CORPORATE EXPRESS N.V. FORM 20-F (Annual and Transition Report (foreign private issuer)) Filed 03/14/08 for the Period Ending 12/31/07 Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 01131206511111 0000948634 CXP 5110 - Paper And Paper Products Office Supplies Technology 12/31 http://www.edgar-online.com © Copyright 2008, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. QuickLinks -- Click here to rapidly navigate through this document UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One) REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 or ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: 31 December 2007 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-16663 CORPORATE EXPRESS N.V. (Exact name of Registrant as specified in its charter) THE NETHERLANDS (Jurisdiction of incorporation or organization) Hoogoorddreef 62, 1101 BE Amsterdam ZO, The Netherlands (Address of principal executive offices) Securities registered or to be registered pursuant to Section 12(b) of the Act. * Title of each Class Name of each exchange on which registered American Depositary Shares, each representing one Ordinary Share at a par value of EUR 1.20 per share The New York Stock Exchange Ordinary Shares at a par value of EUR 1.20 per share The New York Stock Exchange* Not for trading, but only in connection with the registration of American Depositary Shares representing such Shares pursuant to the requirements of the Securities and Exchange Commission. Securities registered or to be registered pursuant to Section 12(g) of the Act. None (Title of class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. 8 1 / 4 % Senior Subordinated Notes due 2014 7 7 / 8 % Senior Subordinated Notes due 2015 (Title of Class) Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. 182,847,847 Ordinary Shares 53,281,979 Preference Shares A 0 Preference Shares B Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Indicate by check mark which financial statement item the registrant has elected to follow. ITEM 17 ITEM 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No 2007 Annual Report and Form 20-F CONTENTS 1 2 3 4 5 6 About Corporate Express Chief Executive's review Key figures Biographies Executive Board Management structure 7 9 11 12 The Business About the Company Group financial review Overview of business segments 14 20 35 Corporate Governance Introduction Executive Board Supervisory Board Regulations concerning securities Indemnification of members of the Executive Board and Supervisory Board The General Meeting of Shareholders Description of share capital and Articles of Association Provision of information Audit of financial reporting and role of internal and external auditors Compliance with the Dutch Corporate Governance Code 51 51 53 56 56 57 60 64 65 66 Report of the Supervisory Board Activities of the Supervisory Board Composition of the Supervisory Board and the Executive Board Independence Schedule of attendance of the Supervisory Board and Committees Committees of the Supervisory Board Corporate governance Remuneration report Financial statements and dividend proposal Discharge Considerations about the business Biographies Supervisory Board 68 69 70 70 70 71 72 72 72 72 73 Remuneration Report Remuneration policy Remuneration of Executive Board and Supervisory Board 2007 Remuneration of members of the Executive Board 2007 Remuneration of members of the Supervisory Board 2007 76 81 81 84 Other Financial Information Risk factors Risk control framework Capital resources Research and development Inflation Contractual obligations, contingent liabilities, commitments and guarantees Off-balance sheet arrangements Property, plant & equipment 87 91 94 94 94 94 95 95 1 7 8 9 Financial Statements Consolidated statements of income Consolidated balance sheets Consolidated statements of cash flows Consolidated statements of recognised income and expense Notes to the consolidated financial statements Company balance sheets Company statements of income Notes to the company balance sheets and statements of income Supplemental guarantor information 97 98 99 100 101 175 175 176 180 Other Information Significant subsidiaries Dividend Report of independent auditors 193 195 197 Information Required under Form 20-F Material contracts Exchange controls Taxation for U.S. residents holding shares in Corporate Express NV Exchange rate information Selected financial data 200 200 200 202 203 10 11 Additional Information about Corporate Express Shares Corporate Express Shares Important Dates and Contact Information 207 215 Cross Reference to Form 20-F Cross reference to Form 20-F 217 2 ABOUT THIS REPORT Cautionary statement (regarding forward-looking statements) This Annual Report (on Form 20-F) contains various forward looking statements (within the meaning of the US Private Securities Litigation Reform Act of 1995) that reflect management's current views with respect to future events and financial operations and performance. The words 'believe', 'expects', 'anticipate', 'intend', 'may', 'plan', 'estimate', 'will', 'should', 'could', 'aim' or 'might', or, in each case, their negative, or similar expressions, identify certain of these forward-looking statements. Other forward-looking statements can be identified in the context in which the statements are made. Forward-looking statements appear in a number of places throughout this Annual Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth strategies and the industry in which we operate. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurances that they will materialise or prove to be correct. Because these statements involve risks and uncertainties, the actual results or outcome could differ materially from those set out in the forward-looking statements as a result of, among others: • competition from local and international suppliers of office products to businesses and institutions • consolidation in the office products industry • changes in international and local economic, political, business and industry conditions • our ability to successfully develop and expand the range of products we offer to customers • our ability to enter new and develop existing geographical markets • fluctuations in energy and freight costs • fluctuations in currency exchange rates • our ability to retain key personnel • our ability to manage our international operations and integrate our existing and future acquisitions into our business, and • changes in our business strategy and development plans. Additional factors that could cause our actual results, performance or achievements to differ materially include, but are not limited to, those disclosed under 'Risk factors'. These forward-looking statements speak only as of the date of this Annual Report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as result of new information, future events or otherwise, other than as required by law or regulation. Accordingly, prospective investors are cautioned not to place undue reliance on any of the forward-looking statements. Use of non-GAAP financial measures Corporate Express presents certain non-GAAP financial measures in this Annual Report that we believe provide useful information. In the Group Financial Review and Financial Review per Business Segment, we discuss changes at constant exchange rates and 'organic' sales growth. These non-GAAP financial measures have been presented together with a reconciliation of the non-GAAP figures to the GAAP figures. The 3 non-GAAP financial measures should be considered in addition to measures of financial performance reported in our primary financial statements. Below we provide an explanation of why Corporate Express believes the non-GAAP measures used in this Annual Report provide useful information regarding our financial condition and results of operations. Constant exchange rates While our reporting currency is the euro, the majority of our business is conducted in currencies other than the euro. The position in relation to the US dollar is particularly relevant. Results of subsidiaries denominated in currencies other than the euro are translated into euro at an average exchange rate for the period. In addition to a discussion of these results at actual exchange rates, we include analysis of the performance of our businesses based on constant exchange rates. We provide constant exchange rate analysis to give a year-on-year measure of changes in our financial condition and results of operations which excludes the effect of fluctuations in currency exchange rates because fluctuations are outside of our control and may distort our underlying performance and result. Changes of results at constant exchange rates as disclosed in this Annual Report are calculated by translation of results of the earlier year under discussion, at the euro average exchange rate of the latter year being discussed. Changes of results at constant exchange rates can be materially different to changes based on our reported results, because average exchange rates of the earlier year can be significantly different from average exchange rates of the latter year under discussion. 'Organic' sales analysis The 'organic' sales analysis presented in this Annual Report eliminates all factors that disturb a like-for-like comparison. In addition to the currency exchange rate movements discussed above, these factors include such items as acquisitions, divestments, variations in the number of working days and any movements between gross-based sales and net-based sales for similar activities from a customer perspective. We use 'organic' sales analysis, in conjunction with constant exchange rates analysis, to give a measure of the underlying year-on-year growth. The factors mentioned above can have a significant impact on a business segment's reported results. Their exclusion provides a useful insight into the underlying performance of the business segment and enables us to monitor the performance of both the underlying activities and acquired activities. Organic performance can be materially different to the reported performance of a business segment. In each instance where we present organic results, we also present a table which illustrates the basis on which the result is derived and a reconciliation to the nearest comparable GAAP measure. Reclassification Corporate Express completed the sale of ASAP Software on November 2007. Previous years have been restated to present the ASAP Software business segment as a discontinued operation. For further information on this restatement, see Note 6 and Note 7 to the Consolidated Financial Statements. Publications This report complies with the regulations in the Netherlands regarding financial reporting and is also the basis of Corporate Express' Annual Report on Form 20-F. A cross-reference table to Form 20-F is included in this report on page 218. Exhibits to the Form 20-F will be filed with the SEC. 4 Presentation of financial and other information Corporate Express' financial statements have been prepared on the basis of the International Financial Reporting Standards ('IFRS'). A summary of our accounting policies is given in Note 2 to the Consolidated Financial Statements. Corporate Express' accounting policies under IFRS vary in certain respects from accounting principles generally accepted in the United States of America ('US GAAP'). Corporate Express historically included a note in its financial statements explaining the effect that the application of US GAAP would have had on net result and shareholder's equity as reported under IFRS. On 21 December 2007 the U.S. Securities and Exchange Commission (SEC) approved rule amendments allowing foreign private issuers to issue financial statements without reconciliation to US Generally Accepted Accounting Principles (US GAAP) if they are prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The rule amendments apply to financial statements covering years ended after 15 November 2007. As the Corporate Express financial year ended on 31 December 2007, we will not longer present a reconciliation of IFRS to US GAAP. The euro is Corporate Express' reporting currency. Exchange rate information, including Noon Buying Rates in New York, is given on page 202. The use in this Annual Report of the terms 'we', 'us', 'our', the 'Corporate Express Group', the 'Group', 'Corporate Express' and the 'Company' refer to Corporate Express NV and its subsidiaries on a consolidated basis, except when otherwise specified. Amounts are rounded and hence (sub) totals may not therefore be equal to the arithmetic sum of the items composing such (sub) totals. Documents on display Copies of this Annual Report and the documents referred to within this Annual Report are available for inspection upon request at the Corporate Express' Corporate Centre at Hoogoorddreef 62, 1101 BE Amsterdam ZO, the Netherlands (telephone +31 (0)20 651 11 11), on our website www.cexpgroup.com and the SEC's public reference room located at 100 F Street, NE, Washington, DC, 20549. In addition, Corporate Express' SEC filings are also available on the SEC's website at www.sec.gov. 5 ABOUT CORPORATE EXPRESS Chief Executive's review 7 Key figures 9 Biographies Executive Board 11 Management structure 12 6 CHIEF EXECUTIVE'S REVIEW 2007 was a year of significant changes. Changes which will determine the course of Corporate Express for many years to come. The changes we have made stem from the results of a strategic review which identified how Corporate Express could become a more operationally focused and sales driven organisation. As a result, we divested our software distribution business and changed the name of the company from Buhrmann to Corporate Express to better reflect our transformation into a truly global business-to-business player in the office supplies market. We have appointed new management and changed the operational structure of the Company to improve our execution and performance. I am confident that these changes will enable our Company to perform to its full potential and create growth and value for all our stakeholders, including our customers, employees and especially our shareholders. In my first message to you, I would like to explain the most important outcomes of the strategic review we commenced in March 2007. Firstly, having taken our pre-existing position into consideration, we have concluded that a stand-alone position as a global business-to-business player in the office products market is the best way to create long-term value for our business. We operate in an attractive market, we have a great trade name, an extensive assortment including highly rated private branded products and the confidence of our customers and suppliers. We have a strong infrastructure, leading logistical and eCommerce capabilities and excellent teams of people around the world. Secondly, although our long-term strategy is solid, we have to improve significantly our operational execution and performance in order to capitalise on our strong position. To achieve our full potential we need to ' Focus. Execute. and Deliver. '. We have to focus on getting the basics right. We need to grow sales by increasing our share of wallet, improving category offering, building a stronger mid-market position, and strengthening our geographic footprint. To improve our execution, we have to become a truly sales driven company helping our customers to focus their resources, energy and time on their core business. A newly formed Executive Management Group will ensure that we are much more operationally focused and closer to the business. They are already in the process of implementing organisational changes, centralising key support functions and re-directing marketing and sales groups. What delivers performance is the motivation and energy of our people to deliver satisfaction to our customers. We want to make it easy for them to choose the best products they need in their offices. We aim to help them to be more efficient and productive so they can focus on their core business instead of non-strategic tasks. These structural changes require a transformation of our company culture: we will change the way people work. Clear, specific targets and key performance indicators will be applied throughout the Company. Historically most of our businesses have shown sound growth profiles, as our European business is currently enjoying. With this in mind and with the North American business being stabilised and improving its organic growth, we feel comfortable that we are moving towards achieving our growth target of 6 percent average organic growth over the period 2008-2010 leading to an expected EBITDA of at least 7 percent for our Global Office Products, including overhead costs. While we are fully aware the economic outlook for 2008 is uncertain, we are confident our actions and strategic priorities put us in a robust position to outperform the market. We cannot expect that the financial results will immediately reflect the profound changes that are taking place in our Company but we anticipate that the results of our operational improvements will start to come through during 2008. 7 Since becoming CEO on 1 October 2007, I have visited many of our operations, customers and shareholders around the world, explaining our strategic initiatives and recently announced changes. I am pleased to say that these audiences have been receptive to our ' Focus. Execute. Deliver. ' approach. In spite of our strategy to continue on a stand-alone basis, on 19 February 2008 we received an unsolicited proposal by Staples to acquire the shares in our Company. We are of the opinion that this proposal significantly undervalues the company and fails to reflect Corporate Express' prospects. We do not believe the proposal is in the best interests of our shareholders and other stakeholders. We therefore rejected this proposal. I would like to recognise the contribution of my predecessor Frans Koffrie, who was in charge of the transformation of a diversified holding company into a focused global office products supplier. We are all grateful for what he has achieved, creating the springboard for the next phase of development for our Company. None of our achievements would be possible without the efforts of our employees, whom, on behalf of our boards, I would like to thank. I recognise that 2007 was a challenging year but the changes we have made position Corporate Express well for the next phase of its growth and create exciting opportunities and benefits for our shareholders, customers, suppliers and employees. Peter Ventress CEO 8 KEY FIGURES The following tables present key figures as of and for the years ended at 31 December 2007 and 2006. The key figures should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this Annual Report. Additionally, please see the Group Financial Review in Chapter 2 starting on page 14 for a description of major events that may effect the comparability of the results of operations as presented below. Income statement data 2007 2006 in millions of euro Net sales from continuing operations(1) Gross contribution Operating result Result before taxes Taxes Net result from continuing operations Net result from discontinued operations Net result total Group 5,631 1,840 201 86 3 89 106 195 5,497 1,802 223 134 [10] 124 18 142 178 17 123 19 195 142 Attributable to: Holders of ordinary shares Corporate Express NV Minority interests in Group companies Balance sheet data 2007 2006 in millions of euro, at period end Goodwill(1) Working capital Total assets Long-term borrowings Total equity 1,420 563 3,799 1,128 1,583 Other data total Group 2007 1,531 560 4,178 1,350 1,527 2006 in millions of euro, at period end A Net cash provided by operating activities B Net cash from/used in investing activities 223 117 232 [381] A + B Cash flow available for financing activities 341 [149] (1) Prior year data have been adjusted to reflect the fact that the ASAP Software business segment is reported as discontinued. Per ordinary share 2007 2006 in euro, unless stated otherwise, at period end Basic net result per share attributable to holders of ordinary shares Corporate Express NV Number of ordinary shares outstanding at year-end (in thousands) Dividend declared (1) 0.98 182,848 0.21(1) Subject for approval of the Annual General Meeting of Shareholders. 9 0.68 180,905 0.21 2007 Result per division 10 BIOGRAPHIES EXECUTIVE BOARD Peter Ventress Function: CEO (as per October 2007), joined the Company in 1999 Responsibilities within Executive Board (as at 31 December 2007): Office Products US, Office Products Europe, Strategy, Investor Relations & Corporate Communications, General & Legal Affairs and Internal Audit Nationality and year of birth: British, 1960 Education: Masters degree in Modern History and Modern Languages (Oxford University), MBA (Open University London) Previous positions: 2007: Member Executive Board 2005: President Corporate Express Europe 1999-2005: Several management positions within Corporate Express Before 1999: Management positions in U.K. paper merchanting companies Shares held in the Company as at 31 December 2007: none(1) (1) On the date of this report, Mr Ventress holds 43,605 ordinary shares in the Company (see Remuneration Report). George Dean Function: Member Executive Board (as from 1998), joined the Company in 1990 Responsibilities within Executive Board (as at 31 December 2007): Office Products Australia, Office Products Canada, Printing Systems Division, Human Resources, Group Real Estate Nationality and year of birth: British, 1947 Education: Bachelor of Science Honours degree in Chemical Engineering (University of Edinburgh) Previous positions: 1996: President Paper Merchanting Division of the Company until its divestment in 2003 1990: MD of Howard Smith Paper Group Ltd Before 1990: Wiggins Teape Group for a period of 21 years Shares held in the Company as at 31 December 2007: none Frans Koffrie was President and CEO until 29 September 2007 and Mark Hoffman was Member of the Executive Board until 27 March 2007. George Dean will resign from the Executive Board after the Annual General Meeting of Shareholders in April 2008 and will retire from the Company in May 2008. Floris Waller Function: CFO (as from 1999), joined the Company in 1999 Responsibilities within Executive Board (as at 31 December 2007): Accounting & Control, Corporate Finance & Group Treasury, Corporate Tax & Pensions, Risk Management, Information Technology, Mergers, Acquisitions & Divestments, Holdings and (jointly with CEO) Investor Relations & Internal Audit Nationality and year of birth: Dutch, 1958 Education: Masters degree in Business Economics, CPA degree (both Erasmus University, Rotterdam) Previous positions: various financial management positions at Unilever over a period of 15 years Shares held in the Company as at 31 December 2007: 4,235 11 MANAGEMENT STRUCTURE Executive Management Group Peter Ventress 1960, Chairman, Executive Board and CEO Floris Waller 1958, Vice Chairman, Executive Board and CFO George Dean 1947, Executive Board Tim Beauchamp 1955, SVP Distribution Operations Bauke Broersma 1952, SVP Personnel & Organisation ad interim Peter Damman 1962, President Office Products Europe Dick Dijkstra 1960, SVP Information Technology and CIO Jay Mutschler 1952, President Office Products US A vacancy exists for the SVP Merchandising & Marketing function Corporate officers Kees Bangma 1956, Corporate Finance & Group Treasury Rutger Goldschmeding 1961, Accounting & Control Roelof Hoving 1962, Corporate Tax & Pensions Heidi van der Kooij 1962, General Counsel & Company Secretary Major operations Corporate Express US Jay Mutschler 1952, President Robert VanHees 1969, SVP Finance & Administration and CFO Corporate Express Europe Peter Damman 1962, President Rob Peters 1966, SVP Finance & Administration and CFO Corporate Express Australia Grant Harrod 1962, Managing Director & CEO Grant Logan 1952, CFO Printing Systems Carl Thomas 1947, President Gerhard Nijhuis 1949, Financial Director Internal Audit Cor Zwart 1946 12 THE BUSINESS About the Company 14 General information 14 Structure 14 History 15 Strategy 15 Industry context 16 Group Financial Review 20 Overview of business segments 35 Office Products 35 Printing Systems 46 13 ABOUT THE COMPANY General information Corporate Express is one of the world's leading suppliers of office products to businesses (Business-to-business or B2B). With its proprietary distribution network spanning 32 countries (including strategic alliances and partners) across Europe, North America and Australia. Corporate Express believes that it is the leading B2B supplier of office products in the United States, Australia, Norway, Sweden, Germany and the Benelux, and is one of the top three suppliers of such products in the United Kingdom, Canada, New Zealand, Ireland and Austria. Although Corporate Express has a long history as a distribution and trading company, for the last decade it has focused its business on the supply of office products. This trend has been underlined by recent announcements of disposals of non-core businesses (ASAP Software and Veenman Germany) and acquisitions in key focus areas (ATG in Norway and Sweden, and Davenport in Canada). The decision to rename Buhrmann NV into Corporate Express NV in the spring of 2007 also reconfirmed our focus on office products. We also supply graphic equipment and related services. In July 2007 Corporate Express established a permanent presence in Hong Kong and China to facilitate direct sourcing of primarily privately branded office products from Asian manufacturers. In 2007, our nearly 18,000 employees, working from more than 350 locations in 21 countries, generated annual sales of €5.6 billion. In response to a growing demand from our customers, we offer a single-source supply solution, a 'one-stop-shop', that is designed to help customers streamline their purchasing efforts and reduce their total costs. We are also increasingly offering our customers other ranges of business products including non-traditional office products such as facility supplies, print & forms, educational supplies and promotional marketing items. The majority of our office products is sold through contracts with major companies with which Corporate Express has integrated eCommerce systems, including customised Internet sites. Over 45% of our office products are sold via eCommerce systems. eCommerce reduces customers transaction costs significantly and speeds up their ordering process by enabling them to select and order products on-line. Structure Corporate Express NV, the parent company of a group of subsidiary companies, conducts its business on a global basis. Our significant subsidiaries are listed on page 196. All subsidiaries are directly or indirectly wholly owned by Corporate Express NV, except for Corporate Express Australia Ltd and its subsidiaries, in which Corporate Express owned 58.82% at year-end. Corporate Express reports its results in three office products regions, and the Printing Systems Division: • Corporate Express North America includes the activities of Corporate Express in the United States and Canada. • Corporate Express Europe, covers the activities of Corporate Express in 24 European countries, including strategic alliances and partners. • Corporate Express Australia consists of our fully consolidated business in Australia and New Zealand (58.82% share ownership) • The Printing Systems Division operates in six countries in Europe. The various office products businesses report to Corporate Express' newly formed Executive Management Group (EMG), which leads the company operationally. In addition to the Executive 14 Board members, the EMG consists of senior geographical and functional leaders. The Corporate Center, which is primarily located in Amsterdam, the Netherlands, supports the operations of the Group as well as the Executive Board. Corporate costs are reported as a separate activity. History Corporate Express NV has evolved from the Koninklijke Nederlandsche Papierfabrieken NV (KNP), which was incorporated in 1875. In 1993 Koninklijke Nederlandsche Papierfabrieken NV merged with Bührmann-Tetterode NV and VRG-Groep NV. The resulting conglomerate, NV Koninklijke KNP BT (KNP BT) offered paper and packaging products, business services and a variety of other distribution activities. During 1997 and 1998, the packaging activities and the paper manufacturing subsidiaries were divested and the remaining business and distribution services were renamed Buhrmann NV. In 1999, Buhrmann expanded its office products activities with the acquisition of Corporate Express Inc., operating in North America, Europe and Australia and running a distribution business for office and computer supplies, office furniture, imaging and computer graphic supplies as well as desktop software (ASAP Software). In 2001, Buhrmann strengthened its office products activities with two acquisitions: the North American office products business of USOP and the European office products division of Samas. In 2000 the Information Systems Division was divested and in 2003 the Paper Merchanting Division was sold to the Australian-based PaperlinX to narrow our focus on the office products market. In 2006 and 2007, we made a smaller number of acquisitions, of which the most significant was the Scandinavian office products company Andvord Tybring-Gjedde (ATG), but it also included Coastwide Laboratories Inc in the USA, Educational Experience Pty Ltd in Australia, and Davenport in Canada. Finally, in 2007, Corporate Express divested its desktop software activities (ASAP Software, Inc.) and its German copier activities (Veenman Deutschland GmbH), and was renamed Corporate Express NV, confirming the Company's focus on office products. Strategy As a services and distribution company, Corporate Express aims to provide a wide range of business products that are essential to our customers in their daily work. Corporate Express works on a business-to-business basis and use direct distribution to help our customers reduce their process related procurement costs. Corporate Express has a strong technological focus and use eCommerce systems, including customised Internet sites, to streamline the supply chain. Corporate Express is committed to delivering sustainable and profitable growth. Corporate Express aims to achieve this growth primarily organically by increasing market share in the large account segment which at 31 December 2007 accounted for approximately 80% of our sales, and by growing our mid-market share. In addition to sales growth, we believe that there is opportunity to strengthen our geographical footprint by acquisition across Europe and, potentially, there may be viable options in high growth emerging markets. Our initiative for growing sales and securing a greater share of our customers' expenditures is by focusing on selling our office products line of business to the full potential of our customers, and broadening our product range. We are meeting a wider set of our customer needs because we offer not only traditional office products, such as print and forms, promotional articles and furniture, but also non-traditional office products such as facility products and products from adjacent markets such as educational supplies. This helps to position Corporate Express as the preferred single-source supplier of our customers. Our innovative systems help streamline the ordering process, which reduces cost and the effort required to manage multiple suppliers, and brings productivity into the hands of our customers. 15 Corporate Express also believes that there is an increased trend among large companies to outsource non-strategic tasks and in this area our business has experienced growth. As we focus on generating profitable growth, we have also identified a number of ways to improve our margins. We have developed a successful range of private brand products, notably the Corporate Express brand, through which we deliver customers competitive alternatives to well-known branded products. Currently Corporate Express has approximately 25% of its global sales under its private brand. Additionally, our preferred supplier program is helping us to focus our procurement efforts on a reduced number of suppliers. This process is being reinforced by the establishment in July 2007 of a permanent presence in Hong Kong and Shenzhen, P.R. China to facilitate direct sourcing of primarily privately branded office products from Asian manufacturers. Corporate Express believes that this new infrastructure will help to better control the supply chain and reduce procurement costs. Corporate Express believes that it will also be able to directly influence manufacturers to become more environmentally conscious with regard to issues such as production, packaging and waste. For a discussion of the risks associated with the implementation of the Company's strategy, see pages 87 to 91. Industry context Corporate Express does business primarily in the office products market. The office products market is relatively consolidated in the large account segment, but it is significantly fragmented in the mid-market and small office/home-office segments, that are characterized by many small and medium-size players. Corporate Express believes that in addition to the large account segment, the major players in the market, including Corporate Express, may have the opportunity to continue consolidating the markets, both through organic and acquisition-driven growth. Market segmentation by channel The business consumable market is served by numerous players of all sizes and with a variety of business models. These include manufacturers of office products with direct distribution capabilities, paper merchants and other distributors with adjacent activities, supermarket chains, general department stores and copier resellers. With respect to dedicated distributors of office products, the market is divided into direct distributors, mail order andretail outlets. Corporate Express operates primarily as a direct distributor, using the brand name Corporate Express. Direct distributors The direct distributors' channel is subdivided into larger and smaller players. The key differentiators are geographical spread and reliance on wholesalers, both for supply and maintaining inventories. Contract distributors (such as Corporate Express) primarily serve customers with a high number of office workers ('white collar'), often in several locations, mostly on the basis of exclusive multi-year contracts. Customers are generally guaranteed next day delivery, provided with advanced IT and eCommerce options, and given access to private brands. Due to the higher service levels and lower total costs of ownership that are offered, contract distribution is the most frequently used channel for medium-size and large companies in the office products markets. In the top segment of the market, which has traditionally been Corporate Express' core business, there are very few large players who are able to provide the required level of service. The range of products a single distributor supplies to customers in this segment is being extended. Transactional distributors generally serve medium and small business customers in a limited geographical area 16 without formal contracts. Most of these companies are relatively small and carry a limited range of products in stock and use wholesalers extensively. Some of these distributors operate as 'stock-less dealers' relying entirely on wholesalers for their fulfillment. Mail order Mail order—the distribution of catalogues, using database marketing-caters mainly to small- and medium-sized companies and private individuals. While their procurement and order fulfillment functions are similar to contract stationers, direct marketers offer a narrower assortment of products, sell primarily through catalogues rather than a direct sales force and generally use generic third parties to deliver products. Retail outlets Retail outlets, which require locations accessible by individual customers, generally serve private individuals and small businesses. Customers obtain their products at the retail outlet, which often offers a somewhat different range of products than in the business-to-business channels. Activities in this channel require significant real estate positions including the related financial commitments. Competitive factors Corporate Express operates in a highly dynamic and competitive marketplace, particularly because competition is not limited to market participants with a specific position in a channel. Also, within each channel there are multiple players who offer alternative solutions for the demand side of the market. More details of competition within our channels are provided in the sections on the Company's business segments. The three most significant competitive factors in the office products industry are service (ease of ordering, delivery speed and reliability), price and the efficiency created in terms of the customers' total procurement costs. Large players have a competitive edge in offering attractive pricing, IT capabilities, geographical footprint, private brands and a wide choice of products. However, service aspects such as fast and complete delivery can be achieved by players of any size, which ensures that competition remains vigorous. Product quality is less an issue since all distributors can carry or source the same or similar products. Private brand strategies are also designed to differentiate in this area. Our office supplies business competes successfully in these markets on the basis of its high quality information technology and logistics capability, its customised and value added services and the breadth of its assortment. These aspects aim to achieve benefits to customers in terms of managing the 'total cost of ownership' when procuring office products. Seasonality Our sales correlate with white-collar employment and the average amount spent per employee. The sales of our consumable products have a strong relationship with the number of effective working days in a reporting period, in which the employees from our customers are at work. However, the sales of certain product categories of a more discretionary nature, such as furniture, do not closely correlate with the amount of working days. 17 Trends Customers seek increasingly to control the volume of office products purchased by centralising their contractual arrangements. At the same time, they also expect delivery to multiple locations at a local, regional, national or international level. Paying attention to the cost structure of our (potential) customers may lead to the customer deciding to outsource non-strategic tasks such as the procurement of office products. Therefore Corporate Express believes that large companies will increasingly see the benefits of using a single-source supplier. This allows them to consolidate purchasing power and to create efficiencies by eliminating the internal costs associated with complex, multiple deliveries, multiple invoices and varied ordering procedures. It also allows them to compare, monitor and manage purchasing patterns of departments, locations and business units. Major players in the industry, including our office supplies business, continue to invest in extensive information technology, eCommerce and logistic infrastructures. The low value per order, high order volume, dispersed ordering points and multiple delivery locations require a sophisticated and efficient infrastructure for fulfilling these requirements in an economically sensible way. Customer relations and marketing Corporate Express markets and sells its products and services to both contract and non-contract business customers through a network of central account managers and local sales representatives. Many contract customers enter into agreements that set service levels for certain products over a particular period, typically a minimum of two or three years, after which contracts are rolled over or re-tendered. Marketing is limited primarily to supporting the trade name, private product branding and promotional support of certain product categories. Supplier relations and merchandising Most products are purchased directly from manufacturers, who deliver directly to Corporate Express' distribution or mixing centers. Lower volume items are sourced from various types of wholesalers. Our strategy has been to establish preferential relationships with certain suppliers who can offer mutually attractive supply chain economics, while reducing the number of products per category in our assortment. To further maximise its purchasing power, Corporate Express has been consolidating its purchases from key suppliers. This includes the sourcing of office products sold under private brand names. Our preferred supplier initiative increases our relevance to the suppliers with whom we do business. This leads to improved terms and conditions resulting in lower sourcing costs and working capital. In 2007, Corporate Express established a presence in Hong Kong and Shenzen, China, to facilitate the direct sourcing of office products from Asian manufacturers. Going forward, a substantial proportion of Corporate Express' privately branded products will be handled through this global sourcing organisation. Notwithstanding long term supplier relationships, Corporate Express is subject to short term price changes caused by fluctuating prices of commodities. 18 Information Technology and logistics Customers have visibility towards Corporate Express' product assortment through our online ordering systems and printed catalogues. Orders are placed via a variety of eCommerce systems or by traditional ways such as telephone, fax or mail. Corporate Express' larger distribution centres have an average of 10,000 stock keeping units. Orders for items in stock are routed to the appropriate distribution centre for order fulfillment. Orders for items that are not part of the regular stock are usually transmitted electronically to suppliers or wholesalers for delivery to our distribution centres or directly to customers. Corporate Express is usually able to acquire most items that are not available within its own inventory in the same ordering time frame as stock items. These are then shipped with the items in-stock. First time fill rates are generally around 98%. Corporate Express' advanced logistics system is key to its efficient distribution network, which allows for next-day delivery in all of its office products markets. In general, Corporate Express operates from a single regional distribution centre that supports multiple distribution break-points. A combination of owned vehicles and thirdparty delivery services is used to deliver office products. 19 GROUP FINANCIAL REVIEW COMPARISON 2007 AND 2006 Major events in 2007 and 2006 The Financial Review should be considered in light of the following, major events: 2007 On 12 November 2007 we completed the sale of ASAP Software to Dell Inc. for a total consideration of US$353 million. After considering the impact of related transaction expenses and taxation, the transaction resulted in a gain of €97 million. The proceeds have largely been used to pay down debt. In October 2007 we announced the outcome of our strategic review and as a result have implemented a series of strategic initiatives and organisational changes designed to transform the Company into a more operationally focused and sales driven organisation. In July 2007 we announced the establishment of a permanent presence in Hong Kong and China to facilitate direct sourcing of primarily privately branded office products from Asian manufacturers. A number of smaller acquisitions were completed of which Davenport in Canada was the most significant. 2006 In 2006, we announced the organisational restructuring of Corporate Express North America. The geographic profit centre approach was replaced by a product line and customer segment driven organisation. For this restructuring and the centralisation of back office functions in North America announced in 2005, provisions were recorded in 2006 which are presented as special items. In September 2006 the acquisition of Andvord Tybring-Gjedde (ATG), the leading office products group in the Nordic region, was completed. Total purchase consideration for the acquisition of ATG was €246 million, which was financed by borrowings under existing debt facilities. We also completed a number of smaller acquisitions in Europe, Australia and North America, of which Coastwide Laboratories Inc. in the USA and The Educational Experience Pty Ltd. in Australia were the most significant. Critical accounting policies and estimates Our main accounting policies are set out in Note 2 to our Financial Statements. The accounting policies and estimates that are most critical in determining the presentation of operating results and financial condition and which require subjective or complex judgments from management are listed in Note 3 to our Financial Statements. Corporate Express' accounting policies under IFRS vary in certain respects from accounting principles generally accepted in the United States of America ('US GAAP'). On 21 December 2007 the Securities and Exchange Commission (SEC) approved rule amendments pursuant to which financial statements from foreign private issuers in the U.S. will be accepted without reconciliation to U.S. Generally Accepted Accounting Principles only if they are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). We prepare our financial statements in accordance with IFRS as issued by the IASB. The rule amendments apply to financial statements covering years ended after 15 November 2007. 20 Comparability On 12 November 2007, we completed the sale of ASAP Software to Dell Inc. Prior to the sale, ASAP Software was a separate business segment and as a result of the disposal, the financial statements have been adjusted with the results of operations of ASAP Software presented as 'net result from discontinued operations'. Therefore the historical statements included herein have been adjusted and reflect the continuing operations of Corporate Express to conform to this presentation. As of 1 January 2007, the activities of Graphic Systems and the Veenman copier businesses were combined in the business segment Printing Systems. The segment presentation has been adjusted accordingly (and retrospectively). As of 1 January 2007, postage expenses relating to the mailing activity in our print and forms business, which are reimbursed by our customers, have been accounted for on a 'gross' basis instead of on a 'net' basis, as was previously the case. As a result, 2007 reported sales, gross contribution and operating expenses all increased by €19 million or approximately 0.3%, 1.0%, and 1.1% respectively, compared to 2006. Key figures 2007 2006 Change in % Change at constant rates(1) in millions of euro, unless stated otherwise Net sales Gross contribution Operating expenses Operating result Gross contribution as a percentage of net sales Operating expenses as a percentage of net sales Operating result as a percentage of net sales (1) 5,631 1,840 [1,639] 201 32.7% 29.1% 3.6% 5,497 1,802 [1,579] 223 32.8% 28.7% 4.1% 2.4% 2.1% 3.8% [9.7%] 6.7% 6.4% 8.3% [7.4%] See 'Use of non-GAAP Financial Measures' on page 3. Our Global Office Products business suffered from the negative effects of the organisational changes in 2006 in the Office Products North America business segment combined with lower market growth rates and a higher degree of competitive pressure in North America. The decline in operating result of the Office Products North America business segment could only partially be offset by the significant improvement in the performance of the Office Products Europe business segment, specifically helped by strong sales growth in the Nordic region, due to in part the acquisition of ATG in 2006, and general economic growth in Europe. In addition, the Office Products Australia business segment contributed strong results, largely due to positive economic conditions in Australia, even though 2007 was mainly a year of consolidation. The operating result of the Printing Systems Division improved, due both to efforts to control costs and the generally positive investment climate in the printing sector. Net sales Net sales for the Group increased by 2.4% to €5,631 million in 2007, from €5,497 million in 2006. At constant exchange rates, net sales increased by 6.7%; Global Office Products grew by 7.3% and the Printing Systems grew by 2.3% at constant exchange rates. Total net sales on an organic basis increased by 2%. Sales in the Office Products North America business segment increased 1% at constant rates. Continued economic uncertainty and increased (price) competition negatively impacted sales. Our net 21 sales in the Office Products North America business segment were also impacted by the lingering effects of last year's reorganisation process. The Office Products Europe segment showed strong sales growth, helped by the acquisition of ATG in 2006, whereas Office Products Australia continued its very satisfying performance. We continued extending our product range and benefited from strong sales growth in facility supplies, document and print management and promotional products. Furniture sales suffered from reduced spending on discretionary items. Office Products Australia benefited from increased sales in educational supplies as a result of the acquisition of Educational Experience in 2006. Overall, we strengthened our positions in the strategic and large accounts segments while achieving modest growth in the mid-markets. The table presents a calculation, on an organic(1) basis, of the development of net sales for the Group. 2007 2006 Change in % in millions of euro, unless stated otherwise Net sales 5,631 Effect of currency exchange rate movements Net sales at constant exchange rates Acquisitions and divestments Adjustment for 'imputed sales' Variation in the number of working days 5,631 [38] 7 26 Net sales on an organic basis 5,626 (1) 5,497 [238] 5,259 230 28 5,517 7% 2% See 'organic' sales analysis on page 4. Gross contribution Gross contribution increased from €1,802 million in 2006 to €1,840 million in 2007, an increase of 2.1% or 6.4% at constant exchange rates. Global Office Products increased by 7.2% and the Printing Systems Division declined by 1.4%. As a percentage of net sales, gross contribution decreased only slightly, from 32.8% in 2006 to 32.7% in 2007. The change in accounting for postage expenses that are reimbursed by our customers impacted gross contribution postively by €19 million. The regional office products business segments showed varying levels of performance. The gross contribution margin declined substantially in North America due to mainly difficulties in fully passing on supplier price increases, as well as (relative) stronger growth in lower margin customer segments (strategic and large) and lower margin product groups (facility supplies, computer supplies and paper). Both Office Products Europe and Australia, however, were able to improve their gross contribution margins. The Office Products Europe business segment benefited from the inclusion of ATG, and the success from pan-European merchandising and margin improvement initiatives. The Office Products Australia business segment benefited from sales of educational supplies. We were also able to further grow our share of own brand-sales; in North America we introduced a full range of writing instruments and discretionary items such as white boards. Operating result Operating result of the Group declined 9.7% from €223 million in 2006 to €201 million in 2007. At constant exchange rates the decline was 7.4%. Operating result as a percentage of net sales decreased from 4.1% in 2006 to 3.6% in 2007. The decline was fully due to the weak performance in the Office 22 Products North America business segment. In the Office Products Europe and Office Products Australia business segments, we achieved strong growth of operating results. In North America the operating expense growth was limited to 2.0%, but when excluding the impact of the accounting change for postage expenses, operating expenses were equal to last year. Operating expenses developed satisfactory, largely due to cost saving initiatives, especially in non-sales related areas, however against a declining gross contribution. The operating expenses of the Printing Systems Division were favourably impacted by the positive result of €10 million on the sale of Veenman Germany. On the other hand, our consolidated operating results were negatively affected by increased expenses at the corporate level, primarily due to higher fees (mostly relating to the strategic review) and termination payments for departing board members. Corporate operating expenses, not allocated to the business segments, were €27 million in 2007 compared to €4 million in 2006. Total share-based payment charges amounted to €8 million in 2007 (€8 million in 2006) and were allocated to the business segments. Regarding pensions, total operating expenses included income of €21 million in 2007 and €22 million in 2006 mainly related to the financing portion (interest cost less expected return on plan assets) of the pension plan in the Netherlands, which is by far the largest defined benefit plan in the Group. Of this income approximately €18 million in 2007 and €20 million in 2006 is included in Corporate operating expenses relating to the inactive participants in this plan. The assumptions used to calculate the pension income and benefit obligations of this plan are listed in Note 22 of the Financial Statements. A change in the assumptions used to calculate the pension obligation and related costs (service cost and interest cost) resulted in a higher net pension income of approximately €2 million in 2007. The average expected rate of return on plan assets for the Dutch plan was 6.7% in 2007 and 6.6% in 2006. The actual return on plan assets of the pension plan in the Netherlands, after investment fees and administration expenses, was 2% in 2007 and 7% in 2006. Special items included in operating expenses in 2007 and 2006 In 2007, there were one-off costs (before tax) of €30 million. We incurred €22 million of one-off costs in the Office Products North America business segment, related primarily to personnel reduction at U.S. headquarters and investments in our logistics infrastructure. In the Office Products Europe business segment, we incurred one-off costs of €8 million, consisting of a €6 million million provision for the planned consolidation of our German distribution centres (including a provision for to be terminated lease obligations) and €2 million relating to a reorganisation programme for Corporate Express Italy. As part of Corporate expenses we recorded €5 million in relation to the termination of the contracts of Frans Koffrie, former CEO of Corporate Express NV, and Mark Hoffman, former President and CEO of Corporate Express North America. One-off cost of €5 million related to the reclassification of two defined contribution plans into a defined benefit plans in the Netherlands. The book profit on the sale of the Veenman Germany activities amounted to €10 million. In 2006, we recorded special items of €40 million. We incurred €35 million of one-off costs, such as double running and relocation expenses, for the centralisation of backoffice functions and the streamlining of the organisation in North America. We also recorded €5 million of one-off costs for optimising our facilities in the Benelux and the further restructuring of Veenman Germany. Excluding these special items, operating expenses would have increased by 9.0% at constant exchange rates and operating result would have decreased by 9.1% on the same basis. 23 Financial items 2007 2006 in millions of euro, unless stated otherwise Financing expenses Subsequent result from disposal of operations Taxes [115] — 3 [96] 7 [10] Total financial items [112] [99] Financing expenses related to refinancing Other financing expenses In 2007 and 2006 no expenses were recorded relating to refinancing activities. 2007 2006 in millions of euro, unless stated otherwise Cash interest expenses Interest income Dividend Preference Shares Non-cash interest Exchange results due to translation of long-term internal and external borrowings Total other financing expenses [85] 4 [11] [10] [13] [74] 3 [11] [10] [4] [115] [96] Cash interest expenses in 2007 were up €10 million, as a result of increased capital need, following the acquisitions of ATG and Educational Experience, and a slightly increased average blended interest rate. Non-cash interest includes amortisation cost related to long-term borrowings, such as the imputed interest on the convertible bond, and amortisation of capitalised financing costs. The exchange results in 2007 and 2006 relate to translation differences on the mismatch between inter-company loans that do not qualify as permanent investments and the currency overlay for our external debt. Subsequent result from disposal of operations In 2006 a pre-tax (non-cash) benefit of €9 million (€6 million net of tax) was recorded as an accounting consequence of transferring pension assets and liabilities from Corporate Express' Dutch pension fund following the divestment of our former Paper Merchanting Division in 2003. An amount of €1 million was released from provisions related to divestments of prior years. Taxes Our international operations are subject to income taxes of different jurisdictions with varying statutory tax rates. Corporate Express' effective tax rate was 3% income in 2007 and 7% cost in 2006. The effective tax rate is determined based on the ratio of taxes to the amount of result from operations before taxes and expenses related to the Preference Shares A, as these dividends are non-tax deductible. For a detailed calculation of the effective tax rate, see Note 14 to the Financial Statements. The tax benefit of €3 million in 2007 includes a benefit of €30 million as the result of further recognition of deferred tax assets and releases of deferred tax liabilities. The tax expense of €10 million in 2006 includes a benefit of €3 million as the result of lower net deferred tax liabilities due to the enacted change of the tax rate in the Netherlands in fiscal year 2007 (from 29.6 to 25.5%). Further, the 24 2006 tax expense was reduced by €4 million following the assessment of the outcome of a tax dispute in Italy and by €2 million as result of the recognition of deferred tax assets due to, among other things, the increased funding level of the Dutch pension scheme. Net result 2007 2006 in millions of euro, unless stated otherwise Operating result Total financial items Net result from continuing operations Net result from discontinued operations Net result total Group Attributable to: —Holders of ordinary shares Corporate Express NV —Minority interests in Group companies 201 [112] 89 106 195 178 17 223 [99] 124 18 142 123 19 Minority interests represent the 41.2% (2006: 46.5%) share at year-end of third-parties in the net result of Corporate Express Australia Ltd. In April 2007, Corporate Express Australia completed an off-market share buyback. As a result of strong shareholder participation, the size of the original buyback target was increased from AU$50 million to approximately AU$90 million. In doing so, 16,984,761 of its fully paid ordinary shares were purchased at the buyback price of AU$5.30 per share. Corporate Express chose not to participate in the buy-back, thereby increasing its interest in Corporate Express Australia to 58.8%. Previously, following Corporate Express Australia's on-market share buy-back in 2006, Corporate Express had increased its share from 53.1% to 53.5%. Net result from discontinued operations In the financial statements and other financial information included in this annual report on Form 20-F, business activities that were divested, are reported under discontinued operations in accordance with IFRS 5. As a result, Corporate Express' financial reporting is based primarily on continuing operations. In 2007, ASAP Software results are presented retrospectively in the line 'net results from discontinued operations', and cash flows are presented retrospectively as the line items 'net cash from operating/investing/ financing/discontinued operations'. See Note 6 to our Financial Statements. The result on the sale of the Veenman Germany business is presented as income under the line item 'other operating expenses', since due to its size it cannot be considered a discontinued operation. The income statements and cash flow statements have been adjusted for the comparative periods 2006-2005 to reflect discontinued operations. The individual lines of the income statement reflect only continuing operations of Corporate Express Group for all years presented. Net result attributable to holders of ordinary shares The net result of €178 million attributable to shareholders of Corporate Express NV in 2007 translates to basic earnings per share of €0.98. Excluding the tax-adjusted impact of special items, exchange results due to the mismatch between inter-company borrowings and external borrowings as reported under net financing costs and amortisation of intangibles, net result in 2007 would have amounted to €124 million, compared to €151 million in 2006, an 18% decrease, representing €0.68 per ordinary share in 2007, compared to €0.84 in 2006. A dividend has been proposed of €0.21 per share. 25 Liquidity Corporate Express' liquidity requirements arise primarily from the need to fund the expansion of its business in the form of working capital requirements, capital expenditure and restructuring or similar projects. Corporate Express' primary source of liquidity is cash generated from operations. The following table sets forth the cash flow movements for the periods indicated. Twelve months ended 31 December 2007 2006 in millions of euro, unless stated otherwise Net cash from operating activities, continuing operations Net cash from operating activities, discontinued operations 227 [5] 188 45 A Net cash from operating activities total Group Net cash from investing activities, continuing operations Net cash from investing activities, discontinued operations 223 121 [4] 232 [376] [5] BNet cash used in investing activities total Group 117 [381] 341 [365] [149] 103 [24] [45] A+B Cash flow available for financing activities C Net cash from financing activities A+B+C Net cash flow Net cash provided by operating activities Operating result adjusted for non-cash items (such as depreciation of tangible fixed assets, amortisation of internally used software and intangible assets and additions/releases of provisions) was €27 million lower in 2007 than in 2006. Working capital increased by €22 million in 2007, compared to an increase of €68 million in 2006. As a percentage of net sales, working capital (four-quarter rolling average) increased to 11.0% as a result of increased inventory levels reflecting an extended supply chain due to the increased direct sourcing out of Asia and temporarily increased inventory related to changes in our distribution infrastructure. Profit tax payments were €1 million lower and other operational payments (such as for restructuring) were €10 million lower in 2007 compared to 2006. Payments regarding the defined benefit pension plans of €7 million were €6 million lower than in the previous year, as 2006 included an additional contribution in the U.K. scheme of £3.8 million. The net effect was an amount of €227 million of cash from operating activities, continuing operations in 2007, compared to €188 million in 2006. Net cash from operating activities, discontinued operations was negative €5 million in 2007 compared to positive €45 million in 2006. Net cash used in investing activities Net capital expenditure of €82 million in 2007 was €8 million higher than in 2006 (€74 million). A significant portion of our capital expenditure relates to the development of information technology, eCommerce and logistics systems. Cash used for acquisitions and received from divestments amounted to an inflow of €203 million in 2007, compared to an outflow of €303 million in 2006. In 2007 we acquired Davenport in Canada, Møller & Landschultz in Denmark and some smaller acquisitions and divested of ASAP Software and 26 Veenman Germany. In 2006 the amount mainly related to the acquisition of ATG, and to a lesser extent to that of Coastwide Laboratories in the USA as well as a number of smaller acquisitions. Net cash used in financing activities On 12 November 2007 we completed the sale of ASAP Software for a total consideration of US$353 million. The net proceeds have been used to pay down debt. Cash interest expenses in 2007 were up €13 million, as a result of an increased capital need, mainly due to acquisitions, and a slightly increased average blended interest rate. In 2006 Corporate Express acquired ATG for a total purchase consideration of €246 million, which was financed by borrowings under the existing debt facilities. In both 2007 and 2006 Corporate Express paid cash dividends on its Preference Shares A of €11 million. In 2007 Corporate Express paid €21 million of dividends on its ordinary shares (2006: €15 million) which is approximately 48% of the total dividend declared on ordinary shares. The dividend was paid out in stock or cash at the option of the shareholder. Payments to minority shareholders were €68 million in 2007 and €10 million in 2006. This includes dividends paid to minority shareholders of Corporate Express Australia and buy-backs by Corporate Express Australia of its own shares in which Corporate Express did not participate. Net cash flow The resulting net cash flow was negative €24 million in 2007 compared to negative €45 million in 2006, reflected in the movements in net liquid funds. Trend information In 2007, we revisited our strategy, made a number of changes in senior management and adressed most of the internal issues in our U.S. business. We started to implement a number of initiatives designed to re-focus and simplify our business. Our new strategic initiatives, announced in October 2007, will enable us to unlock the full potential of our Company. We cannot expect that the financial results will immediately reflect the profound changes that are taking place in our Company but we anticipate to see the results of our operational improvements coming through during 2008, while we are fully aware the economic outlook for 2008 is uncertain. 27 GROUP FINANCIAL REVIEW COMPARISON 2006 and 2005 Major events in 2006 and 2005 The Financial Review should be considered in light of the following major events: 2006 See page 20 for major events in 2006. 2005 On 31 March, the repurchase of all of the issued and outstanding Preference Shares C was completed for an aggregate purchase price of US$520 million in cash. To fund this transaction, Corporate Express issued 7 7 / 8 % of Senior Subordinated Notes due 2015 (2015 Notes) with an aggregate principal amount of US$150 million in February 2005. An amount of €250 million was raised by a discounted rights issue of 39.3 million ordinary shares in March 2005. Another significant special item that was recorded in 2005 was the restructuring of customer care and back-office activities in North America. Key figures 2006 2005 Change in % Change at constant rates(1) in millions of euro, unless stated otherwise Net sales Gross contribution Operating expenses Operating result Gross contribution as a percentage of net sales Operating expenses as a percentage of net sales Operating result as a percentage of net sales (1) 5,497 1,802 [1,579] 223 32.8% 28.7% 4.1% 5,118 1,696 [1,497] 199 33.1% 29.3% 3.9% 7.4% 6.2% 5.4% 12.1% 7.9% 6.7% 5.9% 12.6% See 'Use of non-GAAP Financial Measures' on page 3. Net sales Net sales for Corporate Express Group increased by 7.4% to €5,497 in 2006, from €5,118 in 2005. At constant exchange rates the increase was 7.9%. Net sales on organic basis increased 5%. Overall market conditions were favourable with higher levels of white-collar employment and increased average spend on office products per employee. However, economic growth in North America slowed during the second half of the year. Markets in Europe improved gradually during the course of the year with still significant differences between individual countries. We put more focus on the profitability of sales growth in the large account segment. We were pleased that our initiatives in the mid-market segment started to pay off. In North America, our internal focus on the streamlining of the sales activities impacted new business generation negetively resulting in a reduced organic growth rate in the last months of the year. The success of our product range extension was particularly reflected in strong sales growth in facility supplies, helped by the acquisition of Coastwide Laboratories in May of this year and improved 28 performance in document and print management. In Australia we acquired Educational Experience, an educational supplies business, and also completed some other relatively small acquisitions. Our position in Europe was considerably strengthened by the acquisition of ATG, that has held a leading position in the Nordic region. Printing Systems Division doubled its operating result mainly by achieving 11.8% sales growth, while keeping costs under control. The table below presents a calculation, on organic(1) basis, of the development of net sales for the Group. 2006 2005 Change in % in millions of euro, unless stated otherwise Net sales Effect of currency exchange rate movements 5,497 — 5,118 [23] Net sales at constant exchange rates Acquisitions and divestments Adjustment for 'imputed sales' Variation in the number of working days 5,497 [155] 7 21 5,095 25 7 — 8% Net sales on an organic basis 5,370 5,127 5% (1) See 'organic' sales analysis on page 4. Gross contribution Gross contribution increased by 6.7% at constant exchange rates. As a percentage of net sales, gross contribution showed a decline from 33.1% in 2005 to 32.8% in 2006. Gross contribution was unfavourably impacted by price erosion following re-tendering and new contract wins in a very competitive market place and paper purchase price increases that could only be passed on to customers on a delayed basis as well as the negative mix impact of the change in product mix. Also, we experienced higher shares of lower margin large accounts and lower margin product categories such as computer supplies and an adverse business mix (i.e. strong growth in Printing Systems which realises relatively lower margin levels). These margin pressures could be partially offset by the benefits from our private brands and merchandising initiatives as well as overall margin management. Operating result Operating result of the Group increased 12.1% from €199 million in 2005 to €223 million in 2006. At constant exchange rates the increase was 12.6%. Operating result as a percentage of net sales increased to 4.1%. The improvement in the operating result was due to an increase in the gross contribution of 6.7% at constant exchange rates, which was partially offset by an increase in operating expenses of 5.9% at constant exchange rates. Total share-based payment charges amounted to €8 million in 2006 (€7 million in 2005) and were allocated to the business segments. Corporate operating expenses, not allocated to the business segments, were €4 million in 2006 compared to €12 million in 2005, due to favourable pension income and lower incidental expenses. Regarding pensions, total operating expenses included income of €22 million in 2006 and €18 million in 2005 mainly related to the financing portion (interest costs less expected return on plan assets) of the pension plan in the Netherlands, which is by far the largest defined benefit plan in the 29 Group. Out of this income, approximately €20 million in 2006 and €17 million in 2005 is included in Corporate operating expenses, and relates to the inactive participants of the plan. The assumptions used to calculate the pension income and benefit obligations of this plan are listed in Note 22 of the Financial Statements. A change in the assumptions used to calculate the pension obligation and related costs (service and interest costs) resulted in a higher net pension income of approximately €2 million in 2006. The average expected rate of return on plan assets for the Dutch plan was 6.6% in 2006 and 7.0% in 2005. The effect of a lower rate on the expected return on plan assets, which is part of the calculation of net pension income, was offset by a higher fair value of the plans' assets in 2006 compared to 2005. The actual return on plan assets of the pension plan in the Netherlands, after investment fees and administration expenses, was 7% in 2006 and 15% in 2005. Special items included in operating expenses in 2006 and 2005 In 2006, we incurred in total €35 million in one-off costs, such as double running and relocation expenses, for the centralisation of back-office functions and the streamlining of the organisation in North America. We also recorded €5 million for optimising our facilities in the Benelux and the further restructuring of Veenman Germany. In 2005, in the Office Products North America business segment we recorded a €10 million charge for the centralisation of local administrative operations such as credit and collections and customer care. A charge of €4 million was recorded in the Office Products North America business segment to settle with the U.S. Department of Justice allegations that Corporate Express Office Products submitted false claims in connection with the sale of office products to U.S. government agencies that were from countries of origin not designated under the Trade Agreements Act. Restructuring charges of €8 million were recorded related to the German furniture business, Veenman Germany and Corporate Express Benelux. Excluding these special items, operating expenses would have increased 4.4% at constant exchange rates and operating result would have increased 19.8% on the same basis. Financial items 2006 2005 in millions of euro, unless stated otherwise Refinancing expenses Other financing expenses Subsequent result from disposal of operations Taxes — [96] 7 [10] [85] [106] 5 [12] Total financial items [99] [198] Financial expenses related to refinancing In 2006 no expenses were recorded relating to refinancing activities. In 2005 Corporate Express placed the 2015 Notes, the proceeds of which were used to repurchase the Preference Shares C, together with a discounted rights issue which raised €250 million. The expenses related to the placement of the 2015 Notes and the discounted rights issue have been recorded as a deduction from the proceeds and have not been recorded in the income statement. The repurchase of the Preference Shares C resulted in a charge of €85 million in 2005. This special item constitutes the difference between the value paid and the book value of the liability and conversion option which were both recorded as debt. 30 Other financing expenses 2006 2005 in millions of euro, unless stated otherwise Cash interest expenses Interest income Dividend Preference Shares Non-cash interest Exchange results due to translation of long-term internal and external borrowings [74] 3 [11] [10] [4] [64] 3 [19] [8] [18] Total other financing expenses [96] [106] Cash interest expenses in 2006 were up €10 million, mainly as result of the financing of the acquisition of ATG. Non-cash interest includes amortisation cost related to longterm borrowings, such as the imputed interest on the convertible bond, and amortisation of capitalised financing costs. The exchange results in 2006 relate to translation differences in the mismatch between intercompany loans that do not qualify as permanent investments and the currency overlay for our external debt. The exchange results in 2005 include a similar mismatch, but relate predominantly to the Preference Shares C which were denominated in US$and translated into euro. The accrual for dividend on Preference Shares decreased due to the repurchase of the Preference Shares C in March 2005. Subsequent result from disposal of operations In 2006 a pre-tax (non-cash) benefit of €9 million (€6 million net of tax) was recorded as an accounting consequence of transferring pension assets and liabilities from the Corporate Express Dutch pension fund, following the divestment of our former Paper Merchanting Division in 2003. An amount of €1 million was released from provisions related to the divestments of prior years. The release in 2005 of €5 million relates to our former subsidiary Kappa Packaging which was divested in 1998. Taxes Our international operations are subject to income taxes of different jurisdictions with varying statutory tax rates. Corporate Express' effective tax rate was 6.8% in 2006 and 9.0% in 2005. The effective tax rate is determined based on the ratio of taxes to the amount of result from operations before taxes and expenses related to the Preference Shares A (and C in 2005), as these items are exempted from taxes. (For a detailed calculation of the effective tax rate, see Note 14 to the Financial Statements). The tax expense of €10 million in 2006 million includes a benefit as the result of lower net deferred tax liabilities due to the enacted change of the tax rate in the Netherlands as per fiscal year 2007 (from 29.6 to 25.5%). Further, the 2006 tax rate was positively influenced as a result of a favourable development of a tax dispute in Italy (€4 million) and a further recognition of deferred tax assets (€2 million) among others due to the increased funding levels of the Dutch pension scheme. In 2005, taxes include a €4 million benefit due to the further recognition of deferred tax assets. 31 Net result 2006 2005 in millions of euro, unless stated otherwise Operating result Total financial items Net result from continuing operations Net result from discontinued operations Net result total Group Attributable to: —Holders of ordinary shares Corporate Express NV —Minority interests in Group companies 223 [99] 124 18 142 123 19 199 [198] 1 20 21 2 19 Minority interests represent the 46.5% (2005: 46.9%) share at year-end of third-parties in the net result of Corporate Express Australia Ltd. In April 2005, Corporate Express Australia completed its off-market share buy-back. A total of 6.3 million of its own shares was purchased for A$35 million. Corporate Express chose not to participate in the buyback, thereby raising its interest in Corporate Express Australia to 53.1%. As a result of Corporate Express Australia's on-market share buy-back in 2006, Corporate Express' share increased further, from 53.1% to 53.5%. Net result attributable to holders of ordinary shares The net result of €123 million attributable to shareholders of Corporate Express NV in 2006 translates to basic earnings per share of €0.68. Excluding the tax-adjusted impact of special items, exchange results due to translation of long-term internal and external borrowings as reported under net financing costs, and amortisation of intangibles, net result in 2006 would have amounted to €151 million, compared to €119 million in 2005, a 27% increase, representing €0.84 per ordinary share in 2006, compared to €0.71 in 2005. In line with the Dividend Policy, a dividend was proposed and paid of €0.21 per share. Liquidity Corporate Express' liquidity requirements arise primarily from the need to fund the expansion of its business, working capital requirements, capital expenditure and restructuring. Corporate Express' primary source of liquidity is cash generated from operations. The following table sets forth the cash flow movements for the periods indicated. Twelve months ended 31 December 2006 2005 in millions of euro, unless stated otherwise Net cash from operating activities, continuing operations Net cash from operating activities, discontinued operations 188 45 216 15 A Net cash from operating activities total Group Net cash from investing activities, continuing operations Net cash from investing activities, discontinued operations B Net cash used in investing activities total Group 232 [376] [5] [381] 232 [81] [5] [86] A+B Cash flow available for financing activities C Net cash from financing activities [149] 103 145 [199] [45] [54] A+B+C Net cash flow 32 Net cash provided by operating activities Operating result adjusted for non-cash items (such as depreciation of tangible fixed assets, amortisation of internally used software and intangible assets and additions/releases of provisions) was €26 million higher in 2006 compared to 2005. Working capital increased by €68 million in 2006 in comparison with an increase of €30 million in 2005. As percentage of net sales, working capital (four-quarter rolling average) increased to 10.7%, as a consequence of the growth of our business and increased inventory levels reflecting an extended supply chain due to increased direct sourcing out of Asia. Profit tax payments were €2 million higher and other operational payments (such as for restructuring) were €10 million higher in 2006 compared to 2005. Payments regarding the defined benefit pension plans of €13 million were €4 million higher than in 2005, including an additional contribution in the U.K. scheme of £3.8 million. The net effect was a decrease of €28 million in cash from operating activities, continuing operations from €216 million in 2005 to €188 million in 2006. Discontinued operations delivered net cash from operating activities of €45 million in 2006 and €15 million in 2005. Net cash used in investing activities Net capital expenditure of €74 million in 2006 was €16 million higher than in 2005 (€58 million). A significant portion of our capital expenditure represents the development of information technology, eCommerce and logistics systems. Cash used for acquisitions amounted to €303 million in 2006, mainly related to the acquisition of ATG and to a lesser extent to that of Coastwide Laboratories in the USA and a number of smaller acquisitions. In 2005, cash used for acquisitions amounted to €20 million relating to several small asset acquisitions (in the Office Products North America business segment and in the Office Products Australia business segment). Net cash used in financing activities In 2006 Corporate Express acquired ATG for a total consideration of €278 million (excluding debt and including fees a purchase consideration of €246 million) which was financed by borrowings under the existing debt facilities. Mainly as a result of the increased borrowings, interest payments in 2006 were up €13 million. In 2005, Corporate Express placed the 2015 Notes with an aggregate principal amount of US$150 million. The net proceeds of the 2015 Notes were US$142 million (€110 million), after deduction of transaction expenses. Corporate Express also executed a discounted rights issue which raised €239 million, after deduction of transaction expenses. The proceeds of the 2015 Notes and discounted rights issue were used to finance the repurchase of the Preference Shares C for US$520 million (€401 million). In both 2006 and 2005 Corporate Express paid cash dividends on its Preference Shares A of €11 million. All Preference Shares C were repurchased in 2005. In 2006 Corporate Express paid €15 million in dividends on its ordinary shares (2005 €12million) which is about 48% of the total dividend declared on ordinary shares. The balance was paid out as dividend in stock at the option of the shareholder. Payments to minority shareholders were €10 million in 2006 and €31 million in 2005. This includes dividends paid to minority shareholders of Corporate Express Australia and the buy-back by Corporate Express Australia of its own shares in both 2006 and 2005 in which we did not participate. 33 Net cash flow The resulting net cash flow was negative €45 million in 2006 compared to negative €54 million in 2005 which was reflected in the movements in net liquid funds. 34 OVERVIEW OF BUSINESS SEGMENTS OFFICE PRODUCTS NORTH AMERICA Introduction Headquartered in Broomfield, Colorado, Corporate Express North America is a leading business-to-business supplier of office products and related services in North America. Office Products North America includes the office products businesses of Corporate Express in the U.S. and Canada and the operations for promotional marketing (PROMO), document and print management (DPM) and imaging and computer graphic supplies (ICGS). Corporate Express North America manages a dynamic assortment of about 50,000 items from some 170 locations. It operates approximately 1,100 dedicated delivery vehicles and has around 10,000 employees, including 1,600 sales representatives. Business strategy Corporate Express North America aims to consolidate its leading position in the large account business, which currently represents over 80% of sales. The business also aims to further increase sales in the very sizeable midmarket sector. The business continues to leverage its distribution channel by extending its product range, focusing in particular on the fragmented facility supplies market. Corporate Express North America is pursuing various sourcing initiatives including forming partnerships with key suppliers on a global basis in order to strengthen category management, utilise inherent purchasing power and expand private brands where it makes economic sense. The aim is to increase sourcing potential, brand awareness and customer loyalty as well as to improve margins. Key figures 2007 2006 Change in % Change at constant rates(1) in millions of euro, unless stated otherwise Net sales Gross contribution Operating expenses Operating result Gross contribution as a percentage of net sales Operating expenses as a percentage of net sales Operating result as a percentage of net sales (1) 2,967 969 [886] 83 32.7% 29.9% 2.8% 3,187 1,074 [943] 131 33.7% 29.6% 4.1% [6.9%] [9.7%] [6.0%] [36.8%] 1.0% [2.1%] 2.0% [31.7%] See 'Use of non-GAAP financial measures' on page 3. Competition Corporate Express North America believes that customers in the office supplies market prefer to deal directly with large value-added office products suppliers. These can provide the lowest total cost of managing their office products needs, while guaranteeing high levels of service, convenience and rapid delivery. From this perspective, the largest competitors are the business services activities of OfficeMax, Office Depot, and Staples. These businesses—and many smaller, often regional, office products distributors and other businesses which are penetrating the office products market—compete for the contracts or other arrangements to sell office products to many of the same kinds of customers as Corporate Express does. 35 Comparison of 2007 and 2006 As of 1 January 2007, postage expenses relating to the mailing activity in our print and forms business, which are reimbursed by our customers, have been accounted for on a 'gross' basis instead of on a 'net' basis, as was previously the case. As a result, 2007 reported sales, gross contribution and operating expenses all increased by €19 million or approximately 0.6%, 1.7%, and 2.0% respectively, compared to 2006. Net sales Net sales of Office Products North America declined by 6.9%, from €3,187 million in 2006 to €2,967 million in 2007. The sales performance was strongly impacted by the weakening of the US dollar against the euro. At constant exchange rates, sales increased by 1.0%. On an organic basis, sales decreased by 1%. Continued economic uncertainty in North America combined with increased (price) competition had a negative effect on sales. Despite on average modest price inflation, certain product categories, such as paper, suffered from sharply higher prices. The U.S. office supplies market showed no growth, particularly due to reduced spending on discretionary items (such as white boards, beamers and furniture) and a decelerating growth of white-collar employment. Our net sales in the Office Products North America business segment were also impacted by the lingering effects of last year's reorganisation process. Management's attention is focused on adapting our U.S. operations to address the increasingly competitive market conditions and to improve our operating results by focusing on various sales activities. Organic sales growth recovered in the last quarter; we regained our strong position in the large accounts segment, while growth in de mid-market was still below average. We achieved strong sales growth in facility supplies, helped by the acquisition of Coastwide Laboratories in 2006, and by the launch of the Sustainable Earth product line, an environmentally friendly cleaning products with Green Seal Certification. Document and print management and promotional marketing products also performed well in 2007 with healthy sales growth. The reduced spending on discretionary items was most evident in our furniture business. We generated strong sales in Canada, winning market share in office supplies and furniture, at the time the local market was growing rapidly due to strong demand for natural resources. End of August 2007, we acquired Davenport, an office supplies and furniture distribution company based in Ontario. The table presents a calculation, on an organic(1) basis, of the development of net sales. 2007 2006 Change in % in millions of euro, unless stated otherwise Net sales Effect of currency exchange rate movements Net sales at constant exchange rates Acquisitions and divestments Adjustment for 'imputed sales' Variation in the number of working days Net sales on an organic basis (1) 2,967 — 2,967 [16] 7 9 2,966 See 'organic' sales analysis on page 4. 36 3,187 [252] 2,935 19 28 — 2,982 1% [1%] Gross contribution Gross contribution declined by 2.1% at constant exchange rates. As a percentage of net sales, gross contribution decreased to 32.7% from 33.7%. The change in accounting for postage expenses that are reimbursed by our customers impacted gross contribution by €19 million positively. The decline was mostly due to difficulties in fully passing on supplier price increases. We also experienced a negative product mix, with higher shares of lower margin product groups such as facility supplies, computer supplies and paper, and relatively increased sales to lower margin strategic and large account customers. These margin pressures could partially be offset by the margin benefits from our private brands and preferred supplier initiatives. Private brands amounted to 31% of sales, helped by the success of a full range of writing instruments and discretionary items such as white boards. Operating result Operating result declined due to lower sales volumes and price pressure that could only partially be offset by cost saving initiatives with respect to non-sales related activities and functions. In 2007, we recorded €22 million of one-off charges, primarily related to personnel reduction costs at our U.S. headquarters and investments in our logistics infrastructure. One-off and restructuring costs in 2006 amounted to €35 million. We also incurred integration expenses related to the acquisition of Davenport in Canada. Excluding the impact of the aforementioned one-off costs and the impact of the above mentioned accounting change for postage expenses, operating expenses were equal to last year at constant rates. Excluding these one-off items, operating result would have declined from €166 million in 2006 to €105 million in 2007. Comparison of 2006 and 2005 Key figures 2006 2005 Change in % Change at constant rates(1) in millions of euro, unless stated otherwise Net sales Gross contribution Operating expenses Operating result Gross contribution as a percentage of net sales Operating expenses as a percentage of net sales Operating result as a percentage of net sales (1) 3,187 1,074 [943] 131 33.7% 29.6% 4.1% 3,048 1,054 [911] 143 34.6% 29.9% 4.7% 4.4% 1.9% 3.5% [8.2%] 4.8% 2.2% 3.9% [8.3%] See 'Use of non-GAAP financial measures' on page 3. Net sales Net sales of Office Products North America increased 4.4% from €3,048 million in 2005 to €3,187 million in 2006. At constant exchange rates, the increase was 4.8%. On an organic basis, sales increased 4%. 2006 was a year of considerable change for Office Products North America. The U.S. Office Products organisation was transformed from a geographical profit centre structure to a product line and customer segment driven organisation. In addition to the streamlining of the organisation, U.S. Office Products centralised administrative operations, such as credit and collections and customer care operations to drive cost-efficiencies and enhance customer experience by improving service and 37 execution of marketing and sales initiatives. By making these changes, Office Products North America invested in its long-term health. However, the internal focus on completing these streamlining and centralisation activities impacted new business generation negatively. The growth in organic sales was driven by strength in large account business while we increased focus on the profitability of this segment. Sales growth in the mid-market resumed and improved on a relative basis following our investment in people, focused organisation structure and fine-tuned market approach. We saw strong sales growth in facility supplies, helped by the acquisition of Coastwide Laboratories in May of this year, and profitability growth in document and print management. Canada showed a consistent strong performance and completed three minor acquisitions. Lastly, our promotional products company expanded in the U.K. with a small acquisition. Our private brands programme in North America represented 28% of the office products sales in 2006, compared to 25% in 2005. The table below presents a calculation of the development of sales on an organic(1) basis. 2006 2005 Change in % in millions of euro, unless stated otherwise Net sales Effect of currency exchange rate movements Net sales at constant exchange rates Acquisitions and divestments Adjustment for 'imputed sales' Variation in the number of working days Net sales on an organic basis (1) 3,187 — 3,187 [21] 7 16 3,189 3,048 [9] 3,038 23 7 — 3,068 5% 4% See 'organic' sales analysis on page 4. Gross contribution Gross contribution increased by 2.2% at constant exchange rates. As a percentage of net sales, gross contribution decreased to 33.7% from 34.6%. The decline was caused by the impact of price-erosion following re-tendering and new contract wins in a very competitive market place and paper purchasing price increases that could only be passed on to customers on a delayed basis. We also experienced a negative mix due to higher shares of lower margin large accounts and lower margin product categories. These margin pressures could be partially offset by the benefits from our private brands and preferred supplier initiatives. Operating result Operating result benefited from a higher gross contribution (albeit at a lower percentage of net sales) but was negatively impacted by one-off operating expenses, such as double running and relocation costs related to the organisational streamlining and centralisation of the North American operations. These one-off and restructuring costs amounted to €35 million in 2006 and €10 million in 2005. In the fourth quarter of 2005 we recorded a charge of €4 million to settle with the U.S. Department of Justice allegations that Corporate Express Office Products submitted false claims in connection with the sales of office products to U.S. government agencies that were from countries of origin not designated under the Trade Agreements Act. Operating result declined from €143 million in 2005 to €131 million in 2006. Excluding the impact of the aforementioned one-off costs, operating expenses increased 1.5% at constant rates, mainly as a result of ordinary cost inflation, higher warehousing and delivery expenses due to higher sales volumes partially offset by an estimated US$19 million of savings from the centralisation and streamlining projects. 38 OVERVIEW OF BUSINESS SEGMENTS OFFICE PRODUCTS EUROPE Introduction With its headquarter in Amsterdam, Corporate Express Europe is a major distributor of business-to-business office supplies. Together with its partners, it operates in 24 countries, forming a strong pan-European network. Business is mainly conducted under the name Corporate Express employing around 4,000 people operating from approximately 130 locations. Business strategy Corporate Express Europe aims to grow its business through a 'differentiated sales approach', which means it tailors its sales strategy to the different types of customer the company is targeting. For example, an international account management approach is frequently used for large international companies, while direct marketing is more appropriate for small office and home office operations. Corporate Express Europe continues to harmonise its European business and operations. It is integrating its international account management systems to strengthen its position as a full-service supplier of office products and related services to businesses and institutions. Certain functions, such as merchandising, international account management, international category management, eCommerce management and increasingly IT support, have recently been centralised operating at a European level. Competition The office products industry in Europe is highly fragmented with no single company accounting for more than 10% of the total market. Corporate Express Europe, which offers a wide variety of products and services, frequently competes against companies that focus on only a few products or categories of products within one or only a few countries or even regions. From a pan-European perspective, Corporate Express' principal competitors include Lyreco and Office Depot. In addition, Corporate Express faces competition from various direct marketing companies and, in many countries, relatively strong local distributors. Comparison of 2007 and 2006 Key figures 2007 2006 Change in % Change at constant rates(1) in millions of euro, unless stated otherwise Net sales Gross contribution Operating expenses Operating result Gross contribution as a percentage of net sales Operating expenses as a percentage of net sales Operating result as a percentage of net sales (1) 1,289 433 [401] 32 33.6% 31.1% 2.5% 1,002 315 [300] 15 31.4% 30.0% 1.5% 28.7% 37.5% 33.6% 28.6% 37.5% 33.5% See 'Use of non-GAAP financial measures' on page 3. As from 1 January 2007, the Veenman copier businesses were transferred from the Office Products Europe business segment to the Printing Systems business segment. 2006 results have been restated accordingly. 39 Net sales The European economy showed signs of sustained economic recovery with growing employment during 2007. Net sales generated by the Office Products Europe business segment increased 28.7%, from €1,002 in 2006 to €1,289 in 2007. Organic sales growth of 6% was driven by markets share gains in both our core markets, such as the Nordic countries, Germany, the Benelux and the U.K., as well as in smaller markets, such as Ireland. Italy and Austria, however, did not perform as well. Our leading position in the Nordic-region was further strengthened by the acquisition of the Danish distribution company Møller & Landschultz in the fourth quarter of 2007. Sales in the Nordic region amounted to €458 million, in Germany to €313 million, in the U.K. to €169 million and in the Benelux countries to €158 million. We achieved growth in net sales in all customer segments. Sales growth in the pan-European account segment was driven by landing new accounts. In addition, sales in the large account and mid-market segments (primarily in the Nordic countries, Germany and the U.K.) increased year-on-year by 23% and 47%, respectively. All product categories posted organic growth, with facility supplies (in the large accounts segment) and furniture (in Germany) doing particularly well. The table below presents a calculation of the development of sales on organic(1) basis. 2007 2006 Change in % in millions of euro, unless stated otherwise Net sales Effect of currency exchange rate movements Net sales at constant exchange rates Acquisitions and divestments Variation in the number of working days Net sales on an organic basis (1) 1,289 — 1,289 [1] 14 1,302 1,002 1 1,002 228 — 1,230 29% 6% See 'organic' sales analysis on page 4. Gross contribution The Office Products Europe business segment increased its gross contribution margin by 2.2%-point, benefiting from the inclusion of ATG (with strong sales of traditional office supplies) and the success from pan-European merchandising and margin improvement initiatives. Gross contribution increased 37.5% at constant rates, from €315 million to €433 million. Operating result As a result of the strong sales growth combined with the substantial margin improvement, operating result increased from €15 million in 2006 to €32 million in 2007. Operating expenses increased 33.5% at constant rates due to the sales volume growth (including the full year impact of ATG) and the continued investments in IT harmonisation and the further build-up of centralised European resources. Operating expenses also include €8 million of one-off charges mostly related to the planned consolidation of our German distribution centres (including a provision for to be terminated lease obligations). In 2006 we recorded €3 million of one-off charges for optimising our facilities for Corporate Express in the Netherlands. Excluding these special charges, operating expenses increased 32.3% at constant rates and operating result would have improved from €18 million to €40 million. 40 Comparison of 2006 and 2005 Key figures 2006 2005 Change in % Change at constant rates(1) in millions of euro, unless stated otherwise Net sales Gross contribution Operating expenses Operating result Gross contribution as a percentage of net sales Operating expenses as a percentage of net sales Operating result as a percentage of net sales (1) 1,002 315 [300] 15 31.4% 30.0% 1.5% 840 252 [253] [1] 30.0% 30.1% [0.2%] 19.2% 25.0% 18.5% 19.1% 24.8% 18.4% See 'Use of non-GAAP financial measures' on page 3. Net sales Markets in Europe improved gradually during 2006 with still significant differences between individual countries. The Office Products Europe business segment was able to realise promising sales growth. This was underpinned by the acquisition of ATG, the leading office products group in the Nordic region, providing us with a stronger platform for profitable growth. In addition, we acquired the Spanish company Offiexpress in the first half of 2006, marking our entry in the Spanish market. Net sales increased from €840 million in 2005 to €1,002 million in 2006, an increase of 19.1% at constant exchange rates. Organically, net sales growth was 7%. Sales growth was driven mainly by the large account business while the mid-market performance started to improve in most product categories. Almost all operating companies contributed to the sales growth. The United Kingdom (sales of €160 million) and Benelux (sales of €151 million) in particular showed rewarding sales performances. Our leadership position in Germany (sales of €305 million) was further reinforced, although competitive market conditions warrant attention towards realising a satisfactory gross contribution growth. In addition, most other countries, like France and Ireland, posted strong sales growth. From a product group perspective, computer supplies and facility supplies saw good growth, validating the success of our product line extensions. Sales of our private brands in Europe remained stable at 23% of our office supplies and computer supplies sales. Sales of ATG since the acquisition date amounted to €101 million which represented 11% growth over the period on a pro-forma basis. 41 The table below presents a calculation of the development of net sales on an organic(1) basis. 2006 2005 Change in % in millions of euro, unless stated otherwise Net sales Effect of currency exchange rate movements Net sales at constant exchange rates Acquisitions and divestments Variation in the number of working days Net sales on an organic basis (1) 1,002 — 1,002 [113] 6 895 840 1 840 — — 840 19% 7% See 'organic' sales analysis on page 4. Gross contribution Gross contribution benefited from the acquisition of ATG, both in absolute and relative terms. Gross contribution increased 24.8% at constant exchange rates from €252 million in 2005 to €315 million in 2006. As a percentage of net sales, gross contribution improved significantly to 31.4% (versus 30.0% last year). In addition to higher margin levels realised by ATG, margin management across Europe and the success of our merchandising programme could more than offset the adverse impact of costs attached to acquiring new customers and negative mix effects such as relatively strong growth in Germany (where lower margin levels are achieved) and higher sales shares of lower margin computer supplies. Operating result Operating result improved from a €1 million loss in 2005 to a profit of €15 million in 2006 (of which €7 million was attributable to ATG). Whereas gross contribution increased by 24.8%, operating expenses increased only 18.4% (mostly due to higher warehousing and delivery expenses related to higher sales volumes). Continued focus on cost control and benefits from various restructuring initiatives were partly offset by cost increases related to a further centralisation of European functions and the effects of cost inflation. We recorded special charges both in 2006 and 2005. In 2006 we recorded €3 million for optimising our facilities for Corporate Express in the Netherlands. In 2005, restructuring charges of €6 million were recorded related to the German furniture business and Corporate Express Benelux. Excluding these special charges, operating expenses increased 20% at constant rates and operating result would have improved from €5 million to €18 million. 42 OVERVIEW OF BUSINESS SEGMENTS OFFICE PRODUCTS AUSTRALIA Introduction Headquartered in Sydney, Office Products Australia is a leading business-to-business supplier of office, warehouse and factory essentials in Australia and New Zealand, operating under the brand name Corporate Express. Corporate Express Australia has over 2,500 employees, working from 50 locations (including 36 distribution centres). Corporate Express NV owns 59% of the shares of Corporate Express Australia Ltd. The remaining 41% are quoted on the Australian Stock Exchange (ASX). Business strategy Corporate Express Australia's growth strategy is focused on being the single-source supplier of choice to gain a larger share of its customers' business. The business will achieve this by expanding its product range and geographic coverage through organic growth and acquisitions. Corporate Express Australia continues to expand its customer base by focusing on mid-market customers. Competition Corporate Express Australia is a leading single-source distributor of office and business supplies in Australia and New Zealand. As a result of our single-source model Corporate Express Australia operates across many different business sectors in a fragmented market place. Competition therefore comes from a multitude of other distributors who focus on only a few products or have only an overlap in a limited number of categories of products. In the office products line of business the most sizeable competitors are OfficeMax and Lyreco. Comparison of 2007 and 2006 Key figures 2007 2006 Change in % Change at constant rates(1) in millions of euro, unless stated otherwise Net sales Gross contribution Operating expenses Operating result Gross contribution as a percentage of net sales Operating expenses as a percentage of net sales Operating result as a percentage of net sales (1) 796 258 [193] 65 32.4% 24.3% 8.1% 743 232 [172] 60 31.2% 23.2% 8.0% 7.1% 11.3% 12.3% 8.4% 5.1% 9.3% 10.3% 6.4% See 'Use of non-GAAP financial measures' on page 3. Net sales In an environment of ongoing economic growth, driven largely by demand for natural resources in Western Australia, Office Products Australia realised net sales growth of 7.1% or 5.1% at constant exchange rates. Organic sales growth was 2%, driven largely by strong sales of (educational) supplies following the successful acquisitions of Educational Experience in 2006 and Raeco in 2007. In addition, sales of facility supplies grew strongly. Selling these lines of business to existing office products customers highlights the success of our single source supplier concept. We continued to grow market 43 share organically by expanding the amount of product sold to existing customers and expanding further into the medium and small-sized customer sectors. The table presents a calculation, on an organic(1) basis, of the development of net sales. 2007 2006 Change in % in millions of euro, unless stated otherwise Net sales Effect of currency exchange rate movements Net sales at constant exchange rates Acquisitions and divestments Variation in the number of working days Net sales on an organic basis (1) 796 — 796 [6] — 790 743 14 757 19 — 776 5% 2% See 'organic' sales analysis on page 4. Gross contribution Because of the high growth in sales of educational supplies and other positive product mix changes, the gross contribution margin improved strongly, from 31.2% to 32.4%. As a result of the margin improvement and the strong sales growth, gross contribution improved from €232 million in 2006 to €258 million in 2007, an increase of 9.3% at constant exchange rates. Operating result Operating expenses increased 10.3% at constant rates, as a result of volume growth, growth in costs related to sales of services, and acquisitions. We expect that the ongoing implementation of project OneSource, which is designed to permit us to realise a more centralised and more efficient structure with consolidated purchasing and procurement, will lead to increased cost leverage. Operating result improved with 6.4% at constant rates, from €60 million in 2006 to €65 million in 2007. Comparison of 2006 and 2005 Key figures 2006 2005 Change in % Change at constant rates(1) in millions of euro, unless stated otherwise Net sales Gross contribution Operating expenses Operating result Gross contribution as a percentage of net sales Operating expenses as a percentage of net sales Operating result as a percentage of net sales (1) 743 232 [172] 60 31.2% 23.2% 8.0% See 'Use of non-GAAP financial measures' on page 3. 44 701 216 [156] 59 30.7% 22.3% 8.4% 6.1% 7.6% 10.1% 1.0% 8.3% 9.9% 12.4% 3.1% Net sales In an environment with favourable market conditions, Office Products Australia realised net sales growth of 8.3% at constant exchange rates. The net sales growth was attributable mainly to the good performance of facilities supplies, furniture and promotional marketing products. Selling these lines of business to existing office products customers highlights the success of our single source supplier concept. Additionally our performance was underpinned by an increasing presence in the mid-market. The IT business continued to shift away from low-margin large customers to the more attractive small and medium-sized customer segment. Thanks to the gains in the mid-market, traditional stationery products also showed a positive performance. A total of five acquisitions (including a strategically significant acquisition in educational supplies) with annualised sales of AU$60 million were completed. On an organic basis, net sales growth was 3%. The table presents a calculation, on an organic(1) basis, of the development of net sales. 2006 2005 Change in % in millions of euro, unless stated otherwise Net sales Effect of currency exchange rate movements Net sales at constant exchange rates Acquisitions and divestments Variation in the number of working days Net sales on an organic basis (1) 743 — 743 [21] [3] 720 701 [14] 686 10 — 696 8% 3% See 'organic' sales analysis on page 3. Gross contribution Gross contribution improved from €216 million in 2005 to €232 million in 2006, an increase of 9.9% at constant exchange rates. Gross contribution as a percentage of net sales improved from 30.7% in 2005 to 31.2% in 2006 as a result of margin management initiatives and a better product mix (a lower share of low margin hardware and software products and relatively stable share of traditional office products) thereby more than offsetting competitive pressure resulting in lower margin levels following the retendering by customers. Operating result Operating result increased from €59 million in 2005 to €60 million in 2006, an increase of 3.1% at constant rates. Operating expenses increased by 12.4% at constant exchange rates. Besides having additional expenses resulting from acquisitions, higher operating expenses resulted also from higher sales volumes. Office Products Australia implemented its initiative Project OneSource, aiming to reduce duplicate costs in the individual businesses, by moving from a regional to a functional structure. In 2006, some restructuring expenses were incurred for the implementation of OneSource. 45 OVERVIEW OF BUSINESS SEGMENTS PRINTING SYSTEMS Introduction Headquartered in Amsterdam, the Printing Systems Division consists of two related activities, Graphic Systems and the Veenman business. Graphic Systems is a leading valueadded reseller of printing equipment and related services, supplies and spare parts. The activities of the Veenman business include selling and servicing printing equipment of hard copy and electronic documents to companies within the Netherlands. This division, which employs over 1,200 people, is active in Belgium, Greece, Italy, Luxembourg, the Netherlands and Spain. Graphic Systems is the largest independent distributor of industry-leading Heidelberg offset printing presses. It also offers customers digital pre-press equipment, such as scanners, computer-to-film, computer-to-plate equipment and finishing systems. Business strategy Printing Systems seeks to leverage its position as a supplier of printing equipment. In order to reduce cyclicality, Printing Systems has developed its Triple S strategy, which involves offering customers a total solution to their printer-related needs. This strategy also reinforces long-term relationships with Printing Systems' customers. Industry overview The market for graphic systems comprises three categories: (i) printing systems hardware, (ii) service contracts and (iii) consumables and software. In 2007, 68% of the industry's sales were attributable to hardware, and 32% of sales resulted from providing services, supplies and spare parts. The printing industry has a relatively high cyclicality because a substantial part of its sales consist of investment goods. Such investment decisions are often influenced by prevailing economic conditions. In general, printing firms decide to invest in new printing equipment either to increase their capacity or to upgrade when existing equipment becomes economically obsolescent. The lead time between ordering and installing the equipment is generally a number of months. The major trade show for the graphic arts industry, DRUPA, is held once every four years. DRUPA is a showcase for new technology and usually results in increased orders. The next DRUPA will be held in May 2008. The supplies market (film, plates and ink) is more fragmented and characterised by many small orders that need to be delivered at very short notice. Competition Competition in this market is primarily driven by product quality, pricing, service and sales coverage. Corporate Express believes it has a strong advantage over its competitors in all of these areas. Good customer database management and knowledge of complex printing processes, combined with high-quality service and equipment, prevent competitors from entering these markets. 46 Comparison of 2007 and 2006 Key figures 2007 2006 Change in %(1) in millions of euro, unless stated otherwise Net sales Gross contribution Operating expeneses Operating result Gross contribution as a percentage of net sales Operating expenses as a percentage of net sales Operating result as a percentage of net sales (1) 578 179 [147] 32 30.9% 25.4% 5.5% 565 181 [159] 22 32.1% 28.2% 3.9% 2.3% [1.4%] [7.8%] 44.7% In the Printing Systems business segment the changes at constant exchange rates are the same as in actual rates as the business is only conducted in euro. As of 1 January 2007, the activities of Graphic Systems and the Veenman copier businesses were combined in the Printing Systems business segment. Results have been restated accordingly. Net sales Benefiting from the upward trend in the investment cycle in the printing sector, the Printing Systems business segment achieved strong results, characterised by strong machine sales and good cost control. Order intake improved despite the fact that customers may have postponed orders in the run-up to the international print media trade fair in Düsseldorf, Germany (DRUPA), which is taking place every four years (the previous DRUPA was in 2004). Net sales increased by 2.3% from €565 million in 2006 to €578 million in 2007. All Graphic Systems' operating companies reported healthy sales growth, driven primarily by replacement sales of printing presses. In 2007, Triple S (supplies, spare parts and services in Graphic Systems) sales accounted for 32% of sales and showed sales growth of 2%, which was primarily driven by market share gains in our supplies business. The sale of Veenman Germany was completed per late October 2007, but economic ownership, as contractually agreed upon, moved to Konica Minolta on 31 May 2007. The table presents a calculation, on an organic 1 basis, of the development of net sales. 