto and judgment may be
entered thereon in any court of competent jurisdiction.

         Section 6.08. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the fullest
extent possible.

         Section 6.09. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.

         Section 6.10. Amendment. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to be bound by such change or amendment.

         Section 6.11. Authority. Each of the parties hereto represents to the
other that (a) it has the corporate or other requisite power and authority to
execute, deliver and perform this Agreement and the Ancillary Agreements, (b)
the execution, delivery and performance of this Agreement and the Ancillary
Agreements by it have been duly authorized by all necessary corporate or other
action, (c) it has duly and validly executed and delivered this Agreement and
the Ancillary Agreements, and (d) this Agreement and each Ancillary Agreement is
a legal, valid and binding obligation, enforceable against it in accordance with
its terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equity principles.

         Section 6.12. Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When a reference is made in this Agreement to
an Article or a Section, such reference shall be to an Article or Section of
this Agreement unless otherwise indicated.

                          [remainder of page is blank]

                                       14
<PAGE>   16



         IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.


                                  DAISYTEK INTERNATIONAL CORPORATION


                                  By:
                                     --------------------------------------
                                      Name:
                                      Title:

                                  DAISYTEK, INCORPORATED


                                  By:
                                     --------------------------------------
                                      Name:
                                      Title:

                                  PRIORITY FULFILLMENT SERVICES, INC.


                                  By:
                                     --------------------------------------
                                      Name:
                                      Title:

                                  PFSWEB, INC.


                                  By:
                                      --------------------------------------
                                      Name:
                                      Title:





                                       15
<PAGE>   17

                                                                    EXHIBIT 2.2





               INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT

                          dated as of December 7, 1999

                                  by and among

                      DAISYTEK INTERNATIONAL CORPORATION,

                             DAISYTEK, INCORPORATED

                                      and

                                  PFSWEB, INC.




<PAGE>   18


               INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT


                  This INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT (the
"Agreement") is made and entered into as of December 7, 1999, by and among
Daisytek International Corporation, a Delaware corporation ("Daisytek
International"), Daisytek, Incorporated, a Delaware corporation and a
wholly-owned subsidiary of Daisytek International ("Daisytek"), and PFSweb,
Inc., a Delaware corporation and a wholly-owned subsidiary of Daisytek
("PFSweb"). Certain capitalized terms used herein are defined in Section 1 of
this Agreement.

                                    RECITALS

                  WHEREAS, the Boards of Directors of Daisytek International
and Daisytek have determined that it would be appropriate and desirable to
completely separate the PFS Business from Daisytek;

                  WHEREAS, Daisytek has caused PFSweb to be incorporated in
order to effect such separation;

                  WHEREAS, Daisytek and PFSweb are parties to the Separation
Agreement pursuant to which Daisytek will contribute and transfer to PFSweb,
and PFSweb will receive and assume, the assets and liabilities then associated
with the PFS Business as described therein;

                  WHEREAS, Daisytek and PFSweb intend that the Contribution,
together with the Distribution, qualify as a tax-free reorganization under
Section 368(a)(1)(D) of the Code;

                  WHEREAS, Daisytek currently owns all of the issued and
outstanding PFSweb Common Stock;

                  WHEREAS, the parties currently contemplate that PFSweb shall
consummate the Initial Public Offering;

                  WHEREAS, immediately following the consummation of the
Initial Public Offering, Daisytek shall own not less than 80% of the
outstanding shares of PFSweb Common Stock;

                  WHEREAS, Daisytek plans to divest itself of its entire
ownership of PFSweb by distributing all of its shares of PFSweb Common Stock to
Daisytek International, which, in turn, will distribute in the Distribution all
of such shares of PFSweb Common Stock to the holders of Daisytek Common Stock;

                  WHEREAS, Daisytek International, Daisytek and PFSweb intend
that the Distribution will be tax-free to Daisytek, Daisytek International and
its stockholders under Sections 355 and 368(a)(1)(D) of the Code;




<PAGE>   19



                  WHEREAS, the parties intend in this Agreement to set forth
the principal arrangements between them regarding the Initial Public Offering
and the Distribution; and

                  WHEREAS, the parties hereto have determined that in order to
accomplish the objectives of the Initial Public Offering and the Distribution
and to facilitate the consummation thereof, it is necessary and desirable to
enter into the agreements and understandings set forth herein;

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

                  1.        DEFINITIONS.

                  "Active Trade or Business" means the active conduct of the
trade or business (as defined in Section 355(b)(2) of the Code) conducted by
PFSweb immediately prior to the Distribution Date.

                  "Affiliate" means a PFSweb Affiliate or a Daisytek Affiliate,
as the case may be.

