Tax Allocation And Indemnification Agreement

DRAFT OF 9/26/96
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TAX ALLOCATION AND INDEMNIFICATION AGREEMENT
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TAX ALLOCATION AND INDEMNIFICATION AGREEMENT dated as of _______, 1996 (this "Agreement") between R.R. Donnelley & Sons Company, a Delaware corporation ("RRD"), and Donnelley Enterprise Solutions Incorporated, a Delaware corporation (the "Company").


W I T N E S E T H:
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WHEREAS, RRD is the owner of all of the issued and outstanding capital stock of the Company;


WHEREAS, RRD and the Company are members of an "affiliated group" (as defined in Section 1504(a) of the Code) of which RRD is the common parent;


WHEREAS, as a result of the initial public offering of the Common Stock of the Company pursuant to the Underwriting Agreement among the Company, Salomon Brothers Inc, Montgomery Securities and J.P. Morgan Securities Inc. (the "Underwriting Agreement"), it is expected that RRD and the Company will no longer be members of an affiliated group; and


WHEREAS, RRD and the Company desire to set forth their rights and obligations with respect to certain tax liabilities;


NOW, THEREFORE, in consideration of the agreements and mutual covenants contained herein, the parties hereto agree as follows:


Section 1. Definitions. As used in this Agreement, the following terms shall have the following meaning:


"Affiliate" shall mean, with respect to any entity, any other
individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust or unincorporated
organization which directly or indirectly controls, is controlled by or is
under common control with such entity.


"Balance Sheet" shall mean the balance sheet of the Company and
the Subsidiaries as of June 30, 1996, included in Amendment No. 1 to the
Registration Statement on Form S-1 filed by the Company with the Securities
and Exchange Commission.


"Balance Sheet Date" shall mean June 30, 1996.


"Code" shall mean the Internal Revenue Code of 1986, as amended.


"Combined Group" shall mean the "affiliated group" (as defined in
Section 1504(a) of the Code) of which RRD is the common parent and any
other group of corporations that, at any time on or before the Closing
Date, files or has filed Tax Returns on a combined, consolidated or unitary
basis with the Company or the Subsidiaries (other than such a group which
includes or has included the Company and/or one or more of the
Subsidiaries, but no other corporation).


"Company Group Member" shall mean the Company and the
Subsidiaries (and, after the Closing Date, any Affiliate thereof) and their
respective successors and assigns.


"Closing Date" shall mean the date of the closing of the initial
public offering of the Common Stock of the Company pursuant to the
Underwriting Agreement.


"Interim Period" shall mean the period beginning the calendar day
after the Balance Sheet Date and ending on and including the Closing Date.


"RRD Group Member" shall mean RRD and any Affiliates of RRD
(other than the Company and the Subsidiaries) and their respective
successors and assigns.


"Subsidiaries" shall mean Integrated Analysis, Inc. and
LANSystems (U.K.) Ltd.


"Tax" (and, with correlative meaning, "Taxes" and "Taxable")
shall mean any federal, state, local or foreign income, gross receipts,
property, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value added,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any governmental authority.


"Tax Package" has the meaning set forth in Section 3(c).


"Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim
for refund, amended return or declaration of estimated Tax.


Section 2. Liability for Taxes. (a) RRD shall be liable for, and indemnify each Company Group Member against, all (i) Taxes imposed on the Company or any Subsidiary solely as a result of being a member of a Combined Group pursuant to Treas. Reg. (S) 1.1502-6 or similar provisions of state and local law and


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(ii) Taxes imposed on the Company or any Subsidiary, or for which the Company or any Subsidiary may otherwise be liable, for any taxable year or period (or portion thereof) that ends on or before the Balance Sheet Date; provided, however, that RRD shall not be liable for, and shall not indemnify any Company Group Member against, any Taxes shown as a liability or reserve on the Balance Sheet. Except to the extent shown as an asset on the balance sheet, RRD shall be entitled to any refund of (or credit for) Taxes attributable to RRD or any of its Affiliates (including the Company and each of the Subsidiaries) allocable to any taxable year or period (or portion thereof) that ends on or before the Balance Sheet Date, and the Company agrees to remit any such refund paid to it to RRD.


(b) The Company shall be liable for, and indemnify each RRD Group Member against, all Taxes imposed on the Company or any Subsidiary, or for which the Company or any Subsidiary may otherwise be liable (including, without limitation, any Taxes shown as a liability ...