2007 2006 Change in % (1) in millions of euro, unless stated otherwise Net sales Net sales at constant exchange rates Acquisitions and divestments Variation in the number of working days Net sales on an organic basis (1) 578 578 [15] 3 566 565 565 [36] — 529 See 'organic' sales analysis on page 4. Gross contribution Gross contribution was €179 million in 2007 compared to €181 million in 2006, a decrease of 1.4%. As a percentage of net sales, gross contribution was 30.9% in 2007 compared to 32.1% in 2006. The decline was due to a higher share of machinery sales with lower gross margin levels than Triple S sales. Also the sale of Veenman Germany impacted the gross contribution development negatively. 47 2% 7% Operating result Operating expenses were well-controlled and declined by 7.8% (including the impact of the sale of Veenman Germany). As a percentage of sales, operating expenses declined from 28.2% to 25.4%. As a result, operating result increased by 44.7%, from €22 million in 2006 to €32 million in 2007. Comparison of 2006 and 2005 Key figures 2006 2005 Change in %(1) in millions of euro, unless stated otherwise Net sales Gross contribution Operating expeneses Operating result Gross contribution as a percentage of net sales Operating expenses as a percentage of net sales Operating result as a percentage of net sales (1) 565 181 [159] 22 32.1% 28.2% 3.9% 529 175 [165] 11 32.2% 31.1% 2.0% 6.9% 3.4% [3.5%] 110.8% In the Printing Systems business segment the changes at constant exchange rates are the same as in actual rates as the business is only conducted in euro. As of 1 January 2007, the activities of Graphic Systems and Veenman copier businesses were combined in Printing Systems business segment. Results have been restated accordingly. Net sales Net sales increased by 6.9% from €529 million in 2005 to €565 million in 2006. Although the investment climate was slightly improving, we witnessed a recovery at a slower pace than in previous cyclical recoveries. Order intake in 2006 developed well. Nevertheless, sales in the graphics industry were driven by replacements rather than capacity expansion. In 2006, Triple S (supplies, spare parts and services in Graphic Systems) sales accounted for 34% of sales and showed sales growth of 8%, which was primarily driven by market share gains in our supplies business. The table presents a calculation, on an organic 1 basis, of the development of net sales 2006 2005 Change in % (1) in millions of euro, unless stated otherwise Net sales Net sales at constant exchange rates Variation in the number of working days Net sales on an organic basis (1) 565 565 3 568 529 529 — 529 See 'organic' sales analysis on page 4. Gross contribution Gross contribution was €181 million in 2006 compared with €175 million in 2005, an increase of 3.4%. As a percentage of net sales, gross contribution was 32.1% in 2006 compared to 33.2% in 2005. The decline was due to a higher share of machinery sales with lower gross margin levels than Triple S sales. 48 7% 7% Operating result As a result of the higher sales level and resulting gross contribution, operating result doubled in 2006, from €11 million in 2005 to €22 million. Furthermore, the business segment's operating costs remained well-controlled; operating expenses decreased by 3.5%, a decline as a percentage of net sales from 31.2% to 28.2% as the increased sales level was realised with slightly reduced headcount following a continuing emphasis on efficiency in all aspects of the business. We recorded special charges both in 2006 and 2005 related to Veenman Germany. Excluding these special charges, operating expenses decreased 3% at constant rates and operating result would have improved from €12 million to €24 million. 49 CORPORATE GOVERNANCE Introduction 51 Executive Board 51 Supervisory Board 53 Regulations concerning securities 56 Indemnification of members of the Executive Board and Supervisory Board 56 The General Meeting of Shareholders 57 Description of share capital and Articles of Association 60 Provision of information 64 Audit of financial reporting and role of internal and external auditors 65 Compliance with the Dutch Corporate Governance Code 66 50 CORPORATE GOVERNANCE This chapter describes our corporate governance structure and certain of the provisions of our Articles of Association and Dutch law.(1) The corporate governance principles we employ are documented in the Articles of Association of the Company and policy documents published in the 'Corporate Governance' section of the website of the Company (www.cexpgroup.com). They will be reviewed and amended when deemed necessary. (1) This description is only a summary and does not purport to be complete and is qualified in its entirety by reference to our Articles of Association and Dutch law. Introduction Corporate Express NV is a public limited company ('naamloze vennootschap'), incorporated on 6 January 1875 under Dutch law and is the parent company of the Corporate Express Group. We endorse the importance of good corporate governance, which is understood to include honest and transparent actions on the part of management, correct supervision thereof and the acceptance of responsibility for that supervision. The Company is required to comply with, inter alia, Dutch corporate governance rules, the U.S. Sarbanes-Oxley Act, New York Stock Exchange rules and related regulations, each insofar as applicable to the Company. This report addresses the Company's overall corporate governance structure and states to what extent it applies the provisions of the Dutch Corporate Governance Code (the 'Code') of 9 December 2003. A summary of significant differences between the Company's corporate governance structure and the New York Stock Exchange corporate governance standards is published on the Company's website. The Executive Board and the Supervisory Board are responsible for the corporate governance structure of the Company and are of the opinion that all of the principles of the Code are endorsed and the vast majority of the best practice provisions are applied. Some best practice provisions of the Code are not or not fully applied and the reasons for these deviations are set out hereinafter. A summary of best practice provisions that are not (fully) applied by the Company may be found on page 68. At the Annual General Meeting of Shareholders (AGM) held on 29 April 2004, the Executive Board and the Supervisory Board reported on the corporate governance structure of the Company. At the AGM held on 14 April 2005, further changes made to the corporate governance structure were discussed. No material changes were made to the corporate governance structure during 2007. In 2008 the By-Laws of the Supervisory Board were changed with respect to the maximum number of Board memberships a Supervisory Board member may have (see paragraph 'Independence, expertise, composition and term of appointment' below). The provision regarding the discretion of the Supervisory Board to employ its own advisors was also elaborated. Substantial changes in the corporate governance structure will be submitted to the General Meeting of Shareholders for consideration. Executive Board General The executive management of Corporate Express is entrusted to its Executive Board under the chairmanship of the Chief Executive Officer (CEO). The Executive Board currently consists of three members. After the resignation of George Dean in April 2008, the Executive Board will consist of two 51 members. The members of the Executive Board have collective powers and responsibilities. They share responsibility for managing the Company, determining and deploying its strategy and policies, achieving its objectives and results and developing a sound personnel policy. For practical purposes the Executive Board has adopted a division of responsibilities indicating the functional and business areas monitored and reviewed by the individual members. The Executive Board is accountable for the performance of its assignment to the Supervisory Board and to the General Meeting of Shareholders. In discharging its duty, the Executive Board focuses on the interests of the Company, taking into consideration the interests of its shareholders and other capital providers, employees, customers and suppliers. No member of the Executive Board was elected pursuant to any arrangement or understanding with major shareholders, customers, suppliers or others. The Executive Board follows the By-Laws of the Executive Board, which are published on the Company's website. In its responsibility for the day-to-day office products business of the Group and the execution of the Group strategy, the Executive Board is assisted by the Executive Management Group, which was formed after an announcement made on 1 October 2007 and which will lead the Company operationally from 1 January 2008 onwards. The Executive Management Group consists of the members of the Executive Board, senior geographical and functional leaders (see Report of the Supervisory Board). Individual data on the members of the Executive Board and Executive Management Group is published on pages 11 and 12. Risk management approach The Executive Board is responsible for ensuring compliance with all relevant legislation and regulations. It is responsible for proper financing of the Company and for managing the risks attached to the Company's activities. The Executive Board reports on and accounts for internal risk management and control systems to the Supervisory Board and the Audit Committee. Term of appointment The members of the Executive Board, appointed prior to 2004, are appointed indefinitely. Our policy is that these appointments cannot be changed unilaterally by the Company into fixed-term positions. New members of the Executive Board will be appointed for a term of four years, provided that market circumstances so permit. In April 2007, Peter Ventress was appointed member of the Executive Board for a term of four years. The composition of the Executive Board, its performance, as well as the performance of individual members of the Executive Board is reviewed annually by the Supervisory Board. Determination and disclosure of remuneration of the Executive Board The Remuneration Report compiled by the Supervisory Board explains the Company's remuneration policy for members of the Executive Board and discloses the structure and amount of compensation for individual Executive Board members (see pages 78 to 87). The remuneration policy presented in the Remuneration Report was adopted by the 2004 AGM and amended by the 2006 AGM. Any material amendments to the remuneration policy will be submitted for adoption to the General Meeting of Shareholders. Determining the remuneration for individual Executive Board members is in principle a responsibility of the Supervisory Board. The Supervisory Board has delegated this authority to the Compensation, Nominating and Corporate Governance Committee for one year. This policy will be reviewed each year by the Supervisory Board. Remuneration of the individual members of the Executive Board is consistent with the remuneration policy. 52 The remuneration structure, including severance pay, aims to support the interests of the Company in the medium and long term. It does not encourage members of the Board to act in their own interests and neglect the interests of the Company, and it does not 'reward' failing Board members upon termination of their employment. The Company does not grant personal loans, guarantees or the like to members of the Executive Board and no such (remissions of) loans and guarantees are outstanding as per 31 December 2007. Severance pay The contracts with members of the Executive Board which were appointed before 2007 state that a fixed severance payment will be made in the event of involuntary dismissal. Involuntary dismissal is defined as employment that is terminated as a result of an acquisition of the Company or when actual control of the Company passes into other hands ('change of control'). It can also occur as the result of a reorganisation, termination of the Company's activities or other circumstances that cannot be considered as unsatisfactory performance on the part of the Board member concerned. In such cases, an amount of three times the annual fixed salary will be paid. Accumulation of pension and certain predefined other deferred income will also continue for a period of three years. We believe that this provision ensures that the Executive Board can fully concentrate on the interests of the Company and those associated with the Company when evaluating a possible merger, acquisition or reorganisation. However, it has been determined that this provision will not be included in the contracts of new members of the Executive Board appointed from 2007 and accordingly Peter Ventress' contract does not include such a provision. For other dismissal situations, no fixed severance payment has been arranged with the members of the Executive Board. Corporate Express will consider each case separately and pay an amount of compensation that it feels is reasonable based on the reason for the termination, the age of the person in question and the duration of employment. In some cases, this amount could exceed the compensation mentioned in the Code. An important factor will be how well a Board member has performed his duties. Conflicts of interest In compliance with the Code, the Company has formalised strict rules to avoid conflicts of interests between the Company and members of the Executive Board. The Supervisory Board must approve all decisions about transactions in which conflicting interests of Executive Board members are involved and transactions which are of material significance for the Company and/or members of the Executive Board. No conflicts of interest were reported in 2007. Supervisory Board General The Supervisory Board supervises the policies of the Executive Board and the general course of affairs of Corporate Express and advises the Executive Board on these matters. In doing so, the Supervisory Board is guided by the interests of the Company and the relevant interests of the Company's stakeholders. The Supervisory Board supervises and advises the Executive Board in performing its management tasks and setting the direction of the Group's business, including: • achievement of the Company's objectives; • the strategy and risks inherent in the business activities; • the structure and operation of the internal risk management and control systems; • the financial reporting process; and • compliance with legislation and regulations. 53 Major decisions and the Group's strategy are discussed with the Supervisory Board. In its report, the Supervisory Board describes its activities in the financial year, the number of (committee) meetings and the main items discussed. Individual data on the members of the Supervisory Board are published on pages 73 and 74. Independence, expertise, composition and term of appointment The Supervisory Board, in the two-tier corporate structure under Dutch law, is a separate body that is independent of the Executive Board. The Supervisory Board considers all of its members to be independent as defined in the By-Laws of the Supervisory Board and in the Code. No member of the Supervisory Board was elected pursuant to any arrangement or understanding with major shareholders, customers, suppliers or others. No member of the Supervisory Board can also be or is a member of management and no family relatives of the Supervisory Board are part of management. The By-Laws of the Supervisory Board that are published on the Company's website stipulate the qualification requirements for individual members of the Supervisory Board and the requirements for the composition of the Supervisory Board. They require that every Supervisory Board member be qualified to assess the broad outlines of the overall policy of Corporate Express and have the specific expertise that is necessary to fulfil his or her duty. They also require that the Supervisory Board be composed in such a way that it can carry out its duties properly and that the reappointment of a Supervisory Board member will only take place after careful consideration. The Supervisory Board must consist of at least three members according to its By-Laws of the Supervisory Board and currently consist of six members, including a Chairman and Vice Chairman. Pursuant to a change in the By-Laws of the Supervisory Board made in February 2008, members of the Supervisory Board shall not have more than five supervisory board memberships in Dutch listed companies as recommended by the Code. The By-Laws of the Supervisory Board also determine that a Supervisory Board member should limit the number and nature of his other positions (whether or not they are supervisory board positions in Dutch listed companies) so as to ensure satisfactory performance of his duties as a Supervisory Board member. This policy is reviewed in the annual performance evaluation of the Supervisory Board. Members of the Supervisory Board are appointed for a period of four years and may serve on the Board for a maximum of three four-year terms. Composition and role of the Committees of the Supervisory Board The Supervisory Board, while retaining overall responsibility, has delegated certain tasks to an Audit Committee and a Compensation, Nominating and Corporate Governance Committee ('CNCG Committee'). Specific information about the committees, including the Committee Charters, is published on the Company's website. The main purpose of these Committees is to prepare the foundations which support the decision-making processes of the Supervisory Board. In its report, the Supervisory Board describes the duties of the Committees that have been carried out in the financial reporting year. The Supervisory Board can delegate certain authorities to its Committees. This delegated authority is limited to a maximum of one year and can be renewed if deemed necessary. The respective Committee reports to the Supervisory Board the decisions it has made on the basis of such delegation. The Supervisory Board remains collectively responsible for decisions prepared by the Committees. 54 Audit Committee The Audit Committee consists of at least three members of whom at least one should qualify as a financial expert as defined in the Audit Committee Charter. Currently two of the three members of the Audit Committee (Mr Izeboud and Mr De Swaan) qualify as financial experts, and all members of the Audit Commitee qualify as 'independent' as defined in the By-Laws of the Supervisory Board. The Audit Committee assists the Supervisory Board in fulfilling its oversight responsibilities in relation to: • the Company's accounting and financial reporting practice, policies and procedures (including judgments and estimates, significant reporting issues, material adjustments and the robustness of the processes); • the quality of the Company's internal control systems and risk assessment (understanding the risks the Company is exposed to and how they are effectively dealt with, and oversight of the internal audit function); • the quality of the disclosure controls and procedures; • the integrity of the financial statements; and • the performance and evaluation (including its independence) of the external auditor and advice on the replacement of the external auditor. The meetings of the Audit Committee are attended by the Company's Chief Financial Officer, the Director Accounting & Control, the Director Internal Audit, the external auditor and other individuals if and when required. The Chief Executive Officer attends the meetings whenever deemed appropriate by the Audit Committee or by himself. The Audit Committee has been delegated authority to take independent decisions about the approval of the services from the external auditor as set forth in the 'External Auditor Policy' that is published on the Company website. Considering their significant interest to the Company, matters concerning Corporate Express' financing are an integral part of the meetings of the Supervisory Board. Compensation, Nominating and Corporate Governance Committee (CNCG Committee) The CNCG Committee consists of at least three members and assists the Board with the following tasks: • drafting the remuneration policy for members of the Executive Board; • drafting the Remuneration Report; • making proposals for remuneration of individual members of the Executive Board; • reviewing share-based compensation schemes; • assessing the composition and performance of the Executive Board and the Supervisory Board and advising on selection criteria and appointment procedures; • reviewing the succession plan, evaluation process, selection criteria, appointment procedures and compensation structure of the Company's top management; and • advising on the development and implementation of corporate governance guidelines. Given the size of the Supervisory Board, it was decided to combine the tasks in the area of Board nomination, remuneration policy and corporate governance policy into one Committee. The Supervisory Board considers it important that the Chairman of the Supervisory Board is closely involved with the appointment and reappointment of members of the Supervisory Board and the Executive Board and 55 with the corporate governance structure, two of three areas that are part of the CNCG Committee's duties. For this reason, the CNCG Committee is chaired by the Chairman of the Supervisory Board. The CNCG Committee cannot be chaired by a Supervisory Board member who is also a member of an executive board of another Dutch listed company or who is a former member of the Executive Board of the Company. Remuneration of the Supervisory Board The General Meeting of Shareholders determines the remuneration of the Supervisory Board members. The remuneration of a Supervisory Board member is not dependent on the results of the Company. The Remuneration Report (see pages 86 and 87) contains information on the level and structure of the remuneration of individual Supervisory Board members. Conflicts of interest In compliance with the Code, the Company has formalised strict rules to avoid conflicts of interest between the Company and members of the Supervisory Board. Decisions to engage in transactions in which interests of Board members play a role, which have a material significance for the Company and/or for the Board members concerned, require approval by the Supervisory Board. The Supervisory Board is responsible for taking decisions on handling conflicts of interest between the Company and members of the Executive Board and Supervisory Board, major shareholders and the External Auditor. No conflicts of interest were reported in 2007. Regulations concerning securities The Regulations regarding the Ownership of and Transactions in Securities by Executive Board members and Supervisory Board members ('the Regulations concerning Securities') apply to securities of companies listed in the Netherlands, other than the Company. We do not apply the best practise provision of the Code in so far as it provides that at least once per quarter all Board members need to give notice to the Compliance Officer of the Company of any changes in their holdings of securities in Dutch listed companies (other than the Company). We believe that applying these provisions would create a cumbersome administrative burden. In the performance of their tasks, members of the Company Supervisory Board and Executive Board do not generally receive price-sensitive information about other Dutch listed companies. All Board members have the responsibility to behave ethically and to comply with applicable laws and regulations, including insider trading rules of the Company that prohibit, inter alia, trading in shares in companies about which they possess price-sensitive information. The Regulations concerning Securities are posted on our website in the By-Laws of the Executive Board and Supervisory Board. Indemnification of members of the Executive Board and Supervisory Board Unless the law provides otherwise, the members of the Executive Board and of the Supervisory Board shall be reimbursed by the Company for various costs and expenses, such as the reasonable costs of defending claims, as formalised in the Articles of Association. In certain circumstances, described in the Articles of Association, such as an act or failure to act by a member of the Executive Board or a member of the Supervisory Board that can be characterised as gross negligence ('grove nalatigheid'), wilful misconduct ('opzet') or intentional recklessness ('bewuste roekeloosheid'), there will be no entitlement to this reimbursement. The Company has also taken out Directors & Officers liability insurance for the persons concerned. 56 The General Meeting of Shareholders General A General Meeting of Shareholders is held at least once a year. Meetings may be convened by the Supervisory Board or the Executive Board and must be held if shareholders jointly representing at least 10% of the outstanding share capital make a written request to that effect to the Supervisory Board and the Executive Board, specifying in detail the business to be dealt with. Shareholder meetings; Voting rights Our Annual General Meeting shall be held annually, and not later than six months after the end of our financial year. Extraordinary General Meetings of Shareholders shall be held as often as the Executive Board or the Supervisory Board deem necessary. Any General Meeting of Shareholders shall be held in Amsterdam. General meetings of shareholders shall be convened by the Supervisory Board or the Executive Board. The convocation shall take place no later than the fifteenth day prior to the date of the meeting, and shall be carried out by means of a notice in a national daily paper and in the Official Price List. The notice of the meeting shall state the requirement for admission to the meeting. Each shareholder is entitled to attend a General Meeting of Shareholders in person or be represented by written proxy, address the meeting and exercise voting rights with due observance of the provisions of the Articles of Association, provided that such shareholder is a holder of such interests on the applicable record date set by the Executive Board with respect to the meeting. In order to gain admittance, holders of registered ordinary shares or depositary receipts must notify the Executive Board in writing of their intention to attend the meeting not later than the applicable date mentioned in the notice, which date may not be later than the seventh day prior to the date of the meeting. In addition, instruments of proxy with respect to ordinary shares or depositary receipts must be delivered to the Executive Board not later than the applicable date set forth in the notice, which date may not be later than the third day prior to the meeting. A holder of ordinary shares which are bearer shares, will be entitled to attend upon the delivery of a written statement, not later than seven days before the meeting, from a Necigef-participant that such person is a Necigef-beneficiary. In the case of bearer depositary receipts, the depositary receipt certificates must be deposited at the place and by the applicable date stated in the notice, which date may not be prior to the seventh day prior to the meeting. Pursuant to the Articles of Association, each share of capital stock is entitled to one vote, such that each share of Preference Shares A, Preference Shares B, or ordinary shares is entitled to one vote in all matters properly brought before the shareholders of Corporate Express. Unless the Articles of Association or mandatory law provides otherwise, all shareholders' resolutions require an absolute majority of the votes cast. For more information on the voting rights attached to the (depositary receipts of) Preference Shares A, see also pages 60 and 62. Powers—general Good corporate governance assumes full participation of shareholders in the decision-making process in the General Meeting of Shareholders. It is in the Company's interest to have as many shareholders as possible participate in the decision-making process in the General Meeting of Shareholders. We shall do everything reasonably possible to enable the shareholders to vote by proxy and to communicate with all other shareholders. Corporate Express was one of the founders of the Stichting Communicatiekanaal Aandeelhouders (Shareholders' Communication Channel Foundation or Communication Channel) in 1998. The 57 Communication Channel offers participating shareholders the opportunity to cast their vote without personally being present or represented in the General Meeting of Shareholders and may also be used by (groups of) shareholders for proxy solicitation. The General Meeting of Shareholders should be able to exert such influence on the policy of the Executive Board and the Supervisory Board of the Company that it plays a full role in the system of 'checks and balances' in the Company. Decisions of the Executive Board on a major change in the identity or the character of the Company are submitted for approval by the General Meeting of Shareholders. For example, Corporate Express called an Extraordinary General Meeting of Shareholders in October 2003, to ask for the shareholders' approval for the sale of the Paper Merchanting Division. In March 2005 an Extraordinary General Meeting of Shareholders was called to request approval for the repurchase of the Preference Shares C and related financing issues. The most important powers of the General Meeting of Shareholders of Corporate Express NV are: • Adoption of financial statements, including appropriation of the results; • Determination of dividend in accordance with the provisions of the Articles of Association; • Release from liability of the Executive Board and the Supervisory Board; • Appointment, suspension and dismissal of the members of the Executive Board and the Supervisory Board; • Adoption of the remuneration policy for the Executive Board; • Determination of the remuneration for the members of the Supervisory Board; • Approval of the share based remuneration plan for members of the Executive Board; • Appointment and dismissal of the External Auditor; • Delegation for a specified period to the Executive Board of the right to issue shares and take up shares (option rights); • Amendment of the Articles of Association pursuant to the proposal by the Executive Board and subject to the approval of the Supervisory Board, by absolute majority of the votes cast; and • Providing authorisation to the Executive Board for the Company to purchase its own shares. Any substantial amendment to the corporate governance structure and amendments to the Policy on Appropriation of Net Results will also be presented to the General Meeting of Shareholders. The right to place an item on the agenda Shareholders can ask the Executive Board or Supervisory Board to place certain items on the agenda of the General Meeting of Shareholders. These requests are granted if they: • are submitted at least 60 days before the General Meeting of Shareholders by; • shareholders, who, on their own or together, represent at least 1% of our issued capital or whose shares on the date of the announcement of the meeting have a market value of at least €10,000,000; and • assuming that there are no important interests of the Company that could prevent them being placed on the agenda. 58 Appointment of Executive Board and Supervisory Board The appointment of members of the Executive Board and of the Supervisory Board shall be made following a non-binding nomination by the Supervisory Board. A resolution of the General Meeting of Shareholders to approve of an appointment in accordance with a nomination by the Supervisory Board requires an absolute majority of the votes cast. In the event of a candidate nominated by the Supervisory Board not being appointed by the General Meeting of Shareholders, the Supervisory Board will nominate a new candidate. Shareholders who have the right to place an item on the agenda of the General Meeting of Shareholders are also entitled to nominate a candidate. A resolution of the General Meeting to appoint a member of the Executive Board or of the Supervisory Board other than in accordance with a nomination by the Supervisory Board, requires an absolute majority of the votes cast representing more than one-third of the issued capital. At a General Meeting of Shareholders, votes can only be cast for candidates named in the agenda or explanatory notes of the meeting. The General Meeting of Shareholders may decide to suspend or remove a member of the Executive Board or the Supervisory Board. A resolution of the General Meeting of Shareholders to suspend or remove a Board member that is not in accordance with a proposal of the Supervisory Board, requires an absolute majority of the votes cast representing more than one-third of the issued capital. Dividends The proposed dividend for a financial year must be approved by the General Meeting of Shareholders, which is typically held in April of the following financial year, and the dividend is paid after this meeting. Dividend payments are only allowed to the extent that the shareholders' equity is in excess of the sum of the paid-up capital and any reserves required under Dutch law. Under the Articles of Association, before the dividend will be paid to any other class of shares, the dividend with respect to the Preference Shares A must be paid first from the profits earned in any given financial year. The annual dividend on the Preference Shares A is fixed for successive periods of eight years. For the period ending 31 December 2009 the dividend per share is equal to €0.21 per annum. The annual dividend on the Preference Shares A is based on a percentage of the liquidation preference of those shares (which is €3.40355), which percentage is equal to 1.25 points above the arithmetic mean of the average effective yields on Dutch government bonds with terms of seven to eight years, as calculated by the Central Office for the Statistics and published in the Official Stock Exchange List of Euronext Amsterdam. From the balance of the remaining profits after the dividend on the Preference Shares A has been paid, Corporate Express will pay a dividend on the Preference Shares B, if such Preference Shares B have been issued. The percentage of this dividend is to be calculated over the paid up portion of the nominal value and is equal to the repurchase interest rate of the European Central Bank plus or minus a maximum of three percentage points, to be determined by the Executive Board and subject to the approval of the Supervisory Board. The profit remaining after payment of dividends on the Preference Shares A and (where applicable) Preference Shares B may be distributed as a dividend to the holders of the ordinary shares, subject to any allocation to reserves. The General Meeting of Shareholders may, at the proposal of the Executive Board which has been approved by the Supervisory Board, resolve that a payment of dividend on ordinary shares be wholly or partly in shares. In the event that for any given fiscal year the dividend payments referred to above cannot be made (in whole or in part) because there are insufficient profits, payment of the deficiency shall be made out of the profits from succeeding financial years; first insofar as possible pro rata on the Preference Shares A and thereafter on the issued Preference Shares B if any are issued. The Executive Board, subject to the approval of the Supervisory Board, may decide to carry out payment of dividend on Preference Shares by charging such payment to the distributable part of the capital and reserve, except for the 59 share premium reserve A. Furthermore the General Meeting of Shareholders, at the proposal of the Executive Board which has been approved by the Supervisory Board, may decide to make a distribution of dividend to holders of ordinary shares out of the distributable part of the capital and reserves, except for the share premium reserve A. Liquidation Upon the liquidation or dissolution of Corporate Express NV, any remaining balance after the payment of debts shall be distributed first to the holders of Preference Shares A to the extent of the sum of (1) any unpaid and accrued dividends and (2) an amount per Preference Share A, equal to a yield basis per share of €3.40355. In the event that the existing balance of funds is not sufficient to carry out the above distribution to holders of Preference Shares A in full, the available balance will be distributed amongst the holders thereof on a pro rata basis equal in proportion to the yield basis per share as set forth above. Any balance of funds remaining after the distribution to holders of Preference Shares A shall then be distributed to holders of Preference Shares B, if such Preference Shares B have been issued, to the extent of the sum of (1) any outstanding dividend payable on the Preference Shares B and (2) the nominal amount paid on the Preference Shares B. If the remaining balance is insufficient to carry out the above distribution to the holders of Preference Shares B in full, the distribution shall be effected in proportion to the amounts paid on the shares. Any remaining balance after the distribution of funds to holders of Preference Shares A and to holders of Preference Shares B shall be distributed to holders of ordinary shares on a pro rata basis with respect to the total amount of ordinary shares held. Description of share capital and Articles of Association General Our Articles of Association were last amended by a notarial deed dated 19 April 2007. We have our head office at Hoogoorddreef 62, (1101 BE) Amsterdam and our registered seat in Maastricht. We are registered with the Trade Register of the Chamber of Commerce of Amsterdam under file number 33250021. Share capital As of 31 December 2007, our authorised share capital amounted to €1,080,000,000, divided into 395,000,000 ordinary shares, 55,000,000 Preference Shares A, and 450,000,000 Preference Shares B, with a nominal value of €1.20 per share each. The ordinary shares may, at the option of the Corporate Express shareholders, be bearer shares or registered shares. The issued bearer ordinary shares are represented by one single share certificate, the Necigef Global Certificate. The Preference Shares A and B are registered shares. As of 31 December 2007, the issued share capital was divided into 182,847,847 ordinary shares and 53,281,979 Preference Shares A, all of which have been fully paid up. No Preference Shares B were issued as of 31 December 2007. Preference Shares A On 31 December 2007, all Preference Shares A had been taken into administration in Stichting Administratiekantoor van Preferente Aandelen Corporate Express, or Trust Office, against which depositary receipts with limited convertibility were issued. The Trust Office was established under Dutch law in May 1994, and has its registered seat in Maastricht. 60 The purpose of the Trust Office is to issue and administer depositary receipts of Preference Shares A. The holders of the depositary receipts receive all the economic benefits which attach to ownership of the Preference Shares A. The depositary receipts can be exchanged for Preference Shares A in accordance with the provisions of the Articles of Association. Our Articles of Association provide that Preference Shares A may be transferred to natural persons only and that a transfer or issue of Preference Shares A or voting rights relating to Preference Shares A shall not be possible if such transfer would result in the acquirer acquiring more than 1% of the capital issued in the form of Preference Shares A or 1% of the voting rights attached to such shares. Our Articles of Association contain certain exceptions to these transfer restrictions and the Executive Board may under certain circumstances grant an exemption from these transfer restrictions. The depositary receipts are listed on Euronext Amsterdam N.V.. Notwithstanding the general provision in the Articles of Association which provides that each share of capital stock is entitled to one vote, an arrangement with the Trust Office exists such that the voting rights attached to the Preference Shares A held by the Trust Office that can be exercised at a General Meeting of Shareholders are determined by reference to the value of the Preference Shares A in proportion to the value of the ordinary shares in the capital of Corporate Express. The voting right is calculated on the basis of the total value of all Preference Shares A (calculated by multiplying the number of Preference Shares A outstanding and the stock market price of one depositary receipt for such Preference Share A) divided by the stock market price of one ordinary share, both on the last trading day of the month prior to the month in which the applicable shareholders' meeting is convened, capped at a maximum of one vote per Preference Share A. At the request of a holder of depositary receipts and subject to the transfer restrictions described above and certain limitations set out in our Articles of Association, the Trust Office will grant a written proxy, with the power of substitution, to the holder to exercise the voting rights attached to the underlying Preference Shares A. The terms of administration of the Trust Office provide that the voting rights to be exercised by a holder of depositary receipts, as proxy of the Trust Office, is also related to the capital interest of the depositary receipts held by the holder of the depositary receipts in proportion to the value of the ordinary shares, calculated in accordance with what is set out above. The voting right that may then be exercised by the depositary receipt holder, as proxy of the Trust Office, may be exercised at his or her own discretion. The Trust Office is charged with exercising the voting rights attached to the Preference Shares A (except for those Preference Shares A for which it has issued a proxy) in a manner which primarily safeguards the interests of the holders of depositary receipts, taking into account the interests of Corporate Express, its affiliates and all of its stakeholders. The board of the Trust Office comprises five members: three members A and two members B. The members A are appointed by the board of the Trust Office. The members B are appointed by the holders of depositary receipts representing Preference Shares A. As of 31 December 2007, these members were Messrs R.A.H. van der Meer and W.O. Wentges. The other members of the board of the Trust Office are Messrs A.A. Loudon (Chairman), R.W.F. van Tets and C.J.A. Reigersman. All members of the board of the Trust Office are independent of Corporate Express as defined in Appendix X of the General Rules of Euronext Amsterdam N.V. and defined in the Dutch Corporate Governance Code. All best practice provisions of the Code concerning Depositary Receipts have been applied. In 2007 a meeting of holders of depositary receipts of Preference Shares A was held. In this meeting the 2006 report to depositary receipt holders was discussed as well as the agenda of the General Meeting of Shareholders of Corporate Express NV to be held in April 2007. Furthermore, the depositary receipt holders present or represented in the meeting voted in favour of the re-appointments of Messrs Van der Meer and Wentges as members B of the board of the Trust Office for a term of four 61 years. At this meeting, the holders of depositary receipts expressed their confidence in the board of the Trust Office. Preference Shares B Preference Shares B may be issued, inter alia, as a (preventive) measure against a hostile acquisition or a concentration of power, that is created without the Executive Board having been able to safeguard the continuity and independence, which are maintained in the interest of Corporate Express and all those involved with Corporate Express. For this purpose, Corporate Express and the Stichting Preferente Aandelen Corporate Express (the 'Protection Trust') have a call option agreement in place relating to Preference Shares B. In December 2007, the Company decided to terminate the put option after considering certain developments in the area of corporate governance. The agreement with the Protection Trust entitles the Protection Trust to subscribe for Preference Shares B in the capital of Corporate Express. This mechanism will allow the Company a period of time to define its position vis-à-vis a bidder for its shares and the bidder's plans, or to counter a concentration of power, and consider alternatives, including—to the extent relevant—the negotiation of a more beneficial transaction. The Preference Shares B will be outstanding no longer than strictly necessary. Once the reason for the placing of the Preference Shares B no longer exists, the Company will propose to the General Meeting of Shareholders to cancel the Preference Shares B entirely as a class. To maintain the effectiveness of the issue of Preference Shares B as a protection instrument, the scope of the authority to issue these shares should extend to such a number of Preference Shares B as corresponds to the issued number of ordinary shares and Preference Shares A at the time of the issue. As a consequence, Preference Shares B may be issued up to a maximum amount equal to the issued share capital of Corporate Express other than in the form of Preference Shares B, minus one. In the event that no public bid on the shares of the Company has been announced, the call option of the Protection Trust is effectively limited to such an amount of Preference Shares B that after these shares having been issued, the Protection Trust can exercise 30% of the votes minus one in a shareholders' meeting of the Company where the entire issued capital is represented. Once any Preference Shares B are issued to Stichting Preferente Aandelen Corporate Express, the Preference Shares B can be withdrawn against payment of the amount paid on these shares plus accrued and unpaid dividends, if any, following a resolution of the General Meeting of Shareholders. After six months after the issue of the Preference Shares B, the Protection Trust has the right to request the Company to convene a General Meeting of Shareholders in which the proposal will be submitted to withdraw all of the issued Preference Shares B. The Protection Trust will exercise its voting rights attached to such Preference Shares B in accordance with its purpose. The objective of the Protection Trust is to promote the interest of Corporate Express and its enterprises (including those of its group companies) in such a way that the interests of Corporate Express and its enterprises and all those involved will be best served, whereby the Protection Trust will, among other things, give attention to the continuity and identity of the enterprises concerned. Upon issue of Preference Shares B, only 25% of the nominal value is required to be paid-up. As of 31 December 2007, no Preference Shares B had been issued. The Protection Trust has the right to file an application for an inquiry into the policy and conduct of business at the Enterprise Chamber of the Amsterdam Court of Appeal (Ondernemingskamer) as granted by the Company. The Company believes that this may be a useful option in the period before the issuance of protective shares, without affecting the rights of other shareholders at that stage. As of 31 December 2007, the board of the Protection Trust comprises: Messrs A.L. Asscher (Chairman), J.F. van Duyne, P. Bouw, K. Vuursteen and L.J.A.M. Ligthart. The Protection Trust is 62 independent of Corporate Express in the meaning of article 5:71 subsection 1 (c) of the Act on Financial Supervision (Wet op het Financieel Toezicht). Issue of shares; Pre-emptive rights The authority to issue ordinary shares has partly been delegated by the General Meeting of Shareholders to the Executive Board pursuant to a resolution dated 12 April 2007. The Executive Board is authorised to issue ordinary shares up to a maximum of 10% of the issued share capital, which percentage is extended by an additional 10% of the issued share capital in the event the issue is related to a merger or an acquisition. For these purposes, issuances of ordinary shares include the granting of rights to subscribe for shares (including convertible debt options and warrants). The authority of the Executive Board to issue ordinary shares will terminate on 11 October 2008 unless it is extended by a resolution of the General Meeting of Shareholders. Prior approval of the Supervisory Board will be required for any Executive Board resolution to issue ordinary shares. Except for (i) issuances of ordinary shares in exchange for non-cash consideration or (ii) issuances to employees of Corporate Express or any of its subsidiaries, or (iii) in the event of a legal merger or legal split-up of Corporate Express, Corporate Express shareholders have pro rata pre-emptive rights to subscribe for new issuances of ordinary shares. These pre-emptive rights may, subject to the prior approval of the Supervisory Board, be restricted or excluded by the corporate body that is authorised to issue shares. The authorisation to limit or exclude the pre-emptive right when issuing ordinary shares was not extended by the General Meeting held in April last year. Although a large majority of the votes exercised in that meeting was in favor of the proposal, the two third majority of the votes—required by operation of law due to the fact that less than half of the issued share capital was represented in the meeting—was not met. The ability to limit or exclude the pre-emptive right when issuing ordinary shares is relevant for the following reason. In certain countries, selling restrictions on the offering of ordinary shares and rights to take up ordinary shares apply. This requires the Company to be able to formally exclude the pre-emptive right ('voorkeursrecht') accruing to shareholders pursuant to article 11 of the Company's articles of association and section 2:96a of the Dutch Civil Code in the context of an issue of ordinary shares. Without this possibility it may be inefficient and time consuming to issue any ordinary shares which will in any case be limited to 10% (or, as the case may be, 20%) of the issued share capital. In accordance with current practice, Corporate Express, in the event of an issue of ordinary shares, intends to offer shareholders the possibility to participate in the issue. Following the above, the Executive Board, with the approval of the Supervisory Board, are again making this proposal to the General Meeting of Shareholders in April 2008. Repurchase of shares We may repurchase our own shares, subject to certain provisions of Dutch law and the Articles of Association. We may not repurchase our own shares if (i) the payment required to make the repurchase would reduce shareholders' equity to an amount less than the sum of paid-in and called portions of the share capital and any reserves required by law or our Articles of Association or (ii) we and our subsidiaries would thereafter hold shares with an aggregate nominal value equal to more than 10% of the issued share capital. Shares owned by us may not be voted. Any repurchase of shares which are not fully paid-up is null and void. A repurchase of shares may be effected by the Executive Board if the Executive Board has been so authorised by the General Meeting of Shareholders, which authorisation may not be granted for a period of more than 18 months. Most recently, the General 63 Meeting of Shareholders granted this authorisation until 11 October 2008 by resolution dated 12 April 2007. Capital reduction Upon the proposal of the Executive Board and subject to the approval of the Supervisory Board, the General Meeting of Shareholders may resolve to reduce Corporate Express' issued share capital by cancellation of shares or by reducing the nominal value of the shares through amendment of the Articles of Association, subject to certain statutory provisions and the provisions of the Articles of Association. Restriction of non-Dutch shareholders' rights Under our Articles of Association, there are no limitations on the rights of non-resident or foreign shareholders to hold or exercise voting rights in respect of our securities, and we are not aware of any such restrictions under Dutch corporate law. Disclosure of share ownership Dutch law (the Act on Financial Supervision) requires public disclosure to the (Dutch) Authority Financial Markets (AFM) with respect to the (potential) ownership of and (potential) voting rights on listed shares when the following thresholds are passed: 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%. As at 31 December 2007, the following entities had reported a significant holding of shares in the capital of the Company: • AllianceBernstein Corporation (10–15%); • Centaurus Capital Ltd (5–10%); • Fortis Utrecht N.V. (5–10%); • ING Group N.V. (10–15%); • Kempen Capital Management N.V. (5–10%); • Stichting Administratiekantoor van Preferente Aandelen Corporate Express (or Trust Office) (20–25%); and • Stichting Preferente Aandelen Corporate Express (50% potential). Provision of information In accordance with the Dutch Act on Financial Supervision, Corporate Express will ensure that any price-sensitive information—information that is concrete and has not publicly been disclosed and whose disclosure might significantly affect the Company's share price—will be disclosed without delay to the general public in the form of a press release that will be disseminated over two or more major wire services, at least one international and one national daily newspaper, and publication on the Corporate Express website. Price-sensitive information that has been publicly released by Corporate Express or is already in the public domain may be discussed by spokespersons designated by the Company on an individual or selective basis. However, if the provision of such information is regarded by Corporate Express to be of interest to the general public—for instance at an Annual General Shareholder's Meeting, quarterly earnings review or presentation to analysts—Corporate Express will make this information available for general dissemination through a conference call, webcast or a presentation which will be broadcast live 64 on a medium that will allow the public, without charge, to receive the information. Following such an event, presentations will be posted on the Corporate Express website and, in so far as reasonably possible, provision will be made for an audio replay to be available for a certain period thereafter. In the ordinary course of business, designated spokespersons regularly communicate with outside parties, such as media or securities industry professionals in one-on-one meetings, group meetings, site visits or industry conferences, etc., to provide them with relevant information to enable them to gain better insight into the Company. Corporate Express adheres to the policy that, at such meetings, price-sensitive non-public information should not be discussed or disclosed in any way or form. Corporate Express will provide analysts and investors with fair access to Company information and management within the limits of its time and resources. Under no circumstances will Corporate Express compromise the independence of analysts or investors in relation to the Company, irrespective of their recommendation on Corporate Express stock or a decision to buy or sell Corporate Express stock. To prevent inadvertent disclosure of price-sensitive information, Corporate Express has imposed upon itself 'quiet periods' in the weeks prior to an upcoming results' announcement, during which it will not engage in any discussion or participate in any kind of meeting with the general public, media or securities industry professionals in which one could reasonably expect that price-sensitive non-public information could be discussed. The Company's quiet periods are published on the website of the Company. Audit of financial reporting and role of internal and external auditors Financial reporting The Executive Board is responsible for the quality and completeness of the financial information that is made public. It is the duty of the Supervisory Board to see to it that the Executive Board fulfils this responsibility. Please refer to the section entitled Risk Control Framework in the chapter Other Financial Information (pages 91 and 94). Role, appointment, remuneration and assessment of external auditor The external auditor is appointed each year by the Annual General Meeting of Shareholders. The Supervisory Board shall nominate a candidate, based on advice from the Audit Committee and Executive Board. The remuneration for the external auditor is proposed by the Audit Committee and approved by the Supervisory Board after consultation with the Executive Board. The Supervisory Board has delegated approval for the assignment of services from the external auditor to the Audit Committee for a period of one year. This delegation can be renewed by the Supervisory Board. External auditors' fees and services The external auditor charged the Company the following fees (in millions of euros): 2007 2006 Audit fees Audit-related fees Tax fees All other fees 3.9 0.5 0.2 0.0 5.7 0.1 0.1 0.0 Total fees 4.6 5.9 Audit-related fees in 2007 were incurred for services in respect of the divestments. Tax fees in 2007 related to compliance services. 65 External auditor policy Corporate Express has established a policy for the independence of and provision of services by its external auditors. This policy stipulates that external auditors may only provide services which do not conflict with its independence and which are explicitly listed in the policy. These permissible services are audit services (e.g audit of financial statements), audit-related services (e.g. due-diligence work and internal control reviews and assistance with internal control reporting requirements) and non-audit services (e.g. risk management advisory services, treasury advisory services and tax planning and tax consultation services). The Audit Committee annually reviews the list of permissible services and may add to or subtract services from the list from time to time. The External Auditor Policy is posted on our website. The audit services require pre-approval of the Audit Committee. The audit related services and non-audit services also require the pre-approval of the Audit Committee which has been given in advance for services for which the aggregate amount of fees (for each of audit related and non-audit services) is less than €250,000 in any fiscal year. Relationship and communication of the external auditor with the bodies of the Company The external auditor attends the meeting of the Supervisory Board in which the financial statements are approved and shall in principle attend all meetings of the Audit Committee. The external auditor simultaneously reports its findings concerning the audit of the financial statements to the Executive Board, the Supervisory Board and the Audit Committee. Internal audit function The internal auditor operates under the responsibility of the Executive Board. Compliance with the Dutch Corporate Governance Code The Company fully complies with the Dutch Corporate Governance Code by either applying its principles and best practice provisions or by explaining why it deviates there from. Such principles and best practice provisions are fully applied with the exception of the following recommendations that are not fully applied for reasons set out above. • II.1.1. Appointment of members of the Executive Board for a maximum term of four years (see page 52). • II.2.6/III.7.3. • II.2.7. • III.5.11. • IV.1.1. Notice of changes in holdings of securities in Dutch listed companies (see page 56). Severance pay not to exceed one year salary (see page 53). Chairman of Supervisory Board not to chair remuneration committee (see page 56). Appointments, suspension or removal procedures of members of the Executive Board or Supervisory Board (see page 59). Change in control clauses in important contracts Corporate Express NV is not a party to any material agreement which becomes effective, or is being amended or terminated subject to the condition of a change of control of Corporate Express NV following a public bid defined in section 5:70 of the Financial Supervision Act, other than those mentioned in Note 32 of the financial statements, in the paragraph Material Contracts on page 200 and in the Remuneration Report. 66 REPORT OF THE SUPERVISORY BOARD Activities of the Supervisory Board 68 Composition of the Supervisory Board and the Executive Board 69 Independence 70 Schedule of attendance of the Supervisory Board and Committees 70 Committees of the Supervisory Board 70 Corporate governance 71 Remuneration report 72 Financial statements and dividend proposal 72 Discharge 72 Considerations about the business 72 Biographies Supervisory Board 73 67 REPORT OF THE SUPERVISORY BOARD Activities of the Supervisory Board During the reporting year the Supervisory Board met thirteen times. The most important matter was the strategic review of the Company, which was discussed intensively over a period of seven months and was announced by the Company on 1 October. The conclusion was that the Company should continue its stand-alone position as business-to-business player in the office products market. The existing strategy of the Company was found to be solid, but a significant improvement in the operational execution and performance is needed. In order to achieve this, four strategic initiatives were identified on which management will focus. The combined Boards, after careful consideration and taking into account the advice from investment banks and strategic consultants, considered this the best way forward for the Company to create shareholder value. On the same day the appointment of Peter Ventress as CEO was announced, following the resignation of Frans Koffrie with immediate effect. Paul van den Hoek decided to step down as Chairman of the Supervisory Board and was succeeded by Frank Meysman (see below: Composition of the Supervisory Board and the Executive Board). The Supervisory Board endorsed that the Executive Board should be supported operationally by a global management team in order to deliver on the strategic initiatives and to enhance the transformation of the Company from a holding company to a truly global operating company. This management team (Executive Management Group) consists of the members of the Executive Board as well as regional and functional leaders. We are confident that the steps taken will drive significant improvement of operational execution where operating profit should be clearly improved through sales growth and cost control measures. The first initiative regarding a further reduction of costs was already taken with the reduction of overhead expenses at the U.S. headquarters, announced in August. At the end of the year we discussed our assessment of the functioning of the Executive Board and its individual members in the absence of the Executive Board. We concluded that given all the changes made, the performance of the new team was satisfactory and we have confidence in their ability to exercise the strategy. As a result of the need to improve the results of North America, we spent considerable time reviewing and understanding the issues involved and the steps necessary to rectify the situation. We again visited the North American headquarters where management of the North American office products business made wide ranging presentations about the nature and progress of business. Management of the European and Australian office products businesses also presented their respective operations. Special attention was also given to a number of portfolio transactions. Divestments of ASAP Software, Inc. and the copier business Veenman Germany, both identified as noncore businesses, were approved during the course of the year. Acquisitions in office products businesses were made in Canada with Davenport Office and in Denmark with Møller & Landschultz. We also discussed the financing of the Company. Regular reports were received from the Audit Committee and the Compensation, Nominating and Corporate Governance Committee (CNCG Committee) on matters addressed in their meetings. The independence and performance of the external auditor, PricewaterhouseCoopers Accountants N.V. was assessed, as well as their relationship with management and the Audit Committee. This resulted in our proposal to the General Meeting of Shareholders in April 2007 to assign the audit of the 2007 financial statements to PricewaterhouseCoopers. With the external auditor we discussed their report on the 2006 financial statements. We also reviewed and discussed the annual report for 2006. We further discussed and approved the branding strategy and the proposal to change the Articles of Association of the Company with the change of the name of the Company from Buhrmann to 68 Corporate Express being the most notable change. Course of business and quarterly results were discussed on a regular basis and the composition of the management team in the U.S. was discussed after the resignation of Mark Hoffman. The Supervisory Board also discussed and approved the proposal of the Executive Board to terminate the put-option on the Preference Shares B and to grant the Protection Trust the right to file an application to make an inquiry into the policy and conduct of business at the Enterprise Chamber of the Amsterdam Court of Appeal ('Ondernemingskamer') (see the chapter Corporate Governance). Regarding the composition of the Executive Board, we agreed that—with the Executive Management Group to support it operationally—the Executive Board will be reduced to two members (CEO and CFO) after the resignation of George Dean in April 2008. We also discussed our own functioning and that of the Committees of the Board while taking into account our profile, composition and the competencies of each of the members of the Supervisory Board. As reflected in the schedule below, attendance by current members of the Supervisory Board to the meetings of the Board and the Committees was satisfactory. All members of the Board gave evidence of a strong engagement with the Company and the Board concluded that the cooperation in the reporting year was very productive and constructive. The meetings of the Board are productive and give room to an open discussion which leads to balanced decision-making for which the Board can take collective responsibility. The Supervisory Board met regularly without management. Composition of the Supervisory Board and the Executive Board During the reporting year the composition of the Supervisory Board was as follows: Paul C. van den Hoek (Chairman) (until 1 October), Rob F. van den Bergh, Gilles Izeboud, Frank L.V. Meysman (Chairman from 1 October), Ben J. Noteboom, Jan Peelen (Vice Chairman) and Tom de Swaan. For the biographies of the current members of the Supervisory Board, please refer to page 75. Paul van den Hoek decided to step down from the Supervisory Board as per 1 October upon the announcement of the Company's strategic review, in order to allow the new management to focus on the chosen direction. His term would otherwise have ended in April 2008. Frank Meysman succeeded Paul van den Hoek as Chairman of the Supervisory Board. The Board is very grateful to Paul van den Hoek for all the contributions he has made over many years in the supervision of the Company, leading the Supervisory Board and helping to shape the Company to the focused office products company it is today. In March we accepted the resignation of Mark Hoffman as member of the Executive Board and CEO of the North American office products business. Peter Ventress was appointed member of the Executive Board in the General Meeting of Shareholders held in April, at which time he still held responsibility for the European office products business. Peter Ventress' appointment to the Executive Board was justified by the increased importance of the European office products business. The appointment was made for a term of four years. Frans Koffrie stepped down at the end of September and was succeeded as CEO by Peter Ventress. The Board is sincerely thankful to Frans Koffrie for the many contributions he has made to the Company over the years. He has been the architect of the Company's transformation from a diversified holding company to a focused office supplier with strong market positions. The schedules of retirement of the Supervisory Board and the Executive Board do not provide for retirements in 2008. As announced on 1 October 2007, George Dean will resign from the Executive Board after the Annual General Meeting in April 2008. 69 Independence All members of the Supervisory Board in its composition as per 31 December 2007 may be considered independent as defined in the By-Laws Supervisory Board. Schedule of attendance of the Supervisory Board and Committees Supervisory Board meetings (13)(1) Supervisory Board members Van den Hoek Van den Bergh Izeboud Meysman Noteboom Peelen De Swaan (1) Audit Committee meetings (7) 9(1) 11 13 13 12 13 11 CNCG Committee meetings (5)(1) n/a 2(1) 7 5(1) n/a n/a 5 3(1) n/a n/a 2(1) 5 5 n/a Was not a member of the Supervisory Board or the respective Committee for the full reporting year. Committees of the Supervisory Board Without prejudice to its own responsibility, the Supervisory Board has formed two committees, i.e. the Audit Committee and the CNCG Committee, each consisting of members of the Board. The purpose of both Committees is described in the chapter on Corporate Governance (see pages 51 to 66). Audit Committee During the year the Audit Committee paid attention to the Company's strategic review process that was published on 1 October. The Audit Committee reviewed the quarterly and annual results and particular attention was paid to special items and critical accounting policies, as well as to the minutes of the Disclosure Committee. The Audit Committee monitored internal controls over financial reporting and the continuous compliance to the requirements and interpretation of the applicable Dutch and US securities and corporate governance regulations. This included the usual assessment of risks faced by the Company. Certain aspects of the Company's management reporting system were also discussed, such as continued development of key performance indicators. The Audit Committee also discussed with management the assessment pursuant to section 404 of the Sarbanes-Oxley Act and the external auditor report on this matter. The development of the finance function was reviewed and discussed. Attention was paid to legal, tax and pension matters. Fraud cases were also discussed on the basis of regular reports by management. The Audit Committee paid attention to the technical aspects of the Company's financing. The Audit Committee reviewed reports from the external auditor on the Company's financial representation as well as follow-up actions by management. The audit scope and approach, independence and fees of the external auditor were approved. The performance of the external auditor and the relationship between the external auditor and the Company was considered. The Audit Committee also reviewed and discussed with the Director of Internal Audit his annual report on the 70 control status of the operating companies and the planning and resources of the internal audit function for 2008. The Audit Committee also discussed the financing of the Company. Pursuant to a change in US securities regulations, it was decided not to reconcile the Company's financial statements as from 2007 to US GAAP. The analysis, on an IFRS basis only, of the fair enterprise value of the Company at the cash-generating unit level was discussed with management and the external auditor in order to determine whether an impairment was required. The Audit Committee agreed with management that there was no impairment of goodwill in 2007. The Audit Committee discussed certification (pursuant to section 302 of the Sarbanes-Oxley Act) of the 2007 Annual Report and Form 20-F with the CEO and CFO and the Committee agreed to management's conclusions that the annual report fairly presented in all material respects the financial condition, results of operations and cash flows of the Company and that no untrue statements of a material fact were included and no material facts were omitted that could make the report misleading. During the reporting year the composition of the Audit Committee has been as follows: Gilles Izeboud (Chairman), Rob van den Bergh (from 5 November), Frank Meysman (until 5 November), and Tom de Swaan. According to the Supervisory Board, Gilles Izeboud and Tom de Swaan qualify as 'financial experts' as defined in the Audit Committee Charter. All meetings of the Audit Committee during the reporting year were attended by the external auditor as well as by representatives of management and the finance function. The Audit Committee also had regular, brief discussions with the external auditor in the absence of management. Compensation, Nominating and Corporate Governance Committee (CNCG Committee) During the reporting year the CNCG Committee discussed with management the long-term and short-term management incentive plans. Changes of both plans were discussed and agreed which, as far as they affect the existing remuneration policy for members of the Executive Board or share-based payments, will be submitted for approval to the General Meeting of Shareholders to be held in April 2008 (see also the Remuneration Report). Bonus payments for Executive Board members over 2006 as well as bonus targets for 2007 were determined and the contract for Peter Ventress upon his appointment to the Executive Board was agreed. The severance payments for Mark Hoffman and Frans Koffrie were also considered and approved. The Committee discussed with management the annual review of the succession plans, including succession objectives and potential successors for the most senior management positions as well as a forecast for future requirements and bench-strength. Gender diversity was also discussed as well as concrete measures to increase the number of female managers in senior positions. The Committee also discussed development plans and the evaluation process of senior management. The size and composition of the Supervisory Board was discussed as well as the functioning of the Executive Board, the Supervisory Board, its Committees and individual members. The Committee also discussed corporate governance issues, particularly whether changes needed to be made to the corporate governance structure of the Company in the light of national and international developments. During the reporting year the CNCG Committee consisted of Paul van den Hoek (Chairman) (until 1 October), Frank Meysman (Chairman) (from 1 October), Jan Peelen and Ben Noteboom. Corporate governance The corporate governance structure of Corporate Express is described in the chapter on Corporate Governance. We endorse the principles and apply almost all of the best practice provisions of the 71 Dutch Corporate Governance Code (the Code). All exceptions to the Code have been disclosed in the above-mentioned chapter. The corporate governance structure of the Company was discussed at the Annual General Meeting of Shareholders in April 2005 and has not changed since in any material respect. Remuneration report The Remuneration Report incorporates the remuneration policy for members of the Executive Board and forms part of, and is incorporated in, the Report of the Supervisory Board. Financial statements and dividend proposal The annual report at hand, which has been prepared by the Executive Board, consists of the Consolidated Financial Statements, the Financial Statements of Corporate Express NV and the management report for the past financial year. The financial statements have been audited by PricewaterhouseCoopers Accountants N.V. You will find the statement of the external auditor on page 197 of this report. The annual report includes a report by management which confirms the effectiveness of the Company's internal control over financial reporting as of 31 December 2007. We have reviewed and endorse these reports and will recommend that the Annual General Meeting of Shareholders, to be held on 8 April 2008, adopts the financial statements for 2007 accordingly. The dividend proposal to the Annual General Meeting of Shareholders is included in the Annual Report on page 196. The dividend of €0.21 per ordinary share will be paid either in cash or in new ordinary shares at the option of each shareholder. Discharge We also propose that the Annual General Meeting of Shareholders, in accordance with Article 32, Paragraph 2 of the Articles of Association, discharges the Executive Board from management as carried out in the past financial year and the Supervisory Board from its supervision. Considerations about the business In 2007 the Company conducted a strategic review which resulted in significant changes, which will determine its course in the coming years. The outcome of the strategic review clearly indicated the viability and attractiveness of the markets we operate in and underlined the strength of our business model. However, we also concluded that the Company should become a more operationally focused and sales driven organisation. With a new CEO and new senior management to support him we believe important building blocks to achieve this are in place to make a success of the four strategic initiatives that the Company identified, which are to increase our sales to existing customers, to improve the product lines we offer, to grow our presence in the market for mid-sized companies and to strengthen our presence in carefully selected regions. Operationally, the Company generally performed well in the reporting year, notably due to the results of Office Products Europe and Australia as well as the Printing Systems Division. Office Products North America recovered from disruptions late 2006, early 2007, due to hard work of all employees and new local leadership. To them as well as to the employees of our other businesses we are sincerely thankful. Supervisory Board Amsterdam, 1 March 2008 72 BIOGRAPHIES SUPERVISORY BOARD Frank L.V. Meysman Chairman (as per 1 October 2007) Appointed in 2006, current term of office until 2010 Position: previously chairman of the Board of Sara Lee/DE, board member of Sara Lee Corporation Nationality: Belgian Year of birth: 1952 Other supervisory directorships: Grontmij N.V. (Chairman), Spadel N.V., Picanol N.V. Relevant additional functions: Member Executive Board GIMV (Gewestelijke Investeringsmaatschappij Vlaanderen) Shares held in the Company as at 31 December 2007: none Jan Peelen Appointed in 1999, current term of office until 2010 Position: previously member Executive Committee of Unilever NV and board member of Unilever Nationality: Dutch Year of birth: 1940 Other supervisory directorships: VVAA Groep B.V. (Chairman), Royal Friesland Foods N.V., Arcadis N.V., Albron N.V. Relevant additional functions: none Shares held in the Company as at 31 December 2007: none Rob F. van den Bergh Appointed in 2006, current term of office until 2010 Position: previously board member and CEO of VNU N.V. Nationality: Dutch Year of birth: 1950 Other supervisory directorships: ABN AMRO N.V., Pon Holdings B.V., N.V. Deli Universal, Nationale Postcode Loterij, TomTom N.V. Relevant additional functions: Member of the investment committee of NPM Capital N.V., Member Advisory Committee CVC Shares held in the Company as at 31 December 2007: 2,022 Ben J. Noteboom Appointed in 2005, current term of office until 2009 Position: currently CEO Randstad Holding NV Nationality: Dutch Year of birth: 1958 Other supervisory directorships: None Relevant additional functions: None Shares held in the Company as at 31 December 2007: none 73 Gilles Izeboud Appointed in 2005, current term of office until 2009 Position: previously board member of PriceWaterhouseCoopers Nationality: Dutch Year of birth: 1942 Other supervisory directorships: Robeco Groep N.V., Robeco N.V., Rolinco N.V., Rorento N.V., ENDEX European Derivatives Exchange N.V., Corporate Express Nederland Holding BV Relevant additional functions: Substitute Council of the Enterprise Division of the Amsterdam Court of Appeal (Ondernemingskamer), Board member Shell Reserves Compensation Foundation Shares held in the Company as at 31 December 2007: none Tom de Swaan Appointed in 2006, current term of office until 2010 Position: previously board member and CFO of ABN AMRO Holding N.V., previously member of the board of De Nederlandsche Bank N.V. Nationality: Dutch Year of birth: 1946 Other supervisory directorships: Royal DSM N.V., GlaxoSmithKline plc, Zurich Financial Services, Royal Ahold N.V., Van Lanschot N.V. Relevant additional functions: none Shares held in the Company as at 31 December 2007: none Paul van den Hoek resigned from the Supervisory Board as per 1 October 2007 Composition Committees of the Supervisory Board as per 31 December 2007 Audit Committee Gilles Izeboud—Chairman Rob van den Bergh (as per 5 November 2007) Tom de Swaan (as per 31 October 2006) Frank Meysman was member of the Audit Committee until 5 November 2007 Compensation Nominating and Corporate Governance Committee (CNCG Committee) Frank Meysman—Chairman (as per 1 October 2007) Ben Noteboom Jan Peelen Paul van den Hoek was member and chairman of the CNCG Committee until 1 October 2007 74 REMUNERATION REPORT Remuneration policy 76 Remuneration of Executive Board and Supervisory Board 2007 81 Remuneration of members of the Executive Board 2007 81 Remuneration of members of the Supervisory Board 2007 84 75 REMUNERATION REPORT This report by the Supervisory Board sets out the remuneration policy for the Executive Board. It also provides details of the remuneration in the reporting year of members of the Executive Board and the Supervisory Board. Remuneration policy Procedure The remuneration policy for the Executive Board is determined by the Supervisory Board on the recommendation of the Compensation, Nominating and Corporate Governance Committee (CNCG Committee). The tasks and responsibilities of the CNCG Committee are described in the Corporate Governance section (see page 40). The remuneration policy was adopted at the General Meeting of Shareholders held in April 2004 and last amended by the General Meeting of Shareholders held on 13 April 2006. Any material amendments to the policy shall be submitted to the General Meeting of Shareholders. No material changes were made to the remuneration policy in the reporting year. Determination of the remuneration for each individual Executive Board member is in principle a responsibility of the Supervisory Board. The Supervisory Board has delegated this authority to the CNCG Committee. Pursuant to this delegation of authority, and acting within the principles of the remuneration policy, the CNCG Committee determines the remuneration packages for the members of the Executive Board, including base salary, pension rights, annual bonus and long-term cash incentive awards, grants of share options and any severance payments. The CNCG Committee may make decisions which reflect special circumstances and make remuneration alterations which will be explained in the next Annual Report. The CNCG Committee does not retain remuneration consultants, but seeks professional advice from external advisors as and when required. Objective The objective of the remuneration policy for members of the Executive Board is to attract and retain qualified, expert Executive Board members with an international outlook and motivate them to perform in such a manner that the value of Corporate Express is likely to be enhanced. Remuneration of the Executive Board is designed in such a way that it balances short-term operational performance with the longer-term objective of creating sustainable value and growth. Variable pay is a significant part of the total remuneration package. Reward structure The total remuneration package for members of the Executive Board consists of: • a base salary • an annual performance bonus • a long-term cash incentive plan • a share option plan • pension arrangements, and • other benefits and allowances. Levels of remuneration are reviewed annually taking account of competitive levels of remuneration according to relevant industry comparisons. 76 The details of the remuneration packages of members of the Executive Board are as follows: Base salary The base salary for members of the Executive Board is set at a market competitive level, using industry survey data provided by outside remuneration advisors. Where a member of the Executive Board resides outside of the Netherlands, benchmark salary levels are referenced for the relevant markets. Currently these are the Netherlands, Europe and North America. Annual performance bonus Members of the Executive Board participate in an annual bonus plan based on the achievement of a number of targets determined at the beginning of each calendar year. Bonus levels for the Executive Board are set up to 75% of base salary for a European-based Board member, or up to 100% of base salary for a U.S.-based Board member, at the achievement of 100% of the bonus targets. Bonus targets may be a combination of the performance of the total Group, regional targets and individual targets. The bonus targets, which are set annually, are designed to be challenging and to reflect key drivers of value creation, long-term growth in shareholder value, and the development of earnings per share. The bonus targets for 2007 are described on page 73. Specific targets are not disclosed for reasons of commercial confidentiality. At the end of each financial year the CNCG Committee measures the results against the targets set. The amount of the annual bonus is then calculated and is payable after the audited accounts of the financial year in question are finalised. The CNCG Committee has the right to change targets as a result of unforeseen circumstances and it may also decide to grant a special award for specialcircumstances if such amendment is justified in the opinion of the CNCG Committee. Any such changes will be accounted for in the Annual Report. Long-term cash incentive plan In addition to the annual bonus plan, a U.S.-based Executive Board member, if any, may participate in a long-term cash incentive plan designed specifically for the senior management of the Office Products North American region. Under the U.S. long-term cash incentive plan currently in place, a bonus of up to 3.25 times base salary can be earned annually subject to the achievement of specific performance conditions related to annual economic value creation targets. In the event of an overachievement of the target, the longterm cash incentive payment may be increased to up to 3.9 times base salary or 120% of the target pay-out. There currently are no U.S. based Executive Board members. Other members of the Executive Board do not participate in a long-term cash incentive plan. Share option plan Corporate Express operates a share option plan, the 'Corporate Express Incentive Plan', which aims to encourage senior management to focus on the growth of long-term sustainable value for shareholders. A variable number (350 to 400) of senior managers participate, including the members of the Executive Board. Allocation of the share options granted to individual Executive Board members is determined annually by the CNCG Committee and the aggregate number of options granted to members of the Executive Board in any year shall not exceed 20% of the total number of options granted in that year. The number of options granted to all other eligible employees is determined at the discretion of the Executive Board, provided that the aggregate number of options granted stays within the limit determined by the Supervisory Board and as specified at the General Meeting of Shareholders. 77 Exercise price and term The exercise price for option rights granted is the closing price of Corporate Express ordinary shares on the first trading day on which the shares are quoted ex-dividend after the Annual General Meeting of Shareholders. Neither the exercise price nor other conditions in relation to the granted options can be modified during the term of the options, except insofar as prompted by structural changes relating to the shares or the Company in accordance with established market practice. The options have a term of seven years and vest after three years, provided, in the case of options granted as from 2004, that the performance conditions are met. Performance measurement and peer group At the Annual General Shareholders' meeting in 2004, shareholders approved the adoption of a new share option plan. Pursuant to this new Corporate Express Incentive Plan, the number of options which vest is dependent on the performance of the Company relative to a peer group as measured over a three-year period up to the vesting date. The performance of the Company is measured by the concept of Total Shareholder Return (TSR). Using TSR, which shows the total return to shareholders as a combination of share price appreciation and dividends distributed, the performance of the Company's shares against other companies' shares can be compared over the relevant (three-year) period. Using the TSR peer group ranking as a performance indicator demonstrates a clear link between the reward provided and the investment growth enjoyed by our shareholders (in comparison to that enjoyed by investors in the defined peer group companies). The financial performance of the Company, as measured by TSR is compared to the TSR of a peer group. The criteria for a company to fit within this peer group include, among other things, that such company (i) be in the same or a similar industry to Corporate Express; (ii) has a business model comparable to that of Corporate Express; (iii) be listed or traded on a major stock exchange; (iv) has a certain minimum market capital-isation; (v) operates in at least North America or Europe; and (vi) is considered a peer of Corporate Express by both the investor community and by Corporate Express itself. The composition of the peer group may be changed by the Supervisory Board for future option grants, provided that the above listed peer group criteria are met. In addition, where options have been granted, but have not yet begun vesting, the Supervisory Board may change the composition of the peer group with respect to that grant, if a peer group company at the time of grant no longer meets one or more of the criteria. The peer group companies for option grants under the new Corporate Express Incentive Plan in 2005 are: Bunzl PLC; Genuine Parts Company; Hagemeyer N.V.; Manutan International S.A.; Office Depot, Inc.; OfficeMax, Inc.; Randstad Holding NV; Staples, Inc.; United Stationers, Inc.; Wesco International, Inc. and W.W. Grainger, Inc. For the 2006 and 2007 grants the Supervisory Board added two companies to the peer group: Premier Farnell plc and Electrocomponents plc. Premier Farnell is a multi channel high service distributor of electronic products operating in 21 countries in Europe, North America and Asia Pacific. Electrocomponents is a high service electronic, electrical and industrial distributor operating in 26 countries throughout the world. The peer group therefore currently consists of twelve (2005 grant) to fourteen (2006 and 2007 grants) companies (including the Company). The TSR for each peer group company is calculated over the three-year period following each annual grant of options under the new Corporate Express Incentive Plan, and each peer group company is ranked in descending order of generated TSR to determine the relative position of 78 Corporate Express. The conditional awards vest three years after the date of grant but the number of share options to vest depends upon Corporate Express' ranking as follows: Vested award (% of original conditional award that will vest) TSR peer group ranking 1st 2nd 3rd 4th 5th 6th 7th 8th to 12th or 14th 200% 175% 150% 125% 100% 75% 50% 0% As a matter of illustration, the provisional ranking of Corporate Express on 31 December 2007 for the 2005, 2006 and 2007 grants was number 10, 11 and 12 respectively. As a result of the TRS performance of the Company with respect to the 2004 grant, it ranked 7th in the peer group. Consequently, 50% of the options granted in 2004, have vested in May 2007. Number of options The maximum number of options for the 2007 grant under the new Corporate Express Incentive Plan was 2,261,312, representing 1.25% of the total number of ordinary shares outstanding as of 31 December 2006. The number of options vesting from each of the 2005, 2006 and 2007 grants may vary between 0% and 2.5% of the total number of ordinary shares outstanding as at the end of the calendar year ending immediately prior to the respective grant depending on the Company's performance relative to the peer group as indicated in the above table. Pension arrangements Retirement benefits are designed to be in line with relevant market practice and consistent with those provided by other multinational companies in each country of residence. Mr P.J. Ventress and Mr F.F. Waller have a pension arrangement based on an individual defined contribution plan with a pension payment at age 65. Mr Waller uses a life-cycle ('levensloop') plan for which an annual contribution of 12% of his fixed salary is made by the Company. Mr Ventress has a death in service life insurance policy which provides a lump sum death benefit of €1,240,000. Pension arrangements for both individuals include an entitlement to pension in the event of ill health or disability, and a spouse's or dependant's pension on death, on terms similar to these applicable to employees participating in the Dutch Corporate Express Pension Fund. Mr G. Dean, who is a U.K. citizen, has pension arrangements divided between the U.K. and the Netherlands. His current pension arrangement consists partly of the individual defined contribution plan in place for the Dutch Executive Board members and partly of participation in the defined benefit scheme of Corporate Express UK Ltd., with a retirement age of 61. Mr Dean has a pre-pension arrangement providing for potential retirement from the age of 60 to 62 depending on the agreement of the Supervisory Board, while the pension arrangements in the event of ill health, disability and death are a combination of terms applying to employees participating in the Corporate Express UK Ltd. Pension Fund, and the Dutch members of the Executive Board. 79 Other benefits and allowances Members of the Executive Board enjoy similar benefits to many other employees of the Corporate Express Group. These may include subsidised medical insurance, the use of company cars, and an allowance to cover small out-of-pocket expenses not covered by the reimbursement of their business entertaining expenses and contributions as part of certain deferred compensation schemes. The Company does not grant personal loans or guarantees to members of the Executive Board and no loans and guarantees are outstanding as per 31 December 2007. Employment contracts of members of the Executive Board The members of the Executive Board have employment contracts with Corporate Express NV. Employment contracts and the main conditions of employment for members of the Executive Board are reviewed annually. The employment contracts with the members of the Executive Board are for an indefinite term. Notice periods of up to six months have been set for each Executive Board member. The contract with Mr P.J. Ventress and Mr F.F. Waller may be terminated at the discretion of the Supervisory Board from the age of 60. No fixed severance payments have been arranged with the members of the Executive Board except in 'change of control' situations as described below. Corporate Express believes that the circumstances of each case should be taken into account, considering relevant factors such as the reason for the termination, the age of the person in question, and the duration of employment, when determining the amount of severance payment. As a result severance payments could in specific cases exceed the compensation mentioned in the Dutch Corporate Governance Code. The performance by a Board member of his duties will in any event be an important factor. The current contracts of two of the members of the Executive Board (Mr Dean and Mr Waller) determine that where employment will be terminated in the event of an acquisition of the Company or if actual control passes into other hands (change of control), or in the case of reorganisation, termination of the Company's activities or in any other comparable circumstances that cannot be considered as blameworthy function fulfilment on the part of the Board member concerned, a fixed severance payment will be made. In such cases, compensation will be paid by Corporate Express equivalent to three times the annual fixed salary, and the pension accumulation over a period of three years, will continue. The contract of Mr Ventress does not include this provision, as the Company has previously indicated that this provision will not be included in contracts of new members of the Executive Board appointed after 2006. For all members of the Executive Board, in case of change of control of the Company, the Supervisory Board may at its discretion allow the granted share options to vest on the date on which the control of the Company passes. The same provision applies to the share options granted to employees of the Company. Future developments The CNCG Committee regularly reviews the remuneration policy for members of the Executive Board in the light of Company and market developments and will submit material changes thereto to the Annual General Meeting of Shareholders for approval. As previously indicated the Company has evaluated long term incentive plans, in particular the Corporate Express Incentive Plan and expects to propose to change the Remuneration Policy for Executive Board members to the Annual General Meeting of Shareholders in 2008. The Company will also propose changes to the annual bonus plan and the introduction of a bonus share plan, to promote executive share ownership. Details of the proposals will be included in the explanatory notes to the agenda of the shareholders' meeting. 80 Remuneration of Executive Board and Supervisory Board 2007 The disclosures in this section are in compliance with the requirements of Title 9, Book 2 of the Dutch Civil Code and the Dutch Corporate Governance Code and, where applicable, have been included in the audit by the External Auditor. Remuneration of members of the Executive Board 2007 Mr Hoffman resigned from the Executive Board on 29 March 2007 and Mr Koffrie resigned from the Executive Board on 29 September 2007. Base salary Remuneration is paid in euros, with the exception of the remuneration of Mr Hoffman, who was paid in US dollars. Correcting for currency translation effects and the period served on the Executive Board, the annualised increase of the base salary costs was approximately 5% compared to 2006. The individual increases took into account regular benchmarking whereby salaries payable to members of the Executive Board were compared with those of other executive directors of similar companies based in the Netherlands, Europe and North America. Annual performance bonus Group, divisional and personal targets were set by the CNCG Committee for 2007 as follows: • Group: these were based on the achievement of an earnings per share target. • Divisional: these were based on the achievement of targets for operating result before amortisation and excluding special items, economic value added and sales growth. • Personal: these were based on agreed key objectives relative to the Executive Board member's specific responsibilities. Bonuses related to 2007 amount to €532 thousand. The Group financial target (based on earnings per share) has not been achieved. With the exception of North America, divisional targets have largely been met. Mr Ventress fully achieved his personal targets. Personal targets for Mr Koffrie, Mr Waller and Mr Dean were not completely achieved. To Mr Koffrie an annual bonus of €46 thousand was paid out, which entirely related to one of his personal targets and which constituted 10% of his total bonus opportunity over 2007. Bonuses in 2006 amounted to €1,239 thousand. Other incentives The other incentives in 2007 include a special award for Mr Ventress. Upon his appointment as CEO, Mr Ventress has been granted 43,605 ordinary shares in the Company in order to further emphasise the alignment between the objectives of the CEO with the value-creation objectives of the shareholders. The number of shares has been determined by dividing the amount of the award (50% of his base salary as CEO, i.e. €300 thousand) by the volume weighted average share price over the period of two weeks after the announcement of the 2007 Q3 results. Mr Ventress has committed to retain these shares for a period of three years. The actual transfer of the shares has taken place in 2008. A special bonus was paid to Mr Dean in the amount of €42 thousand in relation to his added responsibility for North America in the course of the year. A special bonus was also made to Mr Waller recognising his efforts in a number of one-off projects. 81 Pension arrangements and other deferred income Pension charges of €430 thousand in 2007 (€691 thousand in 2006) consist of payments made to the relevant defined contribution pension arrangements and certain deferred income schemes. Severance payments When the amount of severance payment for a member of the Executive Board is determined as per the remuneration policy, the circumstances of each case should be taken into account, considering relevant factors such as the reason for the termination, the age of the person in question and the duration of the employment. For both Mr Koffrie and Mr Hoffman this policy was applied. For Mr Koffrie it was decided to apply the customary practice in the Netherlands on calculating severance payments (the so-called Cantonal Court Formula or 'kantongerechtsformule'), taking into account his age, duration of employment, performance and level of remuneration. Including the six months' notice period, the overall payment amounted to €3 million gross. Separately a bonus over 2007 of €46 thousand has been paid out in 2008 (see 'Annual performance bonus'). Mr Hoffman stepped down as member of the Executive Board on 29 March 2007. Including a salary continuation arrangement until 3 May 2009 and certain accrued incentives, the overall severance payment made to Mr Hoffman was US$2.1 million (€1.5 million). Base salary 2007 Annual bonus(1) 2006 2007 Other incentives(2) 2006 2007 Deferred income(3) 2006 2007 2006 in thousands of euros P.J. Ventress(4) F.F. Waller G. Dean 346 464 462 n/a 434 431 (70%) 229 (25%) 70 (67.5%) 187 n/a (85%) 221 (95%) 246 300 41 42 n/a — — 46 168 88 n/a 162 239 Subtotal F.H.J. Koffrie(5) M.S. Hoffman(6) 1,272 461 132 865 575 577 486 (10%) 46 n/a 467 (80%) 345 (74%) 427 383 — — — — 1,608 302 128 — 401 176 114 Total 1,865 2,017 532 1,239 383 1,608 430 691 (1) The percentage in parenthesis represents the % score of the total bonus opportunity for the individual that was awarded over the respective year's performance, paid out in the first quarter of the following year. (2) Other incentives are remunerations or accruals for remunerations, such as any cash long term incentive payments or special awards that were granted. (3) Deferred income consists primarily of defined contribution premium paid. (4) Appointed Executive Board member as per 12 April 2007 with base salary €420,000; CEO as per 1 October 2007 with base salary €600,000. (5) Member of the Executive Board until 29 September 2007. (6) Until 29 March 2007. Share options for the members of the Executive Board At the end of 2007, the members of the Executive Board held option rights on 497,026 Corporate Express ordinary shares that were granted under the Corporate Express Incentive Plan and the New Corporate Express Incentive Plan. The table below shows the movements in the number of outstanding option rights for each member of the Executive Board. In 2005, the number of options as well as the exercise price of the options granted up to and including in 2004 has been adjusted by a factor 0.9456 to compensate for the dilution effect caused by 82 the rights issue in the first quarter of 2005. The aggregate number of options outstanding at that time for members of the Executive Board increased by 44,272. The adjustment factor that was applied is derived from the 'Theoretical Ex-Rights Price' (TERP) of the Corporate Express share. The fair value of these options has not changed as a result of the application of the adjustment factor. Under Dutch fiscal rules, management receiving options could—under the Corporate Express Incentive Plan up to and including 2003—elect to accept a higher exercise price (33.3% higher in 2003). The base exercise price for these option series was set at €2.70 in 2003, equalling the share price at close of business on the Amsterdam Stock Exchange on 2 May 2003, as adjusted (see above). 1 January 2007 P.J. Ventress 6,343 8,029 9,722 9,712 17,500 Granted during the year 2002 2003 2004 2005 2006 2007 Fair value of grant in euro(1) Granted in 2007 79,985 10,036 47,638 46,618 115,850 198,000 — — — — — 45,000 51,306 G. Dean 37,002 37,002 44,402 44,402 45,000 Total 31,716 31,716 44,402 44,402 60,000 — — — — — — 45,000 2002 2003 2004 2005 2006 2007 221,550 46,200 217,570 213,574 297,900 198,000 — — — — — 45,000 207,808 F.F. Waller Exercised in 2007 — — — — — — 45,000 2002 2003 2004 2005 2006 2007 189,900 39,600 217,570 213,574 397,200 264,000 Expired in 2007 [6,343] — — — — — Adjusted number of options vesting (2) — — [4,861] — — — Outstanding 31 December 2007 0 8,029 4,861 9,712 17,500 45,000 [6,343] [4,861] 85,102 [37,002] — — — — — — — [22,201] — — — 0 37,002 22,201 44,402 45,000 45,000 [37,002] [22,201] 193,605 — — — — — 60,000 — — — — — — [31,716] — — — — — — — [22,201] — — — 0 31,716 22,201 44,402 60,000 60,000 212,236 60,000 — [31,716] [22,201] 218,319 471,350 150,000 — [75,061] [49,263] 497,026 (1) The fair value of the options is estimated using an option price determination model based on assumptions at the moment the grant was made. It does not reflect the current market value. Details on the model and assumptions used for the calculation are provided on page 131 in the section Financial Statements. It is noted that, due to the transition to IFRS, the statistical method of calculating the fair value has changed as from 2004. (2) Pursuant to the performance condition pertaining to the options granted from 2004 onwards the number of options vesting may vary (between 0% and 200%) from the number of options granted. From the number of 2004 options granted, 50% vested. The option exercise prices and expiry dates for the current option series are as follows: 2002: €12.95, expiry date 05.05.2007 2003: €2.70, expiry date 01.05.2010 2004: €7.37, expiry date 02.05.2011 2005: €7.40, expiry date 17.04.2012 2006: €14.65, expiry date 18.04.2013 2007: €10.08, expiry date 15.04.2014 83 The options granted to Mr Hoffman and not yet exercised have all lapsed upon his resignation from the Executive Board. For the options granted to Mr Koffrie, the Supervisory Board decided that these may be retained by him to be exercised until the end of the vesting period of each of the respective option series or 31 December 2010, whichever is earlier. The following options were retained by Mr Koffrie: 2003: 58,146; 2004: 44,931; 2005: 89,862; 2006: 90,000 and 2007: 90,000. Loans to members of the Executive Board No loans, advances or guarantees are outstanding to members of the Executive Board as at 31 December 2007. As a policy, the Company does not make such loans, advances or guarantees to members of the Executive Board. Remuneration of members of the Supervisory Board 2007 The General Meeting of Shareholders determines the remuneration for the Supervisory Board members. This does not depend on the Company's results. Remuneration for the members of the Supervisory Board is composed entirely of base remuneration as detailed in the table below. Members of the Supervisory Board are not eligible to participate in any bonus or profit-sharing plans, or in any other incentive-based plans maintained by the Company. The members of the Supervisory Board held no option rights to Corporate Express shares as at 31 December 2007. The Company does not provide pension benefits for members of the Supervisory Board. Remuneration of members of the Supervisory Board in 2007 amounted to €395.7 thousand (2006: €369.5 thousand). Specification in thousands of euros 2007 R.F. van den Bergh(2) G. Izeboud(1)(2) P.C. van den Hoek(1)(2) A.G. Jacobs(1)(2) F.L.V. Meysman(2) B.J. Noteboom(2) J. Peelen(2) G.H. Smit(2) T. de Swaan(2) Total 2006 46.0 66.0 75.7 — 59.0 49.0 49.0 — 51.0 7.5 61.7 96.0 19.0 36.3 49.0 49.0 42.5 8.5 395.7 369.5 (1) Including remuneration received as a member of the Supervisory Board of Corporate Express Nederland Holding BV. (2) Including remuneration received as a member of the Audit Committee and/or the Compensation, Nominating and Corporate Governance Committee, as applicable. Mr Van den Bergh was appointed as member of the Supervisory Board on 31 October 2006 and was appointed member of the Audit Committee on 5 November 2007. Mr Van den Hoek resigned from the Supervisory Board as per 1 October 2007 and per 31 December 2007 as Chairman of Corporate Express Nederland Holding BV. Mr Izeboud became Chairman of the Audit Committee on 14 April 2007. Mr Jacobs resigned from the Supervisory Board as per 13 April 2006. 84 Mr Meysman was appointed as a member of the Supervisory Board on 13 April 2006 and became Chairman of the Supervisory Board and CNCG Committee on 1 October 2007. Mr Smit resigned from the Supervisory Board as per 31 October 2006. Mr De Swaan was appointed as member of the Supervisory Board on 31 October 2006. 85 OTHER FINANCIAL INFORMATION Risk factors 87 Risk control framework 91 Capital resources 94 Research and development 94 Inflation 94 Contractual obligations, contingent liabilities, commitments and guarantees 94 Off-balance sheet arrangements 95 Property, plant & equipment 95 86 OTHER FINANCIAL INFORMATION Risk factors The key risks related to our strategy and industry, business operations, financial and other risks and uncertainties related to our business are described below. These risks are not the only ones we face; additional risks of which we are presently not aware or that we currently deem immaterial may also impair our business. Any of these risks may adversely affect Corporate Express' execution of its strategy, reputation, financial condition and result of operations. As part of our strategic review in 2007, the various risk factors have been evaluated and hence are part of our conclusions on how to achieve the full potential of our business. Risks relating to our strategy and industry The demand for Corporate Express' products and services relates to the number of white collar workers employed by Corporate Express' customers. Corporate Express' Office Products business is concentrated in North America, Western Europe and Australia. The demand for Corporate Express' products and services, most notably our office products, relates to the number of white collar workers employed by Corporate Express' customers in these markets. A decline or interruption of economic growth and consequently employment growth in these markets or more specifically a reduction of white collar workers employed by Corporate Express' customers may adversely affect Corporate Express' operating results. Customers are able to reduce their spend per white collar worker on short term notice, by postponing the purchase of items or through substitution by lower-cost items. Corporate Express' customers may, on short notice, postpone or reduce spending on its products and services per white collar worker, for example, by our eCommerce platforms to control purchasing patterns at our customer. As a result, our level of sales can significantly change over a short period of time. In addition, customers may also, on short notice, substitute certain of Corporate Express' products and services for other, potentially lower margin, products and services. Although our customer base is spread over many industries and sectors, including government institutions, most of our customers are large corporations or institutions which frequently re-tender their office products contracts. Many of our large account customers frequently (every 2-3 years) re-tender their office products contracts in order to take advantage of the competitive pricing within the office products industry, thereby eroding achieved efficiencies in our office products distribution activities. Although we have tens of thousands of customers, and no single customer represents more than 0.5% of our revenues, the loss of several large account customers in a relatively short period could materially adversely affect our business. Corporate Express could lose market share and profit margins due to increased competitive pressures from our direct competitors as well as other (new) distribution channels causing reduced new business generation. Corporate Express operates in a highly competitive market. Many of Corporate Express' competitors offer the same or similar products that Corporate Express offers to the same customers or potential customers. Some of its competitors may have certain advantages over Corporate Express, including greater financial resources, better technical capabilities, better marketing capabilities, the ability to adapt more quickly to changing customer requirements, greater name recognition and the ability to devote greater resources to developing, promoting and selling their products. Also, new entrants in Corporate Express' markets may, by offering alternative distribution channels, change the 87 competitive landscape to the Company's disadvantage. If Corporate Express' competitors successfully exploit these advantages, they could force the Company to lower its prices and reduce the volume sold. Our reliance on suppliers allowances and promotional incentives could impact profitability. We derive important benefits from suppliers allowances ('rebates') and promotional incentives ('catalogue income') provided by certain suppliers of products and services. We cannot be certain that we will be able to take advantage of any such suppliers allowances and promotional incentives that may be offered in the future. Should any of our key suppliers reduce or otherwise eliminate suppliers allowances or promotional benefits, our profit margin for these products and services may be reduced, potentially resulting in a material adverse effect on our results of operations. Revenues in Corporate Express' Printing Systems are cyclical. A substantial part of the Printing Systems Division's revenues is derived from the sale of printing equipment which is regarded as high-value investment goods. The demand for this type of goods depends to a large extent on developments in economic circumstances, particularly in relation to the activity levels at commercial printers, and technological innovation at the Printing Systems' main supplier ('economic obsolescence'). As a result, Printing Systems experiences cyclicality in its revenues which could adversely affect Corporate Express' operations over sustained periods (historically cycles have had a duration of 8-9 years). Risks relating to our business operations Corporate Express may not be able to manage its growth effectively, including the hire and retention of enough qualified staff. Challenges which may result from organic growth, as well as growth through acquisitions, include Corporate Express' ability to improve the efficiency of growing operations; hiring and retention of sufficient qualified personnel to staff new or expanded operations; maintain its existing customer base and the amount of sales to these customers; and assess the value, strengths and weaknesses of acquisition candidates. Corporate Express' potential failure to address these concerns could prevent it from achieving its strategic objectives. Inability to maintain and improve its information systems effectively, and prevent and recover from serious breakdowns, could disrupt Corporate Express' business processes. Corporate Express needs to maintain and consistently improve sophisticated information systems to grow its businesses and achieve operating efficiencies. If Corporate Express fails to do so, its information systems may not function correctly or efficiently, which could have an adverse effect on its ability to perform administrative functions and process and distribute customer orders. This, in turn, could have a material adverse impact on Corporate Express' results of operations. Furthermore, in the event of a serious breakdown of information systems, customers will expect a timely recovery. If Corporate Express fails to implement information technology improvements or recover from serious breakdowns within the anticipated time frame, such failure could have a material adverse effect on Corporate Express' future business developments. Our restructuring programmes may not achieve expected benefits. From time to time, Corporate Express implements restructuring programmes, including reductions in the number of staff. Corporate Express expects that these programmes will result in structural cost savings and will improve its operating results. However, this expectation involves a number of assumptions and uncertainties, and Corporate Express may not achieve the expected benefits. The savings expected from these programmes are often significant and need to be realised on a timely basis. 