                  "Ancillary Agreements" has the meaning ascribed to such term
in the Separation Agreement.

                  "Annual Financial Statements" has the meaning set forth in
Section 5.1 (a)(vi).

                  "Business Day" means any day other than a Saturday, a Sunday,
or a day on which banking institutions located in the State of New York are
authorized or obligated by law or executive order to close.

                  "Code" means the Internal Revenue Code of 1986, as amended
from time to time, together with the rules and regulations promulgated
thereunder.

                  "Consent" means any consent of, waiver or approval from, or
notification to, any Person.

                  "Contribution" means the transfer of certain assets by
Daisytek to PFSweb (and the assumption by PFSweb of certain liabilities) as
contemplated by the Separation Agreement.

                  "Control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.



                                       2
<PAGE>   20



                  "CPR Rules" means the Rules for Non-Administered Arbitration
of Business Disputes promulgated by the Center for Public Resources, as in
effect on the date hereof.

                  "D Reorganization" means a transaction qualifying as a
reorganization under Section 368(a)(1)(D) of the Code.

                  "Daisytek Affiliate" means a Person, other than PFSweb or a
PFSweb Affiliate, that, after giving effect to the Distribution, directly or
indirectly through one or more intermediaries, is Controlled by Daisytek
International.

                  "Daisytek Annual Statements" has the meaning set forth in
Section 5.1(b)(ii).

                  "Daisytek's Auditors" has the meaning set forth in Section
5.1(b)(ii).

                  "Daisytek Business" means any business or operations of
Daisytek or any Daisytek Affiliates other than the PFS Business.

                  "Daisytek Common Stock" means the Common Stock, par value
$.01 per share, of Daisytek International.

                  "Daisytek Disclosure Portions" means all material set forth
in, or incorporated by reference into, either the IPO Registration Statement or
the Distribution Registration Statement, as applicable, to the extent relating
exclusively to (i) Daisytek and the Daisytek Affiliates (excluding PFSweb and
the PFSweb Affiliates), (ii) the Daisytek Business, (iii) Daisytek's intentions
with respect to the Distribution or (iv) the terms of the Distribution,
including, without limitation, the form, structure and terms of any
transaction(s) and/or offering(s) to effect the Distribution and the timing of
and conditions to the consummation of the Distribution.

                  "Daisytek Option" means an option to purchase shares of
Daisytek Common Stock issued under any stock option plan of Daisytek
International.

                  "Daisytek Public Filings" has the meaning set forth in
Section 5.1(a)(xiii).

                  "Daisytek Transfer Agent" means ChaseMellon Shareholder
Services LLC, in its capacity as the transfer agent and registrar for the
Daisytek Common Stock.

                  "Dispute Notice" means written notice of any dispute between
Daisytek and PFSweb arising out of or relating to this Agreement, which shall
set forth, in reasonable detail, the nature of the dispute.

                  "Distribution" means the distribution of PFSweb Common Stock
by Daisytek to Daisytek International and thereafter by Daisytek International
in one or more transactions occurring after the Initial Public Offering that
collectively have the effect that all shares of PFSweb Common Stock held by
Daisytek are distributed to Daisytek International stockholders, whenever such
transaction(s) shall occur.


                                       3
<PAGE>   21



                  "Distribution Date" means any date or dates, as the case may
be, determined by Daisytek, in its sole and absolute discretion, to be a date
on which shares of PFSweb Common Stock held by Daisytek are distributed in
connection with the Distribution.

                  "Distribution Registration Statement" means any and all
registration statements, information statements or other documents, if any,
filed by any party with the SEC in connection with any transaction constituting
part of the Distribution, in each case as supplemented or amended from time to
time.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, together with the rules and regulations promulgated
thereunder.

                  "GAAP" means generally accepted accounting principles,
consistently applied.

                  "Indemnifying Party" means a Person that is obligated to
provide indemnification under this Agreement.

                  "Indemnitee" means a Person that is entitled to seek
indemnification under this Agreement.

                  "Indemnity Payment" means an amount that an Indemnifying
Party is required to pay to an Indemnitee under this Agreement.

                  "Initial Public Offering" or "IPO" means the initial public
offering by PFSweb of shares of PFSweb Common Stock as contemplated by the IPO
Registration Statement.

                  "Insurance Proceeds" means the payment received by an insured
from an insurance carrier or paid by an insurance carrier on behalf of the
insured, net of any applicable premium adjustment and tax effect.

                  "IPO Registration Statement" means the Registration Statement
on Form S-1, Registration No. 333-87657, of PFSweb, as supplemented and amended
from time to time.