88 In addition, these restructuring programmes absorb management time and can interrupt normal business operations. The continuation and successful retention of office products contracts depends primarily on pricing and service levels; notwithstanding the contractual side, a disruption of service levels has a direct impact on sales levels achieved. The continuation of office products contracts with our existing customers, and the successful retention of new office products contracts, primarily depends on pricing and service levels. We believe that one of the key factors differentiating Corporate Express from its competitors is its ability to provide competitive pricing on products combined with high quality service levels. Any disruption in the service levels that our customers have come to expect from us could result in the loss of their business to our competitors and adversely impact sales going-forward. If Corporate Express' contract with Heidelberg were to be terminated, or Heidelberg were to cease operations, Corporate Express could lose most of its Printing Systems' revenues. Corporate Express' Printing Systems Division is the authorised distributor in a number of countries of printing equipment manufactured by Heidelberg. Printing Systems derives most of its revenues from the sale of that equipment. The distribution agreement runs until 30 June 2008 but will continue in effect after 30 June 2008 unless terminated with eighteen months prior written notice by one of the parties. As per the date of this report, none of the parties has given such notice. The agreement may nevertheless be terminated earlier by either party for cause. Financial and other risks and uncertainties related to our business Corporate Express' exposure to exchange rate fluctuations may affect its reported results of operations and financial condition. A major proportion of Corporate Express' activities is conducted in currencies other than the euro. The position in relation to the US dollar is in particular relevant, as approximately one-third of Corporate Express' operating results (of continuing activities) were generated in US dollars in 2007. This results in foreign exchange translation exposure when the Company's results are translated into euro in our consolidated financial statements. For example, a 10% weakening in the value of the US dollar in relation to the euro would have decreased result after taxes in 2007 by approximately 2%. Corporate Express finances its subsidiaries predominantly through internal debt denominated in local currencies. The residual translation risks in the subsidiaries are not hedged. Exchange rate fluctuations may lead to currency translation adjustments which may have a direct impact on the Corporate Express Group's equity and results. In addition, the foreign exchange policy of the Company and the implementation thereof may result in certain fair value changes. Corporate Express has material debt. At 31 December 2007, we had a total indebtedness of approximately €1,128 million, based on IFRS. Generally the Company is categorised by rating agencies as a highly leveraged company. Corporate Express' indebtedness could have important consequences, including that its ability to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes may be impaired, limiting our flexibility. Also it may increase its vulnerability to general adverse economic and industry conditions including that it may experience difficulties in satisfying its obligations with respect to its borrowings. Generally, the daily average debt outstanding is higher than the debt as reported at quarter ends. It is noted that a substantial part of Corporate Express' assets has been pledged to secure its obligations under the Senior Facilities Agreement and in connection with its securitisation programme 89 and will be unavailable to secure other debt. If Corporate Express' cash flow and capital resources are insufficient to fund its debt service obligations, Corporate Express may be forced to reduce or delay scheduled expansion and capital expenditures, sell material assets or operations, obtain additional capital or restructure its debt. In the event that Corporate Express is required to dispose of material assets or operations, obtain additional capital, or restructure its debt to meet its debt service and other obligations, the terms of any such transaction may not be as advantageous to Corporate Express as they otherwise might be. Corporate Express is restricted by the terms of its debt. The Senior Facilities Agreement determines Corporate Express' ability to, among other things, incur other debt, pay dividends, make investments and enter into certain corporate transactions. The Senior Facilities Agreement also requires Corporate Express to meet certain minimum or maximum financial ratios and tests. Corporate Express may not be able to do so for reasons beyond its control. If Corporate Express fails to comply with the obligations in the Senior Facilities Agreement, there could be an event of default. This may cause Corporate Express to renegotiate the terms of the debt, which may lead to an increase of interest expenses and may further restrict Corporate Express' ability to operate its business, including making acquisitions and paying dividends. In addition, if an event of default occurs, the lenders under the Senior Facilities Agreement could declare the debt under that agreement immediately due and payable, and seek to foreclose on Corporate Express' assets that secure the Senior Facilities Agreement. If there is a default, Corporate Express may not have sufficient assets to repay the debt under that facility and other debt. In addition, other funding instruments such as the accounts receivable securitisation programme, our 2% Subordinated Convertible Bonds due 2010, the 2014 Notes and 2015 Notes have certain restrictions attached. Failure to comply with the restrictions imposed in relation to any such instruments could result in a default under those agreements. Adverse developments in equity and bond markets may affect pension cost and may require Corporate Express to make additional contributions to its pension funds. Corporate Express is operating a variety of pension funds, including a number of defined benefit schemes that are separately insured in trusts (pension funds). Local law or specific arrangements with these pension funds require a minimum funding level of benefit obligations of these pension funds. These regulations may change over time. The pension costs and funding levels are calculated based on certain assumptions. The value of the assets under management of these trusts varies, particularly with developments in the equity and bond markets. Lower than projected returns on the equity and bond markets may require Corporate Express to adjust the assumptions underlying the calculation of the pension cost and may further require it to make additional contributions to these pension funds in order to meet the minimum funding levels. Changes in the assumptions underlying Corporate Express' estimated utilisation of its considerable amount of tax loss carry-forwards could have a material adverse impact on its tax assets and effective tax burden. Corporate Express has a considerable amount of tax losses carry-forward, pursuant to which it records deferred tax assets. Corporate Express records these deferred tax assets to the amount that it estimates they are likely to be realised. In determining deferred tax assets and deferred tax liabilities, Corporate Express takes into account estimated future taxable income, tax planning, applicable limitations on the use of tax losses carry-forward and the possibility that prior year tax returns will be challenged by the tax authorities. If actual future taxable income is different than originally assessed, if tax planning fails to materialise, if limitations on the use of tax losses carry-forward apply or if the possibility that prior year tax returns will be challenged turn out to be different than originally assessed, 90 deferred tax assets and deferred tax liabilities may have to be adjusted which could have a material adverse effect on Corporate Express' reported tax expense and net result in future years. Acquisitions and divestitures executed by Corporate Express could affect the business and the financial position. Risks we could face with respect to recent and future acquisitions include difficulties in the integration of operations, technologies, products and personnel of the acquired entity; diversion of management's attention away from other business concerns; and expenses of any undisclosed or unknown liabilities of the acquired entity. In connection with our divestments, Corporate Express may have agreed to indemnify the purchasers against various potential liabilities, such as liabilities related to legal and regulatory proceedings, environmental liabilities and liabilities related to taxes. Corporate Express has established provisions for such potential liabilities that it believes are adequate. However, Corporate Express cannot ascertain that these provisions will in fact be sufficient to cover these potential liabilities. Volatility of the market for our ordinary shares, the 2014 Notes, the 2015 Notes and the Subordinated Convertible Bonds may affect the valuation of Corporate Express. The market price of Corporate Express' ordinary shares, the 2014 Notes, the 2015 Notes and the Subordinated Convertible Bonds could be subject to wide fluctuations in response to numerous factors, many of which are beyond the control of Corporate Express. These factors include, among other things, actual or anticipated variations in operating results, earnings releases by the Corporate Express Group and its competitors, changes in financial estimates by securities analysts, market conditions in the industry and the general state of the securities market, governmental legislation or regulation, currency and exchange rate fluctuations, as well as general economic and market conditions, such as recessions. Risk control framework Company-level controls In addition to our Corporate Governance structure (see pages 36 to 48), our internal arrangements for Company-level controls are primarily derived from our Management Charter. The purpose of this Management Charter is to define for all our employees the most important aspects of fulfilling their individual and collective responsibilities towards Corporate Express. The Management Charter contains our Corporate Profile, Responsibilities, our Business Principles and Code of Ethics (published on our website: www.cexpgroup.com), Authority Limits and the Letter of Representation Process. It also refers to our set of Mandatory Policies, Manuals and Other Instructions. These policies address matters such as the Disclosure of Company Information, Fair Treatment and Equal Opportunity, ICT Business Continuity and Disaster Recovery, and Compliance with Competition Laws. The area of internal control over financial reporting is primarily covered by our Financial Management Process supported by the Accounting Manual and the Internal Control Manual. Strategy, operational and other risks The major risk factors related to our strategy, organisation and operations are described in the preceeding section. Risks are inherent to entrepreneurship. We generally manage these identified risks by a combination of upfront identification of potential risks, assessment of the potential impact, and regular reviews. As part of our ongoing management process, consideration is given to as to what extent risks can be avoided in an economical, sensible way or must be taken as part of our business. 91 Monitoring, assessment and reporting Corporate Express uses a comprehensive management reporting system to monitor the Company's performance. This comprises a coherent set of instruments which covers the adoption of strategy, portfolio analysis, budgeting and reporting of current results, as well as projected results. Internally, we set financial targets and judge business performance primarily by using performance measures based on economic value creation. Reporting, analysis and review of actual results take place on a monthly basis and cover not only results, but also balance sheet, cash flow information and certain other key performance indicators. Risks associated with business activities are managed through local operational management following normal reporting lines. In other words, risk management relies primarily on the frequently held business reviews at various levels in the Company. Risk management is also supported by our system of authority limits for regional, functional and local operational management. Besides requesting the relevant manager to obtain approval from a higher level of authority for a number of matters, the system triggers a flow of information to senior management of Corporate Express. The same approach applies to corporate matters. Also, every quarter, operational management is required to confirm by means of a Letter of Representation that compliance is maintained with the Management Charter and the Mandatory Policies, Manuals and Other Instructions. It also emphasises proper and prompt disclosure, compliance with local regulations as well as the correctness of financial representation and a continuous assessment of internal controls. In order to support the Executive Board in matters related to disclosure controls and procedures, our internal Disclosure Committee reviews, discusses and reports on disclosure related issues quarterly (the minutes of the Disclosure Committee meeting are also provided to the Audit Committee). The main purpose is to ensure that all disclosures made by Corporate Express are accurate, complete and timely, and fairly present the financial condition and the results of operations in all material respects. The adequacy of the design and proper functioning of internal control systems of our operations are periodically investigated by the Internal Audit Department who reports its findings to senior management and the Executive Board. Although the Internal Audit Department functions directly under the responsibility of the Executive Board, the Director of Internal Audit discusses at least annually the control status of our operations with the Audit Committee. The external auditor has full access to all reports from Internal Audit. The Director of Internal Audit attends the meetings with the Audit Committee. Additionally, a detailed fraud reporting process is in place supported by a globally uniform procedure for 'whistleblowing'. External auditor The external auditor reports on findings on internal control as part of the audit of the Consolidated Financial Statements. Also the external auditor attends the meetings with the Audit Committee. The external auditor's reports are discussed at the appropriate levels in the organisation. The Group level reports are reviewed both by the Executive Board and the Audit Committee. In respect of the conclusions and observations about the Annual Report, a final report is issued to the Executive Board and Supervisory Board jointly. The independence of our external auditor is required by our External Auditor Policy (for information on auditor independence and fees see pages 47 and 48). This policy stipulates, among other things, what services may not be provided and to what extent certain non-audit services may be provided by the external auditor. Other provisions require, for example, that each of the lead audit partner and review partner rotate from their position after a maximum period of five years. In the context of a pending court case against Béfec (a predecessor of PricewaterhouseCoopers, France), the 92 independence of our external auditors was discussed among the Executive Board, the Audit Committee and the signing partners of our external auditors, PricewaterhouseCoopers Accountants N.V., after which it was concluded that the external auditor has taken appropriate measures to safeguard his independence. In 2005, we carried out an in-depth assessment of the performance of our external auditor and the audit approach taken. This has resulted in a number of changes to improve the efficiency of the audit process. The main conclusions of this assessment were presented at our Annual Shareholder Meeting in 2006. The next thorough assessment of the external auditor performance is scheduled for 2009, to be reported in 2010. Disclosure controls and procedures We maintain disclosure controls and procedures to ensure that information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this annual report we carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level. During the period covered by this Annual Report, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Management's report on internal control over financial reporting (Sarbanes-Oxley section 404) The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS and includes those policies and procedures that: • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company • ensure that transactions are recorded as necessary to permit preparation of financial statements and that receipts and expenditures of the Company are being made only in accordance with authorizations of management, and • prevent or timely detect unauthorised purchases, use or disposition of the Company's assets that could have a material effect on the financial statements. The Executive Board of Corporate Express is responsible for the design and operation of the Company's internal risk control systems, including establishing and maintaining adequate internal control over financial reporting. Although the purpose of these systems is to enable risks to be optimally managed, all internal control systems, no matter how well designed, have inherent limitations which may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to preparation and presentation of the financial statements. Also, as with other business propositions, we need to apply our judgement in evaluating the cost-benefit relationship of possible controls and control procedures, while taking into account the developments in our business and the external environment. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 93 Corporate Express' Executive Board assessed the effectiveness of the Company's internal controls over financial reporting as of 31 December 2007. In making this assessment, management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO-I). Based on this assessment and taking into account the requirements under the U.S. Sarbanes-Oxley Act, the Executive Board has determined that, as of 31 December 2007, the Company's internal control over financial reporting was effective. The external auditor has issued an opinion on the company's internal control over financial reporting. Their report appears on page 197. In addition, the Executive Board reviewed its compliance to the interpretation of the Dutch Corporate Governance Code in this area. Although there have been a small number of cases during the year where additional activities have been, respectively are being carried out to fully strengthen the controls, no major issues were reported nor do we have indications that our internal controls will not continue to properly function. Consequently, during the period covered by this Annual Report, we believe that our internal controls for financial reporting were adequate and have been operating appropriately, at reasonable levels of assurance. Capital resources Corporate Express' cash requirements in excess of cash generated by operations are largely funded by borrowings under arrangements with commercial banks and debt raised in the capital markets. Working capital during 2007 was adequate for our business needs. The borrowing agreements are described in Note 32 of the Financial Statements (pages 96 to 179) and reference is made to that section in our annual report. The Company has a working capital facility of €255 million under the Senior Facilities Agreement (see Note 32 of the Financial Statements), of which €20 million was used at 31 December 2007. Research and development Corporate Express' policy is to expense costs of research as incurred and, insofar as future benefits are expected, to capitalise costs of development. Costs of research were insignificant in the years ended at 31 December 2007, 2006 and 2005. The capitalised cost of development relates mainly to software. Inflation In North America, we estimate that price inflation as experienced by Corporate Express for office products was around 1% annually in 2007. Employee benefit costs typically increased between 3% to 4% in 2007 due to inflationary factors. In Europe, Corporate Express experienced a slight price inflation for office products in 2007. Employee benefit costs increased in this year by around 3% annually due to inflationary factors. Individual product categories such as paper, computer supplies, software products and printing equipment, may have had significantly different price developments, as noted above. Contractual obligations, contingent liabilities, commitments and guarantees Long-term borrowings (excluding Preference Shares A which are perpetual, and including finance leases, which amount to approximately €4 million and relate mainly to leasehold improvements in our Office Products North America business) were €833 million in total at 31 December 2007. Further detail is provided in Note 32 to our consolidated financial statements. Interest shown in this table does not include the effect of interest rate swaps. 94 The total amount of Corporate Express' contractual obligations, contingencies, commitments and guarantees, which are not included in the Consolidated Balance Sheet, is disclosed in the table on Note 37 to our Consolidated Financial Statements, and described below. Rent and operating leases of €535 million in total at 31 December 2007 (2006: €499 million) are primarily related to distribution facilities and offices which the Company leases under non-cancellable operating leases. The amounts shown represent the nominal value of future lease payments, and are netted for sub-leases. We do not include the purchase commitments with our suppliers within the contractual obligations, since these commitments may be cancelled by us without advance notice or payment. Repurchase guarantees amounted to €28 million in total as of 31 December 2007 (2006: €39 million) and mainly relate to repurchase guarantees concerning graphic machines sold to customers, and financed by external financing companies. In cases when the customer is declared in default, the respective financing company has a right of recourse against Corporate Express, which in general, will be lower than the market value of the machines. The amounts included in the table in Note 37 to our consolidated financial statements represent the maximum exposure under these guarantees. Off-balance sheet arrangements In connection with the accounts receivable securitisation programme (the Programme), Corporate Express has entered into agreements pursuant to which we have agreed to guarantee the performance of our operating companies in the United States and Europe, which sell their accounts receivable into the Programme, as well as our subsidaries that service the Programme. This includes compliance with the terms of the documentation under the Programme relating to selection and servicing of receivables. However, Corporate Express guarantees neither payment on any accounts receivable sold to the master purchasers in accordance with the documentation under the Programme, nor repayment of any notes issued in connection with the Programme. At 31 December 2007, accounts receivables amounting to €240 million were pledged under the U.S. and European securitisation programmes. Corporate Express' obligations under the guarantees issued in connection with the Programme are not quantifiable and are contingent in nature. For more information about the Programme, refer to Note 32 to our consolidated financial statements. Other commitments not included in the balance sheet include investment commitments relating to expenditure on projects, such as the development of information technology systems. Until September 2007, Corporate Express had issued certain performance guarantees to an estimated maximum amount of €7 million (2006: €6 million). Property, plant & equipment We lease our principal executive offices, which are located at Hoogoorddreef 62, 1101 BE Amsterdam ZO, the Netherlands. We own and lease additional properties in the United States, Europe and Australia for use in the ordinary course of business. For information on our operating lease commitments, see Note 37 to our Consolidated Financial Statements. Land and buildings had a book value of €101 million at 31 December 2007, including leasehold improvements under finances leases, amounting to €4 million (mainly in our Office Products North America business). We do not own or lease any physical property that is considered material to us as a whole. For details on our property, plant & equipment, see Note 21 to the Consolidated Financial Statements. We periodically reassess the adequacy of our facilities. If necessary, we renew, discontinue, acquire or lease properties to provide an adequate infrastructure for our business. We believe that our current facilities are adequate for our current level of business, but are continuously evaluating potential for rationalisation. 95 FINANCIAL STATEMENTS Consolidated statements of income 97 Consolidated balance sheets 98 Consolidated statements of cash flows 99 Consolidated statements of recognised income and expense 100 Notes to the consolidated financial statements 101 Company balance sheets 175 Company statements of income 175 Notes to the company balance sheets and statements of income 176 Supplemental guarantor information 180 96 CONSOLIDATED STATEMENTS OF INCOME for the years ended 31 December 2007, 2006 and 2005 Notes 2007 2006 2005 In millions of euro, unless stated otherwise Continuing operations: Net sales Purchase value of trade goods sold 7,8 7 Gross contribution Employee benefit expenses, excluding restructuring expenses, termination benefits and costs related to the transfer of defined contribution plans into defined benefit plans Depreciation of property, plant & equipment and amortisation of software and other intangible assets 5,497 [3,696] 5,118 [3,421] 1,840 1,802 1,696 [883] [97] [883] [96] [881] [86] [5] 10 [35] [629] — — [40] [561] — — [17] [513] 7 201 223 199 Repurchase Preference Shares C Other financing expenses 12 12 — [115] — [96] [85] [106] Total financing expenses Subsequent result from disposal of operations 13 [115] 0 [96] 7 [191] 5 86 134 13 3 [10] [12] 89 124 1 106 18 20 195 142 21 178 17 123 19 2 19 195 142 21 Costs related to the transfer of defined contribution plans into defined benefit plans Result from disposal of Veenman Germany Restructuring and termination expenses Other operating expenses Operating result 9 7,18,19, 20,21 9,22 6,10 11 10 5,631 [3,791] Result before taxes Taxes 14,31 Net result from continuing operations Discontinued operations: Net result from discontinued operations 6 Total operations: Net result from total Group Attributable to: Holders of ordinary shares Corporate Express NV Minority interests in Group companies 15 Net result from continuing operations per share attributable to holders of ordinary shares Corporate Express NV (in euro): Basic Diluted 16 16 0.40 0.40 0.58 0.57 [0.11] [0.11] Net result from discontinued operations per share attributable to holders of ordinary shares Corporate Express NV (in euro): Basic Diluted 16 16 0.58 0.54 0.10 0.08 0.12 0.12 Net result from total Group per share attributable to holders of ordinary shares Corporate Express NV (in euro): Basic Diluted 16 16 0.98 0.93 0.68 0.65 0.01 0.01 The accompanying Notes are an integral part of these Financial Statements. 97 CONSOLIDATED BALANCE SHEETS as at 31 December 2007 and 2006 Notes 2007 2006 In millions of euro, unless stated otherwise Assets Non-current assets Goodwill Software Other intangible assets Property, plant & equipment Net pension asset Deferred tax assets Investments in associates Other non-current assets 18 19 20 21 22 31 1,420 98 82 196 190 350 4 12 1,531 108 82 216 132 416 4 10 2,352 2,500 17,27 498 700 183 12 50 520 867 200 14 73 28 1,443 3 1,674 4 Total current assets 1,446 1,678 Total assets 3,799 4,178 219 1,745 [90] [331] 217 1,729 10 [493] 1,543 40 1,463 64 1,583 1,527 1,011 136 22 41 1,284 125 30 51 1,211 1,490 117 19 547 11 23 286 66 18 720 4 30 323 Total current liabilities 1,004 1,161 Total liabilities 2,215 2,651 Total equity and liabilities 3,799 4,178 569 545 17,23 Total non-current assets Current assets Inventories Trade receivables Prepaid expenses and accrued income Current tax receivable Cash and cash equivalents 24 17,25 26 Non-current assets held for sale Equity and liabilities Equity attributable to equity holders of the Company Issued and paid-in capital Additional paid-in capital Other reserves Accumulated deficit 29,30 30 30 30 Minority interests 15 Total equity Non-current liabilities Long-term borrowings Deferred tax liabilities Net pension liabilities Provisions 17,32 31 22 33 Total non-current liabilities Current liabilities Current portion of long-term borrowings Short-term loans and bank overdrafts Trade liabilities Current tax liabilities Current provisions Other current liabilities 17,32 17 17 33,34 35 Commitments not included in the Balance Sheet 37 The accompanying Notes are an integral part of these Financial Statements. 98 CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended 31 December 2007, 2006 and 2005 Notes 2007 2006 2005 In millions of euro, unless stated otherwise Cash flow from operating activities Net result from total Group Adjustments: Taxes Total financing expenses Subsequent result from disposal of operations Net result from discontinued operations Total adjustments 195 142 21 [3] 115 0 [106] 10 96 [7] [18] 12 191 [5] [20] 81 178 5 Operating result Depreciation of property, plant & equipment and amortisation of software and other intangible assets Adjustments for share based payments Adjustments for additions and (releases) from provisions 201 97 8 [4] 223 96 8 2 199 86 7 11 [ Increase ] /decrease in working capital: [Increase]/decrease inventories [Increase]/decrease accounts receivable Increase/[decrease] accounts payable [Increase]/decrease prepaid expenses and accrued income Increase/[decrease] other current liabilities [12] [12] 17 [20] 6 [49] [1] 9 [25] [3] [1] [42] 4 [8] 17 Net [increase]/decrease in working capital [22] [68] [30] [31] [16] [7] [32] [27] [13] [30] [17] [9] Total other operational payments and receivables [53] [73] [53] —Net cash from operating activities continuing operations —Net cash from operating activities discontinued operations 227 [5] 188 45 216 15 Total net cash from operating activities total Group (A) 223 232 232 [93] 10 [55] 260 [1] [81] 7 [303] — 0 [59] 1 [20] — [2] —Net cash used in investing activities continuing operations —Net cash used in investing activities discontinued operations 121 [4] [376] [5] [81] [5] Net cash used in investing activities total Group (B) 117 [381] [86] Cash flow available for financing activities (A+B) 341 [149] 145 Cash flow from financing activities Dividend payments Interest payments Dividend Preference Shares A Dividend payment to and repurchase of shares from minority shareholders Proceeds from share issues Repurchase Preference Shares C (including expenses) Net proceeds/[repayments] of other long-term borrowings [21] [84] [11] [68] 0 — [181] [15] [71] [11] [10] 7 — 203 [12] [58] [11] [31] 239 [411] 85 —Net cash provided by/[used in] financing activities continuing operations —Net cash provided by/[used in] financing activities discontinued operations [365] 0 103 0 [199] 0 Net cash provided by/ [ used in ] financing activities total Group (C) [365] 103 [199] Net cash flow total group (A+B+C) [24] [45] [54] Net increase in liquid funds Liquid funds at year-end: Cash and cash equivalents Bank overdrafts 50 [19] 73 [18] 114 [10] 31 55 104 73 [18] 0 114 [10] [4] 154 [6] 10 55 100 158 [24] [45] [54] Other operational payments and receivables: Profit taxes (net) Payments deducted from provisions for restructuring and other provisions excluding pensions Payments for defined benefit pension plans 33 22 Cash flow from investing activities Investments in property, plant & equipment and software Proceeds from the disposal of property, plant & equipment Acquisitions of Group companies Proceeds of divestments net of transaction fees Other 19,21 10 5 6 A Minus liquid funds at beginning of year: Cash and cash equivalents Bank overdrafts Translation differences B Net cash flow total Group A-B The accompanying Notes are an integral part of these Financial Statements. 99 CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE for the years ended 31 December 2007, 2006 and 2005 Notes 2007 2006 2005 In millions of euro, unless stated otherwise Cash flow hedges: Valuation gain/[loss] taken to equity Transferred to income statement for the year [2] [4] 0 [2] 7 [2] [6] [2] 5 56 25 [27] Exchange differences on translation of foreign operations Tax on items [98] [12] [127] [4] 180 6 Net result taken directly to equity Net result for the year [60] 195 [107] 142 164 21 Total recognised income and expense for the year 135 34 185 Attributable to: Holders of ordinary shares Corporate Express NV Minority interests in Group companies 118 17 15 19 166 19 135 34 185 Actuarial gains and (losses) on pension plans The accompanying Notes are an integral part of these Financial Statements. 100 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise 1. Business Corporate Express was incorporated in 1875 under the name Koninklijke Nederlandsche Papierfabrieken NV (KNP). In 1993, KNP merged with Bührmann-Tetterode NV and VRG-Groep NV and the legal entity was renamed NV Koninklijke KNP BT (KNP BT). In 1998, the name KNP BT was changed into Buhrmann NV and on 20 April 2007 into Corporate Express NV. The Company is incorporated under the laws of the Netherlands and has its statutory seat in Maastricht (the Netherlands). Corporate Express' head office is located in Amsterdam, the Netherlands. Corporate Express has four business segments: Office Products North America; Office Products Europe; Office Products Australia; and Printing Systems. Office Products North America, Europe and Australia mainly operate under the name Corporate Express and offer a full range of products to large-and medium-sized companies and institutions such as traditional office products and office furniture but also facility supplies, forms and print and promotional products. On 12 November 2007 ASAP Software, until that date the fifth business segment, was divested. ASAP Software supplies desktop software and related services and derives its sales predominantly in North America. Corporate Express also supplies pre-press systems, printing presses, folding, cutting and binding machines and provides related services, spare parts, supplies and related services in six countries in Europe. These activities together with our Veenman copier business are grouped in Printing Systems. Corporate Express' primary listing of ordinary shares is at Euronext Amsterdam NV in Amsterdam. Corporate Express also has American Depository Shares (ADS) listed on the New York Stock Exchange, representing its ordinary shares, evidenced by American Depositary Receipts (ADR), each represent one ordinary share of Corporate Express NV. 2. Summary of accounting policies Basis of preparation The Consolidated Financial Statements comply with Title 9, Book 2 of the Netherlands Civil Code. In accordance with Article 402, Title 9, Book 2 of the Netherlands Civil Code, an abbreviated Company Income Statement is included. Corporate Express' financial statements comply in all respects with IFRS as issued by the International Accounting Standards Board, the interpretations thereof by the International Financial Reporting Interpretations Committee (IFRIC) and the Standing Interpretations Committee (SIC). For Corporate Express there are no differences between IFRS as adopted for use in the European Union and full IFRS as issued by the International Accounting Standards Board. For new accounting pronouncements under IFRS that are effective after 31 December 2007, see Note 40. The Company adopted IFRS7 in 2007. Other accounting pronouncements which became effective as of 1 January 2007 had no material impact on the financial statements for 2007. Corporate Express' accounting policies under IFRS vary in certain respects from accounting principles generally accepted in the United States of America ('US GAAP'). On 21 December 2007, the Securities and Exchange Commission (SEC) approved rule ammendments under which financial statements from foreing private issuers in the U.S. will be accepted without reconciliation to U.S. Generally Accepted Accounting Principles only if they are prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The rule ammendments apply to financial statements covering years ended after 15 November 2007. 101 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) The consolidated financial statements will be submitted for adoption to the General Meeting of Shareholders. The Consolidated Financial Statements are presented in euro and are prepared under the historical cost convention, except for the financial assets and liabilities (including derivative instruments), which are valued at fair value as described in the Notes. Amounts are rounded to the nearest million euro; therefore amounts may not equal (sub) totals due to rounding. As a general principle, an asset is recognised in the Consolidated Balance Sheet when it is controlled by the entity, it is probable that the future economic benefits will flow to the Company and the asset can be measured reliably. A liability is recognised in the Consolidated Balance Sheet when it is probable that an outflow of resources will result from the settlement of a present obligation, and the amount at which the settlement will take place can be measured reliably. Non-current financial liabilities are stated at amortised costs. If the criteria for recognition are no longer met, the assets and liabilities are derecognised. Where necessary, the assets have been reduced to reflect the impaired value. Change of accounting policy As of 1 January 2007, postage expenses relating to the mailing activity in our print and forms business, which are reimbursed by our customers, have been accounted for as net sales. Segmentation Corporate Express' segment information is presented in respect of the Groups' business and geographical segments. The primary segmentation, business segments, reflects the Group' management structure. Principles of consolidation The Consolidated Financial Statements include Corporate Express NV and the entities controlled by Corporate Express. Control is achieved when Corporate Express has the power to govern the financial and operating policies of an investee (subsidiary) so as to obtain benefits from its activities. Control is presumed to exist when Corporate Express NV owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity unless, in exceptional circumstances, it can be demonstrated that such ownership does not constitute control. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether Corporate Express controls another entity. Subsidiaries are fully consolidated (Group companies) from the date on which control is obtained. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The interest of minority shareholders in a Group company is stated at the minority's proportion of the net asset (equity) values and net income of the Group company. 102 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) A Group company is included in the consolidation until the date on which Corporate Express ceases to control the Group company. Non-current assets held for sale and discontinued operations In case of disposal or classification as held for sale of an entire component of the entity, comprising major operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity, that component is treated as a discontinued operation. Accordingly, the Consolidated Statements of Income and the Consolidated Cash flow Statements of previous years are represented and the results of that operation, including the result on the sale of that operation, are disclosed as a single amount. A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. A non-current asset or disposal group classified as held for sale is measured at the lower of its carrying amount and fair value less costs to sell. The carrying amount includes goodwill acquired in a business combination if the Group company or component of the Corporate Express Group is a cash-generating unit to which goodwill has been allocated (see Note 6). At the time of sale, any gain or loss on disposal is recognised in income, including the cumulative amount of any translation differences recognised directly in equity with respect to the assets sold. Foreign currencies Each Group company measures its balance sheet and income statement items in the currency of the primary economic environment in which the Group company operates ('the functional currency'). The Consolidated Financial Statements are presented in euro, which is the Group's presentation currency. In the consolidation, assets and liabilities of Group companies whose functional currency is not the euro are translated into euro at the rates prevailing at the balance sheet date. Income statements of these Group companies are translated into euros at the average rates for the reporting period. The resulting translation differences are recorded directly in equity as 'cumulative translation adjustments'. Transactions in currencies other than the functional currencies of the Group companies are recorded at the exchange rates prevailing on the dates of the transactions. Monetary items (such as receivables, cash and cash equivalents and liabilities) denominated in currencies other than the functional currencies of the Group companies are translated at the rates prevailing on the balance sheet date. The resulting translation differences and translation differences on settlements are reflected in the income statement. Translation differences, net of related taxation, arising from long-term loans granted to Group companies that have the nature of permanent investments (quasi equity), are recorded directly in equity as 'cumulative translation adjustments' by analogy of translation differences on shareholdings in Group companies (see 'Principles of consolidation'). 103 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) The following translation rates against the euro have been used (main currencies only): 31 December 2007 Average 2007 31 December 2006 Average 2006 31 December 2005 Average 2005 Currency per 1 EUR AUD CAD GBP USD NOK SEK 1.6757 1.4449 0.7334 1.4721 7.9580 9.4415 1.6355 1.4690 0.6846 1.3705 8.0183 9.2523 1.6991 1.5281 0.6715 1.3170 8.2380 9.0404 1.6666 1.4241 0.6818 1.2554 8.0463 9.2529 1.6109 1.3725 0.6853 1.1797 7.9850 9.3885 1.6327 1.5096 0.6839 1.2446 8.0131 9.2803 Net sales The criteria for recognition of sales of goods are: • Significant risks and rewards of ownership have been transferred to the buyer. In most cases, the significant risks and rewards of ownership are transferred at the point of delivery or at the moment after installation (ready to operate), depending on shipping terms, contractual arrangements and performance obligations. • Corporate Express retains neither continuing managerial involvement nor effective control over the goods sold. • The amount of revenue can be measured reliably and collectibility is reasonably assured. • The related cost (of sales) can be measured reliably. Based on these criteria, sales of goods are in general recognised at the point of delivery, as Corporate Express has no future performance obligations. The criteria for recognition of rendering services are: • It is probable that the economic benefits associated with the transaction will flow to the entity. • The stage of completion of the transaction at balance sheet date can be measured reliably. • The amount of revenue can be measured reliably. • The costs incurred for the transaction and the costs to complete the transaction can be measured reliably. Based on these criteria, sales of machines in the Printing Systems business segment are recognised after installation while sales of supplies and spare parts are recognised at the point of delivery. Sales of services are recognised in the period in which the services are rendered. The Company sells copiers and graphic machines together with subsequent servicing usually to third-party lease companies who enter into long-term lease contracts with our customers. The revenue from these contracts is allocated to the delivery of copiers and graphic machines and subsequent servicing in proportion to their fair value which means that any price discount given is allocated in proportion to their fair value. 104 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) The Company also rents copiers and graphic machines to customers of which the revenue is recognised on a linear basis over the contractual rental period. Corporate Express receives contributions from vendors for inclusion of their products in Corporate Express' catalogues which have no relationship with purchased volumes. Catalogue contributions are in principle recognised as income on a linear basis over the period the catalogue is generating sales and included in net sales. Catalogue contributions received for promoting and advertising are recognised in income when the catalogue is released. Sales are recorded on a gross basis when Corporate Express acts as the primary obligor in a sales transaction and/or whether based on an assessment of certain indicators, such as general inventory risk and credit risks, Corporate Express bears the major part of the risks and rewards in a sales transaction. If the supplier acts as the primary obligor and/or bears the major part of the risks and rewards in a sales transaction, Corporate Express records the sales on a net basis (sales value less purchase value of goods or services). In the Statements of Income, net sales represents the invoiced value, excluding sales tax, of trade goods sold and services rendered to third parties, less discounts, rebates to customers and less goods returned by the customers. Also included in net sales are shipping and other handling costs separately charged to the customers. Rebates of customers paid out upfront and related to future periods are amortised over the duration of the customer contract. Purchase value of trade goods sold Purchase value of trade goods sold is the average purchase cost of trade goods (see 'Inventories'). Gross contribution Gross contribution is arrived at by subtracting purchase value of trade goods sold from net sales. Employee benefits In general, employee benefits are recorded as an expense in the period in which services by the employee are rendered. A liability and an expense is recognised for vacation days, vacation pay, bonuses and other short-term benefits when the employees render service that increases their entitlement to these benefits. The expected cost of long-term benefits such as sabbatical leave, jubilee benefits, disability benefits and long-term bonus plans are actuarially determined and recognised as a liability and an expense proportionally for the reporting period. The accounting policies regarding pensions and employee stock options is described below. Termination benefits are payable whenever an employee's employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. Termination benefits are recognised as a liability and expense when Corporate Express has raised valid expectations to those effected to either terminate the employment of current employees according to a detailed formal plan or to provide termination benefits as a result of an accepted offer made to encourage voluntary redundancy. 105 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) Pensions Defined contribution plans are plans under which Corporate Express pays fixed contributions and will have no legal or constructive obligation to pay additional contributions. Contributions for defined contribution plans are recognised as an expense when incurred. Defined benefit plans are post-employment benefit plans other than defined contribution plans. The main defined benefit plans in the Netherlands and some foreign defined benefit plans are funded with plan assets which have been segregated and restricted in trusts. For the funded plans, contributions are made by Corporate Express, as necessary, to provide assets sufficient to meet benefit entitlements in accordance with, among others, legal requirements and financing agreements with these trusts. In the balance sheet, the pension obligation less, in the case of funded plans, fair value of the plan assets, is recorded either as a net pension provision or a net pension asset. A net pension asset is only recorded to the amount of economic benefits available for Corporate Express in the form of future refunds from the plan or reductions in future contributions to the plan. The pension obligation of a defined benefit plan is measured as the present value of the estimated pension benefits, taking into account, among others, expected wage inflation and salary increases due to promotion, using the projected unit credit method under which the cost of providing pensions is charged to the income statement so as to spread the service cost over the service lives of employees. The discount rate used to calculate the present value is the interest on high-quality corporate bonds that have a maturity approximating the terms of the related obligations. The net periodic pension cost for defined benefit plans consists of the current service cost and interest cost less, in the case of funded plans, expected return on plan assets. In case of an amendment of a defined benefit plan, past service costs are recognised as an expense on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are vested immediately following the changes to a defined benefit plan, past service costs are recognised immediately as an expense. Actuarial gains and losses arise due to, among others, changes in discount rates, differences between expected and realised returns on plan assets, differences in mortality and differences between expected and actual wage inflation and salary increases due to promotion. Actuarial gains and losses are recorded directly in equity (see Consolidated Statements of Recognised Income and Expense). The pension obligation is determined as the present value of the defined benefit obligation less the fair value of plan assets, together with adjustments for past service cost. Employee stock options Stock options are granted to a group of employees. The grants meet the definition of equity-settled, share-based compensation. The fair value of the options is measured at grant date allowing for any market-based performance conditions and recognised as expenses on a linear basis during the vesting period, based on the number of options that eventually vest, with a corresponding increase in equity as option reserve. Vesting conditions are taken into account in the measurement of the fair value and the related recognition of expense. When the options are exercised or lapsed, a reclassification within equity attributable to equity holders of the Company takes place from the option reserve to retained earnings. This policy is applied to all options that on 1 January 2004, the date of transition to IFRS, had not been exercised, vested or lapsed. 106 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) Acquisition of companies The purchase method of accounting is used to account for the acquisition of companies. At the acquisition date, the identifiable assets, liabilities and contingent liabilities of the acquired company are recognised separately based on Corporate Express' accounting policies, regardless of whether they had been previously recognised in the financial statements of the acquired company. The identified assets, liabilities and contingent liabilities of the acquired company are measured initially at their fair values at the acquisition date. This includes intangible assets such as customer lists, customer relationships and brand names, insofar as they can be reliably measured, regardless of whether they will be subsequently used. These intangibles assets are amortised over the estimated useful lives. The cost of an acquisition includes the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by Corporate Express, in exchange for control of or significant influence in the acquired company plus any costs directly attributable to the acquisition. Any excess of the cost of the acquisition over Corporate Express' interest in the net fair value of the acquired company's identified assets, liabilities and contingent liabilities is initially recognised as goodwill. If Corporate Express' interest in the net fair value of the items recognised exceeds the cost of the acquisition, the identification and measurement of the acquired company's identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the business combination are reassessed. Any excess remaining after that reassessment is recognised immediately in the income statement. Goodwill acquired with acquisitions of Group companies is separately presented in the Consolidated Balance Sheet. Goodwill acquired with acquisition of associated companies is included in investments in associates. After the initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortised but instead tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. In the impairment test, goodwill related to cash-generating units whose carrying values exceed their recoverable amount are written down to the higher of the net selling price (fair value less cost to sell) or the discounted net future cash flows expected to be generated (value in use). The discount rate is derived from the pre-tax estimated weighted average cost of capital, reflecting the risks inherent to the cash-generating unit for which cash flows have not been adjusted and a normative financing profile. Impairment losses on goodwill are recognised as an expense immediately and are not reversible. The determination of a cash generating unit for goodwill impairment testing purposes is based on the business segments (see Note 5). For the repurchase of shares held by minority shareholders the economic entity model is applied. Financial instruments In principle Corporate Express uses the following financial instruments: • financial assets: cash, trade and other receivables, long term investments; • financial liabilities: trade payables, long-term borrowings; and • derivative financial instruments: forward exchange contracts, currency swaps and interest rate swaps. 107 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) Information on the accounting policies for the financial instruments listed above can be found elsewhere within this Note 2 to the consolidated financial statements. Corporate Express is party to derivative financial instruments in the normal course of business, in order to limit the interest cost with respect to our long-term debt, in accordance with the Group's financial risk management policies (Note 4). Derivative financial instruments are measured at their fair value. Changes in the fair value of derivative financial instruments are recognised in the income statement, unless the derivatives are designated, and effective, as cash flow hedges in which case the changes in the fair value are deferred and recorded directly in equity attributable to equity holders of the Company. Any ineffective portion is recognised immediately in the income statement. In principle interest rate swaps are accounted for as cash flow hedges which means that changes in the fair value of these interest rate swaps are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. The amounts deferred in equity are recognised in the income statement when the hedged items affect the income statement. At inception of the hedge the hedge documentation is prepared which includes the method of prospective and retrospective testing for effectiveness. An interest rate swap is accounted for as a (cash flow) hedge if it is expected to be highly effective, based on the prospective effectiveness test at inception of the hedge. At least quarterly a retrospective test is performed to determine whether the swap has been highly effective. The ineffective portion is recorded in the income statement. In the event that the hedged transaction terminates, the deferred gains or losses on the associated derivative are recorded in the income statement. The estimated fair value of interest rate swaps is calculated as the present value, based on the zero coupon interest curve, of the estimated future cash flows. The fair value of currency swaps is determined using forward exchange market rates at the balance sheet date. Corporate Express accounts for ordinary purchases and sales of financial assets at trade date. Impairment of non-current assets other than goodwill At balance sheet date, the carrying amounts of property, plant and equipment, internally used software and other noncurrent intangible assets is reviewed to determine whether there is any indication that those assets might have been impaired. Assets whose carrying values exceed their recoverable amount are written down to the higher of the fair value less cost to sell and its value in use. Impairment losses are recognised as an expense immediately. Where an impairment loss of a non-current asset other than goodwill subsequently reverses, the carrying amount of these assets is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Software (for own use) This software is stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised as an expense and calculated on a straight-line basis over the expected useful life of the individual software asset with a maximum of seven years. 108 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) The cost includes third-party costs and internal costs, such as employee benefit costs, insofar related to the development of the software. Also included in the cost are borrowing costs to finance the development of software. Other intangible assets Other intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses and consist primarily of customer relationships and brand names mostly acquired in business combinations. These intangible assets are recognised at fair value determined at the date of acquisition and are amortised using the straight-line method over their individually estimated useful lives. Property, plant & equipment Property, plant & equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognised as an expense and calculated on a straight-line basis over the expected useful lives of the assets, taking into account a residual value. Useful life, residual value and depreciation method of property, plant & equipment are annually reviewed. Land is not depreciated. Each component of an item of property, plant & equipment with a cost that is significant in relation to the total cost of the item is depreciated separately over its own useful life, not exceeding the remaining useful life of the related asset. Borrowing costs to finance the construction of property, plant & equipment are capitalised as part of the costs of the asset, during the period of time that is required to complete and prepare the asset for its intended use. Borrowing costs included in the cost of qualifying assets during the year are calculated by applying an average local capitalisation rate to expenditure on such assets. The depreciation rates per year are as follows: Land Buildings Plant and equipment Other fixed equipment Not depreciated 3–7% 5–10% 10–33% Maintenance, repairs and refurbishments are generally recognised as expenses during the period in which they are incurred. However, major renovations are capitalised when they meet the recognition criteria. Major improvements are recognised as a separate component and depreciated over the useful life of the component, not exceeding the remaining useful life of the related asset. Catalogue production costs The cost to produce catalogues is capitalised and presented as prepaid expenses insofar as the catalogue enables the receipt of sales orders. The production costs of that part of a catalogue which is 109 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) used for promoting and advertising products and services is expensed as incurred. The capitalised catalogue production costs includes third-party and internal costs of development and distribution. The capitalised catalogue production costs are presented as a current asset and amortised on a linear basis over the period the catalogue is generating sales which usually does not exceed 12 months. The amortisation expense is included in other operating costs. Income taxes and deferred taxes The amount of tax included in the income statement is based on the reported accounting profit plus or minus non-deductible accounting expenses and non-taxable accounting income. The amount of tax included in the income statement includes changes in the valuation of deferred tax assets for loss carry-forwards. Current tax assets and liabilities are not discounted and are calculated at tax rates prevailing at the balance sheet date. Deferred tax assets and liabilities are recognised for temporary differences in the carrying value of assets and liabilities and their tax base and for loss carry-forwards. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences and loss carry-forwards can be utilised. Deferred taxes are not discounted and are determined at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets and liabilities are offset when there is a legally enforcable right to offset. Tax expense and income related to items that are recorded in equity are recorded likewise. Investments in associates An associate is an entity over which Corporate Express is in a position to exercise significant influence, but not control, in the financial and operational policy decisions of the investee through participation. Significant influence is assumed when Corporate Express holds 20% or more of the voting power. Investments in associates are initially measured at cost and subsequently increased or decreased for the Company's share in the result (after tax) and other changes in equity of the associate less, if applicable, impairments and less distributions received such as dividends. The result of an associate is determined in accordance with Corporate Express' accounting policies. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to the ownership of the asset. All other leases are classified as operational leases. Corporate Express leases distribution and office facilities under non-cancellable operating leases. Some of the larger leases have separate clauses related to leasehold improvements, where Corporate Express has substantially all the risks and rewards of ownership. Therefore the leasehold improvements are classified as finance leases. 110 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) Assets under finance leases, with the Company as lessee, are recognised as assets of the Company (under land and buildings in the property, plant & equipment) at their fair value at the date of inception or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. The interest of element of the finance cost is charged to the income statement over the lease period so as to achieve a constant rate of interest on the remaining balance of the liability for each period. The leasehold improvements acquired under finance leases are depreciated over the shorter of the useful life of the asset or the lease term. Payments under operating leases with the Company as lessee are expensed on a straight-line basis over the term of the relevant lease. Inventories Inventories related to trade goods, used machines and goods in transit are valued at the lower of purchase cost or net realisable value. Purchase cost includes the purchase price, import duties and other taxes (other than those subsequently recoverable from the tax authority) and inbound third-party transportation, handling and other costs directly attributable to the acquisition of trade goods. The purchase price is net of trade discounts, cash discounts from suppliers for prompt payment and rebates received from suppliers. The difference between the weighted average purchase cost and net realisable value (if the latter is lower) is the provision for impairment for obsolete and slow-moving items. Trade receivables Trade receivables are carried at amortised cost which is usually the nominal value, less an allowance for doubtful receivables. The allowance is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of allowance is recognised in the income statement. Prepaid expenses and accrued income Prepaid expenses and accrued income are carried at cost which is usually the nominal value. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term, highly liquid investments with original maturities of three months or less. Trade payables Trade payables are carried at amortised cost which is usually the nominal value. 111 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) Equity attributable to equity holders of the Company, ordinary shares and Preference Shares Corporate Express' ordinary shares are classified as equity attributable to equity holders of the Company. External costs directly attributable to the issue of new ordinary shares, other than in connection with business combinations, are deducted from equity attributable to equity holders of the Company net of tax. Where any Group company purchases Corporate Express share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to equity holders of the Company until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received (net of any directly attributable incremental transaction costs and the related income tax effects) is included in equity attributable to equity holders of the Company. Corporate Express' Preference Shares A are classified as a financial liability and are recognised at the proceeds received, which represent fair value, net of transaction costs incurred. Subsequently the Preference Shares are stated at amortised cost. Under IFRS, the critical feature in differentiating a financial liability from an equity instrument is the existence of a contractual obligation on one party (the issuer) to deliver cash or another financial asset to the other party (the holder) or to exchange another financial instrument with the holder under conditions that are potentially unfavourable to the issuer. When such a contractual obligation exists, that instrument meets the definition of a financial liability regardless of the manner in which the contractual obligation will be settled. Further information regarding Corporate Express' ordinary shares and Preference Shares is given in Note 29. The 'option reserve' in equity attributable to equity holders of the Company is the amount of expenses recognised in connection with the employee share options. When the options are exercised reclassification from option reserve to share premium reserve takes place. When the options have lapsed, a reclassification from the option reserve to retained earnings takes place. The cumulative translation adjustments in equity attributable to equity holders of the Company relates to the euro translation of assets and liabilities of Group companies whose functional currency is not the euro. When a Group company is sold or otherwise disposed of, the cumulative translation adjustments, if any, are recognised in the income statement as part of the result on the sale or disposal. Also, cumulative translation adjustments with respect to long-term loans that are designated as permanent investments (quasi equity, see Transactions in foreign currencies) are recognised in the income statement when these loans are reduced. The hedge reserve relates to changes in the fair value of the interest rate swaps for which hedge accounting is applied. The amounts recorded in the hedge reserve are recognised in the income statement, as other financing expenses, when the hedged item affects the income statement. Subordinated Convertible Bonds Corporate Express' Subordinated Convertible Bonds are classified as a compound financial instrument. The liability component is initially stated at fair value and is subsequently stated at amortised cost which is the initial amount minus interest and principal payments plus cumulative 112 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) amortisation using the effective interest method of any difference between the initial amount and the maturity amount. The amortisation is recorded in the income statement. The value of the conversion option is determined using the residual method. The liability component is recorded as long-term borrowings and the value of the conversion option is recorded directly in equity attributable to equity holders of the Company (net of taxes). High Yield Bonds, Senior Facilities Agreement and Securitised Notes The High Yield Bonds and Term Loans A, C and D and Medium Term Notes are initially stated at fair value (proceeds received net of transaction costs incurred) and subsequently stated at amortised cost. Any difference between the proceeds and redemption value is recognised in the income statement over the term of the loan using the effective interest method. The amortisation is recorded in the income statement as other financing costs. The Revolver and Short Term Notes are stated at the proceeds received under long-term borrowings. Transaction costs incurred are recorded as capitalised financing fees under other non-current assets as these borrowings have variable amounts outstanding. The interest paid on these types of borrowings is recorded in the income statement as other financing costs. The capitalised financing fees are amortised on a linear basis over the expected life of the related borrowing. The amortisation expense is presented in the income statement as other financing costs. Provisions The accounting policies regarding pensions and other employee benefits are stated under employee benefits. Provisions are recognised when the Group has: • A present legal or constructive obligation as a result of past events. • It is probable that an outflow of resources will be required to settle the obligation. A reliable estimate of the amount can be made. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects the current market assesments of the time value of money and the risk specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense. Other non-current provisions and liabilities in the balance sheet include provisions for integration and reorganisation following acquisitions, divestments and restructuring of businesses as well as provisions for product warranties and reflect amounts payable after more than one year from the balance sheet date. Amounts payable within one year are recorded under current liabilities. Provisions for restructuring as a result of an acquisition are only recognised as part of the cost of the acquisition if the acquired company has an existing liability for restructuring recognised before the acquisition date. A provision recognised after the acquisition date is not recognised as part of the cost of the acquisition and is therefore not part of the acquisition goodwill. In this case the provision is set up through the income statement. 113 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 2. Summary of accounting policies (Continued) Advertising costs Advertising costs are expensed as incurred and included in operating expenses. Research and development Costs of research are expensed as incurred and included in operating expenses. Costs of research are insignificant. Costs of development, which predominantly relate to internally used software, are capitalised and after being put into use, amortised over the expected life of the asset. Disclosure of material items of income and expense During the course of a year, certain events may take place which may have unique characteristics that set them apart from the Company's standard day-to-day operations. If these events are significant in size, Corporate Express reports them separately to provide a more operationally oriented view on the results of the business. Consolidated statements of cash flows Cash flow statements have been prepared using the indirect method. Cash flows of subsidiaries with functional currencies other than the euro are translated into euros using the average rates of exchange for the periods involved. Corporate Express has chosen to report interests paid and received as part of the cash flow from financing activities. The net cash flow is recorded net of the effects of acquisitions and divestments on liquid funds. 3. Critical accounting estimates and assumptions The Consolidated Financial Statements include amounts that are based on management's best estimates, judgements and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates, judgements and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Pensions Corporate Express' operating companies offer a variety of defined benefit plans. In countries such as the Netherlands and the United Kingdom, these defined benefit plans are maintained in separate trusts (pension funds) to which Corporate Express makes contributions. The Company accounts for pensions in accordance with IAS 19 under which pension expense and related plan assets and benefit obligations are based on a specific methodology that reflects the concepts of accrual accounting. Amounts are reflected in the income statement systematically over the service periods of the employees covered by the plan. Amounts expensed are typically different from amounts funded. Application of IAS 19 requires that management makes use of assumptions regarding, among others, discount rate, expected return on plan assets and rates of compensation, state pension and pension increases in assessing benefit obligations and periodic pension costs. IAS 19 requires readjustment of the significant actuarial assumptions annually to reflect current market and economic 114 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 3. Critical accounting estimates and assumptions (Continued) conditions. Actual circumstances could change the impact of these assumptions giving rise to different benefit obligations, and may affect pension cost in the following years which could have an effect on Corporate Express' future operating result and net result. A sensitivity analysis of pension cost in 2007 for a change in discount rate and/or expected return on plan assets is provided under Note 22. Goodwill impairment Under the impairment test, the fair value of the cash-generating unit that contains the goodwill is compared to its book value, including the goodwill. Any excess of book value over fair value is recorded as an impairment of goodwill. This fair value of the cashgenerating unit is calculated based on discounted future cash flows and residual values. The determination of the estimated multi-year forecasts requires management to make assumptions and estimates regarding, amongst others, sales growth, gross contribution margins and operating expense developments. These assumptions are based, amongst others, on past performance. Management assumptions and estimates are also affected by external factors such as assumed macro-economic conditions, and market developments. These estimates may change over time and may cause the Company to record additional impairment charges. Also the fair value and hence the impairment charge is sensitive to the discount rate. The discount rate is derived from the pre-tax estimated weighted cost of capital, reflecting the risks inherent to the cash-generating unit and a normative financing profile. The discount rate before tax used for the impairment test at 31 December 2007 was between 10.3% and 11.2% dependent on the cash-generating unit. In 2007, 2006 and 2005, no goodwill impairments were recorded (see also Note 18). A sensitivity analysis around the key assumptions has been performed and it was concluded that no reasonably possible changes in key assumptions would cause an impairment amount. Taxation Corporate Express has a considerable amount of loss carry-forwards. For these loss carry-forwards and for temporary differences in the valuation of assets and liabilities for reporting and tax purposes, deferred tax assets and deferred tax liabilities are recognised. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. In determining the valuation of deferred tax assets and liabilities, Corporate Express' assessment of future taxable income, available taxable temporary differences, tax planning, applicable limitations on the use of tax loss carry-forwards are factors taken into account. These factors are determined in consultation with external tax experts. If actual future taxable income is different than originally assessed, if tax planning fails to materialise, if limitations on the use of tax loss carry-forward apply the valuation of deferred tax assets and liabilities may have to be adjusted which may have an effect on the reported tax expense and net result. Other receivables in respect of rebates from suppliers Corporate Express receives various types of rebates from suppliers, which are based on the volume of goods purchased (volume-based rebates) or based on the inclusion of certain products of the supplier in Corporate Express' catalogue offerings (catalogue contributions) or are received for entering 115 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 3. Critical accounting estimates and assumptions (Continued) into a contract with a supplier (contract-based rebates). Volume-based rebates are settled in arrears, mostly not exceeding one year. For each interim reporting period volume-based rebates are accrued on the basis of a prudent estimate of the volumes to be purchased for the entire rebate period. Provisions for restructuring and integration Corporate Express records provisions for restructuring and integration relating to cost-saving restructuring measures and the integration of acquired businesses. These provisions are based on Corporate Express' best estimate of costs to be incurred for, among other things, severance payments, termination fees and penalties for rental and other contracts. If actual costs are different than originally estimated, the provisions for restructuring and integration may be insufficient which could affect operating result and net result. Furthermore, additional restructuring measures may be necessary depending on changes in economic conditions and operating performance, which may result in additional provisions, which in turn may affect operating result and net result. Provisions for legal proceedings Corporate Express is involved in various legal and regulatory proceedings arising in the normal course of its business. Corporate Express accrues for the estimated probable costs to resolve these proceedings if a reasonable estimate can be made of the probable outcome. After consultation of in-house and outside legal counsels, these accruals are based on the analysis of possible outcomes of litigation and settlements. Operating result and net result could be affected if actual outcomes are different than originally estimated. 4. Financial market risks Corporate Express is exposed to financial market risks, including adverse changes in interest rates, currency exchange rates and availability of short-term liquidity. Our financial policies are designed to mitigate these risks by restricting the impact of interest and currency movements on our financial position while safeguarding an adequate liquidity profile. The financial risks are managed by our Treasury function, which does not operate with a profit objective but pursues benefits of scale and efficiency and provides in-house services in the area of financial logistics. Cash and third-party debt is concentrated in the main financing companies to ensure maximum efficiency in meeting changing business needs, while local operations are largely financed by a mix of equity and long-term inter-company loans denominated in local currencies. Derivative financial instruments are used only to hedge against financial market risks, and not for speculative purposes. Financial instruments with third parties are primarily dealt by Corporate Express NV, Corporate Express US Finance, Inc. and Corporate Express Shared Service Center (Europe) NV. These entities also act as the main financing companies for the Group. In addition, an accounts receivable securitisation programme is being operated using Corporate Express Silver US LLC and Corporate Express Silver Europe BV (see Note 32). 116 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 4. Financial market risks (Continued) Capital risk management The financing policy aims to maintain a capital structure which enables us to achieve our Group strategic objectives and daily operational needs. The degree of flexibility of the capital structure, including appropriate access to capital markets, the financing of working capital fluctuations and the costs of financing (optimal weighted average cost of capital) are factors taken into consideration. With respect to the level of debt financing, Corporate Express focuses on cash interest cover (operating result before depreciation of tangible fixed assets and amortisation of software and other intangible assets over cash interest) and the relationship between borrowings and total enterprise value (market value based leverage, which is calculated by using the market capitalisation of equity and the nominal value of interest-bearing debt as the total enterprise value). The objective is to restrict the four quarterly rolling cash interest coverage to a minimum of three times and the market-value based gearing (net interest-bearing debt over total enterprise value) over time to a maximum of 50%. In addition, consideration is given to the development of specific capital ratios, of which the leverage ratio (net interest-bearing debt over operating result before depreciation of tangible fixed assets and amortisation of software and other intangible assets) is the most relevant. Actual cash interest cover at 31 December 2007 was 3.9 (2006: 5.0), which is above our minimum target level of 3.5, and the leverage ratio was 3.1 (2006: 3.2)(1). (1) Cash interest cover 2006 and 2007 and leverage ratio 2006 are calculated based on operating result before depreciation of tangible fixed assets and amortisation of software and other intangible assets, including discontinued operations. Credit risks Our business involves risks that our customers do not pay their invoices for reasons of insolvency. In general we want to balance providing adequate service with non-payment risks and consequently set limits for delivery on credit terms or require cash on delivery. These decisions are taken on a local level according to local customs and experience. The Company's customer base is spread over many industries and sectors (including government institutions), most of these customers are large corporations or institutions. No individual customer represents 0.5% or more of the Company's total sales or trade accounts receivable balance in any year. Management believes it has adequately provided for the collection risk (including the repurchase agreements) in the Company's accounts receivable, by recording a provision for impairment of trade receivables, which reduces such amounts to their net realisable value, taking into consideration that collection risks are to a certain extent insured. The Company has deposited its cash and deposits with reputable financial institutions with high-quality credit ratings. Interest rate risks The Company is funded through a mix of equity and debt instruments on which different types of interest rates are being paid. Consequently, a change of interest rates in these instruments can lead to higher costs. 117 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 4. Financial market risks (Continued) Our interest policy is designed to restrict the short-term impact of fluctuations in interest rates while keeping the interest burden as low as possible. Of the non-current portion of long-term borrowings on 31 December 2007, 46% was at fixed interest rates before hedging. Interest rate swaps are used to hedge against floating interest. We currently aim to have around 50% of the long-term borrowings, after hedging, at fixed interest given the present level of interest cover. On 31 December 2007, 56% of the non-current long-term borrowings was, after hedging, at fixed interest rates. Treasury reviews the interest position on a frequent basis taking into regard changes in market circumstances. Breakdown of long-term borrowings by interest profile: 31 December 2007 Fixed Subordinated loans and Preference Shares A Other loans Interest swaps >1 year (see below) 468 Total 563 % Floating % 46% 95 56% 543 [95] 54% 448 44% 31 December 2006 Fixed % Subordinated loans and Preference Shares A Other loans Interest swaps >1 year (see below) 484 2 228 38% 0% Total 714 56% 118 Floating % 797 [228] 62% 569 44% NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 4. Financial market risks (Continued) Corporate Express' Interest Rate Swap contracts: 31 December 2007 Notional amount(1) Maturity Average interest rate in %(2) in millions < 1 year < 2 years < 3 years < 5 years 119 61 34 0 Total 214 4.71% 5.17% 4.95% Fair value in millions 0 [1] [1] [2] 31 December 2006 Notional amount(1) Maturity in millions < 1 year < 2 years < 3 years < 5 years 133 133 57 38 Total 361 Average interest rate in %(2) 4.27% 4.71% 4.95% 4.95% Fair value in millions 1 1 0 0 2 (1) The notional amount of these interest rates swaps are denominated in US dollars and have been translated at the year-end exchange rate. (2) Pursuant to these swaps, Corporate Express pays the fixed interest rates indicated in the table and receives floating rates based on three-month LIBOR. The total fair value at 31 December 2007 of the interest rate swap contracts was €2 million negative (€2 million positive in 2006). The estimated fair value of the outstanding interest rate swap contracts (IRS's) indicates how much would be paid or received in exchange for termination of the contracts without further commitments as per the balance sheet date, and is included in the tables above. As of 1 January 2005, hedge accounting is applied to all IRS's. The fair value of the IRS's at the start of hedge accounting is amortised to the hedge reserve with an offsetting amount in the income statement. The total amount recorded in the income statement in 2007 was a gain of €0.2 million (as financing costs) and a total amount of €4 million was released from the hedge reserve. In 2006, a gain of €2 million (as financing costs) was recorded in the income statement and an amount of €2 million was added to the hedge reserve. Sensitivity analysis for interest rate risk At 31 December 2007, if interest rates on borrowings had been 100 bps higher with all other variables held constant, pre-tax profit for the year would have been €3.2 million (2006: €4.4 million) lower, mainly as a result of higher interest expense on floating rate borrowings; other components of 119 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 4. Financial market risks (Continued) equity would have been €2.1 million (2006: €5.6 million) higher mainly as a result of an increase in the fair value of fixed rate financial assets classified as available-for-sale. Currency rate risks A major proportion of Corporate Express' activities is conducted in currencies other than the euro. The position in relation to the US dollar is in particular relevant, as approximately one-third of Corporate Express' operating results of continuing operations were generated in US dollars in 2007. This results in foreign exchange translation exposure when our results are translated into euro in our consolidated financial statements. Regarding currency risk exposure on trading transactions, it is the policy to cover these risks on a transaction basis as much as possible to stabilise the operational margins in local currency terms. Currency forward contracts with terms up to one year are also used to cover these risks. The occurrence of these exposures is relatively low as operating companies generally source in local currencies and operate on local markets with local competitors. Corporate Express aims to incur its debt by currency after hedges approximately in proportion to the forecasted split of earnings before interest and amortisation, after tax (to be) paid over the major currencies. The remaining translation risk is not covered. Forward foreign exchange and currency swaps are used to adjust the currency profile of the loans issued towards the desired position in order to achieve the hedging as per policy. Per the end of 2007 the expected US$proportion in the forecasted earnings before interest and amortisation, after tax to be paid for 2008 amounts to approximately 41%. The proportion of US$in debt amounts to approximately 44%. Given the volatility of currency exchange rates, there can be no assurance that Corporate Express will be able to effectively manage its currency transaction risks or that any volatility in currency exchange rates will not have a material adverse effect on Corporate Express' financial conditions or results of operations. Breakdown of long-term borrowings by currency: 31 December 2007 As issued: EUR USD Other After hedging with forward exchange and currency swaps (see below): EUR USD Other 120 31 December 2006 334 586 91 396 838 50 1,011 1,284 408 444 159 486 690 108 1,011 1,284 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 4. Financial market risks (Continued) Forward foreign exchange and currency swap contracts at 31 December 2007: Currency swap contracts Buy USD/sell CAD Buy USD/sell EUR Buy GBP/sell EUR Buy EUR/sell SEK Buy EUR/sell NOK Buy EUR/sell DKK Maturity < 1 year < 1 year < 1 year < 1 year < 1 year < 1 year Total Weighted average contractual exchange rate 0.98 1.45 0.86 9.47 8.02 7.46 Notional amount Fair value 21 121 2 31 13 5 0 [2] 0 0 0 0 193 [1] The estimated fair value of the outstanding currency swap contracts indicates how much would be paid or received in exchange for termination of the contracts without further commitments as per the balance sheet date. The fair value of the currency swap contracts at 31 December 2007 of €1 million negative (2006: €0 million) is included in long-term borrowings. Corporate Express does not apply hedge accounting to the currency swaps which means that the changes in the fair value are recorded in the income statement and included in financing costs. Sensitivity analysis currency rate risks The value changes of financial instruments due to a 10 percent strengthening of the euro against the US$at 31 December 2007 would have decreased result before tax by €17 million in 2007 (2006: €25 million) and would not have impacted other components of equity (same for 2006). The value changes of financial instruments due to a 10 percent weakening of the euro against the US$at 31 December 2007 would have increased result before tax by €21 million in 2007 (2006: €31 million) and would not have impacted other components of equity (same for 2006). Liquidity risk The Company faces continuous changes in its requirements for working capital and the payment of its costs and as a consequence has a need to be able to raise liquidity. The objective is to be able to fund the expansion of its business, working capital requirements, capital expenditure and restructuring. The Company's policy is to arrange contractual bank facilities with reputable banks to meet its needs. Treasury manages its liquidity position constantly and concentrates available liquidity. 121 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 4. Financial market risks (Continued) 31 December 2007 Due within 1 year Borrowings(1) Perpetual interest payment on Preference Shares(2) Interest payments Derivatives gross settled cash in Derivatives gross settled cash out Derivatives net settled Trade payables Operational lease liabilities Due > 1 year < 2 years Due > 2 years < 3 years Due > 3 years < 4 years Due > 4 years < 5 years Due > 5 years Total 117 37 622 2 2 205 985 11 59 11 56 11 40 11 21 11 17 11 p/yr 49 11 p/yr 242 [193] 194 0 547 99 — — 0 — 84 — — 0 — 67 — — — — 53 — — — — 43 — — — — 189 [193] 194 0 547 535 31 December 2006 Due within 1 year Borrowings(1) Perpetual interest payment on Preference Shares(2) Interest payments Derivatives gross settled cash in Derivatives gross settled cash out Derivatives net settled Trade payables Operational lease liabilities Due > 1 year < 2 years Due > 2 years < 3 years Due > 3 years < 4 years Due > 4 years < 5 years Due > 5 years Total 66 36 164 720 230 — 1,216 11 76 11 73 11 67 11 41 11 18 11 p/yr 55 11 p/yr 330 [210] 210 4 720 99 — — 1 — 81 — — 0 — 62 — — 0 — 48 — — — — 39 — — — — 170 [210] 210 5 720 499 (1) At redemption value, see table 'repayment schedule long-term borrowings' on page 162. (2) Interest on Preference Shares A will be subject to market circumstances as per 2010 after which it will be fixed for another period of 8 years. 122 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 5. Acquisitions During 2007, Corporate Express acquired 100% of the shares of: • Davenport Office Inc. (31 August), a contract office supply and furniture distributor in Canada • Raeco International (1 June), a catalogue distribution supplier of library supplies with operations in Australia and New Zealand • Møller & Landschultz A/S (30 November), a business-to-business office products distributor in Denmark. The acquired businesses contributed net sales of €22 million and an operating result of €1 million to the Group for the period from acquisition date till 31 December 2007. If the acquisition had occurred on 1 January 2007, Group net sales would have been €5,709 million and operating result would have been €205 million. These pro forma amounts are unaudited. Details of net assets acquired and goodwill are as follows: Total purchase considerations for Davenport, Raeco and Møller & Landschultz Cash paid Contingent balance payables to vendors Direct costs relating to the acquisition 52 1 1 Total purchase consideration Fair value of net assets acquired 53 22 Goodwill (provisional) 30 The goodwill arising on these acquisitions is attributable to the anticipated profitability of the distribution of the Corporate Express' products in the new markets and the anticipated future operating synergies from the operation. The goodwill is provisional as the Company is in the process of finalisation of the purchase price allocation of the other intangible fixed assets. 123 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 5. Acquisitions (Continued) Davenport, Reaco and Møller & Landschultz Carrying value of net assets acquired Recognition intangible assets Fair value Assets Customer relations Other intangible non-current assets Property, plant and equipment Inventories Trade receivables Other receivables Cash and cash equivalents — — 7 7 10 1 0 12 2 — — — — — 12 2 7 7 10 1 0 Liabilities Long-term borrowings Deferred taxes Trade payables Other current liabilities [4] — [6] [2] — [4] — — [4] [4] [6] [2] Net assets acquired Goodwill 13 — 9 — 22 30 Purchase consideration settled in cash Other acquisition related payments — — — — 52 2 Total cash outflow on acquisition — — 55 During 2006, Corporate Express acquired 100% of the shares of Andvord Tybring-Gjedde ASA (ATG), an office products group based in Norway and Sweden. The acquired business contributed net sales of €101 million and operating result of €7 million and a net result of €1 million to the Group for the period from 22 September 2006 to 31 December 2006. The contribution of the acquired business to the earnings per share for 2006 was €0.01. If the acquisition had occurred on 1 January 2006, Group net sales would have been €6,532 million and operating result would have been €260 million. These pro forma amounts are unaudited. Details of net assets acquired and goodwill are as follows: Purchase consideration ATG Cash paid Direct costs relating to the acquisition 241 5 Total purchase consideration Fair value of net assets acquired 246 107 Goodwill 139 The goodwill arising on the acquisition of ATG is attributable to the anticipated profitability of the distribution of the Corporate Express' products in the new markets and the anticipated future operating synergies from the operation. The proposed transaction fulfils one of Corporate Express' strategic ambitions, providing an opportunity to expand the Group's geographic coverage in the Nordic region. 124 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 5. Acquisitions (Continued) The combination presents a strategic and geographical fit, delivering Corporate Express with major market positions in Norway and Sweden and improved access to the Danish market. It brings a platform for further expansion in the Nordic region. ATG Carrying values of net assets acquired Recognition intangible assets Fair value Assets: Brand names Customer relations Other intangible non-current assets Property, plant and equipment Deferred tax assets — — — 24 19 3 62 7 — — 3 62 7 24 19 Inventories Trade receivables Other receivables Cash and cash equivalents 35 46 3 8 — — — — 35 46 3 8 Liabilities: Long-term borrowings Pensions Other non-current liabilities Deferred tax liabilities [32] [5] [1] — — — — [17] [32] [5] [1] [17] Trade payables Other current liabilities [20] [26] — — [20] [26] Net assets acquired Goodwill 52 — 72 — 107 139 Purchase consideration settled in cash Liquid funds acquired: Cash and cash equivalents — — 246 — — 8 Cash outflow on acquisition — — 238 In 2007 the purchase price allocations of the acquisitions in 2006 were finalised resulting in an adjustment of goodwill of €21 million. During 2006 a number of smaller acquisitions (13) were made which resulted in the recognition of €33 million in Goodwill and €7 million in other intangible assets, mainly customer relations. The goodwill is paid for the expected excess of return on the acquired companies and is capitalised. The businesses acquired in 2006 contributed net sales of €56 million to the Group. If the acquisitions had occurred on 1 January 2006, net sales contribution would have been €90 million. These pro forma amounts are unaudited. The pro forma amounts do not necessarily reflect net sales as they would have been if the acquisitions had been completed as of 1 January 2006 and are not necessarily indicative of future results. 125 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 5. Acquisitions (Continued) In 2005 a number of small acquisitions took place which resulted in the recognition of €10 million in goodwill and €6 million in other intangible assets, mainly customer relations. The goodwill is paid for the expected excess of return on the acquired companies and is capitalised. If these acquisitions had occurred at 1 January 2005, net sales would have been €5,923 million in 2005 and net result would have been €22 million in 2005. These pro forma amounts are unaudited and include the effects of financing. The pro forma amounts do not necessarily reflect net sales and net result as they would have been if the acquisitions had been completed as of the respective years and are not necessarily indicative of future results. 6. Divestments, discontinued operations As of 12 November 2007, Corporate Express sold ASAP Software to Dell Computers for a total consideration of US$353 million. After considering the impact of the related transaction expenses and the taxation, the transaction resulted in a net gain of €97 million. In these financial statements, the net result of ASAP Software has been reported retrospectively as the line item Net result fom discontinued operations. Likewise, ASAP Software's cash flows has been reported retrospectively as the line items Net cash from operating/investing/financing activities discontinued operations. Until disposal ASAP Software was our fifth business segment and reported likewise. Results from discontinued operations 2007(1) Net sales Purchase value trade goods sold Depreciation and amortisation Operating result Result before taxes Taxes Net result Gain before tax on sale ASAP Software Tax on sales ASAP Software Gain after tax on sale ASAP Software 2006 2005 602 [542] [3] 15 15 [6] 9 142 [45] 97 809 [727] [3] 29 28 [11] 18 — — — 772 [693] [3] 33 33 [13] 20 — — — Net cash provided by operating activities Capital expenditure [5] [4] 45 [5] 15 [5] Number of employees at year-end — (1) 603 544 Results ASAP Software for the period 1 January–11 November 2007. As of 26 October 2007 Corporate Express sold 100% of the shares of Veenman Germany GmbH to Konica Minolta for a total consideration of €14.5 million. After considering the impact of the related transaction expenses the transaction resulted in a gain of €10 million, which has been reported as income on a separate line item under operating result. 126 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 7. Segment information Corporate Express has four business segments: Office Products North America; Office Products Europe; Office Products Australia; and Printing Systems. ASAP Software used to be the fifth business segment until 12 November 2007 when ASAP Software was sold to Dell Computers. Office Products North America, Europe and Australia mainly operate under the name Corporate Express and offer a full range of products to large- and medium-sized companies and institutions such as traditional office supplies and office furniture but also facility supplies, forms and print and promotional products. The copier business of Veenman, which until 2006 was reported as an activity of Office Products Europe is in this segment information reported under Printing Systems. This organisational transfer has been reflected retrospectively in the segment information. The impact on net sales for 2006 is €94 million and 2005 €108 million. The historical segment information of ASAP Software is reported in the column 'Discontinued operations' in the tables below. 'Unallocated' in the tables below includes our financing costs incurred by the corporate head office as well as costs, assets and liabilities relating to geographical holding companies. Business segment information OPNA 2007 OPE 2007 Printing Systems 2007 OPA 2007 Corporate Express continuing operations 2007 Unallo-cated 2007 Discontinued operations(1) 2007 Corporate Express total operations(1) 2007 in millions of euro, except number of employees Net sales Purchase value trade goods sold Depreciation and amortisation Operating result / segment result Total net financing costs Subsequent result from disposal of operations Result before taxes Taxes —Net result from continuing operations —Net result from discontinued operations Net result from total Group Attributable to: Holders of ordinary shares Corporate Express NV Minority interests in Group companies Goodwill Total assets Total liabilities Net cash from operating activities Capital expenditure(2) Number of employees at year-end 2,967 [1,998] [57] 83 — — — — — — — — 1,289 [856] [22] 32 — — — — — — — — 796 [538] [10] 65 — — — — — — — — 578 [400] [8] 32 — — — — — — — — — — [0] [10] — — — — — — — — — — — — — — — — 263 720 251 66 [14] 288 302 118 50 [9] 3 212 149 35 [6] — — 848 1,733 356 110 [50] 10,071 3,962 (1) Results ASAP Software for the period 1 January–11 November 2007. (2) Property, plant & equipment and software. 2,537 127 1,256 — 832 1,342 [34] [4] 74 5,631 [3,791] [97] 201 [115] 0 86 3 89 — 89 — 72 17 1,420 3,799 2,215 227 [83] 17,900 602 [542] [3] 15 — — — — — 106 106 — 106 — — — — [5] [4] — 6,233 [4,333] [100] 216 — — — — 89 106 195 — 178 17 1,420 3,799 2,215 223 [87] 17,900 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 7. Segment information (Continued) Business segment information OPNA 2006 OPE 2006 Printing Systems 2006 OPA 2006 Corporate Express continuing operations 2006 Unallo-cated 2006 Discontinued operations 2006 Corporate Express total operations 2006 in millions of euro, except number of employees Net sales Purchase value trade goods sold Depreciation and amortisation Operating result / segment result Total net financing costs Subsequent result from disposal of operations Result before taxes Taxes —Net result from continuing operations —Net result from discontinued operations Net result from total Group Attributable to: Holders of ordinary shares Corporate Express NV Minority interests in Group companies Goodwill Total assets Total liabilities Net cash from operating activities Capital expenditure(1) Number of employees at year-end (1) 3,187 [2,113] [65] 131 — — — — — — — — — 919 1,872 416 152 [50] 10,015 1,002 [687] [13] 15 — — — — — — — 743 [512] [9] 60 — — — — — — — 565 [384] [8] 22 — — — — — — — — — — [4] — — — — — — — — — — — — — — — 263 714 229 1 [9] 275 282 109 44 [8] 3 233 164 27 [5] 3,806 2,524 Property, plant & equipment and software. 128 1,515 — 824 1,559 [36] [2] 68 5,497 [3,696] [96] 223 [96] 7 134 [10] 124 — 124 809 [727] [3] 29 — — — — — 18 18 6,306 [4,422] [99] 252 — — — — 124 18 142 105 19 18 — 123 19 1,460 3,925 2,477 187 [73] 71 253 173 45 [5] 1,531 4,178 2,651 232 [78] 17,927 603 18,529 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 7. Segment information (Continued) Business segment information OPNA 2005 OPE 2005 Printing Systems 2005 OPA 2005 Unallo-cated 2005 Corporate Express continuing operations 2005 Discontinued operations 2005 Corporate Express total operations 2005 in millions of euro, except number of employees Net sales Purchase value trade goods sold Depreciation and amortisation Operating result / segment result Total net financing costs Subsequent result from disposal of operations Result before taxes Taxes —Net result from continuing operations —Net result from discontinued operations Net result from total Group Attributable to: Holders of ordinary shares Corporate Express NV Minority interests in Group companies 3,048 [1,995] [58] 143 — — — — — — — — — Goodwill Total assets Total liabilities Net cash from operating activities Capital expenditure(1) 1,014 2,021 455 183 [39] Number of employees at year-end 9,976 (1) 840 [588] [11] [1] — — — — — — — 701 [485] [7] 59 — — — — — — — 529 [353] [9] 11 — — — — — — — — — — [12] — — — — — — — — — — — — — — — 134 387 190 [1] [7] 269 259 109 40 [9] 3 242 168 28 [3] 3,018 2,337 Property, plant & equipment and software 129 1,629 — 850 1,425 [34] [1] 71 5,118 [3,421] [86] 199 [191] 5 13 [12] 1 — 1 [18] 19 1,420 3,759 2,347 216 [59] 17,031 772 [693] [3] 33 — — — — — 20 20 20 — 79 282 185 15 [5] 544 5,890 [4,114] [89] 232 — — — — 1 20 21 2 19 1,499 4,041 2,532 232 [64] 17,575 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 7. Segment information (Continued) Geographical segment information North America 2007 2006 Australia/ New Zealand Europe 2005 2007 2006 2005 2007 2006 Total Corporate Express 2005 2007 2006 2005 in millions of euro, except number of employees Net sales Depreciation and amortisation Operating result/segment result Capital expenditure(1) Long lived assets(2) Total assets Total liabilities Number of employees at year-end 2,962 [57] 80 [53] 1,021 2,034 1,102 10,051 (1) Property, plant & equipment and software. (2) Long-lived assets include tangible and intangible fixed assets. 8. 3,187 [65] 130 [55] 1,193 2,455 1,629 10,020 3,048 [58] 141 [44] 1,330 2,706 1,614 1,873 [30 ] 56 [22 ] 400 1,271 907 1,567 [21] 34 [16] 373 1,252 880 1,369 [20] [1 ] [11] 220 876 783 9,981 5,312 5,383 4,713 796 [10] 65 [9] 294 493 206 2,537 743 [9] 60 [8] 289 471 142 2,524 701 [7 ] 59 [9 ] 283 460 135 5,631 [97] 201 [85] 1,715 3,799 2,215 2,337 5,497 [96] 223 [78] 1,855 4,178 2,651 17,900 17,927 5,118 [86 ] 199 [64 ] 1,832 4,042 2,532 17,031 Net sales 2007 2006 2005 Trade goods Services Equipment rental Catalogue income 5,536 75 4 16 5,396 82 5 14 5,011 86 7 13 Total 5,631 5,497 5,118 9. Employee benefit expenses Notes 2007 2006 2005 Wages and salaries Social security contributions Pensions Stock options Other [713] [123] [20] [8] [56] [742] [117] [12] [8] [56] [728] [111] [13] [7] [51] Subtotal [920] [935] [910] 5 14 18 — 33 19 — 13 15 [883] [883] [881] Less: Costs related to the transfer of defined contribution plans into defined benefit plans Reclassification restructuring and termination expenses Capitalisation of expenses 11 Total 130 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 9. Employee benefit expenses (Continued) Pensions in 2007 includes an expense of €25 million related to defined contribution plans and an income of €10 million related to defined benefit plans. Pensions in 2006 and 2005 includes an expense of respectively €21 million and €20 million related to defined contribution plans and an income of respectively €9 million and €8 million related to defined benefit plans. For details of the income related to defined benefit plans, see Note 22. A one-off cost of €5 million related to the reclassification of two defined contribution plans in the Netherlands as defined benefit plans. 10. Other operating expenses Notes 2007 2006 2005 Rent and maintenance expenses Delivery and subcontracting expenses Automation, communication, facility expenses and consulting fees Other [111] [255] [166] [111] [101] [226] [146] [101] [95] [192] [135] [101] Subtotal [643] [575] [522] 21 [10] 3 6 — 7 4 — 5 [629] [561] [513] Less: Reclassification restructuring Result on disposal of Veenman Germany Capitalisation of expenses 11 Total Other operating expenses include advertising expenses (net) of €8 million for 2007, €7 million for 2006 and €6 million for 2005. In 2007 Veenman Germany was sold which resulted in a bookgain of €10 million. As Veenman Germany cannot be considered a discontinued operation, the result of the sale is reported under operating expenses. 11. Restructuring and termination expenses In 2007, we incurred €22 million of one-off costs in the Office Products North America business segment. These costs related primarily to personnel reduction at the U.S. headquarters and investments in our logistics infrastructure. In the Office Products Europe business segment, we incurred one-off costs of €8 million, consisting of a €6 million charge for the planned consolidation of our German distribution centres, including a charge for lease obligations to be terminated. A €2 million charge incurred for the restructuring of Corporate Express Italy. As part of Corporate expenses we recorded €5 million in relation to the termination of the contracts of Frans Koffrie, former CEO of Corporate Express NV, and Mark Hoffman, former President and CEO of Corporate Express North America. 131 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 11. Restructuring and termination expenses (Continued) In 2006, we incurred in total €35 million in one-off costs, such as double running and relocation expenses, for the centralisation of back-office functions and the streamlining of the organisation in North America. We recorded a charge of €5 million incurred as the result of optimising our facilities in the Benelux and further restructuring of Veenman Germany. In 2005, in the Office Products North America business segment we recorded a €10 million charge for the centralisation of local administrative operations such as credit and collections and customer care. Restructuring charges of in total €8 million were recorded related to the German furniture business, Veenman Germany and Corporate Express Benelux. 12. Total net financing costs Refinancing expenses In the years ended 31 December 2007 and 31 December 2006, no refinancing expenses were recorded. 2005 Repurchase Preference Shares C On 22 February 2005, Corporate Express reached agreement with the holders of the Preference Shares C regarding the purchase by Corporate Express of all 43,628 issued and outstanding Preference Shares C for an aggregate purchase price of US$520 million in cash. The Preference Shares C are accounted for as debt, combining a liability and a derivative. The repurchase of the Preference Shares C resulted in a charge of €85 million in 2005 which constitutes the difference between the value paid and the bookvalue, reflecting among others, accrued interest, the buy-back premium of the conversion option and the value of the specific contractual rights attached to the Preference Shares C. 132 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 12. Total net financing costs (Continued) Other financing costs 2007 Interest income on bank deposits Interest income on financial liabilities held for trading Net foreign exchange gain on financial liabilities measured at amortised costs Change in fair value of financial liabilities held for trading Financial income Interest expense on financial liabilities measured at amortised costs Dividend on preference shares Amortisation of capitalised financing fees (Note 23) Interest expense on financial liabilities held for trading Change in fair value on financial liabilities held for trading Net foreign exchange loss on financial liabilities measured at amortised cost Other Financial expense Less: amounts included in the cost of qualifying assets 2006 4 5 3 2 2 2 — 2 2 — — 2 13 7 4 [98] [11] [2] — [18] — 0 [84] [11] [2] — [0] [7] 0 [66] [19] [2] [3] [15] [3] [2] [129] [104] [110] 0 Total 2005 [115] 0 [96] 0 [106] 13. Subsequent result from disposal of operations In 2006 following the disposal of our Paper Merchanting Division a pre-tax (non-cash) benefit of €9 million (€6 million net of tax) was recorded as an accounting consequence of transferring related pension assets and liabilities out of the Corporate Express Dutch pension fund. An amount of €1 million was released from a provision related to former divestments. The amount in 2005 mainly relates to Corporate Express' former subsidiary Kappa Packaging which was divested in 1998. 14. Income taxes Corporate Express' operations are subject to income taxes of different jurisdictions with varying statutory tax rates. In 2007, taxes in the Consolidated Statement of Income amount to a gain of €3 million. In this gain a benefit of €30 million is included as the result of further recognition of deferred tax assets and releases of deferred tax liabilities. In 2006, taxes in the Consolidated Statement of Income amount to an expense of €10 million. In this expense a benefit of €10 million is included as the result of the settlement of tax disputes, further recognition of deferred tax assets and the enacted change of the tax rate in the Netherlands as per the fiscal year 2007. In 2005, taxes in the Consolidated Statement of Income include a €4 million benefit due to the further recognition of deferred tax assets. 133 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 14. Income taxes (Continued) Corporate Express' effective tax rate on continuing operations was [2.6%] in 2007, 6.8% in 2006 and 9.0% in 2005. The effective tax rate is determined based on the ratio of taxes to the amount of result from operations before taxes and before amortisation and impairment of goodwill and before expenses related to the Preference Shares A and C as these items are predominantly exempted from taxes. For calculating the effective tax rate, certain adjustments are made to the amount of taxes in the Consolidated Statement of Income and result from operations which are shown in the following tables. 2007 Net result 2006 195 142 21 [3] 10 12 11 11 11 — — 13 5 [106] — — 5 5 [25] 26 85 — 3 [25] [77] [4] 100 Adjustments: Taxes Add back non-deductible or non-taxable items: Interest Preference Shares A Amortisation cost and fair value changes Preference Shares C Repurchase Preference Shares C Translation differences on intercompany loans Other non-deductible expenses Subsequent result from disposal of operations Total taxable result for calculating effective tax rate 115 2007 Taxes as per Consolidated Statement of Income Effective tax rate 2005 148 2006 133 2005 3 [10] [12] [2.6%] 6.8% 9.0% A reconciliation from Corporate Express' weighted average statutory tax rate to its effective tax rate is as follows: 2007 Weighted average statutory tax rate Changes related to: —Loss carry-forwards not expected to be realised —Loss carry-forwards expected to be realised —Deferred tax liabilities Tax incentives, tax exempt income, non-tax deductible expenses and other Effective tax rate 2006 2005 29.6% 33.7% 31.9% 7.4% [5.4%] [13.0%] [21.2%] 3.8% [8.9%] [1.6%] [20.2%] 4.2% [1.5%] 1.0% [26.6%] [2.6%] 6.8% 9.0% The differences in the weighted average statutory tax rates are the result of lower statutory tax rates in some countries and a mix effect. Due to the divestment of ASAP Software in 2007, the effective tax rates of 2006 and 2005 as reported in previous years have been recalculated based on continuing operations. 134 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 14. Income taxes (Continued) Taxes as per Consolidated Statement of Income can be specified as follows: 2007 Current 2006 2005 [27] [31] Deferred: Benefits operating loss carry-forwards Adjustments to deferred taxes for enacted changes in tax laws or a change in the tax status Adjustments in the valuation of deferred tax assets due to change in judgment about realisability Other deferred tax items 24 — 5 1 15 3 0 3 14 — 4 [3] Total deferred 30 21 15 3 [10] [12] Total income taxes [27] 15. Total minority interest Minority interests mainly represent the 41.2% (2006: 46.5% and 2005: 46.9%) share of third parties in the result of Corporate Express Australia Ltd. 16. Earnings per share Basic earnings per share are computed by dividing result by the weighted average number of ordinary shares outstanding for the periods under review. Diluted earnings per share assume that dilutive convertible securities were converted at the beginning of each year and all options outstanding at the end of the year were exercised, insofar as the average market price was higher than the average exercise price during the financial year. Potential dilutive convertible securities are treated as dilutive when their conversion to ordinary shares would decrease earnings per share or increase loss per share. 135 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 16. Earnings per share (Continued) The computation of basic and diluted earnings per ordinary share is as follows: Calculation basic earnings per share 2007 A-Net result from continuing operations attributable to holders of ordinary shares Corporate Express NV B-Net result from discontinued operations attributable to holders of ordinary shares Corporate Express NV C-Net result from total Group attributable to holders of ordinary shares Corporate Express NV 2006 2005 72 106 178 105 18 123 182,192 180,078 0.40 0.58 [0.11] B-Net result from discontinued operations per share attributable to holders of ordinary shares Corporate Express NV (in euro) 0.58 0.10 0.12 C-Net result from total Group per share attributable to holders of ordinary shares Corporate Express NV (in euro) 0.98 0.68 0.01 Weighted average number of ordinary shares outstanding (in thousands) A-Net result from continuing operations per share attributable to holders of ordinary shares Corporate Express NV (in euro) 136 [18] 20 2 168,231 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 16. Earnings per share (Continued) Calculation diluted earnings per share 2007 A-Net result from continuing operations attributable to holders of ordinary shares Corporate Express NV B-Net result from discontinued operations attributable to holders of ordinary shares Corporate Express NV C-Net result from total Group attributable to holders of ordinary shares Corporate Express NV Add: Amortisation cost, repurchase and fair value changes Preference Shares C Amortisation cost Convertible Subordinated Bonds (net of taxes) Net result on diluted basis: A-Net result from continuing operations attributable to holders of ordinary shares Corporate Express NV B-Net result from discontinued operations attributable to holders of ordinary shares Corporate Express NV C-Net result from total Group attributable to holders of ordinary shares Corporate Express NV Calculation weighted average number of ordinary shares outstanding on diluted basis (in thousands): Weighted average number of ordinary shares outstanding (in thousands) Conversion Preference Shares C Conversion Convertible Subordinated Bonds Exercise of Share Option Rights(1) 2006 2005 72 106 178 105 18 123 [18] 20 2 — 6 — 6 79 106 184 111 18 129 182,192 — 15,241 344 180,078 — 14,928 1,268 168,231 antidilutive antidilutive 561 168,792 antidilutive antidilutive [18] 20 2 197,776 196,274 Diluted net result from continuing operations per share attributable to holders of ordinary shares Corporate Express NV (in euro) 0.40 0.57 [0.11] Diluted from discontinued operations net result per share attributable to holders of ordinary shares Corporate Express NV (in euro) 0.54 0.08 0.12 Diluted net result from total Group per share attributable to holders of ordinary shares Corporate Express NV (in euro) 0.93 0.65 0.01 Potential ordinary shares are only treated as dilutive when their conversion to ordinary shares would decrease earnings per share. When their conversion would increase earnings per share they are antidilutive and not taken into account. (1) The calculation is based on the assumption that the proceeds resulting from the exercise of options are used to acquire ordinary shares on the stock market. In case the market price is higher than 137 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 16. Earnings per share (Continued) the exercise price, dilution occurs. In case the exercise price is higher than the market price, no dilution occurs. At 31 December 2007 the following calculation was made: Options in the money: options granted per 2007 at an average exercise price of Average market price ordinary share Corporate Express in 2007 Number of options granted and outstanding at 31 December 2007 Theoretical proceeds from exercise of options Average unrecognised compensation cost Total theoretical proceeds from exercise of options Theoretical purchase treasury stock at average market price Theoretical increase in outstanding ordinary shares € 5.50 A € # € € € # # 9.23 1,000,807 5,501,103 566,095 6,067,197 657,000 343,807 B C D=C×A E F=D+E G=F/B H=C-G 17. Financial instruments by category Financial assets and liabilities in the tables below are split into categories in accordance with IAS 39. Financial instruments by categories Notes Carrying amount Loans and receivables Available for sale financial assets Financial assets at fair value through profit and loss designated upon initial recognition Financial liabilities measured at amortised costs Financial liabilities at fair value through profit and loss designated upon initial recognition Fair value(1)(2) 31 December 2007 As per balance sheet Financial instruments in non-current assets Other non-current assets 23 12 — 12 — — — 12 Financial instruments in current assets Trade receivables Cash and cash equivalents 25 27 700 50 700 50 — — — — — — — — 700 50 32 178 — — — 178 — 167 32 831 2 1,011 — — — — — — — — — 831 — 1,009 — 2 2 843 2 1,012 117 19 — — — — — — 117 19 — — 117 19 2 547 — — — — — — — 547 2 — 2 547 Financial instruments in non-current liabilities (2) —Preference Shares A —NC payables total excluding derivatives held for trading —Derivatives held-for-trading(3) Long-term borrowings Financial instruments in current liabilities Current portion long-term borrowings Bank overdrafts Financing derivatives in hedging relationship (IRSs)(4) Trade liabilities 32 32 138 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 17. Financial instruments by category (Continued) Financial instruments by categories Notes Carrying amount Loans and receivables Available for sale financial assets Financial assets at fair value through profit and loss designated upon initial recognition Financial liabilities measured at amortised costs Financial liabilities at fair value through profit and loss designated upon initial recognition Fair value(1)(2) 31 December 2006 As per balance sheet Financial instruments in non-current assets Other non-current assets 23 10 — 10 — — — 10 Financial instruments in current assets Trade receivables Cash and cash equivalents 25 27 867 73 867 73 — — — — — — — — 867 73 32 178 — — — 178 — 174 32 1,105 0 1,283 — — — — — — — — — 1,105 — 1,283 — 0 — 1,207 0 1,381 66 18 — — — — — — 66 18 — — 66 18 [3] 720 — — — — — — — 720 [3] — [3] 720 Financial instruments in non-current liabilities (2) —Preference Shares A —NC payables total excl. derivatives held for trading —Derivatives held-for-trading(3) Long-term borrowings Financial instruments in current liabilities Current portion long-term borrowings Bank overdrafts Financing derivatives in hedging relationship (IRSs)(4) Trade liabilities 32 32 (1) For financial assets and liabilities such as trade and other receivables, cash and cash equivalents, short-term loans, bank overdrafts and trade liabilities, the carrying value is a reasonable approximation of fair value. (2) For long-term borrowings the market value is disclosed in Note 32. The fair values of Corporate Express' fixed rate loans have been estimated based on applicable market interest rates available to Corporate Express for instruments of a similar nature and maturity. The fair value of variable rate debt approximates the carrying value. (3) The fair value of derivatives held for trading is recorded within non-current liabilities: long-term borrowings: other. (4) The fair value of derivatives in a hedging relationship is recorded in other current liabilities. Derivatives such as currency swaps and forwards have zero value at the inception of the contract. The method of recognising the subsequent gain or loss depends whether a derivative is designated as a hedging instrument or not. The fair value of forward exchange contracts and currency swaps (derivatives not in a hedging relationship) is calculated using publicly available market prices at the balance sheet date for the individual components of the contracts. The estimated fair value of interest rate swaps is calculated as the present value, based on the zero coupon interest curve, of the estimated 139 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 17. Financial instruments by category (Continued) future cash flows. Changes in the fair value of all derivative financial instruments are calculated by using month-end rates (from Reuters), and are recognised in the income statement (financing costs). 18. Goodwill The movements in goodwill are as follows: 2007 2006 Balance at 1 January: Cost Accumulated impairment 2,034 [503] 2,042 [543] Book value 1,531 1,499 Divestment Group companies Acquisitions through business combinations Adjustment acquisitions prior year (Note 5) Translation difference: —Cost —Accumulated Impairment [68] 30 21 — 156 — [128] 32 [164] 40 Total changes [111] 32 Balance as at 31 December: Cost Accumulated impairment 1,891 [471] 2,034 [503] Book value 1,420 1,531 Goodwill is tested for impairment at least once a year or when changes in circumstances indicate that impairment may have occurred. Under the impairment test, the recoverable amount of the cash-generating unit that contains the goodwill is compared to its book value, including the goodwill. Any excess of book value over the recoverable amount is recorded as an impairment of goodwill. This recoverable amount of the cash generating unit is calculated based on discounted future cash flows for the period 2008–2012 and residual values (value in use). The key assumptions on which Corporate Express has based its cash flow projections are based on the outcome of the Strategic Plan 2008–2011. The Strategic Plan for Global Office Products resulted in an average annual organic sales growth of at least 6% for the period 2008–2010 resulting in an average EBITDA margin of at least 7% per the end of the Strategic Plan period. The cash flows are discounted using a pre tax cost of capital. The discount rate is derived from the pre-tax estimated weighted cost of capital, reflecting the risks inherent to the cash-generating unit and a normative financing profile. The discount rate before tax used for the impairment test at 31 December 2007 was between 10.3% and 11.2% depending on the cash-generating unit reviewed. In 2007, 2006 and 2005, no goodwill impairments were recorded. A sensitivity analysis around the key assumptions has been performed and it was concluded that no reasonably possible changes in key assumptions could cause an impairment of goodwill. For the allocation of goodwill to the business segments, see Note 7. 140 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 19. Software The movements are as follows: Total Balance as of 31 December 2005: Cost Accumulated amortisation Accumulated impairment In use Prepayments/being developed 361 [234] [1] 341 [234] [1] 20 — — Book value 126 106 20 Net investment (excl. borrowing costs) Capitalised borrowing costs Put into use Amortisation Impairments Translation differences 44 0 — [51] — [11] 19 — 31 [51] — [10] 25 0 [31] — — [2] Total changes [18] [12] [7] 369 [260] [1] 356 [260] [1] 13 — — Book value 108 96 13 Net investment (excl. borrowing costs) Capitalised borrowing costs Divestments Group companies Put into use Amortisation Impairments Translation differences 43 1 [7] — [38] — [8] 30 — [7] 5 [38] — [8] 12 1 — [5] — — [1] Total changes [10] [17] 7 331 [232] [1] 311 [232] [1] 19 — — 98 79 19 Balance as of 31 December 2006: Cost Accumulated amortisation Accumulated impairment Balance as of 31 December 2007: Cost Accumulated amortisation Accumulated impairment Book value 141 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 20. Other intangible assets The movements are as follows: Customer relationships Total Balance as of 31 December 2005: Cost Accumulated amortisation Accumulated impairment Brand names Other 9 [1] — 8 [1] — — — — 1 — — 8 7 — 1 Acquisition through business combinations Amortisation Impairments Translation differences 80 [5] — [1] 70 [5] — [1] 3 [0] — 0 7 [0] — 0 Total changes 74 64 3 7 Balance as of 31 December 2006: Cost Accumulated amortisation Accumulated impairment 88 [6] — 77 [6] — 3 [0] — 8 [0] — Book value 82 71 3 8 13 [13] — 0 11 [12] — 0 — [0] — 0 — [1] — 0 0 0 0 [1] 100 [18] — 88 [17] — 3 0 — 8 [1] — 82 71 3 7 Book value Acquisition through business combinations Amortisation Impairments Translation differences Total changes Balance as of 31 December 2007: Cost Accumulated amortisation Accumulated impairment Book value The estimated useful life for the other intangible assets, acquired in business combinations, are 2–10 years for brand names, 2–10 years for customer relationships and 9 years for other, comprising mainly exclusive distribrution contracts. Customer relationships have been valued with the capital asset charge method, brand names with the relief from royalty method and exclusive distribution contracts with an income approach. 142 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 21. Property, Plant & Equipment The movements in tangible fixed assets are as follows: Land and buildings Total Balance as of 31 December 2005: Cost Accumulated depreciation Machinery and equipment Other equipment 515 [308] 180 [78] 202 [136] 132 [93] Book value 207 102 66 39 Net investment (excl. borrowing costs) Capitalised borrowing costs Acquisitions through business combinations Depreciation Translation differences 35 1 29 [43] [13] 7 0 15 [10] [7] 14 1 13 [18] [5] 15 0 1 [15] [1] 9 4 5 [1] Total changes Balance as of 31 December 2006: Cost Accumulated depreciation 515 [299] 187 [81] 215 [143] 113 [74] Book value 216 106 71 37 Net investment (excl. borrowing costs) Capitalised borrowing costs Acquisitions through business combinations Divestment Group companies Depreciation Translation differences 41 0 6 [10] [46] [11] 11 0 5 [5] [9] [7] 18 0 1 [5] [22] [2] 12 0 1 0 [16] [1] Total changes [19] [5] [11] [2] 466 [271] 176 [75] 183 [124] 107 [71] 196 101 59 36 Balance as of 31 December 2007: Cost Accumulated depreciation Book value Under land and buildings, Corporate Express has recorded the commitments related to leasehold improvements under finance leases contracts, amounting to approximately €4 million as of 31 December 2007. These leasehold improvements were made to certain distribution and office facilities (under operating lease contracts) in the Office Products North America business. 143 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 21. Property, Plant & Equipment (Continued) Land and buildings include the following amounts where the Group is a lessee under a finance lease: 31 December 2007 31 December 2006 Cost-capitalised finance leases Accumulated depreciation Net book amount 5 [1] 7 [3] 4 4 22. Pensions Corporate Express sponsors pension plans in accordance with legal requirements and local customs. For most of its employees in the United States, Canada and Australia, Corporate Express sponsors defined contribution plans. In the United States, these contributions are paid into a 401K plan of an individual employee. Contributions for defined contribution plans are recognised as an expense when incurred. The total cost of the defined contribution plans is disclosed in Note 9. Most employees in Europe are covered by defined benefit plans. In addition Corporate Express has some, relatively small, defined benefit plans in the United States in which the benefits of the participants are no longer increased. The defined benefit plans in the Netherlands ('domestic') and some foreign defined benefit plans are funded with plan assets which have been segregated in trusts. Contributions are made by Corporate Express, as necessary, to provide assets sufficient to meet benefit obligations in accordance with, among others, legal requirements and financing agreements with these trusts. The information below includes the funded and unfunded defined benefit plans. Domestic plans 2007 2006 Foreign plans 2005 2007 2006 Total 2005 2007 2006 2005 Service cost Interest cost Expected return on plan assets Past service cost [9] [29] 50 [5] [10] [26] 49 — [8] [31] 50 — [2] [5] 5 — [3] [4] 3 — [2] [4] 3 — [11] [34] 55 [5] [13] [30] 52 — [10] [35] 53 — Net periodic pension expenses 7 13 11 [3] [4] [3] 5 9 8 144 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 22. Pensions (Continued) Domestic plans 2007 2006 Foreign plans 2005 2007 2006 Change in projected benefit obligation Benefit obligation at beginning of year Service cost Interest cost Plan participant's contributions Actuarial (gain)/loss Benefits paid Settlement Amendments Transfers from defined contribution plans Past service cost Acquisitions through business combinations Currency translation adjustments Other 647 9 29 — [84] [34] — — 20 5 — — — 725 10 26 — [21] [34] [60] 2 — — — — [1] 639 8 31 — 80 [33] [4] — — — — — 4 103 2 5 — [6] [5] — — — — — [5] — Projected benefit obligation at end of year 593 647 725 94 Domestic plans 2007 2006 Total 2005 88 3 4 1 [3] [4] — — — — 16 [2] — 103 2007 2006 75 2 4 1 6 [4] — — — — — 4 — 750 11 34 — [90] [39] — — 20 5 — [5] — 813 13 30 1 [24] [38] [60] 2 — — 16 [2] [1] 714 10 35 1 86 [37] [4] — — — — 4 4 88 687 750 813 Foreign plans 2005 2007 2006 2005 Total 2005 2007 2006 2005 Change in plan assets Fair value of plan assets at beginning of year Estimated return on plan assets Actuarial gains/(losses) 776 50 [33] 812 49 [1] 734 50 58 74 5 [0] 52 3 2 43 3 1 851 55 [34] 864 52 1 777 53 59 Total actual return on plan assets Employer's contribution Plan participants' contributions Benefits paid Settlement Transfer from defined contribution plans Acquisitions through business combinations Currency translation adjustments Other 17 2 — [34] — 20 — — — 48 — — [34] [50] — — — — 108 3 — [33] [4] — — — 4 4 5 — [5] — — — [4] — 5 11 1 [4] — — 11 [2] — 4 5 1 [4] — — — 3 — 22 7 — [39] — 20 — [4] — 53 11 1 [38] [50] — 11 [2] — 112 8 1 [37] [4] — — 3 4 Fair value of plan assets at end of year 782 776 812 74 74 52 856 851 864 Domestic plans 2007 2006 Foreign plans 2005 2007 2006 Total 2005 2007 2006 2005 Funded status/prepaid/(accrued) benefit cost Unrecognised past service costs 188 1 129 2 87 — [20] — [29] — [36] — 168 1 100 2 51 — Prepaid/(accrued) benefit cost 189 131 87 [20] [29] [36] 169 102 51 145 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 22. Pensions (Continued) Movement in the amounts recognised in the balance sheet: 2007 2006 Net pension provision Net assets for funded plans Funded plans Unfunded plans 2005 Net pension provision Net assets for funded plans Total Funded plans Unfunded plans Net pension provision Total Net assets for funded plans Funded plans Unfunded plans Total Beginning of year Net period pension expenses Contributions Benefits paid Recognised actuarial gains/ (losses) Settlement Transfer from defined contribution plan Acquisitions through business combinations Currency translation adjustments Other 132 [14] [15] [30] 90 [22] [17] [39] 97 [19] [15] [34] 12 2 — [2] 3 0 [1] — 1 [3] 3 2 13 — — [2] 11 — [2] — 2 [4] 11 2 11 3 — [2] 4 — [1] — 2 [3] 4 2 50 — 6 — 0 — 6 — 20 9 4 — 1 — 5 — [21] — [4] — [3] — [7] — [5] — — — — — — — — — — — — — — — — [5] — [5] — — — — — — 0 0 0 2 0 1 — — 1 [1] 0 0 1 [1] — — [1] — — — [1] — End of year 190 [8] [13] [20] 132 [14] [15] [30] 90 [22] [17] [39] Actuarial gains of €56 million in 2007 €25 million in 2006 and actuarial losses of €27 million in 2005 were recorded directly in Equity attributable to equity holders of the Company. These actuarial gains and losses are mainly due to changes in the assumptions (discount rate, expected wage and pension increase) for the calculation of the projected benefit obligation and due to differences between the expected return on plan assets and the actual result on plan assets. The accumulative amount of actuarial gains recorded directly in equity attributable to equity holders of the Company at 31 December 2007 was €24 million (before tax). At 31 December 2006 the accumulative amount of actuarial losses recorded directly in equity attributable to equity holders of the Company was €32 million (before tax). Settlement in 2006 under Net assets for funded plans is the transfer of the pension obligations of the former Paper Merchanting Division less plan assets to the pension fund of the acquirer. The settlement gain of €9 million is included subsequent result from disposal of operations (see Note 6). Funded and unfunded defined benefit pension plans and experience results: 2007 2006 2005 2004 Projected defined obligation Fair value of plan assets 687 856 750 851 813 864 714 777 Funded status Experience result 169 21 101 0 51 6 63 5 146 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 22. Pensions (Continued) The pension benefits expected to be paid in each of the next five years and in the aggregate for the five years thereafter are as follows: Domestic plans 2008 2009 2010 2011 2012 2013–2017 Foreign plans Total 35 35 36 36 36 183 3 4 4 4 6 30 38 39 39 40 42 213 The employer's contributions expected to be paid in each of the next five years and in the aggregate for the five years thereafter are as follows: Foreign plans 2008 2009 2010 2011 2012 2013–2017 2 2 2 2 2 10 Corporate Express' future contributions to the Dutch pension fund cannot be accurately assessed. Due to recent changes in Dutch law, these contributions also depend on statutory funding levels and certain solvency criteria. The weighted average asset allocation of the funded defined benefit plans at 31 December 2007, 2006 and 2005 and target allocation for the year 2008 are as follows: Domestic plans Target 2008 Asset category: Equity securities Debt securities Real estate Cash Other (including commodities and insurance contracts) Allocation 2007 Foreign plans Allocation 2006 Allocation 2005 35% 50% 10% — 36% 50% 8% 1% 30% 50% 10% 1% 5% 5% 9% Target 2008 Allocation 2007 Allocation 2006 Allocation 2005 33% 50% 9% 8% 60% 30% 0% — 43% 39% 3% 1% 59% 25% 3% — 54% 28% — 3% — 10% 14% 13% 15% At 31 December 2005, the cash held by the pension fund in the Netherlands was mainly for the transfer of the pension obligations and related assets with regard to the former Paper Merchanting Division which took place in the first quarter of 2006. 147 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 22. Pensions (Continued) The weighted average assumptions used to measure net periodic pension expenses were as follows: Domestic plans 2007 Discount rate for the year Expected return on plan assets: Equity securities Debt securities Real estate Other Average Rate of compensation increase Increase of state pension Pension increases 2006 Foreign plans 2005 2007 2006 2005 4.5% 4.0% 4.9% 4.9% 4.7% 5.4% 8.0% 5.5% 8.0% 8.0% 6.7% 2.8% 2.0% 2.0% 8.0% 5.5% 8.0% 8.0% 6.6% 2.8% 1.8% 1.8% 8.5% 5.5% 8.0% 8.0% 7.0% 3.0% 2.0% 2.0% 8.0% 6.0% 8.0% 8.0% 7.2% 3.5% 2.0% 2.0% 8.0% 6.0% 8.0% 8.0% 7.2% 3.2% 2.0% 2.0% 8.5% 5.5% 8.0% 8.0% 7.1% 3.3% 2.0% 2.0% For the defined benefit obligation recent local mortality tables have been used. The weighted average assumptions used to measure the Projected Benefit Obligation were as follows: Domestic plans 2007 Discount rate per 31 December Rate of compensation increase Increase of state pension Pension increases 5.4% 3.0% 2.0% 2.0% 2006 4.5% 2.8% 2.0% 2.0% Foreign plans 2005 2007 4.0% 2.8% 1.8% 1.8% 2006 5.5% 3.6% 2.2% 2.2% 4.9% 3.5% 2.0% 2.0% 2005 4.7% 3.2% 2.0% 2.0% The discount rate used is the interest on high quality (AA rated) corporate bonds that have a maturity approximating the terms of the related obligations. In estimating expected return on plan assets, appropriate consideration is taken into account of historical performance for the major asset classes held or anticipated to be held by the applicable pension funds and of current forecasts of future rates of return for those asset classes. The following table shows the effect on result before taxes (for domestic and foreign plans) in 2007 of a change in discount rate and a change in other assumptions: Change in discount rate –0.25% — +0.25% Change in rate of compensation increase –0.25% — +0.25% <1 <1 –1 <1 — <1 <1 <1 <1 Change in pension increase –0.25% — +0.25% +1 <1 –2 +1 — –1 +1 <1 –1 Change in expected return on plan assets –0.25% — +0.25% –2 <1 +2 –2 — +2 –2 <1 +2 148 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 22. Pensions (Continued) The following table shows the increase in pension obligations on 31 December 2007 (for domestic and foreign plans) of a change in discount rate and a change in other assumptions: Change in discount rate –0.25% — +0.25% Change in rate of compensation increase –0.25% — +0.25% +21 +23 +27 –3 — +3 –24 –21 –19 Change in pension increase –0.25% — +0.25% +3 +23 +43 –19 — +19 –39 –21 –3 The ambition of the Dutch pension trust's investment policies is to reach an optimum between maximising return on plan assets in the long term while keeping contributions stable with the aim to be able to grant, with a high likelihood, indexation for consumer price inflation of the benefits. In order to achieve this stability, a sufficient funding level is being maintained. Investments in debt securities are mostly made when they bear fixed interest. The policy is to hedge up to 100% of US dollar risks and 50% of other currency risks related to investments in equity securities and in real estate. Currency risks related to investments in debt securities are in principle completely hedged. Pension plan assets of the Dutch pension trust do not include Corporate Express shares. 23. Other non-current assets The movements in other non-current assets are as follows: Total Financial receivables Capitalised financing fees Book value 31 December 2005 Investments/capitalised fees Reclassification to current Amortisation of financing fees Translation differences 26 1 [13] [2] [2] 21 0 [13] — [1] 5 1 — [2] [0] Book value 31 December 2006 Investments/capitalised fees Divestment of Group companies Reclassification to current Amortisation of financing fees Translation differences 10 6 [1] — [2] [1] 7 4 [1] — — [0] 3 1 — — [2] [0] Book value 31 December 2007 12 10 2 Capitalised financing fees reflect the transaction expenses related to long-term borrowings with variable outstanding amounts. The capitalised financing fees are amortised on a straight-line basis over the expected useful life of the related financial instruments. 149 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 24. Inventories 31 December 2007 31 December 2006 Trade goods Provision for impairment 533 [35] 555 [35] Book value 498 520 The amount of inventory sold recognised as an expense was €3,791 million for 2007 (2006: €3,696 million, 2005: €3,421 million). The following table shows the development of the provision for impairment on inventories: 2007 2006 Balance at 1 January Recognised impairment losses in the income statement Utilisation Acquisitions through business combinations Divestment Group companies Translation differences [35] [13] 10 — 1 1 [34] [16] 16 [2] — 1 Balance at 31 December [35] [35] 25. Trade receivables 31 December 2007 31 December 2006 Gross amount Provision for impairment of trade receivable 722 [22] 890 [23] Book value 700 867 The following table shows the development of the provision for impairment on trade receivables: 2007 Balance at 1 January Recognised impairment losses in the income statement Utilisation Acquisitions through business combinations Divestment of Group companies Translation differences Balance at 31 December 150 2006 [23] [23] [6] 6 0 1 0 [3] 2 — — 1 [22] [23] NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 25. Trade receivables (Continued) Trade receivables as per Carrying amount Of which: neither impaired nor past due on the reporting date Of which: not impaired on the reporting date and past due in the following periods Less than 1 month 31 December 2007 31 December 2006 700 867 463 612 155 163 Between 1 and 2 months Between 2 and 3 months 43 50 More than 3 months 16 22 17 11 Regarding trade receivables that neither impaired nor past due, there are no indications as of the reporting date that the debtors will not meet their payment obligations. An outstanding amount on trade receivables of €28 million (2006: €32 million) is regarded impaired, an allowance of €22 million (2006: €23 million) has been formed to reflect the expected recoverable amount. As per 31 December 2007, an amount of €240 million (2006: €269 million) of trade receivables were pledged under the trade receivables securitisation programme (see Note 32). These receivables and borrowings related to this programme are included in the Consolidated Balance Sheet. The maximum credit risk is €778 million (see also Notes 4, 27 and 37), reflecting the collection risk on trade receivables, cash and cash equivalents and the repurchase agreements. 26. Prepaid expenses and accrued income 31 December 2007 31 December 2006 Accrued income Prepaid expenses 124 59 126 74 Total 183 200 Accrued income consists mainly of supplier rebates and prepaid customer rebates. Prepaid expenses include prepayments for operating costs (such as rent and insurance premiums). In prepaid expenses and accrued income an amount of €17 million has a term longer than 1 year. 27. Cash and cash equivalents 31 December 2007 31 December 2006 Cash at bank and in hand Short-term bank deposits 50 — 73 — Total 50 73 The Company has deposited its cash and deposits with, and has obtained its loans from, reputable financial institutions with high-quality credit ratings. 151 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 28. Non-current assets held for sale 31 December 2007 Balance at 1 January Assets sold Purchases Translation differences Balance at 31 December 31 December 2006 4 [1] — [0] — — 4 — 3 4 Houses bought from employees under relocation plans in the business segment Office Products North America are classified as held for sale as the carrying amount will be recovered principally through a sale transaction. The assets are available for immediate sale in their present condition to terms that are usual and customary for sales of such assets. The sale is highly probable. 29. Ordinary shares and Preference Shares A, B and C Under IFRS, Corporate Express NV's ordinary shares are recorded as equity attributable to equity holders of the Company. Corporate Express NV's Preference Shares A as well as the Preference Shares C, until their repurchase in 2005 (see Note 10), are recorded as liabilities. No Preference Shares B were issued. Under Dutch Law, Corporate Express NV's ordinary shares, Preference Shares A and B are part of equity attributable to equity holders of the Company. as well as the Preference Shares C until their repurchase in 2005. For detailed information about our shares, see pages 164 to 168. Share capital On 31 March 2005 we completed the repurchase of all outstanding preference Shares C in the capital of the Company. Upon completion our Articles of Association were amended in order to convert the Preference Shares C into ordinary shares. As of 31 December 2007, our authorised share capital amounted to €1,080,000,000, divided into 395,000,000 ordinary shares, 55,000,000 Preference Shares A, and 450,000,000 Preference Shares B, with a nominal value of €1.20 per share each. The ordinary shares may, at the option of the Corporate Express shareholders, be bearer shares or registered shares. The issued bearer ordinary shares are represented by one single share certificate, the Necigef Global Certificate. The Preference Shares A and B are registered shares. In order to finance part of the purchase price for the Preference Shares C, we made a rights offering pursuant to which 39,312,904 ordinary shares were issued on 24 March 2005 against an issue price of €6.37 per share. As of 31 December 2007, the issued share capital was divided into 182,847,847 ordinary shares and 53,281,979 Preference Shares A, all of which have been fully paid up. No Preference Shares B were issued as of 31 December 2007. 152 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise (Continued) 30. Equity attributable to equity holders of the Company Other reserves Equity attributable to equity holders of the Company Number of ordinary shares Issued Treasury Issued and fully paidup capital Outstanding Additional paid in capital Treasury Shares at cost Conversion option bonds(1) Option reserve Cumulative translation adjustment Hedge reserve Retained earnings In millions of euro Balance at 31 December 2004 Changes for 2005: Total recognised income and expense Dividend 2004 Issued shares Repurchase shares CE Australia(2) Options forfeited Addition option reserve share based payments Balance at 31 December 2005 Changes for 2006: Total recognised income and expense Dividend 2005 reclassification Issued shares Repurchase shares CE Australia(2) Options exercised Options forfeited Addition option reserve share based payments Balance at 31 December 2006 Changes for 2007: Total recognised income and expense Dividend 2006 Repurchase shares CE Australia(2) Options exercised Options forfeited Addition option reserve share based payments Balance at 31 December 2007 138,126,528 [531,364] 137,595,164 166 1,524 [10 ] 25 25 [87 ] [5] [577] — 1,841,644 39,356,532 — — [43,628] — 1,841,644 39,312,904 — 2 47 1,062 — 8 181 — — — — — — — — — 180 — — 5 — — [19] [12 ] — 166 [2 ] 228 — — — — — — — — — — — — — — — [8] — — — — [10 ] 8 [10 ] — — — — — — — — 7 — — — 7 178,749,712 215 1,713 [10 ] 25 24 93 — [611 ] 144 [30 ] 1 — 15 [15 ] — — 179,324,704 [574,992] 1,450 — 1,038,454 — — — — — — — 1,038,454 — — — 1 — — — 14 — — — — — — — — — — — — [1] — [127 ] — — — [2] — — — — 541,812 — — 574,992 — — 1,116,804 — — 1 — — 2 — — 10 — — — — — [3] [7] — — — — — — [2] [4] 7 [2 ] 6 — — — — — — — — 7 — — 1 8 180,904,970 — 180,904,970 217 1,729 — 25 20 [34 ] [2] [493] — 1,662,868 — — — 1,662,868 — 2 — 14 — — — — — — [98 ] — 1 — 215 [38 ] 118 [21 ] — 280,009 — — — — — 280,009 — — 0 — — 1 — — — — — — — — [1] [9] — — — — — — [26 ] — 9 [26 ] 1 — — — — — — — — 8 — — 1 8 182,847,847 — 182,847,847 219 1,745 — 25 17 [132] [1] (1) Net of tax. (2) In accordance with the economic entity model, the dilution loss on the repurchase of shares by CE Australia has been recorded in equity. [331] In 2007 the movements on the conversion option bonds have been retrospectively reclassified within equity attributable to equity holders of the Company. Since the inception of IFRS (1 January 2004) an aggregated amount for taxes as per 31 December 2007 of €0 million (31 December 2006 €12 million) has been charged to equity attributable to equity holders of the Company (see page 100). 153 1,463 1,543 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 31. Deferred taxes Tax loss carry-forwards Other Total Deferred tax assets Balance at 31 December 2005 (Charged)/credited to income statement Included in net result discontinued operations (Charged)/credited to equity Reclassifications to deferred tax liabilities Acquisitions through business combinations Transfers to current tax Translation differences 365 19 [11] — — 15 — [42] 71 [3] — [1] [6] 7 2 0 436 16 [11] [1] [6] 22 2 [42] Balance at 31 December 2006 346 70 416 (Charged)/credited to income statement Included in net result discontinued operations (Charged)/credited to equity Reclassifications from deferred tax liabilities Acquisitions through business combinations Transfer to current tax Translation differences 42 [82] — 8 — — [30] — [1] 1 — — 2 [6] 42 [83] 1 8 — 2 [36] Balance at 31 December 2007 284 66 350 Of the amounts included in the deferred tax assets at 31 December 2007 €41 million (31 December 2006 €49 million) is current. Deferred tax assets are recognised to the extent that it is probable that 154 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 31. Deferred taxes (Continued) future taxable profit will be available. The amount of estimated future taxable profit for this purpose is based on the budget for the succeeding year and there after multi-year forecasts. Accelerated depreciation and amortisation Fair value gains Pensions Other Total Deferred tax liabilities Balance at 31 December 2005 Charged/(credited) to income statement Charged/(credited) to equity Reclassifications from deferred tax assets Acquisitions through business combinations Translation differences 47 [5] — [6] 2 [5] 27 1 7 — — — 9 [3] — — — — 52 3 — — 1 [5] 136 [5] 7 [6] 3 [10] Balance at 31 December 2006 33 35 6 51 125 13 [16] — 8 1 [3] 2 — 13 — — — [1] — — — — — [2] — — — — [4] 12 [16] 13 8 1 [7] 36 50 5 45 136 Charged/(credited) to income statement Included in discontinued operations Charged/(credited) to equity Reclassifications to deferred tax assets Acquisitions through business combinations Translation differences Balance at 31 December 2007 Of the amounts included in the deferred tax liabilities at 31 December 2007 €5 million (31 December 2006 €2 million) is current. Corporate Express has operating losses carry-forwards at 31 December 2007 of approximately €1,882 million (2006: €2,069 million). Expiration is approximately as follows: Operating losses carry-forwards at 31 December 2007 2008 to 2012 2013 to 2018 2019 to 2024 Unlimited 482 81 240 1,079 Total 1,882 For an amount of €1,005 million (2006: €510 million) of these operating loss carryforwards no deferred tax assets were recognised in the balance sheet as at 31 December 2007 due to the fact that future realisation is not probable. 155 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 32. Long-term borrowings Preference Shares A(1) Convertible Bond High Yield Bonds due 2014 High Yield Bonds due 2015 Term Loans A Term Loans C/D Securitised Notes Other Total Balance as at 31 December 2007 Redemption value Accretion/option value Financing fees 181 — [3] 115 [19] [2] 102 — [4] 102 — [4] 40 — — 355 — [6] 118 — — 153 — — 1,166 [19] [19] Net (amortised cost) 178 94 98 98 40 349 118 153 1,128 Current Long-term — 178 — 94 — 98 — 98 13 27 — 349 50 68 54 99 117 1,011 Balance as at 31 December 2006 Redemption value Accretion/option value Financing fees 181 — [3] 115 [25] [2] 114 — [5] 114 — [5] 80 — — 592 — [8] 125 — — 76 — — 1,397 [25] [23] Net (amortised cost) 178 88 109 109 80 584 125 76 1,349 Current Long-term — 178 — 88 — 109 — 109 27 53 6 578 — 125 33 43 66 1,284 (1) The Preference Shares A are perpetual and do not have a redemption date. Preference Shares A Details about the Preference Shares A are given in Note 29. The financing fees related to the Preference Shares A are not amortised as the Preference Shares A are nonredeemable. The annual dividend is recorded as an expense. Convertible Bond In December 2003, Corporate Express issued its €115 million Subordinated Convertible Bonds, which are listed on the Amsterdam Stock Exchange. The Subordinated Convertible Bonds have a coupon of 2% which is payable annually on 18 June and is convertible into Corporate Express ordinary shares. The conversion price was initially €8.40 per ordinary share and is adjusted annually, among others, for cash dividend. At 31 December 2007 the conversion price was €7.53 per ordinary share. The Subordinated Convertible Bonds must be redeemed on or before 18 December 2010 Corporate Express has the option to redeem the Subordinated Convertible Bonds after 9 July 2008 if the official closing price of Corporate Express' ordinary shares has been in excess of 150% of the conversion price for 20 trading days in a period of 30 trading days. 156 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 32. Long-term borrowings (Continued) The terms and conditions of the Convertible Bonds provide that upon the occurrence of a change of control the bondholders shall be entitled to require us to redeem all (or any of the) bonds. An early redemption of the Convertible Bonds may also trigger early termination of our other financing arrangements. A change of control event as defined in the Convertible Bond documentation includes among others acquisition of the legal and beneficial ownership of shares, which confers the right to cast 51% or more of the votes which may ordinarily be cast at a general meeting of shareholders. The Convertible Bonds were issued at par. The market value of the Convertible Bond at 31 December 2007 amounted to €110 million. The conversion option was measured at issue of this bond using the residual method after deduction of the liability component (measured at fair value) and recorded directly in equity attributable to equity holders of the Company. The liability component is stated at amortised cost using an effective interest rate of 9.25%. 8 1 / 4 % Senior Subordinated Notes due 2014 (2014 Notes) In June 2004, Corporate Express US Finance Inc. issued US$150 million in aggregate principal amount of 8 1 / 4 % Senior Subordinated Notes due 2014 (2014 Notes) in a private placement. These bonds are unsecured obligations of Corporate Express US Finance Inc., and are guaranteed by Corporate Express and certain of its subsidiaries. In September 2004, Corporate Express US Finance Inc. filed a registration statement on Form F-4 with the SEC for US$150 million in aggregate principal amount of the 2014 Notes, the terms of which were substantially identical to the unregistered bonds issued in June. The registration statement filed by Corporate Express US Finance Inc. was an offer to exchange all of its outstanding unregistered 2014 Notes for the newly registered 2014 Notes. Pursuant to this exchange offer, which closed in October 2004, registered bonds were issued to certain existing holders in exchange for their unregistered bonds. The 2014 Notes documentation provides that upon the occurrence of a change of control we are obliged to offer to purchase all outstanding 2014 Notes. An offer to purchase outstanding 2014 Notes prior to its specified maturity may also trigger early termination of our other financing arrangements. A change of control event as defined in the 2014 Notes documentation includes among others acquisition of ownership of 50% or more of the aggregate ordinary voting power in Corporate Express (excluding ownership of Preference Shares A and/or B, provided certain conditions are met). The coupon of 8 1 / 4 % is payable semi-annually. The 2014 Notes must be redeemed on 1 July 2014. At any time before 1 July 2007, Corporate Express can choose to redeem up to 35% at a redemption price of 108.25% of the principal amount, with proceeds raised in one or more equity offering made by Corporate Express, as long as certain conditions are met. Thereafter, all or part of the 2014 Notes, can be redeemed at contractual rates above par (starting at 1 July 2009 at 104.125%, decreasing annually). The 2014 Notes are stated at amortised cost using an effective interest rate of 9.02%. The market value of the 2014 Notes at 31 December 2007 amounted to US$143 million (€97 million). 157 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 32. Long-term borrowings (Continued) 7 7 / 8 % Senior Subordinated Notes due 2015 (2015 Notes) On 31 March 2005, Corporate Express US Finance Inc. issued US$150 million in aggregate principal amount of 7 7 / 8 % Senior Subordinated Notes due 2015 (2015 Notes) in a private placement. These bonds are unsecured obligations of Corporate Express US Finance Inc., and are guaranteed by Corporate Express and certain of its subsidiaries. In August 2005, Corporate Express US Finance Inc. filed a registration statement on Form F-4 with the SEC for US$150 million in aggregate principal amount of the 2015 Notes, the terms of which were substantially identical to the unregistered bonds issued on 31 March 2005. The registration statement filed by Corporate Express US Finance Inc. was an offer to exchange all of its outstanding unregistered 2015 Notes for the newly registered 2015 Notes Pursuant to this exchange offer, registered bonds were issued to certain existing holders in exchange for their unregistered bonds. The 2015 Notes documentation provides that upon the occurrence of a change of control we are obliged to offer to purchase all outstanding 2015 Notes. An offer to purchase outstanding 2015 Notes prior to its specified maturity may also trigger early termination of our other financing arrangements. A change of control event as defined in the 2015 Notes documentation includes among others acquisition of ownership of 50% or more of the aggregate ordinary voting power in Corporate Express (excluding ownership of Preference Shares A and/or B, provided certain conditions are met). The coupon of 7 7 / 8 % is payable semi-annually. The 2015 Notes must be redeemed on 1 March 2015. At any time before 1 March 2008, Corporate Express can choose to redeem up to 35% at a redemption price of 107.875% of the principal amount, with proceeds raised in one or more equity offerings made by Corporate Express, as long as certain conditions are met. Thereafter, all or part of the 2015 Notes can be redeemed at contractual rates above par (starting from 1 March 2010 at 103.938%, decreasing annually). The 2015 Notes are stated at amortised cost using an effective interest rate of 8.65%. The market value of the 2015 Notes at 31 December 2007 amounted to US$141 million (€96 million). Senior Facilities Agreement (Term loans A, C and D and Revolver) On 23 December 2003, Corporate Express entered into a Senior Facilities Agreement replacing the existing Senior Credit Agreement entered into in 1999. The Senior Facilities Agreement arranged with a syndicate of banks led by Deutsche Bank and ABN AMRO, currently consists of 'Term Loans A' of €120 million, 'Term Loans D' with tranches of €50 million and USD728 million and a working capital facility (Revolver) of €255 million and has been amended over time. The latest amendment to the Senior Facilities Agreement was made in July 2007 to increase the Consolidated Leverage Covenant for the period June 2007 until December 2008. The security provided for the Senior Facilities Agreement is a pledge on assets of Corporate Express NV, all its material existing and future operating companies in the United States and the Netherlands. Borrowings under the new Senior Facilities Agreement bear interest at floating rates related to LIBOR for the relevant currency for varying fixed interest periods. The interest rate margins for the working capital facility of which €20 million was used at 31 December 2007 and the Term Loan A vary with the leverage ratio (pricing grid). The initial margin for the working capital facility and the Term Loan A is 2.50%. The margin for the Term Loans D is 2.00%. The working capital facility carries a fee of 0.75% for the undrawn balance. The documentation 158 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 32. Long-term borrowings (Continued) of the Senior Facilities Agreement provides for increases in the working capital facility and term loans subject to meeting certain conditions such as a maximum senior leverage ratio. The Senior Facilities Agreement imposes certain restrictions on Corporate Express and certain of its subsidiaries, including restrictions on the ability to incur additional indebtedness. Corporate Express also is required to apply a percentage of the proceeds of any equity offering (other than certain exempted equity offerings) and sale of assets to the prepayment of debt under the facility. Under the Senior Facilities Agreement, Corporate Express must comply with certain financial covenants. Corporate Express was in compliance with these financial covenants as of 31 December 2007. Corporate Express can on occasion obtain consent from its lenders to amend certain terms and conditions of the Senior Facilities Agreement, which may involve additional fees. The Senior Facilities Agreement provides that a change of control constitutes an event of default. An event of default may result, among others, in an acceleration of the maturity of the facilities and early repayment. An event of default under our Senior Facilities Agreement and early repayment of the facilities may also trigger early termination of our other financing arrangements. A change of control event as defined in the Senior Facilities Agreement includes among others acquisition of beneficial ownership of 35% or more on a fully diluted basis of the voting and/or economic interest in Corporate Express (excluding acquisition of Preference Shares A and/or B, provided certain conditions are met). On 31 December 2007 the applicable margins were 2.50% and 2.00% for the Term Loans A and D, respectively. The interest rates in effect at 31 December 2007, 2006 and 2005 were as follows: 2007 Term Loan A EUR Term Loan D EUR Term Loan D USD 7.45% 6.70% 6.97%–7.01% 2006 5.93% 5.43% 7.11% 2005 4.72% 4.22% 6.20% The market value of the Senior Facilities Agreement is primarily determined by credit status. Interest rate developments have a limited influence since these loans have a floating interest. Although these loans are not traded publicly, indication of market values can be obtained through the agent (Deutsche Bank). The market value at 31 December 2007 is approximately 98% of the redemption value. The Senior Facilities Agreement is subject to a variety of conditions as is customary for these types of facilities and the financial position of Corporate Express. For example, specific minimum or maximum financial ratios ('covenants') must be met such as: Interest coverage ratio: Fixed charge ratio: Leverage ratio: EBITDA/Interest expense EBITDA + rent + lease expenses/Fixed charges Indebtedness/EBITDA The definitions of certain accounting numbers for covenant calculation purposes (for example: operating result before depreciation of tangible fixed assets and software and before amortisation and impairment of goodwill ('EBITDA') as well as special items and indebtedness) differ from figures as published in these Consolidated Financial Statements due to specific contractual arrangements. Also, 159 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 32. Long-term borrowings (Continued) income statement items used in covenants are calculated on a rolling 12 monthly basis. More detailed information on the covenant levels is available on the web site of Corporate Express. The actual covenant ratios at 31 December 2007 comply with the threshold ratios as per loan covenants. There have been no defaults or breaches under the credit facility. In July 2007, the leverage covenant level has been renegotiated for the period June 2007 until December 2008. The Term Loans D are stated at amortised cost using an average effective interest rate of 7.62% for the US dollar denominated loans and 6.03% for the euro denominated loans. The Revolver is stated at its redemption value and the related financing fees are recorded as capitalised financing fees under 'other non-current assets'. The Term Loans A are also stated at their redemption as no financing fees are allocated to these loans. Securitised Notes U.S. securitisation programme In July 2002 several Corporate Express companies entered into an accounts receivable securitisation programme under which funds are raised by pledging accounts receivable from operating companies in the United States as security for short-term and medium-term borrowings. As per 27 July 2007, all medium-term borrowings have been redeemed and the amount of short term borrowings has been increased. The U.S. operating companies, Corporate Express Office Products and Corporate Express Document and Print Management (and previously ASAP Software) sell their accounts receivable to Corporate Express Silver US LLC, which in turn pledges the accounts receivable to third-party dedicated entities as security for borrowings in the form of short-term notes of €78 million outstanding as per 31 December 2007 (and medium-term notes until 27 July 2007). The Short Term Notes in the U.S. programme are issued in US dollars reflecting the currency of the pledged receivables. European securitisation programme In November 2006, Corporate Express UK, Corporate Express Germany and Corporate Express Netherlands started selling their accounts receivable to Corporate Express Silver Europe BV, which in turn pledges the accounts receivable to a third party as security for short-term borrowings in the form of short-term notes. As per 31 December 2007, under the European programme €40 million was outstanding. Outstanding short-term notes under U.S. and European programme The total amount of Short Term Notes outstanding against the receivables pledged fluctuates as a result of liquidity requirements, advance rates calculated and invoices outstanding. To ensure availability of refinancing for the Notes, a back-up liquidity facility has been arranged. On 31 December 2007, Short Term Notes for €118 million were outstanding while on 31 December 2006, Short Term Notes for €49 million were outstanding. The Securitised Notes are stated at their redemption value and the related financing fees are recorded as capitalised financing fees under other non-current assets. At 31 December 2006 €76 million of Medium Term Notes were outstanding. As these Medium Term Notes have been redeemed on 27 July 2007, there are no Medium Term Notes outstanding as per 31 December 2007. 160 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 32. Long-term borrowings (Continued) The receivables and liabilities in connection with the accounts receivable securitisation programme are included in Corporate Express' Consolidated Balance Sheet. The transactions under this programme are treated as collaterised borrowings. At 31 December 2007, accounts receivables of €240 million were pledged under the U.S. and European securitisation programmes (see Note 25). These programmes deliver funding at attractive rates and at the same time diversifies sources of capital and increases financial flexibility. The securitisation programmes' documentation provides that a change of control constitutes an event of default or a termination event, as a result of which the programme may be terminated and/or the maturity of the advances or borrowings may be accelerated. An event of default or a termination event under the programme and the consequences thereof may also trigger early termination of our other financing arrangements. A change of control event as defined in the securitisation documentation includes among others acquisition of beneficial ownership of 35% or more on a fully diluted basis of the voting and/or economic interest in Corporate Express (excluding acquisition of Preference Shares A and/or B, provided certain conditions are met). Other Corporate Express has commitments related to finance leases amounting to approximately €4 million, related to leasehold improvements made to its distribution and office facilities in the Office Products North America segment. These leasehold improvements are reported under property, plant & equipment. Gross financial lease liabilities—minimum lease payments 2007 < 1 year > 1 year and < 5 years > 5 years Future finance charges on finance leases Present value of finance lease liabilities The present value of finance lease liabilities is split as follows: < 1 year > 1 year and < 5 years > 5 years 2006 1 3 2 1 4 3 6 8 [2] 4 [3] 5 1 2 2 1 2 2 4 5 Hedging Corporate Express has entered into a series of interest rate hedging agreements, the purpose of which is to limit Corporate Express' interest cost with respect to its long-term debt. For more information about our financial market risk policies, we refer to Note 4. Average effective interest rate The average blended effective interest rate, including margin and dividend on preference shares, was 6.7% in 2007, 6.6% in 2006 and 6.9% in 2005. The effective interest rate relative to the nominal 161 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 32. Long-term borrowings (Continued) interest rates is effected by fees for the drawn and undrawn balance of the facilities. Also it is noted that the daily average outstanding of the interest-bearing debt is generally higher than at quarter-ends. Repayment schedule for long-term borrowings 2008 2009 2010 2011 >2011 Perpetual Total Fair Value Fixed rate debt: Preference Shares A High Yield Bonds due 2014 High Yield Bonds due 2015 Subordinated Convertible Bonds Other — — — — — — — — — — — — — 115 — — — — — — — 102 102 — — 181 — — — — 181 102 102 115 — 167 97 96 110 — Total redemption value fixed rate debt — — 115 — 204 181 500 471 2008 Variable rate debt: Account receivables securitisation Term Loan A Term Loans D Other 2009 2010 2011 >2011 Perpetual Total Fair Value 50 13 — 54 — 27 4 — 68 — 351 88 — — — 2 — — — 3 — — — — 118 40 355 153 118 39 348 153 Total redemption value variable rate debt 117 37 507 2 3 — 666 658 Total redemption value 117 37 622 2 207 181 1,166 1,130 The fair values of Corporate Express' fixed rate loans have been estimated based on applicable market interest rates available to Corporate Express for instruments of a similar nature and maturity. The fair value of variable rate debt approximates the carrying value. For cash, trade receivables, other short-term assets, trade payables, accrued liabilities and other short-term liabilities, the carrying value of these financial instruments approximates their fair value owing to the short-term maturities of these assets and liabilities. The installments in 2008 amount to €7 million in September and December for Term Loans A. The average remaining term of long-term debt, excluding Preference Shares A, is approximately three years. 162 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 33. Provisions The movements in provisions are as follows: Total Position at 31 December 2005: Non-current Current Integration and restructuring Other 67 33 10 15 57 19 Total 101 25 77 Payments Additions charged to result Releases to result Acquisitions through business combinations Translation differences [27] 23 [16] 3 [3] [18] 18 0 — [1] [9] 5 [16] 3 [2] Total changes [20] [1] [19] Position at 31 December 2006: Non-current Current 51 30 7 17 44 13 Total 81 24 57 Payments Additions charged to result Releases to result Divestments Group companies Acquisitions through business combinations Transfers Translation differences [16] 16 [5] [3] — [7] [2] [10] 13 [0] [1] — [3] [1] [6] 3 [5] [2] — [4] [1] Total changes [17] [2] [14] Position at 31 December 2007: Non-current Current 41 23 9 12 32 11 Total 64 22 43 The non-current balance at 31 December reflects amounts payable after more than one year. Amounts payable within one year are recorded as current provisions. Integration and restructuring Provisions for integration and restructuring mainly relate to the streamlining, centralisation and restructuring measures in the Office Products operations in North America and Europe. Other Other provisions include primarily warranties regarding indemnifications with respect to divested businesses and various other contractual risks. The release to results in 2007 includes the favorable 163 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 33. Provisions (Continued) settlement of a number of outstanding contractual risks. Also included is the provision for vacant leases and product warranties relating to liabilities in the event products delivered or services rendered do not meet the agreed qualities, in those cases that the guarantee period has not expired yet. The additions charged to result only relate to warranties issued during 2007 and are calculated as a percentage of net sales. This percentage is based on past experience. 34. Current provisions Short-term provisions 31 December 2007 31 December 2006 Short-term restructuring provisions Other short-term provisions 12 11 17 13 Total 23 30 35. Other current liabilities Other current liabilities 31 December 2007 31 December 2006 Taxes and social security contributions Employee benefits other than pensions Advance payments on orders Deferred income Accrued interest Other accrued liabilities 30 114 7 9 25 102 33 131 20 10 25 105 Total 286 323 36. Share-based payments Share options are outstanding under two different arrangements; the Corporate Express Incentive Plan up to 2003 and the Corporate Express Incentive Plan from 2004 (New Corporate Express Incentive Plan). Details about the Corporate Express Incentive Plans are provided in the remuneration report on pages 76 to 85 of this Annual Report. 164 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 36. Share-based payments (Continued) The movements in the outstanding number of options and weighted average exercise price are shown in the table below. Each option of the Corporate Express Incentive Plan and New Corporate Express Incentive Plan gives right to one Corporate Express ordinary share. Plan up to 2003 Number of options Balance at 31 December 2005 Plan from 2004 Weighted average exercise price per option in euro Number of options Weighted average exercise price per option in euro 3,666,070 10.50 3,343,112 7.39 — [1,120,425] [912,071] [74,326] — 5.77 19.04 8.34 1,930,225 — — [113,620] 14.65 — — 10.54 Balance at 31 December 2006 1,559,248 9.02 5,159,717 10.03 Options granted(1) Performance adjustment Options exercised Options expired Options forfeited — — [183,176] [873,074] [101,361] — — 2.70 13.04 10.83 1,922,400 [720,339] [106,294] — [1,179,740] 10.08 7.37 7.37 — 10.72 401,637 2.70 5,075,744 10.32 Options granted(1) Options exercised Options expired Options forfeited Balance at 31 December 2007 (1) The weighted average fair value of options granted in 2007 is €4.40 per option (2006: €6.62, 2005: €4.81). The total pre-tax intrinsic value of stock options exercised in 2007 was €1 million (2006: €8 million). The total fair value of option rights that have vested in 2007 was €7 million (2006: €2 million). Options granted are in principle hedged by purchasing the shares required on or close to the grant date. Options may not be hedged if the financial position of the Group gives rise to a decision not to purchase the shares required. Considerations for evaluating the financial position are the growth prospects and its required financing, as well as its capital structure (e.g. leverage ratio). On the basis thereof it was decided not to purchase shares for this purpose in 2007, 2006 and 2005. The total of options exercisable at the end of the year are: Corporate Express Incentive Plans Number of options 31 December 2005 31 December 2006 31 December 2007 2,238,146 1,559,248 1,000,807 165 Weighted average exercise price per option in euro 15.47 9.02 5.50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 36. Share-based payments (Continued) The weighted average fair values and weighted average exercise prices per option at the date of grant for the options outstanding at 31 December are as follows: Plan up to 2003 In euro 2007 Fair value of options granted with exercise prices equal to the market value of the share at the date of grant Exercise price of options granted with exercise prices equal to the market value of the share at the date of grant Fair value of options granted with exercise prices above the market value of the share at the date of grant Exercise price of options granted with exercise prices above the market value of the share at the date of grant Plan from 2004 2006 2005 2007 2006 2005 € 1.25 € 4.36 € 4.71 € 5.20 € 5.20 € 4.85 € 2.70 € 8.91 € 10.18 € 10.32 € 10.03 € 7.39 € 1.25 € 6.14 € 6.21 — — — € 3.59 € 15.72 € 17.71 — — — The following table summarises information about options outstanding at 31 December 2007: Options outstanding In euro Number of options Options exercisable Weighted average remaining contractual life in years Exercise price per option in euro Number of options Weighted average remaining contractual life in years Weighted average exercise price per option in euro Year of granting: 2003 2003 2004 2005 2006 2007 400,738 899 599,170 1,371,089 1,430,922 1,674,563 2.3 years 2.3 years 3.3 years 4.2 years 5.2 years 6.1 years € € € € € € 2.70 3.59 7.37 7.40 14.65 10.08 400,738 899 599,170 — — — 2.3 years 2.3 years 3.3 years — — — € € € 2.70 3.59 7.37 — — — Total 5,477,381 4.8 years € 9.77 1,000,807 2.9 years € 5.50 At 31 December 2007, a total number 5,075,744 options were outstanding under the New Corporate Express Incentive Plan at a weighted average exercise price of €10.32 and a remaining weighted average contractual life 5.0 years, of which 599,170 options at a weighted average exercise price of €7.37 and a remaining weighted average contractual life 3.3 years were exercisable at that date. The aggregate pre-tax intrinsic value of the exercisable options at 31 December 2007 was €1 million which is based on the Company's closing stock price of €5.35 as of 31 December 2007. This reflects the amount which would have been received by the option holders had all option holders exercised their options as of that date. The fair value of the options granted up to 2003 were estimated on the basis of the Black & Scholes option model. Due to the performance hurdle in the New Corporate Express Incentive Plan, 166 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 36. Share-based payments (Continued) the fair value of the options granted in 2007, 2006 and 2005 was estimated on the basis of a binomial model in combination with a Monte Carlo simulation taking into account the number of options that will vest based on the performance-related vesting conditions of the option programme. The following assumptions were used in 2007, 2006 and 2005: 2007 Expected dividend yield Expected share price volatility Risk-free interest rate Expected term Exercise price 1.5% 30% 4.3% 5 years 10.08 2006 1.2% 35% 3.8% 5 years 14.65 2005 2.3% 50% 2.9% 5 years 7.40 The fair value of the option rights is estimated by using an expected dividend yield and share price volatility based on historic track records at the grant date of the options. These values do not constitute the market value. The expected term of 5 years is based on the adjusted historic assumption that options will be exercised 2 years after vesting. The assumptions were used exclusively for this calculation and do not provide an indication of expectations of management regarding developments in the future. The remuneration cost of all the option rights assigned is €8 million for 2007 (€8 million for 2006 and €7 million for 2005) and is included in the statements of income. The tax benefit recognised in 2007 in respect hereof is €0.3 million. The fair value of the options is measured at grant date and recognised as cost on a linear basis during the vesting period, with a corresponding increase in equity attributable to equity holders of the Company as 'option reserve'. When the options are exercised or forfeited, a reclassification from the option reserve to retained earnings within equity attributable to equity holders of the Company takes place. This policy is applied to all options that on the date of transition to IFRS on 1 January 2004 had not been exercised, vested or forfeited. As of 31 December 2007, total unrecognised compensation cost, net of estimated forfeitures, was €9 million related to stock options. The unrecognised compensation cost is expected to be recognised over the next 3 years. Option plans Corporate Express Australia Limited Corporate Express Australia Limited (in which Corporate Express has a 58.8% share) has its own separate share based payment plans, based on the listing of the shares on the Australia stock exchange. The remuneration cost rights assigned under these plans is €1 million for 2007, 2006 and 2005 (including minority interest) and is included in the statements of income. The main plan is the Long Term Incentive Plan ('LTIP') which replaced the Executive Option Plan ('EOP') in November 2004. The main features are: • Senior executives of Corporate Express Australia may be offered an entitlement to ordinary shares in Corporate Express Australia, in the form of performance rights, that is, a right to acquire shares in Corporate Express Australia at a future date at no cost (in other words, a share option with a zero exercise price). 167 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 36. Share-based payments (Continued) • The entitlement is conditional upon the satisfaction of performance hurdles measured over a period of 3 years. The actual number of performance share rights able to be exercised by a participant will depend on the extent to which the performance conditions have been satisfied. No performance share rights will be provided prior to the final date of the relevant measurement period, and then will only be granted if the performance conditions have been met. • The performance measure applied to entitlements granted under the LTIP in 2004 and 2005 is relative TSR (for a definition see also Corporate Express Incentive Plan from 2004 above). The TSR of all the companies in the peer group, being the ASX 200 Index, and Corporate Express Australia, will be ranked at the end of a three year performance period. Vesting of performance share rights depends on where the Company's performance sits within this ranking. Participants do not have an entitlement to the shares unless the Company's TSR is at or above the 50th percentile ranking. If the ranking above the 50th percentile is not achieved at all within the initial measurement period, the measurement is retested at the end of year four or potentially year five. • Performance share rights granted in 2007 and 2006 are subject to a relative TSR performance condition in respect of 50% of the entitlement, and an earnings per share condition in respect of the remaining 50% of the entitlement. In addition the Company has an Exempt Employee Share Plan ('EESP') and a Deferred Employee Share Plan ('DESP') in place. EESP is open to all employees of the Company and limited to AU$1,000 per employee. DESP is designed to enable key employees to acquire company shares using their pre-tax remuneration. The movements in the number of shares to which the outstanding options assigned under the EOP and LTIP give right and weighted average exercise price are as follows: Number of shares Weighted average exercise price per share in AU$ Balance at 31 December 2005 Options granted Options exercised Options expired Options forfeited 1,834,062 470,372 [134,876] — [256,878] 4.05 — 3.78 — 3.76 Balance at 31 December 2006 1,912,680 4.09 Options granted Options exercised Options expired Options forfeited 474,138 [212,020] — [80,267] — 3.98 — 4.28 Balance at 31 December 2007 2,094,531 4.13 168 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 37. Commitments not included in the balance sheet 31 December 2007 31 December 2006 Gross Sub-lease income Net Net 31 December 2007 Rental and operational lease The commitments are as follows: 2008 2009 2010 2011 2012 Thereafter 103 86 69 54 44 190 [4] [3] [2] [1] [1] [0] 99 84 67 53 43 189 — — — — — — Subtotal 546 [11] 535 499 Repurchase guarantees These lapse as follows: 2008 2009 2010 2011 2012 Thereafter — — — — — — — — — — — — 3 4 8 9 3 1 — — — — — — Subtotal — — 28 39 Other These lapse as follows: 2008 2009 2010 2011 2012 Thereafter — — — — — — — — — — — — 5 0 — — — — — — — — — — Subtotal — — 6 7 Total commitments — — 569 545 Rental and operating lease The Company leases certain distribution facilities, logistic and IT equipment, offices and vehicles under non-cancellable operating leases. The amounts in the table above are the future minimum lease payments under all non-cancellable operating leases. Certain of these distribution facilities and offices are subleased by the Company. Income to be received from these subleases is deducted from the amounts in the table. Lease expenses for non-cancellable operating leases for distribution facilities, equipment and offices charged to the income statement during the periods ended 31 December 2007 and 2006 were €109 million and €76 million respectively. Income from subleases included in the 169 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 37. Commitments not included in the balance sheet (Continued) Income statement during the periods ended 31 December 2007 and 2006 were €3 million and €1 million respectively. Repurchase guarantees Repurchase guarantees amounted to €28 million at 31 December 2007 (2006: €39 million), and relate mainly to repurchase guarantees concerning graphic machines sold to customers and financed by external financing companies. Should the customer be declared in default, the respective financing company has a right of recourse against Corporate Express, which, in general, will be lower than market value of the machine. The amount included in the table is the maximum exposure under these guarantees. Other Other commitments not included in the balance sheet include investment commitments relating to expenditure on projects, such as the development of IT systems. Until September 2007 Corporate Express had issued certain performance guarantees to an estimated maximum amount of €7 million (at 31 December 2006: €6 million). 38. Related party transactions Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation and are not disclosed in this Note. Details of transactions between the Group and other related parties are disclosed below. Trading transactions Sales of goods 2007 2006 Purchases of goods 2005 2007 2006 Amounts owed by related parties 2005 2007 2006 Amounts owed to related parties 2005 2007 2006 2005 in millions of euro Faison Inc 158 151 101 — — — — — 2 — — 0 Faison Inc is an associated company. Remuneration of the members of the Executive Board and Supervisory Board The total remuneration of members of the Executive Board during the year was as follows: in thousands of euro 2007 Short-term benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments 2,397 430 383 4,450 1,428 Short-term benefits in the table above includes base salary and annual bonus. 170 2006 3,257 691 1,608 — 1,170 2005 3,236 665 1,228 — 827 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 38. Related party transactions (Continued) The total remuneration of the members of the Supervisory Board was €396 thousand in 2007, €370 thousand in 2006 and €296 thousand in 2005. Details of the remuneration of the members of the Executive Board and Supervisory Board are given in the Remuneration Report on pages 60 to 62 of this Annual Report. Information about ownership of Corporate Express shares by members of the Executive Board and supervisory Board can be found on pages 61 to 62. Other related party transactions On 31 March 2005, Corporate Express repurchased all outstanding Preference Shares C for an aggregate purchase price of US$520 million in cash. Also Corporate Express granted to all sellers of Preference Shares C options to acquire, in aggregate, 36,500,000 of our ordinary shares at a price of €10 per share. These options could only be exercised where, on or before 30 December 2005, Corporate Express and a third party either (i) made an announcement that it was expected to reach an agreement on the terms of a bid for all outstanding shares, or (ii) entered into an agreement in relation to a public bid on all our outstanding shares. The options lapsed on 30 December 2005. Since the Supervisory Board included two representatives of the Preference Shares C holders, the transaction described above qualified as a related party transaction. Both representatives, Messrs Hannan and Barnes resigned on completion of this transaction. 39. Legal proceedings Corporate Express is involved in various routine legal proceedings incidental to the conduct of its business. Corporate Express does not believe that any of these legal or regulatory proceedings will have a material adverse effect on its financial condition, results of operations or cash flows other than the proceedings disclosed below. Paper Merchanting Germany: Anti-trust In April 2000, the German competition authorities (the Bundeskartellamt or 'BKA') launched an investigation against a number of German paper merchants, among which is Corporate Express' former subsidiary Deutsche Papier Vertriebs GmbH, alleging a violation of anti-trust rules in Germany in a number of regions. In 2004 the BKA imposed a fine of €7.6 million on Deutsche Papier Vertriebs GmbH and fines on 11 other paper merchants in Germany. The fine relates to the period between 1995 and 2000 and covers Deutsche Papier's business in the whole of Germany with the exception of the south. Deutsche Papier and the accused individuals do not agree with the amount of the fine, which is partly based on alleged surplus profits generated, and have appealed against this fine. A third-party investigation into the alleged surplus profit in a number of regions and a third party investigation into the calculation of the surplus profit used by the BKA substantiated Corporate Express' position that the fine reflects an overestimation of any surplus profit. In the procedure of one of the other paper merchants, the German Supreme Court has decided that the surplus profit has not been calculated in the correct way and has referred the case to a lower court for re-calculation. It is expected that the courts will await this re-calculation before proceeding in the procedures against the other paper merchants (and individuals). A decision in Deutsche Papier's appeal is therefore not expected before the end of 2008. Corporate Express has given an indemnity to PaperlinX Limited, the buyer of the Paper Merchanting Division. 171 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 39. Legal proceedings (Continued) Information Systems France: Agena S.A.—Béfec In 1994 Corporate Express issued arbitration proceedings against the sellers of the French company Agena S.A., which it acquired in 1991. Corporate Express' claim for damages was based on a misrepresentation of the financial position of the company in the acquisition balance sheet. These proceedings resulted in an arbitral award in 2003 adjudicating damages to the amount of €79 million. In 1995 proceedings had also started against Béfec (a predecessor of PricewaterhouseCoopers, France), the accountants who in 1991 had certified the acquisition balance sheet. These proceedings were adjourned in anticipation of the outcome of the arbitration proceedings against sellers. The matter against Béfec was resumed after the arbitral award. Béfec raised preliminary defence against the claim which was rejected in the final instance by the French Supreme Court. The claim itself and the amount of damages are being judged in proceedings before the Commercial Court. These proceedings are expected to continue throughout 2008. Corporate Express is claiming damages to the amount of €134 million plus interest and costs. Under IFRS (IAS 37) and US GAAP (FAS 5), a contingent asset is disclosed when it is probable that an inflow of an economic benefit will be realised and the amount is estimable. In practice, contingent assets are not disclosed until the amount and timing of the inflow is known (e.g. there is a firm commitment from the counterparty). Accordingly, the above contingent assets may be judged to be a non-disclosure in accordance with IAS 37 and/or FAS 5, given the uncertainty as to its realisation and if so, the timing and amount of realisation. 40. New accounting pronouncements The new accounting pronouncements under IFRS that are effective after 31 December 2007 are the amendments to IAS 23R, IAS 1 and IAS 27R, and the new IFRS 8, IFRIC 11, IFRIC 12, IFRIC 13, IFRIC 14, IFRS 3. The new accounting pronouncements which could potentially affect Corporate Express' future consolidated results of operations, financial position and cash flows under IFRS are described below: In March 2007 the IASB issued the amended IAS 23R. The revisions to IAS 23 are concerned with eliminating one of the two treatments for borrowing costs directly attributable to the acquisition, construction or production of qualifying assets: IAS 23R requires the capitalisation of borrowing costs, while IAS 23 gave also the option to expense these costs. IAS 23R will be effective for periods beginning on or after 1 January 2009. Corporate Express will adopt IAS 23R as of 1 January 2009 and believes it will not have a material impact on its consolidated results of operations, financial position and cash flows. In September 2007, the IASB revised standard IAS 1 'Presentation of Financial Statements' and issued a new version that supersedes the 2003 version of IAS 1 Presentation of Financial Statements (as amended in 2005). The revised standard introduces the 'total comprehensive income', and it is part of a joint project with the FASB to enhance the usefulness of information presented in a complete set of financial statements by addressing presentation and display issues. This amendment to IAS 1 will become effective on 1 January 2009 and will not have an impact on Corporate Express's consolidated results of operations, financial position or cash flows. In November 2006, the IASB issued IFRS 8 'Operating Segments'. IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements under US GAAP (SFAS 131). IFRS 8 requires an entity 172 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 40. New accounting pronouncements (Continued) to adopt the 'management approach' to reporting on the financial performance of its operating segments. Generally, the information to be reported would be what management uses internally for evaluating segment performance and deciding how to allocate resources to operating segments. Such information may be different from what is used to prepare the income statement and balance sheet. IFRS 8 therefore requires explanations of the basis on which the segment information is prepared and reconciliations to the amounts recognised in the income statement and balance sheet. IFRS 8 will become effective on 1 January 2009, with earlier application encouraged. Corporate Express will adopt IFRS 8 as of 1 January 2009 and believes it will not have a material impact on its consolidated results of operations, financial position and cash flows. In November 2006, IFRIC 11 'IFRS 2—Group and Treasury Share Transactions' was issued. IFRIC 11 addresses how to apply IFRS 2 'Share-based Payment' to share-based payment arrangements involving an entity's own equity instruments or equity instruments of another entity in the same group (e.g. equity instruments of its parent). IFRIC 11 requires a share-based payment arrangement in which an entity receives goods or services as consideration for its own equity-instruments to be accounted for as an equity-settled share-based payment transaction, regardless of how the equity instruments needed are obtained. IFRIC 11 also provides guidance on whether share-based payment arrangements, in which suppliers of goods or services of an entity are provided with equity instruments of the entity's parent should be accounted for as cash-settled or equity-settled in the entity's financial statements. IFRIC 11 will become effective on 1 January 2008 with earlier adoption permitted. Corporate Express will adopt IFRIC 11 as of 1 January 2008 and believes it will not have a material impact on its consolidated results of operations, financial position or cash flows. In November 2006, IFRIC 12 'Service concession arrangements' was issued. IFRIC 12 does not apply to Corporate Express. In June 2007, IFRIC 13 'Customer loyalty programmes' was issued. IFRIC 13 addresses accounting by entities that grant award credits to its customers as part of a sales transaction, ie a sales of goods, rendering of services or use by a customer of entity assets. These credits are subject to further qualifying conditions, and the customers can redeem in the future the credits for free or discounted goods or services. IFRIC 13 will become effective on 1 January 2008 with earlier adoption permitted. Corporate Express will adopt IFRIC 13 as of 1 January 2008 and believes it will not have a material impact on its consolidated results of operations, financial position or cash flows. In July 2007, 'IFRIC 14 IAS 19—The limit on a defined benefit asset, minimum funding requirements and their interaction' was issued. IFRIC 14 applies to all post-employment defined benefits and other long-term employee defined benefits, and addresses the issue when refunds or reductions in future contributions by an employer to a defined benefit plan can be regarded as available, and the interaction with the minimum funding requirements as per statutory requirements in the jurisdictions of the plans. IFRIC 14 will become effective on 1 January 2008 with earlier adoption permitted. Corporate Express will adopt IFRIC 14 as of 1 January 2008, although the impact of applying IFRIC 14 is not fully known, based on the nature of changes, the impact on its consolidated results of operations, financial position or cash flows is not expected to be material. In January 2008 the IASB issued a revised version of IFRS 3 Business Combinations and an amended version of IAS 27 Consolidated and Separate Financial Statements. The new standards require greater use of fair value through the income statement and cement the 'economic entity' view of the reporting entity. The new requirements take effect on 1 July 2009, although entities are 173 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) In millions of euro, unless stated otherwise 40. New accounting pronouncements (Continued) permitted to adopt them earlier. Corporate Express will adopt IFRS 3 and IAS 27R as of 1 January 2009, although the impact on deal structures, the scope of due diligence engagements, the modeling of post-acquisition results and procedures to measure fair value has not been assessed yet. 174 COMPANY BALANCE SHEETS (BEFORE APPROPRIATION OF NET RESULT) as of 31 December 2007 and 2006 Notes 2007 2006 In millions of euro Assets Non-current assets Deferred tax assets Total assets 2 1,841 — 1,800 1,843 1,800 3 3 219 1,745 25 17 [132] [1] [509] 178 217 1,729 25 20 [34] [2] [616] 123 3 1,543 1,463 — 7 178 94 178 88 272 266 27 64 1,843 1,800 2 Total assets Equity and liabilities Shareholders's equity Issued and paid-in capital Additional paid in capital Conversion option bonds Option reserve Cumulative translation adjustments Hedge reserve Retained earnings Result for the year 3 3 3 3 3 Total equity attributable to equity holders of the Company Non-current provisions Deferred taxes Non-current liabilities Preference Shares A Convertible Subordinated Bonds Current liabilities Other current liabilities Total equity and liabilities COMPANY STATEMENTS OF INCOME for the years ended 31 December 2007, 2006 and 2005 2007 2006 2005 In millions of euro Result of Group companies and participations (after tax) Other results (after tax) 154 24 132 [9] 68 [66] Net result 178 123 2 175 NOTES TO THE COMPANY BALANCE SHEETS AND STATEMENTS OF INCOME In millions of euro, unless stated otherwise 1. Summary of significant accounting policies The Consolidated Financial Statements comply with Title 9, Book 2 of the Netherlands Civil Code. In accordance with Article 402, Title 9, Book 2 of the Netherlands Civil Code, an abbreviated Company Income Statement is included. The Company financial statements were prepared in accordance with the statutory provisions of Part 9, Book 2, of the Netherlands Civil Code. The Company uses the possibility of article 2:362, paragraph 8, to apply for its company financial statements the principles of measurement and determination of assets, liabilities and result of the consolidated financial statements (see Note 2), except for financial fixed assets which are measured at net asset value (see 'financial fixed assets'). Financial fixed assets Group companies have been valued at their net asset value (or the proportional part thereof). In case a negative net asset value occurs, a provision equal to the negative net asset value is charged to receivables of Group companies. Equity attributable to equity holders of the Company, ordinary shares, Preference Shares Corporate Express' ordinary shares are classified as equity attributable to equity holders of the Company. External costs directly attributable to the issue of new ordinary shares, other than in connection with business combinations, are deducted from equity attributable to equity holders of the Company, net of tax. Corporate Express' Preference Shares A and C are classified as a financial liability and stated at fair value (proceeds received net of transaction costs incurred). Under IFRS, the critical feature in differentiating a financial liability from an equity instrument is the existence of a contractual obligation on one party (the issuer) to deliver cash or another financial asset to the other party (the holder) or to exchange another financial instrument with the holder under conditions that are potentially unfavorable to the issuer. When such a contractual obligation exists, that instrument meets the definition of a financial liability regardless of the manner in which the contractual obligation will be settled. The 'option reserve' in equity attributable to equity holders of the Company is the amount of expenses recognised in connection with the employee share options. When the options are exercised or lapsed, a reclassification from the option reserve to retained earnings within equity attributable to equity holders of the Company takes place. The 'cumulative translation adjustments' in Equity attributable to equity holders of the Company, relates to the translation into euro of assets and liabilities of Group companies whose functional currency is not the euro. When a Group company is sold or otherwise disposed of, the cumulative translation adjustments, if any, are recognised in the income statement as part of the result on the sale or disposal. Also, cumulative translation adjustments with respect to long-term loans that are designated as permanent investments (quasi equity, see 'Principles of consolidation') are recognised in the income statement when these loans are reduced. The hedge reserve relates to changes in the fair value of the interest rate swaps for which hedge accounting is applied. The amounts recorded in the hedge reserve are recognised in the income statement, as other financing expenses, when the hedged item affects the income statement. 176 NOTES TO THE COMPANY BALANCE SHEETS AND STATEMENTS OF INCOME (Continued) In millions of euro, unless stated otherwise 1. Summary of significant accounting policies (Continued) Subordinated Convertible Bonds Corporate Express' Subordinated Convertible Bonds are classified as a compound financial instrument. The conversion option is recorded directly in equity attributable to equity holders of the Company, (net of taxes) and the liability component as long-term borrowings. The liability component is initially stated at fair value (proceeds received net of transaction costs incurred) and is subsequently stated at amortised cost which is the initial amount minus interest and principal payments plus cumulative amortisation using the effective interest method of any difference between the initial amount and the maturity amount. The amortisation is recorded in the income statement. The value of the conversion option is determined using the residual method. 2. Financial fixed assets The changes in the financial fixed assets are as follows: Total Participations in Group companies Receivables from Group companies Book value at 31 December 2004 Proceeds collected by Group companies Financial restructuring Result from Group companies Translation differences 1,641 [89] — 68 180 558 — [56] 68 180 1,083 [89] 56 — — Book value at 31 December 2005 1,800 750 1,050 Proceeds collected by Group companies Financial restructuring Result from Group companies Translation differences [5] — 132 [127] Book value at 31 December 2006 1,800 Proceeds collected by Group companies Financial restructuring Result from Group companies Translation differences [15] — 154 [98] Book value at 31 December 2007 1,841 — [247] 132 [127] 508 — 235 154 [98] 799 [5] 247 — — 1,292 [15] [235] — — 1,042 Group companies have been valued at their net asset value (or the proportional part). Certain Group companies have a negative net asset value. At 31 December 2007, a provision equal to the negative net asset value has been deducted from receivables. 177 NOTES TO THE COMPANY BALANCE SHEETS AND STATEMENTS OF INCOME (Continued) In millions of euro, unless stated otherwise 3. Equity attributable to equity holders of the Company For details of changes in equity attributable to equity holders of the Company, see the Notes to the Consolidated Financial Statements. Other reserves Equity attributable to equity holders of the Company Number of ordinary shares Issued Treasury Outstanding Issued and fully paidup capital Additional paid in capital Treasury Shares at cost Conversion option bonds(1) Option reserve Cumulative translation adjustment Hedge reserve Retained earnings In millions of euro Balance at 31 December 2004 Changes for 2005: Total recognised income and expense Dividend 2004 Issued shares Repurchase shares CE Australia Options forfeited Addition option reserve share based payments Balance at 31 December 2005 Changes for 2006: Total recognised income and expense Dividend 2005 reclassification Issued shares Repurchase shares CE Australia Options exercised Options forfeited Addition option reserve share based payments Balance at 31 December 2006 Changes for 2007: Total recognised income and expense Dividend 2006 Repurchase shares CE Australia Options exercised Options forfeited Addition option reserve share based payments Balance at 31 December 2007 (1) 138,126,528 1,841,644 39,356,532 [531,364] 137,595,164 166 1,524 [43,628] 1,841,644 39,312,904 2 47 8 181 [10] 25 25 [87 ] [5] [577] 180 5 [19] [12] 166 [2 ] 228 [10] 8 [10 ] — [8] 1,062 7 179,324,704 [574,992] 1,038,454 541,812 180,904,970 574,992 — 178,749,712 215 1,713 1,038,454 1 14 1,116,804 1 2 180,904,970 217 1,729 1,662,868 1,662,868 2 15 280,009 280,009 0 1 182,847,847 182,847,847 219 1,745 [10] 25 10 — — 25 25 24 7 93 — [611 ] [127] [2] [1] 144 [30] 1 15 [15 ] — [3] [7] [2] [4] 7 [2 ] 6 — 7 1 8 20 1,450 [34 ] [2] [493] 1,463 [98 ] 1 215 [38] 118 [21 ] [26] [1] [9] 9 [26 ] 1 — 8 1 8 17 [132] [1] [331] 1,543 Net of tax. In 2007 the movements on the conversion option bonds have been retrospectively reclassified witin equity attributable to equity holders of the Company. 4. Commitments not included in the Balance Sheet Corporate Express NV acts as guarantor for loans taken by Group companies (see Note 32 to the Consolidated Balance Sheet) amounting to €903 million in 2007. In addition, Corporate Express NV acts as guarantor in certain legal acts of a number of Group companies in the Netherlands and abroad, including entering into lease contracts and interest rate and currency swap contracts. 178 NOTES TO THE COMPANY BALANCE SHEETS AND STATEMENTS OF INCOME (Continued) In millions of euro, unless stated otherwise 4. Commitments not included in the Balance Sheet (Continued) Furthermore, declarations of joint and several liability (as referred to in Article 403, Title 9, Book 2 of the Dutch Civil Code) have been filed for debts resulting from legal acts of a number of Group companies established in the Netherlands. Amsterdam, 1 March 2008 Supervisory Board F.L.V. Meysman J. Peelen R.F. van den Bergh G. Izeboud B.J. Noteboom T. de Swaan Executive Board P. Ventress G. Dean F.F. Waller 179 SUPPLEMENTAL GUARANTOR INFORMATION As part of the Senior Facilities Agreement and Indenture related to the Senior Subordinated Notes, Corporate Express NV and certain subsidiaries of Corporate Express NV act as guarantors. Presented below is consolidated information for Corporate Express US Inc., the issuer of the debt, Corporate Express NV, the parent guarantor of the debt, the guarantor subsidiaries of, Corporate Express NV (listed below), and the non-guarantor subsidiaries of, Corporate Express NV. All of the subsidiary guarantors are wholly owned subsidiaries of, Corporate Express NV. Pursuant to the Senior Facilities Agreement and the Indenture related to the Senior Subordinated Notes, Corporate Express NV and its subsidiary guarantors jointly, severally, fully and unconditionally guarantee, Corporate Express US Inc.'s debt securities. GUARANTOR SUBSIDIARIES as of 31 December 2007 a United States BTOP USA Corp. BTOPI Holding (U.S.) Corporate Express Swaps US Inc. Corporate Express Document & Print Management, Inc. Corporate Express Office Products, Inc. Corporate Express Promotional Marketing, Inc. Corporate Express of Texas, Inc. Corporate Express US Inc. b The Netherlands Corporate Express Financieringen B.V. Corporate Express Fined B.V. Corporate Express N.V. Buhrmann II B.V. Corporate Express International B.V. Buhrmann Nederland B.V. Corporate Express Nederland Holding B.V. Tetterode-Nederland B.V. Veenman B.V. Corporate Express Nederland B.V. c Belgium Corporate Express Shared Service Center (Europe) NV d Luxemburg Buhrmann Luxembourg S.A.R.L. 180 CONSOLIDATED STATEMENT OF INCOME 31 December 2007 (IFRS) Issuer of debt Parent Guarantor Subsidiaries Non-guarantor Subsidiaries Eliminations Total In millions of euro, unless stated otherwise Continuing operations: Net sales Purchase value of trade goods sold Gross contribution Employee benefit expenses, excluding restructuring Depreciation of property, plant & equipment and amortisation of software and other non-current intangibles Other operating expenses, excluding restructuring Restructuring and termination expenses, one-off pension costs and gain on sale Veenman Germany — — — — 2,940 [1,977] 2,691 [1,814] — — 5,631 [3,791] — — — — 963 [494] 877 [388] — — 1,840 [882] — 0 — 0 [58] [308] [39] [321] — — [97] [629] [2] — [12] [16] — [30] 0 37 [4] 91 [251] [29] 112 [7] 33 — — — 201 [115] — Operating result Total financing expenses Inter company settlements Share in result of associates and subsequent result from disposal of operations [2] 106 — Result before taxes Taxes Results from subsidiaries 104 [41] [81] 33 [9] 172 [189] 112 — Net result [19] 195 — Total operations: Net result Attributable to: Holders of ordinary shares Corporate Express NV Minority interests in Group companies Discontinued operations: Net result 0 — 0 — 0 139 [59] — — — [90] 86 3 — [77] 80 [90] 89 — 105 1 — 106 [19] 195 28 81 [90] 195 [19] — 195 — 28 — 64 17 [90] — 178 17 [19] 195 28 81 [90] 195 181 0 CONSOLIDATED STATEMENT OF INCOME 31 December 2006 (IFRS) Issuer of debt Parent Guarantor Subsidiaries Non-guarantor Subsidiaries Eliminations Total In millions of euro, unless stated otherwise Continuing operations: Net sales Purchase value of trade goods sold — — — — 3,191 [2,116] 2,307 [1,580] — — 5,497 [3,696] — — — — 1,075 [550] 727 [333] — — 1,802 [883] — [1] — — 0 — [67] [307] [37] [28] [254] [2] — — — [96] [561] [40] Operating result Total financing expenses Inter company settlements Share in result of associates and subsequent result from disposal of operations [1] 114 1 0 25 [17] 114 [238] [13] 110 3 29 — — — 223 [96] — 6 — Result before taxes Taxes Results from subsidiaries 113 [44] [79] 8 [17] 132 [136] 56 — 148 [4] — — — [53] 134 [10] — Net result [10] 123 [79] 143 [53] 124 — — 15 — 18 Total operations: Net result [10] 123 [64] 146 [53] 142 Attributable to: Holders of ordinary shares Corporate Express NV Minority interests in Group companies [10] — 123 — [64] — 127 19 [53] — 123 19 [10] 123 [64] 146 [53] 142 Gross contribution Employee benefit expenses, excluding restructuring Depreciation of property, plant & equipment and amortisation of software and other non-current intangibles Other operating expenses, excluding restructuring Restructuring expenses Discontinued operations: Net result 0 — 1 182 3 7 CONSOLIDATED STATEMENT OF INCOME 31 December 2005 (IFRS) Issuer of debt Parent Guarantor Subsidiaries Non-guarantor Subsidiaries Eliminations Total In millions of euro, unless stated otherwise Continuing operations: Net sales Purchase value of trade goods sold — — — — 3,075 [2,013] 2,042 [1,408] — — 5,118 [3,421] — — — — 1,062 [556] 634 [325] — — 1,696 [881] — [1] — — 0 — [61] [277] [10] [25] [228] [8] — — — [86] [513] [17] Operating result Total financing expenses Inter company settlements Share in result of associates and subsequent result from disposal of operations [1] 116 — 0 [90] 31 150 [219] [46] 50 3 15 — — — 199 [191] — — 0 [1] — 5 Result before taxes Taxes Results from subsidiaries 115 [45] [66] [59] [7] 68 [109] 44 — 66 [4] — — — [2] 13 [12] — 4 2 [64] 62 [2] 1 — — 18 2 — 20 4 2 [47] 64 [2] 21 4 — 2 — [47] — 45 19 [2] — 2 19 4 2 [47] 64 [2] 21 Gross contribution Employee benefit expenses, excluding restructuring Depreciation of property, plant & equipment and amortisation of software and other non-current intangibles Other operating expenses, excluding restructuring Restructuring expenses Net result Discontinued operations: Net result Total operations: Net result Attributable to: Holders of ordinary shares Corporate Express NV Minority interests in Group companies 6 183 CONSOLIDATED BALANCE SHEET 31 December 2007 (IFRS) Issuer of debt Guarantor Subsidiaries Parent Non-guarantor Subsidiaries Eliminations Total In millions of euro, unless stated otherwise Assets Non-current assets Goodwill Software Other intangible assets Property, plant & equipment Net pension asset for funded schemes in surplus Deferred tax assets Investment in associates Other non-current assets — — — — — 7 — 2 — — — — — 2 — — 1,284 69 5 104 — 284 3 6 136 30 77 92 190 58 0 4 — — — — — — — — 1,420 98 82 196 190 350 4 12 9 2 1,756 586 — 2,352 Group participations — 1,841 — — Current assets Inventories Trade receivables Prepaid expenses and accrued income Current tax receivable Cash and cash equivalents Assets held for sale — — 0 — 0 0 — — — — — — 265 296 107 10 21 3 233 405 76 2 29 0 — — — — — — 498 700 183 12 50 3 0 — 701 745 — 1,446 10 1,843 2,457 1,332 [1,841] 3,799 Equity and liabilities Equity attributable to equity holders of the Company Minority interests 1,421 — 1,543 — [1,848] — 815 40 [389] — 1,543 40 Total equity 1,421 1,543 [1,848] 855 [389] 1,583 Total assets Non-current liabilities Long-term borrowings Intercompany financing Deferred tax liabilities Pensions Other non-current provisions Current provisions and liabilities Current portion of long-term borrowings Short-term loans and bankoverdrafts Trade payables Current tax payable Other current provisions and liabilities Total equity and liabilities [1,841] — 592 [2,026] 0 — — 272 — — — — 87 3,670 70 1 27 60 [192] 66 22 14 — [1,452] — — — 1,011 — 136 22 41 [1,435] 272 3,856 [30] [1,452] 1,211 13 — — — 10 — 0 — 13 14 74 12 225 — 137 30 7 322 [2] 149 — — — — — 117 19 547 11 309 24 27 449 507 — 1,004 10 1,843 2,457 1,332 184 [1,841] 3,799 CONSOLIDATED BALANCE SHEET 31 December 2006 (IFRS) Issuer of debt Guarantor Subsidiaries Parent Non-guarantor Subsidiaries Eliminations Total In millions of euro, unless stated otherwise Assets Non-current assets Goodwill Software Other intangible assets Property, plant & equipment Net pension asset for funded schemes in surplus Deferred tax assets Investment in associates Other non-current assets — — — — — 6 — 3 — — — — — — — — 1,415 89 7 121 — 359 4 6 116 19 75 95 132 51 — 1 Group participations 9 — — 1,800 2,001 — 489 — Current assets Inventories Trade receivables Prepaid expenses and accrued income Current tax receivable Cash and cash equivalents Assets held for sale — — — — — — — — — — — — 291 433 141 — 30 4 229 434 59 14 43 — — — — — — — 520 867 200 14 73 4 — — 899 779 — 1,678 9 1,800 2,900 1,268 [1,800] 4,178 Equity and liabilities Equity attributable to equity holders of the Company Minority interests 1,480 — 1,463 — [1,874] — 704 64 [310] — 1,463 64 Total equity 1,480 1,463 [1,874] 768 [310] 1,527 Total assets Non-current liabilities Long-term borrowings Intercompany financing Deferred tax liabilities Pensions Other non-current provisions Current provisions and liabilities Current portion of long-term borrowings Short-term loans and bankoverdrafts Trade payables Current tax payable Other current provisions and liabilities Total equity and liabilities — — — — — — — — — [1,800] 1,531 108 82 216 132 416 4 10 2,500 — 852 [2,367] 1 — — 266 — 7 — — 88 3,982 93 — 36 78 [125] 24 30 15 — [1,490] — — — 1,284 — 125 30 51 [1,514] 273 4,199 22 [1,490] 1,490 32 — — — 11 — — — 49 15 1 1 404 3 166 33 17 316 [48] 161 — — — — — 66 18 720 4 353 43 64 575 479 — 1,161 9 1,800 2,900 1,268 185 [1,800] 4,178 CONSOLIDATED STATEMENT OF CASH FLOWS 31 December 2007 (IFRS) Issuer of debt Guarantor Subsidiaries Parent Non-guarantor Subsidiaries Eliminations Total In millions of euro, unless stated otherwise Cash flow from operating activities Net result attributable to holders of ordinary shares Corporate Express NV Adjustments: Net result discontinued operations Result subsidiaries Minority interest Intercompany settlements Subsequent result from disposal of operations Profit tax Total financing expenses Operating result Depreciation of property, plant & equipment and amortisation of software and other intangible assets Other adjustments for non-cash [Increase]/decrease in working capital Other operational payments and receivables: Profit taxes (net) Payments deducted from provisions for restructuring and other provisions excluding pensions Payments for defined benefit pension plans [19] 195 28 62 [88] 178 — 83 — — — 41 [108] — [172] — 4 — 9 [37] [105] — — 29 — [112] 251 [1] — 17 [33] — 59 9 — 88 — — — — — [106] — 17 — — [3] 115 112 — 201 [2] 0 91 — — 0 — — 0 58 1 [20] 40 2 [2] — 97 4 [22] — [4] 7 [34] — [31] — — — — [8] [4] [8] [3] — — [16] [7] Net cash from operating activities continuing operations [1] [4] 125 107 — 227 Net cash from operating activities discontinued operations — — [11] 6 — Net cash from operating activities total operations (A) [1] [4] 114 113 — 223 — — [50] [32] — [82] — — — — — — [11] 212 1 [44] 47 [2] — — — [55] 260 [1] Net cash from investing activities continuing operations — — 153 [32] — 121 Net cash from investing activities discontinued operations — — 0 — Net cash from investing activities total operations (B) — — [32] — Cash flow from investing activities Net investments in property, plant and equipment and internally used software Acquisitions of Group companies and payments related to integration of acquisitions Proceeds of divestments and transaction fees Other [3] 150 186 [5] [4] 117 CONSOLIDATED STATEMENT OF CASH FLOWS 31 December 2007 (IFRS) (Continued) Cash flow from financing activities Dividend payments Interest payments Dividend Preference Shares A Payment to minority shareholders Intercompany financing Proceeds from share issues Net repayment of long-term borrowings [21] 52 [11] — [16] 0 0 — [234] — — [25] — [24] — [9] — [68] [59] — 51 — — — — — — — [21] [84] [11] [68] — 0 [181] 1 4 [284] [85] — [365] — — 0 — Net cash from financing activities total operations (C) 1 4 [284] [85] — [365] Net cash flow (A+B+C) 0 0 [20] [4] — [24] Net cash from financing activities continuing operations Net cash from financing activities discontinued operations — 107 — — 101 — [207] 0 187 0 CONSOLIDATED STATEMENT OF CASH FLOWS 31 December 2006 (IFRS) Issuer of debt Guarantor Subsidiaries Parent Non-guarantor Subsidiaries Eliminations Total In millions of euro, unless stated otherwise Cash flow from operating activities Net result attributable to holders of ordinary shares Corporate Express NV Adjustments: Net result discontinued operations Result subsidiaries Minority interest Intercompany settlements Subsequent result from disposal of operations Profit tax Total financing expenses Operating result Depreciation of property, plant & equipment and amortisation of software and other intangible assets Other adjustments for non-cash [Increase]/decrease in working capital Other operational payments and receivables: Profit taxes (net) Payments deducted from provisions for restructuring and other provisions excluding pensions Payments for defined benefit pension plans Net cash from operating activities continuing operations [10] 123 [64] 127 [53] 123 — 79 — [1] 0 44 [114] — [132] — 17 0 17 [25] [15] — — 13 [1] [56] 238 [3] — 19 [29] [6] 4 [3] — 53 — — — — — [18] — 19 — [7] 10 96 [1] 0 114 110 — 223 — — — — — — 67 20 [43] 28 [11] [25] — — — 96 10 [68] — [33] 41 [40] — [32] — — — — [17] [2] [10] [11] — — [27] [13] [1] [34] 181 41 — 188 Net cash from operating activities discontinued operations — — 41 4 — 45 Net cash from operating activities total operations (A) [1] [34] 221 45 — 232 — — [48] [25] — [73] — — — — — — [25 — 102 [278 — [102] — — — [303 — 0 Net cash from investing activities continuing operations [1] — 30 [405] — [376] Net cash from investing activities discontinued operations — — [5] — — [5] Net cash from investing activities total operations (B) [1] — 25 [405] — [381] Cash flow from investing activities Net investments in property, plant & equipment and internally used software Acquisitions of Group companies and payments related to integration of acquisitions Proceeds of divestments and transaction fees Intercompany settlement 188 CONSOLIDATED STATEMENT OF CASH FLOWS 31 December 2006 (IFRS) (Continued) Cash flow from financing activities Dividend payments Interest payments Dividend Preference Shares A Payment to minority shareholders Intercompany financing Proceeds from share issues Net repayment of long-term borrowings [15] 39 [11] — 15 7 — — [231] — — [50] — [1] — 4 — [10] 322 — 34 — — — — — — — [15] [71] [11] [10] — 7 203 1 33 [282] 351 — 103 — — — — — — Net cash from financing activities total operations (C) 1 33 [282] 351 — 103 Net cash flow (A+B+C) 0 0 [37] — [45] Net cash from financing activities continuing operations Net cash from financing activities discontinued operations — 117 — — [286] — 170 189 [9] CONSOLIDATED STATEMENT OF CASH FLOWS 31 December 2005 (IFRS) Issuer of debt Guarantor Subsidiaries Parent Non-guarantor Subsidiaries Eliminations Total In millions of euro, unless stated otherwise Cash flow from operating activities Net result attributable to holders of ordinary shares Corporate Express NV Adjustments: Net result discontinued operations Result subsidiaries Minority interest Intercompany settlements Subsequent result from disposal of operations Profit tax Total financing expenses 2 [47] 45 [2] — [68] — [31] — 7 90 [18] — — 46 [6] [44] 219 [2] — 19 [15] 1 4 [3] — 2 — — — — — [20] — 19 — [5] 12 191 [1] 0 150 50 — 199 — — 0 — — 0 61 15 [27] 24 3 [3] — — — 86 18 [30] — — 46 34 [40] [34] [36] — — — [30] — — — — — [3] [4] [15] [4] — — [17] [9] Net cash from operating activities continuing operations [1] 80 117 18 — 216 Net cash from operating activities discontinued operations — — 16 0 — 15 Net cash from operating activities total operations (A) [1] 80 133 18 — 232 — — [40] [19] — [59] — — — — [11] [2] [9] [1] — — [20] [2] Net cash from investing activities continuing operations — — [53] [28] — [81] Net cash from investing activities discontinued operations — — [5] 0 — [5] Net cash from investing activities total operations (B) — — [58] [28] — [86] Operating result Depreciation of property, plant & equipment and amortisation of software and other intangible assets Other adjustments for non-cash (Increase)/decrease in working capital Other operational payments and receivables: Profit taxes (net) Intercompany settlement Payments deducted from provisions for restructuring and other provisions excluding pensions Payments for defined benefit pension plans Cash flow from investing activities Net investments in property, plant & equipment and internally used software Acquisitions of Group companies and payments related to integration of acquisitions Proceeds of divestments and transaction fees 4 — 66 — — — 45 [116] 190 2 CONSOLIDATED STATEMENT OF CASH FLOWS 31 December 2005 (IFRS) (Continued) Cash flow from financing activities Dividend payments Interest payments Dividend Preference Shares A Payment to minority shareholders Intercompany financing Proceeds from share issues Net repayment of long-term borrowings [12] 30 [11] — 77 239 [404] — [213] — — 94 — [8] — 3 — [31] 26 — 9 — — — — — — — [12] [58] [11] [31] — 239 [327] 1 [81] [127] 8 — [199] — — 0 — Net cash from financing activities total operations (C) 1 [81] [127] 8 — [199] Net cash flow (A+B+C) 0 0 [51] [2] — [54] Net cash from financing activities continuing operations Net cash from financing activities discontinued operations — 122 — — [197] — 76 0 191 0 OTHER INFORMATION Significant subsidiaries 193 Dividend 195 Policy on appropriation of net results to reserves and dividends 195 Dividend proposal 195 Report of independent auditors 197 192 SIGNIFICANT SUBSIDIARIES Corporate Express NV is the parent company of a group of companies (the Group). The significant subsidiaries of the Group are listed below. The equity interest of Corporate Express in these subsidiaries is 100% unless stated otherwise. The full list containing the information referred to in article 379 and 414 of book 2 of the Dutch civil code is filed at the office of the Chamber of Commerce in Amsterdam. The addresses of these companies can be viewed on our website: www.cexpgroup.com. Office Products US Division headquarters in Denver, CO, USA • Corporate Express US Inc.—Broomfield, CO, USA • Corporate Express Imaging and Computer Graphic Supplies—Deerfield Beach, FL, USA • Corporate Express Document & Print Management, Inc.—Omaha, NE, USA • Corporate Express Promotional Marketing, Inc.—St. Louis, MO, USA Office Products Canada • Corporate Express Canada, Inc.—Headquarters in Mississauga, ON, Canada Office Products Europe Division headquarters in Amsterdam, the Netherlands • Corporate Express Europe BV—Amsterdam, the Netherlands • Corporate Express Europe Import BV—Amsterdam, the Netherlands • Corporate Express GmbH & Co—Wels, Austria • Corporate Express Belgium NV—Wemmel (Brussels), Belgium • Corporate Express France SAS—Bondoufle (Paris), France • Corporate Express Deutschland GmbH & Co. Vertriebs KG—Stuttgart, Germany • Corporate Express Hungaria Kereskedelmi Kft—Budapest, Hungary • Corporate Express (Ireland) Ltd—Dublin, Ireland • Corporate Express SpA—Cusago (Milan), Italy • Corporate Express Luxembourg Sarl—Howald (Hesperange), Luxembourg • Corporate Express Nederland BV—Almere, the Netherlands • Corporate Express Nordic AS—Oslo, Norway • Corporate Express Danmark A/S—Espergærde (Helsingør), Denmark • Corporate Express Polska Sp.zoo—Gdynia, Poland • Corporate Express Svenska AB—Borås (Goteborg), Sweden • Corporate Express Sverige AB—Växjö, Sweden • Corporate Express España SA—Madrid, Spain • Corporate Express UK Ltd—Birmingham, United Kingdom 193 Office Products Australia Division headquarters in Sydney, Australia • Corporate Express Australia Ltd (58.8%)—Rosebery, Sydney, NSW, Australia • Corporate Express New Zealand Ltd (58.8%)—Auckland, New Zealand Global sourcing activities • Corporate Express Asia Ltd—Hong Kong Printing Systems Division headquarters in Amsterdam, the Netherlands • Plantin NV—Brussels (Evere), Belgium • BTI-Hellas AEE—Metamorphosis (Athens), Greece • Macchingraf SpA—Ospiate di Bollate (Milan), Italy • Tetterode-Nederland BV—Amsterdam, the Netherlands • Maquinaria Artes Gráficas Hartmann, SA—Cornellà de Llobregat (Barcelona), Spain • Veenman BV—Capelle a/d IJssel (Rotterdam), the Netherlands Other • Corporate Express International BV—Amsterdam, the Netherlands • Corporate Express Nederland Holding BV—Amsterdam, the Netherlands • Corporate Express Shared Service Center (Europe) NV—Hasselt, Belgium • Corporate Express Silver SA—Luxembourg • Corporate Express Silver Europe BV—Amsterdam, the Netherlands • Corporate Express Silver Financing, LLC—Delaware, USA • Corporate Express Silver US, LLC—Delaware, USA • Corporate Express US Finance Inc.