                  "IRS" means Internal Revenue Service of the U.S. Department
of Treasury or any successor agency.

                  "Losses" means all losses, liabilities, claims, obligations,
demands, judgments, damages, dues, penalties, assessments, fines (civil or
criminal), costs, liens, expenses, forfeitures, settlements, or fees,
reasonable attorneys' fees and court costs, of any nature or kind, whether or
not the same would properly be reflected on a balance sheet, and "Loss" means
any of these.

                  "Negotiation Period" means the period of 20 Business Days
following the initial meeting of the representatives of Daisytek and PFSweb
following the receipt of a Dispute Notice.




                                       4
<PAGE>   22



                  "Notice" means any notice, request, claim, demand, or other
communication under this Agreement.

                  "Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

                  "PFS Business" has the meaning ascribed to such term in the
Separation Agreement.

                  "PFSweb Affiliate" means a Person, other than Daisytek
International or a Daisytek Affiliate, that, after giving effect to the
Distribution, directly or indirectly through one or more intermediaries, is
Controlled by, or is under common Control with PFSweb.

                  "PFSweb Capital Stock" means all classes or series of capital
stock of PFSweb.

                  "PFSweb Common Stock" means the Common Stock of PFSweb.

                  "PFSweb Employee" means an individual employed by Daisytek or
any Daisytek Affiliate who becomes employed by PFSweb or any PFS Affiliate in
connection with the Distribution.

                  "PFSweb Option" means an option to purchase shares of PFSweb
Common Stock issued under a stock option plan of PFSweb.

                  "PFSweb Public Documents" has the meaning set forth in
Section 5.1(a)(ix).

                  "PFSweb Transfer Agent" means ChaseMellon Shareholder
Services LLC, in its capacity as the transfer agent and registrar for the
PFSweb Common Stock.

                  "PFSweb's Auditors" has the meaning set forth in Section
5.1(b)(i).

                  "Pre-Distribution Period" means the period of time from the
date hereof until the completion of the Distribution.

                  "Proposed Acquisition Transaction" means a transaction or
series of transactions as a result of which any Person or any group of related
Persons would (directly or indirectly) acquire, or have the right to acquire,
from PFSweb or one or more holders of outstanding shares of PFSweb Capital
Stock, a number of shares of PFSweb Capital Stock that would comprise 50% or
more of (i) the value of all outstanding shares of PFSweb Capital Stock as of
the date of such transaction, or in the case of a series of transactions, the
date of the last transaction of such series, or (ii) the total combined voting
power of all outstanding shares of Voting Stock of PFSweb as of the date of
such transaction, or in the case of a series of transactions, the date of the
last transaction of such series.


                                       5
<PAGE>   23


                  "Quarterly Financial Statements" has the meaning set forth in
Section 5.1(a)(v).

                  "Ratio" means the amount determined by dividing (i) the
average of the daily high and low per share prices of the Daisytek Common
Stock, as reported in The Wall Street Journal, during the three trading days
ending on the Record Date, by (ii) the average of the daily high and low per
share prices of the PFSweb Common Stock, as reported in The Wall Street
Journal, for the three trading days commencing on the first trading day
following the Record Date.

                  "Record Date" means the close of business on the date(s) to
be determined by the Board of Directors of Daisytek International as the record
date(s) for determining stockholders of Daisytek International entitled to
receive shares of PFSweb Common Stock in the Distribution.

                  "Regulation S-K" means Regulation S-K of the General Rules
and Regulations promulgated by the SEC.

                  "Regulation S-X" means Regulation S-X of the General Rules
and Regulations promulgated by the SEC.

                  "Representation Date" means any date on which PFSweb makes
any representation (i) to the IRS or to counsel selected by Daisytek for the
purpose of obtaining a Subsequent Tax Opinion/Ruling, or (ii) to Daisytek for
the purpose of any determination required to be made by Daisytek pursuant to
Section 4.2.

                  "Representation Letters" means any representation letters and
any other materials (including, without limitation, the ruling request and the
related supplemental submissions to the IRS) delivered or deliverable by
Daisytek and others in connection with the rendering by Tax Advisor and/or the
issuance by the IRS of the Tax Opinions/Rulings, which to the extent related to
PFSweb shall be in form and substance reasonably satisfactory to PFSweb.

                  "Representative" means, with respect to any Person, any of
such Person's directors, officers, employees, agents, consultants, advisors,
accountants or attorneys.

                  "Request" has the meaning set forth in Section 6.7.

                  "SEC" means the United States Securities and Exchange
Commission or any successor agency.

                  "Securities Act" means the Securities Act of 1933, as amended
from time to time, together with the rules and regulations promulgated
thereunder.

                  "Separation Agreement" means the Master Separation Agreement
by and among Daisytek International, Daisytek, Priority Fulfillment Services,
Inc. and PFSweb, as amended from time to time.




                                       6
<PAGE>   24




                  "Subsequent Tax Opinion/Ruling" means either (i) any opinion
of Tax Advisor selected by Daisytek, in its sole and absolute discretion,
confirming, in form and substance reasonably satisfactory to Daisytek, that, as
a consequence of the consummation of a subsequent transaction, no income, gain
or loss for U.S. federal income tax purposes will be recognized by Daisytek,
Daisytek International, the stockholders or former stockholders of Daisytek
International, or any Daisytek Affiliate with respect to the Distribution, or
(ii) an IRS private letter ruling to the same effect.

                  "Subsidiary" means with respect to any specified Person, any
corporation or other legal entity of which such Person or any of its
Subsidiaries Controls or owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote with respect to the election of
members to the board of directors or similar governing body; provided, however,
that for the purposes of this Agreement, neither PFSweb nor any of the
Subsidiaries of PFSweb shall be deemed to be Subsidiaries of Daisytek or of any
of the Subsidiaries of Daisytek.

                  "Tax" means (i) any income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on, minimum, estimated,
or other tax, assessment, or governmental charge of any kind whatsoever imposed
by any governmental authority, including any interest, penalty, or addition
thereto, whether disputed or not; (ii) any liability for the payment of any
amounts of the type described in clause (i) above arising as a result of being
(or having been) a member of any group or being (or having been) included or
required to be included in any Tax Return related thereto; and (iii) any
liability for the payment of any amounts of the type described in clause (i)
above as a result of any express or implied obligation to indemnify or
otherwise assume or succeed to the liability of any other Person.

                  "Tax Advisor" means the professional accounting or law firm
designated by Daisytek as its Tax Advisor.

                  "Tax Agreement" means the Tax Sharing Agreement between
Daisytek and PFSweb, as amended from time to time.

                  "Tax Control" means, with respect to PFSweb, ownership of
PFSweb Capital Stock which constitutes at least 80% of both (i) the total
combined voting power of all outstanding shares of Voting Stock of PFSweb and
(ii) each class and series of PFSweb Capital Stock other than Voting Stock of
PFSweb.

                  "Tax-Free Status of the Distribution" means the
nonrecognition of taxable gain or loss for U.S. federal income tax purposes to
Daisytek International, Daisytek, Daisytek Affiliates and Daisytek
International's stockholders in connection with the Distribution.

                  "Tax Opinions/Rulings" means any opinions of Tax Advisor
and/or the rulings by the IRS deliverable to Daisytek in connection with the
Contribution and the Distribution.



                                       7
<PAGE>   25



                  "Tax-Related Losses" means (i) all federal, state and local
Taxes (including interest and penalties thereon) imposed pursuant to any
settlement, final determination, judgment or otherwise; (ii) all accounting,
legal and other professional fees, and court costs incurred in connection with
such taxes; and (iii) all costs and expenses that may result from adverse tax
consequences to Daisytek, Daisytek International or its stockholders (including
all costs, expenses and damages associated with stockholder litigation or
controversies) payable by Daisytek or Daisytek Affiliates.

                  "Third-Party Claim" means any claim, suit, arbitration,
inquiry, proceeding or investigation by or before any court, governmental or
other regulatory or administrative agency or commission or any arbitration
tribunal asserted by a Person other than Daisytek or any Daisytek Affiliate or
PFSweb or any PFSweb Affiliate which gives rise to a right of indemnification
hereunder.

                  "Underwriters" means the managing underwriters for the IPO.

                  "Underwriting Agreement" means the Underwriting Agreement
between PFSweb and the Underwriters relating to the Initial Public Offering, as
amended from time to time.

                  "Value" means with respect to any trade or business (or
portion thereof), the fair market value of the assets constituting such trade
or business, less the current liabilities associated with such trade or
business, in each case determined as of the Distribution Date.

                  "Voting Stock" means with respect to any Person, all classes
and series of the capital stock of such Person entitled to vote generally in
the election of directors.

                  2.       THE INITIAL PUBLIC OFFERING AND THE DISTRIBUTION.

                  2.1.     Transactions Prior To The IPO. Subject to the
conditions hereof, Daisytek International and PFSweb shall use their reasonable
best efforts to consummate the IPO. Such actions shall include those specified
in this Section 2.1.

                           (a) PFSweb shall file 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
SEC or federal, state or foreign securities laws. Daisytek International and
PFSweb shall also cooperate in preparing, filing with the SEC and causing to
become effective a registration statement registering the PFSweb Common Stock
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 Distribution or the other transactions contemplated by this
Agreement and the Ancillary Agreements.