—Broomfield, CO, USA 194 DIVIDEND Policy on appropriation of net results to reserves and dividends ('Dividend policy') Reserves Corporate Express aims to add or charge to the reserves of the Company the statutory profit or loss for the year after distribution of the statutory dividend on the Preference Shares A and after deducting the proposed dividend on ordinary shares. Specific accounting results such as relating to refinancing, acquisitions, divestments, restructuring or other strategic considerations may lead to adjustments in the additions made to the reserves. Dividends on ordinary shares Corporate Express aims to propose to declare annually a dividend on each ordinary share representing around 20-30% of the consolidated net result attributable to ordinary shares divided by the number of ordinary shares outstanding at year end. In case special items such as those related to acquisitions, divestments, restructuring, impairments or refinancing are incurred, allowance can be made for (after tax elements of) these items. Additionally, financing charges reported under 'exchange results due to translation of longterm internal and external borrowings' are added back to the base used to calculate the dividend. The dividend declared may be distributed in cash and/or stock. The proposed dividend for a fiscal year must be approved by the General Meeting of Shareholders, and the dividend is paid after this meeting. Corporate Express' arrangements for its indebtedness, such as the Senior Facilities Agreement and the subordinated bond loans contain, various restrictions on the ability of Corporate Express to pay cash dividends. Corporate Express' ability to pay dividends is currently contingent on meeting certain financial ratios as determined by Corporate Express' earnings, indebtedness and other indicators of Corporate Express' financial condition and results of operations. These restrictions take precedence over the policy outlined above. Dividend payments may be subject to Netherlands statutory withholding taxes. See also the chapter on Corporate Governance on page 50. Dividends paid in 2004–2007 The following table sets out the dividend per ordinary share declared by Corporate Express for the preceding fiscal year: Year of dividend declaration Dividend declared 2004(1) 2005 2006 2007 (1) € € € € 0.07 0.14 0.17 0.21 The dividend declared in the fiscal year 2004 was paid entirely in shares. Dividend proposal A proposal will be submitted to the General Meeting of Shareholders to be held on 8 April 2008 to pay a dividend of €0.21 per ordinary share. In line with the policy on additions to reserves and dividends of the Company, this represents 34% of the consolidated net result available to holders of 195 ordinary shares after adding back special items (net of tax) and fair value adjustments (net of tax) amounting to €114 million, divided by the number of ordinary shares outstanding at 31 December 2007. Dividend on (depositary receipts of) Preference Shares A An amount of €11.2 million will be paid to holders of (depositary receipts of) Preference Shares A (representing a statutory dividend of €0.21 per share). The record date for dividend on (depositary receipts of) Preference Shares A is Wednesday 9 April 2008. Payment will be effective Friday 11 April 2008. Relevant dates for dividend on (depositary receipts of) Preference Shares A: AGM CUM date Record date Ex-dividend date Payment dividend on (depositary receipts of) Preference Shares A 8 April 2008 9 April 2008 9 April 2008 10 April 2008 11 April 2008 Dividend on ordinary shares The dividend on ordinary shares will be paid either wholly in cash or in new ordinary shares, at the option of the shareholder, and will be debited to the share premium reserve. Shareholders will be contacted by their bank or agent, with whom on Monday 14 April 2008 (after closure of the stock exchange) their ordinary shares are deposited in order to make the choice between a dividend in shares or in cash (record date for dividend on ordinary shares). The period of time in which shareholders can determine their choice for payment in shares or in cash ends on 22 April 2008 before closure of the Amsterdam Stock Exchange. On Tuesday 22 April 2008 after closure of the stock exchange the Executive Board will determine, on the basis of the average share price on that day, the number of dividend rights of ordinary shares that give title to one ordinary share of nominal value €1.20. The new ordinary shares will be entitled to the dividend over the financial year 2008 and the following years. As of Thursday, 10 April 2008 the ordinary shares will be traded ex-dividend. No trading in dividend rights will take place. Issue of the new ordinary shares in accordance with this proposal (in the case of stock dividend) respectively payment of the cash amount will be effected as from Thursday 24 April 2008. Relevant dates for dividend on ordinary shares: AGM CUM date Ex-dividend date Record date Period to opt for dividend in cash or in shares Determination dividend rights 8 April 2008 9 April 2008 10 April 2008 14 April 2008 15–22 April 2008 22 April 2008 (after closure of the Amsterdam) Stock Exchange 24 April 2008 Payment dividend on ordinary shares 196 REPORT OF INDEPENDENT AUDITORS United States opinion To the General Meeting of Shareholders of Corporate Express NV Report of independent registered public accounting firm In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, consolidated statements of cash flow and consolidated statements of recognised income and expense, as set out on pages 71 to 137 and 143 to 151 present fairly, in all material respects, the financial position of Corporate Express NV and its subsidiaries at 31 December 2007 and 31 December 2006, and the results of their operations and their cash flows for each of the three years in the period ended 31 December 2007 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of 31 December 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's Executive Board is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Controls over Financial Reporting on pages 68 to 69 of the Annual Report and Form 20-F. Our responsibility is to express an opinion on these consolidated financial statements and on the Company's internal control over financial reporting based on our audits, which were integrated audits in 2007 and 2006. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject 197 to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Amsterdam, 4 March 2008 PricewaterhouseCoopers Accountants N.V. P.R. Baart RA Note that United States opinion set out above is included for the purposes Corporate Express NV's Annual Report on Form 20-F for the year ended 31 December 2007 only and does not form part Corporate Express NV's 2007 Annual Report. 198 INFORMATION REQUIRED UNDER FORM 20-F Material contracts 200 Exchange controls 200 Taxation for U.S. residents holding shares in Corporate Express NV 200 Exchange rate information 202 Selected financial data 203 199 INFORMATION REQUIRED UNDER FORM 20-F Material contracts On 10 December 2002, Corporate Express NV and Heidelberger Druckmaschinen AG entered into a Distributorship Agreement which extends Corporate Express' right to sell and service certain Heidelberg products in the Netherlands, Belgium, Luxembourg, Italy, Greece and Spain. The agreement took effect as of 1 July 2003 and is in effect for five years. After the five-year period, the agreement will continue to be in effect unless terminated with eighteen months prior written notice by one of the parties. All other material contracts are further described in Note 32 to the financial statements. Exchange controls There are currently no limitations, either under the laws of the Netherlands or in our Articles of Association, on the rights of non-residents to hold or vote ordinary shares. Cash distributions, if any, payable in euros on ordinary shares may be officially transferred from the Netherlands and converted into any other currency without Dutch legal restrictions. However, no payments, including dividend payments, may be made to jurisdictions subject to certain sanctions, adopted by the government of the Netherlands, implementing resolutions of the Security Council of the United Nations or regulations of the European Union. Taxation for U.S. residents holding shares in Corporate Express NV The following notes are provided for guidance. U.S. and Dutch taxation may change from time to time. U.S. residents should consult their local tax advisers, particularly in connection with potential liability to pay U.S. taxes on disposal, lifetime gift or bequest of their shares. Netherlands taxation on dividends Dividends of companies in the Netherlands are in principle subject to dividend withholding tax of 15%. Where a shareholder is entitled to the benefits of the current Income Tax Convention ('the Convention') concluded on 18 December 1992, as most recently amended by Protocol dated 8 March 2004, between the United States and the Netherlands, if dividends are paid by Corporate Express NV to: • a corporation organised under the laws of the United States (or any territory of it) unless the shares in Corporate Express NV form part of the business assets of a permanent establishment in the Netherlands of such corporation, or • any other legal person subject to United States Federal income tax with respect to its worldwide income, unless the shares in Corporate Express NV form part of the business assets of a permanent establishment in the Netherlands of such legal person, these dividends qualify for a reduction of Netherlands withholding tax on dividends from 15% to 5% if the recipient is the beneficial owner which directly holds at least 10% of the voting power of Corporate Express NV shares and to 0% if the recipient is the beneficial owner and qualifies as an 'Exempt Organisation' as defined in Article 36 of the Convention. Where a United States resident or corporation has a permanent establishment in the Netherlands, which has shares in Corporate Express NV forming part of its business property, dividends it receives on those shares are included in that establishment's profit. Such establishment is subject to the Netherlands income tax or corporation tax, as appropriate, and the Netherlands dividend withholding tax will generally be applied at the full rate of 15% (which generally will be reduced to 0% if the permanent establishment holds at least 5% of the nominal paid-up share capital of Corporate 200 Express NV). This tax will be treated as foreign income tax eligible for credit against the shareholder's United States income taxes. Under the Convention, qualifying United States organisations that are generally exempt from United States taxes and that are constituted and operated exclusively to administer or provide pension, retirement or other employee benefits may be exempt at source from withholding tax on dividends received from a Netherlands corporation. An agreement concluded between the United States and the Netherlands tax authorities describes the eligibility of these U.S. organisations for benefits under the Convention. A United States trust, company or organisation that is operated exclusively for religious, charitable, scientific, educational or public purposes, is subject to an initial 15% withholding tax rate. Such an exempt organisation is entitled to reclaim from the Netherlands Tax Authorities a refund of the Netherlands dividend tax, if and to the extent that it is exempt from United States Federal Income Tax and it would be exempt from tax in the Netherlands if it were organised and carried on all its activities there. If you are a Corporate Express NV shareholder resident in any country other than the United States or the Netherlands, any exemption from, or reduction or refund of, the Netherlands dividend withholding tax may be governed by the 'Tax Regulation for the Kingdom of the Netherlands' or by the tax convention, if any, between the Netherlands and your country of residence. United States taxation on dividends If you are a United States shareholder, the dividend (including the withheld amount) will be ordinary dividend income for United States Federal income tax purposes to the extent such dividend is made from our current or accumulated earnings and profits. Dividends received by an individual during taxable years before 2011 will be taxed at a maximum rate of 15%, provided the individual has held the shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date, that Corporate Express NV is a qualified foreign corporation and that certain other conditions are satisfied. NV is a qualified foreign corporation for this purpose. The dividends are not eligible for the dividends received deduction allowed to corporations. For U.S. foreign tax credit purposes, the dividend is foreign source income, and the Netherlands withholding tax is a foreign income tax that is eligible for credit against the shareholder's United States income taxes, subject to various limitations. However, the rules governing the U.S. foreign tax credit are complex, and additional limitations on the credit apply to individuals receiving dividends eligible for the 15% maximum tax rate on dividends described above. Any portion of the dividend that exceeds our current and accumulated earnings and profits, as determined under U.S. federal income tax principles, is subject to different rules. This portion is a tax free return to the extent of your basis in our shares, and thereafter is treated as a capital gain on a disposition of the shares. If Corporate Express NV is entitled to any credit against the amount of dividend tax withheld before remittance to the Netherlands tax authorities, the United States tax authority may take the position that the Netherlands withholding tax eligible for credit should be limited accordingly. Netherlands taxation on capital gains Under the Convention, capital gains on the sale of shares in Corporate Express NV realised by qualifying United States residents or corporations, are generally not subject to taxation by the Netherlands. An exception to this rule generally applies if the alienated shares in Corporate Express NV form part of the business assets of a permanent establishment in the Netherlands of such resident or corporation. If the permanent establishment holds at least 5% of the nominal paid-up share 201 capital of Corporate Express NV, however, the capital gain will generally be exempt under the participation exemption after all. United States taxation on capital gains A United States shareholder generally will recognize gain or loss on the sale or exchange of our shares equal to the difference between the amount realized on such sale or exchange and such shareholder's adjusted tax basis in the shares. Such capital gain or loss will be capital gain or loss and will generally be treated as arising from U.S. sources for U.S. foreign tax credit purposes. Netherlands succession duty and gift taxes Under the Estate and Inheritance Tax Convention between the United States and the Netherlands of 15 July 1969, qualifying United States residents who are not Dutch citizens who have shares in Corporate Express NV, will generally not be subject to succession duty in the Netherlands on the individual's death, unless the shares in Corporate Express NV form part of the business assets of a permanent establishment in the Netherlands of such United States resident. A gift of shares in Corporate Express NV made by a person who is not a resident or a deemed resident of the Netherlands, is generally not subject to Netherlands gift tax. A nonresident Netherlands citizen, however, is still treated as a resident of the Netherlands for gift tax purposes for ten years and any other non-resident person for one year after leaving the Netherlands. Exchange rate information Corporate Express presents its financial statements in euro. In determining earnings originally stated in foreign currencies, Corporate Express used an average of daily quoted exchange rates of the respective currency versus the euro. For the balance sheet, Corporate Express used the exchange rates of the last business day of the reported period. The following table shows the applicable rates used for such purposes for the periods indicated: Income statement for the year ended 31 December 2005 Balance sheet as at 31 December 2005 Australian dollar per euro Canadian dollar per euro British pound per euro US dollar per euro 1.6109 1.3725 0.6853 1.1797 Income statement for the year ended 31 December 2006 Balance sheet as at 31 December 2006 Australian dollar per euro Canadian dollar per euro British pound per euro Norwegian krone per euro US dollar per euro 1.6691 1.5281 0.6715 8.2380 1.3170 202 1.6327 1.5096 0.6839 1.2446 1.6666 1.4241 0.6818 8.2380 1.2554 Income statement for the year ended 31 December 2007 Balance sheet as at 31 December 2007 Australian dollar per euro Canadian dollar per euro British pound per euro Norwegian krone per euro US dollar per euro Swedish kronor per euro 1.67570 1.44490 0.73335 7.95800 1.47210 9.4415 1.63552 1.46899 0.684582 8.01826 1.37048 9.2523 Solely for the convenience of the reader, we provide in the tables below and for the periods indicated, information regarding the Noon Buying Rate for the euro for the period 2003-2007. The term 'Noon Buying Rate' means the noon buying rate in New York City for cable transfers into foreign currencies as certified for custom purposes by the Federal Reserve Bank of New York. The average Noon Buying Rate for each year is calculated by using the average of the Noon Buying rates on the last day of each month during the year. Year-end Average High Low US dollar per euro 2003 2004 2005 2006 2007 1.2597 1.3538 1.1842 1.3197 1.4603 1.1315 1.2439 1.2447 1.2560 1.3797 1.2597 1.3625 1.3476 1.3327 1.4877 1.0361 1.1801 1.1667 1.1860 1.2904 The following table sets forth the high and low Noon Buying Rate for the euro for each of the monthly periods indicated in US dollar per euro: High September 2007 October 2007 November 2007 December 2007 January 2008 February 2008 (until 22 February 2008) Low 1.4219 1.4468 1.4862 1.4759 1.4877 1.4851 1.3603 1.4092 1.4435 1.4344 1.4574 1.4495 On 22 February 2008, the exchange rate of the euro to the US dollar based on the Noon Buying rate of the Federal Reserve bank of New York was €1.00=US$1.4825. Selected financial data The following tables present key figures for continuing operations for the four years ended at 31 December 2007, 2006, 2005 and 2004 (31 December 2004 being the earliest period for which full comparative information under IFRS is presented). The key figures should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this Annual Report 203 on Form 20-F. Additionally, please see the Group Financial Review in chapter 2 starting on page 20 for a description of the results of operations as presented below. Income statement data 2007 2006 2005 2004 in millions of euro Net sales Gross contribution Operating result Result before taxes Taxes Net result from continuing operations Net result from discontinued operations Net result Total Group 5,631 1,840 201 86 3 89 106 195 Attributable to: Holders of ordinary shares Corporate Express NV Minority interests Balance sheet data 5,497 1,802 223 134 [10] 124 18 142 5,118 1,696 199 13 [12] 1 20 21 4,789 1,599 184 64 25 89 19 107 178 17 123 19 2 19 90 18 195 142 21 107 2007 2006 2005 2004 in millions of euro, at period end Goodwill(1) Working capital Total assets Long-term borrowings 1,420 563 3,799 1,128 1,531 560 4,178 1,350 1,499 474 4,042 1,184 1,322 388 3,659 1,265 Total equity 1,583 1,527 1,510 1,118 Other data 2007 2006 2005 2004 in millions of euro, at period end Net cash from operating activities, continuing operations Net cash from operations activities, discontinued operations 227 [5] 188 45 216 15 263 13 Net cash operating activities total Group Net cash from investing activities, continuing operations Net cash from investing activities, discontinued operations 223 121 [4] 232 [376] [5] 232 [81] [5] 276 [80] [5] 117 341 [365] [381] [149] 103 [86] 145 [199] [85] 191 [177] [24] [45] [54] 14 Net cash from investing activities, total Group Net cash flow available for financing activities Net cash from financing activities Net cash flow (continuing activities) 204 Per ordinary share(2) 2007 2006 2005 2004 in euro, unless stated otherwise, at period end Net result from continuing operations per share attributable to holders of ordinary shares Corporate Express NV Basic Diluted Net result from discontinued operations per share attributable to holders of ordinary shares Corporate Express NV Basic Diluted Net result from total Group per share attributable to holders of ordinary shares Corporate Express NV Basic Diluted Proposed dividend Number of ordinary shares outstanding at year-end (in thousands)(3) 0.40 0.40 0.58 0.57 [0.11] [0.11] 0.49 0.43 0.58 0.54 0.10 0.08 0.12 0.12 0.13 0.10 0.98 0.93 0.21 182,848 0.68 0.65 0.21 180,905 0.01 0.01 0.17 178,750 0.62 0.53 0.14 137,595 (1) Prior years data have been adjusted to reflect the fact that the ASAP Software business segment is reported as discontinued operations. For further information on the restatement, see Notes 6 and 7 to the consolidated financial statements. (2) For details on the calculation of earnings per share, see Note 16 to the consolidated financial statements appearing elsewhere in this Annual Report on Form 20-F. (3) For information on the ordinary shares outstanding, see Note 29 to the consolidated financial statements appearing elsewhere in this Annual Report on Form 20-F. 205 ADDITIONAL INFORMATION ABOUT CORPORATE EXPRESS SHARES Corporate Express shares 207 Important dates and Contact information 215 206 CORPORATE EXPRESS SHARES Development in the number of Corporate Express ordinary shares issued and outstanding On 1 January issued 2003 2004 2005 2006 2007 132,628,061 136,691,918 138,126,528 179,324,704 180,904,970 Stock dividend(1) Equity placements(2) 4,063,857 1,434,610 1,841,644 1,038,454 1,662,868 — — 39,356,532 541,812 280,009 On 31 December issued Treasury stock(3) On 31 December outstanding 526,155 531,364 574,992 — — 136,165,763 137,595,164 178,749,712 180,904,970 182,847,847 136,691,918 138,126,528 179,324,704 180,904,970 182,847,847 (1) In 2005 and 2006 shareholders could choose to receive the dividend in stock rather than cash. In 2003 and 2004, a stock dividend was paid. For shareholders who wished to receive a cash amount in this period, the Company sold the shares in which the stock dividends have been converted. (2) In 2005 a rights issue took place to partly finance the buy-back of all Preference Shares C at a subscription price of €6.37. In 2006 and 2007, the shares issued covered the option rights after exhaustion of the Treasury stock. (3) Treasury stock are shares purchased to avoid dilution primarily caused by the exercise of option rights under the Corporate Express Incentive Plan. Share price development Corporate Express ordinary shares versus AEX index (2005—31 December 2007) Price of Preference Shares A (daily closing) High Low Year-end in euro 2006 2007 3.75 3.50 207 3.01 2.90 3.26 3.14 Earnings per ordinary share Net result excluding changes in fair values, amortisation of other intangibles and specials items. First quarter Second quarter Third quarter Fourth quarter Full year in euro 2006 2007 0.19 0.14 0.17 0.13 0.19 0.13 0.29 0.28 0.84 0.68 Net result attributable to holders of ordinary shares First quarter Second quarter Third quarter Fourth quarter Full year in euro 2006 2007 0.14 0.09 Composition of enterprise value (at year-end) 208 0.14 0.10 0.19 0.09 0.23 0.70 0.68 0.98 Dividend per share (1) Subject for approval of the Annual General Meeting. Annual volume of Corporate Express ordinary shares traded on Euronext Amsterdam 209 Enterprise value (high, low, year-end) Credit agency ratings at year-end 2007 Rating(1) Moody's S&P (1) Outlook Ba3 BB- Stable Stable Rating relates to Senior Implied Debt Rating and Senior Credit facilities. Market capitalisation ordinary shares in millions of euro High 2003 2004 2005 2006 2007 Low 1,097 1,246 2,258 2,827 2,156 Year-end 260 791 987 1,778 885 944 987 2,222 2,036 973 Geographical and retail/institutional distribution of ordinary shares as at 31 December 2007 (indicative) In percentage Retail Institutional Total 2007 Total 2006 The Netherlands United Kingdom Rest of Europe USA Rest of the world Unidentified 16 — — — — — 13 29 21 7 0 14 29 29 21 7 0 14 33 21 17 15 1 13 Total 16 84 100 100 210 Price of ordinary shares (daily closing) in euro High 2003(1) 2004(1) 2005(1) 2006 2007 7.61 8.66 12.63 15.65 11.91 in euro High Q1 2006 Q2 2006 Q3 2006 Q4 2006 High Q1 2007 Q2 2007 Q3 2007 Q4 2007 1.86 5.42 7.06 9.78 4.86 Low 14.75 15.65 11.89 12.92 in euro (1) Low 6.55 6.77 12.43 11.26 5.35 Period-end 11.98 10.29 9.78 10.37 Low 11.91 11.38 11.25 8.35 Year-end 14.60 11.34 11.89 11.26 Period-end 9.81 9.37 7.46 4.86 10.08 11.38 7.64 5.35 All prices of ordinary shares up to 14 March 2005 have been recalculated for the €250 million rights issue in March 2005. Price of American Depositary Receipts (daily closing) in USD High 2003(1) 2004(1) 2005(1) 2006 2007 9.05 11.73 14.90 19.90 15.40 in USD High Q1 2006 Q2 2006 Q3 2006 Q4 2006 17.84 19.90 15.01 16.21 in USD High Q1 2007 Q2 2007 Q3 2007 Q4 2007 (1) Low 15.40 15.34 15.40 12.18 All prices of ordinary shares up to 14 March 2005 have been recalculated for the €250 million rights issue in March 2005. 211 2.11 7.30 8.73 12.45 7.06 Low 14.70 12.88 12.45 13.75 Low 12.92 12.67 10.37 7.06 Year-end 8.75 9.87 14.71 14.84 7.86 Period-end 17.64 14.45 15.01 14.84 Period-end 13.52 15.31 10.91 7.86 Movement in price of Corporate Express ordinary shares traded on Euronext Amsterdam Major shareholders As per 31 December 2007, Corporate Express issued share capital consists of 182.8 million ordinary shares and 53.3 million Preference Shares A. As most of the ordinary shares are bearer shares, we have no exact information on holdings of shareholders. Corporate Express is not controlled by any majority shareholder. Based on current information we received, a stake of over 5% in our issued share capital, which may be a combination of ordinary shares and (depositary receipts of) Preference Shares A is held by the following companies: • AllianceBernstein Corporation (10–15%) • Centaurus Capital Ltd (5–10%) • Fortis Utrecht N.V. (5–10%) • ING Group N.V. (10–15%) • Kempen Capital Management N.V. (5–10%) Major shareholders do not have different voting rights. Stichting Administratiekantoor van Preferente Aandelen Corporate Express holds 53.3 million Preference Shares A. The voting power on these is related to the economic value per the end of the month before any General Meeting of Shareholders will be hosted. Based on the current total share capital outstanding the Preference Shares A represent up to a maximum of about 22.56% voting interest in Corporate Express NV. 212 Stock exchange listings Since December 1938, Corporate Express ordinary shares have been listed on Euronext Amsterdam (symbol: CXP) and, since September 2001, on NYSE in New York (symbol: CXP). ADRs In the United States, the ordinary shares trade in the form of American Depositary Receipts on the New York Stock Exchange. The underlying share ratio is 1:1. Transfer agent, registrar and depositary for ADRs: The Bank of New York, P.O. Box 11258, Church Street, New York, NY 10286-1258. Other securities traded • Depositary receipts of cumulative Preference Shares A, with face value of €1.20, listed on Euronext Amsterdam (symbol: CEXP). • Corporate Express US Finance Inc. (formerly known as Buhrmann US, Inc.) 8 1 / 4 % Subordinated Bonds 2004–2014. • Corporate Express US Finance Inc. (formerly known as Buhrmann US, Inc.) 7 7 / 8 % Subordinated Bonds 2005–2015. • Corporate Express NV 2% Subordinated Convertible Bonds 2003–2010. Euronext Amsterdam derivatives market • Corporate Express call/put options 1, 2, 3, 6, 9, 24 months. Major indices The Corporate Express ordinary share is included in the main index of Euronext (AEX) in Amsterdam. Other indices in which Corporate Express is included per year-end 2007 are inter alia, Euronext Top 150, S&P Europe 350 Index, S&P Global 1200, Dow Jones Euro STOXX, Dow Jones STOXX 600 Index, Ethibel Sustainability Index and Kempen/SNS Smaller Europe SRI Index. According to the Industry Classification Benchmark (ICB) of FTSE Group and Dow Jones Indices, Corporate Express is classified as Industrial Supplier (sub sector 2797) within the sector Support Services. Disclosure/website All results announcements, as well as press releases, are sent out before the market of Euronext Amsterdam opens. All results announcements, as well as any other major announcements, are accompanied by a conference call and/or meeting for the professional investment community. All others interested in these meetings and/or conference calls can listen to a simultaneous webcast. This can be accessed via www.cexpgroup.com > Investor Relations > Presentations. Furthermore, all other presentations made to groups of investors are published at the same time on our website. Shareholders' Communication Channel Corporate Express is one of the initiators of the Shareholders' Communication Channel Foundation (Stichting Communicatiekanaal Aandeelhouders), which offers participating shareholders 213 the opportunity to vote at Annual General Meetings, without being present at the meeting either in person, or by proxy. The Communication Channel can also assist management and (groups of) shareholders with proxy solicitation. The Communication Channel's URL is www.communicatiekanaal.com. 214 IMPORTANT DATES AND CONTACT INFORMATION Important dates Dividend calendar—Ordinary shares Registration date AGM 18 March 2008 Listing ex-dividend 10 April 2008 Record date for dividend payment 14 April 2008 Period to opt for dividend in cash or in shares 15–22 April 2008 (before closure of Euronext Amsterdam) Determination dividend rights 22 April 2008 (after closure of Euronext Amsterdam) Dividend payment 24 April 2008 Dividend calendar—Depositary receipts of Preference Shares A Record date for dividend payment 9 April 2008 Dividend payment 11 April 2008 Financial calendar General Meeting of Shareholders 8 April 2008 Publication of first quarter 2008 results 7 May 2008 Publication of second quarter 2008 results 6 August 2008 Publication of third quarter 2008 results 5 November 2008 Publication of fourth quarter 2008 results 10 February 2009 General Meeting of Shareholders 8 April 2009 215 Contact information For more information Corporate Express NV Hoogoorddreef 62 1101 BE Amsterdam ZO The Netherlands Telephone +31 (0)20 651 11 11 This is also our registred office address. www.cexpgroup.com www.cexp.com www.cexpeurope.com www.ce.com.au Information included on our websites does not form part of this publication. Our agent in the United States for service and process in connection with the 2014 and 2015 Notes is: CT Corporation System 111 Eighth Avenue, 13th Floor New York, NY 10011 Investor Relations Carl Hoyer Telephone +31 (0)20 651 10 42 Email carl.hoyer@cexpgroup.com Email ir@cexpgroup.com Media Relations Anneloes Geldermans Telephone +31 (0)20 651 10 34 Email anneloes.geldermans@cexpgroup.com Email corpcomm@cexpgroup.com 216 Cross Reference to Form 20-F 217 CROSS REFERENCE TO FORM 20-F Page Part I Item 1. Identity of Directors, Senior Management and Advisers N/A Item 2. Offer Statistics and Expected Timetable N/A Item 3. Key Information A. Selected financial data B. Capitalisation and indebtedness C. Reasons for the offer and use of proceeds D. Risk factors 7, 160-162 N/A N/A 64-67 Item 4. Information on the Company A. History and development of the company B. Business overview C. Organisational structure D. Property, plants & equipment 11, 12, 167 11-14, 25, 28, 31, 33, 97-99 11, 153 70, 111 Item 5. Operating and Financial Review and Prospects A. Operating result B. Liquidity and capital resources C. Research and development, patents and licenses, etc. D. Trend information E. Off-balance sheet arrangements F. Tabular disclosure of contractual obligations G. Safe harbor 16-17, 20-21, 25-35 19-20, 23-24, 69-70, 92-93, 122-127 69 13-14, 20 70, 133-134 92-93, 133-134 2 Item 6. Directors, Senior Management and Employees A. Directors and senior management B. Compensation C. Board practices D. Employees E. Share ownership 8-9, 54 38, 40-41, 56-62 37-41, 50-52, 58-59 25, 28, 31, 33, 97-99, 100-101 8, 54, 57-58, 60 Item 7. Major Shareholders and Related Party Transactions A. Major shareholders B. Related party transactions C. Interests of experts and counsel 46-47, 167 134 N/A Item 8. Financial Information A. Consolidated Statements and Other Financial Information B. Significant Changes 71-151, 154-155, 157 5 Item 9. The Offer and Listing A. Offer and listing details B. Plan of distribution C. Markets D. Selling shareholders E. Dilution F. Expenses of the issue 164-167 N/A 167 N/A N/A N/A 218 Item 10. Additional Information A. Share capital B. Memorandum and articles of association C. Material contracts D. Exchange controls E. Taxation F. Dividends and paying agents G. Statement by experts H. Documents on display I. Subsidiary Information Item 11. Quantitative and Qualitative Disclosures About Market Risk 43-44, 119 43-47 122-127, 159 159 159-160 N/A N/A 3 153 82, 88-93, 106-107 Item 12. Description of Securities Other than Equity Securities N/A Part II Item 13. Defaults, Dividend Arrearages and Delinquencies N/A Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds N/A Item 15. Controls and Procedures A. Disclosure Controls and Procedures B. Management's Annual Report on Internal Control over Financial Reporting C. Attestation Report of the Registered Public Accounting Firm D. Changes in Internal Control over Financial Reporting 67-68 68-69 157 68-69 Item 16. [Reserved] A. Audit committee financial expert B. Code of Ethics C. Principal Accountant Fees and Services D. Exemptions from the Listing Standards for Audit Committees E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 39-40 67 47-48 N/A N/A Part III Item 17. Financial Statements N/A Item 18. Financial Statements 71-151, 154-155, 157 Item 19. Exhibits Filed with the SEC 219 ITEM 19: EXHIBITS Exhibit number Description 1.1 Articles of Association of Corporate Express NV, as last amended, dated 19 April 2007. 1.2 By-laws of the Executive Board of Corporate Express NV, as last amended, dated 19 June 2007. 1.3 By-laws of the Supervisory Board of Corporate Express NV, as last amended, dated 2 February 2008. **2.1 Indenture, dated as of 2 March 2005 for the 77/8% Senior Subordinated Notes due 2015 among Buhrmann US Inc. (currently named Corporate Express US Finance Inc.), as issuer, Buhrmann NV (currently named Corporate Express NV) and the other guarantors listed therein and The Bank of New York, as trustee. **2.2 Form of 77/8% Senior Subordinated Notes due 2015 (included in exhibit 2.1) ‡2.3 Indenture, dated as of 1 July 2004 for the 81/4% Senior Subordinated Notes due 2014 among Buhrmann US Inc. (currently named Corporate Express US Finance Inc.), as issuer, Buhrmann NV (currently named Corporate Express NV) and the other guarantors listed therein and The Bank of New York, as trustee. ‡2.4 Form of 81/4% Senior Subordinated Notes due 2014 (included in exhibit 2.3). ††2.5 Term and conditions of the 2.00% Guaranteed Convertible Subordinated Bonds due 2010. *4.1 Distributor Agreement, dated 10 December 2002 between Heidelberg Druckmaschinen Aktiengesellschaft (Heidelberg) and Buhrmann NV (currently named Corporate Express NV), effective as of 1 July 2003. †4.2 Deposit Agreement, dated as of 21 December 1993, Amended and Restated as of September 20, 2001 by and among Buhrmann NV (currently named Corporate Express NV) and The Bank of New York as Depositary and Owners and Holders of American Depositary Receipts. ***4.3 Form of employment contract for Members of the Executive Board, as last amended, dated 9 March 2007. 4.4 Amended and restated Senior Facilities Agreement, dated 27 July 2007, between Corporate Express NV (formerly Buhrmann NV), as Parent, Corporate Express US Finance Inc (formerly Buhrmann US Inc.), as Borrower, various Guarantors, Deutsche Bank AG London and ABN AMRO Bank N.V., as Arrangers, Deutsche Bank AG London, as Agent, Deutsche Bank AG London, as Security Trustee, and various Lenders. 8.1 List of significant subsidiaries 12.1 Certification of Corporate Express NV's (formerly Buhrmann NV) Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 12.2 Certification of Corporate Express NV's (formerly Buhrmann NV) Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 13.1 Certification of Corporate Express NV's (formerly Buhrmann NV) Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 13.2 Certification of Corporate Express NV's (formerly Buhrmann NV) Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 15.1 Audit Committee Charter, as last amended, dated 12 April 2007. ‡‡15.2 Compensation, Nominating and Corporate Governance Committee Charter, as last amended, dated 10 December 2004. * Incorporated by reference to Annual Report of Buhrmann NV on Form 20-F, dated 27 June 2003, File No. 001-16663. ** Incorporated by reference to Amended Registration Statement of Buhrmann NV on Form F-4, dated 1 July 2005, File No. 333-123952. † Incorporated by reference to Post Effective Amendment No. 1 to the Form F-6 Registration Statement filed with the Securities and Exchange Commission on 28 August 2001. †† Incorporated by reference to Annual Report of Buhrmann NV on Form 20-F, dated 21 June 2004, File No. 001-16663. ‡ Incorporated by reference to Registration Statement of Buhrmann NV on Form F-4 dated 22 July 2004, File No. 333-117584. ‡‡ Incorporated by reference to Annual Report of Buhrmann NV on Form 20-F, dated 14 March 2005, File No. 001-16663. *** Incorporated by reference to Annual Report of Buhrmann NV on Form 20-F dated 9 March, 2007, File No. 001-16663 SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. CORPORATE EXPRESS NV By: /s/ PETER J. VENTRESS Name: Peter J. Ventress Title: Chief Executive Officer By: /s/ FLORIS F. WALLER Name: Floris F. Waller Title: Chief Financial Officer Dated: March 10, 2008 Corporate Express NV Hoogoorddreef 62 1101 BE Amsterdam P.O. Box 23456 1100 DZ Amsterdam The Netherlands Phone +31 (0)20 651 11 11 Fax +31 (0)20 651 10 00 www.cexpgroup.com QuickLinks CONTENTS ABOUT THIS REPORT ABOUT CORPORATE EXPRESS CHIEF EXECUTIVE'S REVIEW KEY FIGURES BIOGRAPHIES EXECUTIVE BOARD MANAGEMENT STRUCTURE THE BUSINESS ABOUT THE COMPANY GROUP FINANCIAL REVIEW COMPARISON 2007 AND 2006 GROUP FINANCIAL REVIEW COMPARISON 2006 and 2005 OVERVIEW OF BUSINESS SEGMENTS OFFICE PRODUCTS NORTH AMERICA OVERVIEW OF BUSINESS SEGMENTS OFFICE PRODUCTS EUROPE OVERVIEW OF BUSINESS SEGMENTS OFFICE PRODUCTS AUSTRALIA OVERVIEW OF BUSINESS SEGMENTS PRINTING SYSTEMS CORPORATE GOVERNANCE REPORT OF THE SUPERVISORY BOARD BIOGRAPHIES SUPERVISORY BOARD REMUNERATION REPORT OTHER FINANCIAL INFORMATION FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME for the years ended 31 December 2007, 2006 and 2005 CONSOLIDATED BALANCE SHEETS as at 31 December 2007 and 2006 CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended 31 December 2007, 2006 and 2005 CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE for the years ended 31 December 2007, 2006 and 2005 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In millions of euro, unless stated otherwise COMPANY BALANCE SHEETS (BEFORE APPROPRIATION OF NET RESULT) as of 31 December 2007 and 2006 COMPANY STATEMENTS OF INCOME for the years ended 31 December 2007, 2006 and 2005 NOTES TO THE COMPANY BALANCE SHEETS AND STATEMENTS OF INCOME In millions of euro, unless stated otherwise SUPPLEMENTAL GUARANTOR INFORMATION GUARANTOR SUBSIDIARIES as of 31 December 2007 CONSOLIDATED STATEMENT OF INCOME 31 December 2007 (IFRS) CONSOLIDATED STATEMENT OF INCOME 31 December 2006 (IFRS) CONSOLIDATED STATEMENT OF INCOME 31 December 2005 (IFRS) CONSOLIDATED BALANCE SHEET 31 December 2007 (IFRS) CONSOLIDATED BALANCE SHEET 31 December 2006 (IFRS) CONSOLIDATED STATEMENT OF CASH FLOWS 31 December 2007 (IFRS) CONSOLIDATED STATEMENT OF CASH FLOWS 31 December 2006 (IFRS) CONSOLIDATED STATEMENT OF CASH FLOWS 31 December 2005 (IFRS) OTHER INFORMATION SIGNIFICANT SUBSIDIARIES DIVIDEND REPORT OF INDEPENDENT AUDITORS United States opinion INFORMATION REQUIRED UNDER FORM 20-F ADDITIONAL INFORMATION ABOUT CORPORATE EXPRESS SHARES CORPORATE EXPRESS SHARES IMPORTANT DATES AND CONTACT INFORMATION CROSS REFERENCE TO FORM 20-F ITEM 19: EXHIBITS SIGNATURES Exhibit 1.1 ARTICLES OF ASSOCIATION of: Exhibit 1.1 Corporate Express N.V. having its official seat in Maastricht. 19 April 2007. Office translation of the complete text of the Articles of Association of Corporate Express N.V., formerly named Buhrmann N.V., having its official seat in Maastricht, as they read after the deed of amendment executed on 19 April 2007 before G.W.Ch. Visser, civil law notary in Amsterdam, in respect of which a ministerial statement of no objections was granted on 13 April 2007, under number NV 2293. In preparing the attached document, an attempt has been made to translate as literally as possible without jeopardizing the overall continuity of the text. Inevitably, however, differences may occur in translation, and if they do, the Dutch text will govern by law. In the attached document, Dutch legal concepts are expressed in English terms and not in their original Dutch terms; the concepts concerned may not be identical to concepts described by the English terms as such terms may be understood under the laws of other jurisdictions. GV/aj/41936-00210 CHAPTER I . Definitions . Article 1 . In these articles of association the following expressions shall have the following meanings: a. the general meeting: the body of the company formed by shareholders and other persons entitled to vote; b. the general meeting of shareholders: the meeting of shareholders and other persons entitled to attend the general meetings; c. depository receipts: depository receipts of shares in the company. Unless the contrary is evident, depository receipts not issued with the cooperation of the company are included therein; d. holders of depository receipts: holders of depository receipts of preference shares A issued with the cooperation of the company. Unless the contrary is evident, those persons who, as a result of a life interest or pledge created in shares, have the rights granted by the law to holders of depository receipts of shares issued with the cooperation of a company are included therein; e. trust office: the trust office which has been designated by the Executive Board with the approval of the Supervisory Board for the purpose of issuing depository receipts of preference shares A in the company; f. the distributable part of the capital and reserves: that part of the company’s capital and reserves which exceeds the aggregate of the part of the capital which has been paidup and called and the reserves which must be maintained by virtue of the law; g. accountant: a “registeraccountant” or other accountant referred to in article 393, Book 2 of the Civil Code, as well as an organisation within which such accountants practice; h. the annual meeting: the general meeting of shareholders held for the purpose of discussion and adoption of the annual accounts; i. subsidiary: • a legal entity in which the company or one or more of its subsidiaries, whether or not by virtue of agreement with other persons who can cast votes, can exercise alone or together more than half of the voting rights in the general meeting of members or shareholders of that legal entity; • a legal entity in respect of which the company or one or more of its subsidiaries is a member or shareholder and, whether or not by virtue of agreement with other persons who can cast votes, alone or together, can appoint or dismiss more than half the management or members of the Supervisory Board, also in the event all the persons who can cast votes, vote. 1 A company trading under its own name shall be regarded as a subsidiary, where the company or one or more subsidiaries as partner is fully liable to creditors for debts; all this with due observance of all provisions of the paragraphs 3 and 4 of article 24a, Book 2 of the Civil Code; j. group company: a legal entity or company with which the company is, in the meaning of article 24b, Book 2 of the Civil Code, joint in a group; k. dependent company: • a legal entity in respect of which the company or one or more dependent companies, solely or jointly and for its or their own account, contribute(s) at least one-half of the issued capital; • a partnership, a (business) undertaking of which is registered in the trade register and for which the company or a dependent company is fully liable as a partner towards third parties for all liabilities; l. Official Price List: the Official Price List of Euronext Amsterdam N.V. or an official publication replacing it; m. General Rules: the General Rules (“Algemeen Reglement”) Euronext Amsterdam Stock Market; n. Necigef: Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V.: the Netherlands central securities depository (centraal instituut) as referred to in the Securities Bank Giro Transfer Act (Wet giraal effectenverkeer) (Euroclear Netherlands); o. Necigef-beneficiary: in respect of ordinary shares, a participant (deelgenoot) in the collective deposit (verzameldepot) of ordinary shares of a Necigef-participant, all within the meaning of the Securities Bank Giro Transfer Act; p. Necigef-participant: an institution which is an associated institution (aangesloten instelling) within the meaning of the Securities Bank Giro Transfer Act; q. Necigef Global Certificate: the one single share certificate representing all bearer ordinary shares in issue from time to time referred to in article 5, paragraph 2, of these articles of association; r. in writing: unless the law or these articles provide otherwise, a message that is conveyed by letter, telefax, e-mail or any other electronic means of communication, provided the message is legible and reproducible. CHAPTER II . Name, seat, objects . Article 2. Name and seat . 1. The name of the company is: Corporate Express N.V. 2. The official seat of the company is in Maastricht. 2 Article 3. Objects . The objects of the company are to participate in, to manage, to finance and to render services to other companies or enterprises, in particular those companies which operate in the field of the distribution of products and the rendering of services for the office market, the graphic market and the industrial market, and to do all that is connected therewith or may be conducive thereto, all to be interpreted in the broadest sense. CHAPTER III . Capital and shares. Registers . Article 4. Authorized capital. Types of shares . 1. The authorized capital amounts to one billion and eighty million euros (EUR 1,080,000,000.—). 2. It is divided into shares of one euro and twenty eurocents (EUR 1.20) each, being: 3. • three hundred and ninety-five million (395,000,000) ordinary shares; • fifty-five million (55,000,000) preference shares A; and • four hundred and fifty million (450,000,000) preference shares B. The ordinary shares may, at the choice of the shareholder, be registered shares or bearer shares. The preference shares A and B shall be registered shares. 4. Wherever the articles of association refer to shares or shareholders, all three classes of shares mentioned in paragraph 2 shall be understood to be referred to as well as the holders thereof, unless the contrary is evident. Wherever the articles of association refer to preference shares, both classes of preference shares mentioned in paragraph 2 shall be understood to be referred to, unless the contrary is evident. 5. The company shall not lend its co-operation to the issue of depository receipts of its preference shares B. The company may, duly observing the provision in article 22 paragraph 1, opening lines and sub b., lend its co-operation to the issue of depository receipts of its ordinary shares and its preference shares A. Article 5. Bearer ordinary shares: Necigef Global Certificate . 1. On the occasion of the issuance of ordinary shares any person entitled to receive such share may submit a written request to the company for a registered ordinary share. Without such request, the person entitled to such share shall obtain a bearer ordinary share in conformity with the provisions of this article 5. 2. All bearer ordinary shares in issue from time to time shall be represented by one single share certificate (the “Necigef Global Certificate”). 3. The company shall have the Necigef Global Certificate kept in safe custody by Necigef for the benefit of the Necigef-beneficiaries. 3 4. The company shall confer a right to a bearer ordinary share on a person by (i) having Necigef enable the company to add an ordinary share to the Necigef Global Certificate, and (ii) by the entitled person designating a Necigef-participant that will accordingly credit him as Necigef-beneficiary in this Necigef-participant’s collective deposit of ordinary shares in the company. 5. Without prejudice to the provisions in article 42, paragraph 4, of these Articles of Association, Necigef shall be irrevocably charged with the management of the Necigef Global Certificate and be irrevocably authorised on behalf of the Necigef-beneficiaries to perform all acts in respect of the shares concerned, including acceptance and delivery and lending cooperation in the crediting and debiting of the Necigef Global Certificate. 6. No individual bearer ordinary share shall be handed over. 7. A Necigef-beneficiary may at any time require the conversion of one or more bearer ordinary shares up to the maximum number he is entitled to into registered ordinary shares. Such conversion of one or more ordinary shares is only allowed to the maximum number for which he is Necigef-participant and shall require (i) the transfer by deed of the shares concerned by Necigef to the Necigef-beneficiary, (ii) the company acknowledging the transfer of the shares concerned, (iii) Necigef enabling the company to have the ordinary shares debited from the Necigef Global Certificate, (iv) the Necigef-participant concerned debiting the Necigef-beneficiary accordingly as a participant in its collective deposit of ordinary shares in the company and (v) the company effecting the entry of the Necigef-beneficiary’s name in the company’s register of shareholders as holder of the registered ordinary shares concerned. 8. A holder of registered ordinary shares may at any time require the conversion of such ordinary shares into bearer ordinary shares. Conversion of one or more registered ordinary shares shall require (i) the transfer of the shares concerned by the shareholder to Necigef, (ii) the company acknowledging the transfer of the shares concerned, (iii) Necigef enabling the company to have the ordinary shares credited to the Necigef Global Certificate, (iv) the Necigef-participant crediting the shareholder accordingly as Necigef-beneficiary in its collective deposit of ordinary shares in the company, and (v) the company effecting the deletion of the shareholder’s name as holder of the shares concerned in the company’s register of shareholders. 9. For the purpose of application of the provisions of these Articles of Association, shareholders shall be understood to include Necigef-beneficiaries. 10. In the event of the damage, destruction or loss of share certificates, the Board of Management may issue duplicates. The issue of a duplicate shall 4 render the original document worthless vis-à-vis the company. The new document shall clearly state that it is a duplicate. Article 6 . To be deleted. Article 7 . To be deleted. Article 8 . To be deleted. Article 9. Registers of shareholders . 1. Of preference shares A and B no certificates will be issued. 2. The Executive Board shall keep a register containing the names and addresses of all holders of ordinary registered shares and of all holders of preference shares A. 3. The Executive Board shall also keep a separate register containing the names and addresses of all holders of preference shares B. 4. In each register shall be recorded the date on which the shares are acquired by the shareholder, the date of acknowledgement or official service and the amount paid on each share. 5. Every holder of one or more registered shares and everyone having a life interest or a right of pledge over one or more such shares shall be obliged to provide the company in writing with their address. 6. All entries and notes in a register shall be signed by two members of the Executive Board or by a person authorized thereto in accordance with the provisions of article 21 paragraph 2. 7. Article 85, Book 2 of the Civil Code also applies to the registers. 8. Extracts from a register are not marketable. CHAPTER IV . Issuance of shares . Article 10. Body competent to issue shares . 1. Shares are issued pursuant to a resolution adopted by the general meeting. The provision in the preceding sentence is not applicable if and insofar as another body of the company has been designated by the articles of association or by a resolution adopted by the general meeting for a period of five years maximum. When a designation is made, it must be determined how many shares may be issued. A designation made by the articles of association may be withdrawn pursuant to an amendment to the articles of association. A designation made by a resolution adopted by the general meeting cannot be withdrawn, unless it was determined otherwise when the designation was made. 2. A resolution by the general meeting to issue shares or to designate another body competent to issue shares may only be adopted on a proposal of the Executive Board that has been approved by the Supervisory Board. 5 3. Issue of preference shares B pursuant to a decision of a body other than the general meeting, as a result of which the total amount of preference shares B issued would exceed one hundred per cent (100%) of the total amount of ordinary shares and preference shares A issued, shall only be effected after prior approval by the general meeting to be granted for each specific case. 4. If preference shares B are issued pursuant to a decision of a body other than the general meeting, as a result of which the total amount of preference shares B issued would not exceed one hundred per cent (100%) of the total amount of ordinary shares and preference shares A issued, a general meeting of shareholders shall be convened and held within four weeks from the day of issue, at which the reasons for the issue are explained. If the number of preference shares A that are or at any time were held by the trust office equals seventy per cent (70%) or more of the share capital issued in the form of ordinary shares and preference shares A, issue of preference shares B by a body other than the general meeting of shareholders shall only be effected up to an amount of preference shares B not exceeding fifty per cent (50%) of the joint total amount of ordinary shares and preference shares A issued. 5. The provisions in paragraphs 1 up to and including 4 shall be analogously applicable to granting rights to take up shares, but shall not be applicable to issuing shares to a person exercising a right to take up shares previously granted. 6. If preference shares B are issued pursuant to a resolution adopted by a body other than the general meeting, a general meeting of shareholders shall be convened which shall be held two years at the latest from the day on which preference shares B were issued for the first time pursuant to a resolution adopted by a body other than the general meeting. The agenda for this meeting shall mention a resolution concerning the acquisition by the company or cancellation of the preference shares B issued pursuant to a resolution adopted by a body other than the general meeting. If the resolution to be adopted under this agenda item does not purport the acquisition by the company or cancellation of the preference shares B issued pursuant to a resolution adopted by a body other than the general meeting, a general meeting shall be convened and held each time within two years from the date of the preceding meeting and the agenda for those meetings shall include a resolution concerning acquisition by the company or cancellation of the preference shares B issued pursuant to a resolution adopted by a body other than the general meeting. This until no more preference shares B issued pursuant to a resolution adopted by a body other than the general meeting are held by third parties. 7. Article 96, Book 2 of the Civil Code also applies to the issue of shares and the granting of rights to take up shares. 6 Article 11. Conditions of issuance. Rights of pre-emption . 1. The price and further conditions of issue shall be determined at the same time as the resolution to issue shares. The issue price may be no lower than par, without prejudice to the provisions of article 80 paragraph 2, Book 2 of the Civil Code. 2. Upon the issue of ordinary shares, every holder of ordinary shares shall have a preferential right in accordance with article 96a, Book 2 of the Civil Code. The same applies to the granting of rights for the taking up of ordinary shares. 3. The preferential right may be limited or excluded pursuant to a resolution adopted by the general meeting. The provision in the preceding sentence shall not be applicable if and insofar as the other body of the company designated pursuant to article 10 paragraph 1 by the articles of association or a resolution adopted by the general meeting for a fixed period of five years maximum has been designated as being competent to limit or exclude the preferential right. The competence of the other body of the company shall terminate at the time when the competence of this other body of the company to issue shares terminates. Paragraphs 1 and 2 of article 10 shall be analogously applicable. 4. Articles 96a and 97, Book 2 of the Civil Code also apply to the conditions of issue and to the preferential right. Article 12. Payment for shares . 1. 2. 3. 4. Upon the taking up of each ordinary share and each preference share A, the total par value shall be paid together with, if the share is taken up at a higher price, the difference between these amounts, without prejudice to the provisions in article 80 paragraph 2, Book 2 of the Civil Code. In taking up each preference share B, at least a quarter of the par value shall be paid. Further payments on preference shares B shall be made only after the company has called up such payments. The calling in of further payments shall be effected pursuant to a decision of the Executive Board. Such decision shall be subject to the approval of the Supervisory Board. Payments on preference shares may only be made in money. Payments on ordinary shares shall be made in money insofar as no other form of payment has been agreed. 5. 6. The Executive Board shall be authorized to enter into legal transactions concerning non-monetary payments on ordinary shares, and the other legal transactions referred to in article 94, Book 2 of the Civil Code, without the prior approval of the general meeting. Articles 80, 80a, 80b and 94b, Book 2 of the Civil Code also apply to payments on shares and non-monetary contributions. 7 7. For preference shares A a separate share premium reserve shall be held, to be indicated as share premium reserve A. Amounts are booked to this share premium reserve which are paid as premiums on the preference shares A. No amount can be written off from the share premium reserve A and no distribution can be made out of this share premium reserve, without prejudice to the provisions of article 14 paragraph 2 sub b and article 34 paragraph 3 under b. CHAPTER V . Own shares and depository receipts thereof . Article 13 . 1. The company shall be entitled to acquire its own fully paid-up shares or the depository receipts in respect thereof, provided either no valuable consideration is given or provided that: a. the distributable part of the capital and reserves is at least equal to the purchase price; and b. the nominal value of the shares or the depository receipts in respect thereof which the company acquires, holds or holds in pledge or which are held by a subsidiary does not exceed one tenth of the issued capital. 2. The company may acquire own shares or depository receipts thereof in order to transfer them, in pursuance of a regulation relating thereto, to staff employed by the company or by a group company. 3. The acquisition or alienation of own shares shall take place pursuant to a decision of the Executive Board. Such a decision shall be subject to the approval of the Supervisory Board, without prejudice to the provisions of article 98 paragraph 4, Book 2 of the Civil Code. 4. Articles 89a, 95, 98, 98a, 98b, 98c, 98d and 118, Book 2 of the Civil Code also apply to own shares or depository receipts thereof. CHAPTER VI . Capital reduction . Article 14 . 1. 2. The general meeting may decide to reduce the issued capital, but only at the proposal of the Executive Board with the approval of the Supervisory Board: a. by cancelling shares; or b. by reducing the amount of the shares by alteration of the articles of association. a. A resolution to cancel shares may only be adopted for: (i) shares which the company holds itself or for which it holds the depository receipts; or (ii) all preference shares of a certain class or all ordinary shares, but exclusively provided in all cases that such cancellation is 8 effected in accordance with this article and that the holders of the relevant class of shares will receive the payments provided for in this article 14 paragraph 2. If, after total cancellation of one or more classes of shares, only one class of issued shares remains, the remaining class shall no longer be subject to cancellation. b. c. 3. In the event of cancellation of all preference shares A, without prejudice to any provision of the law on the subject, on each preference share A the following shall be paid: (i) an amount equal to the yield basis A referred to in article 33 paragraph 1 sub a, to the greatest extent possible as a repayment of the nominal amount paid on those shares and for the remainder, to the greatest extent possible, at the expense of the share premium reserve A and, if this reserve does not suffice, at the expense of the other distributable parts of the capital and reserves, plus, (ii) the sum of (x) an amount equal to any unpaid dividend, whether declared or not, on the preference shares A in respect of any closed financial year, which amount shall be calculated in accordance with the provisions of article 33, paragraph 1, increased by the interest as referred to in that article, if applicable, to be calculated over the period ending on the date on which the dividend shall become payable, and (y) an amount equal to the dividend on the preference shares A in respect of the current financial year, which amount shall be calculated in accordance with the provisions of article 33, paragraph 1, to be calculated proportionally over the elapsed portion of that financial year ending on the date on which the dividend shall become payable. If, in accordance with the foregoing, the entire amount of the share premium reserve A is not paid, the remainder of the share premium reserve A shall be written off in favour of a general share premium reserve. A resolution of the general meeting to cancel or partially repay shares of a certain class shall only be passed in case of a simultaneous or prior approving resolution of the meeting of holders of shares of the class concerned unless it was resolved otherwise upon the first issuance of shares of the class concerned. Partial repayments on shares or exemption from the obligation to pay calls is only possible in order to implement a decision to reduce the amount of the shares. Such repayments or such an exemption shall take place: a. with regard to all shares; or 9 b. with regard to either the preference shares of a certain class or the ordinary shares. A resolution of the general meeting to reduce the amount of the shares of one or more classes shall only be passed in case of simultaneous or prior approving resolutions of the meetings of holders of shares of the classes concerned severally. 4. The provisions of articles 99 and 100, Book 2 of the Civil Code also apply to capital reduction. CHAPTER VII . Transfer and delivery of shares. Limited rights . Article 14A. Limitation of the transfer of preference shares A . 1. Preference shares A may be transferred only to natural persons. 2. Without prejudice to the provision in the preceding paragraph, transfer of preference shares A shall not be possible if the acquirer is the holder of a nominal amount of preference shares A together equal to one per cent (1%) or more of the capital issued in the form of preference shares A. If the acquirer is not a holder of preference shares A or is the holder of a nominal amount of preference shares A equal to less than one per cent (1%) of the capital issued in the form of preference shares A, transfer shall not be possible insofar as he would thereby acquire more than one per cent (1%) of the capital issued in the form of preference shares A. For the application of the provisions in this article, holding preference shares A or acquiring preference shares A shall be understood to include holding or acquiring voting rights, whether or not by the establishment of a life interest, the acquisition or holding of preference shares A by a third party for the account of a person and entering into or being a party to an agreement with a third party who has the right to vote, which agreement provides for a permanent joint policy in respect of exercising the right to vote, all as referred to in articles 12 and 13 of the Wet melding zeggenschap en kapitaalbelang in effectenuitgevende instellingen (Disclosure of Major Holdings and Equity Investments in Securities Issuing Institutions Act). For calculating the said percentage of one per cent (1%), the preference shares A which are allocated to a person as holder or acquirer pursuant to the preceding sentence shall be included. 3. For the application of the provisions in the two preceding paragraphs of this article, acquisition of preference shares A in an issue of preference shares A or in a payment in preference shares A is put on a par with transfer; for determining the size of the capital issued in the form of preference shares A, the shares to be issued or to be used in payment are included in the calculation. In deviation from what has been provided hereinbefore in this paragraph, a shareholder who is a legal entity or who is the holder of one per cent (1%) or more of the capital issued in the form of preference shares 10 A, may acquire preference shares A in an issue or in a payment in preference shares A, however up to such maximum percentage of the nominal amount by which the capital issued in the form of preference shares A is increased by the issue or payment as being equal to the percentage of the capital issued in the form of preference shares A held by that shareholder prior to the issue or the payment. 4. 5. The provisions in paragraphs 1 and 2 shall not be applicable to the company and its subsidiaries. Furthermore, the provisions in paragraphs 1, 2 and 3 shall not be applicable if the Executive Board has granted an exemption. Such exemption may be subject to conditions. The exemption is irrevocable. The Executive Board’s decision to that effect shall be subject to the approval of the Supervisory Board. The exemption shall only be granted: a. to the trust office and to a third party with whom the trust office has entered into an agreement providing for a permanent joint policy in respect of exercising the right to vote as referred to in paragraph 2; b. in case of a transfer by the company and an issue of preference shares A by the company in the context of a merger or of acquiring a participating interest or increase thereof or of a joint venture. Merger in sub-paragraph b. is understood to constitute the legal merger as referred to in Title 7, Book 2 of the Civil Code, as well as gaining control by means of participation in a company or acquiring a company against the issue of shares. 6. In the event that in the division of a community of property, in case of acquisition pursuant to the law of inheritance or generally in case of acquisition under general title, the number of preference shares A thus acquired by a natural person, together with those already belonging to the acquirer, exceeds the number that can be transferred pursuant to this article, the shares exceeding said limit shall either be exchanged for depository receipts of shares issued by the trust office or sold within a period to be determined by the Executive Board amounting to two months minimum and six months maximum; failing this, the company shall be irrevocably authorised to sell the relevant shares or depository receipts thereof at the stock exchange, being obliged to transfer the net proceeds to the person who is entitled thereto; failing a stock market quotation, the sale shall be effected at a price to be determined by three corporate members of Euronext Amsterdam N.V. holding office in Amsterdam, to be appointed by said association. 7. In the event that in the division of a community of property, in case of acquisition pursuant to the law of inheritance or generally in case of acquisition under general title, a legal entity acquires preference shares A, the shares thus acquired shall either be exchanged for depository receipts of 11 shares or sold within the period referred to in the preceding paragraph and duly observing the provisions in the preceding paragraph, failing which, the company shall be irrevocably authorised to sell the relevant shares in the manner set forth in the preceding paragraph. 8. 9. If an obligation to effect exchange or sale exists pursuant to the provisions in this article, the right to attend meetings and the voting right cannot be exercised and the right to payments shall be suspended for as long as the shareholder does not fulfil his obligations to effect exchange or transfer. For the application of this article, issue of shares shall be understood to include: a. pursuant to article 322, Book 2 of the Civil Code, the allocation of shares to shareholders of a vanishing company which enters into a legal merger with the company; b. pursuant to article 344e, Book 2 of the Civil Code, the allocation of shares to shareholders of a demerging company who shall become shareholder of the company by that demerger. Article 15. Transfer of registered shares . 1. The transfer of a registered share or the transfer of a right in rem therein shall be realized by means of a deed to that effect as well as, except if the company itself is a party to that legal act, acknowledgement in writing of the transfer by the company. Acknowledgement is effected in the deed, or by a dated declaration of acknowledgement on the deed or on a copy or extract thereof which is certified by a civil law notary or by the transferor. Official service of that deed or that copy or extract on the company shall rank as acknowledgement. If the acknowledgement refers to transfer of partly paid-up preference shares B, acknowledgement can only be effected if the deed is legally dated. 2. A right of pledge may also be created without acknowledgement or official service to the company. In such case, article 239, Book 2 of the Civil Code applies accordingly, on the understanding that the communication meant in paragraph 3 of that article, shall then be replaced by acknowledgement by or official service to the company. 3. The acknowledgement shall be signed by two members of the Executive Board or by the person authorized thereto in accordance with article 21, paragraph 2. 4. The provisions of the paragraphs 1 and 3 apply accordingly to the allocation of registered shares on the division of jointly-held property. Article 16. Life interest (“Vruchtgebruik”). Pledging (“Pandrecht”) . 1. The shareholder shall have voting rights in respect of the shares in which the life interest or the pledge is created. 12 However, the voting rights shall accrue to the beneficiary of the life interest or the pledgee in the event that it was so stipulated at the creation of the life interest or the pledge. The shareholder who holds no voting rights and the beneficiary of a life interest or pledgee who does hold voting rights shall have the rights which the law attributes to holders of depository receipts of shares in a company which are issued with that company’s cooperation. A beneficiary of a life interest or a pledgee who holds no voting rights shall not have the rights referred to in the preceding sentence. 2. The rights arising from a share in which a life interest is created, conducing to the acquisition of shares shall accrue to the shareholder on the basis that the shareholder shall compensate the beneficiary of the life interest for the value thereof to the extent that the latter is entitled thereto by virtue of his life interest. CHAPTER VIII . Management . Article 17. Executive Board . 1. The management of the company shall be constituted by an Executive Board consisting of two or more members. 2. Subject to the fixed minimum, the number of members of the Executive Board shall be fixed by the Supervisory Board. 3. The Supervisory Board shall designate from the Executive Board a president of the Executive Board. The Supervisory Board may also from the Executive Board designate a deputy president and/or a vice-president of the Executive Board. The Supervisory Board may terminate such designations at all times. Article 18. Appointment, suspension and dismissal . 1. The members of the Executive Board shall be appointed by the general meeting from a list of candidates, to be proposed by the Supervisory Board. 2. A nomination or recommendation to appoint a member of the Executive Board shall state the candidate’s age and the positions he holds or has held, insofar as these are relevant for the performance of the duties of a member of the Executive Board. The nomination and recommendation must state the reasons on which they are based. 3. A resolution of the general meeting to appoint a member of the Executive Board in accordance with a nomination by the Supervisory Board shall require an absolute majority of the votes cast. 4. A resolution of the general meeting to appoint a member of the Executive Board other than in accordance with a nomination by the Supervisory Board shall require an absolute majority of the votes cast representing more than one-third of the company’s issued capital. A new meeting as referred to in section 120, subsection 3 of Book 2 of the Netherlands Civil Code cannot be 13 convened. 5. 6. 7. 8. 9. At a general meeting of shareholders, votes in respect of the appointment of a member of the Executive Board, can only be cast for candidates named in the agenda of the meeting or explanatory notes thereto. If none of the candidates nominated by the Supervisory Board is appointed, the Supervisory Board shall retain the right to make a new nomination at a next meeting. Each member of the Executive Board may be suspended and removed at any time by the general meeting. A resolution to suspend or remove other than on a motion of the Supervisory Board may only be passed by the general meeting with an absolute majority of the votes cast representing more than one-third of the company’s issued capital. Article 18, paragraph 4, last sentence, shall apply mutatis mutandis. Each member of the Executive Board may be suspended at any time by the Supervisory Board. A suspension may be extended on one or more occasions, but not for a total of more than three months. If no decision has been made to set aside the suspension or dismiss the member by the end of that period, the suspension shall be set aside. Article 19. Remuneration . 1. The company has a policy on the remuneration of the Executive Board. The policy shall be proposed by the Supervisory Board and adopted by the general meeting. 2. The remuneration and further terms of employment of the Executive Board shall be determined by the Supervisory Board, with due observance of the policy referred to in paragraph 1. 3. If the remuneration of the Executive Board also consists of schemes under which shares or rights to subscribe for shares are granted, the Supervisory Board shall submit a proposal with respect to these schemes to the general meeting for approval. The proposal must at least state the number of shares or rights to subscribe for shares that can be granted to the Executive Board and the conditions for the granting and amending thereof. Article 20. Duties of the Executive Board. Decision making process. Allocation of duties . 1. 2. Subject to the restrictions imposed by these articles of association, the Executive Board shall be entrusted with the management of the company. The Executive Board shall draw up rules regulating tasks, operating procedures and decision-making by the Executive Board. Such by-laws shall require the approval of the Supervisory Board. 14 3. The Executive Board may determine the duties with which each member of the Executive Board will be charged in particular. The allocation of duties shall require the approval of the Supervisory Board. Article 21. Representation . 1. The Executive Board shall be authorized to represent the company. Two members of the Executive Board, acting jointly, as well as one member of the Executive Board and a staff member as mentioned in paragraph 2, acting jointly, are also authorized to represent the company. 2. The Executive Board may appoint staff members with general or limited power to represent the company. Each appointment may, at all times, be discontinued. Each of these staff members shall be able to represent the company with due observance of any restrictions imposed on him. The Executive Board shall determine their titles. A resolution of the Executive Board as meant in this paragraph is subject to the approval by the Supervisory Board. 3. In the event of a conflict of interest between the company and a member of the Executive Board, the company shall be represented by such member of the Executive Board or of the Supervisory Board as the Supervisory Board shall designate for this purpose. Article 22. Approval of decisions of the Executive Board . 1. 2. The Executive Board shall need the approval of the general meeting for resolutions entailing a significant change in the identity or character of the company or its business, in any case concerning: a. the transfer of (nearly) the entire business of the company to a third party; b. entering into or terminating a long term cooperation between the company or a subsidiary and another legal entity or company or as a fully liable partner in a limited partnership or general partnership, if such cooperation or termination is of fundamental importance for the company; c. acquiring or disposing of a participation in the capital of a company if the value of such participation is at least one third of the sum of the assets of the company according to its balance sheet and explanatory notes or, if the company prepares a consolidated balance sheet, its consolidated balance sheet and explanatory notes according to the last adopted annual accounts of the company, by the company or a subsidiary. Without prejudice to any other appropriate provision of these articles of association, the Executive Board shall obtain the approval of the Supervisory Board for managerial decisions with respect to any one or more of the following matters: 15 a. the issue and acquisition of shares in and debentures at the expense of the company or of debentures at the expense of a limited partnership, or a partnership in respect of which the company is actively fully liable; b. cooperation to the issue of depository receipts of shares; c. application for a quotation or withdrawal of the quotation of the securities referred to sub a. and b. in the price list of any stock exchange; d. the entering into or the termination of long-term cooperation of the company or a dependent company with any other company or legal entity or as actively fully liable in a limited partnership (commanditaire vennootschap) or general partnership (vennootschap onder firma) if such cooperation or termination is of fundamental importance for the company; e. the entering by the company or a dependent company in participation in the capital of another company if the value of such participation is at least one quarter of the amount of the issued share capital plus reserves of the company according to its balance sheet with explanatory notes as well as the essential increase or reduction of such participation; f. investments requiring an amount equal to at least one fourth part of the issued share capital with reserves of the company according to its balance sheet with explanatory notes; g. a proposal to amend the articles of association; h. a proposal to dissolve the company; i. a petition for bankruptcy or request for suspension of payments (surséance van betaling); j. 3. 4. termination of the employment of a considerable number of the company’s employees or of a dependant company’s employees simultaneously or within a short period of time; k. radical change in the employment conditions of a considerable number of the company’s employees or of a dependant company’s employees; l. a proposal to reduce the issued share capital of the company; m. a proposal for a merger or demerger within the meaning of Title 7, Book 2 of the Civil Code. The Supervisory Board is entitled to require further decisions of the Executive Board in addition to those mentioned in paragraph 2 to be subject to its approval. Such further decisions shall be clearly specified and notified to the Executive Board in writing. The lack of approval of the general meeting in respect of a decision referred to in paragraph 1 and the lack of approval of the Supervisory Board in 16 respect of a decision referred to in paragraph 2, sub-paragraphs a. up to and including l. and in paragraph 3 does not affect the authority of the Executive Board or its members to represent the company. Article 23. Absence or prevention . If a member of the Executive Board is absent or is prevented from performing his duties, the remaining members or member of the Executive Board shall be temporarily entrusted with the entire management of the company. If all members of the Executive Board are absent or are prevented from performing their duties, the management of the company shall be temporarily entrusted to the Supervisory Board which shall then be authorized to entrust the management temporarily to one or more persons, whether or not from among its members. CHAPTER IX . Supervisory Board . Article 24. Number of members. Profile. 1. 2. 3. The company shall have a Supervisory Board, consisting of individuals. The Supervisory Board shall consist of at least three members. Where the number of members of the Supervisory Board falls below three, then the board shall take measures forthwith to fill the number of its members. The number of members of the Supervisory Board shall, with due observance of the provisions of paragraph 1, be determined by the Supervisory Board. The Supervisory Board adopts a profile on its size and composition, taking into account the character of the business, its activities and the desired expertise and background of the members of the Supervisory Board. Article 25. Appointment . 1. The members of the Supervisory Board shall be appointed by the general meeting from a list of candidates, to be proposed by the Supervisory Board. 2. When a member of the Supervisory Board is proposed for appointment, particulars shall be stated in respect of his age, his profession, the nominal amount of shares in the capital of the company he holds and his present and past functions in so far as the same are of interest in connection with the performance of the duties of a member of a Supervisory Board. Legal entities of which he is already a Supervisory Board member shall also be mentioned; if there are companies among them which belong to the same group, it shall be sufficient to name that group. The reasons for the proposal shall be stated. 3. A resolution of the general meeting to appoint a member of the Supervisory Board in accordance with a nomination by the Supervisory Board shall require an absolute majority of the votes cast. 4. A resolution of the general meeting to appoint a member of the Supervisory Board other than in accordance with a nomination by the Supervisory Board shall require an absolute majority of the votes cast representing more than 17 one-third of the company’s issued capital. A new meeting as referred to in section 120, subsection 3 of Book 2 of the Netherlands Civil Code cannot be convened. 5. 6. At a general meeting of shareholders, votes in respect of the appointment of a member of the Supervisory Board, can only be cast for candidates named in the agenda of the meeting or explanatory notes thereto. If none of the candidates nominated by the Supervisory Board is appointed, the Supervisory Board shall retain the right to make a new nomination at a next meeting. For the appointment of members of the Supervisory Board, the provisions of article 142 Book 2 of the Civil Code also apply. Article 26. Retirement, suspension and dismissal of members of the Supervisory Board . 1. Every member of the Supervisory Board shall retire not later than the day on which the first general meeting of shareholders is held after four years have elapsed from his appointment. 2. The Supervisory Board members shall retire periodically in accordance with a rotation plan to be drawn up by the Supervisory Board. Any alteration to the rotation plan cannot imply that a member sitting on the Supervisory Board shall resign against his will before the period has expired in respect of which he was appointed. 3. A resigning member of the Supervisory Board may be re-appointed. In a proposal for reappointment, the Supervisory Board shall take into account the performance of the nominated member of the Supervisory Board in the past. 4. Without prejudice to the provisions in paragraph 5, every member of the Supervisory Board may be suspended or dismissed by the general meeting of shareholders at all times. 5. A resolution of the general meeting to suspend or remove a member of the Supervisory Board other than in accordance with a proposal of the Supervisory Board shall require an absolute majority of the votes cast representing more than one third of the company’s issued capital. Article 25, paragraph 4, last sentence, shall apply mutatis mutandis. 6. Any suspension may be extended one or more times, but may not last longer than three months in all. If, at the end of that period, no decision has been taken on termination of the suspension or on removal, the suspension shall end. Article 27. Remuneration . The general meeting shall determine the remuneration for every member of the Supervisory Board. 18 Article 28. Duties and powers . 1. 2. It shall be the duty of the Supervisory Board to supervise the management of the Executive Board and the general course of affairs in the company and in the business connected with it. It shall assist the Executive Board with advice. In performing their duties the Supervisory Board members shall act in accordance with the interests of the company and of the business connected with it. The Executive Board shall supply the Supervisory Board in due time with the information required for the performance of its duties. 3. Further, at least once a year, the Executive Board shall inform the Supervisory Board of the main aspects of the strategic policy, the general and financial risks and the company’s management and control systems in writing. 4. The Supervisory Board shall have access to the buildings and premises of the company and shall be authorized to inspect the books and records of the company. The Supervisory Board may designate one or more persons from among its members or an expert to exercise these powers. The Supervisory Board may also in other cases be assisted by experts. The costs of these experts shall be for the account of the company. Article 29. Proceedings and decision making process. Committees . 1. The Supervisory Board shall elect a president from amongst its members, and one or more vice-president(s) who shall take the place of the president in the latter’s absence. It shall appoint a secretary, who need not be a member of the Supervisory Board, and make arrangements for his substitution in case of absence. 2. In the absence of the president and the vice-president(s) at a meeting, the meeting shall itself designate a president. 3. The Supervisory Board shall meet whenever the president, or two other Supervisory Board members, or the Executive Board make(s) a request thereto. 4. The secretary shall keep minutes of the proceedings at meetings of the Supervisory Board. The minutes shall be adopted in the same meeting or in a following meeting of the Supervisory Board and shall be signed by the president and the secretary as evidence thereof. 5. All decisions of the Supervisory Board shall be adopted by an absolute majority of the votes cast. 6. Decisions of the Supervisory Board shall only be valid if taken at a meeting at which the majority of the Supervisory Board members are present or represented. 7. A Supervisory Board member may be represented by a co-member of the Supervisory Board authorized in writing. A Supervisory Board member may not act as representative for more than one co-member. 19 8. The Supervisory Board may also take decisions without a meeting, provided the proposal concerned is submitted to all Supervisory Board members and none of them objects to this manner of taking decisions. The secretary shall draw up a report regarding a decision thus taken and shall attach the replies received to the report, which shall be signed by the president and the secretary. This manner of taking decisions shall be notified in the following meeting of the Supervisory Board. 9. The Supervisory Board shall meet together with the Executive Board as often as the Supervisory Board or Executive Board makes a request thereto. 10. The Supervisory Board shall draw up rules containing further regulations on the procedure for holding meetings and decision-making by the Supervisory Board, and its operating procedures. 11. The Supervisory Board may, without prejudice to its responsibilities, designate one or more committees from among its members, who shall have the responsibilities specified by the Supervisory Board. 12. The composition of any such committee shall be determined by the Supervisory Board. 13. The general meeting may additionally remunerate the members of the committee(s) for their services. Article 30. Indemnity . 1. The Company shall indemnify and hold harmless each member of the Executive Board and each member of the Supervisory Board (each of them, for the purpose of this article 30 only, the “ Director ”) against any and all liabilities, claims, judgements, fines and penalties (the “ Claims ”), incurred by the Director as a result of any threatening, pending or completed action, investigation or other proceeding, whether civil, criminal or administrative (the “ Action ”), brought by any party other than the Company itself or its group companies, in relation to acts or omissions in or related to his capacity as a Director. Claims will include derivative actions brought on behalf of the Company or its group companies against the Director and claims by the Company itself (or one of its group companies) for reimbursement of claims by third parties on the ground that the Director was jointly liable toward that third party, in addition to the Company. 2. The Director will not be indemnified with respect to Claims in so far as they relate to the gaining in fact of personal profits, advantages or remuneration to which he was not legally entitled, or if the Director shall have been adjudged to be liable for gross negligence (grove nalatigheid) , wilful misconduct ( opzet ) or intentional recklessness ( bewuste roekeloosheid ). 3. Any expenses (including reasonable attorneys’ fees and litigation costs) (together the “ Expenses ”) incurred by the Director in connection with any Action, shall be reimbursed by the Company, but only upon receipt of a written undertaking by that Director that he shall repay such Expenses if a 20 competent Court should determine that he is not entitled to be indemnified. Expenses shall be deemed to include any tax liability which the Director may be subject to as a result of his indemnification. 4. Also in case of an Action against the Director by the Company itself or its group companies, the Company will advance to the Director his reasonable attorneys’ fees and litigation costs but only upon receipt of a written undertaking by that Director that he shall repay such fees and costs if a competent Court should resolve the Action in favour of the Company or its group companies rather than the Director. 5. The Director shall not admit any personal financial liability vis-à-vis third parties, nor enter into any settlement agreement, without the Company’s prior written authorisation. The Company and the Director shall use all reasonable endeavours to cooperate with a view to agreeing on the defence of any Claims. However, in the event that the Company and the Director would fail to reach such agreement, the Director shall comply with all directions given by the Company in its sole discretion. 6. 7. The indemnity contemplated by this article 30 shall not apply to the extent Claims and Expenses are reimbursed by insurers. In case of amendment of this article 30, the indemnity provided hereby shall nevertheless continue to apply to Claims and/or Expenses incurred in relation to the acts or omissions by the Director during the periods in which this clause was in effect. CHAPTER X . Annual accounts and annual report. Profits . Article 31. Financial year. Annual accounts and annual report. Auditor . 1. 2. The financial year of the company shall be the calendar year. Annually, the Executive Board shall draw up annual accounts and shall deposit these at the company’s office for inspection by shareholders, not later than five months after the end of the financial year, unless by reason of special circumstances this term is extended by the general meeting by not more than six months. Within this period, the Executive Board shall also submit the annual report. 3. Within the period referred to in paragraph 2, the Executive Board shall submit the annual accounts simultaneously with the annual report to the Supervisory Board. 4. The Supervisory Board shall present its report on the annual accounts to the general meeting. 5. The company shall assign an auditor to audit the financial statements. The general meeting is empowered to make such assignment. If no such assignment is made by that meeting, the Supervisory Board or, if there are no members of that board in office or if it fails to make an assignment, the Executive Board shall be empowered to do so. The assignment may be 21 withdrawn at any time by the general meeting and by the person who made the assignment; assignments made by the Executive Board may also be withdrawn by the Supervisory Board. 6. The auditor shall report on his audit to the Supervisory Board and the Executive Board. The auditor shall convey the results of his audit in a report attesting to the financial statements giving a true and fair view. 7. Articles 101, 102 and 103 and Title 9, Book 2 of the Civil Code also apply to the annual accounts and to the annual report. Article 32. Adoption. Release . 1. The annual accounts shall be adopted by the general meeting. The annual accounts may not be adopted by the general meeting if the general meeting has been unable to take cognisance of the auditor’s report, unless the remaining information include a legal ground for the lacking of the statement. 2. In the general meeting of shareholders where the resolution to adopt the annual accounts is passed, a proposal to release the members of the Executive Board from liability for the exercise of the management and a proposal to release the members of the Supervisory Board from liability for the exercise of the supervision of the management, insofar as the exercise of such duties is reflected in the annual accounts or otherwise disclosed to the general meeting prior to the approval of the annual accounts, shall be brought up for discussion as two separate items. Article 33. Dividend. Reservations . 1. a. From the profits - the positive balance of the profit and loss account - earned in the financial year last expired, first, insofar as possible, the dividend attributable to each of the holders of preference shares A is pro rata parte paid out to them, insofar as possible. The dividend in respect of the preference shares A will be expressed in a percentage of the yield basis A adjusted on a time proportional basis to the extent that the preference shares A have been issued or cancelled during the financial year last expired and will be determined in the resolution to issue such preference shares A for the first time. The preference share A annual dividend shall be declared each year on the date the company’s annual accounts are adopted and shall be paid within 3 business days of such adoption. In the event that such dividend is not so paid, the company shall, simultaneously with the delayed payment of such dividend, pay in addition to the holders of such preference shares A an amount equal to the interest on such dividend in respect of each day such dividend is not paid by the company, calculated at an annual rate equal to the then current dividend rate. 22 In the resolution to issue preference shares A for the first time, it may be stipulated that the above mentioned dividend percentage in respect of the preference shares A concerned be periodically altered. In such case, the resolution shall also state the moments of alteration and, in detail, the manner by which the dividend percentage when altered shall be calculated. The amount of dividend per preference share A, being the result of the above mentioned method of calculation, shall be rounded off upwards to entire cents. The term “issue shares of a certain class for the first time” used in these articles of association shall also apply to a first issue of shares of a class after all shares of such class were cancelled in accordance with article 14 paragraph 2 sub a. The yield basis A, applying to the preference shares A, amounts to three euros and forty thousand three hundred and fifty-five one hundred thousandth eurocents (EUR 3.40355). In case of a partial repayment on preference shares A in accordance with article 14 paragraph 3, and also in case of a payment to holders of preference shares A in accordance with article 34 paragraph 3 under b. the yield basis A shall decrease, as from the day on which the payment concerned shall become payable, by an amount equal to the amount to be paid on each preference share A. b. From the balance of the profit remaining after application of the provision under a. a dividend shall be paid on the preference shares B, the percentage of which - to be calculated over the paid up part of the nominal value - is equal to the repo-rate of the European Central Bank, decreased or increased by a discount or upcount, with a maximum of three percent point (3%), to be determined by the Executive Board under the approval of the Supervisory Board, averaged over the number of days over which the payment is made. c. In the event that for any financial year the payments referred to under a. and b. cannot or cannot entirely be made because the profit does not so allow, payment of the deficit shall be made from the profit of the following financial years. In that case, always insofar as possible, the dividend in arrears attributable to the holders of preference shares A, together with the dividend over the last ended financial year attributable to them, shall be paid first. Subsequently, the dividend in arrears attributable to the holders of preference shares B together with the dividend over the last ended financial year attributable to them, shall be paid. 23 2. Subsequently, the Executive Board shall, subject to the approval of the Supervisory Board, determine which part of the profit remaining after application of paragraph 1, shall be allocated to the reserves. 3. The part of the profit remaining thereafter shall be at the disposal of the general meeting, provided that no further distributions can be made on the preference shares A and B. 4. If, over any year, a loss has been suffered, for such year no dividend on the ordinary shares shall be paid, without prejudice to the provisions of article 34 paragraph 2. In subsequent years, too, payment of dividend on ordinary shares shall only be effected when the loss has been cleared by profits. However, the general meeting may, on the proposal of the Executive Board which has been approved by the Supervisory Board, resolve to clear the loss to the debit of the distributable part of the capital and reserves, provided that, in order to clear losses, no charge may be made to the share premium reserve A. 5. 6. 7. The Executive Board may decide to pay an interim dividend. The decision is subject to the approval of the Supervisory Board. No dividend shall be paid on the shares held by the company in its own capital. For the computation of profit distribution, the shares on which according to this paragraph 6 no dividend shall be paid, shall not be taken into account. Furthermore, payments to shareholders are subject to articles 103, 104 and 105, Book 2 of the Civil Code. Article 34. Distribution in shares and to the debit of the reserves . 1. The general meeting may, at the proposal of the Executive Board which has been approved by the Supervisory Board, resolve that a payment of dividend on ordinary shares be wholly or partly not in cash, but in shares in the company. 2. The general meeting may, at the proposal of the Executive Board which has been approved by the Supervisory Board, resolve that distributions to holders of ordinary shares be made out of the distributable part of the capital and reserves, except for the share premium reserve A. The provisions of paragraph 1 apply analogously. Distributions as referred to in this paragraph 2 shall not be made, if not all amounts due in accordance with article 33 paragraph 1 sub a and b juncto c are paid. 3. a. b. The Executive Board, subject to approval by the Supervisory Board, may, decide to effect payment of the amounts payable to holders of preference shares in accordance with article 33 paragraph 1 by such payment being charged to the distributable part of the capital and reserves, except for the share premium reserve A. The Executive Board, subject to approval by the Supervisory Board, may also decide to effect payment to the holders of preference shares 24 A not being due in accordance with article 33 paragraph 1, however, exclusively by such payment being charged to the share premium reserve A. A decision of the Executive Board referred to in the previous sentence shall only be taken in case of a simultaneous or prior approving resolution of the meeting of holders of preference shares A and, on the basis of a simultaneous adjustment of the yield basis. Article 35. Date for payment . Payment of dividends and other distributions shall be announced in accordance with article 44. CHAPTER XI . General meetings of shareholders . Article 36. Annual meeting . 1. The annual meeting shall be held annually, and not later than six months after the end of the financial year. 2. The agenda for that meeting shall contain, inter alia, the following points for discussion: a. the annual report; b. adoption of the annual accounts; c. determination of dividend; d. release from liability of members of the Executive Board; e. release from liability of members of the Supervisory Board; f. any filling of vacancies; g. any other proposals put forward by the Supervisory Board or the Executive Board put forward for discussion and announced with due observance of article 38, such as proposals concerning the designation of a body competent to issue shares and the authorization of the Executive Board to cause the acquisition of own shares or depository receipts thereof by the company. Article 37. Other meetings . Other general meetings of shareholders shall be held as often as the Executive Board or the Supervisory Board deems such necessary, without prejudice to the provisions of the articles 110, 111 and 112, Book 2 of the Civil Code. Article 38. Convocation. Agenda . 1. General meetings of shareholders shall be convened by the Supervisory Board or the Executive Board. 2. The convocation shall take place no later than on the fifteenth day prior to the date of the meeting. 3. The notice of the meeting shall state the subjects to be dealt with or it shall state that the shareholders and the holders of depository receipts of shares may take cognisance thereof at the company’s office, without prejudice to 25 the provisions of article 45 paragraph 2 of the articles of association and of article 99 paragraph 7, Book 2 of the Civil Code. 4. The notice of the meeting shall state the requirement for admission to the meeting as described in article 42. 5. Convocation shall be made in the manner stated in article 44. 6. Matters not stated in the notice of the meeting may be further announced, subject to the time limit pertaining to the convocation of meetings, in the manner stated in article 44. 7. Unless the notice of the meeting includes the contents of all documents which, according to the law or the articles of association, are to be available to shareholders and to holders of depository receipts of shares for inspection in connection with the meeting to be held, these documents are to be made available free of charge to shareholders and holders of depository receipts at a paying agent (“betaalkantoor”) in the Netherlands, as meant in the General Rules to be designated in the notice of the meeting. 8. Holders of shares and holders of depository receipts representing alone or in the aggregate at least one percent (1%) of the issued capital, or alone or in the aggregate, at least a value of ten million euros (EUR 10,000,000) according to the Official Price List, have the right to request to the Executive Board or the Supervisory Board to place items on the agenda of the general meeting of shareholders. These requests shall in principal be honoured by the Executive Board or the Supervisory Board on the condition: a. that these shall be no grave interests of the company which resist against the placing on the agenda; b. that the request has been filed in writing with the Executive Board or the chairman of the Supervisory Board at least sixty days prior to the date of the general meeting of shareholders. Article 39. Place of meetings . The general meetings of shareholders shall be held in Amsterdam. Article 40. Chairmanship . 1. The general meetings of shareholders shall be chaired by the president of the Supervisory Board or, in his absence, by a vice-president of that board; in the event that the latter is (are) also absent, the Supervisory Board members present shall elect a chairman from their midst. The Supervisory Board may designate another person to act as chairman of a general meeting of shareholders. 2. If the chairman has not been appointed in accordance with paragraph 1, the meeting shall itself choose a chairman. Until that moment a member of the Executive Board designated thereto by the Executive Board shall act as chairman. 26 Article 41. Minutes . 1. Minutes shall be kept of the proceedings at every general meeting of shareholders by a secretary to be designated by the chairman. The minutes shall be adopted by the chairman and the secretary and shall be signed by them as evidence thereof. 2. The Supervisory Board or the chairman may determine that notarial minutes shall be drawn up of the proceedings of the meeting. The notarial minutes shall be co-signed by the chairman. Article 42. Rights at meetings. Admittance . 1. Each shareholder entitled to vote and each beneficiary of a life interest or pledgee to whom the voting rights accrue shall be entitled to attend the general meeting of shareholders, to address the meeting and to exercise his voting rights. Where it concerns ordinary registered shares, the Executive Board must be notified in writing of the intention to attend the meeting. Such notice must be received by the Executive Board not later than on the date mentioned in the notice of the meeting. 2. The rights to attend and vote at meetings pursuant to paragraph 1 may be exercised by a person holding a written instrument of proxy, provided that, in the case of ordinary shares the instrument of proxy is received by the Executive Board not later than the date stated in the notice convening the meeting, or in the case of preference shares A which are held by the trust office, the instrument of proxy is received by the Executive Board not later than at the signing of the attendance list prior to the commencement of the general meeting of shareholders. 3. If the voting rights on a share accrue to the beneficiary of a life interest or to a pledgee, instead of to the shareholder, the shareholder is also authorized to attend the general meeting of shareholders and to address the meeting, provided that, where it concerns ordinary registered shares, the Executive Board has been notified of the intention to attend the meeting in accordance with paragraph 1. Paragraph 2 applies analogously. 4. With respect to the voting rights and the right to participate in meetings attached to ordinary bearer shares, the company shall apply by analogy the provisions of Sections 88 and 89 Book 2 of the Dutch Civil Code and recognise as a shareholder the person named in a written statement from a Necigef-participant as a Necigef-beneficiary, entitled to a given number of ordinary bearer shares belonging to such Necigef-participant’s collective deposit of ordinary bearer shares in the company and remaining thus entitled until the close of the meeting. A holder of ordinary bearer shares or his proxy shall only have admittance to the meeting if the foregoing statement has been deposited not later than on the date stated in the notice convening the meeting at the place mentioned therein. The receipt issued once such statement has been deposited shall give admittance to the meeting. The foregoing provisions of 27 this paragraph 4 shall apply mutatis mutandis to each pledgee or usufructuary of ordinary bearer shares in whom voting rights are vested or their proxy. 5. The Executive Board has the power to determine in the notice convening the meeting that for the application of section 117, subsections 1 and 2, of Book 2 of the Netherlands Civil Code, and section 117a, subsections 2 and 4, of Book 2 of the Netherlands Civil Code, the persons that are entitled to attend and address meetings and to vote are the persons who have those rights on a determined day and are entered as such in a register (or one or more parts thereof) that has been designated for that purpose by the Executive Board, notwithstanding who is entitled to those shares or depositary receipts at the time of the meeting. In this matter the provisions of paragraph 1 up to and including 4 also apply on the understanding that: a. the statement of the Necigef-participant as referred to in paragraph 4 does not have to include that the person mentioned shall remain participant until the close of the meeting; b. the requirement of entry in the register that has been designated for that purpose by the Executive Board shall substitute the requirement of depositing a statement as referred to in this paragraph 4. 6. The Executive Board may determine that the right to attend meetings referred to in section 1 may also be exercised by electronic means of communication. As a minimum requirement, the person entitled to attend the meeting via electronic means of communication must be identifiable, he must be able to directly take note of the proceedings of the meeting and, if entitled, to exercise his voting rights. The Executive Board may set as additional requirement that persons entitled to attend the meeting can also participate in the deliberation by electronic means of communications. 7. The Executive Board may set further conditions to the use of electronic means of communication referred to in paragraph 6. Those conditions shall be disclosed with the notice of the meeting. 8. Each person entitled to vote or his proxy shall sign the attendance list. The names of persons who participate in the meeting in accordance with article 42 paragraph 6 or who have cast their votes as referred to article 43 paragraph 8, shall be added to the attendance list. 9. Each holder of depository receipts shall be entitled to attend the general meeting of shareholders and to address the meeting. Where registered depository receipts are concerned, the provisions in paragraph 1 second and third sentence shall be analogously applicable. Where bearer depository receipts of shares are concerned, the certificates of depository receipts of shares must be deposited at the place stated in the notice convening the meeting not later than the date stated in the notice convening the meeting, without prejudice to the provisions of paragraph 5. The provisions in this 28 paragraph shall not be applicable to the beneficiary of a life interest and the pledgee referred to in paragraph 1 and to the shareholders referred to in paragraph 3. 10. The right to attend meetings in accordance with paragraph 9 may be exercised by a proxy authorised in writing, provided that, without prejudice to the lodging requirement, the form of proxy has been received by the Executive Board on the date stated in the notice of the meeting at the latest. Paragraph 2 shall be analogously applicable. 11. The date mentioned in the notice of the meeting, referred to in the paragraphs 1 and 4, cannot be prior than the thirtieth day prior to the date of the meeting. The date mentioned in the notice of the meeting, referred to in paragraph 5, cannot be prior than the seventh day before that meeting or at some time, so much earlier as will be allowed by law. The date mentioned in the notice of the meeting, referred to in the paragraphs 2 and 10, cannot be prior than the third day prior to the date of the meeting. 12. The members of the Supervisory Board and of the Executive Board shall be entitled to attend the meeting and shall, as such, have the right to advise the general meeting of shareholders. 13. The chairman shall decide whether persons other than those who shall be admitted in accordance with the above provisions of this article shall be admitted to the meeting. Article 43. Votes . 1. Except where the law or the articles of association require a qualified majority, all resolutions shall be adopted by absolute majority of the votes cast. 2. Each share confers the right to cast one vote. 3. 4. If in an election of persons a majority is not obtained, a second free vote shall be taken. If again a majority is not obtained, further votes shall be taken until either one person obtains a majority or the election is between two persons only, both of whom receive an equal number of votes. In the event of such further elections (not including the second free vote), each election shall be between the persons who participated in the preceding election, but with the exclusion of the person who received the smallest number of votes in that preceding election. If in a preceding election more than one person receives the smallest number of votes, it shall be decided by lot which of these persons should not participate in the new election. If there is a tie of votes in an election between two persons, it shall be decided by lot who is elected, without prejudice to the provision of the following paragraph. If there is a tie of votes in a vote other than a vote for the election of persons, the proposal is thus rejected. 29 5. All votes may be cast orally. The chairman is however entitled to decide a vote by a secret ballot. If it concerns an election of persons, also a person present at the meeting and entitled to vote can demand a vote by a secret ballot. Voting by secret ballot shall take place by means of secret, unsigned ballot papers. 6. Abstentions and invalid votes shall not be counted as votes. 7. Voting by acclamation shall be possible if none of the persons present and entitled to vote objects against it. 8. 9. In the event that he uses the authority referred to in article 42 paragraph 5, the Executive Board may determine that votes cast by electronic means of communication before the general meeting of shareholders shall be treated the same as votes cast during the meeting. These votes cannot be cast before the date of registration set out in the notice, as referred to in article 42 paragraph 5. Without prejudice to the other provisions of article 42, the notice shall state the manner in which persons entitled to take part in and vote at meetings may exercise their rights prior to the meeting. The provisions of the articles 13 paragraphs 3 and 4, and 117, Book 2 of the Civil Code also apply to the general meeting of shareholders. Article 43A. Meeting of holders of shares of one class . 1. 2. Meetings of holders of shares of one class shall be convened by the Executive Board or by the Supervisory Board. The meetings shall be held as often as the Executive Board or the Supervisory Board deems necessary, and also whenever such is required in accordance with the law or the articles of association. With regard to these meetings, the provisions regarding the general meetings of shareholders shall, to the extent possible, apply analogously. CHAPTER XII . Convocations and notifications . Article 44 . All announcements for the general meetings of shareholders, all notifications concerning dividend and other payments and all other communications to shareholders and holders of depository receipts shall be effected by means of a notice in a national daily paper and in the Official Price List, or in such manner as shall be authorised by law at the time, including a notice made by electronic means which shall be accessible directly and permanently up until the meeting, without prejudice to the provisions of article 96a paragraph 4, Book 2 of the Civil Code. CHAPTER XIII . Amendment of the articles of association and dissolution . Article 45. Amendment to the articles of association. Dissolution . 30 1. A resolution to amend the articles of association or to dissolve the company shall only be adopted at the proposal of the Executive Board which has been approved by the Supervisory Board. 2. When a proposal to amend the articles of association or to dissolve the company is to be submitted to the general meeting, this must be mentioned in the notice of the general meeting of shareholders or in the further announcement referred to in article 38 paragraph 6 and, if an amendment to the articles of association is to be discussed, a copy of the proposal, setting forth the text of the proposed amendment verbatim, shall at the same time be deposited at the company’s office for inspection and shall be held available for shareholders and holders of depository receipts free of charge until the end of the meeting. Article 46. Liquidation . 1. In the event of dissolution of the company by virtue of a resolution of the general meeting, the members of the Executive Board shall be charged with the liquidation of the business of the company and the Supervisory Board with the supervision thereof. 2. During liquidation, the provisions of these articles of association shall remain in force as far as possible. 