                                       8
<PAGE>   26



                           (b) PFSweb and Daisytek International shall enter
into the Underwriting Agreement, in form and substance reasonably satisfactory
to them and each shall comply with its respective obligations thereunder.

                           (c) Daisytek International and PFSweb shall consult
with each other and the Underwriters regarding the timing, pricing and other
material matters with respect to the IPO.

                           (d) PFSweb 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.

                           (e) PFSweb shall prepare, file and use reasonable
best efforts to seek to make effective, an application for listing of the
PFSweb Common Stock issued in the IPO on the NASDAQ National Market, subject to
official notice of issuance.

                           (f) PFSweb shall participate in the preparation of
materials and presentations as the Underwriters shall deem necessary or
desirable.

                  2.2.     Proceeds of the IPO. The IPO will be a primary
offering of PFSweb Common Stock and the net proceeds of the IPO will be retained
by PFSweb, subject to the payments to be made under the Separation Agreement.

                  2.3.     Conditions Precedent to Consummation of the IPO. The
obligations of the parties to consummate the IPO shall be conditioned on such
conditions as Daisytek International shall determine in its sole and absolute
discretion, which conditions, or any of them, may be waived by Daisytek
International in its sole and absolute discretion, including without
limitation, the following conditions, which shall be for the sole benefit of
Daisytek International and shall not give rise to or create any duty on the
part of Daisytek International or any Daisytek Affiliate or their Board of
Directors to waive or not waive any such condition:

                           (a) The IPO Registration Statement shall have been
filed and declared effective by the SEC, 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 2.1 shall have been taken
and, where applicable, have become effective or been accepted.

                           (c) The PFSweb Common Stock to be issued in the IPO
shall have been accepted for listing on the NASDAQ National Market, on official
notice of issuance.

                           (d) PFSweb shall have entered into the Underwriting
Agreement and all conditions to the obligations of PFSweb and the Underwriters
shall have been satisfied or waived.


                                       9
<PAGE>   27



                           (e) Daisytek International shall be satisfied in its
sole discretion that Daisytek will own at least 80% of the voting rights
attached to the then outstanding PFSweb Common Stock immediately following the
IPO, and, to the extent deemed necessary or desirable by Daisytek International
in its sole discretion, all other matters regarding the Tax-Free Status of the
Distribution shall, to the extent applicable as of the time of the IPO, be
satisfied or can reasonably be anticipated to 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 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
IPO in order to assure the successful completion of the IPO and the other
transactions contemplated by this Agreement shall have been taken.

                  2.4.     The Distribution. Daisytek and Daisytek International
pan, as soon as practicable after the satisfaction of applicable conditions,
and not later than 12 months following the consummation of the Initial Public
Offering, to complete the Distribution. PFSweb shall cooperate with Daisytek in
all respects to accomplish the Distribution and shall, at Daisytek
International's direction, promptly take any and all actions necessary or
desirable to effect the Distribution, including, without limitation, to the
extent necessary under then applicable law, the registration under the
Securities Act of PFSweb Common Stock on an appropriate registration form or
forms to be designated by Daisytek International. Daisytek International shall
select any investment banker(s) and manager(s) in connection with the
Distribution, as well as any financial printer, solicitation and/or exchange
agent and outside counsel for Daisytek International; provided that nothing
herein shall prohibit PFSweb from engaging (at its own expense) its own
financial, legal, accounting and other advisors in connection with the
Distribution.

                  2.5.     Certain Stockholder Matters. From and after the
distribution of PFSweb Common Stock in connection with any transaction(s)
included as part of the Distribution and until such PFSweb Common Stock is duly
transferred in accordance with applicable law, PFSweb shall regard the Persons
receiving PFSweb Common Stock in such transaction(s) as record holders of
PFSweb Common Stock in accordance with the terms of such transaction(s) without
requiring any action on the part of such Persons. PFSweb agrees that, subject
to any transfers of such stock, (a) each such holder shall be entitled to
receive all dividends payable on, and exercise voting rights and all other
rights and privileges with respect to, the shares of PFSweb Common Stock then
held by such holder and (b) each such holder shall be entitled, without any
action on the part of such holder, to receive one or more certificates
representing, or other evidence of ownership of, the shares of PFSweb Common
Stock then held by such holder. Daisytek International and Daisytek shall
cooperate, and shall instruct the Daisytek Transfer Agent to cooperate, with
PFSweb and the PFSweb Transfer Agent, and PFSweb shall cooperate, and shall
instruct the PFSweb Transfer Agent to cooperate, with Daisytek International,
Daisytek and the



                                      10
<PAGE>   28



Daisytek Transfer Agent, in connection with all aspects of the Distribution and
all other matters relating to the issuance and delivery of certificates
representing, or other evidence of ownership of, the shares of PFSweb Common
Stock distributed to the holders of Daisytek Common Stock in connection with
any transaction(s) included as part of the Distribution. Following the
Distribution, Daisytek International shall instruct the Daisytek Transfer Agent
to deliver to the PFSweb Transfer Agent true, correct and complete copies of
the stock and transfer records reflecting the holders of Daisytek Common Stock
receiving shares of PFSweb Common Stock in connection with any transaction(s)
included as part of the Distribution.

                  2.6.     Means of Distribution. (a) Subject to Section 2.4
hereof, on or prior to the Distribution Date, Daisytek will distribute and
deliver to Daisytek International who, in turn, will deliver to the Daisytek
Transfer Agent for the benefit of holders of record of Daisytek Common Stock on
the Record Date, a single stock certificate, endorsed in blank, representing
all of the outstanding shares of PFSweb Common Stock then owned by it, which
certificate shall be reissued in sufficient manner so that the Daisytek
Transfer Agent may, and shall be instructed to, distribute on the Distribution
Date the appropriate number of such shares of PFSweb Common Stock to each such
holder of record of Daisytek Common Stock on the Record Date or designated
transferee or transferees of such holder.

                           (b) Subject to Section 2.4, each holder of Daisytek
Common Stock on the Record Date (or such holder's designated transferee or
transferees) will be entitled to receive in the Distribution a number of shares
of PFSweb Common Stock equal to the number of shares of Daisytek Common Stock
held by such holder on the Record Date multiplied by a fraction, the numerator
of which is the number of shares of PFSweb Common Stock beneficially owned by
Daisytek International on the Record Date and the denominator of which is the
number of shares of Daisytek Common Stock issued and outstanding on the Record
Date.

                  2.7.     Actions Prior to the Distribution. (a) Daisytek
International and PFSweb shall prepare and mail, prior to the Distribution
Date, to the holders of Daisytek Common Stock, such information concerning
PFSweb, its business, operations and management, the Distribution and such
other matters as Daisytek International shall reasonably determine and as may
be required by law. Daisytek International and PFSweb will prepare, and PFSweb
will, to the extent required under applicable law, file with the SEC any such
documentation which Daisytek International determines are necessary or
desirable to effectuate the Distribution, and Daisytek International and PFSweb
shall each use its reasonable best efforts to obtain all necessary approvals
from the SEC with respect thereto as soon as practicable.

                           (b) Daisytek International and PFSweb 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) PFSweb shall prepare and file, and shall use its
reasonable best efforts to have approved, an application for the listing on the
NASDAQ National Market, subject to official notice of distribution of the
PFSweb Common Stock to be distributed in the



                                      11
<PAGE>   29



Distribution, and the shares of PFSweb Common Stock covered by PFSweb Options to
be granted under Section 3.6 below.

                  2.8.     Conditions To Distribution. The consummation of the
Distribution is subject to the following conditions, which conditions, or any
of them, may be waived by Daisytek in its sole and absolute discretion:

                           (a) The receipt by Daisytek International of either,
at its option and in its sole and absolute discretion (i) a ruling by the IRS
that, among certain other Tax consequences of the transaction, the Contribution
and Distribution will qualify as tax-free for federal income tax purposes and
will not result in the recognition of taxable gain or loss for federal income
tax purposes to Daisytek, Daisytek International or the holders of Daisytek
Common Stock or (ii) an opinion from its Tax Advisor regarding the Tax-Free
Status of the Distribution and such other matters, in form and substance
satisfactory to it, as it shall determine to be necessary or advisable in its
sole and absolute discretion;

                           (b) The receipt of any material Consents necessary to
consummate the Distribution, which Consents shall be in full force and effect;

                           (c) No order, injunction, decree or regulation 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

                           (d) No events or developments shall have occurred
subsequent to the IPO Closing Date that, in the sole judgment of Daisytek, would
result in the Distribution having a material adverse effect on Daisytek, any
Daisytek Affiliate any holder of Daisytek Common Stock, PFSweb, any PFSweb
Affiliate or any holder of PFSweb Common Stock.

                  The foregoing conditions are for the sole benefit of Daisytek
International and shall not give rise to or create any duty on the part of
Daisytek International or any Daisytek Affiliate or their Board of Directors to
waive or not waive any such condition.