3. From the balance remaining after payment of debts there shall first be distributed as a Liquidation Distribution to the holders of preference shares A: 4. a. the sum of (x) an amount equal to any unpaid dividend, whether declared or not, on the preference shares A in respect of any closed financial year, which amount shall be calculated in accordance with the provisions of article 33, paragraph 1, increased by the interest as referred to in that article, if applicable, to be calculated over the period ending on the date on which the Liquidations Distribution shall become payable, and (y) an amount equal to the dividend on the preference shares A in respect of the current financial year, which amount shall be calculated in accordance with the provisions of article 33, paragraph 1, to be calculated proportionally over the elapsed portion of that financial year ending on the date on which the Liquidation Distribution shall become payable; and b. an amount per preference share A equal to the yield basis A referred to in article 33 paragraph 1 under a. The balance remaining after application of paragraph 3 there shall be distributed to the holders of preference shares B: a. any outstanding dividend referred to in article 33 paragraph 1, which shall then be calculated over the period ending on the date on which the liquidation payment shall become payable; and b. the nominal amount paid on these shares. 31 If the balance is not sufficient therefor, distribution shall be effected in proportion to the amounts paid on those shares. 5. The balance then remaining shall be distributed to the holders of ordinary shares in proportion to the total amount of ordinary shares held by each of them. 6. The liquidation shall otherwise be subject to the provisions of Title 1, Book 2 of the Civil Code. -0-0-0-032 Exhibit 1.2 BY-LAWS EXECUTIVE BOARD CORPORATE EXPRESS NV Adopted by the Executive Board on 26 October 2004 Approved by the Supervisory Board on 10 December 2004 and last amended on 19 June 2007 1 CONTENTS Page Introduction Chapter I – Composition of the Executive Board; Positions 1. Composition; Division of Tasks 2. Chief Executive Officer 3. Chief Financial Officer 4. Company Secretary Chapter II – Duties and Powers 5. General Duties and Powers 6. Strategy and Risks 7. Financial Reporting; Annual Accounts and Annual Report 8. Relation with the External Auditor 9. Relation with the Supervisory Board 10. The Shareholders’ Meeting 11. Relation with Analysts, the Financial Press and Institutional and Other Investors 12. Website of the Company Chapter III – Meetings of the Executive Board; Decision-making 13. Meetings of the Executive Board 14. Decision-making within the Executive Board Chapter IV – Other Provisions 15. Conflicts of Interests of Executive Board Members 16. Remuneration of Executive Board Members 17. Outside Positions 18. Holding and Trading Securities 19. Confidentiality 20. Miscellaneous 3 3 3 4 5 6 7 7 8 9 10 11 11 12 13 13 13 14 15 15 16 16 16 17 17 Annexes 1. List of Definitions 2. List of Information to be included in the Annual Report 3. List of Items to be placed on the Company’s Website 19 21 23 2 INTRODUCTION 0.1 0.2 These By-Laws are established pursuant to article 20.2 of the Company’s articles of association. These By-Laws are complementary to the provisions regarding the Executive Board and the Executive Board members as contained in applicable legislation and regulations, the articles of association of the Company and the rules pertaining to the relationship between the Supervisory Board and the Executive Board as contained in the By-Laws of the Supervisory Board. 0.3 These By-Laws and all annexes thereto are posted on the Company’s website. 0.4 The meaning of certain capitalised or uncapitalised terms used in these By-Laws is set forth in the List of Definitions attached as Annex 1 . CHAPTER I COMPOSITION OF THE EXECUTIVE BOARD; POSITIONS 1. Composition; Division of Tasks 1.1 The Executive Board members are appointed by the General Meeting of Shareholders. The Supervisory Board shall nominate one or more candidates for appointment.(1) 1.2 Executive Board members shall be appointed for a maximum of four years per term, provided however, that the Company may deviate from this provision in the event the market situation does not allow to fully comply at a certain time, in which case it will disclose that the appointment of an Executive Board member has been made for an indefinite period of time.(2) Notwithstanding the foregoing provision, the Executive Board members already in office on 1 January 2004 have been appointed for an indefinite period of time. 1.3 Executive Board members that have been appointed for a fixed term pursuant to clause 1.2 of these By-Laws, shall retire periodically in accordance with a rotation plan to be drawn up by the Supervisory Board in order to avoid, as far as possible, a situation in which many Executive Board members retire at the same time. The rotation plan, once drawn up, shall be made available for public inspection at the offices of the Company and shall be posted on the Company’s website.(3) The Supervisory Board may at any time amend a rotation plan. Amendments to a rotation plan, however, do not permit a sitting Executive Board member to (1) (2) (3) Articles of Association, article 18.1. Dutch Corporate Governance Code, best practice provision II.1.1. See point 40 of the explanatory notes to the Dutch Corporate Governance Code. 3 remain in office for a longer period than appointed for, or allow that he be asked to retire before his term has expired. 1.4 The number of Executive Board members shall be determined by the Supervisory Board after consultation with the CEO, and shall be two as a minimum. 1.5 Individual Executive Board members may be charged with specific parts of the managerial tasks, without prejudice to the collective responsibility of the Executive Board. The Executive Board remains collectively responsible for decisions, even if they are prepared by individual Executive Board members. An individual Executive Board member may only exercise such powers as are explicitly attributed or delegated to him provided however, that he may never exercise powers beyond those exercisable by the Executive Board. 1.6 The division of tasks within the Executive Board shall be determined (and amended, if necessary) by the Executive Board, subject to the approval of the Supervisory Board. Executive Board members especially charged with particular managerial tasks shall be primarily responsible for the risk control and monitoring of the managerial tasks concerned. 1.7 Each Executive Board member must inform the other Executive Board members in a clear and timely manner about the way in which he has used delegated powers and about major developments in the area of his responsibilities. 2. Chief Executive Officer 2.1 The Supervisory Board shall appoint one of the Executive Board members as CEO. 2.2 Within the Executive Board, the CEO shall be primarily responsible for: 2.3 (a) preparing an agenda and chairing meetings of the Executive Board; (b) ensuring that the Executive Board functions and makes decisions in a collective manner; (c) determining whether a proposed resolution should be brought to the Executive Board for a vote; (d) ensuring that resolutions are in accordance with the Strategic Plan; (e) supervising the implementation of passed resolutions and determining if further consultation with the Executive Board on their implementation is required; and (f) engaging in ad hoc discussions with Executive Board members regarding their respective tasks. Within the Executive Board, the CEO, who is the main contact between the Supervisory Board and the Executive Board, shall also be responsible for the following matters regarding the relationship between the Executive Board and the Supervisory Board: (a) submitting a proposed agenda and preparing meetings of the Supervisory Board in consultation with the Chairman of the Supervisory Board; 4 (b) ensuring that the Supervisory Board is provided with all information necessary for the proper performance of its duties; (c) overseeing and ensuring communications of the Executive Board with the Supervisory Board; (d) consulting regularly with the Chairman of the Supervisory Board and consulting other Supervisory Board members if deemed necessary or advisable; (e) considering requests of Executive Board members to consult with particular Supervisory Board members regarding an area of expertise; and (f) participating in meetings with the Audit Committee (upon the invitation of the Audit Committee) and the CNCG Committee. 2.4 The CEO shall be assisted in the organisation of the matters set out in clauses 2.2 and 2.3 by the Company Secretary. 3. Chief Financial Officer 3.1 The Executive Board shall appoint one of the Executive Board members as CFO, subject to the approval of the Supervisory Board. 3.2 Within the Executive Board, the CFO shall be primarily responsible for: 3.3 (4) (a) formulating and communicating the Company’s financial strategy; (b) overseeing and ensuring the integrity of the Company’s accounts; (c) the financial reporting of the Company; and (d) performing any other related duties as may be prescribed from time to time by the Executive Board. Within the Executive Board, the CFO shall also be primarily responsible for preparing and taking part in meetings of the Audit Committee (upon the invitation of the Audit Committee) to discuss: (a) the integrity of the financial statements of the Company (including but not limited to the choice of accounting policies, application and assessments of the effects of new rules, information about the handling of estimated items in the annual accounts and forecasts);(4) (b) the views of the Executive Board regarding the nomination to the General Meeting of Shareholders for the appointment of the External Auditor, qualifications, independence, approach, fees and proposed audit-scope of the External Auditor See Charter of the Audit Committee, clauses 5.2 and 5.3. 5 (without prejudice to the responsibilities of the Audit Committee in the area of finance, accounting and tax);(5) (c) the performance of tasks by the internal audit department of the Company and the External Auditor;(6) (d) the financial reporting process;(7) (e) the system of internal business controls (including but not limited to the effect of internal risk management and control systems);(8) (f) compliance by the Company with legislation and regulations and applicable codes of conduct in the area of finance, accounting and tax;(9) (g) compliance by the Company with recommendations of the External Auditor and the Company’s internal audit department;(10) (h) the Company’s tax planning;(11) (i) disagreements between the Executive Board and the External Auditor or the internal audit department of the Company in connection with the preparation of the financial statements and/or the quality of the internal risk management and control systems of the Company;(12) (j) any information that has come to the intention of the Audit Committee, indicating that a fraud or other illegal act has or may have occurred that could have a material effect on the Company’s financial statements.(13) 4. Company Secretary(14) 4.1 The Executive Board shall be assisted by the Company Secretary, who shall be appointed and dismissed by the Executive Board, subject to the approval of the Supervisory Board. The Company Secretary may be removed by the Executive Board after approval is obtained from the Supervisory Board. 4.2 4.3 (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) All Executive Board members shall have access to the advice and services of the Company Secretary. The Company Secretary shall see to it that correct Executive Board procedures are followed and that the Executive Board acts in accordance with its statutory obligations and its obligations under the Company’s articles of association. The Company Secretary shall assist the CEO in the organisation of the affairs of the Executive Board (the preparing and reporting See Charter of the Audit Committee, clause 5.1. See also the Buhrmann Policy regarding External Auditor Independence and Services. See Charter of the Audit Committee, clauses 5.1 and 5.5. See Charter of the Audit Committee, clause 5.3. See Charter of the Audit Committee, clause 5.4. See Charter of the Audit Committee, clauses 5.6 and 5.7. See Charter of the Audit Committee, clauses 5.1 and 5.5. See Charter of the Audit Committee, clause 5.6. See Charter of the Audit Committee, clause 5.8. See Charter of the Audit Committee, clause 5.9. Dutch Corporate Governance Code, best practice provision III.4.3. 6 of meetings, information etc.). The Company Secretary shall as such also be the secretary of the Executive Board. 4.4 The Company Secretary may delegate his duties under these By-Laws, or parts thereof, to a deputy appointed by him in consultation with the CEO. 4.5 The Company Secretary shall also perform tasks for the Supervisory Board, as provided for in the By-Laws of the Supervisory Board. CHAPTER II DUTIES AND POWERS 5. General Duties and Powers 5.1 The Executive Board is responsible to manage the Company, which includes among other things responsibility for determining and achieving the objectives of the Company, the strategy and policies and the development of results and a sound personnel policy. The Executive Board shall be accountable for these matters to the Supervisory Board and the General Meeting of Shareholders.(15) The responsibility for the management of the Company is vested collectively in the Executive Board. 5.2 The Executive Board is responsible for compliance with all relevant laws and regulations, for managing the risks attached to the Company’s activities and for financing the Company. The Executive Board reports on these issues at least annually and discusses the internal risk management and control systems as well as the main conclusions of the risk analysis referred to in clause 6.2 (a) with the the Audit Committee and the main conclusions of these discussions will be reported to the Supervisory Board.(16) 5.3 When discharging its duties the Executive Board shall act in accordance with the interests of the Company, taking into consideration the interests of the Company’s stakeholders.(17) 5.4 The Executive Board shall be responsible for the quality of its performance. 5.5 The Executive Board members shall externally express concurring views with respect to important affairs, matters of principle and matters of general interest, without jeopardising the responsibilities of the individual Executive Board members. 5.6 The Executive Board is, together with the Supervisory Board, responsible for the corporate governance structure of the Company, compliance with the Dutch Corporate Governance Code and any other applicable legislation and regulations.(18) (15) (16) (17) (18) Dutch Corporate Governance Code, Principle II.1. Dutch Corporate Governance Code, Principle II.1. Dutch Corporate Governance Code, Principle II.1 Dutch Corporate Governance Code, Principle I. 7 5.7 The Executive Board shall ensure that employees have the possibility of reporting alleged irregularities of a general, operational and financial nature in the Company to the CEO or an official designated by him, without jeopardising their legal position. Alleged irregularities concerning the functioning of Executive Board members are reported to the Chairman of the Supervisory Board. The procedures set forth in this clause 5.7 supplement those whistle- blowing procedures established by the Audit Committee pursuant to clause 14 of the By-Laws of the Supervisory Board and clause 6 of the Audit Committee Charter. The whistleblowers’ policy is posted on the Company’s website.(19) 5.8 All transactions between the Company and individuals or legal entities who hold at least 10% of the number of votes to be cast in the Company must be agreed on terms that are customary for arm’s-length transactions in the branch of business in which the Company and its Subsidiaries operate. Decisions to enter into transactions with such persons that are of material significance to the Company and/or to such persons require the approval of the Supervisory Board. Such transactions will be published in the Annual Report, together with a statement that this clause 5.8 has been complied with.(20) 5.9 The Executive Board shall perform its activities under the supervision of the Supervisory Board. 6. Strategy and Risks 6.1 The Executive Board shall formulate and record the Strategic Plan which includes: (i) the operational and financial objectives of the Company; (ii) the strategy designed to achieve the objectives; and (iii) the parameters to be applied in relation to the strategy. The Strategic Plan and significant amendments thereto must be submitted to the Supervisory Board for approval and shall be summarised in the Annual Report.(21) The Executive Board shall at least once a year inform the Supervisory Board about the main features of the strategy.(22) 6.2 The Executive Board shall be responsible for ensuring that the Company has internal risk management and control systems that are suitable for the Company. The Executive Board shall in any event employ as instruments of the internal risk management and control systems(23): (19) (20) (21) (22) (23) (24) (a) risk analyses of the operational and financial objectives of the Company; (b) a code of conduct, which is posted on the Company’s website; (c) guides for the layout of financial reports and the procedures to be followed in drawing up the reports; (d) a system of monitoring and reporting; and (e) disclosure controls and procedures.(24) Dutch Corporate Governance Code, best practice provision II.1.6. Dutch Corporate Governance Code, best practice provision III.6.4. Dutch Corporate Governance Code, best practice provision II.1.2. Section 2:142.2 Dutch Civil Code Dutch Corporate Governance Code, best practice provision II.1.3. Rules 13a-15 and 15d-15 of the US Exchange Act. 8 6.3 The Executive Board shall report the risks associated with the Strategic Plan to the Supervisory Board following discussions with the Audit Committee. The risks identified with the Strategic Plan shall be described in the Strategic Plan. 6.4 The Executive Board shall appoint the Disclosure Committee, consisting of senior officers of the Company, which shall assist the Executive Board with certain tasks set out in clause 6.5 of these By-Laws. 6.5 The Executive Board, assisted by the Disclosure Committee, shall at least once a year evaluate the effectiveness of the internal control framework and disclosure controls and procedures of the Company in ensuring, inter alia : (a) with reasonable certainty that the assets of the Company have been safeguarded against unauthorised use; (b) that the financial administration of the Company is sound, reliable and fairly represents the condition of the Company; (c) that financial disclosures are made in a complete, accurate and timely manner; and (d) that information required to be disclosed by the Company in the reports that it files or submits to regulatory authorities is recorded, processed, summarised and reported within the required time periods.(25) Such evaluations shall comply in all respects with those required by Rules 1 3a- 15 and 1 5d- 15 of the US Exchange Act. Following discussions with the Audit Committee, the Executive Board shall provide the Supervisory Board with a report on the results of such evaluation. 7. Financial Reporting; Annual Accounts and Annual Report 7.1 The Executive Board shall be responsible for the quality and completeness of publicly disclosed financial reports.(26) The preparation and publication of the Annual Report, the Annual Accounts, the quarterly and half-yearly figures and ad hoc financial information require careful internal procedures.(27) The Executive Board shall be responsible for designing, establishing and maintaining internal control over financial reporting that ensures that all major financial information is known to the Executive Board, so that the timeliness, completeness, reliability and accuracy of the external financial reporting in accordance with generally accepted accounting principles is assured.(29) For this purpose the Executive Board shall ensure that financial information from business divisions and/or Subsidiaries is reported directly to itself and that the integrity of that information is not compromised.(30) (25) (26) (27) (29) (30) Rules 13a-15(e) and 15d-15(e) of the US Exchange Act. Dutch Corporate Governance Code, Principle V.1. Dutch Corporate Governance Code, best practice provision V.1.1. Rules 13a)15(f) and 15d-15(f) of the US Exchange Act. Dutch Corporate Governance Code, best practice provision V.1.3. 9 7.2 The Executive Board shall release the Annual Report and the Annual Accounts within five months of the end of the financial year. 7.3 The Executive Board shall ensure that the information listed in Annex 2 is included in the Annual Report. 7.4 7.5 The Executive Board shall declare in the Annual Report that the internal risk management and control systems are adequate and effective and shall provide clear substantiation of this. In the Annual Report, the Executive Board shall report on the operation of the internal risk management and control system during the year under review. In doing so, it shall describe any significant changes in internal controls or other factors that could significantly affect internal controls, including any corrective actions taken with regard to significant deficiencies and material weaknesses and any other major improvements that are planned, and shall confirm that they have been discussed with the Audit Committee and the Supervisory Board.(31) The Executive Board shall, in the Annual Report, set out the sensitivity of the results of the Company to relevant external factors and variables.(32) 7.6 The broad outline of the corporate governance structure of the Company shall be explained in a separate chapter of the Annual Report, partly by reference to the principles mentioned in the Dutch Corporate Governance Code. In this chapter the Company shall indicate to what extent it applies the Dutch Corporate Governance Code and, in the event of non-appliance, why, and to what extent it does not apply it.(33) 7.7 The internal audit department shall operate under the responsibility of the Executive Board.(34) The Executive Board shall consult with the Audit Committee and inform the External Auditor with respect to the drawing up the work schedule of the internal audit department. The Executive Board shall ensure that the Audit Committee and the External Auditor take cognisance of the findings of the internal audit department.(35) 8. Relation with the External Auditor 8.1 Under the oversight of the Audit Committee, the Executive Board shall ensure that the External Auditor can properly perform his audit work and shall encourage the Company to properly perform and pursue the role and the policy of the Company regarding the External Auditor, as provided for by agreement with the External Auditor, these By-Laws, the By- Laws of the Supervisory Board and the Charter of the Audit Committee. 8.2 The Executive Board shall annually, and on an interim basis if necessary, report to the Audit Committee on the development of its relationship with the External Auditor, particularly on his independence (including the desirability of rotating the responsible audit partners of the External Auditor and the desirability of the External Auditor providing both audit services and non-audit services to the Company).(36) (31) (32) (33) (34) (35) (36) Dutch Corporate Governance Code, best practice provision II.1.4; Rules 13a-15 and 15d-15 of the US Exchange Act. Dutch Corporate Governance Code best practice provision II.1.5. Dutch Corporate Governance Code best practice provision I.1. Dutch Corporate Governance Code Principle V.3. Dutch Corporate Governance Code, best practice provision V.3.1. Dutch Corporate Governance Code, best practice provision V.2.2. 10 8.3 At least once every four years, the Audit Committee and the Executive Board shall each conduct a thorough and independent assessment of the functioning of the External Auditor in the various entities and capacities in which the External Auditor acts. The Audit Committee and the Executive Board shall conduct their assessment separately and independently from one another. The main conclusions of this assessment shall be communicated to the General Meeting of Shareholders in connection with the nomination for the appointment of the External Auditor.(37) 9. Relation with the Supervisory Board In relation to the provision of information and the exercise of duties and powers by the Supervisory Board and its members and Committees, the Executive Board and its members shall act in accordance with the provisions applying to the Executive Board and its members under or pursuant to these By-Laws, the By-Laws of the Supervisory Board, the Charters of the Committees, the Company’s articles of association and the applicable legislation and regulations. 10. The Shareholders’ Meeting 10.1 The Executive Board and the Supervisory Board shall endeavour to provide the General Meeting of Shareholders with all information that it requires for the exercise of its powers.(38) 10.2 The Executive Board and the Supervisory Board shall endeavour to provide the General Meeting of Shareholders with all requested information, unless this would be contrary to an overriding interest of the Company. If the Executive Board and the Supervisory Board invoke an overriding interest, they shall state the reasons.(39) 10.3 If a right of approval is granted to the General Meeting of Shareholders by law or under the Company’s articles of association, or the Executive Board or the Supervisory Board requests a delegation of powers, the Executive Board and the Supervisory Board shall inform the General Meeting of Shareholders by means of a shareholders’ circular of all facts and circumstances relevant to the approval, delegation or authorisation to be granted. The shareholders’ circular shall in any event be posted on the Company’s website as of the convening of the General Meeting of Shareholders at which the proposal concerned is discussed, until the meeting has ended.(40) This shareholders’ circular may be in the format of explanatory notes to the agenda of the General Meeting of Shareholders. 10.4 10.5 (37) (38) (39) (40) The Executive Board members shall be present at the General Meeting of Shareholders, unless they are unable to attend for important reasons. The Executive Board and the Supervisory Board shall procure that each substantial change in the corporate governance structure of the Company or in the Company’s compliance with the Dutch Corporate Governance Code, best practice provision V.2.3. Dutch Corporate Governance Code, Principle IV.3. Dutch Corporate Governance Code, best practice provision IV.3.5. Dutch Corporate Governance Code, best practice provision IV 3.7. 11 Dutch Corporate Governance Code is submitted to the General Meeting of Shareholders for discussion under a separate agenda item.(41) 10.6 10.7 The policy of the Company on reserves and on dividends (the level and purpose of the reserves, the amount of the dividend and the type of dividend) and any changes to this policy shall be dealt with and explained as a separate agenda item at the General Meeting of Shareholders.(42) A proposal to distribute a dividend shall be dealt with as a separate agenda item at the General Meeting of Shareholders.(43) 10.8 The Company shall determine a registration date as referred to in article 42.5 of the Company’s articles of association, for the exercise of the voting rights and the rights attached to meetings.(44) 10.9 The Executive Board and the Supervisory Board shall ensure compliance with all applicable legislation and regulations with respect to the rights of the General Meeting of Shareholders and the related rights of individual shareholders. 10.10 If a serious private bid is made for a business unit or a participating interest and the value of the bid exceeds one-third of the amount of the assets according to the Company’s last adopted consolidated balance sheet and such bid is made public, the Executive Board shall, at its earliest convenience, make public its position on the bid and the reasons for this position.(45) 11. Relation with Analysts, the Financial Press and Institutional and Other Investors 11.1 The Executive Board shall see to it that all shareholders and other parties in the financial markets shall be equally and simultaneously informed about matters that may affect the share price. The contacts between the Executive Board on the one hand and press and financial analysts on the other shall be carefully handled and structured and the Company shall not engage in any acts that compromise the independence of analysts in relation to the Company and vice versa.(46) 11.2 Meetings with and presentations to analysts, presentations to (institutional) investors and press conferences, as far as they regard the results of the Company or other pricesensitive matters, shall be announced in advance on the Company’s website and by means of press releases. Provisions shall be made for all shareholders to follow meetings and presentations regarding all material non-public information in real time, by means of webcasting, telephone lines or by other means. The presentations will be posted on the Company’s website immediately after the meetings. (47) 11.3 (41) (42) (43) (44) (45) (46) (47) (48) The Company shall not in advance assess, comment on or correct analysts’ reports and valuations other than factually.(48) Dutch Corporate Governance Code, best practice provision I.2. Dutch Corporate Governance Code, best practice provision IV.1.4. Dutch Corporate Governance Code, best practice provision IV.1.5.; Articles of Association, article 36.2 (c). Dutch Corporate Governance Code, best practice provision IV.1.7. Dutch Corporate Governance Code, best practice provision IV.1.3. Dutch Corporate Governance Code, Principle IV.3. Dutch Corporate Governance Code, best practice provision IV 3.1. See also Buhrmann Policy Regarding the Disclosure of Company Information, clause 5. Dutch Corporate Governance Code, best practice provision IV.3.2. 12 11.4 The Company shall not pay any fee to any party for the carrying out of research for analysts’ reports or for the production or publication of analysts’ reports on the Company, with the exception of credit rating agencies.(49) 11.5 Analysts’ meetings, presentations to institutional or other investors and direct discussions with those investors shall not take place shortly before the publication of the regular financial information (quarterly, half-yearly or annual reports) (50), or in the period of one month prior to the publication of a prospectus for the issuance of shares in the capital of the Company. 12. Website The Executive Board shall post and update all information that the Company is required to publish or deposit pursuant to the applicable provisions of company law or securities law and regulation on a separate part of the Company’s website (i.e. separate from the commercial information of the Company) that is recognisable as such. A list of items that must be placed on the website is attached as Annex 3 . It is sufficient for the Company to create a hyperlink to the website of the institutions that (also) publish the relevant information electronically due to statutory provisions or stock exchange regulations.(51) CHAPTER III MEETINGS OF THE EXECUTIVE BOARD; DECISION-MAKING 13. Meetings of the Executive Board 13.1 The Executive Board shall in principle meet once a month, or more often as deemed desirable or required for a proper functioning of the Executive Board by any one or more Executive Board members. Meetings of the Executive Board shall be called by the CEO. Save in urgent cases, to be determined by the CEO, the agenda for the meeting, including any related documentation, shall be sent to all Executive Board members at least two calendar days before the meeting. 13.2 Executive Board meetings are presided over by the CEO. If the CEO is absent, one of the other Executive Board members, designated by a majority of votes cast by the Executive Board members present and represented at the meeting, shall preside over the meeting. 13.3 An Executive Board member may be represented at Executive Board meetings by another Executive Board member holding a proxy in writing. The existence of such proxy must be proved satisfactorily to the CEO or, in his absence, Executive Board members present at the meeting. (49) (50) (51) Dutch Corporate Governance Code, best practice provision IV.3.3. Dutch Corporate Governance Code, best practice provision IV.3.4. See also Buhrmann Policy Regarding the Disclosure of Company Information, clause 8. Dutch Corporate Governance Code, best practice provision IV.3.6. 13 13.4 The admittance to the meeting of persons other than the Executive Board members and the Company Secretary or his deputy shall be decided by majority vote of the Executive Board members present and represented at the meeting. 13.5 The Company Secretary or any other person designated for such purpose by the chairman of the meeting shall draw up the minutes of the meeting. The minutes shall contain a summary of the meeting and an overview of the resolutions taken at the meeting. The minutes shall be adopted by the Executive Board at the same meeting, or the next meeting. 14 . Decision-making within the Executive Board 14.1 The Executive Board members shall endeavour to achieve that resolutions are, as much as possible, adopted unanimously. 14.2 Each Executive Board member has the right to cast one vote. 14.3 Where unanimity cannot be reached and the law, the Company’s articles of association or these By-Laws do not prescribe a larger majority, all resolutions of the Executive Board are adopted by an absolute majority of the votes cast. In the event of a tie, the CEO shall have the deciding vote. At a meeting, the Executive Board may only pass resolutions if the majority of the Executive Board members then in office are present or represented. 14.4 In general, resolutions of the Executive Board shall be adopted at an Executive Board meeting. 14.5 The Executive Board shall not pass resolutions relating to the area of expertise of a particular Executive Board member in the absence of that Executive Board member. 14.6 Executive Board resolutions may also be adopted in writing, provided the proposal concerned is submitted to all Executive Board members then in office and none of them objects to this form of adoption. Adoption of resolutions in writing shall be effected by statements in writing from all the Executive Board members. A statement from an Executive Board member who wishes to abstain from voting on a particular resolution which is adopted in writing must reflect the fact that he does not object to this form of adoption. 14.7 The Executive Board may deviate from the provisions of clauses 14.3 (last sentence), 14.4, 14.5 and 14.6 if this is deemed necessary by the CEO, considering the urgent nature and other circumstances of the case, provided that all Executive Board members are allowed the opportunity to participate in the decision-making process. The CEO and the Company Secretary shall then prepare a report on a resolution so adopted that is not in writing, which shall be added to the documents for the next meeting of the Executive Board. 14.8 A resolution adopted by the Executive Board may be evidenced outside the Company through a statement from the CEO and/or the Company Secretary. 14 CHAPTER IV OTHER PROVISIONS 1 5. Conflicts of Interests of Executive Board Members 15.1 An Executive Board member shall not: (a) enter into competition with the Company; (b) demand or accept (substantial) gifts from the Company for himself or for his spouse, registered partner or other life companion, foster child or relative by blood or marriage up to the second degree; (c) provide unjustified advantages to third parties to the detriment of the Company; or (d) take advantage of business opportunities to which the Company is entitled for himself or for his spouse, registered partner or other life companion, foster child or relative by blood or marriage up to the second degree.(52) 15.2 An Executive Board member shall immediately report any conflict of interest or potential conflict of interest that is of material significance to the Company and/or to him, to the Chairman of the Supervisory Board and to the other Executive Board members and shall provide all relevant information, including information concerning his spouse, registered partner or other life companion, foster child and relatives by blood or marriage up to the second degree. The Chairman of the Supervisory Board shall decide whether a conflict of interest exists.(53) 15.3 A conflict of interest exists, in any event, if the Company intends to enter into a transaction with a legal entity: (i) in which an Executive Board member personally has a material financial interest; (ii) which has an executive board member who has a relationship under family law with an Executive Board member;(54) or (iii) in which an Executive Board member has a managerial or supervisory position.(55) 15.4 An Executive Board member shall not take part in any discussion or decision-making that involves a subject or transaction in relation to which he has a conflict of interest with the Company.(56) 15.5 All transactions in which there are conflicts of interest with Executive Board members shall be agreed on terms that are customary for arm’s-length transactions in the branch of business in which the Company and its Subsidiaries operate. Decisions to enter into transactions in which there are conflicts of interest with Executive Board members that are of material significance to the Company and/or the relevant Executive Board members require the approval of the Supervisory Board. The Supervisory Board may delegate the power to approve such transactions to one or more Supervisory Board members. Such transactions shall be published in the Annual Report, together with a statement that a conflict of interest (52) (53) (54) (55) (56) Dutch Corporate Governance Code, best practice provision II.3.1. Dutch Corporate Governance Code, best practice provision II.3.2. A relationship under family law exists between a child, its parents and their blood relatives (Section 1:197, Dutch Civil Code). Dutch Corporate Governance Code, best practice provision II.3.2 (continued). Dutch Corporate Governance Code, best practice provision II.3.3. 15 exists and a declaration that the provisions of clauses 15.2 through 15.5 of these By-Laws have been complied with.(57) 16. Remuneration of Executive Board Members The remuneration and contractual terms of employment of Executive Board members shall be determined by the Supervisory Board in accordance with article 19.2 of the Company’s articles of association and clause 12 of the By-Laws of the Supervisory Board, within the scope of the remuneration policy adopted by the General Meeting of Shareholders. 17. Outside Positions 17.1 An Executive Board member may not be a member of the supervisory board of more than two companies. An Executive Board member may not concurrently serve as chairman of the supervisory board of a company. Membership of the supervisory board of affiliates of the Company does not count for this purpose.(58) 17.2 The acceptance by an Executive Board member of membership of the supervisory board of a company requires the approval of the Supervisory Board. Other important positions held by an Executive Board member must be notified to the Supervisory Board.(59) 17.3 Executive Board members shall not without prior permission of the CEO following consultation with the Chairman of the Supervisory Board or, in the case of the CEO, prior permission of the Chairman of the Supervisory Board, accept: (a) any other remunerated position, including in an advisory or supervisory capacity; or (b) any non-remunerated position with third parties, with the exception of positions with local sports clubs, social clubs, charitable institutions and schools. 18. Holding and Trading Securities 18.1 Any shareholding in the Company by Executive Board members is for the purpose of longterm investment.(60) 18.2 Executive Board members are bound to the Buhrmann Insider Trading Rules regarding securities of the Company and other securities referred to in the Buhrmann Insider Trading Rules. 18.3 The ownership of and transactions with securities by Executive Board and Supervisory Board members other than as referred to in the Buhrmann Insider Trading Rules is governed by (57) (58) (59) (60) Dutch Corporate Governance Code, best practice provision II.3.4. Dutch Corporate Governance Code, best practice provision II.1.7. Dutch Corporate Governance Code, best practice provision II.1.7. Dutch Corporate Governance Code, Principle II.2. 16 regulations set by the Supervisory Board. These regulations are posted on the Company’s website.(61) 19. Confidentiality No Executive Board member shall, during his membership of the Executive Board or afterwards, disclose in any way whatsoever to anyone whomsoever any information of a confidential nature regarding the business of the Company and/or companies in which it holds a stake, that came to his knowledge in the capacity of his work for the Company and which he knows or should know to be of a confidential nature, unless required by law. An Executive Board member is allowed to disclose the above information to Executive Board members and Supervisory Board members as well as to staff members of the Company and companies in which the Company holds a stake, who, in view of their activities for the Company and/or companies in which the Company holds a stake, should be informed of the information concerned. An Executive Board member shall not in any way whatsoever utilise the information referred to above for his personal benefit. 20. Miscellaneous 20.1 Acceptance by Executive Board members. Anyone who is appointed as an Executive Board member must, upon assuming office, declare in writing to the Company that he accepts and agrees to the contents of these By-Laws and pledge to the Company that he will comply with the provisions of these By-Laws. 20.2 Amendment. These By-Laws may be amended by the Executive Board at any time and without any notification being made, subject only to prior Supervisory Board approval. 20.3 Interpretation. In the event of lack of clarity or difference of opinion on the interpretation of any provision of these By-Laws, the opinion of the Chairman of the Supervisory Board shall be decisive. 20.4 G overning law and jurisdiction. These By-Laws are governed by the laws of the Netherlands. The courts of the Netherlands have exclusive jurisdiction to settle any dispute arising from or in connection with these By-Laws (including any dispute regarding the existence, validity or termination of these By-Laws). 20.5 Complementarity to Dutch law and articles of association. These By-Laws are complementary to the provisions governing the Executive Board as contained in Dutch law, other applicable Dutch, EU or foreign regulations and the Company’s articles of association. Where these By-Laws are inconsistent with Dutch law, other applicable Dutch, EU or foreign rules and regulations or the Company’s articles of association, the latter shall prevail. Where these By-Laws are consistent with the Company’s articles of association but inconsistent with Dutch law or other applicable Dutch, EU or foreign rules and regulations, the latter shall prevail. (61) Dutch Corporate Governance Code, best practice provision II.2.6. Clauses 18.2 and 18.3 of these By-Laws assume the existence of two separate sets of regulations, with the 18.3-regulations applying only to Executive Board members and Supervisory Board members, while the 18.2 regulations also apply to other “insiders”. As an alternative, two separate sets can be produced: one for Executive Board members and Supervisory Board members, and the other for other “insiders”. 17 20.6 Partial invalidity. If one or more provisions of these By-Laws are or become invalid, this shall not affect the validity of the remaining provisions. The Executive Board, subject to prior approval of the Supervisory Board, may replace the invalid provisions by provisions which are valid and the effect of which, given the contents and purpose of these By-Laws is, to the greatest extent possible, similar to that of the invalid provisions. * * * * * 18 ANNEX 1 LIST OF DEFINITIONS 1. In the By-Laws of the Executive Board and the Supervisory Board, the following terms have the following meanings: affiliated company has the meaning attributed to it in Section 1 of the Disclosure of Major Holdings in Listed Companies Act 1996 ( Wet melding zeggenschap in ter beurze genoteerde vennootschappen 1996 ). Annual Accounts means the annual accounts of the Company as referred to in Section 2:101 of the Dutch Civil Code. Annual Report means the annual report of the Company drawn up by the Executive Board, as referred to in Section 2:101 of the Dutch Civil Code. Audit Committee means the Committee designated as such in clause 5 of the By-Laws of the Supervisory Board. Buhrmann Insider Trading Rules means the insider trading rules of the Company regarding securities of the Company and other securities referred to in these insider trading rules. By-Laws means the By-Laws of the Executive Board or the By-Laws of the Supervisory Board, depending on the context, including the annexes belonging thereto. CEO means the Chief Executive Officer of the Company. CFO means the Chief Financial Officer of the Company. CNCG Committee means the Compensation, Nominating and Corporate Governance Committee, designated as such in clause 5 of the By-Laws of the Supervisory Board. Committee means, as regards the Supervisory Board, each committee of the Supervisory Board as referred to in clause 5 of the By-Laws of the Supervisory Board. Company means Buhrmann N.V., and, where appropriate, the subsidiaries and possible other group companies of the Company, whose financial information is incorporated in the consolidated annual accounts of the Company. Company Secretary means the officer of the Company who operates as the secretary of the Company and as secretary of the Executive Board and Supervisory Board and who is appointed and may be dismissed by the Executive Board subject to the approval of the Supervisory Board. Disclosure Committee means the disclosure committee appointed by the Executive Board, as referred to in clause 7.2 of the By-Laws of the Executive Board. Executive Board means the Executive Board of the Company. 19 External Auditor means the accounting and auditing firm that, in accordance with Section 2:393 of the Dutch Civil Code, is charged with the audit of the annual accounts of the Company. Form 20-F means an annual report on Form 20-F under the US Exchange Act. General Meeting of Shareholders means the general meeting of shareholders of the Company. group company has the meaning attributed to it in Section 2:24b of the Dutch Civil Code. in writing means by letter, by telecopier, by e-mail, or by message which is transmitted via any other current means of communication and which can be received in written form. Remuneration Report means the remuneration report of the Supervisory Board regarding the remuneration policy of the Company as drawn up by the Compensation, Nominating and Corporate Governance Committee of the Supervisory Board. Strategic Plan means the strategic policy and business plan of the Company designed to achieve its operational and financial objectives as established pursuant to the provisions of the relevant By-Laws of the Executive Board. Subsidiary has the meaning attributed to it in Section 2:24a of the Dutch Civil Code. Supervisory Board means the supervisory board of the Company. Supervisory Board Profile means the profile for the size and composition of the Supervisory Board, as designated in clause 1.1 of the By-Laws of the Supervisory Board. Supervisory Board Report means the report of the Supervisory Board to be included in the Annual Report, as designated in clause 9.2 of the By-Laws of the Supervisory Board. Works Council means the works council of the Company. 2. 3. Save where the context dictates otherwise, in the By-Laws of the Executive Board and the Supervisory Board: (a) words and expressions expressed in the singular form also include the plural form, and vice versa; (b) words and expressions expressed in the masculine form also include the feminine form; and (c) a reference to a statutory provision counts as a reference to this statutory provision including all amendments, additions and replacing legislation that may apply from time to time. Headings of articles and other headings in the By-Laws of the Executive Board and the Supervisory Board are inserted for ease of reference and do not form part of the ByLaws concerned for the purpose of interpretation. 20 ANNEX 2 LIST OF INFORMATION TO BE INCLUDED IN THE ANNUAL REPORT II.1.2 CG Code The broad outline of: (i) the operational and financial objectives of the Company, (ii) the strategy designed to achieve the objectives and (iii) the parameters to be applied in relation to the strategy .(62) II.1.4 CG Code A statement from the Executive Board that the internal risk management and control systems are adequate and effective and report on the operation of the internal risk management and control system during the year under review.(63) II.1.5 CG Code A report on the sensitivity of the results of the Company to the relevant external factors and variables.(64) II.3.4 CG Code Publication of all transactions in which there are conflicts of interest with Executive Board members that are of material significance to the Company and/or the Executive Board members concerned.(65) III.6.3 CG Code Publication of all transactions in which there are conflicts of interest with Supervisory Board members that are of material significance to the Company and/or the Supervisory Board members concerned.(66) III.6.4 CG Code Publication of all transactions between the Company and legal or natural persons who hold at least ten percent of the number of votes to be cast in the Company.(67) IV.3.9 CG Code A survey of all existing or potential anti-takeover measures and also an indication of the circumstances in which it is expected that these measures may be used. I.1 CG Code In a separate chapter: the broad outline of the corporate governance structure of the Company, partly by reference to the principles mentioned in the Dutch Corporate Governance Code, indicating expressly to what extent it applies the best practice provisions in the Dutch Corporate Governance Code and, in the event of non- appliance, why, and to what extent, it does not apply it.(68) Rules 1 3a-15/ 15d/15 under the US Exchange Act of 1934 The Executive Board’s evaluations of the Company’s internal control over financial reporting and disclosure controls and procedures. (62) (63) (64) (65) (66) (67) (68) Executive Board By-Laws, clause 6.1. Executive Board By-Laws, clause 7.5. Executive By-Laws, clause 7.6. Executive Board By-Laws, clause 15.5. Supervisory Board By-Laws, clause 19.4. Executive Board By-Laws, clause 5.8. Executive Board By-Laws, clause 7.7. 21 NOTES TO THE ANNUAL ACCOUNTS II.2 (2nd Principle) CG Code The information prescribed by law on the level and structure of the remuneration of the individual members of the Executive Board. II.2.14 CG Code In addition to the information to be included pursuant to Section 2:383d of the Dutch Civil Code, a statement of the value of the options granted to the Executive Board members and the employees and an indication of how this value is determined. III.7 CG Code The information prescribed by law on the level and structure of the remuneration of the individual members of the Supervisory Board. -0-0-0-0-0-022 ANNEX 3 LIST OF ITEMS TO BE PLACED ON THE COMPANY’S WEBSITE II.1.3 CG Code A code of conduct (the “Buhrmann Business Principles and Code of Ethics”).(69) II.1.6 CG Code Whistleblower Policy (included in the Buhrmann Business Principles and Code of Ethics) (70) II.2.13 CG Code The Remuneration Report of the Supervisory Board.(71) III.1.1. CG Code By-Laws of the Supervisory Board and all annexes thereto.(72) III.3.1 CG Code Supervisory Board Profile.(73) III.3.6 CG Code Rotation Plan of the Supervisory Board.(74) III.5.1 CG Code Charters and composition of the Committees.(75) III.7.3 CG Code Regulations concerning ownership of and transactions in securities by Executive Board members and Supervisory Board members.(76) IV.3.1 CG Code Announcement in advance of meetings with analysts, presentations to analysts, presentations to (institutional) investors and press conferences as well as publications of the relevant presentations after these meetings.(77) IV.3.6 CG Code The Company shall place and update all information which it is required to publish or deposit pursuant to the provisions of company law and securities law and regulation applicable to it, on a separate part of the Company’s website – which means separate of the commercial information on the Company – that is recognisable as such.(78) (69) (70) (71) (72) (73) (74) (75) (76) (77) (78) Executive Board By-Laws, clause 6.2(b). Executive Board By-Laws, clause 5.7. Supervisory Board By-Laws, clause 12.1. Supervisory Board By-Laws, clause 0.3. Supervisory Board By-Laws, clause 1.1. Supervisory Board By-Laws, clause 2.5. Supervisory Board By-Laws, clause 5.4. Executive Board By-Laws, clause 18.3; Supervisory Board By-Laws, clause 23.3. Executive Board By-Laws, clause 11.2. Executive Board By-Laws, clause 12. 23 IV.3.7 CG Code Shareholders circulars drawn up by the Company.(79) The By-Laws of the Executive Board and all annexes thereto.(80) Rotation plan for Executive Board members.(81) Essential elements of contract with Executive Board member, immediately upon conclusion thereof.(82) Reports of General Meetings of Shareholders.(83) -0-0-0-0-0-0- (79) (80) (81) (82) (83) Executive Board By-Laws, clause 10.3. Executive Board By-Laws, clause 0.3. Once available, see Executive Board By-Laws, clause 1.3. Supervisory Board By-Laws, clause 12.4. Supervisory Board By-Laws, clause 13.8. 24 Exhibit 1.3 BY-LAWS SUPERVISORY BOARD CORPORATE EXPRESS NV Adopted by the Supervisory Board on 10 December 2004 and last adjusted on 2 February 2008 Introduction 4 Chapter I - Composition of the Supervisory Board; Positions; Committees 4 1. Supervisory Board Profile, Size, Expertise and Independence 4 2. (Re)Appointment; Term of Office; Resignation 6 3. Chairman and Vice-Chairman 7 4. Company Secretary 9 5. Committees 9 Chapter II - Duties and Powers 10 6. General Duties and Powers; Relation with the Executive Board 10 7. Duties regarding the Actions of the Executive Board Members 12 8. Duties regarding the Members and the Performance of the Executive Board and the Supervisory Board 12 9. Certain other Duties of the Supervisory Board 13 10. Duties regarding the Supervision of Financial Reporting 14 11. Duties regarding Nomination and Assessment of External Auditor 15 12. Remuneration of Executive Board Members 17 13. The Shareholders’ Meeting 18 14. Complaints Handling; Whistleblowers 19 Chapter III - Supervisory Board Meetings; Decision-making 20 15. Frequency, Notice, Agenda and Venue of Meetings 20 16. Attendance of and Admittance to Meetings 20 17. Chairman of the Meeting; Reports 21 18. Decision-making within the Supervisory Board 21 Chapter IV - Other Provisions 22 19. Conflicts of Interests of Supervisory Board Members 22 20. Remuneration of Supervisory Board Members 23 21. Induction Programme, Ongoing Training and Education 23 22. Other Positions 24 23. Holding and Trading Securities 24 2 24. Confidentiality 25 25. Miscellaneous 25 Annexes 1. 2. 3. 4. 5. Page List of Definitions Supervisory Board Profile Rotation Plan Supervisory Board List of Information to be included in the Supervisory Board Report Information to be included in the Remuneration Report 27 30 32 33 34 3 INTRODUCTION 0.1 These By-Laws are established pursuant to article 29.10 of the Company’s articles of association.(1) 0.2 These By-Laws are complementary to the provisions regarding the Supervisory Board and the Supervisory Board members as contained in applicable legislation and regulations, the articles of association of the Company and the rules pertaining to the relationship between the Executive Board and the Supervisory Board as contained in the By-Laws of the Executive Board (which have been approved by the Supervisory Board). 0.3 These By-Laws and all annexes thereto are posted on the Company’s website.(2) 0.4 The meaning of certain capitalised or uncapitalised terms used in these By-Laws is set forth in the List of Definitions attached as Annex 1 . CHAPTER I COMPOSITION OF THE SUPERVISORY BOARD; POSITIONS; COMMITTEES 1. Supervisory Board Profile, Size, Expertise and Independence 1.1 The Supervisory Board shall prepare a profile of its size and composition, taking account of the nature of the business of the Company and its Subsidiaries and the desired expertise and background of the Supervisory Board members (the “Supervisory Board Profile”). The current Supervisory Board Profile is attached as Annex 2 . The Supervisory Board Profile shall furthermore be made available for public inspection at the offices of the Company and is posted on the Company’s website.(3) 1.2 The number of Supervisory Board members shall be determined by the Supervisory Board after consultation with the CEO and taking into account clauses 1.1 and 1.2 of the Profile, and shall be four as a minimum. (1) (2) (3) Dutch Corporate Governance Code, best practice provision III.1.1. Dutch Corporate Governance Code, best practice provision III.1.1. Dutch Corporate Governance Code, best practice provision III.3.1. 4 1.3 1.4 (4) (5) (6) (7) (8) (9) The Supervisory Board shall endeavour to ensure, within the limits of its powers, that it is at all times composed so that: (a) its members are able to act critically and independently of one another, the Executive Board and any particular interest;(4) (b) each Supervisory Board member is capable of assessing the broad outline of the overall policy;(5) (c) each Supervisory Board member has the specific expertise required to perform his duties within the framework of his role within the Supervisory Board Profile;(6) (d) the Supervisory Board as a whole matches the Supervisory Board Profile and the composition of the Supervisory Board is such that it is able to carry out its duties properly;(7) (e) at least one Supervisory Board member is a financial expert within the meaning of clause 2.4 of the Charter of the Audit Committee;(8) (f) all Supervisory Board members, with the exception of not more than one person, shall be independent within the meaning of clause 1.4 of these By-Laws;(9) (g) all Supervisory Board members observe the restrictions regarding the nature and number of their other positions as set forth in clause 22 of these By-Laws. A Supervisory Board member is deemed independent if the following criteria of dependence do not apply to him. These criteria are that the Supervisory Board member concerned, his spouse, registered partner or other life companion, foster child or relative by blood or marriage up to the second degree: (a) is, or was in the five years prior to his/her appointment to the Supervisory Board, an employee of the Company, a member of the Executive Board, an executive officer or member of the executive board of an affiliate, a general partner or managing partner of an affiliate or a director who is or was also an employee of an affiliate; (b) receives directly or indirectly personal financial compensation from the Company, or an affiliated company, other than ordinary course compensation received for work performed as a Supervisory Board member or member of a Committee of the Supervisory Board; Dutch Corporate Governance Code, Principle III.2. Dutch Corporate Governance Code, Principle III.3. Dutch Corporate Governance Code, Principle III.3. Dutch Corporate Governance Code, Principle III.3. Dutch Corporate Governance Code, best practice provision III.3.2. Dutch Corporate Governance Code, best practice provision III.2.1. 5 (c) has had an important business relationship with the Company or an affiliated company in the year prior to the appointment; (d) is a member of the executive board of a company in which a member of the Executive Board is a supervisory board member; (e) holds at least ten per cent of shares in the Company’s capital (including shares held by natural or legal persons that cooperate with the individual concerned under an express, tacit, oral or written agreement); (f) is a member of the executive board or supervisory board, or a representative or executive officer in some other way, of a legal entity which holds at least ten per cent of the shares in the Company’s capital, unless such entity is a member of the same group as the Company; or (g) has temporarily managed the Company during the previous twelve months due to vacant seats on the Executive Board, or because Executive Board members were unable to perform their duties.(10) 1.5 When required by applicable regulations, the Supervisory Board members shall meet the independence and experience requirements of the relevant foreign stock exchanges and any implementing rules of relevant supervisory authorities (including but not limited to applicable codes of conduct) in addition to the requirements of the above clauses 1.1 through 1.4. 1.6 A statement as to whether the requirement of clause 1.3(f) of these By-Laws has been satisfied and which member(s) of the Supervisory Board, if any, should not be deemed independent, shall be included in the Supervisory Board Report. 2. (Re)Appointment; Term of Office; Resignation 2.1 The Supervisory Board members are appointed by the General Meeting of Shareholders. The Supervisory Board shall nominate one or more candidates for appointment. 2.2 A nomination or recommendation to the General Meeting of Shareholders to appoint a Supervisory Board member shall state the candidate’s age, his profession, the amount of the shares he holds in the Company’s capital and the positions he holds or has held, insofar as these are relevant for the performance of the duties of a Supervisory Board member. Furthermore, the legal entities whose supervisory boards he is also a member of must be listed; if those include legal entities which belong to the same group, reference to that group is sufficient. The recommendation or nomination for appointment or reappointment shall state the reasons on which it is based.(11) (10) Dutch Corporate Governance Code, best practice provision III.2.2. (11) Section 2:142 Dutch Civil Code. 6 2.3 Any nomination or recommendation by the Supervisory Board for appointment or reappointment of a Supervisory Board member must be in accordance with clause 1 of these By-Laws, including the Supervisory Board Profile. On reappointment, account must be taken of the candidate’s past performance as a Supervisory Board member. A Supervisory Board member is reappointed only after careful consideration.(12) 2.4 A person may be appointed to the Supervisory Board for a maximum of three 4-year terms.(13) 2.5 Supervisory Board members shall retire periodically in accordance with a rotation plan to be drawn up by the Supervisory Board in order to avoid, as far as possible, a situation in which many Supervisory Board members retire at the same time.(14) The current rotation plan is attached as Annex 3 . The rotation plan shall be made available for public inspection at the offices of the Company and is posted on the Company’s website.(15) The Supervisory Board may at any time amend the rotation plan. Amendments to the rotation plan, however, do not permit a sitting Supervisory Board member to remain in office for a longer period than appointed for, or allow that he be asked to retire before his term has expired. 2.6 A Supervisory Board member shall retire early in the event of unacceptable performance, structural incompatibility of interests, and in any other instances where deemed necessary by the Supervisory Board.(16) 2.7 A Supervisory Board member who is temporarily charged with the management of the Company when seats on the Executive Board are vacant or Executive Board members are unable to fulfil their duties, shall resign from the Supervisory Board.(17) 3. Chairman and Vice-Chairman 3.1 The Supervisory Board shall elect a Chairman and a Vice-Chairman from among its members. The Vice-Chairman shall replace, and shall assume the powers and duties of, the Chairman in the latter’s absence. The Chairman shall not be a former member of the Executive Board.(18) (12) (13) (14) (15) (16) (17) (18) Dutch Corporate Governance Code, Principle III.3; Section 2:142 Dutch Civil Code. Dutch Corporate Governance Code, best practice provision III.3.5. Dutch Corporate Governance Code, best practice provision III.3.6. Dutch Corporate Governance Code, best practice provision.III.3.6. Dutch Corporate Governance Code, best practice provision III.1.4. Dutch Corporate Governance Code, best practice provision III.6.7. Dutch Corporate Governance Code, best practice provision III.4.2. 7 3.2 The Chairman of the Supervisory Board shall be primarily responsible for monitoring the proper functioning of the Supervisory Board and its Committees. He shall act as the spokesman of the Supervisory Board and shall be the main contact for the CEO and the Executive Board. The CEO and the Chairman of the Supervisory Board shall meet on a regular basis. As a general rule, the Chairman of the Supervisory Board shall preside over General Meetings of Shareholders.(19) 3.3 Without prejudice to the generality of clause 3.2, the Chairman of the Supervisory Board shall see to it that:(20) 3.4 (19) (20) (a) Supervisory Board members follow their induction programme and, as needed, pursue additional education or training programmes; (b) the Supervisory Board members receive all information necessary for the proper performance of their duties in a timely manner; (c) there is sufficient time for consultation and decision-making by the Supervisory Board; (d) the Committees function properly; (e) the performance of the Executive Board members and the Supervisory Board members is assessed at least once a year; (f) the Supervisory Board elects a Vice-Chairman of the Supervisory Board; and (g) the Supervisory Board has proper contact with the Executive Board and the Works Council. In addition, the Chairman of the Supervisory Board shall be primarily responsible for: (a) ensuring the proper discharge by the Supervisory Board of its duties; (b) determining the agenda of Supervisory Board meetings and chairing such meetings; (c) consulting with any external advisor appointed by the Supervisory Board; (d) addressing problems related to the performance of individual Supervisory Board members; and (e) addressing any internal disputes and conflicts of interest concerning individual Supervisory Board members and the resulting resignation of such members, if appropriate. See Dutch Corporate Governance Code, Principle III.4. Dutch Corporate Governance Code, best practice provision III.4.1. 8 4. Company Secretary(21) 4.1 The Supervisory Board shall be assisted by the Company Secretary, who shall be appointed and dismissed in accordance with the provisions of clause 4 of the By-Laws of the Executive Board. 4.2 All Supervisory Board members have access to the advice and services of the Company Secretary. 4.3 The Company Secretary shall see to it that correct Supervisory Board procedures are followed and that the Supervisory Board acts in accordance with its statutory obligations and its obligations under the Company’s articles of association. The Company Secretary shall assist the Chairman of the Supervisory Board in the organisation of the affairs of the Supervisory Board (information, agenda, reporting of meetings, evaluation, training programme, etc.). The Company Secretary shall as such also be the secretary of the Supervisory Board. 4.4 The Company Secretary may delegate his duties under these By-Laws, or parts thereof, to a deputy appointed by him in consultation with the Chairman of the Supervisory Board. 4.5 The Company Secretary shall also perform activities for the Executive Board, as provided for in the By-Laws of the Executive Board. 5. Committees 5.1 The Supervisory Board may appoint standing and/or ad hoc Committees from among its members, which are charged with tasks specified by the Supervisory Board. The composition of any Committee is determined by the Supervisory Board. The Supervisory Board has established an Audit Committee and a Compensation, Nominating and Corporate Governance Committee (the “CNCG Committee”).(22) 5.2 The Supervisory Board remains collectively responsible for decisions prepared by the Committees. The Supervisory Board may delegate the authority to pass resolutions implementing the policies as determined by the Supervisory Board to one or more of the Committees. This delegation of authority will be effective for a period of one year and can be extended by the Supervisory Board, each time for an additional period of one year. A Committee may only exercise such powers as are explicitly attributed or delegated to it and may never exercise powers beyond those exercisable by the Supervisory Board. Each Committee must inform the Supervisory Board in a clear and timely way of the manner in which it has used delegated authority and of any major development in the area of its responsibilities. All independent Supervisory Board members shall have unrestricted access to all Committee meetings and records. The Supervisory Board shall receive a report from each Committee of its deliberations and (21) (22) Dutch Corporate Governance Code, best practice provision III.4.3. The “Selection and Appointment Committee” and the “Remuneration Committee” referred to in the Dutch Corporate Governance Code are combined in the CNCG Committee. 9 findings.(23) For each Committee, the Supervisory Board shall include in the Supervisory Board Report: (i) a report on how it has performed its duties, and (ii) details on its existence, its composition, the number of meetings held and the main issues discussed. 5.3 The Supervisory Board shall establish a Charter for each Committee which may be amended from time to time. Each Charter shall indicate the role and responsibility of the Committee concerned, its composition and the manner in which it performs its duties. Each Committee shall consist of at least three members. The Charter of a Committee may contain further requirements on the composition of the Committee concerned. 5.4 The Charters and the composition of the Committees are posted on the Company’s website.(24) 5.5 The Supervisory Board as a rule has no “delegated Supervisory Board member” (gedelegeerd commissaris) . Under special circumstances, however, the Supervisory Board may resolve to appoint a “delegated Supervisory Board member”, in which case best practice provision III.6.6 of the Dutch Corporate Governance Code shall apply in full. CHAPTER II DUTIES AND POWERS 6. General Duties and Powers; Relation with the Executive Board 6.1 The Supervisory Board shall be charged with the supervision of the Executive Board and the general course of affairs of the Company. The Supervisory Board shall in any event evaluate the main organisational structure and the control mechanisms established under the management of the Executive Board. The Supervisory Board shall assist the Executive Board with advice.(25) The responsibility for the proper performance of its duties is vested collectively in the Supervisory Board. 6.2 In performing its duties the Supervisory Board shall act in accordance with the interests of the Company, taking into consideration the interests of the Company’s stakeholders.(26) Supervisory Board members shall perform their duties without mandate and independent of any interest in the business of the Company. They should not support one interest without regard to the other interests involved. (23) (24) (25) (26) Dutch Corporate Governance Code, best practice provision III.5.3. Dutch Corporate Governance Code, best practice provision III.5.1. Section 2:140 Dutch Civil Code; Dutch Corporate Governance Code, Principle III.1. Section 2:140 Dutch Civil Code; Dutch Corporate Governance Code, Principle III.1. 10 6.3 The Supervisory Board shall be responsible for the quality of its performance.(27) 6.4 The Supervisory Board and its individual members each have their own responsibility for obtaining all information from the Executive Board and the External Auditor needed to enable them to carry out their duties properly as a supervisory body. If deemed necessary by the Supervisory Board, it may obtain information from officers and external advisers of the Company. The Company shall provide the necessary means for this purpose. The Supervisory Board may require that certain officers and external advisers attend its meetings.(28) 6.5 The Executive Board shall of its own accord and in a timely manner provide the Supervisory Board and its members and Committees with the information needed to function and to discharge their duties properly. The information will as much as possible be provided in writing. 6.6 Each quarter, the Executive Board shall provide the Supervisory Board with the following reports: (a) a report with detailed information on, among other things, key performance indicators, significant mergers and acquisitions, material investments, major organisational issues, important regulatory developments and other relevant issues; and (b) a report with detailed information on the financial situation and development of the Company and its Subsidiaries, which will be drafted in the format agreed upon from time to time between the Executive Board and the Supervisory Board. 6.7 At least annually, the Executive Board shall provide the Supervisory Board with a report on the effectiveness of the internal control framework and disclosure controls and procedures of the Company, as provided for in clause 6.4 of the By-Laws of the Executive Board. 6.8 Each member of the Supervisory Board has access to the books, records and offices of the Company in so far as required or as is useful for the proper performance of his duties. The Supervisory Board member shall exercise this right in consultation with the Chairman of the Supervisory Board and the Company Secretary. 6.9 The Supervisory Board may in exercising its duties seek the assistance or advice of one or more experts. 6.10 The Supervisory Board is empowered to engage independent advisors to aid it and its Committees 30 (and to ask the support of one or more supporting staff members in the performance of its duties) at the Company’s expense. (27) (28) Dutch Corporate Governance Code, Principle III.1. Dutch Corporate Governance Code, best practice provision III.1.9. 11 7. Duties regarding the Actions of the Executive Board Members 7.1 The supervision of the Executive Board by the Supervisory Board shall include: (i) achievement of the Company’s objectives; (ii) the strategy and risks inherent in the business activities; (iii) the structure and operation of the internal risk management and control systems; (iv) the financial reporting process; (v) compliance with the legislation and regulations.(29) 7.2 The Supervisory Board supervises the financial reporting in accordance with clause 10 of these By-Laws. 7.3 The Supervisory Board shall discuss the main features of the corporate strategy and the risks of the business, the result of the assessment by the Executive Board of the structure and operation of the internal risk management and control systems, as well as any significant changes thereto at least once a year.(30) The Supervisory Board shall furthermore discuss the financing of the Company and finance related strategies. Reference to these discussions shall be made in the Supervisory Board Report. 8. Duties regarding the Members and the Performance of the Executive Board and the Supervisory Board 8.1 Duties regarding the Members and the Performance of the Executive Board The duties of the Supervisory Board regarding the Executive Board members specifically include: (29) (30) (31) (32) (33) (34) (a) the selection and nomination of Executive Board members,(31) the submission of proposals for the remuneration policy for Executive Board members to the General Meeting of Shareholders, the determination of the remuneration (in accordance with said remuneration policy) and the contractual employment conditions of Executive Board members;(32) (b) determination of the number of Executive Board members, the designation of the Chairman of the Executive Board, the approval (or proposal, where useful) of changes to the division of tasks within the Executive Board or of the By-Laws of the Executive Board(33) and the evaluation and assessment of the functioning of the Executive Board and its individual members; the approval of additional positions of the Executive Board to the extent required under the By-Laws of the Executive Board;(34) and Dutch Corporate Governance Code, best practice provision III.1.6. Dutch Corporate Governance Code, best practice provision III.1.8; see also Section 2:141 Dutch Civil Code. See also clause 1.1 of the Executive Board By-Laws and the Charter of the CNCG Committee. See also clause 12 of these By-Laws, Charter of the CNCG Committee. See also clause 1 of the Executive Board By-Laws. See also clause 17 of the Executive Board By-Laws. 12 (c) 8.2 to address conflict of interest issues between the Company and Executive Board members.(35) Duties regarding the Members and the Performance of the Supervisory Board The duties of the Supervisory Board in relation to the Supervisory Board members specifically include: (a) the selection and nomination of Supervisory Board members and proposals to the General Meeting of Shareholders for the remuneration of Supervisory Board members; (b) the determination of the number of Supervisory Board members, the appointment of a Chairman and Vice-Chairman of the Supervisory Board, the establishment of Committees and defining their role, the evaluation and assessment of the functioning of the Supervisory Board, its Committees and the individual Supervisory Board members (including an evaluation of the of the Supervisory Board Profile and the induction, education and training programme); the approval of other positions of Supervisory Board members to the extent required under clause 22 of these By-Laws; and (c) addressing conflict of interest issues between the Company and Supervisory Board members.(36) 8.3 At least once a year the Supervisory Board shall, without the Executive Board being present, discuss its own functioning, and that of its individual members, and the conclusions that must be drawn on the basis thereof. The desired profile, composition and competence of the Supervisory Board shall also be discussed. At least once a year the Supervisory Board shall also, without the Executive Board being present, discuss the functioning of the Executive Board as a body and the functioning of its individual members, and the conclusions that must be drawn on the basis thereof.(37) Reference to these issues shall be made in the Supervisory Board Report. 9. Certain other Duties of the Supervisory Board 9.1 The other duties of the Supervisory Board include: (a) (35) (36) (37) duties regarding the External Auditor as described in clause 11 of these By-Laws and the Charter of the Audit Committee; See also clause 15 of the Executive Board By-Laws and clause 19 of these By-Laws; Dutch Corporate Governance Code, best practice provision III.6.5. See also clause 19 of these By-Laws. Dutch Corporate Governance Code, best practice provision III.1.7. 13 (b) establishing and maintaining, through the Audit Committee, procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters, where appropriate through the Audit Committee;(38) (c) the taking of measures for the temporary management of the Company if a member of the Executive Board is absent or prevented from performing his duties; (d) other duties the Supervisory Board is charged with under legislation, the Company’s articles of association, these By-Laws, the Charter of a Committee or the ByLaws of the Executive Board. 9.2 The Supervisory Board shall draw up a report to be included in the Annual Report, describing its activities in the financial year concerned and containing the specific statements and information listed in Annex 4 (the “Supervisory Board Report”).(39) 9.3 The Supervisory Board and the Executive Board are jointly responsible for the corporate governance structure of the Company, compliance with the Dutch Corporate Governance Code and any other applicable legislation and regulations.(40) 10. Duties regarding the Supervision of Financial Reporting 10.1 The Supervisory Board shall, primarily through the Audit Committee, supervise compliance with internal procedures established by the Executive Board for the preparation and publication of the Annual Report, the Annual Accounts, the quarterly and half-yearly figures and ad hoc financial information.(41) The Supervisory Board shall also supervise the establishment and maintenance of internal control mechanisms for external financial reporting as described in clause 7.1 of the By-Laws of the Executive Board.(42) 10.2 The Audit Committee shall regularly, and in any event as soon as possible, report to the Supervisory Board on the Annual Report, the Annual Accounts, and the quarterly figures. The Annual Accounts and the Annual Report for the year just ended shall be discussed in a meeting with the Supervisory Board within five months of this year end. The quarterly accounts of the Company for the respective period just ended shall be discussed in a meeting of the Executive Board with the Supervisory Board within two months of the end of this period. These meetings are prepared by the Audit Committee. (38) (39) (40) (41) (42) See also clause 14 of these By-Laws. Dutch Corporate Governance Code, best practice provision III.1.2. Dutch Corporate Governance Code, Principle I. Dutch Corporate Governance Code, best practice provision V.1.1. Dutch Corporate Governance Code, best practice provision V.1.3. 14 10.3 The External Auditor shall in any event attend the part of the meeting of the Supervisory Board at which the report of the External Auditor with respect to the audit of the Annual Accounts is discussed, and at which a decision will be taken on the adoption of the Annual Accounts. The External Auditor shall receive the financial information underlying the adoption of the quarterly and/or half-yearly figures, and other interim financial reports, and shall be given the opportunity to respond to all information.(43) The External Auditor shall report his findings in relation to the audit of the Annual Accounts to the Executive Board, the Audit Committee and the Supervisory Board.(44) 10.4 The line of contact between the Supervisory Board and the External Auditor is through the Audit Committee of the Supervisory Board. The Audit Committee is the first contact for the External Auditor if any irregularities in the contents of the financial reports are discovered.(45) 10.5 The Supervisory Board shall see to it that the recommendations made by the External Auditor are considered carefully by the Executive Board and the Supervisory Board and, to the extent accepted, that they are actually implemented by the Executive Board. This supervision may be delegated to the Audit Committee of the Supervisory Board. 11. Duties regarding Nomination and Assessment of External Auditor 11.1 The External Auditor shall be appointed by the General Meeting of Shareholders for a period of one year per term. Upon the independent recommendation of the Audit Committee, the Supervisory Board shall nominate a candidate for this appointment to the General Meeting of Shareholders and may recommend replacement of the External Auditor. The Audit Committee may take note of the views of the Executive Board before making its recommendation. The Audit Committee’s recommendation however shall be made on an independent basis.(46) 11.2 The remuneration of the External Auditor, and instructions to the External Auditor to provide non-audit services, shall be approved by the Supervisory Board through the Audit Committee. The Audit Committee may take note of the views of the Executive Board before approving the remuneration of the External Auditor. The Audit Committee’s decision however, shall be made on an independent basis.(47) (43) (44) (45) (46) Dutch Corporate Governance Code, best practice provision V.4.1. Dutch Corporate Governance Code, Principle V.4. Dutch Corporate Governance Code, best practice provision III.5.5. Dutch Corporate Governance Code, Principle V.2. See also the Charter of the Audit Committee, clause 5.1 and the Buhrmann Policy regarding External Auditor Independence and Services, clause 3. Dutch Corporate Governance Code, Principle V.2. (47) 15 11.3 The Audit Committee shall report the dealings of the Audit Committee and the Executive Board with the External Auditor on an annual basis to the Supervisory Board, including their assessment of the External Auditor’s independence (including the requirement or desire to rotate the responsible audit partners of the External Auditor and the desirability of the External Auditor providing both audit services and non-audit services to the Company). The Audit Committee may take note of the views of the Executive Board when preparing its report. The Audit Committee shall, however, prepare its report on an independent basis. The Supervisory Board shall take this report of the report of the Audit Committee into account in addition to the Audit Committee’s overall recommendations when confirming its nomination to the General Meeting of Shareholders for the appointment of an External Auditor.(48) 11.4 At least once every four years, the Audit Committee and the Executive Board shall each conduct a thorough and independent assessment of the functioning of the External Auditor in the various entities and capacities in which the External Auditor acts. The Audit Committee and the Executive Board shall conduct their assessment separately and independently from ne another. The main conclusions of each assessment shall be communicated to the General Meeting of Shareholders in connection with the nomination for the appointment of the External Auditor.(49) 11.5 Conflicts of interest and potential conflicts of interest between the External Auditor and the Company shall be resolved in the manner determined by the Supervisory Board at the recommendation of the Audit Committee. Executive Board members and Supervisory Board members must inform the chairman of the Audit Committee of issues that may compromise the required independence of the External Auditor or that may give rise to a conflict of interest or a potential conflict of interest between the External Auditor and the Company, when brought to their attention.(50) 11.6 When appointed, the External Auditor shall be requested to state explicitly to the Company that he has been informed of: (i) the Company’s policy as laid down in clause 11.5, the Charter of the Audit Committee and the Policy on External Auditor Independence and Services and (ii) other matters provided for in the Executive Board ByLaws, these By-Laws and the Charter of the Audit Committee, that he agrees with and will co-operate fully with their implementation. (48) (49) (50) Dutch Corporate Governance Code, best practice provision V.2.2. Dutch Corporate Governance Code, best practice provision V.2.3. Dutch Corporate Governance Code, best practice provision III.6.5. 16 12. Remuneration of Executive Board Members 12.1 The CNCG Committee shall annually on behalf of the Supervisory Board prepare a Remuneration Report, which contains an account of the manner in which the remuneration policy for Executive Board members has been implemented in the past financial year, as well as an overview of the remuneration policy for Executive Board members planned by the Supervisory Board for the next financial year and subsequent years.(51) This overview shall, in any event, contain the information as set out in Annex 5 .(52) The principal points of the Remuneration Report shall be included in the Supervisory Board Report. The Remuneration Report is posted on the Company’s website.(53) 12.2 The remuneration policy planned for the next financial year and subsequent years as specified in the Remuneration Report shall be submitted to the General Meeting of Shareholders for adoption.(54) Significant changes to the remuneration policy shall also be submitted to the General Meeting of Shareholders for its approval. Schemes whereby Executive Board members are remunerated in the form of shares or rights to subscribe for shares, and significant changes to such schemes, shall be submitted to the General Meeting of Shareholders for approval. 12.3 The Supervisory Board shall determine the remuneration of the individual Executive Board members on a proposal by the CNCG Committee, within the scope of the remuneration policy adopted by the General Meeting of Shareholders and taking into account the following(55): • Executive Board members shall not profit from the activities of the Company other than through remuneration as an Executive Board member or through shares in the Company held for the purpose of long-term investment; • The Company and its Subsidiaries shall not grant personal loans, guarantees or the like to Executive Board members.(56) • Apart from their remuneration, Executive Board members shall be reimbursed for all reasonable costs. 12.4 The main features of the contract of an Executive Board member with the Company shall be disclosed immediately after its conclusion by publication on the Company’s website. The features disclosed are in any event the amount of the fixed salary, the structure and amount of the variable remuneration component, any redundancy scheme, pension arrangements and performance criteria.(57) (51) (52) (53) (54) (55) (56) (57) Dutch Corporate Governance Code, best practice provision II.2.9. Dutch Corporate Governance Code, best practice provision II.2.10. Dutch Corporate Governance Code, best practice provision II.2.13 Dutch Corporate Governance Code, II.2 (2nd Principle); Section 2:135 Dutch Civil Code. Dutch Corporate Governance Code, II.2 (2nd Principle); Section 2:135 Dutch Civil Code. Dutch Corporate Governance Code, best practice provision II.2.8 and Rule 13(k) of the US Exchange Act. Dutch Corporate Governance Code, best practice provision II.2.11. 17 12.5 If an Executive Board member or former Executive Board member is paid special remuneration or compensation during a given financial year, an explanation of this remuneration or compensation must be included in the Remuneration Report. The Remuneration Report shall in any event account for and explain remuneration paid or promised by way of severance pay in the year under review to an Executive Board member.(58) 13. The Shareholders’ Meeting 13.1 Where appropriate, the Supervisory Board shall provide all shareholders and other parties in the financial markets with equal and simultaneous information about matters that may influence the share price.(59) 13.2 The Executive Board and the Supervisory Board shall endeavour to provide the General Meeting of Shareholders with all information that it requires for the exercise of its powers.(60) 13.3 The Executive Board and the Supervisory Board shall endeavour to provide the General Meeting of Shareholders with all requested information, unless this would be contrary to an overriding interest of the Company. If the Executive Board and the Supervisory Board invoke an overriding interest, they must give reasons.(61) 13.4 If a right of approval is granted to the General Meeting of Shareholders by law or under the Company’s articles of association, or the Executive Board or the Supervisory Board requests a delegation of powers, the Executive Board and the Supervisory Board shall inform the General Meeting of Shareholders by means of a shareholders’ circular of all facts and circumstances relevant to the approval, delegation or authorisation to be granted. The shareholders’ circular shall in any event be posted on the Company’s website as of the date of notice of the General Meeting of Shareholders, at which the proposal concerned is discussed, until the meeting has ended.(62) This shareholders’ circular may be in the format of explanatory notes to the agenda of the General Meeting of Shareholders. 13.5 The Executive Board and the Supervisory Board shall ensure compliance with all applicable legislation and regulations with respect to the rights of the General Meeting of Shareholders and the related rights of individual shareholders. 13.6 (58) (59) (60) (61) (62) The Supervisory Board members shall be present at the General Meetings of Shareholders, unless they are unable to attend for important reasons. Dutch Corporate Governance Code, best practice provision II.2.12. Dutch Corporate Governance Code, Principle IV.3. Dutch Corporate Governance Code, Principle IV.3. Dutch Corporate Governance Code, best practice provision IV.3.5. Dutch Corporate Governance Code, best practice provision IV.3.7. 18 13.7 The General Meetings of Shareholders are presided over by the Chairman of the Supervisory Board or, in his absence, the Vice-Chairman of the Supervisory Board. The Supervisory Board may designate someone else to preside over the meeting. 13.8 The Supervisory Board shall endeavour to make available a draft notarial deed of proceedings of the General Meeting of Shareholders to the shareholders of the Company upon written demand to the Company (for the attention to the Company Secretary) no later than three months after the end of the meeting, following which the shareholders have another three months in which to respond to the contents of the draft deed. The notarial deed of proceedings is then signed by the chairman of the relevant meeting and subsequently executed by the civil law notary who acted as the secretary of that meeting.(63) The minutes of the General Meeting of Shareholders as laid down in the notarial deed of proceedings is posted as soon as possible on the Company’s website, in any case before the end of the following General Meeting of Shareholders. 13.9 A resolution of the General Meeting of Shareholders may be disclosed externally through a statement from the Chairman of the Supervisory Board, the CEO or the Company Secretary. 13.10 The Supervisory Board and the Executive Board shall procure that each substantial change in the corporate governance structure of the Company or in the Company’s compliance with the Dutch Corporate Governance Code is submitted to the General Meeting of Shareholders for discussion under a separate agenda item.(64) 13.11 The Supervisory Board shall see to it that the responsible partner (certifying auditor) of the firm of the External Auditor is present at the General Meeting of Shareholders and that he can address the meeting. The External Auditor may be questioned by the General Meeting of Shareholders in relation to his statement on the fairness of the annual accounts.(65) 14. Complaints Handling; Whistleblowers In addition to the obligations of the Executive Board in respect of this subject as set out in clause 5.7 of the By-laws of the Executive Board, the Supervisory Board, through the Audit Committee, shall establish and maintain procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.(66) The whistleblowers’ policy of the Company is included in the Buhrmann Business Principles and Code of Ethics which is posted on the Company’s website. (63) (64) (65) (66) Dutch Corporate Governance Code, best practice provision IV.3.8. Dutch Corporate Governance Code, best practice provision I.2. Dutch Corporate Governance Code, best practice provision V.2.1. Compare Dutch Corporate Governance Code, best practice provision II.1.6 and Rules 10a-3(b)(3) of the US Exchange Act. See also clause 6 of the Charter of the Audit Committee. 19 CHAPTER III SUPERVISORY BOARD MEETINGS; DECISION-MAKING 15. Frequency, Notice, Agenda and Venue of Meetings 15.1 The Supervisory Board shall meet as often as deemed necessary for the proper functioning of the Supervisory Board. The Supervisory Board shall meet at least six times a year. Meetings shall be scheduled annually as much in advance as possible. 15.2 Meetings of the Supervisory Board shall in principle be called by the Company Secretary, in consultation with the Chairman of the Supervisory Board. Save in urgent cases, to be determined by the Chairman of the Supervisory Board, the agenda for a meeting, including any related documentation, shall be sent to all Supervisory Board members at least five calendar days before the meeting. Prior to convening the meeting the Chairman of the Supervisory Board shall in principle consult on the content of the agenda with the CEO. 15.3 Each Supervisory Board member, the CEO, and the Executive Board collectively, shall have the right to request that an item be placed on the agenda for a Supervisory Board meeting. 15.4 Supervisory Board meetings shall be generally held at the offices of the Company, but may also take place elsewhere. In addition, at the discretion of the Chairman of the Supervisory Board, meetings of the Supervisory Board may be held by conference call, video conference or by any other means of communication, provided all participants can communicate with each other simultaneously. 16. Attendance of and Admittance to Meetings 16.1 The CEO and the other Executive Board members shall in principle attend all Supervisory Board meetings, to the extent the Supervisory Board does not indicate that it wishes to meet in the absence of the CEO or the other Executive Board members. 16.2 A Supervisory Board member may be represented at Supervisory Board meetings by another Supervisory Board member holding a proxy in writing. The existence of such proxy must be proved satisfactorily to the chairman of the meeting. 16.3 If a Supervisory Board member is frequently absent from Supervisory Board meetings he shall be called to account for this by the Chairman of the Supervisory Board. The Supervisory Board Report shall include a schedule indicating the attendance or absence by each Supervisory Board member and each member of a Committee with respect to all meetings of the Supervisory Board or of the Committees in the reporting year.(67) (67) Dutch Corporate Governance Code, best practice provision III.1.5. 20 16.4 The admittance to the meeting of persons other than Supervisory Board members, the Company Secretary and Executive Board members shall be decided by majority vote of the Supervisory Board members present and represented at the meeting. 17. Chairman of the Meeting; Reports 17.1 Supervisory Board meetings are presided over by the Chairman of the Supervisory Board or, in his absence, the Vice-Chairman of the Supervisory Board. If both are absent, one of the other Supervisory Board members, designated by a majority of votes cast by the Supervisory Board members present and represented at the meeting, shall preside over the meeting. 17.2 The Company Secretary or any other person designated for such purpose by the chairman of the meeting shall draw up the minutes of the meeting. The minutes shall contain a summary of the meeting and an overview of the resolutions taken at the meeting. The minutes shall be adopted by the Supervisory Board at the same meeting, or the next meeting. 18. Decision-making within the Supervisory Board 18.1 The Supervisory Board members shall endeavour to achieve that resolutions are, as much as possible, adopted unanimously. 18.2 Each Supervisory Board member has the right to cast one vote. 18.3 18.4 Where unanimity cannot be reached and the law, the Company’s articles of association or these By-Laws do not prescribe a larger majority, all resolutions of the Supervisory Board are adopted by an absolute majority of the votes cast. In the event of a tie, the Chairman of the Supervisory Board shall have the deciding vote. At a meeting, the Supervisory Board may only pass resolutions if the majority of the Supervisory Board members then in office are present or represented. In general, resolutions of the Supervisory Board shall be adopted at a Supervisory Board meeting. 18.5 Supervisory Board resolutions may also be adopted in writing, provided the proposal concerned is submitted to all Supervisory Board members then in office and none of them objects to this form of adoption. Adoption of resolutions in writing shall be effected by statements in writing from all the Supervisory Board members. A statement from a Supervisory Board member who wishes to abstain from voting on a particular resolution which is adopted in writing must reflect the fact that he does not object to this form of adoption. 18.6 The Supervisory Board may deviate from the provisions of clauses 18.3 (last sentence), 18.4 and 18.5 if this is deemed necessary by the Chairman of the Supervisory Board, considering the urgent nature and other circumstances of the case, provided that all 21 Supervisory Board members are allowed the opportunity to participate in the decision-making process. The Chairman of the Supervisory Board and the Company Secretary shall then prepare a report on a resolution so adopted that is not in writing, which shall be added to the documents for the next meeting of the Supervisory Board. 18.7 A resolution adopted by the Supervisory Board may be evidenced outside the Company through a statement from the Chairman of the Supervisory Board and/or the Company Secretary. CHAPTER IV OTHER PROVISIONS 19. Conflicts of Interests of Supervisory Board Members 19.1 A Supervisory Board member shall immediately report any conflict of interest or potential conflict of interest that is of material significance to the Company and/or to him to the Chairman or, where the possible conflict of interest exists with the Chairman, the Vice-Chairman, of the Supervisory Board and shall provide all relevant information, including information concerning his spouse, registered partner or other life companion, foster child and relatives by blood or marriage up to the second degree. The Chairman or, where the possible conflict of interest exists with the Chairman, the Vice-Chairman, of the Supervisory Board member shall decide whether a conflict of interest exists.(68) 19.2 A conflict of interest exists, in any event, if the Company intends to enter into a transaction with a legal entity: (i) in which a Supervisory Board member personally has a material financial interest; (ii) which has an executive board member who has a relationship under family law with a Supervisory Board member;(69) or (iii) in which a Supervisory Board member has a managerial or supervisory position.(70) 19.3 A Supervisory Board member shall not take part in any discussion or decision-making that involves a subject or transaction in relation to which he has a conflict of interest with the Company.(71) (68) (69) (70) (71) Dutch Corporate Governance Code, best practice provision III.6.1. A relationship under family law exists between a child, its parents and their blood relatives (Section 1:197 Dutch Civil Code). Dutch Corporate Governance Code, best practice provision III.6.1 (continued). Dutch Corporate Governance Code, best practice provision III.6.2. 22 19.4 All transactions in which there are conflicts of interest with Supervisory Board members shall be agreed on terms that are customary for arm’s-length transactions in the branch of business in which the Company and its Subsidiaries operate. Decisions to enter into transactions in which there are conflicts of interest with Supervisory Board members that are of material significance to the Company and/or to the relevant Supervisory Board members require the approval of the Supervisory Board. Such transactions shall be published in the Annual Report, together with a statement that a conflict of interest exists and a declaration that the provisions of clauses 19.1 through 19.4 of these By-Laws have been complied with.(72) 20. Remuneration of Supervisory Board Members 20.1 The remuneration of the Supervisory Board members shall be determined by the General Meeting of Shareholders. The Supervisory Board shall from time to time submit proposals with respect thereto on its remuneration to the General Meeting of Shareholders. If a Supervisory Board member is required to charge VAT on his fees, this will be paid by the Company. 20.2 The remuneration of a Supervisory Board member may not depend on the results of the Company.(73) A Supervisory Board member shall not be granted any shares and/or rights to shares in the Company’s capital by way of remuneration.(74) 20.3 Apart from their remuneration, Supervisory Board members shall be reimbursed for all reasonable costs and expenses. 20.4 The Company and its Subsidiaries shall not grant personal loans, guarantees or the like to Supervisory Board members.(75) 21. Induction Programme, Ongoing Training and Education(76) 21.1 Upon appointment, a Supervisory Board member shall follow an induction programme that shall serve to familiarise the relevant individual with the Company and that may cover such issues as general financial and legal affairs, financial reporting by the Company, any specific aspects unique to the Company and its business activities, and the responsibilities of a Supervisory Board member. The programme shall be tailor-made taking into account the skills and experience and of the individual involved as well as his specific requirements. (72) (73) (74) ( 75) (76) Dutch Corporate Governance Code, best practice provision III.6.3. Dutch Corporate Governance Code, Principle III.7. Dutch Corporate Governance Code, best practice provision III.7.1. Dutch Corporate Governance Code, best practice provision III.7.4; Article 13(k) of the US Exchange Act. Dutch Corporate Governance Code, best practice provision III.3.3. 23 21.2 The Supervisory Board shall conduct an annual review to identify any aspects with regard to which the Supervisory Board members require further training or education during their term of office. 21.3 The induction course, training and education shall be facilitated and paid for by the Company. 22. Other Positions 22.1 Supervisory Board members shall limit the number and nature of their other positions so as to ensure due performance of their duties as Supervisory Board members. It is the intention of the Supervisory Board that its members will not hold more than five memberships of supervisory boards in Dutch listed companies (including the Company). In this connection, a chairmanship counts twice. Each Supervisory Board member holding more than five such board memberships shall commit to reducing these board memberships to a maximum of five. No new Supervisory Board member shall be appointed holding more than five board memberships as referred to above. 22.2 Supervisory Board members must inform the Chairman of the Supervisory Board and the Company Secretary of their other positions which may be of importance to the Company or the performance of their duties before accepting such positions. If the Chairman of the Supervisory Board determines that there is a risk of a conflict of interest, the matter shall be discussed by the Supervisory Board in accordance with clause 19 of these By-Laws. The Company Secretary shall keep a list of the outside positions concerned of each Supervisory Board member. 23. Holding and Trading Securities 23.1 Any shareholding in the Company by Supervisory Board members is for the purpose of long-term investment.(77) 23.2 Supervisory Board members are bound to the Buhrmann Insider Trading Rules regarding securities of the Company and other securities referred to in the Buhrmann Insider Trading Rules. 23.3 The ownership of and transactions with securities by Executive Board and Supervisory Board members other than as referred to in the Buhrmann Insider Trading Rules is governed by regulations set by the Supervisory Board. These regulations are posted on the Company’s website.(78) (77) (78) Dutch Corporate Governance Code, best practice provision III.7.2. Dutch Corporate Governance Code, best practice provision III.7.3. 24 24. Confidentiality No Supervisory Board member shall, during his membership of the Supervisory Board or afterwards, disclose in any way whatsoever to anyone whomsoever any information of a confidential nature regarding the business of the Company and/or any companies in which it holds a stake, that came to his knowledge in the capacity of his work for the Company and which he knows or should know to be of a confidential nature, unless required by law. A Supervisory Board member is allowed to disclose the above information to Executive Board members and Supervisory Board members as well as to staff members of the Company and companies in which the Company holds a stake who, in view of their activities for the Company and companies in which the Company holds a stake, should be informed of the information concerned. A Supervisory Board member shall not in any way whatsoever utilise the information referred to above for his personal benefit. 25. Miscellaneous 25.1 Acceptance by Supervisory Board members. Anyone who is appointed as a Supervisory Board member must, upon assuming office, declare in writing to the Company that he accepts and agrees to the contents of these By-Laws and pledge to the Company that he will comply with the provisions of these By-Laws. 25.2 Amendment. These By-Laws may be amended by the Supervisory Board at its sole discretion without prior notification. Prior to amendment of these By-Laws the Executive Board shall be consulted. 25.3 Interpretation. In case of uncertainty or difference of opinion on how a provision of these By-Laws should be interpreted, the opinion of the Chairman of the Supervisory Board shall be decisive. 25.4 Governing law and jurisdiction. These By-Laws are governed by the laws of the Netherlands. The courts of the Netherlands have exclusive jurisdiction to settle any dispute arising from or in connection with these By-Laws (including any dispute regarding the existence, validity or termination of these By-Laws). 25.5 Complementarity to Dutch law and articles of association. These By-Laws are complementary to the provisions governing the Supervisory Board as contained in Dutch law, other applicable Dutch, EU or foreign regulations and the Company’s articles of association. Where these By-Laws are inconsistent with Dutch law, other applicable Dutch, EU or foreign rules and regulations or the Company’s articles of association, the latter shall prevail. Where these By-Laws are consistent with the Company’s articles of association but inconsistent with Dutch law or other applicable Dutch, EU or foreign rules and regulations, the latter shall prevail. 25 25.6 Partial invalidity. If one or more provisions of these By-Laws are or become invalid, this shall not affect the validity of the remaining provisions. The Supervisory Board may replace the invalid provisions by provisions which are valid and the effect of which, given the contents and purpose of these By-Laws is, to the greatest extent possible, similar to that of the invalid provisions. * * * 26 * * ANNEX 1 LIST OF DEFINITIONS 1. In the By-Laws of the Executive Board and the Supervisory Board, the following terms have the following meanings: affiliated company has the meaning attributed to it in Section 1 of the Disclosure of Major Holdings in Listed Companies Act 1996 (Wet melding zeggenschap in ter beurze genoteerde vennootschappen 1996) . Annual Accounts means the annual accounts of the Company as referred to in Section 2:101 of the Dutch Civil Code. Annual Report means the annual report of the Company drawn up by the Executive Board, as referred to in Section 2:101 of the Dutch Civil Code. Audit Committee means the Committee designated as such in clause 5 of the By-Laws of the Supervisory Board. Buhrmann Insider Trading Rules means the insider trading rules of the Company regarding securities of the Company and other securities referred to in these insider trading rules. By-Laws means the By-Laws of the Executive Board or the By-Laws of the Supervisory Board, depending on the context, including the annexes belonging thereto. CEO means the Chief Executive Officer of the Company; CFO means the Chief Financial Officer of the Company. CNCG Committee means the Compensation, Nominating and Corporate Governance Committee, designated as such in clause 5 of the By-Laws of the Supervisory Board. Committee means, as regards the Supervisory Board, each committee of the Supervisory Board as referred to in clause 5 of the By-Laws of the Supervisory Board. Company means Buhrmann N.V., and, where appropriate, the subsidiary companies and possible other group companies of the Company, whose financial information is incorporated in the consolidated annual accounts of the Company. Company Secretary means the officer of the Company who operates as the secretary of the Company and as secretary of the Executive Board and Supervisory Board and who is appointed and may be dismissed by the Executive Board subject to the approval of the Supervisory Board. Disclosure Committee means the disclosure committee appointed by the Executive Board, as referred to in clause 7.2 of the By-Laws of the Executive Board. 27 Executive Board means the Executive Board of the Company. External Auditor means the accounting and auditing firm that, in accordance with Section 2:393 of the Dutch Civil Code, is charged with the audit of the annual accounts of the Company. Form 20-F means an annual report on Form 20-F under the US Exchange Act. General Meeting of Shareholders means the general meeting of shareholders of the Company. Group Company has the meaning attributed to it in Section 2:24b of the Dutch Civil Code. in writing means by letter, by telecopier, by e-mail, or by message which is transmitted via any other current means of communication and which can be received in written form. Remuneration Report means the remuneration report of the Supervisory Board regarding the remuneration policy of the Company as drawn up by the CNCG Committee of the Supervisory Board. Strategic Plan means the strategic policy and business plan of the Company designed to achieve its operational and financial objectives as established pursuant to the provisions of the relevant By-Laws of the Executive Board. Subsidiary has the meaning attributed to it in Section 2:24a of the Dutch Civil Code. Supervisory Board means the supervisory board of the Company. Supervisory Board Profile means the profile for the size and composition of the Supervisory Board, as designated in clause 1.1 of the By-Laws of the Supervisory Board. Supervisory Board Report means the report of the Supervisory Board to be included in the Annual Report, as designated in clause 9.2 of the By-Laws of the Supervisory Board. Works Council means the works council of the Company. 2. Save where the context dictates otherwise, in the By-Laws of the Executive Board and the Supervisory Board: (a) words and expressions expressed in the singular form also include the plural form, and vice versa; (b) words and expressions expressed in the masculine form also include the feminine form; and 28 (c) 3. a reference to a statutory provision counts as a reference to this statutory provision including all amendments, additions and replacing legislation that may apply from time to time. Headings of clauses and other headings in the By-Laws of the Executive Board and the Supervisory Board are inserted for ease of reference and do not form part of the ByLaws concerned for the purpose of interpretation. 29 ANNEX 2 SUPERVISORY BOARD PROFILE 1. SIZE AND COMPOSITION OF THE SUPERVISORY BOARD 1.1 Notwithstanding clause 1.2 of the By-Laws of the Supervisory Board, the size of the Supervisory Board must be such that the Supervisory Board as a whole can perform its duties effectively and responsibly and that each individual member of the Supervisory Board is able to make a contribution by his or her specific qualities. 1.2 Without prejudice to the provisions of clause 1.1, the Supervisory Board endeavours to achieve that it consists of at least four members and no more than ten members. 1.3 The Supervisory Board must at all times be composed so that clause 1.3 of the By-Laws of the Supervisory Board is complied with as much as possible and that a relationship is created based on trust, enabling the Supervisory Board to operate as a team. 1.4 Without prejudice to the provisions of clause 1.3, each Supervisory Board member should have the following qualities: 1.5 (a) corporate experience with and insight into the business of the Company, both national and international, such that he or she is able to function in a practical way as part of the Supervisory Board; (b) an eye for the relationship between and the importance of the different components of the Company’s policy; (c) the ability, and the time available, to supervise and stimulate the policy of the Executive Board in a timely and effective manner and to advise and assist the Executive Board in the implementation of the policy. The Supervisory Board should have at its disposal one or more persons with expertise in one or more of the following areas: (a) international developments in markets and products in a field comparable with that in which the Company operates or which it is seeking to enter; (b) financial policy in a multinational listed company; (c) organisation, management and advice of Executive Board members respectively, of complex international companies; (d) human resources and industrial relations; (e) international/national developments in government policy and legislation, public affairs and tax; (f) knowledge of corporate governance developments; 30 (g) investor relations; (h) international mergers, acquisitions and joint ventures. 