                  2.9.     Fractional Shares. As soon as practicable after the
Distribution Date, Daisytek International shall direct the Daisytek Transfer
Agent to determine the number of whole shares and fractional shares of PFSweb
Common Stock allocable to each holder of record or beneficial owner of Daisytek
Common Stock as of the Record Date, to aggregate all such fractional shares and
sell the whole shares obtained thereby, at the direction of Daisytek
International, to Daisytek International, PFSweb, 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 to which a fractional share shall be allocable such holder's or owner's
ratable share of the proceeds of such sale, after making appropriate deductions
of the 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. Daisytek International and the Daisytek Transfer
Agent may aggregate the shares of Daisytek


                                       12
<PAGE>   30



Common Stock that may be held by any beneficial owner thereof through more than
one account in determining the fractional share allocable to such beneficial
owner.

                  2.10.    Replacement of Daisytek Options. As of the
Distribution Date, each outstanding Daisytek Option held by a PFSweb Employee
shall be replaced with a PFSweb Option having substantially the same terms and
conditions as the Daisytek Option to be replaced thereby, including any and all
vesting requirements and conditions of exercise; provided, however, that (i) the
PFS Employee shall be credited, for vesting purposes, with the period of
employment in which the PFS Employee was employed by Daisytek or a Daisytek
Affiliate, (ii) the number of shares of PFSweb Common Stock subject to such
PFSweb Options shall be equal to the number of shares of Daisytek Common Stock
subject to the Daisytek Option multiplied by the Ratio and (iii) the per share
exercise price of the PFSweb Common Stock subject to such PFSweb Option shall be
equal to the per share exercise price of the Daisytek Common Stock subject to
the Daisytek Option divided by the Ratio. PFSweb shall take all corporate action
and make all required filings under applicable state Blue Sky laws and the
Securities Act to register or qualify the PFSweb Options and/or the underlying
shares of PFSweb Common Stock so that the shares of PFSweb Common Stock acquired
upon exercise of each PFSweb Option are freely tradable under the Securities Act
(except for shares acquired by affiliates (as defined in the Securities Act) of
PFSweb) and each applicable state's Blue Sky laws.

                  2.11.    Further Assurances Regarding the Distribution. In
addition to the actions specifically provided for elsewhere in this Agreement,
PFSweb shall, at Daisytek International's direction, use all commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things commercially reasonably necessary, proper or
expeditious under applicable laws, regulations and agreements in order to
consummate and make effective the Distribution as promptly as reasonably
practicable. Without limiting the generality of the foregoing, PFSweb shall, at
Daisytek International's direction, cooperate with Daisytek International, and
execute and deliver, or use all commercially reasonable efforts to cause to
have 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 domestic or foreign
governmental or regulatory authority requested by Daisytek International in
order to consummate and make effective the Distribution.

                  2.12.    Abandonment of the Distribution. In the event that
Daisytek International so determines that one or more of the aforesaid
conditions precedent has not been satisfied and that it no longer intends to
proceed with or complete the Distribution, Daisytek International shall provide
to PFSweb a written notification of such determination (an "Abandonment
Notice"). Effective as of the date of the Abandonment Notice, (a) provided that
no Distribution Date has yet occurred, Sections 4.2 and 4.3 of this Agreement
shall terminate, become null and void and have no further force and effect and
(b) Daisytek International's rights, and PFSweb's obligations, set forth in the
Registration Rights Agreement shall immediately become effective.


                                       13
<PAGE>   31



                  3.       EXPENSES.

                  3.1.     General. Except as otherwise provided in this
Agreement, the Separation Agreement, any of the other Ancillary Agreements or
any other agreement between the parties relating to the Contribution, the
Initial Public Offering or the Distribution, all costs and expenses of either
party hereto in connection with the Contribution, the Initial Public Offering
and the Distribution shall be paid by the party that incurs such costs and
expenses.

                  3.2.     Expenses Relating to the Initial Public Offering.
PFSweb shall be responsible for the payment of all costs, fees and expenses
relating to the Initial Public Offering.

                  3.3.     Expenses Relating To The Distribution. Daisytek shall
be responsible for the payment of all costs, fees and expenses relating to the
Distribution.

                  4.       COVENANTS TO PRESERVE TAX-FREE STATUS OF THE
DISTRIBUTION AND THE QUALIFICATION OF THE CONTRIBUTION AS A D REORGANIZATION.