1.6 Several Supervisory Board members should have qualities, which enable them to chair the Supervisory Board. 1.7 Notwithstanding the provisions of clauses 1.3(f) and 1.4(a) of the By-Laws of the Supervisory Board, no more than one former Executive Board member should be a Supervisory Board member at the same time. 2. MISCELLANEOUS 2.1 The Supervisory Board shall discus at least once a year, without the Executive Board being present, the composition and competence of the Supervisory Board. These deliberations will be mentioned in the annual Supervisory Board report.(79) 2.2 Each change to the Supervisory Board Profile will be discussed at the General Meeting of Shareholders and with the Works Council.(80) 2.3 This Supervisory Board Profile must be taken into account on each (re)appointment of Supervisory Board members.(81) 2.4 This Supervisory Board Profile shall be made available for public inspection at the offices of the Company and is posted on the Company’s website.(82) -0-0-0-0-0-0- (79) (80) (81) (82) Dutch Corporate Governance Code, best practice provision III.1.7. Section 2:158 Dutch Civil Code. Dutch Corporate Governance Code, Principle III.3. Dutch Corporate Governance Code, best practice provision III.3.1. 31 ANNEX 3 ROTATION PLAN SUPERVISORY BOARD Name R.F. van den Bergh G. Izeboud F.L.V. Meysman (Chairman) B.J. Noteboom J. Peelen (Vice-Chairman) T. de Swaan First appointed on (date) 31/10/2006 14 April 2005 13/04/2006 14/04/2005 1/12/1999 31/10/2006 32 Re-appointed in (year) n.a n.a. n.a. n.a. 2006 n.a. 3 terms of 4 years expire in (year): 2018 2017 2018 2017 2011 2018 To be reappointed in (year): 2010 2009 2010 2009 2010 2010 ANNEX 4 LIST OF INFORMATION TO BE INCLUDED IN THE SUPERVISORY BOARD REPORT The Supervisory Board Report shall in any case contain the following information: (1) a reference to the discussions on the corporate strategy and business risks, and the result of the assessment by the Executive Board of the structure and operation of the internal risk management and control systems, as well as any significant changes thereto, which were held by the Supervisory Board in the year under review;(83) (2) a schedule indicating the attendance or absence by each Supervisory Board member and each member of a Committee with respect to all meetings of the Supervisory Board or of the Committees in the reporting year;(84) (3) a statement as to whether in the opinion of the Supervisory Board clause 1.3(f) of the By-Laws of the Supervisory Board has been satisfied and which member(s) of the Supervisory Board, if present, should not be deemed independent;(85) (4) a reference to the discussions described in clause 8.3 of the By-Laws of the Supervisory Board;(86) (5) for each Committee: a report on how it has performed its duties;(87) details of its composition, number of meetings and the main issues discussed;(88) (6) the following information on each Supervisory Board member:(89) (i) age ; (ii) nationality; (iii) date of initial appointment and term of appointment; (iv) current and former positions in the Company; (v) service on Committees (vi) chief position; (vii) other positions, to the extent relevant for the performance of his duties as member of the Supervisory Board; (viii) securities held in the Company; (ix) details of agreements under which benefits are derived on termination of membership of the Supervisory Board or any other position at the Company; (x) gender; (xi) profession; and (7) the principal points of the Remuneration Report.(90) -0-0-0-0-0-0- (83) (84) (85) (86) (87) (88) (89) (90) Dutch Corporate Governance Code, best practice provision III.1.8. See also clause 7.3 of these By-Laws. Dutch Corporate Governance Code, best practice provision III.1.5. See also clause 16.3 of these By-Laws. Dutch Corporate Governance Code, best practice provision III.2.3. See also footnote 9 and clause 1.6 of these By-Laws. Dutch Corporate Governance Code, best practice provision III.1.7. Dutch Corporate Governance Code, Principle III.5. See also clause 3.2 of these By-Laws. Dutch Corporate Governance Code, best practice provision III.5.2. See also clause 3.2 of these By-Laws. Dutch Corporate Governance Code, best practice provision III.1.3., Form 20-F requirements. Dutch Corporate Governance Code, II.2 (2 nd Principle). See also clause 12.1 of these By-Laws. 33 ANNEX 5 INFORMATION TO BE INCLUDED IN THE REMUNERATION REPORT The Remuneration Report shall contain an account of the manner in which the remuneration policy has been implemented in the past financial year, as well as an overview of the remuneration policy planned by the Supervisory Board for the next financial year and subsequent years. The overview shall in any event contain the following information:(91) (a) a statement of the relative importance of the variable and non-variable remuneration components and an explanation of this ratio; (b) an explanation of any absolute change in the non-variable remuneration component; (c) if applicable, the composition of the group of companies (peer group) whose remuneration policy determines in part the level and composition of the remuneration of the Executive Board members; (d) a summary and explanation of the Company’s policy with regard to the term of the contracts with Executive Board members, the applicable periods of notice and redundancy schemes and an explanation of the extent to which best practice provision II.2.7 is endorsed; (e) a description of the performance criteria on which any right of the Executive Board members to options, shares or other variable remuneration components is dependent; (f) an explanation of the chosen performance criteria; (g) a summary of the methods that will be applied in order to determine whether the performance criteria have been fulfilled and an explanation of the choice of these methods; (h) if performance criteria are based on a comparison with external factors, a summary should be given of the factors that will be used to make the comparison; if one of the factors relates to the performance of one or more companies (peer group) or of an index, it should be stated which companies or which index has been chosen as the yardstick for comparison; (i) a description and explanation of each proposed change to the conditions on which an Executive Board member can acquire rights to options, shares or other variable remuneration components; (j) if any right of an Executive Board member to options, shares or other variable remuneration components is not performance-related, an explanation of why this is the case; (k) current pension schemes and the related financing costs; and (91) Dutch Corporate Governance Code, best practice provision II.2.10. 34 (l) agreed arrangements for the early retirement of Executive Board members. -0-0-0-0-0-0 35 Exhibit 4.4 CONFORMED COPY (Incoporating amendments and corrections made pursuant to a n amendment agreement dated 10 March 2004, a second amendment deed dated 28 June 2004, a correction of manifest errors letter dated 10 November 2004, a third amendment letter dated 1 December 2004, a fourth amendment and consent letter dated 10 March 2005 and a fifth amendment and restatement deed dated 30 November 2005, by a Sixth Amendment Agreement dated 18 September 2006, a second correction of manifest errors letter dated 18 January 2007 and by a Seventh Amendment Agreement dated 27 July 2007) €730,000,000 AMENDED AND RESTATED SENIOR FACILITIES AGREEMENT Between BUHRMANN N.V. as Parent BUHRMANN US INC. as Existing Borrower THE ORIGINAL GUARANTORS NAMED HEREIN as Original Guarantors DEUTSCHE BANK AG, LONDON BRANCH ABN AMRO BANK N.V. as Arrangers DEUTSCHE BANK AG, LONDON BRANCH as Agent DEUTSCHE BANK AG, LONDON BRANCH as Security Trustee and THE LENDERS 5 Old Broad Street London EC2N 1DW TABLE OF CONTENTS Page 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. DEFINITIONS AND INTERPRETATION THE FACILITIES CONDITIONS UTILISATION DOCUMENTARY CREDITS SWINGLINE FACILITIES UNCOMMITTED INCREMENTAL FACILITIES OPTIONAL CURRENCIES REPAYMENT OF REVOLVING AND SWINGLINE FACILITY OUTSTANDINGS REPAYMENT OF TERM FACILITY OUTSTANDINGS CANCELLATION VOLUNTARY PREPAYMENT MANDATORY PREPAYMENT INTEREST ON REVOLVING AND SWINGLINE FACILITY ADVANCES INTEREST ON TERM FACILITY ADVANCES MARKET DISRUPTION AND ALTERNATIVE INTEREST RATES COMMISSIONS AND FEES TAXES INCREASED COSTS ILLEGALITY REPLACEMENT AND MITIGATION REPRESENTATIONS AND WARRANTIES INFORMATION UNDERTAKING FINANCIAL CONDITION POSITIVE UNDERTAKINGS NEGATIVE UNDERTAKINGS ACCESSION OF NEW GUARANTORS AND NEW BORROWERS EVENTS OF DEFAULT DEFAULT INTEREST GUARANTEE AND INDEMNITY AGENT AND OBLIGORS’ AGENT SECURITY TRUSTEE i 1 59 61 61 65 69 73 80 80 81 85 86 90 97 98 99 101 102 104 105 106 108 117 123 127 132 154 155 162 163 167 172 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. BORROWERS’ INDEMNITIES CURRENCY OF ACCOUNT PAYMENTS SET-OFF SHARING AMONG THE FINANCE PARTIES CALCULATIONS AND ACCOUNTS ASSIGNMENTS AND TRANSFERS COSTS AND EXPENSES REMEDIES AND WAIVERS NOTICES AND DELIVERY OF INFORMATION ENGLISH LANGUAGE PARTIAL INVALIDITY AMENDMENTS THIRD PARTY RIGHTS COUNTERPARTS GOVERNING LAW JURISDICTION 175 176 176 178 179 180 182 187 189 189 191 191 191 195 195 195 196 SCHEDULE 1 PART I - LENDERS AND COMMITMENTS PART II - ORIGINAL GUARANTORS 198 198 200 SCHEDULE 2 FORM OF TRANSFER CERTIFICATE 202 SCHEDULE 3 PART I - CONDITIONS PRECEDENT TO FIRST UTILISATION PART II - FORM OF CERTIFICATE OF OBLIGOR PART III - SECURITY DOCUMENTS PART IV - CONDITIONS SUBSEQUENT DOCUMENTS 207 207 211 213 217 SCHEDULE 4 PART I - FORM OF UTILISATION REQUEST (TERM FACILITIES AND REVOLVING FACILITY) PART II - FORM OF UTILISATION REQUEST (SWINGLINE FACILITY) PART III - FORM OF INCREMENTAL TERM FACILITY COMMITMENT AGREEMENT PART IV - FORM OF INCREMENTAL REVOLVING FACILITY COMMITMENT AGREEMENT 221 221 223 224 231 SCHEDULE 5 SECURITY TRUSTEE PROVISIONS PART I - SUPPLEMENTARY SECURITY TRUSTEE PROVISIONS PART II - APPOINTMENT AND RETIREMENT OF SECURITY TRUSTEE 237 237 241 SCHEDULE 6 ASSOCIATED COSTS RATE 243 SCHEDULE 7 PART I - FORM OF ACCESSION NOTICE 246 246 ii PART II - ACCESSION DOCUMENTS 248 SCHEDULE 8 PART I - FORM OF AUDITORS’ CONFIRMATION PART II - FORM OF DIRECTORS’ COMPLIANCE CERTIFICATE 249 249 250 SCHEDULE 9 GROUP STRUCTURE 251 SCHEDULE 10 PART I - EXISTING LIENS PART II - EXISTING INDEBTEDNESS PART III - NON-GUARANTOR SUBSIDIARIES PART IV - EXISTING PROCEEDINGS PART V - PLANS PART VI - MATERIAL SUBSIDIARIES PART VII - EXISTING INVESTMENTS 262 262 276 283 289 290 291 291 SCHEDULE 11 FORM OF L/C BANK ACCESSION CERTIFICATE 293 iii THIS AGREEMENT is dated 23 December 2003, as amended and corrected pursuant to an amendment agreement dated 10 March 2004, a second amendment deed dated 28 June 2004, a correction of manifest errors letter dated 10 November 2004, a third amendment letter dated 1 December 2004, a fourth amendment and consent letter dated 10 March 2005 and a fifth amendment and restatement deed dated 30 November 2005, and, as of the Sixth Amendment Agreement Effective Date, by a Sixth Amendment Agreement and by a second correction of manifest errors letter dated 18 January 2007 and made between: (1) BUHRMANN N.V. (the “ Parent ”); (2) BUHRMANN US INC. (the “ Existing Borrower ”); (3) THE ORIGINAL GUARANTORS NAMED IN PART II OF SCHEDULE 1 (together with the Parent, the “ Original Guarantors ” and each an “ Original Guarantor ”); (4) DEUTSCHE BANK AG, LONDON BRANCH and ABN AMRO BANK N.V. (each an “ Arranger ” and together, the “ Arrangers ”); (5) DEUTSCHE BANK AG, LONDON BRANCH (as agent for and on behalf of the Finance Parties, the “ Agent ”); (6) DEUTSCHE BANK AG, LONDON BRANCH (as security trustee for and on behalf of the Finance Parties, the “ Security Trustee ”); and (7) THE LENDERS (as defined below). 1. DEFINITIONS AND INTERPRETATION 1.1 Definitions In this Agreement the following terms have the meanings set out below. “ Acceding Borrower ” means any member of the Group which has complied with the requirements of Clause 27.2 ( Accession of New Borrowers ). “ Acceding Guarantor ” means any member of the Group which has complied with the requirements of Clause 27.1 ( Accession of New Guarantors ). “ Accession Notice ” means a duly completed notice of accession in the form of Part I of Schedule 7 ( Form of Accession Notice ). “ Act ” means the Companies Act 1985. “ Additional Dividend Amount ” means: (a) for the fiscal year ending 31 December, 2006, €25,000,000; (b) for any fiscal year ending after 31 December, 2006, an amount equal to the lesser of: (i) €25,000,000; or 1 (ii) the Additional Dividend Amount for the previous fiscal year (the “Previous Year”) plus the difference (which, for the avoidance of doubt, may be a negative number) between 35% of the Consolidated Net Income Available to Common (calculated before deducting any non-cash exceptionals accrued during such period) for the fiscal year immediately preceding the Previous Year and the aggregate amount of Dividends paid during the Previous Year. “ Additional Security Documents ” means all mortgages, pledge agreements, security agreements and other security documents entered into from time to time pursuant to Clauses 25.7 ( Additional Security and Further Assurances ), 25.8 ( Stock Pledges in Non-U.S. Subsidiaries of the Existing Borrower Which Are Not Guarantors ) and/or 26.12 ( Limitation on Creation of Subsidiaries ), as each such document may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. “ Adjusted Consolidated EBITDA ” means, for any period, Consolidated EBITDA for such period, adjusted by excluding therefrom (to the extent otherwise included therein) any amounts attributable to CEAL and any of its Subsidiaries, so long as CEAL is a Non-Wholly Owned Subsidiary. “ Adjusted Consolidated Net Income ” means, for any period, Consolidated Net Income for such period plus, without duplication, the sum of the amount of all net non-cash charges (including, without limitation, depreciation, amortisation, deferred tax expense and non-cash interest expense) and net non-cash losses which were included in arriving at Consolidated Net Income for such period, less the amount of all net non-cash gains and non-cash credits which were included in arriving at Consolidated Net Income for such period. “ Adjusted Consolidated Tangible Assets ” means, at any time, the Consolidated Tangible Assets at such time, adjusted by excluding therefrom (to the extent otherwise reflected therein) any amounts attributable to (a) CEAL and any of its Subsidiaries, so long as CEAL is a Non-Wholly Owned Subsidiary and (b) any Receivables Subsidiary. “ Adjusted Consolidated Working Capital ” means, at any time, Consolidated Current Assets (but excluding therefrom all cash and Cash Equivalents) less Consolidated Current Liabilities at such time. “ Advance ” means, save as otherwise provided in this Agreement, a Revolving Facility Advance, an A Facility Advance, a D1 Facility Advance, a D2 Facility Advance, a Swingline Facility Advance, or an Incremental Term Facility Advance as the context may require. “ A Facility ” means the term loan facility granted to the Existing Borrower pursuant to Clause 2.1(c) ( The Facilities ). “ A Facility Advance ” means an advance (as from time to time reduced by repayment) made or to be made by the A Facility Lenders under the A Facility or arising in respect of the A Facility under Clause 15.3 ( Division of Term Facility Advances ). “ A Facility Commitment ” means, in relation to an A Facility Lender at any time, and save as otherwise provided in this Agreement, the amount set opposite its name in the relevant column of Section A of Part I of Schedule 1 ( Lenders and Commitments ) or as specified in the Transfer Certificate pursuant to which such Lender becomes a party to this Agreement. 2 “ A Facility Lender ” means a person which: (a) is named opposite the column relating to the A Facility (with a positive amount) in Section A of Part I of Schedule 1 ( Lenders and Commitments ); or (b) has become a party to this Agreement in accordance with the provisions of Clause 39 ( Assignments and Transfers ), which in each case has not ceased to be a party to this Agreement in accordance with the terms of this Agreement. “ A Facility Margin ” means, in relation to A Facility Advances, 2.50 per cent. per annum. “ A Facility Outstandings ” means, at any time, the aggregate principal amount of the A Facility Advances outstanding under this Agreement. “ A Facility Repayment Date ” has the meaning ascribed to that term in Clause 10.1 ( Repayment of A Facility Outstandings ). “ Affiliate ” means, with respect to any person, any other person directly or indirectly controlling (including, but not limited to, all directors and officers of such person), controlled by, or under direct or indirect common control with, such person. A person shall be deemed to control another person if such person possesses, directly or indirectly, the power (a) to vote 10 per cent. or more of the securities having ordinary voting power for the election of directors of such corporation or (b) to direct or cause the direction of the management and policies of such other person, whether through the ownership of voting securities, by contract or otherwise, provided that neither the Agent nor any Lender (nor, in each case, any affiliate thereof) shall be considered an Affiliate of the Parent or any subsidiary thereof. “ Affiliate Debt ” means any Indebtedness (including, without limitation, any Intercompany Existing Indebtedness), whether now existing or hereafter incurred, owed by (a) the Parent to any of its Subsidiaries or Affiliates (b) any Subsidiaries of the Parent to the Parent or any of its Subsidiaries or Affiliates or (c) any Affiliate of the Parent to the Parent or any of its Subsidiaries. “ Agent’s Spot Rate of Exchange ” means, in relation to two currencies, the Agent’s spot rate of exchange for the purchase of the first-mentioned currency with the secondmentioned currency in the London foreign exchange market at or about 11.00 a.m. on a particular day. “ Agreed Business Plan ” means the business plan for the Group prepared by or on behalf of the Parent in the agreed form. “ Alternate Currency Incremental Term Facility Advance ” means each Incremental Term Facility Advance denominated in an Optional Currency. “ Anton Acquisition ” means the acquisition by Corporate Express Norway Holdings AS from the Anton Vendors of shares carrying more than 50 per cent. of the voting rights in Anton Target so that the Anton Target shall become a Subsidiary (to the extent that the shares in the Anton Target are acquired through a series of successive acquisitions, those successive acquisitions shall be treated as if they were a single acquisition of the Anton Target). 3 “ Anton Acquisition Funds ” means a portion of the D1 Facility in an amount of €175,000,000 (or its equivalent in dollars). “ Anton Fees Letter ” means the fees letter dated on or about the Sixth Amendment and Restatement Effective Date between the Arrangers and the Existing Borrower. “ Anton Target ” means Andvord Tybring – Gjedde ASA. “ Anton Vendor ” means, as the context requires: (a) each legal or beneficial owner of shares in the Anton Target immediately prior to the acquisition of such shares by any member of the Group; or (b) all such owners taken together. “ Applicable Currency ” means, for any Tranche of Incremental Term Facility Advances the currency (in euros or in an Optional Currency) for such Tranche designated in the Incremental Term Facility Commitment Agreement for such Tranche. “ Applicable Excess Cash Flow Percentage ” means, (a) so long as a Default or an Event of Default exists on the respective Excess Cash Flow Payment Date, 100 per cent. and (b) so long as no Default or Event of Default exists on the respective Excess Cash Flow Payment Date, 50 per cent. where the Consolidated Leverage Ratio on the last day of the respective Excess Cash Flow Payment Period is equal to or greater than 2.50:1.00 and zero where the Consolidated Leverage Ratio on the last day of the respective Excess Cash Flow Payment Period is less than 2.50:1.00. “ Applicable Margin ” means: (a) with respect to the A Facility, the D Facilities and the Revolving Facility, the A Facility Margin, the D Facilities Margin and the Revolving Facility Margin, respectively. From and after each day of delivery of any certificate delivered in accordance with the following sentence indicating an entitlement to a different margin than the A Facility Margin, the D Facilities Margin or the Revolving Facility Margin, as the context may require, (each, a “ Start Date ”) to and including the applicable End Date described below, the Applicable Margin shall (subject to any adjustment pursuant to the immediately succeeding paragraph) be that set forth below opposite the Consolidated Leverage Ratio indicated to have been achieved in any certificate delivered in accordance with the following sentence: Consolidated Leverage Ratio Greater than 3.50:1.00 Greater than 3.00:1.00 but less than or equal to 3.50:1.00 Applicable Margin for A Facility, Revolving Facility and Euro Swingline Facility Advances Applicable Margin for Dollar Swingline Facility Advances Applicable Margin for D Facilities 2.500 per cent. 1.500 per cent. 2.00 per cent 2.250 per cent. 1.250 per cent. 2.00 per cent 4 Consolidated Leverage Ratio Greater than 2.50:1:00 but less than or equal to 3.00:1.00 Greater than 2.00:1.00 but less than or equal to 2.50:1.00 Less than or equal to 2.00:1.00 Applicable Margin for A Facility, Revolving Facility and Euro Swingline Facility Advances Applicable Margin for Dollar Swingline Facility Advances Applicable Margin for D Facilities 2.000 per cent. 1.000 per cent. 2.00 per cent 1.750 per cent. 0.750 per cent 2.00 per cent 1.500 per cent. 0.500 per cent. 2.00 per cent The Consolidated Leverage Ratio shall be determined based on the delivery of a certificate of the Parent by an Authorised Representative of the Parent to the Agent (with a copy to be sent by the Agent to each Lender), within 50 days of the last day of any fiscal quarter of the Parent, which certificate shall set forth the calculation of the Consolidated Leverage Ratio as at the last day of the Test Period ended immediately prior to the relevant Start Date (but determined on a Pro Forma Basis to give effect to any €5 Million Permitted Acquisition and any €5 Million Asset Sale effected on or prior to the date of delivery of such certificate) and the Applicable Margins which shall be thereafter applicable (until same are changed or cease to apply in accordance with the following sentences) . The Applicable Margins so determined shall apply, except as set forth in the succeeding sentence, from the Start Date to the earlier of (i) the date on which the next certificate is delivered to the Agent, (ii) the date which is 50 days following the last day of the Test Period in which the previous Start Date occurred (the “ End Date ”), at which time, if no certificate has been delivered to the Agent indicating an entitlement to an Applicable Margin other than those described in the first sentence of this paragraph (a) (and thus commencing a new Start Date), the Applicable Margins shall be the A Facility Margin, the D Facilities Margin and the Revolving Facility Margin (as applicable); and (b) with respect to each Tranche of the Incremental Term Facility Outstandings that percentage set forth in, or calculated in accordance with, Clause 7 ( Uncommitted Incremental Facilities ) and the relevant Incremental Term Facility Commitment Agreement provided that, if at any time, the Applicable Margin relating to any Incremental Term Facility Outstandings exceeds by more than 0.50 per cent. the Applicable Margin relating to the D Facilities at such time, the Applicable Margin relating to the D Facilities shall be automatically increased to a percentage which is 0.50 per cent. below the Applicable Margin relating to the Incremental Term Facility Outstandings. “ Asset Sale ” means any sale (including pursuant to sale-leaseback transactions (other than a sale-leaseback transaction where the Parent or any of its Subsidiaries played a primary financial role in the development of the relevant asset)), transfer or other disposition by the Parent or any of its Subsidiaries to any person other than the Parent or any Wholly-Owned Subsidiary of the Parent of any asset or Property (including, without limitation, any Equity Interests or other securities of another person, but excluding the sale by the Parent of its own 5 share capital) of the Parent or such Subsidiary other than (a) sales, transfers or other dispositions of inventory made in the ordinary course of business, (b) sales, transfers or other dispositions of assets pursuant to paragraphs (c)(i) ( obsolete equipment ), (f) ( inventory ), (g) ( overdue receivables ) and (h) ( condemned property ) of Clause 26.2 ( Consolidation, Merger, Purchase or Sale of Assets, etc. ), (c) sales or liquidations of Cash Equivalents, (d) sales of Receivables Facility Assets pursuant to any Permitted Receivables Transaction, (e) operating leases or subleases of any property by the Parent and its Subsidiaries in the ordinary course of business, (f) the licensing of intellectual property in the ordinary course of business, (g) any Sale In Lieu of Liquidation and (h) any single sale of assets (or series of related sales of assets) which generates Net Sale Proceeds of less than €250,000 (or its equivalent in other currencies). “ Associated Costs Rate ” means, in relation to any Advance or Unpaid Sum, the rate determined in accordance with Schedule 6 ( Associated Costs Rate ). “ Authorisation ” means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration. “ Authorised Representative ” means, with respect to (i) delivering Utilisation Requests and similar notices, any person or persons that has or have been authorised by the board of directors of the relevant Borrower to deliver such notices pursuant to this Agreement and that has or have appropriate signature cards on file with the Agent, (ii) delivering financial information and officer’s certificates pursuant to this Agreement, the chief financial officer, any treasurer or other financial officer of the relevant Borrower or the Parent and (iii) any other matter in connection with any Finance Document, any officer (or a person or persons so designated by any two officers) of the Parent or the relevant Borrower. “ Available A Facility Commitment ” means, in relation to an A Facility Lender, at any time and save as otherwise provided in this Agreement, its A Facility Commitment at such time adjusted to take account of: (a) any cancellation or reduction of it or any transfer by such an A Facility Lender or any transfer to it, in each case, pursuant to the terms of this Agreement; and (b) in the case of any proposed Advance, the Euro Amount of any A Facility Advance which, pursuant to any other Utilisation Request is to be made on or before the proposed Utilisation Date, less the Euro Amount of its share of the A Facility Advances made under this Agreement, provided always that such amount shall not be less than zero. “ Available Commitment ” means, in relation to a Lender, the aggregate amount of its Available Revolving Facility Commitment, its Available Term Facility Commitments and, subject to Clause 7 ( Uncommitted Incremental Facilities ) and the relevant Incremental Facility Commitment Agreement, its Available Incremental Term Facility Commitment or, in the context of a particular Facility, its Available A Facility Commitment, its Available D1 Facility Commitment, its Available D2 Facility Commitment, its Available Revolving Facility Commitment, its Available Swingline Facility Commitment or its Available Incremental Term Facility Commitment, as the context may require. 6 “ Available D1 Facility Commitment ” means, in relation to a D1 Facility Lender, at any time and save as otherwise provided in this Agreement, its D1 Facility Commitment at such time adjusted to take account of: (a) any cancellation or reduction of it or any transfer by such D1 Facility Lender or any transfer to it, in each case, pursuant to the terms of this Agreement; and (b) in the case of any proposed Advance, the Euro Amount of any D1 Facility Advance which, pursuant to any other Utilisation Request is to be made on or before the proposed Utilisation Date, less the Euro Amount of its share of the D1 Facility Advances made under this Agreement, provided always that such amount shall not be less than zero. “ Available D2 Facility Commitment ” means, in relation to a D2 Facility Lender, at any time and save as otherwise provided in this Agreement, its D2 Facility Commitment at such time adjusted to take account of: (a) any cancellation or reduction of it or any transfer by such D2 Facility Lender or any transfer to it, in each case, pursuant to the terms of this Agreement; and (b) in the case of any proposed Advance, the Euro Amount of any D2 Facility Advance which, pursuant to any other Utilisation Request is to be made on or before the proposed Utilisation Date, less the Euro Amount of its share of the D2 Facility Advances made under this Agreement, provided always that such amount shall not be less than zero. “ Available Facility ” means, in relation to a Facility, at any time, the aggregate amount of the Available Commitments in respect of that Facility at that time. “ Available Incremental Term Facility Commitment ” means, in relation to a Lender, at any time and save as otherwise provided in this Agreement, its Incremental Term Facility Commitment at such time adjusted to take account of: (a) any cancellation or reduction of it or any transfer by such Lender or any transfer to it, in each case, pursuant to the terms of this Agreement; and (b) in the case of any proposed Advance, the Euro Amount of any Incremental Term Facility Advance which, pursuant to any other Incremental Term Facility Commitment Agreement is to be made on or before the proposed Utilisation Date, less the Euro Amount of its share of the Incremental Term Facility Advances made under this Agreement and the relevant Incremental Term Facility Commitment Agreement, provided always that such amount shall not be less than zero. “ Available Liquidity ” means, at any time, an amount equal to the Available Revolving Facility. “ Available Revolving Facility ” means, at any time, the aggregate amount of the Available Revolving Facility Commitments. 7 “ Available Revolving Facility Commitment ” means, in relation to a Revolving Facility Lender, at any time and save as otherwise provided in this Agreement, its Revolving Facility Commitment, adjusted to take account of: (a) any cancellation or reduction of it or any transfer by such Revolving Facility Lender or any transfer to it, in each case, pursuant to the terms of this Agreement; and (b) in the case of any proposed Utilisation, the Euro Amount of (i) any Revolving Facility Advance and/or Documentary Credit and/or any Swingline Facility Advance which pursuant to any other Utilisation Request is to be made, or as the case may be, issued and (ii) any Revolving Facility Advance and/or Documentary Credit and/or any Swingline Facility Advance which is due to be repaid or expire (as the case may be), in each case, on or before the proposed Utilisation Date, less the Euro Amount of its participation in the Swingline Facility Outstandings and the Revolving Facility Outstandings at such time provided always that such amount shall not be less than zero. “ Available Swingline Facility ” means, at any time, the aggregate amount of the Available Swingline Facility Commitments. “ Available Swingline Facility Commitment ” means, in relation to a Swingline Facility Lender, at any time and save as otherwise provided in this Agreement its Swingline Facility Commitment, adjusted to take account of: (a) any cancellation or reduction of it or any transfer by such Swingline Facility Lender or any transfer to it, in each case, pursuant to the terms of this Agreement; and (b) in the case of any proposed Utilisation, the Euro Amount of (A) any Swingline Facility Advance which pursuant to any other Utilisation Request is to be made and (B) any Swingline Facility Advance which is due to be repaid, in each case, on or before the proposed Utilisation Date, less the Euro Amount of its participation in the Swingline Facility Outstandings at such time, provided always that such amount shall not be less than zero. “ Available Term Facility Commitment ” means, in relation to a Lender, the aggregate amount of its Available A Facility Commitment, its Available D1 Facility Commitment and its Available D2 Facility Commitment. “ BBA LIBOR ” means in relation to an Optional Currency, the British Bankers’ Association Interest Settlement Rate for the relevant currency and specified period. “ Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy” as now or hereafter in effect, or any successor to it. “ Belgian Guarantor ” means each of the parties as set out in Part II of Schedule 1 ( Original Guarantors ) named as Belgian Guarantors and any Acceding Guarantor incorporated in the Kingdom of Belgium. “ Beneficiary ” means, in relation to a Documentary Credit, the beneficiary of it. 8 “ Borrowers ” means the Existing Borrower and any Acceding Borrower. “ Break Costs ” means the amount (if any) by which: (a) the interest which a Lender should have received for the period from the date of receipt of all or any part of its participation in an Advance or Unpaid Sum to the last day of the current Interest Period or Term in respect of that Advance or Unpaid Sum, had the principal amount of such Advance or Unpaid Sum received been paid on the last day of that Interest Period or Term, exceeds: (b) the amount which that Lender would be able to obtain by placing an amount equal to the principal amount of such Advance or Unpaid Sum received or recovered by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following such receipt or recovery and ending on the last day of the current Interest Period or Term. “ Business Day ” means a day (other than a Saturday or Sunday) on which (a) banks generally are open for business in London and (b) if such reference relates to a date for the payment or purchase of any sum denominated in: (i) euro (A) is a TARGET Day and (B) is a day on which banks generally are open for business in the financial centre selected by the Agent for receipt of payments in euro; or (ii) an Optional Currency, banks generally are open for business in the principal financial centre of the country of such Optional Currency. “ Capital Expenditures ” means, with respect to any person, all expenditure by such person which is required to be treated as capital expenditure in accordance with GAAP. “ Capitalised Lease ” of a person means any lease of Property by such person as lessee which would be capitalised on a balance sheet of such person prepared in accordance with GAAP. “ Capitalised Lease Obligations ” of any person means all rental obligations which, under GAAP, are required to be capitalised on the books of such person, in each case taken at the amount thereof accounted for as indebtedness in accordance with GAAP. “ Cash ” means any credit balances on any deposit, savings or current account with a bank and cash in hand held in the ordinary course of business. “ Cash Equivalents ” means: (a) Cash; (b) securities issued or directly fully guaranteed or insured by the governments of the United States, The Netherlands, the United Kingdom, France, Switzerland, Germany or Australia or any agency or instrumentality thereof (provided that the full faith and credit of the respective such government is pledged in support thereof) having maturities of not more than six months from the date of acquisition; 9 (c) certificates of deposit and time deposits with maturities of six months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any commercial bank incorporated in the United States or commercial bank of a foreign country recognised by the United States, in each case having capital and surplus in excess of €500,000,000 (or the foreign currency equivalent thereof) and has outstanding debt which is rated “A” (or similar equivalent thereof) or higher by at least one nationally recognised statistical rating organisation (as defined under Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor; (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in (b) and (c) above entered into with any financial institution meeting the qualifications specified in (c) above; and (e) commercial paper having one of the two highest ratings obtainable from S&P or Moody’s and in each case maturing within six months after the date of acquisition . Furthermore, with respect to Subsidiaries of the Parent which are not organised in one or more Qualified Jurisdictions, Cash Equivalents shall include bank deposits (and investments pursuant to operating account agreements) maintained with various local banks in the ordinary course of business consistent with past practice of the Parent’s Subsidiaries. “ Cash Interest ” means, for any applicable computation period, cash interest as shown in the Group’s consolidated financial statements. “ CEAL ” means Corporate Express Australia Limited, a corporation incorporated in Australia. “ CEAL Exception Conditions ” means, in relation to the CEAL Group at any time: (a) each member of the CEAL Group is a Non Wholly Owned Subsidiary of the Parent; and (b) no member of the CEAL Group has incurred any Indebtedness which directly or indirectly guarantees or supports any obligation of the Group (other than members of the CEAL Group). “ CEAL Group ” means CEAL and its Subsidiaries. “ CEXP ” means Corporate Express, Inc., a Colorado Corporation. “ Change of Control ” means: (a) any person or “group” (within the meaning of Sections 13(d) and 14(d) under the Securities Exchange Act, as in effect on the Effective Date), other than as a result of the ownership of Parent Preference Shares A and Parent Preference Shares B by the respective Permitted Holders thereof, shall (i) have acquired beneficial ownership of 35 per cent. or more on a fully diluted basis of the voting and/or economic interest in the Parent’s share capital or (ii) obtained the power (whether or not exercised) to elect a majority of the Parent’s directors; 10 (b) the board of directors of the Parent shall cease to consist of a majority of Continuing Directors; (c) any “change of control” or similar event under, and as defined in, the Senior Subordinated Note Indenture, the New Senior Subordinated Note Indenture, the Senior Subordinated Convertible Bond Agency Agreement, the documentation relating to any Permitted Subordinated Indebtedness or any Permitted Refinancing Indebtedness or any issue of Parent Preferred Stock (including, without limitation, each of the Parent Preference Shares A and the Parent Preference Shares B), in each case to the extent then outstanding, shall occur; or (d) the Parent shall at any time cease to own beneficially and of record, directly or indirectly through one or more Wholly-Owned Subsidiaries of the Parent, free and clear of all Liens (other than those created pursuant to the Finance Documents), other encumbrances, or voting agreements, restrictions or trusts of any kind, 100 per cent. of the outstanding Equity Interests of each Borrower on a fully diluted basis and shares representing the right to elect a majority of the directors of each Borrower. “ Code ” means the U.S. Internal Revenue Code of 1986, as amended from time to time, and the cases and applicable regulations and rulings promulgated or issued thereunder . Section references to the Code are to the Code, as in effect as at the Effective Date and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. “ Collateral ” means all property (whether real or personal, movable or immovable) with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document (including any Additional Security Document). “ Commitment ” means, in relation to a Lender, its A Facility Commitment, its D1 Facility Commitment, its D2 Facility Commitment, its Revolving Facility Commitment, its Swingline Facility Commitment and/or, subject to Clause 7 ( Uncommitted Incremental Facilities ) its Incremental Revolving Facility Commitment and/or its Incremental Term Facility Commitment, as the context may require. “ Commitment Letter ” means the letter dated 13 November 2003 from the Arrangers to the Parent and the Existing Borrower with respect to arranging the Facilities. “ Compliance Certificate ” means a certificate substantially in the form set out in Part I of Schedule 8 ( Form of Auditors’ Confirmation ) (or such other similar form as the Agent shall agree with the Parent and the relevant auditors) or Part II of Schedule 8 ( Form of Directors’ Compliance Certificate ) as appropriate. “ Consolidated Current Assets ” means, at any time, the current assets of the Parent and its Consolidated Subsidiaries at such time determined on a consolidated basis. “ Consolidated Current Liabilities ” means, at any time, the consolidated current liabilities of the Parent and its Consolidated Subsidiaries at such time, but excluding (i) the current portion of any Indebtedness under this Agreement, of any Permitted Receivables Transaction Indebtedness and of any other long-term Indebtedness which would otherwise be included therein, (ii) accrued but unpaid interest with respect to the Indebtedness and (iii) the current portion of Indebtedness constituting Capitalised Lease Obligations. 11 “ Consolidated EBIT ” means, for any applicable computation period, EBIT (Earnings Before Interest and Tax) as shown on the Group’s consolidated income statement. “ Consolidated EBITDA ” means, for any applicable computation period, Consolidated EBIT for such period plus, to the extent deducted in determining Consolidated EBIT for such period, impairment costs, amortisation and depreciation expenses for such period . Such calculation shall exclude the effect on such Consolidated EBIT of: (a) non-cash extraordinary, non-cash unusual and non-cash non-recurring gains, losses and charges occurring during such period; (b) non-recurring charges related to assimilation of persons acquired, and the expenses of, Permitted Acquisitions, including expenses incurred in connection with the retirement of Indebtedness of persons so acquired; (c) the write-off of debt financing fees associated with terminated credit facilities; (d) any non-cash pre-acquisition write-offs or similar charges incurred by a person acquired pursuant to a Permitted Acquisition that as the result of a pooling of interest are included in the Parent’s consolidated financial statements for the period; (e) any non-cash write-offs or similar non-cash charges which are recorded following a Permitted Acquisition in the Parent’s consolidated financial statements with respect to an acquired person’s assets to the extent such amounts were accounted for in the first twelve months following the date such acquisition was consummated; (f) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time after the Initial Borrowing Date; (g) any profits (or adding back losses) attributable to minority interests in the Group; (h) one-time charges (including, without limitation, restructuring charges and any upfront fees related to these Facilities, the refinancing of the Senior Subordinated Notes and the issue of the Senior Subordinated Convertible Bonds) occurring during such period to the extent not already included above; and (i) share based payments, provided that Consolidated EBITDA for any period shall be reduced by the aggregate amount of all cash payments made during such period in respect of any amounts previously excluded pursuant to sub-paragraphs (i), (iv), (v), and (vii) of this sentence, whether in such period or a prior period, and provided further (a) that for the purposes of all calculations of Consolidated EBIT and other calculations relevant to this definition of Consolidated EBITDA (including the calculation of Consolidated EBITDA itself) (i) the earnings before interest and tax of any Non-Consolidated Person shall be included only to the extent of the payment of cash dividends or cash distributions by such Non-Consolidated Person to the Parent or a Subsidiary thereof during such period, (ii) the earnings before interest and tax of any Non-Consolidated Person shall be excluded to the extent that the declaration or payment of cash dividends or similar distributions by that Non-Consolidated Person of those earnings is not at the date of determination permitted by operation of its charter or any agreement, instrument or law applicable to such Non-Consolidated Person, and (iii) the earnings before interest and 12 tax of any other person acquired by a Non-Consolidated Person or a Subsidiary of a Non-Consolidated Person in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, and (b) that values of income, losses or any other variables in respect of any Subsidiary of the Parent (excluding the CEAL Group) shall be reduced pro rata to reflect the proportion of the economic interest in such Subsidiary that is directly or indirectly owned by the Parent. “ Consolidated EBITDAR ” means, for any period, Consolidated EBITDA for such period, adjusted by adding thereto the amount of all rent and lease expense included as a component of Consolidated Fixed Charges for such period pursuant to sub-paragraph (ii) of the definition thereof and which was deducted in calculating Consolidated EBIT (and not already added back in determining Consolidated EBITDA) for such period. “ Consolidated Fixed Charge Coverage Ratio ” for any period, means the ratio of Consolidated EBITDAR to Consolidated Fixed Charges for such period. “ Consolidated Fixed Charges ” means, for any period, the sum, without duplication, of (i) Consolidated Interest Expense for such period, (ii) the amount of all rent expense of, and lease payments expensed by, the Parent and its Subsidiaries with respect to Real Property (including land, buildings, improvements and fixtures, including Leaseholds) and vehicles, determined on a consolidated basis for such period, (iii) the amount of all Capital Expenditures made by the Parent and its Subsidiaries determined on a consolidated basis for such period (other than (x) Capital Expenditures to the extent made pursuant to Clause 24.1(b) ( Capital Expenditures ) and (y) any Capital Expenditures paid in respect of Capitalised Leases), (iv) all Dividends (excluding dividends paid-in-kind through the issuance of additional shares of share capital of the Parent) actually paid by the Parent in relation to the Parent Preference Shares A and the Parent Common Stock during such period and (v) the scheduled principal amount of all amortisation payments with respect to the Term Facilities for such period (as determined on the first day of the respective period). “ Consolidated Indebtedness ” means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of the Parent and its Subsidiaries (excluding (i) all Contingent Obligations other than Contingent Obligations which are required, in accordance with GAAP, to be reflected on the consolidated balance sheet of the Parent and its Subsidiaries (ii) obligations under any Hedging Agreements and Other Hedging Agreements or other similar types of agreements and (iii) Indebtedness in respect of Capitalised Leases, but including and taking account of receivables and payables under currency swaps, forward foreign exchange transactions or other agreements pursuant to which foreign exchange risk is hedged) on a consolidated basis as determined in accordance with GAAP, provided that notwithstanding any contrary treatment pursuant to GAAP (and without double counting), (a) the aggregate amount of guarantees or letters of credit issued in support of Indebtedness of persons which are not Subsidiaries of the Parent shall at all times be included as a component of Consolidated Indebtedness, (b) the amount of Permitted Receivables Transaction Outstandings at any time shall be included as a component of Consolidated Indebtedness, (c) any fees incurred in connection with raising such Indebtedness shall be added back (to the extent deducted in determining the balance sheet amount of such Indebtedness), (d) the equity component of any convertible bonds shall be included as a component of Consolidated Indebtedness and (e) to the extent Consolidated Indebtedness does not already do so, Indebtedness of any Subsidiary of the Parent shall be reduced pro rata to reflect the proportion of the economic interest held in such Subsidiary. 13 “ Consolidated Interest Coverage Ratio ” means, for any period, the ratio of Consolidated EBITDA to Consolidated Interest Expense for such period. “ Consolidated Interest Expense ” means, for any period, Cash Interest for such period less, to the extent included in the determination of Cash Interest, (a) the interest element of Capitalised Lease Obligations and (b) the aggregate amount of interest income of members of the Group (other than from other members of the Group) for such period. Notwithstanding anything to the contrary contained above, (x) to the extent Consolidated Interest Expense for any period does not already include all Receivables Facility Financing Costs for such period, the amount of such Receivables Facility Financing Costs shall be added to (and form part of) Consolidated Interest Expense and (y) to the extent Consolidated Interest Expense does not already do so, Cash Interest of any Subsidiary of the Parent shall be reduced pro rata to reflect the proportion of the economic interest held in such Subsidiary. Notwithstanding anything to the contrary contained above, to the extent any Test Period begins before the Initial Borrowing Date, Consolidated Interest Expense as calculated above for each such period shall instead be deemed to be for a period as set out in column 1 below and for an amount equal to the product of such number of times as set out in column 2 below and the Consolidated Interest Expense as calculated above. Column 1 - Deemed Test Period Column 2 – Multiplier For the period beginning on 1 January 2004 and ending on 31 March 2004. 4 For the period beginning on 1 January 2004 and ending on 30 June 2004. 2 For the period beginning on 1 January 2004 and ending on 30 September 2004. 1.33 “ Consolidated Leverage Ratio ” means, on any date, the ratio of (i) Consolidated Indebtedness on such date to (ii) Consolidated EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date, in each case taken as one accounting period, provided that (x) to the extent any €5 Million Permitted Acquisition or any €5 Million Asset Sale (for purposes of the Consolidated Leverage Ratio) has occurred during the relevant Test Period, Consolidated EBITDA shall be determined for the respective Test Period on a Pro Forma Basis for such occurrences and (y) for the purpose of calculating the Consolidated Leverage Ratio, freely available cash balances of the Group held with a Lender in an aggregate amount not to exceed €50,000,000 shall be deducted from the amount of Consolidated Indebtedness. “ Consolidated Net Income ” means, for any period, the net income (or loss) of the Parent and its Consolidated Subsidiaries for such period, determined on a consolidated basis (after any deduction for minority interests), provided that (a) in determining Consolidated Net Income, (i) the net income of any Non-Consolidated Person shall be included only to the extent of the payment of cash dividends or cash distributions by such Non-Consolidated Person to the Parent or a Subsidiary thereof during such period, (ii) the net income of any Non-Consolidated Person shall be excluded to the extent that the declaration or payment of cash dividends or similar distributions by that Non-Consolidated Person of that net income is not at the date of determination permitted by operation of its charter or any agreement, 14 instrument or law applicable to such Non-Consolidated Person, (iii) the net income (or loss) of any other person acquired by a Non-Consolidated Person or a Subsidiary of a NonConsolidated Person in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) after tax gains and losses from Asset Sales (without regard to the exceptions in (d) or (e) in the proviso of the definition thereof) or abandonments or reserves relating thereto shall be excluded, and (b) values of income, losses or any other variables in respect of any Subsidiary of the Parent or any person that is accounted for by the equity method of accounting (excluding the CEAL Group) shall be reduced pro rata to reflect the proportion of the economic interest in such Subsidiary or person. “ Consolidated Net Income Available to Common ” means, for any period, Consolidated Net Income for such period less (to the extent same have not already been deducted in determining such Consolidated Net Income) the amount of all Dividends (excluding Dividend paid pursuant to Clause 26.3(f) ( Restricted Payments ) to the extent representing a return of the issue price rather than the payment of accrued dividends thereon) paid or accrued (whether or not paid, and including amounts attributable to dividends paid-in-kind) during the respective period with respect to Preferred Stock (including, without limitation, all such amounts attributable to the Parent Preference Shares A, the Parent Preference Shares B (after any issuance thereof) and any other Preferred Stock of Parent (from time to time issued). “ Consolidated Subsidiaries ” means, as to any person, all Subsidiaries of such person which are consolidated with such person for financial reporting purposes in accordance with GAAP. “ Consolidated Tangible Assets ” means, at any time, the total consolidated assets of the Parent and its Consolidated Subsidiaries as same would be shown on a consolidated balance sheet of the Parent prepared in accordance with GAAP, provided that all intangible assets (in any event including good will) shall be excluded in making such determinations. “ Contingent Obligation ” means, as to any person, any obligation of such person guaranteeing or intended to guarantee any Indebtedness, leases or dividends (“ primary obligations ”) of any other person (the “ primary obligor ”) in any manner, whether directly or indirectly or to otherwise assure or hold harmless the holder of such primary obligation against loss in respect thereof, provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith. “ Continuing Director ” means a director who is either a member of the Supervisory Board of the Parent on the Initial Borrowing Date or who became a member of the Supervisory Board of the Parent subsequent to the Initial Borrowing Date and whose election, or nomination for election by the Parent’s shareholders, was duly approved by a majority of the Continuing Directors then on the Supervisory Board of the Parent. “ D Facilities ” means the D1 Facility and the D2 Facility and “ D Facility ” means any of them as the context may require from time to time. 15 “ D Facilities Margin ” means, in relation to the D Facility Advances, 1.75 per cent. per annum. “ D Facilities Repayment Date ” has the meaning ascribed to it in Clause 10.3 ( Repayment of D Facility Outstandings ). “ D Facility Advances ” means the D1 Facility Advances and the D2 Facility Advances. “ D Facility Commitments ” means, at any time, the aggregate of the D1 Facility Commitments and the D2 Facility Commitments. “ D Facility Lenders ” means the D1 Facility Lenders and the D2 Facility Lenders and “ D Facility Lender ” means any of them as the context may require from time to time. “ D Facility Outstandings ” means the D1 Facility Outstandings and the D2 Facility Outstandings. “ D1 Facility ” has the meaning ascribed to that term in Clause 2.1(d) ( The Facilities ). “ D1 Facility Advance ” means an advance (as from time to time reduced by repayment) made or to be made by the D1 Facility Lenders under the D1 Facility or arising in respect of the D1 Facility under Clause 15.3 ( Division of Term Facility Advances ). “ D1 Facility Commitment ” means, in relation to a D1 Facility Lender at any time, and save as otherwise provided in this Agreement, the amount agreed between such D1 Facility Lender and the Agent and notified to the Parent, or as specified in the Transfer Certificate pursuant to which such Lender becomes a party to this Agreement. “ D1 Facility Lender ” means a person which: (a) is a participant in the D1 Facility immediately prior to the Sixth Amendment and Restatement Effective Date; or (b) has become a party to this Agreement in accordance with the provisions of Clause 39 ( Assignments and Transfers ), which in each case has not ceased to be a party to this Agreement in accordance with the terms of this Agreement. “ D1 Facility Outstandings ” means, at any time, the aggregate principal amount of the D1 Facility Advances outstanding under this Agreement. “ D2 Facility ” has the meaning ascribed to that term in Clause 2.1(e) ( The Facilities ). “ D2 Facility Advance ” means an advance (as from time to time reduced by repayment) made or to be made by the D2 Facility Lenders under the D2 Facility or arising in respect of the D2 Facility under Clause 15.3( Division of Term Facility Advances ). “ D2 Facility Commitment ” means, in relation to a D2 Facility Lender at any time, and save as otherwise provided in this Agreement, the amount agreed between such D2 Facility Lender and the Agent and notified to the Parent, or as specified in the Transfer Certificate pursuant to which such Lender becomes a party to this Agreement. 16 “ D2 Facility Lender ” means a person which: (a) is a participant in the D2 Facility immediately prior to the Sixth Amendment and Restatement Effective Date; or (b) has become a party to this Agreement in accordance with the provisions of Clause 39 ( Assignments and Transfers ), which in each case has not ceased to be a party to this Agreement in accordance with the terms of this Agreement. “ D2 Facility Outstandings ” means, at any time, the aggregate principal amount of the D2 Facility Advances outstanding under this Agreement. “ Default ” means an Event of Default or any event or circumstance which (with the passage of time, the expiry of a grace period, the giving of notice, the making of any determination under any of the Finance Documents or any combination of any of the foregoing) would be an Event of Default. “ Defaulting Lender ” means any Lender with respect to which a Lender Default is in effect. “ Denver Warehouse ” means the property located at 13800 E. 39th Avenue, Aurora, CO, USA. “ Disruption Event ” means either or both of: (a) a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facilities (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or (b) the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party: (i) from performing its payment obligations under the Finance Documents; and (ii) from communicating with other Parties in accordance with the terms of the Finance Documents, and which (in either case) is not caused by, and is beyond the control of, the Party whose operations are disrupted. “ Dividend ” means, with respect to any person, that such person has declared or paid a dividend (excluding dividends paid by the Parent in the Parent Common Stock and Parent Preferred Stock) or returned any equity capital to its stockholders, partners or members or authorised or made any other distribution, payment or delivery of property (other than ordinary share capital of such person) or cash to its stockholders, partners or members as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for a consideration any shares of any class of its share capital or any partnership or membership interests outstanding (or any options or warrants issued by such person with respect to its 17 share capital or other Equity Interests), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the share capital or any partnership or membership interests of such person outstanding (or any options or warrants issued by such person with respect to its share capital or other Equity Interests). “ Documentary Credit ” means a letter of credit, bank guarantee or other documentary credit issued or to be issued by an L/C Bank pursuant to Clause 4.1 ( Conditions to Utilisation ) or assumed in accordance with Clause 5.12 ( Assumption of Existing Documentary Credits ) and, where relevant, issued in conformity with Uniform Customs and Practice for Documentary Credits (1993 Revision) ICC Publication No. 500. “ Dollar Swingline Facility Advance ” means an advance denominated in dollars as from time to time reduced by repayment made or to be made by the Swingline Facility Lenders under the Swingline Facility. “ Dollar Swingline Facility Outstandings ” means, at any time, the aggregate principal amount of the Dollar Swingline Facility Advances outstanding under this Agreement. “ Dormant Subsidiary ” means a member of the Group which does not trade (for itself or as agent for any person) and does not own, legally or beneficially, assets (including, without limitation, indebtedness owed to it) which in aggregate have a value of €1,000 or more or its equivalent in other currencies. “ Double Taxation Treaty ” means in relation to a payment of interest on an Advance made to a particular Borrower, any convention or agreement between the government of the Relevant Tax Jurisdiction of that Borrower and any other government for the avoidance of double taxation with respect to taxes on income and capital gains which makes provision in relation to interest. “ Dutch Guarantor ” means each of the parties as set out in Part II of Schedule 1 ( Original Guarantors ) named as Dutch Guarantors and any Acceding Guarantor incorporated in The Netherlands. “ Effective Date ” means the date of this Agreement. “ Eligible Institution ” means and includes a commercial bank, a finance company, an insurance company, a financial institution, fund or other person which regularly lends, or purchases interests, in loans or extensions of credit of the types made pursuant to this Agreement, but in any event excluding the Parent and its Subsidiaries and Affiliates. “ EMU Legislation ” means the legislative measures of the European Union for the introduction of changeover to or operation of the euro in one or more member states being in part legislative measures to implement the third stage of the European Monetary Union. “ End Date ” has the meaning ascribed to that term in the definition of “ Applicable Margin ”. “ Environment ” means living organisms including the ecological systems of which they form part and the following media: (a) air (including air within natural or man-made structures, whether above or below ground); 18 (b) water (including territorial, coastal and inland waters, water under or within land and water in drains and sewers); and (c) land (including land under water). “ Environmental Claims ” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, liens, notices of non-compliance or violation, investigations or proceedings pursuant to or under any Environmental Law or any permit issued, or any approval given, under any such Environmental Law or Environmental Licence. “ Environmental Law ” means all laws and regulations of any relevant jurisdiction which: (a) have as a purpose or effect the protection of, and/or prevention of harm or damage to, the Environment; (b) provide remedies or compensation for harm or damage to the Environment; and (c) relate to Hazardous Materials or health or safety matters. “ Environmental Licence ” means any Authorisations required at any time under Environmental Law. “ Equity Interests ” means, in relation to any person, any and all shares, interests, rights to purchase, warrants, options, participation or other equivalents of or interest in (however designated) equity of such person, including any preferred stock, any limited or general partnership interest and any limited liability company membership interest. “ ERISA ” means the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect as at the Effective Date and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. “ ERISA Affiliate ” means each person (as defined in Section 3(9) of ERISA) which together with the Parent or a Subsidiary of the Parent would be deemed to be a “single employer” (i) within the meaning of Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the Parent or a Subsidiary of the Parent being or having been a general partner of such person. “ EURIBOR ” means, in relation to any amount owed by an Obligor under this Agreement in euro on which interest for a given period is to accrue: (a) the rate per annum for deposits in euro which appears on the Relevant Page for such period at or about 11.00 a.m. (Brussels time) on the Quotation Date for such period; or (b) if no such rate is displayed and the Agent shall not have selected an alternative service on which such rate is displayed, the arithmetic mean (rounded upwards, if not already such a multiple, to 4 decimal places) of the rates (as notified to the Agent) at which each of the Reference Banks was offering to prime banks in the European interbank market deposits in euro for such period at or about 11.00 a.m. (Brussels time) on the Quotation Date for such period. 19 “ Euro Amount ” means: (a) in relation to an Advance, (i) if such Advance is denominated in euro, the amount of such Advance or (ii) if such Advance is denominated in a currency other than euro, the equivalent in euro of such Advance, as the amount specified in the Utilisation Request for that Advance as adjusted, if necessary, in accordance with the terms of this Agreement and to reflect any repayment, consolidation or division of that Advance; (b) in relation to a Documentary Credit, (i) if such Documentary Credit is denominated in euro, the Outstanding L/C Amount in relation to it at such time or (ii) if such Documentary Credit is not denominated in euro, the equivalent in euro of the Outstanding L/C Amount at such time, calculated as at the later of (A) the date which falls 2 Business Days before its issue date or any renewal date or (B) the date of any revaluation pursuant to Clause 5.3 ( Revaluation of Documentary Credits ); and (c) in relation to any Outstandings, the aggregate of the Euro Amounts (calculated in accordance with paragraphs (a) and (b) above) of each outstanding Advance and/or Outstanding L/C Amount, made under the relevant Facility or Facilities (as the case may be), (i) if such Outstandings are denominated in euro, the aggregate amount in euro of it at such time or (ii) if such Outstandings are not denominated in euro, the equivalent in euro of the aggregate amount of it at such time. “ Euro Swingline Facility Advance ” means an advance denominated in euro as from time to time reduced by repayment made or to be made by the Swingline Facility Lenders under the Swingline Facility. “ Euro Swingline Facility Outstanding ” means, at any time, the aggregate principal amount of the Euro Swingline Facility Advances outstanding under this Agreement. “ Europcenter ” means Buhrmann Shared Service Center (Europe) N.V. a corporation organised under the laws of the Kingdom of Belgium, formerly known as Buhrmann Europcenter N.V. “ Event of Default ” means any of the events or circumstances described as such in Clause 28 ( Events of Default ). “ Excess Cash Flow ” means, for any period, the amount (if any) by which (a) the sum of: (i) Adjusted Consolidated Net Income (excluding any amounts of Consolidated Net Income attributable to CEAL and its Subsidiaries but including any cash Dividends actually received from CEAL only) for such period; and (ii) the decrease, if any, in Adjusted Consolidated Working Capital (excluding any decrease in Adjusted Consolidated Working Capital attributable to CEAL and its Subsidiaries) from the first day to the last day of such period, 20 exceeds: (b) the sum of: (i) the aggregate amount of all Capital Expenditures made by the Parent and its Subsidiaries during such period (other than Capital Expenditures (x) to the extent financed with existing moneys and (y) paid in respect of Capitalised Leases); (ii) the aggregate amount of all Permitted Acquisitions made by the Parent and its Subsidiaries during such period (other than Permitted Acquisitions to the extent financed with existing moneys); (iii) the aggregate amount of permanent principal payments of Indebtedness for borrowed money of the Parent and its Subsidiaries during such period (other than, without double counting, (A) repayments to the extent made with existing moneys, (B) repayments of the Existing Borrower’s 12¼ per cent. Senior Subordinated Notes due 2009 to the extent made with cash on the consolidated balance sheet of the Parent and its Subsidiaries and (C) repayments of Outstandings, unless such repayments of Outstandings were (1) required as a result of a Scheduled Repayment and paid with internally generated funds or (2) made as a voluntary prepayment with internally generated funds (but in the case of a voluntary prepayment of the Revolving Facility, only to the extent accompanied by a voluntary reduction to the Revolving Facility Commitments)); (iv) the increase, if any, in Adjusted Consolidated Working Capital (excluding any increase in Adjusted Consolidated Working Capital attributable to CEAL and its Subsidiaries) from the first day to the last day of such period; (v) the aggregate amount of cash Dividends paid by the Parent during such period pursuant to paragraph (g) of Clause 26.3 ( Restricted Payments ), as the case may be; (vi) the net amount of Investments (i.e., the amount invested during the respective period, net of any returns on investments previously made pursuant to said sections during said period) pursuant to Clause 26.5(g)(ii) and/or (n) ( Advances, Investments and Loans ); and (vii) one-time charges (including, without limitation, restructuring charges and any upfront fees related to these Facilities, the refinancing of the Senior Subordinated Notes, the issue of the Senior Subordinated Convertible Bonds, the issue of the New Senior Subordinated Notes and the issue of Parent Common Stock specifically for the repurchase of the Parent Preference Shares C) occurring during such period to the extent not already included above. For the purposes of this definition only: (A) “ existing moneys ” means equity proceeds, share capital, Asset Sales proceeds, insurance proceeds and/or Indebtedness; and 21 (B) in calculating Adjusted Consolidated Working Capital, any amounts expressed in currencies other than euros shall be converted into euros (as shown on Reuters ECB page 37 or, if same does not provide such exchange rate, on such other basis as may be satisfactory to the Agent) for the exchange of such currency into euros for the last day of the fiscal year of the Parent. “ Excess Cash Flow Payment Date ” means the date occurring 105 days after the last day of each fiscal year of the Parent, with the first Excess Cash Flow Payment Date to occur on the 105 th day after the last day of the fiscal year of the Parent ending closest to 31 December 2005. “ Excess Cash Flow Payment Period ” means, with respect to the repayment required on each Excess Cash Flow Payment Date, the immediately preceding fiscal year of the Parent. “ Existing Credit Agreement ” means the Credit Agreement dated 26 October 1999 between, inter alios , the Parent, the Existing Borrower, the banks and financial institutions named therein and the Bankers Trust Company as administrative agent as amended, modified or supplemented from time to time. “ Existing Documentary Credit ” means each letter of credit, bank guarantee or other documentary credit as set out in Section C of Part II of Schedule 10 ( Existing Indebtedness ) each as issued pursuant to or existing under the Existing Credit Agreement and outstanding on the Initial Borrowing Date. “ Existing Indebtedness ” means all Third Party Existing Indebtedness and all Intercompany Existing Indebtedness existing as at the Effective Date each as set out in Part II of Schedule 10 ( Existing Indebtedness ). “ Existing Lien ” means the list of Liens existing as at the Effective Date set out in Part I of Schedule 10 ( Existing Liens ). “ Expiry Date ” means, in relation to any Documentary Credit granted under this Agreement, the date stated in it to be its expiry date or the latest date on which demand may be made under it. “ Facilities ” means the Term Facilities, the Revolving Facility, the Swingline Facility and (subject to Clause 7 ( Uncommitted Incremental Facilities )) the Incremental Revolving Facility and the Incremental Term Facility granted to the Borrowers in this Agreement, and “ Facility ” means any of them as the context may require. “ Facilities Obligations ” means all amounts owing to the Finance Parties pursuant to the terms of this Agreement or any other Finance Document. “ Facility Office ” means: (a) in relation to the Agent, the office identified with its signature below or such other office as it may, from time to time select for performance of its agency function under this Agreement; and (b) in relation to a Lender, the office from time to time designated by it to the Agent for the purposes of this Agreement (or, in the case of a Transferee, at the end of the 22 Transfer Certificate to which it is a party as Transferee) or such other office as such Lender may from time to time select. “ Fair Market Value ” means, with respect to any asset, the price at which a willing buyer, not an Affiliate of the seller, and a willing seller who does not have to sell, would agree to purchase and sell such asset, as determined in good faith by the board of directors or other governing body or, pursuant to a specific delegation of authority by such board of directors or governing body, a designated senior executive officer, of the Parent or the Subsidiary of the Parent selling such asset. “ Federal Funds Rate ” means in relation to any day, the rate per annum equal to: (a) the weighted average of the rates on overnight Federal Funds transactions with members of the US Federal Reserve System arranged by Federal Funds brokers, as published for that day (or, if that day is not a New York Business Day, for the immediately preceding New York Business Day) by the Federal Reserve Bank of New York; or (b) if a rate is not published for that day or immediately preceding New York Business Day, the average of the quotations for that day on those transactions received by the Agent from three Federal Funds brokers of recognised standing selected by the Agent. “ Fee Letters ” means the fee letters referred to in Clauses 17.2 ( Underwriting Fee ) and 17.3 ( Agency Fee ). “ €5 Million Asset Sale ” means any Asset Sale where the aggregate consideration (taking the Fair Market Value of any non-cash consideration) received by the Parent and its Subsidiaries in connection therewith is equal to or in excess of €5,000,000 (or its equivalent in other currencies). “ €5 Million Permitted Acquisition ” means each Permitted Acquisition where the aggregate consideration paid (or which may be paid) in connection therewith (including any deferred compensation arrangements, the principal amount of Seller Debt and/or Permitted Acquired Debt and the Fair Market Value of all Equity Interests in the Parent issued as consideration in connection therewith) exceeds €5,000,000 (or its equivalent in other currencies). “ Fifth Amendment and Restatement Deed ” means the Amendment and Restatement Deed dated 30 November 2005 between, inter alios , the Obligors’ Agent, the Guarantors, the Agent, the Security Trustee and the D Facility Lenders. “ Fifth Amendment and Restatement Effective Date ” has the meaning ascribed to that term in the Fifth Amendment and Restatement Deed. “ Final Maturity Date ” means (a) in respect of the Revolving Facility and the Incremental Revolving Facility, the date falling 60 months after the date of this Agreement; (b) in respect of the A Facility, subject to Clause 10.1 ( Repayment of A Facility Outstandings ), 31 December 2009; 23 (c) in respect of the D Facilities, subject to Clause 10.3 ( Repayment of D Facility Outstandings ), 31 December 2010; and (d) in respect of the Incremental Term Facility, the Incremental Term Facility Maturity Date. “ Finance Documents ” means: (a) this Agreement, any Documentary Credit, any Accession Notices, Transfer Certificates and the Fee Letters; (b) any Incremental Facility Commitment Agreement; (c) the Security Documents; (d) the Intercreditor Deed; (e) the Hedging Agreements; (f) any Additional Security Document; and (g) any other agreement or document designated a “ Finance Document ” in writing by the Parent and the Agent. “ Finance Parties ” means the Agent, the Arrangers, the Security Trustee, the Lenders and each Hedge Counterparty to a Hedging Agreement and “ Finance Party ” means any of them. “ GAAP ” means in relation to any financial statement to be delivered in accordance with this Agreement generally accepted accounting principles in the Netherlands, including without limitation IFRS where relevant. “ Group ” means the Parent, the Borrowers, and all other Subsidiaries of the Parent from time to time. “ Group Business ” means the business as conducted by the Parent and its Subsidiaries on the date of this Agreement and any logical extensions or related ancillary businesses thereto (including business functions incidental to such business). “ Group Structure Chart ” means the group structure chart set out in Schedule 9 ( Group Structure ). “ Guarantee ” means the guarantee contained in Clause 30 ( Guarantee and Indemnity ). “ Guarantors ” means the Original Guarantors and any Acceding Guarantors and “ Guarantor ” means any one of them, as the context requires. “ Hazardous Materials ” means (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is friable, urea formaldehyde foam insulation, transformers or other equipment that contains dielectric fluid containing levels of polychlorinated biphenyls, and radon gas, (b) any chemicals, materials or substances defined as or included in the definition of “hazardous substances”, “hazardous waste”, “hazardous materials”, “extremely hazardous substances”, “restricted hazardous waste”, “toxic 24 substances”, “toxic pollutants”, “contaminants”, or “pollutants”, or words of similar import, under any applicable Environmental Law and (c) any other chemical, material or substance, the Release of which is prohibited, limited or regulated by any governmental authority. “ Hedge Counterparty ” means each party other than a member of the Group to a Hedging Agreement or, as the case may be, an Other Hedging Agreement and “ Hedge Counterparties ” means all such parties. “ Hedging Agreement ” means any agreement entered into in connection with Clause 25.12 ( Interest Rate Protection ) between a member of the Group and a Lender in respect of an interest rate swap, currency swap, forward foreign exchange transaction, cap, floor, collar or option transaction or any other treasury transaction or any combination of it or any other transaction entered into in connection with protection against or benefit from fluctuation in any currency, rate or price. “ Hedging Letter ” means the letter dated on or about the date of this Agreement from the Agent to the Parent setting out the agreed hedging policy in respect of the Term Facilities (other than the Incremental Term Facility). “ Holding Company ” means a company or corporation of which another company or corporation is a Subsidiary. “ IFRS ” means international accounting standards within the meaning of IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements as interpreted and applied as at the Sixth Amendment and Restatement Effective Date. “ Increased Cost ” means: (a) any reduction in the rate of return from a Facility or on a Finance Party’s (or an Affiliate’s) overall capital; (b) any additional or increased cost; or (c) any reduction of any amount due and payable under any Finance Document, which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having agreed to make available its Commitment or having funded or performed its obligations under any Finance Document. “ Incremental Facility Commitment Agreement ” means an Incremental Revolving Facility Commitment Agreement or an Incremental Term Facility Commitment Agreement, as the context may require. “ Incremental Revolving Facility ” means, subject to Clause 7 ( Uncommitted Incremental Facilities ), the uncommitted revolving credit facility as may be granted to the Borrowers (or any of them) pursuant to Clause 2.1(f) ( The Facilities ). “ Incremental Revolving Facility Commitment ” means, in relation to an Incremental Revolving Facility Lender at any time, and save as otherwise provided in this Agreement, any commitment to make Utilisations provided by such Incremental Revolving Facility Lender pursuant to Clause 7 ( Uncommitted Incremental Facilities ), in such amount as agreed to by 25 such Incremental Revolving Facility Lender in the respective Incremental Revolving Facility Commitment Agreement. “ Incremental Revolving Facility Commitment Agreement ” means each incremental revolving facility commitment agreement in the form set out in Part IV of Schedule 4 ( Form of Incremental Revolving Facility Commitment Agreement ). “ Incremental Revolving Facility Lender ” has the meaning ascribed to that term in Clause 7.2(b) ( Incremental Revolving Facility Commitment Agreement ). “ Incremental Term Facility ” means, subject to Clause 7 ( Uncommitted Incremental Facilities ), the uncommitted term loan facility as may be granted to the Borrowers (or any of them) pursuant to Clause 2.1(g) ( The Facilities ). “ Incremental Term Facility Advance ” means an advance (as from time to time reduced by repayment) made or to be made by one or more of the Lenders under the Incremental Term Facility or arising in respect of the Incremental Term Facility. “ Incremental Term Facility Commitment ” means, in relation to a Lender at any time, and save as otherwise provided in this Agreement, any commitment to make Incremental Term Facility Advances provided by such Lender pursuant to Clause 7 ( Uncommitted Incremental Facilities ), in such amount as agreed to by such Lender in the respective Incremental Term Facility Commitment Agreement or as specified in the Transfer Certificate pursuant to which such Lender becomes a party to this Agreement. “ Incremental Term Facility Commitment Agreement ” means each incremental term facility commitment agreement in the form set out in Part III of Schedule 4 ( Form of Incremental Term Facility Commitment Agreement ). “ Incremental Term Facility Lender ” has the meaning ascribed to that term in Clause 7.1(b) ( Incremental Term Facility Commitment Agreement ). “ Incremental Term Facility Maturity Date ” means, for any Tranche of Incremental Term Facility, the final maturity date specified for such Tranche of Incremental Term Facility in the relevant Incremental Term Facility Commitment Agreement relating thereto, provided that the final maturity date for all Incremental Term Facility Advances of a given Tranche shall be the same date. “ Incremental Term Facility Outstandings ” means, at any time, the aggregate principal amount of the Incremental Term Facility Advances outstanding under this Agreement. “ Incremental Term Facility Repayment Date ” has the meaning ascribed to that term in Clause 10.4 ( Repayment of Incremental Term Facility Outstandings ). “ Incremental Term Facility Scheduled Repayment ” has the meaning ascribed to that term in Clause 10.4 ( Repayment of Incremental Term Facility Outstandings ). “ Incremental Term Facility Utilisation Date ” shall mean, with respect to each Tranche of Incremental Term Facility, each date on which Incremental Term Facility Advances of such Tranche are incurred pursuant to Clause 4.2 ( Conditions to Utilisation of Incremental Term Facilit y) and as otherwise permitted by Clause 7 ( Uncommitted Incremental Facilities ). 26 “ Indebtedness ” means, as to any person, without duplication: (a) all indebtedness of such person for borrowed money or for the deferred purchase price of property or services; (b) the maximum amount available to be drawn under all letters of credit (excluding trade letters of credit), bankers’ acceptances and similar obligations issued for the account of such person and all unpaid drawings in respect of such letters of credit (excluding trade letters of credit), bankers’ acceptances and similar obligations; (c) the aggregate amount required to be capitalised under leases under which such person is the lessee; (d) all obligations of such person to pay a specified purchase price for goods or services, whether or not delivered or accepted, i.e., take-or-pay and similar obligations; (e) all Contingent Obligations of such person; (f) all obligations under any Hedging Agreement or Other Hedging Agreement or under any similar type of agreement provided that, the net mark to market value in respect of any Hedging Agreement or Other Hedging Agreement which qualifies for hedge accounting under IAS 39, other than currency swaps, forward foreign exchange transactions and other agreements pursuant to which foreign exchange risk is hedged, shall be deemed to be zero; and (g) the amount of Permitted Receivables Transaction Outstandings from time to time. Notwithstanding anything to the contrary contained above or elsewhere in this Agreement, Indebtedness shall not include preference shares or trade payables and accrued expenses incurred by any person in accordance with customary practices and in the ordinary course of business of such person. “ Indebtedness to be Refinanced ” means all Indebtedness of the Parent and its Subsidiaries outstanding immediately before the consummation of the Transaction (including, without limitation, Indebtedness referred to in Clause 2.2(a) ( Purpose ) which is to be repaid or refinanced on the Initial Borrowing Date, including any such Indebtedness which is not permitted to remain outstanding after the Initial Borrowing Date pursuant to Clause 26.4 ( Indebtedness ) or as set out in paragraph 11 of Part I of Schedule 3 ( Conditions Precedent to First Utilisation ). “ Indemnifying Lender ” has the meaning ascribed to that term in Clause 5.1(b) ( Issue of Documentary Credits ). “ Information Memorandum ” means the document dated November 2003 concerning the Obligors which, at the request of the Parent and on its behalf, was prepared in relation to this transaction and distributed by the Arrangers to selected banks and other institutions during November and December 2003 for the purposes of syndication of the Facilities. “ Initial Borrowing Date ” means the date falling on the first Utilisation of the Facilities. “ Instructing Group ” means Lenders, the sum of whose Term Facility Outstandings (or, if prior to the occurrence of the Utilisations on the Initial Borrowing Date, whose Term Facility 27 Commitments), Incremental Revolving Facility Commitments, Incremental Term Facility Commitments and Revolving Facility Commitments (or after the termination thereof, the Incremental Revolving Facility Outstandings, the Incremental Term Facility Outstandings and the Revolving Facility Outstandings) as of any date of determination represent greater than 50 per cent. of the sum of all Term Facility Outstandings (or, if prior to the occurrence of the Utilisations on the Initial Borrowing Date, whose Term Facility Commitments) and the sum of all Incremental Revolving Facility Commitments, Incremental Term Commitments and Revolving Facility Commitments of all Lenders at such time (or after the termination thereof, the sum of the then total Incremental Revolving Facility Outstandings, Incremental Term Facility Outstandings and Revolving Facility Outstandings of all Lenders at such time). “ Instructing Group’s Satisfaction ” means, in relation to any documentation being satisfactory to the Instructing Group as contained in the definitions of “Permitted Receivables Transaction” and “Permitted Subordinated Indebtedness”, such documentation shall be deemed satisfactory and approved by the Instructing Group so long as (a) the relevant documentation (in substantially final form which has been approved by the Agent) is distributed to the Lenders at least 5 Business Days prior to the entering into of such documentation, (b) the Instructing Group does not object thereto within such 5 Business Days and (c) the Agent approves the final form of the documentation relating thereto. “ Intellectual Property Rights ” means any patent, trade mark, service mark, registered design, trade name or copyright or any license to use any of the same. “ Intercompany Existing Indebtedness ” means the list of Indebtedness existing on the Effective Date set out in Section B ( Intercompany Existing Indebtedness ) of Part II of Schedule 10 ( Existing Indebtedness ). “ Intercompany Loan ” means each intercompany loan or advance between or among the Parent and its Subsidiaries or between or among Subsidiaries of the Parent. “ Intercreditor Deed ” means the intercreditor deed dated on or about the date of this Agreement between the Parent, the Existing Borrower, the Agent, the Security Trustee, the Lenders, the Original Guarantors and certain other parties. “ Interest Period ” means, save as otherwise provided in this Agreement, any of those periods mentioned in Clause 15.1 ( Interest Periods for Term Facility Advances ). “ Investments ” has the meaning ascribed to that term in Clause 26.5 ( Advances, Investments and Loans ). “ Law ” means: (a) common or customary law; (b) any constitution, decree, judgment, legislation, order, ordinance, regulation, statute, treaty or other legislative measure in any jurisdiction; and (c) any present or future directive, regulation, practice, concession or requirement which has the force of law and which is issued by any governmental body, agency or department or any central bank or other fiscal, monetary, regulatory, self-regulatory or other authority or agency. 28 “ L/C Bank ” means Deutsche Bank AG, London Branch (and/or affiliates of Deutsche Bank AG, London Branch (including, without limitation, Deutsche Bank Trust Company Americas) designated by it to act as such with respect to any Documentary Credit) or any other Lender which has been appointed as L/C Bank in accordance with Clause 5.11 ( Appointment and Change of L/C Bank ) or assumed its role as issuer under any Existing Documentary Credits in accordance with Clause 5.12 ( Assumption of Existing Documentary Credits ) and which has not resigned in accordance with paragraph (c) of Clause 5.11 ( Appointment and Change of L/C Bank ). “ L/C Bank Accession Certificate ” means a duly completed accession certificate in the form set out in Schedule 11 ( Form of L/C Bank Accession Certificate ). “ L/C Proportion ” means, in relation to a Lender in respect of any Documentary Credit (save as otherwise provided in this Agreement and taking into account Clauses 21 ( Replacement and Mitigation ) and 39 ( Assignments and Transfers )) the proportion (expressed as a percentage) borne by such Lender’s Available Revolving Facility Commitment to the Available Revolving Facility immediately prior to the issue of such Documentary Credit. “ Leaseholds ” of any person, means all the right, title and interest of such person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. “ Legal Opinions ” means the legal opinions set out in paragraph 8 of Part I of Schedule 3 ( Conditions Precedent to First Utilisation ). “ Lender ” means an A Facility Lender, a D1 Facility Lender, a D2 Facility Lender, a Revolving Facility Lender, a Dollar Swingline Facility Lender, a Euro Swingline Facility Lender, an Incremental Revolving Facility Lender or an Incremental Term Facility Lender, as the context may require and “ Lenders ” means all of them. “ Lender Default ” means (i) a failure or refusal (which has not been retracted) of a Lender to fund its portion of any participating interest required to be purchased by such Lender pursuant to Clause 6.6 ( Purchase of Swingline Participations ) or (ii) a Lender having notified in writing the Parent, the Existing Borrower and/or the Agent that it does not intend to comply with its obligations under Clause 6 ( Swingline Facilities ) in circumstances which would be contrary to the terms of this Agreement. “ LIBOR ” means, in relation to any amount owed by an Obligor under this Agreement in a currency other than euro on which interest for a given period is to accrue: (a) the rate per annum which appears on the Relevant Page for such period at or about 11.00 a.m. on the Quotation Date for such period; or (b) if no such rate is displayed and the Agent shall not have selected an alternative service on which such rate is displayed, the arithmetic mean (rounded upwards, if not already such a multiple, to the nearest 4 decimal places) of the rates (as notified to the Agent) at which each of the Reference Banks was offering to prime banks in the London interbank market deposits in the relevant currency for such period at or about 11.00 am on the Quotation Date for such period. “ Lien ” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement of any 29 kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing). “ Luxembourg Guarantor ” means each of the parties as set out in Part II of Schedule 1 ( Original Guarantors ) named as Luxembourg Guarantors and any Acceding Guarantor incorporated in Luxembourg. “ Majority Lenders ” of (i) any Facility (other than the D1 Facility or the D2 Facility) means those Lenders which would constitute the Instructing Group under, and as defined in, this Agreement if all outstanding Facilities Obligations of the other Facilities under this Agreement were repaid in full and all Commitments, if any, with respect thereto were terminated or (ii) the D1 Facility or the D2 Facility means those Lenders which would constitute the Instructing Group under, and as defined in, this Agreement, if all outstanding Facilities Obligations of the other Facilities under this Agreement (other than both of the D Facilities) were repaid in full and all commitments, if any, with respect thereto were terminated. “ Margin Regulations ” means and shall include each of Regulation T, Regulation U and Regulation X. “ Margin Stock ” shall have the meaning provided in Regulation U. “ Material Adverse Effect ” means (a) any material adverse condition or material adverse change in or affecting the business, assets, liabilities, results of operations, financial condition or prospects of the Parent and its Subsidiaries taken as a whole, or (b) a material adverse effect (i) on the rights or remedies of any of the Finance Parties hereunder or under any other Finance Document or (ii) on the ability of any Obligor to perform its obligations hereunder to any of the Finance Parties. “ Material Subsidiary ” means, at any time (a) a member of the Group: (i) organised under the laws of a Qualified Jurisdiction; and (ii) whose revenues, consolidated EBITDA or assets (on a consolidated basis if it has Subsidiaries) represent at least 5 per cent. of the revenues, Consolidated EBITDA or assets of the Group, and all such Subsidiaries shall collectively represent at least 66 2 / 3 per cent. of consolidated revenues, the Consolidated EBITDA and consolidated assets of the Group, as determined by reference to the latest annual audited financial statements for the time being of the Group delivered under paragraph (b) ( Annual Financial Statements ) of Clause 23.1 ( Information Covenants ), or, if the company concerned becomes a Subsidiary of the Parent after the end of the fiscal year to which such annual audited financial statements of the Group relate, then the latest financial statements of the Group delivered under paragraph (a) ( Quarterly Financial Statements ) of Clause 23.1 ( Information Covenants ) which include such company, but so that a certificate of the auditors of the Group that a Subsidiary of the Parent is or is 30 not a Material Subsidiary (in accordance with this definition) at any time shall be conclusive; and (b) any other Subsidiary which the Obligor’s Agent has nominated as a Material Subsidiary by written notice to the Agent, provided that the Obligor’s Agent shall give the Agent 5 Business Days’ notice that any Subsidiary nominated under this subparagraph (b) shall cease to be a Material Subsidiary. “ Member State ” means a member of the European Community. “ Moody’s ” means Moody’s Investors Service, Inc. “ Multiemployer Plan ” means: (a) any plan, as defined in Section 4001(a)(3) of ERISA, which is maintained or contributed to (or to which there is an obligation to contribute to) by the Parent or a Subsidiary of the Parent or an ERISA Affiliate and that is subject to Title IV of ERISA; and (b) each such plan which, during the five year period immediately following the latest date on which the Parent, a Subsidiary of the Parent or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan, if the Parent, any Subsidiary of the Parent or any ERISA Affiliate could reasonably incur any liability under such plan. “ Necessary Authorisations ” means all Authorisations (including any competition and other clearances necessary in relation to the Environmental Licences) of any person including any government or other regulatory authority required by applicable Law to enable it to: (a) lawfully enter into and perform its obligations under the Finance Documents to which it is party; (b) ensure the legality, validity, enforceability or admissibility in evidence in England and, if different, its jurisdiction of incorporation, of such Finance Documents to which it is party; and (c) carry on in all material respects its business from time to time. “ Net Cash Proceeds ” means, of any event, the gross cash proceeds (including any cash received by way of deferred payment pursuant to a promissory note, receivable or otherwise, but only as and when received) received from such event, net of reasonable transaction costs received from any such event. “ Net Sale Proceeds ” means, for any sale of assets, the gross cash proceeds (including any cash received by way of deferred payment pursuant to a promissory note, receivable or otherwise, but only as and when received) received from such sale of assets, net of (a) reasonable transaction costs, (b) payments of unassumed liabilities relating to the assets sold at the time of, or within 90 days after, the date of such sale, (c) the amount of such gross cash proceeds required to be used to permanently repay any Indebtedness (other than Indebtedness of the Lenders pursuant to this Agreement) which is secured by the respective assets which were sold, and (d) the estimated marginal increase in taxes which will be 31 payable by the Parent and its Subsidiaries with respect to the fiscal year in which the sale occurs as a result of such sale. “ New Senior Subordinated Notes Purchase Agreement ” means that certain purchase agreement, relating to the New Senior Subordinated Notes due 2015, among the Parent, the Existing Borrower and Deutsche Bank Securities Inc, as same may be amended, modified or supplemented from time to time in accordance with the requirements of this Agreement. “ New Senior Subordinated Note Documents ” means each New Senior Subordinated Note Indenture, New Senior Subordinated Notes Purchase Agreement, the New Senior Subordinated Notes and each other agreement, document or instrument relating to any issuance of New Senior Subordinated Notes. “ New Senior Subordinated Note Indenture ” means any indenture entered into with respect to New Senior Subordinated Notes issued from time to time by the Existing Borrower, provided that any indenture relating to any New Senior Subordinated Notes constituting Permitted Refinancing Indebtedness shall meet the requirements contained in the definition of Permitted Refinancing Indebtedness. “ New Senior Subordinated Notes ” means the Existing Borrower’s New Senior Subordinated Notes, issued in accordance with the requirements of the New Senior Subordinated Note Documents. The term “New Senior Subordinated Notes” shall also include any “exchange notes” issued in respect of such outstanding New Senior Subordinated Notes in accordance with the requirements of the relevant New Senior Subordinated Note Documents, so long as in respect of outstanding New Senior Subordinated Notes, such “exchange notes” are substantially identical to the New Senior Subordinated Notes in respect of which same were issued and so long as the issuance of such “exchange notes” does not result in any increase to the principal amount of New Senior Subordinated Notes outstanding. “ New York Business Day ” means a day (other than a Saturday or a Sunday) on which banks are open for general business in New York City. “ Non-Consolidated Person ” means any person which is not a Subsidiary of the Parent but in which a member of the Group has an equity interest. “ Non-Guarantor Subsidiaries ” means (a) on the Initial Borrowing Date, the Existing Borrower and each Subsidiary of the Parent listed in Part III of Schedule 10 ( Non-Guarantor Subsidiaries ) and (b) after the Initial Borrowing Date, any Subsidiary of the Parent which is not at such time a Guarantor. “ Non-Material Subsidiary ” means, at any time, a member of the Group which is not a Material Subsidiary. “ Non-U.S. Pension Plan ” means any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States of America by any member of the Group for the benefit of employees of any member of the Group residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code. 32 “ Non-U.S. Subsidiary ” means (a) in the case of the Parent, each Subsidiary of the Parent which is not a U.S. Subsidiary of the Parent and (b) in the case of the Existing Borrower, each Subsidiary of the Existing Borrower which is not a U.S. Subsidiary of the Existing Borrower. “ Non-Wholly Owned Subsidiary ” means each Subsidiary of the Parent which is not a Wholly-Owned Subsidiary of the Parent. “ Obligors ” means the Parent, the Borrowers, the Guarantors and any party (other than a Finance Party) to a Security Document and “ Obligor ” means any of them. “ Obligors’ Agent ” means the Parent in its capacity as agent for the Obligors, pursuant to Clause 31.17 ( Obligors’ Agent ). “ Optional Currency ” means: (a) in relation to any D1 Facility Advance and any Incremental Term Facility Advance, dollars; and (b) in relation to any Revolving Facility Advance, dollars and any other currency except euro which: (i) is readily available to banks in the London interbank market, and is freely convertible into euro on the Quotation Date and the Utilisation Date for the relevant Advance; and (ii) has been approved by the Agent (acting on the instructions of all the Lenders) on or prior to receipt by the Agent of the relevant Utilisation Request. “ Original Financial Statements ” means: (a) in relation to the Parent, its audited consolidated financial statements for its financial year ending 31 December 2002; (b) in relation to any Acceding Guarantor or Acceding Borrower, its financial statements delivered pursuant to paragraph 1(d) of Part II of Schedule 7 ( Accession Documents ); and (c) the Pro Forma Financial Statements. “ Original Obligors ” means the Parent, the Existing Borrower and the Original Guarantors. “ Other Hedging Agreement ” means: (a) any agreement entered into between a member of the Group and a bank or financial institution (other than a Lender) in respect of any interest rate swap, currency swap, foreign exchange contracts, cap, floor, collar or optional transaction or any other treasury transaction or any combination of it or any other transaction entered into in connection with protection against or benefit from fluctuating in any rate or price (an “ Other Interest Hedging Agreement ”); and 33 (b) any agreement entered into between a member of the Group and a bank or financial institution (other than a Lender) in respect of any currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against fluctuations in currency or commodity values (an “ Other Currency/Commodity Hedging Agreement ”). “ Outstanding L/C Amount ” means: (a) each sum paid or payable by an L/C Bank to a Beneficiary pursuant to the terms of a Documentary Credit; and (b) all liabilities, costs (including, without limitation, any costs incurred in funding any amount which falls due from an L/C Bank under a Documentary Credit), claims, losses and expenses which an L/C Bank (or any of the Indemnifying Lenders) incurs or sustains in connection with a Documentary Credit, in each case which has not been reimbursed or in respect of which cash cover has not been provided by or on behalf of a Borrower. “ Outstandings ” means, at any time, the Term Facility Outstandings, the Revolving Facility Outstandings, the Dollar Swingline Facility Outstandings, the Euro Swingline Facility Outstandings and any Incremental Term Facility Outstandings. “ Paper Merchant Division ” means the former paper merchant division of the Group Business sold to PaperlinX Limited pursuant to a sale and purchase agreement dated 8 September 2003 between the Parent and PaperlinX Limited. “ Parent Common Stock ” means, as at the Effective Date, the 250,000,000 ordinary shares of €1.20 par value per share of the Parent and any further such shares as may be permitted by this Agreement. “ Parent Preference Shares A ” means, as at the Effective Date, the 59,940,000 ordinary shares of €1.20 par value per share of the Parent and any further such shares as may be permitted by this Agreement. “ Parent Preference Shares B ” means, as at the Effective Date, the 305,000,000 ordinary shares of €1.20 par value per share of the Parent and any further such shares as may be permitted by this Agreement. “ Parent Preference Shares C ” means, as at the Effective Date, the 60,000 ordinary shares of €1.20 par value per share of the Parent. “ Parent Preferred Stock ” means, collectively, the Parent Preference Shares A, the Parent Preference Shares B and, after the issuance thereof, any other Preferred Stock of the Parent. “ Participating Member State ” means any member of the European Community that at the relevant time has adopted the euro as its lawful currency in accordance with EMU Legislation. “ PBGC ” means the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. 34 “ Permitted Acquired Debt ” means Indebtedness of any Subsidiary of the Parent acquired pursuant to a Permitted Acquisition, which Indebtedness existed at the time of the consummation of such Permitted Acquisition and was not created in contemplation thereof (and the provisions of which were not altered in contemplation thereof), so long as (i) the Parent and its Subsidiaries have no liability with respect to any such Indebtedness and (ii) any Liens securing such Indebtedness apply only to assets of the Subsidiary so acquired (and so long as additional assets of such Subsidiary are not granted as security following, or in contemplation of, the respective Permitted Acquisition). “ Permitted Acquisition ” means, subject to the Permitted Acquisition Conditions, (a) the Anton Acquisition ; and (b) the acquisition by the Parent or a Wholly-Owned Subsidiary thereof of: (i) assets constituting part of or an entire business, division or product line of any person not already a Subsidiary of the Parent; or (ii) Equity Interests of any person so that, immediately after giving effect to such acquisition, such person shall constitute a Subsidiary, provided that the aggregate consideration paid (determined in accordance with paragraph (a) of the definition of Permitted Acquisition Conditions) for all such acquisitions made pursuant to paragraph (b) during any fiscal year of the Parent (A) does not exceed €300,000,000 and provided further that, for the purposes of such €300,000,000 limit, (i) any creation or establishment of a Subsidiary pursuant to Clause 25.15(b)(iv) shall be treated as if it were a Permitted Acquisition and any investment in such Subsidiary shall be treated as if it were consideration paid for such Permitted Acquisition, and (ii) the amount of any Permitted Acquired Debt assumed in connection with any Permitted Acquisition shall be deemed to constitute additional consideration paid for such Permitted Acquisition. “ Permitted Acquisition Conditions ” means, in relation to any Permitted Acquisition: (a) the consideration paid for such acquisition consists solely of Parent Common Stock, Qualified Preferred Stock, cash and/or, in the case of the acquisition of a WhollyOwned Subsidiary, the issuance of Seller Debt and/or the assumption of Permitted Acquired Debt in accordance with the requirements of this Agreement; (b) the assets acquired or the business of the person whose stock is acquired, shall fall within the definition of Group Business and the respective Permitted Acquisition shall be effected in accordance with the relevant requirements of Clause 25.2 ( Conduct of Business ); (c) the respective Permitted Acquisition shall be effected by the Parent or a Wholly-Owned Subsidiary thereof; (d) the Borrowers shall have demonstrated compliance on a Pro Forma Basis with the financial covenants in Clause 24 ( Financial Condition ), inclusive; 35 (e) at the date of the declaration of the respective Permitted Acquisition (and if such Permitted Acquisition is consummated within 30 days of such declaration) the Borrowers shall have Available Liquidity of at least €50,000,000; (f) the Existing Borrower in good faith determines that the Parent and its Subsidiaries taken as a whole are not likely to assume or become liable for material increased contingent liabilities as a result of such acquisition; (g) in the case of each Permitted Acquisition where the aggregate consideration is in excess of €5,000,000 (or its equivalent in other currencies), the Parent delivers to the Agent at the time of the consummation of the respective Permitted Acquisition an officer’s certificate in form, scope and substance reasonably satisfactory to the Agent certifying that the foregoing conditions have been satisfied and showing compliance with the requirements of paragraphs (d) and (e) above; (h) no Default or Event of Default shall exist at the time of the consummation of the respective Permitted Acquisition or immediately after giving effect thereto; and (i) in the case of each Permitted Acquisition where the aggregate consideration is in excess of €175,000,000 (or its equivalent in other currencies), the Existing Borrower delivers to the Agent updated projections (from the last projections provided pursuant to this paragraph (i) or to Clause 23.1(c) ( Projections ), whichever was provided later) prepared on a quarterly basis for the period from the date of such Permitted Acquisition until the expiry of the period to which the most recently delivered Projections refer, all prepared in a manner consistent with the Projections, and shall be in form, scope and substance reasonably satisfactory to the Agent acting reasonably and with at least the same level of detail as provided in the Projections, on the next date following the closing of such Permitted Acquisition on which the Existing Borrower is required to provide financial statements to the Agent under Clause 23.1(a) or (b) (as the case may be). provided that the Parent or its Wholly-Owned Subsidiaries may consummate one or more Permitted Acquisitions in any fiscal year of the Parent without complying with paragraphs (d) and (e) above (and the officer’s certificate, if any, required to be delivered pursuant to paragraph (g) above shall not be required to certify compliance with such conditions), so long as the aggregate consideration paid for all Permitted Acquisitions effected pursuant to this proviso during any fiscal year of the Parent does not exceed €15,000,000 (or its equivalent in other currencies). “ Permitted Holder ” shall mean (a) with respect to the Parent Preference Shares A, Stichting A so long as the Stichting A Continuing Directors shall not cease to constitute a majority of the executive committee of Stichting A and (b) with respect to the Parent Preference Shares B, Stichting B so long as the Stichting B Continuing Directors shall not cease to constitute a majority of the executive committee of Stichting B. “ Permitted Liens ” has the meaning ascribed to that term in Clause 26.1 ( Liens ). “ Permitted Receivables Facility ” means (a) the €800,000,000 Asset-Backed Euro Medium Term Note Programme entered into by Silver Funding Limited more particularly described in the Offering Circular dated 18 July 2002 (the “ SFL Programme ”), as may be amended from time to time provided that (i) the details of (and all documents relating to) such amendments 36 have been fully disclosed to the Agent and the Lenders and (ii) such amendments are not materially adverse to the interests of the Finance Parties, or (b) such other facility in form and substance similar to the aforesaid programme, and pursuant to which a Permitted Receivables Transaction is provided, provided that (i) the details of (and all documents relating to) such other facility have been fully disclosed to the Agent and the Lenders and (ii) such other facility is materially no more adverse to the interests of the Finance Parties than the SFL Programme. “ Permitted Receivables Facility Documentation ” means all documentation evidencing, or relating to, any Permitted Receivables Facility or Permitted Receivables Transaction. “ Permitted Receivables Transaction ” means, from time to time, a transaction (or series of transactions) evidenced by a receivables purchase agreement and related documentation entered into after the Initial Borrowing Date and providing for the sale, transfer or issue of Receivables Facility Assets by one or more Receivables Sellers to one or more Receivables Subsidiaries, and further providing for the sale or transfer of Receivables Facility Assets by the Receivables Subsidiary to one or more purchasers of interests therein, provided that (a) such agreement and the documents and instruments entered into in connection therewith have been fully disclosed to the Agent and the Lenders, such agreement, documents and instruments are (i) in form and substance reasonably satisfactory to the Agent and the Instructing Group’s Satisfaction, or (ii) in the case of a transaction in form and substance similar to the Permitted Receivables Transaction entered into pursuant to the SFL Programme (the “ SFL Transaction ”), materially no more adverse to the interests of the Finance Parties than the SFL Transaction, (b) the Parent shall have provided the Agent and the Lenders with not less than 15 days’ prior notice of its intent to enter into such receivables purchase agreement and (c) 100 per cent. of the Permitted Receivables Transaction Proceeds received by the Parent or any of its Subsidiaries shall be applied in accordance with paragraph (e) ( Permitted Receivables Transactions ) of Clause 13.1 ( Repayment from Net Proceeds ). “ Permitted Receivables Transaction Outstandings ” means at any time, the aggregate amount of cash paid to the Parent and/or its Subsidiaries (other than Receivables Subsidiaries) in respect of the Receivables Facility Assets sold or transferred by them pursuant to one or more Permitted Receivables Transactions, in each case to the extent the respective receivables have not yet been repaid by the respective account debtor or repurchased by Receivables Sellers (it being the intent of the parties that the amount of Permitted Receivables Transaction Outstandings at any time outstanding approximate as closely as possible the principal amount of Indebtedness which would be outstanding at such time under the Permitted Receivables Facilities then in effect if same were structured as a secured lending agreement rather than a purchase agreement). “ Permitted Receivables Transaction Proceeds ” means all proceeds received by the Parent and its Subsidiaries (other than Receivables Subsidiaries) from time to time as a result of sales or transfers of Receivables Facility Assets pursuant to one or more Permitted Receivables Transactions. 