                  PFSweb and Daisytek International hereby represent and
warrant to, and covenant and agree with, each other as follows:

                  4.1.     Representations and Warranties.

                           (a) PFSweb hereby represents and warrants that (i) it
has examined the Tax Opinions/Rulings and the Representation Letters, and (ii)
the facts presented and the representations made therein, to the extent
descriptive of PFSweb or the PFS Business (including, without limitation, the
business purposes for the Distribution, the representations in the
Representation Letters and Tax Opinions/Rulings to the extent that they relate
to PFSweb or the PFS Business, and the plans, proposals, intentions and policies
of PFSweb), are true, correct and complete in all material respects.

                           (b) Daisytek International hereby represents and
warrants that (i) it has examined the Tax Opinions/Rulings and the
Representation Letters, and (ii) the facts presented and the representations
made therein, to the extent descriptive of Daisytek or the Daisytek Business
(including, without limitation, the business purposes for the Distribution, the
representations in the Representation Letters and Tax Opinions/Rulings to the
extent that they relate to Daisytek or the Daisytek Business, and the plans,
proposals, intentions and policies of Daisytek), are true, correct and complete
in all material respects.




                  4.2.     Restrictions on PFSweb.

                           (a) PFSweb shall not take any action (such action to
include, if relevant, the issuance of PFSweb Capital Stock upon the exercise by
the holders thereof of all options or convertible securities issued by PFSweb)
during the Pre-Distribution Period if, as a



                                       14
<PAGE>   32



result of taking such action, PFSweb would issue a number of shares of PFSweb
Capital Stock (including by way of the exercise of stock options or the issuance
of restricted stock) that would cause Daisytek to cease to have Tax Control of
PFSweb, unless prior to the consummation of such transaction Daisytek has
determined, in its sole and absolute discretion, which discretion shall be
exercised in good faith solely to preserve the Tax-Free Status of the
Distribution, that such transaction would not jeopardize the Tax-Free Status of
the Distribution. Notwithstanding the foregoing provisions of this Section
4.2(a), PFSweb shall be permitted to issue stock options and restricted stock
awards to its employees so long as such options or restricted stock awards will
not be exercisable or vest, by their terms, prior to the Distribution Date. All
of the restrictions on PFSweb contained in this Section 4.2 shall apply to
PFSweb during the Pre-Distribution Period as well as the other periods specified
in this Section 4.2.

                           (b) Until the first day after the two-year
anniversary of the latest Distribution Date, PFSweb shall not enter into any
Proposed Acquisition Transaction or, to the extent PFSweb has the right to
prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition
Transaction to occur unless prior to the consummation of such Proposed
Acquisition Transaction Daisytek has determined, in its sole and absolute
discretion, which discretion shall be exercised in good faith solely to preserve
the Tax-Free Status of the Distribution, that such Proposed Acquisition
Transaction would not jeopardize the Tax-Free Status of the Distribution. The
foregoing shall not prohibit PFSweb from entering into a contract or agreement
to consummate any Proposed Acquisition Transaction if such contract or agreement
requires satisfaction of the above-described requirement prior to the
consummation of such Proposed Acquisition Transaction, such requirement to be
satisfied through the cooperation of the parties as described in Section
4.3(b)(ii).

                           (c) Until the first day after the two-year
anniversary of the latest Distribution Date, (i) PFSweb shall continue to
conduct the Active Trade or Business, (ii) subject to clause (iii) below, PFSweb
shall not (A) liquidate, dispose of, or otherwise discontinue the conduct of any
substantial portion of the Active Trade or Business or (B) dispose of any
business or assets that would cause PFSweb to be operated in a manner
inconsistent in any material respect with the business purposes for the
Distribution as set forth in the Representation Letters and Tax
Opinions/Rulings, in each case unless Daisytek has determined, in its sole and
absolute discretion, which discretion shall be exercised in good faith solely to
preserve the Tax-Free Status of the Distribution, that such liquidation,
disposition, or discontinuance would not jeopardize the Tax-Free Status of the
Distribution, (iii) PFSweb shall not under any circumstances liquidate, dispose
of, or otherwise discontinue the conduct of any portion of the Active Trade or
Business if such liquidation, disposition or discontinuance would breach Section
4.2(d). PFSweb shall continue the active conduct of the Active Trade or Business
primarily through officers and employees of PFSweb or its Subsidiaries (and not
primarily through independent contractors). Notwithstanding the foregoing, (A)
except with respect to any corporation or other entity the status of which as
the direct owner of an active trade or business is material to the Tax-Free
Status of the Distribution, liquidations of any of PFSweb's Subsidiaries
(including PFS - Texas LLC) into PFSweb or one or more Subsidiaries directly or
indirectly controlled by PFSweb shall not be deemed to breach this Section
4.2(c) and (B) PFSweb shall not be prohibited from liquidating, disposing of or
otherwise discontinuing the conduct of one or more trades or businesses that



                                       15

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