37 “ Permitted Refinancing Indebtedness ” means any Indebtedness of the Parent or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “ Refinance ”): (a) Third Party Existing Indebtedness described in Section A ( Third Party Existing Indebtedness ) of Part II of Schedule 10 ( Existing Indebtedness ) (or previous refinancings thereof constituting Permitted Refinancing Indebtedness); (b) outstanding Senior Subordinated Notes so long as the Permitted Refinancing Indebtedness shall be permitted to be outstanding in accordance with the requirements of Clause 26.4(l) ( Indebtedness ); (c) outstanding New Senior Subordinated Notes so long as the Permitted Refinancing Indebtedness shall be permitted to be outstanding in accordance with the requirements of Clause 26.4(r) ( Indebtedness ), provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) and related redemption fees of the Indebtedness so Refinanced; (ii) the Permitted Refinancing Indebtedness shall not have (A) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; (iii) in the case of Permitted Subordinated Indebtedness, it shall be subordinated in right of payment to the Facilities Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iv) no Permitted Refinancing Indebtedness shall have different obligors, or greater guarantees or security, than the Indebtedness being Refinanced; and (v) in no event shall any Permitted Refinancing Indebtedness be secured (A) in the case of Permitted Refinancing Indebtedness described in paragraph (a), by any share, stock or other Equity Interest subject or purported to be subject to a Security Document (whether equally and ratably with, or junior to, the Finance Parties or otherwise) or (B) in the case of any Permitted Refinancing Indebtedness described in paragraph (b), by any assets whatsoever. “ Permitted Subordinated Indebtedness ” means: (a) the Senior Subordinated Notes; (b) the Senior Subordinated Convertible Bonds; (c) the New Senior Subordinated Notes; and 38 (d) any general unsecured subordinated Indebtedness for borrowed money incurred by any member of the Group after the Initial Borrowing Date, all of the terms and conditions of which and the documentation therefor, shall be in form and substance reasonably satisfactory to the Agent and to the Instructing Group’s Satisfaction, provided, that in any event, unless the Instructing Group otherwise expressly consents in writing prior to the incurrence thereof: (i) no such Indebtedness shall be secured by any asset of the Parent or any of its Subsidiaries; (ii) no such Indebtedness shall be guaranteed except by the Parent or any other Guarantor on a subordinated basis on substantially the same terms as the Senior Subordinated Notes and/or the Senior Subordinated Convertible Bonds are guaranteed; (iii) such Indebtedness shall have substantially the same (or, from the perspective of the Lenders, more favorable) subordination provisions as are contained in the Senior Subordinated Note Indenture and/or the New Senior Subordinated Notes and/or the Senior Subordinated Convertible Bonds; (iv) no such Indebtedness shall have any maturity or required repayment (other than as a result of change of control or asset sale provisions approved by the Instructing Group) prior to the first anniversary of the Final Maturity Date of the D Facility as same is in effect on the date of incurrence of such Indebtedness; and (v) Utilisations from time to time pursuant to this Agreement, in an aggregate outstanding amount at any time equal to the sum of the Term Facility Outstandings on the date of incurrence of such Permitted Subordinated Indebtedness and in an amount equal to the total Revolving Facility Commitments and total A Facility Commitments as then in effect, shall be permitted without complying with any financial tests. Notwithstanding the above sub-paragraphs (i) to (v), such Indebtedness shall be permitted to bear interest at then current market rates (as reasonably determined by the Agent). The incurrence of Permitted Subordinated Indebtedness shall be deemed to be a representation and warranty by the Parent that all conditions thereto have been satisfied in all material respects and that same is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Clauses 4.1 ( Conditions to Utilisation ), 4.2 ( Conditions to Utilisation of Incremental Term Facility ) and 6.2 ( General Conditions to Utilisation of Swingline Facility Advances ). “ Permitted Subordinated Indebtedness Documents ” means all indentures, securities purchase agreements, note agreements and/or other documents and agreements entered into in connection with any Permitted Subordinated Indebtedness. “ Plan ” means (i) any single-employer plan, as defined in Section 4001(a)(15) of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute to 39 by), the Parent or a Subsidiary of the Parent or an ERISA Affiliate and that is subject to Title IV of ERISA and (ii) each such plan which, during the five year period immediately following the latest date on which the Parent, a Subsidiary of the Parent or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan, if, for purposes of this clause (ii), the Parent, any Subsidiary of the Parent or any ERISA Affiliate could reasonably incur any liability under such plan. “ Pledge Agreements ” means each of the documents specified in paragraph 2 of Section A, paragraph 3 of Section B, paragraph 2 of Section C, paragraph 1 of Section D and paragraph 1 of Section E in Part III of Schedule 3 ( Security Documents ). “ Preferred Stock ” as applied to the share capital of any person, means share capital of such person (other than ordinary share capital of such person) of any class or classes (however designed) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such person, to any other class of share capital of such person. “ Prime Lending Rate ” means the rate which Deutsche Bank AG, New York Branch announces from time to time as its prime lending rate, such rate to change from time to time. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or the best rate actually charged to any customer. Deutsche Bank AG, New York Branch may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. “ Pro Forma Basis ” means, as to any person, for any events which occur subsequent to the commencement of a period for which the financial effect of such event is being calculated, and giving effect to the event for which such calculation is being made, such calculation as will give pro forma effect to such event as if same had occurred at the beginning of such period of calculation, and: (a) for purposes of the foregoing calculation, the transaction giving rise to the need to calculate the pro forma effect to any of the following events shall be assumed to have occurred on the first day of the four consecutive fiscal quarter period last ended before the occurrence of the respective event for which such pro forma effect is being determined (the “ Reference Period ”); and (b) in making any determination with respect to the incurrence or assumption of any Indebtedness during the Reference Period or subsequent to the Reference Period and on or prior to the date of the transaction referenced in paragraph (a) above (the “ Transaction Date ”), (i) all Indebtedness (including Indebtedness incurred or assumed and for which the financial effect is being calculated, whether incurred under this Agreement or otherwise, but excluding normal fluctuations in revolving indebtedness incurred for working capital purposes and not to finance any acquisition) incurred or permanently repaid during the Reference Period shall be deemed to have been incurred or repaid at the beginning of such period, (ii) Consolidated Interest Expense of such person attributable to interest or dividends on any Indebtedness, as the case may be, bearing floating interest rates should be computed on a pro forma basis as if the rate in effect on the Transaction Date had been the applicable rate for the entire period and (iii) Consolidated Interest Expense will be increased or reduced by the net cost (including amortisation of discount) or benefit (after giving effect to amortisation of discount) associated with the Hedging Agreements and the Other 40 Interest Hedging Agreements, which will remain in effect for the twelve-month period after the Transaction Date and which shall have the effect of fixing the interest rate on the date of computation; and (c) in making any determination of Consolidated EBITDA, pro forma effect shall be given to any €5 Million Permitted Acquisition and any €5 Million Asset Sale, in each case which occurred during the Reference Period or subsequent to the Reference Period and prior to the Transaction Date, as if such Permitted Acquisition, Asset Sale or other transaction, as the case may be, occurred on the first day of the Reference Period. All pro forma determinations required above shall be made, to the extent possible, in accordance with Regulation S-X. For purposes of this definition, whenever pro forma effect is to be given to any occurrence or event, the pro forma calculation shall be determined in good faith by a responsible financial or accounting officer of the Parent. “ Pro Forma Financial Statements ” means, after taking into account the effect of the Transaction (including the incurrence of all Indebtedness), the pro forma consolidated balance sheet of the Group as of 31 December 2003 with the related pro forma consolidated statements of income and cash flow of the Group for the period covered thereby in the form and showing the information agreed between the Parent and the Agent (acting on the instructions of an Instructing Group). “ Projections ” means the detailed projected consolidated financial statements of the Parent and its Subsidiaries after giving effect to the Transaction as delivered in accordance with paragraph (c) ( Projections ) of Clause 23.1 ( Information Covenants ). “ Property ” of a person, means any and all property, whether real, personal, tangible, intangible or mixed, of such person, or other assets owned, leased, or operated by such person. “ Proportion ” in relation to a Lender, means: (a) in relation to an Advance to be made under this Agreement, the proportion borne by such Lender’s Available Commitment in respect of the relevant Facility to the relevant Available Facility; (b) in relation to an Advance or Advances outstanding under this Agreement, the proportion borne by such Lender’s share of the Euro Amount of such Advance or Advances to the total Euro Amount thereof; (c) if paragraph (a) above does not apply and there are no Outstandings, the proportion borne by the aggregate of such Lender’s Available Commitment to the Available Facilities (or if the Available Facilities are then zero, by its Available Commitment to the Available Facilities immediately prior to their reduction to zero); and (d) if paragraph (b) above does not apply and there are any Outstandings, the proportion borne by such Lender’s share of the Euro Amount of the Outstandings to the Euro Amount of all the Outstandings for the time being. 41 “ Protected Party ” means a Finance Party or any Affiliate of a Finance Party which is or will be, subject to any Tax Liability in relation to any amount payable under or in relation to a Finance Document. “ Qualified Guarantor ” means each Material Subsidiary which is a Wholly-Owned Subsidiary of the Parent, organised under the laws of a Qualified Jurisdiction, in each case which has acceded to this Agreement as a Guarantor and executed the required Security Documents in accordance with the requirements of Clause 25.7 ( Additional Security and Further Assurances ), provided that any Qualified Guarantor shall cease to constitute same at such time, if any, as such Subsidiary ceases to be a Wholly-Owned Subsidiary of the Parent or ceases to be a Material Subsidiary. “ Qualified Jurisdictions ” means and includes the United States, The Netherlands, England and Wales, Belgium, Luxembourg and Australia, in each case including any states, provinces, other similar local units therein or any additional jurisdictions so long as the Agent is reasonably satisfied with the respective jurisdiction requested to be so added. The parties hereto further agree that, in the discretion of the Agent, as a condition to the addition of any jurisdiction to the list of Qualified Jurisdictions, the Agent may (but shall not be required to) request the consent of the Instructing Group to such addition and, in such event, the Agent shall be entitled to wait for such consent before adding the respective jurisdiction to the list of Qualified Jurisdictions. “ Qualified Obligors ” means the Parent, the Existing Borrower and each other Obligor which is (a) a Material Subsidiary and (b) a Wholly-Owned Subsidiary of the Parent or a Borrower, organised under the laws of a Qualified Jurisdiction, in each case which has acceded to the Agreement in accordance with Clause 27.1 ( Accession of New Guarantors ) and executed the required Security Documents in accordance with the requirements of Clause 25.7 ( Additional Security and Further Assurances ) provided that any Qualified Obligor shall cease to constitute the same at such time, if any, as such Obligor ceases to be a Wholly-Owned Subsidiary (other than the Parent) of the Parent or a Borrower or ceases to be a Material Subsidiary. “ Qualified Preferred Stock ” means any preferred stock of the Parent so long as the terms of any such preferred stock: (a) do not contain any mandatory put, redemption, repayment, sinking fund or other similar provision, except upon the occurrence of a change of control (the definition of which shall be no more restrictive than that set forth in the Senior Subordinated Note Indenture) so long as the terms thereof do not require any such redemption or other action unless (and until) all Facilities Obligations have been paid in full in cash and the aggregate amount of the Commitments and all Documentary Credits have been terminated or the requisite consents under this Agreement have been obtained to permit such redemption or other action; (b) do not require the cash payment of dividends to the extent that the payment thereof would not be permitted at such time pursuant to this Agreement (and refinancings, replacements or extensions hereof); (c) do not contain any operating or financial maintenance covenants; 42 (d) do not grant the holders thereof any voting rights (prior to the conversion into Parent Common Stock, if applicable) except for (i) voting rights required to be granted to such holders under applicable law and (ii) limited customary voting rights on fundamental matters such as mergers, consolidations, sales of all or substantially all of the assets of the Parent, or liquidations involving the Parent; and (e) are otherwise reasonably satisfactory to the Agent. Qualified Preferred Stock may only be exchangeable into Parent Common Stock or additional Qualified Preferred Stock. “ Quotation Date ” means, in relation to any currency and any period for which an interest rate is to be determined: (a) (b) in the case of an Advance (other than a Swingline Advance): (i) if the relevant currency is euro, 2 TARGET Days before the first day of that period; and (ii) if the relevant currency is dollars or an Optional Currency, 2 Business Days before the first day of that period; and in the case of a Swingline Advance, the first day of the Term of such Advance, provided that if market practice differs in the Relevant Interbank Market for a currency, the Quotation Date for that currency will be determined by the Agent in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Date will be the last of those days). “ Real Property ” of any person, means all the right, title and interest of such person in and to land, improvements and fixtures, including Leaseholds. “ Receivables Facility Assets ” means all accounts receivable of any Receivables Sellers (other than any Receivables Subsidiary) which are transferred to a Receivables Subsidiary pursuant to a Permitted Receivables Transaction, any assets directly related thereto and any notes issued pursuant to a Permitted Receivables Transaction. “ Receivables Facility Financing Costs ” means, for any period, the total consolidated interest and fee expense of the Parent and its Subsidiaries which would have existed for such period pursuant to a Permitted Receivables Transaction if same were structured as a secured lending arrangement rather than as a facility for the sale of Receivables Facility Assets. “ Receivables Sellers ” at any time, means the Parent and any of its Subsidiaries which is, at such time, a person which is selling or transferring Receivables Facility Assets to a Receivables Subsidiary pursuant to a Permitted Receivables Transaction. “ Receivables Subsidiary ” means a Wholly-Owned Subsidiary of the Parent which engages in no activities other than in connection with the financing of accounts receivable and which is designated (as provided below) as a Receivables Subsidiary (a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which, (i) is guaranteed by the Parent or any other Subsidiary of the Parent (excluding guarantees of obligations (other than the principal 43 of, and interest on, Indebtedness) pursuant to Standard Securitisation Undertakings), (ii) is recourse to or obligates the Parent or any other Subsidiary of the Parent in any way other than pursuant to Standard Securitisation Undertakings, or (iii) subjects any property or asset of the Parent or any other Subsidiary of the Parent, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitisation Undertakings, (b) with which neither the Parent nor any of its Subsidiaries has any contract, agreement, arrangement or understanding (other than pursuant to the Permitted Receivables Facility Documents (including with respect to fees payable in the ordinary course of business in connection with the servicing of accounts receivable and related assets)) on terms less favourable to the Parent or such Subsidiary than those that might be obtained at the time from persons that are not Affiliates of the Parent and (c) to which neither the Parent nor any other Subsidiary of the Parent has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results, other than, up to a maximum aggregate amount of €25,000,000, for credit enhancement purposes pursuant to Permitted Receivables Facility Documentation. Any such designation shall be evidenced to the Agent by filing with the Agent an officer’s certificate of the Parent certifying that, to the best of such officer’s knowledge and belief after consultation with counsel, such designation complied with the foregoing conditions. “ Recovery Event ” means the receipt by the Parent or any of its Subsidiaries of any insurance or condemnation proceeds payable (i) by reason of theft, physical destruction or damage or any other similar event with respect to any properties or assets of the Parent or any of its Subsidiaries, (whether under any policy of insurance required to be maintained under Clause 23.3 ( Insurance ) or otherwise) and (ii) by reason of any condemnation, taking, seizing or similar event with respect to any properties or assets of the Parent or any of its Subsidiaries . “ Reference Banks ” means the principal London offices of Deutsche Bank AG, ABN AMRO Bank N.V., ING Bank N.V. and Coöperative Centrale Raiffeisen-Boerenleenbank B.A. or such other bank or banks as may be appointed as such by the Agent after consultation with the Parent. “ Reference Period ” has the meaning ascribed to it in the definition of “Pro Forma Basis” . “ Refinance ” has the meaning ascribed to that term in the definition of “ Permitted Refinancing Indebtedness ” and “ Refinancings ”, “ Refinances ” and “ Refinanced ” shall be construed accordingly. “ Regulation S-X ” means U.S. Regulation S-X promulgated by the SEC . “ Regulation T ” means U.S. Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof . “ Regulation U ” means U.S. Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof . “ Regulation X ” means U.S. Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof . 44 “ Release ” means the disposing, discharging, injecting, spilling, pumping, leaking, leaching, dumping, emitting, escaping, emptying, pouring or migrating, into or upon any land or water or air, or otherwise entering into the environment. “ Relevant Interbank Market ” means, in relation to euro, the European interbank market and, in relation to any Optional Currency, the London interbank market. “ Relevant Interbank Rate ” means: (a) in relation to an Advance (other than a Euro Swingline Facility Advance) denominated in euros, EURIBOR; or (b) in relation to an Advance (other than a Dollar Swingline Facility Advance) denominated in an Optional Currency, LIBOR; or (c) in relation to a Euro Swingline Facility Advance denominated in euros, LIBOR; or (d) in relation to a Dollar Swingline Facility Advance, Federal Funds Rate. “ Relevant Page ” means the page of the Reuters or Telerate screen on which is displayed in relation to EURIBOR, the European interbank offered rates for euro and, in relation to LIBOR, BBA LIBOR for the relevant currency, or, if such page or service shall cease to be available, such other page or service which displays the European interbank offered rates for euro or the London interbank offered rates for the relevant currency as the Agent, after consultation with the Lenders and the Parent, shall select. “ Renewal Request ” means, in relation to a Documentary Credit, a Utilisation Request therefor, in respect of which the proposed Utilisation Date stated in it is the Expiry Date of an existing Documentary Credit and the proposed Euro Amount is the same or less than the Euro Amount of that existing Documentary Credit. “ Repayment Date ” means: (a) in relation to any Revolving Facility Advance, Dollar Swingline Facility Advance and Euro Swingline Facility Advance, the last day of the Term or, if earlier, the Final Maturity Date of the Revolving Facility; (b) in respect of the Term Facility Outstandings, each of the A Facility Repayment Dates, the D Facilities Repayment Dates; and (c) in respect of the Incremental Term Facility Outstandings, each of the Incremental Term Facility Repayment Dates, provided that if any such day is not a Business Day in the relevant jurisdiction for payment, the Repayment Date will be the next succeeding Business Day in the then current calendar month (if there is one) or the preceding Business Day (if there is not). “ Repeating Representations ” means the representations and warranties set out in Clauses 22.1 ( Due Organisation ), 22.4 ( No Immunity ), 22.5 ( Governing Law and Judgments ), 22.6 ( All Actions Taken ), 22.8 ( Binding Obligations ), 22.9 ( No Winding-up ), 22.11 ( No Material Proceedings ), in relation to circumstances as at the date of the Information Memorandum, 22.15 ( Information Memorandum ), 22.16 ( Projections ), 22.17 ( Indebtedness 45 and Liens ), 22.19 ( Power and Authority ), paragraph (b) of Clause 22.20 ( Structure ), 22.23 ( Intellectual Property ), 22.24 ( Ownership of Assets ), 22.28 ( Security ), 22.29 ( Investment Company Act ), 22.30 ( Margin Stock ), 22.31 ( Public Utility Holding Company Act ) and 22.35 ( Benefits of Subordination Provisions ). “ Replaced Lender ” has the meaning ascribed to that term in Clause 21.1 ( Replacement of Lenders ). “ Replacement Lender ” has the meaning ascribed to that term in Clause 21.1 ( Replacement of Lenders ). “ Reportable Event ” means an event described in Section 4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30day notice period is waived under subsection .22, .23, .25, .27, .28 or .29 of PBGC Regulation Section 4043. “ Reporting Company ” means a company required to file Form 10-K Reports and Form 10-Q Reports under the Securities Exchange Act. “ Restricted Payment ” means (i) the authorisation, declaration or payment of any Dividend with respect to the Parent or any of its Subsidiaries and (ii) the making of any payment on, or with respect to, any Affiliate Debt. “ Revolving Facility ” means the revolving loan facility (including the documentary credit facility and, where appropriate, the Swingline Facility) granted to the Borrowers (or any of them) pursuant to Clause 2.1(a) ( The Facilities ). “ Revolving Facility Advance ” means an advance (including a Rollover Advance but excluding a Documentary Credit) as from time to time reduced by repayment made or to be made by the Lenders under the Revolving Facility. “ Revolving Facility Commitment ” means, in relation to a Lender at any time, and save as otherwise provided in this Agreement, the amount set opposite its name in the relevant column of Part I of Schedule 1 ( Lenders and Commitments ) (as the same may be increased from time to time pursuant to Clause 7.2 ( Incremental Revolving Facility )), or as specified in the Transfer Certificate pursuant to which such Lender becomes a party to this Agreement. “ Revolving Facility Lender ” means a person (including each L/C Bank) which: (a) is named opposite the column relating to the Revolving Facility (with a positive amount) in Section A of Part I of Schedule 1 ( Lenders and Commitments ); or (b) has become a party to this Agreement in accordance with the provisions of Clause 39 ( Assignments and Transfers ), which in each case has not ceased to be a party to this Agreement in accordance with the terms of this Agreement and which, unless the context otherwise requires, includes a Swingline Facility Lender. “ Revolving Facility Margin ” means, in relation to Revolving Facility Advances, Dollar Swingline Facility Advances and Euro Swingline Facility Advances, 2.50 per cent. per annum. 46 “ Revolving Facility Outstandings ” means, at any time, the aggregate outstanding amount of each Revolving Facility Advance and of each Outstanding L/C Amount. “ Rollover Advance ” means a Rollover Advance as defined in Clause 9.2 ( Rollover Advances ). “ S&P ” means Standard & Poor’s Ratings Group. “ Sale In Lieu of Liquidation ” means any transaction whereby a Wholly-Owned Subsidiary of the Parent (other than the Existing Borrower and Europcenter) or a Wholly-Owned Subsidiary of the Existing Borrower (with such Subsidiary being herein called the “ Subject Subsidiary ”) is sold in accordance with the following requirements: (a) before the sale of the Subject Subsidiary, all assets (other than cash and Cash Equivalents) and liabilities of the Subject Subsidiary are sold or otherwise transferred to the immediate parent of the respective Subject Subsidiary (which parent must also be the Parent or a Wholly-Owned Subsidiary thereof) in return for which the Subject Subsidiary shall receive Cash Equivalents (or an in-house bank balance representing an amount owed to it by the respective purchaser) equal to the fair market value of the assets (net of liabilities) transferred (as determined by the Parent in good faith); (b) if there is an intercompany bank balance as described in paragraph (a) above, same shall be converted into Cash Equivalents by the repayment of same (which payment may, but shall not be required to be, made with proceeds of Revolving Facility Advances drawn hereunder in accordance with the terms and conditions hereof); and (c) after the occurrence of the steps described in paragraph (a) above and, if applicable, paragraph (b) above, the Subject Subsidiary shall be sold (to a person other than the Parent or a Subsidiary or Affiliate thereof) for cash in an amount not less than the amount of Cash Equivalents held by the Subject Subsidiary less an arms’ length fee deemed reasonable by the Parent in connection with the respective Sale in Lieu of Liquidation. “ Scheduled Repayment ” means each scheduled repayment (a) in relation to the Revolving Facility Outstandings, as set out in and calculated in accordance with Clause 9 ( Repayment of Revolving and Swingline Facility Outstandings ) and (b) in relation to the Term Facility Outstandings, as set out in and calculated in accordance with Clause 10 ( Repayment of Term Facility Outstandings ). “ Scheduled Repayment Dates ” means, in relation to the Term Facilities, the A Facility Repayment Dates, the D Facilities Repayment Dates and the Incremental Term Facility Repayment Dates. “ SEC ” means the Securities Exchange Commission or successors thereof. “ Secured Obligations ” means all present and future liabilities (whether actual or contingent and whether owed jointly or severally or in any capacity whatsoever) of the Obligors (or any one or more of them) to the Finance Parties (or any one or more of them) under or in connection with any of them under any or all of the Finance Documents, together with all costs, charges and expenses incurred by any Finance Party in connection with the protection, preservation or enforcement of its rights under the Finance Documents provided that no such 47 obligation or liability shall be included in the definition of “Secured Obligations” to the extent that, if it were so included, the Security (or any part thereof) created by any provision of the Security Documents would be unlawful or prohibited by any applicable law. “ Securities Act ” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. “ Securities Exchange Act ” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. “ Security ” means a mortgage, charge, pledge, Lien or encumbrance or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect. “ Security Documents ” means: (a) each of the documents listed in Part III of Schedule 3 ( Security Documents ) and the Additional Security Documents; (b) any other document (executed at any time) conferring or evidencing any Lien, guarantee or other assurance against financial loss for, or in respect of, any of the obligations of the Obligors under this Agreement; and (c) any other document executed at any time pursuant to any covenant in any of the Security Documents referred to in paragraph (a) or (b) above. “ Seller Debt ” means Indebtedness issued as consideration in connection with one or more Permitted Acquisitions so long as (a) no person, other than the respective Subsidiary acquired pursuant to the Permitted Acquisition, has any liability with respect to such Indebtedness and (b) the terms of such Indebtedness do not otherwise cause a violation of this Agreement. “ Senior Indebtedness ” means, in relation to any member of the Group at any time, the aggregate amount of Indebtedness incurred in connection with the Finance Documents and the Permitted Receivables Transactions. “ Senior Subordinated Convertible Bond Agency Agreement ” means the agency agreement dated 18 December 2003 between the Parent as issuer and Deutsche Bank AG as fiscal and paying and conversion agent. “ Senior Subordinated Convertible Bond Documents ” means the Senior Subordinated Convertible Bond Agency Agreement, the Senior Subordinated Convertible Bonds Subscription Agreement, the Senior Subordinated Convertible Bond Offering Circular, the Senior Subordinated Convertible Bonds and each other agreement, document or instrument relating to any issuance of Senior Subordinated Convertible Bonds. “ Senior Subordinated Convertible Bond Offering Circular ” means the Offering Memorandum dated 16 December 2003, prepared in connection with the offering of the Senior Subordinated Convertible Bonds. “ Senior Subordinated Convertible Bonds ” means any convertible bonds issued in the form of bonds under, and as defined in, the Senior Subordinated Convertible Bonds Subscription Agreement. 48 “ Senior Subordinated Convertible Bonds Subscription Agreement ” means that certain Subscription Agreement dated 14 November 2003, relating to the 2 per cent. Guaranteed Subordinated Convertible Bonds due 2010 described therein, among the Parent, Deutsche Bank AG, London Branch and ABN AMRO Rothschild as joint lead managers, as same may be amended, modified or supplemented from time to time in accordance with the requirements of this Agreement. “ Senior Subordinated Notes Purchase Agreement ” means that certain Purchase Agreement, dated as of 26 October 1999, relating to the 12¼ per cent. Senior Subordinated Notes due 2009 described therein, among the Parent, the Existing Borrower, Deutsche Bank Securities Inc., Paribas Corporation and ABN AMRO Incorporated, as same may be amended, modified or supplemented from time to time in accordance with the requirements of this Agreement. “ Senior Subordinated Note Documents ” means each Senior Subordinated Note Indenture, Senior Subordinated Notes Purchase Agreement, the Senior Subordinated Notes and each other agreement, document or instrument relating to any issuance of Senior Subordinated Notes. “ Senior Subordinated Note Indenture ” means any Indenture entered into with respect to Senior Subordinated Notes issued from time to time by the Existing Borrower, provided that any Indenture relating to any Senior Subordinated Notes constituting Permitted Refinancing Indebtedness shall meet the requirements contained in the definition of Permitted Refinancing Indebtedness. “ Senior Subordinated Notes ” means the Existing Borrower’s Senior Subordinated Notes, issued in accordance with the requirements of the Senior Subordinated Note Documents. The term “Senior Subordinated Notes” shall also include any “exchange notes” issued in respect of such outstanding Senior Subordinated Notes in accordance with the requirements of the relevant Senior Subordinated Note Documents, so long as in respect of outstanding Senior Subordinated Notes, such “exchange notes” are substantially identical to the Senior Subordinated Notes in respect of which same were issued and so long as the issuance of such “exchange notes” does not result in any increase to the principal amount of Senior Subordinated Notes outstanding. “ Shareholders’ Agreements ” means all agreements (including, without limitation, shareholders’ agreements, subscription agreements and registration rights agreements) entered into by the Parent or any of its Subsidiaries governing the terms and relative rights of its share capital and any agreements entered into by shareholders relating to any such entity with respect to its share capital. “ Shares ” means the ordinary share capital of the Parent. “ Sharing Event ” means: (a) the occurrence of any Event of Default with respect to any of the Obligors pursuant to any of Clauses 28.6 ( Insolvency ), 28.7 ( Winding-up ), 28.8 ( Execution or Distress ) or 28.9 ( Similar Events ); 49 (b) the declaration of the termination of any Revolving Facility Commitments, or the acceleration of the maturity of any Advances, in each case pursuant to Clause 28.16 ( Acceleration ); or (c) the failure of a Borrower (which continues unremedied for at least 5 Business Days) to pay any principal of, or interest on, Revolving Facility Advances or any Outstanding L/C Amount on the relevant Final Maturity Date. “Sixth Amendment and Restatement Agreement ” means the amendment and restatement agreement dated 18 September 2006 between the Obligors’ Agent, the Guarantors, the Agent and the Security Trustee. “ Sixth Amendment and Restatement Effective Date ” has the meaning ascribed to that term in the Sixth Amendment Agreement. “ Standard Securitisation Undertakings ” means representations, warranties, covenants and indemnities entered into by the Parent or any Subsidiary thereof in connection with a Permitted Receivables Transaction which are reasonably customary in an accounts receivable transaction. “ Start Date ” has the meaning ascribed to that term in the definition of “ Applicable Margin ”. “ Stichting A ” means Stichting Administratiekantoor van Preferente Aandelen Buhrmann N.V. and its successors. “ Stichting A Continuing Director ” means a member of the executive committee of Stichting A on the Initial Borrowing Date or who became a member of such executive committee subsequent to the Initial Borrowing Date and who was appointed by a majority of the Stichting A Continuing Directors then on the executive committee of Stichting A. “ Stichting B ” means Stichting van Preferente Aandelen Buhrmann N.V. and its successors. “ Stichting B Continuing Director ” means a member of the executive committee of Stichting B on the Initial Borrowing Date or who became a member of such executive committee subsequent to the Initial Borrowing Date and who was appointed by a majority of the Stichting B Continuing Directors then on the executive committee of Stichting B. “ Subsidiary ” means, as to any person, (i) any corporation more than 50 per cent. of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such person and/or one or more Subsidiaries of such person and (ii) any partnership, limited liability company, association, joint venture or other entity in which such person and/or one or more Subsidiaries of such person has more than a 50 per cent. Equity Interest at the time. “ Supermajority Lenders ” of (i) any Facility (other than the D1 Facility or the D2 Facility) means those Lenders which would constitute the Instructing Group under, and as defined in, this Agreement if (x) all outstanding Facilities Obligations of the other Facilities under this Agreement were repaid in full and all Commitments, if any, with respect thereto were terminated and (y) the percentage “50%” contained therein were changed to “66 2 / 3 %” or 50 (ii) the D1 Facility or the D2 Facility means those Lenders which would constitute the Instructing Group under, and as defined in, this Agreement if (x) all outstanding Facilities Obligations of the other Facilities under this Agreement (other than both of the D Facilities) were repaid in full and all Commitments, if any, with respect thereto were terminated and (y) the percentage “50%” contained therein were changed to “66 2 / 3 %”. “ Swingline Facility ” means the swingline facility forming part of the Revolving Facility and granted to the Existing Borrower pursuant to Clause 2.1(b) ( The Facilities ). “ Swingline Facility Advance ” means a Dollar Swingline Facility Advance or a Euro Swingline Facility Advance, as the context may require. “ Swingline Facility Commitment ” means, in relation to a Swingline Facility Lender at any time, and save as otherwise provided in this Agreement, the amount set opposite its name in the relevant column of Section B of Part I of Schedule 1 ( Lenders and Commitments ) or as specified in the Transfer Certificate pursuant to which such Lender becomes a party to this Agreement. “ Swingline Facility Lender ” means a person which: (a) is named in Section B of Part I of Schedule 1 ( Lenders and Commitments ); or (b) has become a party to this Agreement in accordance with the provisions of Clause 39 ( Assignments and Transfers ), which in each case includes any affiliate designated by such Swingline Facility Lender to act as such with respect to all or any part of the Swingline Facility Advances and which has not ceased to be a party to this Agreement in accordance with the terms of this Agreement and “ Swingline Facility Lenders ” means all of them. “ Swingline Facility Outstandings ” means the Dollar Swingline Facility Outstandings and the Euro Swingline Facility Outstandings. “ Syndication Date ” means 31 March 2004 or such later date as may be agreed between the Arrangers and the Parent or such earlier date specified by the Arrangers (and notified to the Agent and the Parent) as the day on which primary syndication of the Facilities is completed. “ TARGET Day ” means any day on which the Trans-European Automated Real-time Gross Settlement Express Transfer payment system is open for the settlement of payments in euro. “ Tax Credit ” means a credit against, relief or remission for, or repayment of any tax. “ Tax Deduction ” means a deduction or withholding for or on account of tax from a payment made or to be made under a Finance Document (but, for clarity, shall not include any tax imposed on or measured by the net income or net profits of a Lender pursuant to the laws and the jurisdiction (or any political subdivision therein) in which the principal office of such Lender or the applicable lending office of such Lender for the Finance Documents and the Transaction (or relevant part thereof) is located, other than such tax imposed on gross-up payments covered by Clause 18 ( Taxes )). “ Tax Liability ” has the meaning set out in paragraph (e) of Clause 18.2 ( Tax Indemnity ). 51 “ Tax Payment ” means the increase in any payment made by an Obligor to a Finance Party under paragraph (c) of Clause 18.1 ( Tax Gross-up) or any amount payable under paragraph (d) of Clause 18.1 ( Tax Gross-up ) or under Clause 18.2 ( Tax Indemnity ). “ Tax Sharing Agreements ” means all tax sharing, tax allocation and other similar agreements entered into by the Parent or any of its Subsidiaries. “ Term ” means: (a) in relation to a Revolving Facility Advance, a Dollar Swingline Facility Advance, a Euro Swingline Facility Advance, the period for which such Advance is borrowed as specified in the relevant Utilisation Request; and (b) in relation to any Documentary Credit, the period from the date of its issue until its Expiry Date. “ Term Facilities ” means the A Facility, the D Facilities and, subject to Clause 7 ( Uncommitted Incremental Facilities ), the Incremental Term Facility and “ Term Facility ” means any of them as the context may require from time to time. “ Term Facility Advance ” means any A Facility Advance, D Facility Advance and, subject to Clause 7 ( Uncommitted Incremental Facilities ), Incremental Term Facility Advance and “ Term Facility Advances ” shall be construed accordingly. “ Term Facility Commitments ” means, at any time, the aggregate of the A Facility Commitments, the D Facility Commitments and, subject to Clause 7 ( Uncommitted Incremental Facilities ), the Incremental Term Facility Commitments. “ Term Facility Outstandings ” means, at any time, the aggregate of the A Facility Outstandings, the D Facility Outstandings and, subject to Clause 7 ( Uncommitted Incremental Facilities ), the Incremental Term Facility Outstandings. “ Termination Date ” means: (a) in relation to the Revolving Facility, the Swingline Facility and the Incremental Revolving Facility, the date which is 30 days prior to the Final Maturity Date in respect of the Revolving Facility; (b) in relation to each Term Facility (other than the D1 Facility, the D2 Facility and the Incremental Term Facility), the earlier of the day which is: (c) (i) 31 January 2004; and (ii) the first Business Day on which the Available Commitment of each of the Lenders in respect of the relevant Term Facility is zero; in relation to the D1 Facility (other than in relation to the Anton Acquisition Funds) and the D2 Facility, the earlier of the day which is: (i) 2 December 2005; and (ii) the Fifth Amendment and Restatement Effective Date; 52 (d) in relation to the Anton Acquisition Funds, 28 February 2007. (e) in relation to any Tranche of the Incremental Term Facility, the last date by which Incremental Term Facility Advances under such Tranche may be incurred under this Agreement, which date shall be set out in the relevant Incremental Term Facility Commitment Agreement but no later than the earlier of (i) 30 September 2010 and (ii) the Final Maturity Date of the D Facilities. “ Termination Event ” means, with respect to a Plan which is subject to Title IV of ERISA, (a) a Reportable Event, (b) the withdrawal of the Parent, any Subsidiary of the Parent or any ERISA Affiliate from such Plan during a plan year in which the Parent, any Subsidiary of the Parent or any ERISA Affiliate was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4062(e) of ERISA, (c) the termination of such Plan, the filing of a notice of intent to terminate such Plan or the treatment of an amendment of such Plan as a termination under Section 4041 of ERISA (other than a standard termination under Section 4041(b) of ERISA), (d) the institution by the PBGC of proceedings to terminate such Plan or (e) any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or appointment of a trustee to administer, such Plan. “ Test Period ” means, for any determination, the four consecutive fiscal quarters of the Parent then last ended (taken as one accounting period). “ Third Party Existing Indebtedness ” means the list of Indebtedness existing on the Effective Date set out in Section A ( Third Party Existing Indebtedness ) of Part II of Schedule 10 ( Existing Indebtedness ). “ Tranche ” means the Revolving Facility, the A Facility, the D1 Facility and the D2 Facility utilised in making Advances. In addition, and notwithstanding the foregoing, any Incremental Term Facility Advances extended after the Syndication Date shall, to the extent provided in Clause 7.1(c) ( Constitution of each Tranche of Incremental Term Facility ), be made pursuant to one or more additional Tranches which shall be designated pursuant to the respective Incremental Term Facility Commitment Agreement in accordance with the relevant requirements specified in Clause 7.1(c) ( Constitution of each Tranche of Incremental Term Facility ). “ Transaction ” means the entering into of the Finance Documents and the incurrence of the Outstandings and the payment of all fees and expenses in connection with the foregoing. “ Transaction Date ” has the meaning ascribed to that term in the definition of “Pro Forma Basis”. “ Transfer Certificate ” means a duly completed deed of transfer and accession in the form set out in Schedule 2 ( Form of Transfer Certificate ) and signed by a Lender and a Transferee whereby such Lender seeks to procure the transfer to such Transferee of all or a part of such Lender’s rights, benefits and obligations under this Agreement as contemplated in Clause 39 ( Assignments and Transfers ) and under the Intercreditor Deed. “ Transfer Date ” means, in relation to any Transfer Certificate, the date for the making of the transfer as specified in such Transfer Certificate. 53 “ Transferee ” means a bank or other institution to which a Lender seeks to transfer all or part of its rights, benefits and obligations under this Agreement pursuant to and in accordance with Clause 39 ( Assignments and Transfers ). “ Trust Property ” means: (a) any rights, interests or other property and the proceeds thereof from time to time assigned, transferred, mortgaged, charged, or pledged to and/or otherwise vested in the Security Trustee under, pursuant to or in connection with this Agreement or any Security Document to which the Security Trustee is a party; (b) any security interest from time to time constituted by or pursuant to or evidenced by any Security Document to which the Security Trustee is a party; (c) any representation, obligation, covenant, warranty or other contractual provision in favour of the Security Trustee (other than any made or granted solely for its own benefit) made or granted in or pursuant to any of the Security Documents to which the Security Trustee is a party; (d) any sum which is received or recovered by the Security Trustee under, pursuant to or in connection with any of the Finance Documents or the exercise of any of the Security Trustee’s powers under or in connection therewith and which is held by the Security Trustee upon trust on the terms of this Agreement or any Security Document to which the Security Trustee is a party; (e) all income and other sums at any time received or receivable by the Security Trustee in respect of Trust Property (or any part thereof); or (f) any sum which is received or recovered by the Security Trustee under, pursuant to or in connection with Clause 32.7 ( Parallel Debt ). “ UCC ” means the U.S. Uniform Commercial Code as from time to time in effect in the relevant jurisdiction. “ Unavailable Revolving Facility Amount ” means such amount from time to time not applied in accordance with (A), (B) and/or (C) as referred to in paragraph (b) ( Asset Sale ) of Clause 13.1 ( Repayment from Net Proceeds ) pending application during any 360 day period referred to therein. “ Unfunded Current Liability ” of any Plan, means the amount, if any, by which the actuarial present value of the accumulated plan benefits under the Plan, as of the close of its most recent plan year, determined in accordance with Statement of Financial Accounting Standards No. 87 and based upon the actuarial assumptions used by the Plan’s actuary in the most recent annual valuation of the Plan, exceeds the fair market value of the assets thereof, determined in accordance with Section 412 of the Code, allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions). “ Unpaid Sum ” means any sum due and payable by an Obligor under any Finance Document but unpaid. 54 “ U.S. Guarantor ” means each of the parties as set out in Part II of Schedule 1 ( Original Guarantors ) named as U.S. Guarantors and any Acceding Guarantor incorporated in the United States of America. “ U.S. Lender ” means, in relation to a payment of interest on a participation in an Advance to any Borrower, a Lender which is created or organised under the laws of the United States of America or of any state thereof and, if the Lender is a trust, is a “United States Person” within the meaning of Section 7701(a)(30)(E) of the Code. “ U.S. Person ” shall mean any person organised under the laws of the United States or any state or territory thereof. “ U.S. Subsidiary ” means (a) in relation to the Parent, each Subsidiary of the Parent that is incorporated under the laws of the United States or any State or territory thereof and (b) in relation to a Borrower, each Subsidiary of that Borrower that is incorporated under the laws of the United States or any State or territory thereof. “ Utilisation ” means the utilisation of a Facility under this Agreement whether by way of an Advance or the issue of a Documentary Credit. “ Utilisation Date ” means, in relation to an Advance, the date on which such Advance is (or is requested) to be made and, in relation to a Documentary Credit, the date on which such Documentary Credit is to be issued under this Agreement. “ Utilisation Request ” means a duly completed notice (a) in the case of an Advance (other than a Swingline Facility Advance) and/or a Documentary Credit in the form set out in Part I of Schedule 4 ( Form of Utilisation Request (Term Facilities and Revolving Facility) ), or (b) in the case of a Swingline Facility Advance, in the form set out in Part II of Schedule 4 ( Form of Utilisation Request (Swingline Facility) ). “ Waivable Mandatory Repayment ” has the meaning ascribed to that term in paragraph (c) ( Waivable Mandatory Repayment) of Clause 13.3 ( Application of Mandatory Prepayments . “ Waivable Voluntary Repayment ” has the meaning ascribed to that term in paragraph (b) ( Waivable Voluntary Repayment) of Clause 12.3 ( Application of Voluntary Prepayments ). “ Weighted Average Life to Maturit y” means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining instalment or other required payment of principal including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. “ Wholly-Owned Non-U.S. Subsidiary ” means (a) in relation to the Parent, each Non-U.S. Subsidiary of the Parent that is also a Wholly-Owned Subsidiary of the Parent and (b) in relation to a Borrower, each Non-U.S. Subsidiary of that Borrower that is also a Wholly-Owned Subsidiary of that Borrower. “ Wholly-Owned Subsidiary ” means, as to any person, (a) any corporation 100 per cent. of whose share capital (other than directors’ qualifying shares and other nominal amounts of shares required by applicable law to be held by persons (other than directors)) is at the time 55 owned by such person and/or one or more Wholly-Owned Subsidiaries of such person and (b) any partnership, limited liability company, association, joint venture or other entity in which such person and/or one or more Wholly-Owned Subsidiaries of such person has a 100 per cent. Equity Interest at such time. “ Wholly-Owned U.S. Subsidiary ” means (a) in relation to the Parent, each U.S. Subsidiary of the Parent that is also a Wholly-Owned Subsidiary of the Parent and (b) in relation to a Borrower, each U.S. Subsidiary of that Borrower that is also a Wholly-Owned Subsidiary of that Borrower. 1.2 Accounting Expressions All accounting expressions which are not otherwise defined in this Agreement shall be construed in accordance with GAAP. 1.3 Construction Unless a contrary indication appears, any reference in this Agreement to: the “ Agent ”, an “ Arranger ”, the “ Security Trustee ”, a “ Hedge Counterparty ”, the “ L/C Bank ”, an “ A Facility Lender ”, a “ D1 Facility Lender ”, a “ D2 Facility Lender ”, a “ Revolving Facility Lender ”, a “ Dollar Swingline Facility Lender ”, a “ Euro Swingline Facility Lender ”, an “ Incremental Revolving Facility Lender ”, or an Incremental Term Facility Lender ” shall be construed so as to include their respective and any subsequent successors, Transferees and permitted assigns in accordance with their respective interests; “ agreed form ” means, in relation to any document, in the form agreed and initialled for identification by the Arrangers and the Parent prior to the Initial Borrowing Date; “ continuing ” in relation to an Event of Default or a Default shall be construed as meaning that (a) the circumstances constituting such Event of Default or Default continue and (b) neither the Agent (being duly authorised to do so) nor the Lenders have waived such of its or their rights under this Agreement as arise as a result of that event; “ determines ” or “ determined ” means a determination made in the absolute discretion of the person making the determination; the “ equivalent ” on any given date in one currency (the “ first currency ”) of an amount denominated in another currency (the “ second currency ”) is, unless otherwise agreed, a reference to the amount of the first currency which could be purchased with the second currency at the Agent’s Spot Rate of Exchange for the purchase of the first currency with the second currency; “ indebtedness ” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent (including interest and other charges relating to it); “ month ” is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next succeeding calendar month save that, where any such period would otherwise end on a day which is not a Business Day, it shall end on the next succeeding Business Day, unless that day falls in the calendar month succeeding that in which it would otherwise have ended, in which case it shall end on the immediately 56 preceding Business Day provided that, if a period starts on the last Business Day in a calendar month or if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that later month (and references to “ months ” shall be construed accordingly); a “ person ” shall be construed as a reference to any person, firm, company, corporation, government, state or agency of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing; “ regulation ” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation. “ tax ” shall be construed so as to include all present and future taxes, charges, imposts, duties, levies, deductions or withholdings of any kind whatsoever, or any amount payable to any governmental authority on account of or as security for any of the foregoing, by whomsoever on whomsoever and wherever imposed, levied, collected, withheld or assessed together with any penalties, additions, fines, surcharges or interest relating to it; and “ taxes ” and “ taxation ” shall be construed accordingly; “ VAT ” shall be construed as value added tax as provided for in the Value Added Tax Act 1994 and legislation (or purported legislation and whether delegated or otherwise) supplemental to that Act or in any primary or secondary legislation promulgated by the European Community or European Union or any official body or agency of the European Community or European Union, and any tax similar or equivalent to value added tax imposed by any country other than the United Kingdom and any similar or turnover tax replacing or introduced in addition to any of the same; and the “ winding-up ”, “ dissolution ” or “ administration ” of a company or corporation shall be construed so as to include any equivalent or analogous proceedings under the Law of the jurisdiction in which such company or corporation is incorporated or any jurisdiction in which such company or corporation carries on business, including the seeking of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection from creditors or relief of debtors. 1.4 Currency “ € ” and “ euro ” denote the lawful currency of each Participating Member State, “ £ ” and “ sterling ” denote the lawful currency of the United Kingdom and “ $ ” and “ dollar ” denote the lawful currency of the United States of America. 1.5 Statutes Any reference in this Agreement to a statute or a statutory provision (including any reference to the Board of Governors of the Federal Reserve System of the United States) shall, save where a contrary intention is specified, be construed as a reference to such statute or statutory provision as the same shall have been, or may be, amended or re-enacted. 1.6 Time Any reference in this Agreement to a time shall, unless otherwise specified, be construed as a reference to London time. 57 1.7 References to Agreements Unless otherwise stated, any reference in this Agreement to any agreement or document (including any reference to this Agreement) shall be construed as a reference to: (a) such agreement or document as amended, varied, novated, supplemented, extended, renewed, refinanced or replaced from time to time; (b) any other agreement or document whereby such agreement or document is so amended, varied, supplemented or novated; and (c) any other agreement or document entered into pursuant to or in accordance with any such agreement or document. 1.8 Documentary Credits Any reference in this Agreement to: (a) an amount borrowed includes any amount utilised by way of Documentary Credit; (b) a Lender funding its participation in a Utilisation includes an Indemnifying Lender participating in a Documentary Credit; (c) amounts outstanding under this Agreement include amounts outstanding under, or in relation to, any Documentary Credit; (d) an outstanding amount of a Documentary Credit at any time is the maximum amount that is or may be payable by a Borrower in respect of that Documentary Credit at that time; (e) a Borrower “ repaying ” a Documentary Credit means: (i) that Borrower providing cash cover for that Documentary Credit; (ii) the maximum amount payable under the Documentary Credit being reduced in accordance with its terms; or (iii) the L/C Bank being satisfied that it has no further liability under that Documentary Credit, and that the amount by which a Documentary Credit is repaid under sub-paragraphs (e)(i) and (e)(ii) above is the amount of the relevant cash cover or reduction; and (f) a Borrower providing “ cash cover ” for a Documentary Credit means that Borrower paying an amount (x) at any time prior to the occurrence of a Sharing Event in the currency of the Documentary Credit and (y) at any time on or after the occurrence of a Sharing Event, in euros, to an interest-bearing account in the name of that Borrower and the following conditions are met: (i) the account is with the Agent (if the cash cover is to be provided for all the Indemnifying Lenders) or with an Indemnifying Lender or the L/C Bank (if 58 the cash cover is to be provided for that Indemnifying Lender or the L/C Bank, as the case may be); (ii) withdrawals from the account may only be made to pay a Finance Party amounts due and payable to it under this Agreement in respect of that Documentary Credit until no amount is or may be outstanding under that Documentary Credit; and (iii) that Borrower has executed a security document over that account, in form and substance satisfactory to the Agent or the Finance Party with which that account is held, creating a first ranking security interest over that account, or on such other terms as may be satisfactory to the Agent, the relevant Indemnifying Lender or the L/C Bank. 2. THE FACILITIES 2.1 The Facilities (a) The Revolving Facility Lenders grant to the Borrowers, upon the terms and subject to the conditions of this Agreement, a revolving loan facility in a maximum aggregate amount of €255,000,000 (the “ Revolving Facility ”) or its equivalent from time to time in Optional Currencies. (b) The Swingline Facility Lenders grant to the Borrowers, upon the terms and subject to the conditions of this Agreement, a swingline facility (being part of the Revolving Facility) in a maximum aggregate Euro Amount of €85,000,000 (the “ Swingline Facility ”). (c) The A Facility Lenders grant to the Existing Borrower upon the terms and subject to the conditions of this Agreement, a term loan facility in a maximum aggregate amount of €120,000,000 (the “ A Facility ”). (d) The D1 Facility Lenders grant to the Existing Borrower upon the terms and subject to the conditions of this Agreement, a term loan facility in a maximum aggregate amount of €305,000,000 plus the amount of Anton Acquisition Funds (the “ D 1 Facility ”) or its equivalent from time to time in Optional Currencies (it being agreed that the equivalent in dollars on the Initial Borrowing Date is an amount equal to $380,000,000). (e) The D2 Facility Lenders grant to the Existing Borrower upon the terms and subject to the conditions of this Agreement, a term loan facility in a maximum aggregate amount of €50,000,000, (the “ D2 Facility ”). (f) The Incremental Revolving Facility Lenders grant to the Borrowers upon the terms and subject to the conditions of this Agreement (including, without limitation, Clause 7 ( Uncommitted Incremental Facilities ), and relevant Incremental Revolving Facility Commitment Agreements, a revolving loan facility in a maximum aggregate amount of €65,000,000 (the “ Incremental Revolving Facility ”) or its equivalent from time to time in Optional Currencies. 59 (g) The Incremental Term Facility Lenders grant to the Borrowers upon the terms and subject to the conditions of this Agreement (including, without limitation, Clause 7 ( Uncommitted Incremental Facilities )), and relevant Incremental Term Facility Commitment Agreements, a term loan facility in a maximum aggregate amount equal to the euro equivalent of $500,000,000 (excluding all amounts borrowed prior to the Fifth Amendment and Restatement Effective Date) (the “ Incremental Term Facility ”) or its equivalent from time to time in Optional Currencies. 2.2 Purpose (a) The A Facility and the D Facilities (excluding the Anton Acquisition Funds) are intended to finance, in whole, the Existing Credit Agreement, including, in each case, any fees and expenses in relation thereto. The Anton Acquisitions Funds are intended to finance the consideration payable in relation to the Anton Acquisition including any fees and expenses in relation thereto, and the general corporate purposes of the Group. (b) The Revolving Facility and the Incremental Revolving Facility are intended to finance the general working capital requirements and the general corporate purposes of the Group and may be utilised by way of Revolving Facility Advances or Documentary Credits. (c) The Swingline Facility is intended to finance the general working capital requirements and general corporate purposes of the Group. (d) The Incremental Term Facility is intended to finance Permitted Acquisitions and the redemption or repurchase of the Senior Subordinated Notes or New Senior Subordinated Notes (including, without limitation, any related redemption or repurchase fees). (e) The Borrowers shall apply all amounts borrowed under this Agreement in or towards satisfaction of the purposes referred to in paragraphs (a), (b), (c) and (d) of this Clause 2.2 and none of the Finance Parties shall be obliged to concern themselves with such application. 2.3 Several Obligations The obligations of each Finance Party under this Agreement are several and the failure by a Finance Party to perform any of its obligations under this Agreement shall not affect the obligations of any of the other parties to this Agreement towards any other party to this Agreement nor shall any other party be liable for the failure by such Finance Party to perform its obligations under this Agreement. 2.4 Several Rights The rights of each Finance Party are several and any debt arising under this Agreement at any time from an Obligor to any Finance Party to this Agreement shall be a separate and independent debt. Each Finance Party may, except as otherwise stated in this Agreement, separately enforce its rights under this Agreement. 60 3. CONDITIONS 3.1 Conditions Precedent The obligations of the Finance Parties under this Agreement shall be conditional upon the Agent having confirmed to the Parent that it has received the documents listed in Part I of Schedule 3 ( Conditions Precedent to First Utilisation ) and that each is satisfactory, in form and substance, to the Agent acting reasonably. The Agent shall notify the Parent and the Lenders promptly upon being so satisfied. 3.2 Conditions Subsequent The Parent shall procure (and each relevant Obligor shall ensure) that: (a) as soon as practicable after the Initial Borrowing Date under this Agreement and in any event by no later than 31 January 2004 there shall have been delivered to the Agent each of the documents listed in Section A of Part IV of Schedule 3 ( Conditions Subsequent Documents ); and (b) within 3 months after the Initial Borrowing Date there shall have been delivered to the Agent each of the documents listed in Section B of Part IV of Schedule 3 ( Conditions Subsequent Documents ), each in form and substance satisfactory to the Agent. The Agent shall notify the Parent and the Lenders promptly upon being so satisfied. 4. UTILISATION 4.1 Conditions to Utilisation Save as otherwise provided in this Agreement, an Advance (other than a Swingline Facility Advance or an Incremental Term Facility Advance) will be made by the Lenders to a Borrower or a Documentary Credit will be issued by an L/C Bank at a Borrower’s request if: (a) the Agent has received from the relevant Borrower a duly completed Utilisation Request stating whether the proposed Utilisation is to be by way of Advance or Documentary Credit not later than 9.30 a.m. on a day which is: (i) no more than 10 nor less than 2 Business Days prior to the proposed Utilisation Date for such Advance; or (ii) no more than 10 nor less than 4 Business Days prior to the proposed Utilisation Date for such Documentary Credit, receipt of which shall oblige that Borrower to borrow the amount requested on the date stated upon the terms and subject to the conditions contained in this Agreement provided that no Utilisation Request under the Revolving Facility shall be made prior to the first Utilisation Request under the Term Facilities; (b) the proposed Utilisation Date is a Business Day for the proposed currency of the Advance or Documentary Credit, as the case may be, which is or precedes the relevant Termination Date; 61 (c) in the case of a Utilisation by way of an A Facility Advance, the proposed Euro Amount of such Advance is equal to €120,000,000; (d) in the case of a Utilisation by way of a D1 Facility Advance prior to the Sixth Amendment and Restatement Effective Date, the proposed Euro Amount of such Advance is equal to €305,000,000 (it being agreed that the equivalent in dollars is an amount equal to $380,000,000); (e) in the case of the Utilisation by way of D1 Facility Advance in relation to the Anton Acquisition Funds, the proposed amount of such Advance is equal to the total amount of the relevant Anton Acquisition Funds; (f) in the case of a Utilisation by way of a D2 Facility Advance the proposed Euro Amount of such Advance is equal to €50,000,000; (g) in the case of a Utilisation by way of a Revolving Facility Advance, the proposed Euro Amount of such Advance is (i) equal to the amount of the corresponding Available Revolving Facility (minus the Unavailable Revolving Facility Amount (if any)) or (ii) less than such amount but equal to, or an integral multiple of, €1,000,000; (h) in the case of a Utilisation by way of Documentary Credit, the proposed Euro Amount of such Documentary Credit is equal to or less than the amount of the Available Revolving Facility (minus the Unavailable Revolving Facility Amount (if any)); (i) in the case of a Utilisation by way of a Revolving Facility Advance, (i) at any time prior to the Syndication Date, immediately after the making of such Advance there will be no more than 3 Revolving Facility Advances outstanding and (ii) at any time after the Syndication Date, immediately after the making of such Advance there will be no more than 10 Revolving Facility Advances (for the avoidance of doubt not including any Swingline Facility Advances) outstanding; (j) in the case of a Utilisation by way of a Documentary Credit, the proposed Term of the Documentary Credit is a period not exceeding 364 days, ending on or before the Termination Date in respect of the Revolving Facility; (k) in the case of a Utilisation by way of a Revolving Facility Advance, the proposed Term of such Revolving Facility Advance is a period of one week, two weeks, or 1, 2, 3 or 6 months or such other period as the Agent may agree, and ends on or before the Final Maturity Date of the Revolving Facility provided that, save as the Agent may otherwise agree, prior to the Syndication Date the Term of each Revolving Facility Advance shall be 1 week or 1 month (or, such duration as is necessary to ensure that such Term ends on the Syndication Date); (l) in the case of a Utilisation by way of an Advance other than a Rollover Advance, the interest rate applicable to such Advance’s first Interest Period or Term (as the case may be) will not have to be determined under Clause 16 ( Market Disruption and Alternative Interest Rates ); (m) in the case of a Utilisation by way of a Documentary Credit, the L/C Bank and the Agent have each approved the terms of such Documentary Credit (which, unless the Agent and the L/C Bank otherwise agree in writing, shall be in such form customarily 62 used by the L/C Bank or in such other form as has been approved by the L/C Bank and shall specify the purpose of its issue, the name and address of the Beneficiary of it, the Beneficiary’s receiving bank account and its Expiry Date); (n) in the case of any Utilisation: (i) in the case of a Rollover Advance or a Documentary Credit which is being renewed pursuant to Clause 5.2 ( Renewal of Documentary Credits ), no Event of Default is continuing or would result from the proposed Rollover Advance or the renewal of that Documentary Credit and, in the case of any other Utilisation, no Default is continuing or would result from the proposed Utilisation; and (ii) save in the case of a Rollover Advance, the Repeating Representations made by each Obligor are true and correct in all material respects on the relevant Utilisation Date by reference to the circumstances then existing; and (o) in relation to the first Utilisation requested under this Agreement, the Agent is reasonably satisfied that the Parent will comply with its obligations under Clause 3.2 ( Conditions Subsequent ). 4.2 Conditions to Utilisation of Incremental Term Facility (a) Conditions to Incremental Term Facility Commitments: Subject to and upon the terms and conditions set forth in Clause 7 ( Uncommitted Incremental Facilities ) and the relevant Incremental Term Facility Commitment Agreement, each Lender with an Incremental Term Facility Commitment for a given Tranche of Incremental Term Facility Advances severally agrees, at any time and from time to time on and after the date that such Incremental Term Facility Commitment is obtained pursuant to Clause 7 ( Uncommitted Incremental Facilities ) and prior to the relevant Termination Date for such Tranche of Incremental Term Facility Advances, to make a term loan or term loans (each an “ Incremental Term Facility Advance ” and, collectively, the “ Incremental Term Facility Advances ”) to the relevant Borrower for such Tranche. Such Incremental Term Facility Advances: (i) shall be incurred on an Incremental Term Facility Utilisation Date; (ii) shall be denominated in the Applicable Currency for such Tranche of Incremental Term Facility Advances; (iii) shall, if an Alternate Currency Incremental Term Facility Advance, at the option of that Borrower, be incurred and maintained in one or more borrowings of Alternate Currency Incremental Term Facility Advances under such Tranche; and (iv) shall not exceed for any such Incremental Term Facility Lender at the time of any incurrence thereof, that aggregate principal amount which equals the Incremental Term Facility Commitment of such Incremental Term Facility Lender for such Tranche at such time (before giving effect to any reduction thereof at such time pursuant to paragraph (c) of this Clause 4.2). 63 (b) Utilisation Request: Save as otherwise provided in this Agreement and/or the relevant Incremental Term Facility Commitment Agreement, an Incremental Term Facility Advance will be made by the Lenders to a Borrower at that Borrower’s request if the Agent has received at any time after the Syndication Date from that Borrower a duly completed Utilisation Request in relation to an Incremental Term Facility Advance not later than 10.00 a.m. on a day which is no more than 10 nor less than 3 Business Days prior to the proposed Utilisation Date for such Advance stating: (i) the aggregate principal amount of such Advance (stated in the Applicable Currency, as the case may be); (ii) the Incremental Term Facility Utilisation Date; (iii) in the case of an Alternate Currency Incremental Term Facility Advance, the Optional Currency; and (iv) whether such Advance constitutes part of the D Facilities or Incremental Term Facility, receipt of which shall oblige such Borrower to borrow the amount requested on the date stated upon the terms and subject to the conditions contained in this Agreement and the relevant Incremental Term Facility Commitment Agreement. (c) Reduction of Incremental Term Facility Commitment: The total Incremental Term Facility Commitments under a given Tranche shall (i) be permanently reduced on each Incremental Term Facility Utilisation Date in respect of such Tranche in an amount equal to the aggregate principal amount of Incremental Term Facility Advances of such Tranche incurred on each such date, (ii) terminate in its entirety to the extent not theretofore terminated on the Termination Date for such Tranche of Incremental Term Facility Advances (after giving effect to any Incremental Term Facility Advances of such Tranche to be made on such date) and (iii) prior to the termination of the total Incremental Term Facility Commitment in respect of such Tranche, be permanently reduced from time to time to the extent required by Clause 13.3 ( Application of Mandatory Prepayments ). (d) Application of Reduction of Incremental Term Facility Commitment: Each reduction to, and/or termination of the total Incremental Term Facility Commitment under a given Tranche pursuant to this Clause 4.2 shall be applied proportionately and permanently to reduce, and/or terminate the Incremental Term Facility Commitment of each Lender with such a Commitment under such Tranche provided that any mandatory reduction to the Incremental Term Facility Commitments pursuant to Clause 13.3 ( Application of Mandatory Prepayments ) shall be applied proportionately and permanently to reduce the Incremental Term Facility Commitments of all Lenders for all Tranches on a pro rata basis (based on the then remaining amounts of such Incremental Term Facility Commitments). 4.3 Lenders’ Participations Each Lender will participate through its Facility Office in each Advance made pursuant to Clause 4.1 ( Conditions to Utilisation ), the relevant Incremental Revolving Facility 64 Commitment Agreement and the relevant Incremental Term Facility Commitment Agreement in its respective Proportion. 5. DOCUMENTARY CREDITS 5.1 Issue of Documentary Credits (a) Each L/C Bank shall issue Documentary Credits pursuant to Clause 4.1 ( Conditions to Utilisation ) by: (i) completing the issue date and the proposed Expiry Date of any Documentary Credit to be issued by it; and (ii) executing and delivering such Documentary Credit to the relevant Beneficiary on the relevant Utilisation Date. (b) Each Lender having a Revolving Facility Commitment (an “ Indemnifying Lender ”) will participate in each Documentary Credit in an amount equal to its L/C Proportion. (c) The Agent shall notify the L/C Bank and each Indemnifying Lender of the details of any requested Documentary Credit (including the Euro Amount of it, and, if such Documentary Credit is not to be denominated in euro, the Optional Currency in which it will be denominated and the amount of it) and its participation in that Documentary Credit. 5.2 Renewal of Documentary Credits (a) A Borrower may request that a Documentary Credit issued on its behalf be renewed by delivering to the Agent a Renewal Request which complies with Clause 4.1 ( Conditions to Utilisation ). (b) The terms of each renewed Documentary Credit shall be the same as those of the relevant Documentary Credit immediately prior to its renewal, except that (as stated in the Renewal Request therefor): (i) its amount may be less than the amount of such Documentary Credit immediately prior to its renewal; and (ii) its Term shall start on the date which was the Expiry Date of that Documentary Credit immediately prior to its renewal, and shall end on the proposed Expiry Date specified in the Renewal Request. (c) If the conditions set out in this Agreement have been met, the L/C Bank shall amend and re-issue a Documentary Credit pursuant to a Renewal Request. 5.3 Revaluation of Documentary Credits (a) If any Documentary Credit is denominated in an Optional Currency and has a Term of more than 6 months, the Agent shall at monthly intervals after the date of such Documentary Credit recalculate the Euro Amount of that Documentary Credit by notionally converting into euro the outstanding amount of that Documentary Credit on the basis of the Agent’s Spot Rate of Exchange on the date of calculation. 65 (b) A Borrower shall, if requested by the Agent within 2 Business Days of any calculation under paragraph (a) above, ensure that on the last day of the Term of the next maturing Revolving Facility Advance sufficient Revolving Facility Outstandings are repaid to prevent the Euro Amount of the Revolving Facility Outstandings exceeding the aggregate amount of all of the Revolving Facility Commitments adjusted to reflect any cancellations or reductions, following any adjustment under paragraph (a) above. 5.4 Immediately Payable If a Documentary Credit or any amount outstanding under a Documentary Credit is expressed to be immediately payable, the relevant Borrower shall repay that amount immediately. 5.5 Claims under a Documentary Credit (a) The relevant Borrower irrevocably and unconditionally authorises the L/C Bank to pay any claim made or purported to be made under a Documentary Credit requested by it and which appears on its face to be in order (a “ claim ”). (b) The relevant Borrower shall within 3 Business Days of demand pay to the Agent for the L/C Bank an amount equal to the amount of any claim. (c) The relevant Borrower acknowledges that the L/C Bank: (i) (ii) (d) is not obliged to carry out any investigation or seek any confirmation from any other person before paying a claim; and deals in documents only and will not be concerned with the legality of a claim or any underlying transaction or any available set-off, counterclaim or other defence of any person. The obligations of the relevant Borrower under this Clause will not be affected by: (i) the sufficiency, accuracy or genuineness of any claim or any other document; or (ii) any incapacity of, or limitation on the powers of, any person signing a claim or other document. 5.6 Documentary Credit Indemnities (a) The relevant Borrower shall immediately on demand indemnify the L/C Bank against any cost, loss or liability incurred by the L/C Bank (otherwise than by reason of the L/C Bank’s gross negligence or wilful misconduct) in acting as the L/C Bank under any Documentary Credit requested by that Borrower. (b) Without limiting the obligation of the relevant Borrower under paragraph (a) above, each Indemnifying Lender shall (according to its L/C Proportion) immediately on demand indemnify the L/C Bank against any cost, loss or liability incurred by the L/C Bank (otherwise than by reason of the L/C Bank’s gross negligence or wilful misconduct) in acting as the L/C Bank under any Documentary Credit (unless the L/C Bank has been reimbursed by an Obligor pursuant to a Finance Document). 66 (c) If any Indemnifying Lender is not permitted (by its constitutional documents or any applicable Law) to comply with paragraph (b) above, then that Indemnifying Lender will not be obliged to comply with paragraph (b) and shall instead be deemed to have taken, on the date the relevant Documentary Credit is issued (or if later, on the date that Indemnifying Lender’s participation in the Documentary Credit is transferred or assigned to that Indemnifying Lender in accordance with the terms of this Agreement), an undivided interest and participation in the Documentary Credit in an amount equal to its L/C Proportion of that Documentary Credit. On receipt of demand from the Agent, that Indemnifying Lender shall pay to the Agent (for the account of the L/C Bank) an amount equal to its L/C Proportion of the amount demanded under paragraph (b) above. (d) The relevant Borrower shall immediately on demand reimburse any Indemnifying Lender for any payment it makes to the L/C Bank under this Clause 5.6 in respect of that Documentary Credit. (e) The obligations of each Indemnifying Lender under this Clause 5.6 are continuing obligations and will extend to the ultimate balance of sums payable by that Indemnifying Lender in respect of any Documentary Credit, regardless of any intermediate payment or discharge in whole or in part. (f) The obligations of any Indemnifying Lender under this Clause 5.6 will not be affected by any act, omission, matter or thing which, but for this Clause 5.6 would reduce, release or prejudice any of its obligations under this Clause 5.6 (without limitation and whether or not known to it or any other person) including: (i) any time, waiver or consent granted to, or composition with, any Obligor, any beneficiary under a Documentary Credit or other person; (ii) the release of any Obligor or any other person under the terms of any composition or arrangement with any creditor or any member of the Group; (iii) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor, any beneficiary under a Documentary Credit or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security; (iv) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor, any beneficiary under a Documentary Credit or any other person; (v) any amendment (however fundamental) or replacement of a Finance Document, any Documentary Credit or any other document or security; (vi) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document, any Documentary Credit or any other document or security; or (vii) any insolvency or similar proceedings. 67 5.7 Rights of Contribution No Obligor will be entitled to any right of contribution or indemnity from any Finance Party in respect of any payment it may make under this Clause 5 ( Documentary Credits ). 5.8 Role of the L/C Bank (a) Nothing in this Agreement constitutes the L/C Bank as a trustee or fiduciary of any other person. (b) The L/C Bank shall not be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account. (c) The L/C Bank may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group. (d) The L/C Bank may rely on: (i) any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and (ii) any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify. (e) The L/C Bank may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts. (f) The L/C Bank may act in relation to the Finance Documents through its personnel and agents. (g) The L/C Bank is not responsible for: (i) the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the L/C Bank, the Agent, the Arrangers, an Obligor or any other person given in or in connection with any Finance Document; or (ii) the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document. 5.9 Exclusion of Liability (a) Without limiting paragraph (b) below, the L/C Bank will not be liable for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct. (b) No Finance Party (other than the L/C Bank) may take any proceedings against any officer, employee or agent of the L/C Bank in respect of any claim it might have against the L/C Bank or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document. 68 5.10 Credit Appraisal by the Indemnifying Lenders Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Indemnifying Lender confirms to the L/C Bank that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of the risks arising under or in connection with any Finance Document, including but not limited to, those listed in paragraphs (a) to (d) of Clause 31.15 ( Credit Appraisal by the Lenders ). 5.11 Appointment and Change of L/C Bank (a) The Agent, with the prior approval of the relevant Lender, the Parent and an Instructing Group, may designate any Lender with a Revolving Facility Commitment as an L/C Bank or as a replacement therefor, but not with respect to Documentary Credits already issued by any other L/C Bank. (b) Any Lender so designated shall become an L/C Bank under this Agreement by delivering to the Agent an executed L/C Bank Accession Certificate. (c) An L/C Bank may resign as issuer of further Documentary Credits at any time on or after the first anniversary of the Initial Borrowing Date under this Agreement or if later, the first anniversary of the date of its appointment as L/C Bank under this Agreement by giving not less than 3 months’ prior written notice to the Agent and the Parent to expire on or after such first anniversary if (i) the Parent and an Instructing Group consent to it or so require, (ii) there is, in the reasonable opinion of the L/C Bank, an actual or potential conflict of interest in it continuing to act as L/C Bank, or (iii) its Revolving Facility Commitment is reduced to zero. (d) If the L/C Bank does so resign and no replacement is appointed, any Documentary Credit to be issued in accordance with the terms of this Agreement will be issued by the Agent on behalf of the Lenders with Revolving Facility Commitments severally in an amount reflecting their respective L/C Proportions at the date of issue thereof. 5.12 Assumption of Existing Documentary Credits Each of the Existing Documentary Credits (including any extension or renewal thereof) shall constitute a Documentary Credit issued for the purposes of Clause 4.1 ( Conditions to Utilisation ) on the Initial Borrowing Date and the respective issuer thereof shall constitute the “L/C Bank” for the purposes of this Agreement. 6. SWINGLINE FACILITIES 6.1 Conditions to Utilisation of Swingline Facilities Save as otherwise provided in this Agreement, a Swingline Facility Advance will be made by the respective Swingline Facility Lenders to a Borrower at such Borrower’s request if: (a) the Agent has received from that Borrower a duly completed Utilisation Request stating whether the proposed Swingline Facility Advance is a Dollar Swingline Facility Advance or a Euro Swingline Facility Advance: 69 (i) in the case of a Dollar Swingline Facility Advance, not later than 12.00 p.m. (New York time) on the proposed Utilisation Date for such Advance; or (ii) in the case of a Euro Swingline Facility Advance, not later than 12.00 p.m. (London time) on the proposed Utilisation Date for such Advance, receipt of which shall oblige that Borrower to borrow the amount requested on the date stated upon the terms and subject to the conditions contained in this Agreement provided that no Utilisation Request under the Swingline Facility shall be made prior to the first Utilisation Request under the Term Facilities; (b) the proposed Utilisation Date is a Business Day for the proposed Swingline Facility Advance which is or precedes the relevant Termination Date; (c) the proposed Euro Amount of such Swingline Facility Advance is (i) equal to the amount of the corresponding Available Swingline Facility or (ii) less than such amount but equal to, or an integral multiple of (A) in the case of a Dollar Swingline Advance, $100,000 and (B) in the case of a Euro Swingline Advance, €100,000; (d) the aggregate amount of Revolving Facility Outstandings and Swingline Facility Outstandings would not, immediately after making such Swingline Facility Advance, exceed the aggregate Revolving Facility Commitments of the Revolving Facility Lenders; (e) the proposed Term of the Swingline Facility Advance requested is a period not exceeding 3 months ending on or before the Final Maturity Date in respect of the Revolving Facility; (f) the Utilisation Request is sent to the Agent at the address referred to in Clause 42 ( Notices and Delivery of Information ) and confirmed by a telephone call to the telephone number referred to in Clause 42 ( Notices and Delivery of Information ); and (g) Without in any way limiting the obligation of that Borrower set out in paragraph (f) above, the Agent may act without liability upon the basis of a telephone call of such Utilisation believed by the Agent in good faith to be from an Authorised Representative of that Borrower prior to receipt of the Utilisation Request. In each such case, that Borrower hereby waives the right to dispute the Agent’s record of the terms of such telephone call in the absence of manifest error. 6.2 General Conditions to Utilisation of Swingline Facility Advances If a Borrower requests a Swingline Facility Advance in accordance with Clause 6.1 ( Conditions to Utilisation of Swingline Facilities ); and, on the proposed date for the making of such Swingline Facility Advance: (a) neither of the events mentioned in Clause 16.1 ( Market Disruption ) shall have occurred; (b) the Euro Amount of such Swingline Facility Advance does not exceed either the Available Swingline Facility or the Available Revolving Facility; 70 (c) there would not, immediately after the making of such Advance, be more than 10 Euro Swingline Facility Advances outstanding; and (d) on and as of the proposed date for the making of such Advance: (i) no Default is continuing or would result from the making of such Advance; (ii) no Lender Default exists (unless the Swingline Facility Lenders have entered into arrangements satisfactory to them to eliminate the Swingline Facility Lenders’ risk with respect to the Defaulting Lender’s or Lenders’ participation in such Swingline Facility Advance); and (iii) the Repeated Representations made by each Obligor are true in all material respects on the relevant Utilisation Date by reference to the circumstances then existing, then, save as otherwise provided herein, such Swingline Facility Advance will be made in accordance with the provisions hereof. 6.3 Completion of a Utilisation Request for Swingline Facility Advances Each Utilisation Request for a Swingline Facility Advance is irrevocable and only one Swingline Facility Advance may be requested in each Utilisation Request. 6.4 Swingline Facility Lender’s Participation (a) Each Swingline Facility Lender will participate through its Facility Office in each Swingline Facility Advance made pursuant to this Clause 6 in its respective Proportion immediately prior to the making of that Advance. (b) The Agent shall promptly notify each Swingline Facility Lender of the amount, currency and Euro Amount of each Swingline Facility Advance upon receipt of a Utilisation Request. 6.5 Reduction of Available Commitment If a Swingline Facility Lender’s Swingline Facility Commitment is reduced in accordance with the terms hereof after the Agent has received the Utilisation Request for a Swingline Facility Advance and such reduction was not taken into account in the Available Swingline Facility, then both the Euro Amount of the relevant Swingline Facility Advance and the amount of that Swingline Facility Advance made or to be made shall be reduced accordingly. 6.6 Purchase of Swingline Participations (a) On any Business Day a Swingline Lender may, in its sole discretion, by written notice given to the Agent (and to the other Swingline Facility Lenders) require the Revolving Facility Lenders to acquire participations on such Business Day in all or a portion of the Swingline Facility Outstandings. Such notice shall specify the aggregate amount of such Swingline Facility Outstandings in which the Revolving Facility Lenders will participate. Promptly upon receipt of such notice, the Agent shall give notice thereof to each Revolving Facility Lender, specifying in such notice each such Revolving Facility Lender’s Proportion of such Swingline Facility 71 Outstandings. Each Revolving Facility Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Agent for the account of the applicable Swingline Facility Lenders, such Revolving Facility Lender’s Proportion of such Swingline Facility Outstandings. (b) Each Revolving Facility Lender acknowledges and agrees that its respective obligation to acquire participations in Swingline Facility Outstandings pursuant to this Clause 6.6 is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of any Default or Event of Default or reduction or termination of the Commitments and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Revolving Facility Lender shall comply with its obligations under this Clause 6.6 by wire transfer of immediately available funds in the same manner as provided in Clause 35 ( Payments ) and the Agent shall promptly pay to the applicable Swingline Facility Lender the amount so received by it from each such Revolving Facility Lender. (c) The Agent shall promptly notify the applicable Borrower of any participations in any Swingline Facility Outstandings acquired pursuant to this Clause 6.6 and thereafter payments in respect of such Swingline Facility Outstandings shall be made to the Agent and not to the applicable Swingline Facility Lender. Any amounts received by a Swingline Facility Lender from the applicable Borrower (or other party on behalf of such Borrower) in respect of any Swingline Facility Outstandings after receipt by such Swingline Facility Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Agent; any such amounts received by the Agent shall be promptly remitted by the Agent to the Revolving Facility Lenders that shall have made their payments pursuant to this Clause 6.6 and to such Swingline Facility Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to such Swingline Facility Lender or to the Agent, as applicable, if and to the extent such payment is required to be refunded to the applicable Borrower. The purchase of participations in Swingline Facility Outstandings pursuant to this Clause 6.6 shall not relieve the applicable Borrower of any Default in the payment thereof. 6.7 Consequences of a Swingline Facility Advance not being repaid (a) If a Swingline Facility Advance is not repaid on its due date, each Revolving Facility Lender must pay to the Agent for the account of the Swingline Facility Lenders an amount calculated as described below within three Business Days of demand by the Agent. (b) The amount (if any) required to be paid by a Revolving Facility Lender is the proportion of the Swingline Facility Advance not repaid which the Revolving Facility Commitment of that Revolving Facility Lender bears to the aggregate amount of the Revolving Facility Commitments less the amount of its participation, before any adjustment under this Clause 6.7, in the unpaid amount of the Swingline Facility Advance together with any interest accrued and unpaid on that amount from the date on which such Swingline Facility Advance was made to the date of payment by that Revolving Facility Lender. If this produces a negative figure for a Revolving Facility Lender, no amount need be paid by that Revolving Facility Lender. 72 (c) On a payment under this Clause 6.7, the paying Revolving Facility Lender will be subrogated to the rights of the Swingline Facility Lenders which have shared in the payment received. (d) If and to the extent the paying Revolving Facility Lender is not able to rely on its rights under paragraph (c) above, the applicable Borrower shall be liable to the paying Revolving Facility Lender for a debt equal to the amount the paying Revolving Facility Lender has paid under this Clause 6.7 and that Borrower’s liability to the Swingline Facility Lenders will be reduced accordingly. (e) Any payment under this Clause 6.7 does not reduce the obligations in aggregate of the applicable Borrower. 7. UNCOMMITTED INCREMENTAL FACILITIES 7.1 Incremental Term Facility (a) Incremental Term Facility Commitments (i) Each Borrower shall have the right, in consultation and coordination with the Agent as to all of the matters set forth below in this Clause 7.1, but without requiring the consent of any of the Lenders, to request at any time and from time to time after the Syndication Date and prior to the relevant Termination Date for the respective Tranche of Incremental Term Facility Advances that one or more Lenders or one or more Eligible Institutions provide to such Borrower Incremental Term Facility Commitments under such Tranche of Incremental Term Facility as designated in the respective Incremental Term Facility Commitment Agreement and, subject to the terms and conditions contained in this Agreement and in the respective Incremental Term Facility Commitment Agreement, make Incremental Term Facility Advances pursuant thereto, so long as: (A) no Default or Event of Default then exists or would result therefrom and all of the Repeating Representations contained herein and in the other Finance Documents are true and correct in all material respects at such time (unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); (B) the Existing Borrower and its Subsidiaries will be in compliance with Clause 24 ( Financial Condition ) on a Pro Forma Basis after giving effect to each incurrence of Incremental Term Facility Advances and the application of the proceeds therefrom; and (C) on or before the date of each Incremental Term Facility Commitment Agreement, the Existing Borrower shall have delivered to the Agent a certificate of the Authorised Representative of the Existing Borrower certifying (A) which provisions (if any) of the Permitted Subordinated Indebtedness Documents the respective incurrence of Incremental Term Facility Advances will be allowed under and demonstrating in reasonable detail that the full amount of such Incremental Term 73 Facility Advances may be incurred in accordance with, and will not violate the provisions of, the Permitted Subordinated Indebtedness Document, (B) the ratio of Senior Indebtedness to Consolidated EBITDA is less than 3.00:1.00 (based on the most recently delivered Compliance Certificate in accordance with paragraph (d) ( Officer’s Certificates ) of Clause 23.1 ( Information Covenants )) and (C) the purpose of the use of the proceeds of such Tranche of Incremental Term Facility. (ii) Furthermore, it is understood and agreed that: (A) no Lender shall be obligated to provide an Incremental Term Facility Commitment, and until such time, if any, as such Lender has agreed in its sole discretion to provide an Incremental Term Facility Commitment and executed and delivered to that Borrower and the Agent an Incremental Term Facility Commitment Agreement as provided in paragraph (b) ( Incremental Term Facility Commitment Agreement ) of this Clause 7.1, such Lender shall not be obligated to fund any Incremental Term Facility Advances; (B) any Lender (including Eligible Institutions) may so provide an Incremental Term Facility Commitment without the consent of the Agent or any other Lender; (C) each Tranche of Incremental Term Facility Commitments shall be made available to the Borrowers; (D) the amount of each Tranche of Incremental Term Facility Commitments shall be in a minimum aggregate amount for all Lenders which provide an Incremental Term Facility Commitment under such Tranche of Incremental Term Facility Advances of at least $50,000,000 (or the Euro Amount thereof as determined at the time that Incremental Term Facility Commitments are obtained); (E) the aggregate amount of all Incremental Term Facility Commitments permitted to be provided pursuant to this Clause 7.1 shall not exceed $500,000,000 (excluding all amounts borrowed prior to the Fifth Amendment and Restatement Effective Date (or the Euro Amount thereof as determined at the time that such Incremental Term Facility Commitments are obtained) (it being understood and agreed, however , to the extent that any such Incremental Term Facility Commitments are obtained but later expire, terminate or are voluntarily reduced in each case without being utilised, the amount of such Incremental Term Facility Commitments so expired, terminated or voluntarily reduced may again be available to be obtained under this Clause 7.1 within the limits set forth herein); (F) the up-front fees and, if applicable, any unutilised commitment fees and/or other fees, payable in respect of each Incremental Term Facility Commitment shall be separately agreed to by each relevant Borrower and each Incremental Term Facility Lender; 74 (G) each Tranche of the Incremental Term Facility shall have (i) a Final Maturity Date of no earlier than the Final Maturity Date of the D Facilities and (ii) a Weighted Average Life to Maturity of no less than the Weighted Average Life to Maturity as then remaining for the D Facilities; (H) any Incremental Term Facility Advance being incurred under any single Incremental Term Facility Commitment Agreement shall be used for Permitted Acquisitions and/or the redemption or repurchase of the Senior Subordinated Notes or New Senior Subordinated Notes (including, without limitation, any related redemption or repurchase fees). The date of the consummation of a Permitted Acquisition (as well as the date on which any Indebtedness assumed as part of such Permitted Acquisition is to be refinanced) or, as the case may be, the date of the redemption of the Senior Subordinated Notes or New Senior Subordinated Notes being prepaid with the proceeds of such Incremental Term Facility Advance, shall occur no later than 10 Business Days after the date of the incurrence of such Incremental Term Facility Advance; (I) each Incremental Term Facility Commitment Agreement shall specifically designate, with the approval of the Agent, that the Tranche of the Incremental Term Facility Commitments being provided thereunder shall be a new Tranche which shall exist separately from any existing Tranche of the Incremental Term Facility, Incremental Term Facility Commitments or other Term Facility Advance, unless the requirements of paragraph (c) ( Constitution of each Tranche of Incremental Term Facility ) of this Clause 7.1 are satisfied in which case such Tranche shall be added on to an existing Tranche of the Incremental Term Facility (or Incremental Term Facility Commitments) or another D Facility Advance in accordance with paragraph (c) ( Constitution of each Tranche of Incremental Term Facility ) of this Clause 7.1; (J) all Incremental Term Facility Advances (and all interest, fees and other amounts payable thereon) shall be obligations under this Agreement and the other applicable Finance Documents and shall be secured by the Security Documents, on a pari passu basis with all other Term Facility Outstandings; and (K) each Lender agreeing to provide an Incremental Term Facility Commitment pursuant to an Incremental Term Facility Commitment Agreement shall, subject to the satisfaction of the relevant conditions set forth in this Agreement, make Incremental Term Facility Advances under the Tranche specified in such Incremental Term Facility Commitment Agreement as provided in Clause 4.2 ( Conditions to Utilisation of Incremental Term Facility ) and such Advances shall thereafter be deemed to be Incremental Term Facility Advances under such Tranche for all purposes of this Agreement and the other applicable Finance Documents. 75 (b) Incremental Term Facility Commitment Agreement At the time of the provision of Incremental Term Facility Commitments pursuant to this Clause 7, the relevant Borrowers, each other Obligor, the Agent and each such Lender or other Eligible Institution which agrees to provide an Incremental Term Facility Commitment (each, an “ Incremental Term Facility Lender ”) shall execute and deliver to the relevant Borrower(s) and the Agent an Incremental Term Facility Commitment Agreement, appropriately completed (with the effectiveness of the Incremental Term Facility Commitment provided therein to occur on the date set forth in such Incremental Term Facility Commitment Agreement, which date in any event shall be no earlier than the date on which all fees required to be paid in connection therewith at the time of such effectiveness shall have been paid, all conditions set forth in this Clause 7 shall have been satisfied and all other conditions precedent that may be set forth in such Incremental Term Facility Commitment Agreement shall have been satisfied). In addition on or prior to the effective date of the respective Incremental Term Facility Commitment Agreement: (i) the Parent, the Borrowers and their Subsidiaries shall have delivered such technical amendments, modifications and/or supplements to the respective Security Documents as are reasonably requested by the Agent to ensure that the additional Facilities Obligations to be incurred pursuant to the Incremental Term Facility Commitments are secured by, and entitled to the benefits of, the Security Documents (to the extent required by the terms of this Agreement), and each of the Lenders hereby agrees to, and authorises the Security Trustee to enter into, any such technical amendments, modifications and/or supplements; (ii) the Agent shall have received an opinion or opinions, in form and substance reasonably satisfactory to the Agent, from counsel reasonably satisfactory to the Agent and dated such date, covering such of the matters set forth in the opinions of counsel delivered to the Agent on the Initial Borrowing Date pursuant to Clause 3.1 ( Conditions Precedent ) as may be reasonably requested by the Agent, and such other matters incident to the transactions contemplated thereby as the Agent may reasonably request; (iii) the relevant Borrower(s) and the other Obligors shall have delivered to the Agent such other officers’ certificates, resolutions and evidence of good standing as the Agent shall reasonably request; and (iv) in addition to the applicable conditions precedent set forth in Part I of Schedule 3 ( Conditions Precedent to First Utilisation ), the Agent shall have received from the Authorised Representative of each relevant Borrower a certificate certifying that the conditions set forth in paragraphs (a)(i)(A), (B) and (C) of Clause 7.1 ( Incremental Term Facility ) have been satisfied (together with calculations demonstrating same (where applicable) in reasonable detail and copies of the certificate set forth in such paragraph (a)(i)(C)) of Clause 7.1 ( Incremental Term Facility ). The Agent shall promptly notify each Lender as to the effectiveness of each Incremental Term Facility Commitment Agreement and, at such time, Part I of 76 Schedule 1 ( Lenders and Commitments ) shall be deemed modified to reflect the Incremental Term Facility Commitments of such Incremental Term Facility Lenders. (c) Constitution of each Tranche of Incremental Term Facility Notwithstanding anything to the contrary contained above in this Clause 7.1, the Incremental Term Facility Commitments provided by an Incremental Term Facility Lender or Incremental Term Facility Lenders, as the case may be, pursuant to each Incremental Term Facility Commitment Agreement shall constitute a new Tranche, which shall be separate and distinct from the existing Tranches pursuant to this Agreement provided that, with the consent of the Agent, the parties to a given Incremental Term Facility Commitment Agreement may specify therein that the respective Incremental Term Facility Advance made pursuant thereto shall constitute part of, and be added to, an existing Tranche of Incremental Term Facility Advances or to the D1 Facility Advances or D2 Facility Advances, in either case so long as the following requirements are satisfied: (i) the Incremental Term Facility Advances to be made pursuant to such Incremental Term Facility Commitment Agreement shall be made to the same Borrowers, shall be denominated in the same currency, shall have the same Final Maturity Date and shall have the same Applicable Margins as the Facility to which the new Incremental Term Facility Advances are being added; (ii) the new Incremental Term Facility Advances shall have the same scheduled repayment dates as then remain with respect to the Tranche to which such new Incremental Term Facility Advances are being added (with the amount of each repayment applicable to such new Incremental Term Facility Advances to be the same (on a proportionate basis) as is theretofore applicable to the Tranche to which such new Incremental Term Facility Advances are being added, thereby increasing the amount of each then remaining repayment of the respective Tranche proportionately); and (iii) on the date of the making of such new Incremental Term Facility Advances, and notwithstanding anything to the contrary set forth in Clause 15 ( Interest on Term Facility Advances ), such new Incremental Term Facility Advance shall be added to (and form part of) the Term Facility Outstandings of the respective Tranche on a pro rata basis (based on the relative sizes of the various Term Facility Outstandings), so that each Lender will participate proportionately in each then Term Facility Outstandings of the respective Tranche, and so that the existing Lenders with respect to such Tranche continue to have the same participation (by amount) in each borrowing as they had before the making of the new Incremental Term Facility Advances of such Tranche. 7.2 Incremental Revolving Facility (a) Incremental Revolving Facility Commitments (i) Each Borrower shall have the right, in consultation and coordination with the Agent as to all of the matters set forth below in this Clause 7.2, but without requiring the consent of any of the Lenders, to request at any time and from 77 time to time after the Syndication Date and prior to the Termination Date for the Incremental Revolving Facility that one or more Lenders or one or more Eligible Institutions provide to the Borrowers Incremental Revolving Facility Commitments under the Incremental Revolving Facility as designated in the respective Incremental Revolving Facility Commitment Agreement and, subject to the terms and conditions contained in this Agreement and in the respective Incremental Revolving Facility Commitment Agreement, make Utilisations pursuant thereto, so long as no Default or Event of Default then exists or would result therefrom and all of the Repeating Representations contained herein and in the other Finance Documents are true and correct in all material respects at such time (unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date). (ii) Furthermore, it is understood and agreed that: (A) no Lender shall be obligated to provide an Incremental Revolving Facility Commitment, and until such time, if any, as such Lender has agreed in its sole discretion to provide an Incremental Revolving Facility Commitment and executed and delivered to the relevant Borrowers and the Agent an Incremental Revolving Facility Commitment Agreement as provided in paragraph (b) ( Incremental Revolving Facility Commitment Agreement ) of this Clause 7.2, such Lender shall not be obligated to provide any Incremental Revolving Facility; (B) any Lender (including Eligible Institutions) may so provide an Incremental Revolving Facility Commitment without the consent of the Agent or any other Lender; (C) each of the Incremental Revolving Facility Commitments shall be made available to the relevant Borrowers; (D) each provision of Incremental Revolving Facility Commitments shall be in a minimum aggregate amount for all Lenders of €10,000,000 and in integral multiples of €5,000,000; (E) the aggregate amount of all Incremental Revolving Facility Commitments permitted to be provided pursuant to this Clause 7.2 shall not exceed €65,000,000; (F) the up-front fees and, if applicable, any unutilised commitment fees and/or other fees, payable in respect of each Incremental Revolving Facility Commitment shall be separately agreed to by each relevant Borrower and each Incremental Revolving Facility Lender; and (G) all Utilisations under the Incremental Revolving Facility Commitments (and all interest, fees and other amounts payable thereon) shall be Facilities Obligations under this Agreement and the other applicable Finance Documents and shall be secured by the Security Documents, on a pari passu basis with all other Revolving Facility Outstandings. 78 (b) Incremental Revolving Facility Commitment Agreement At the time of the provision of Incremental Revolving Facility Commitments pursuant to this Clause 7, the relevant Borrowers, each other Obligor, the Agent and each such Lender or other Eligible Institution which agrees to provide an Incremental Revolving Facility Commitment (each, an “ Incremental Revolving Facility Lender ”) shall execute and deliver to the relevant Borrowers and the Agent an Incremental Revolving Facility Commitment Agreement, appropriately completed (with the effectiveness of the Incremental Revolving Facility Commitment provided therein to occur on the date set forth in such Incremental Revolving Facility Commitment Agreement, which date in any event shall be no earlier than the date on which all fees required to be paid in connection therewith at the time of such effectiveness shall have been paid, all conditions set forth in this Clause 7.2 shall have been satisfied and all other conditions precedent that may be set forth in such Incremental Revolving Facility Commitment Agreement shall have been satisfied). The Agent shall promptly notify each Lender as to the effectiveness of each Incremental Revolving Facility Commitment Agreement and at such time, (i) the Revolving Facility shall be increased by the aggregate amount of such Incremental Revolving Facility Commitments, (ii) Section A of Part I of Schedule 1 ( Lenders and Commitments ) shall be deemed modified to reflect the revised Revolving Facility Lenders. In addition on or prior to the effective date of the respective Incremental Revolving Facility Commitment Agreement: (i) the Parent, the Borrowers and their Subsidiaries shall have delivered such technical amendments, modifications and/or supplements to the respective Security Documents as are reasonably requested by the Agent to ensure that the additional Facilities Obligations to be incurred pursuant to the Incremental Revolving Facility Commitments are secured by, and entitled to the benefits of, the Security Documents (to the extent required by the terms of this Agreement), and each of the Lenders hereby agrees to, and authorises the Security Trustee to enter into, any such technical amendments, modifications and/or supplements; (ii) the Agent shall have received an opinion or opinions, in form and substance reasonably satisfactory to the Agent, from counsel reasonably satisfactory to the Agent and dated such date, covering such of the matters set forth in the opinions of counsel delivered to the Agent on the Initial Borrowing Date pursuant to Clause 3.1 ( Conditions Precedent ) as may be reasonably requested by the Agent, and such other matters incident to the transactions contemplated thereby as the Agent may reasonably request; (iii) each relevant Borrower and the other Obligors shall have delivered to the Agent such other officers’ certificates, resolutions and evidence of good standing as the Agent shall reasonably request; and (iv) in addition to the applicable conditions precedent set forth in Part I of Schedule 3 ( Conditions Precedent to First Utilisation ), the Agent shall have received from the Authorised Representative of the Existing Borrower a certificate certifying that the conditions set forth in paragraphs (a)(i) ( Incremental Revolving Facility Commitments ) of this Clause 7.2 have been satisfied. 79 (c) Constitution of Incremental Revolving Facility At the time of any provision of Incremental Revolving Facility Commitments pursuant to this Clause 7.2, the relevant Borrowers shall, in coordination with the Agent, repay outstanding Revolving Facility Advances of certain of the Revolving Facility Lenders, and incur additional Revolving Facility Advances from certain other Revolving Facility Lenders (including the Incremental Revolving Facility Lenders), in each case to the extent necessary so that all of the Revolving Facility Lenders participate in each Utilisation under the Revolving Facility pro rata on the basis of their respective Revolving Facility Commitments (after giving effect to any increase in the Revolving Facility pursuant to this Clause 7.2 and with such Borrowers being obligated to pay to the respective Revolving Facility Lenders any costs of the type referred to in Clause 33 ( Borrower’s Indemnities ) in connection with any such repayment and/or Utilisation. 8. OPTIONAL CURRENCIES 8.1 Selection of Currency A Borrower (or the Parent on its behalf) shall select the currency of an Advance made to it (which shall be euro or an Optional Currency) in the Utilisation Request relating to the relevant Advance provided that an A Facility Advance shall be made in euro, a D1 Facility Advance shall be made in dollars and a D2 Facility Advance shall be made in euro. 8.2 No Change of Currency Once utilised, no Term Facility Advance shall be outstanding in any currency other than the currency in which it was first utilised. 9. REPAYMENT OF REVOLVING AND SWINGLINE FACILITY OUTSTANDINGS 9.1 Repayment of Revolving Facility Advances Each Borrower shall (subject to Clause 9.2 ( Rollover Advances )) repay the full amount of each Revolving Facility Advance and Swingline Facility Advance made to it on the Repayment Date, provided that if such Repayment Date is not a Business Day in the relevant jurisdiction for payment, payment shall instead be made on the next succeeding Business Day. 9.2 Rollover Advances Without prejudice to a Borrower’s obligation to repay the full amount of each Revolving Facility Advance on the applicable Repayment Date, where, on the same day on which that Borrower is due to repay a Revolving Facility Advance (a “ Maturing Advance ”) that Borrower has also requested that a Revolving Facility Advance in the same currency as the Maturing Advance be made to it (a “ Rollover Advance ”), subject to the Lenders being obliged to make such Rollover Advance under Clause 4.1 ( Conditions to Utilisation ), the amount to be so repaid and the amount to be so drawn down shall be netted off against each other so that the amount which that Borrower is actually required to repay or, as the case may be, the amount which the Lenders are actually required to advance to that Borrower, shall be the net amount remaining after such netting off provided that such Borrower shall not be 80 permitted to rollover any Advances denominated in an Optional Currency to the extent that such Advance, when notionally converted into euros at the Agent’s Spot Rate of Exchange on the Quotation Date for the next Term and aggregated with the Euro Amount of all other Revolving Facility Outstandings would result in the aggregate amount of all Revolving Commitments being exceeded by an amount greater than 5 per cent. 9.3 Cash Collateralisation of Documentary Credits In relation to any unexpired Documentary Credit, a Borrower may give the Agent not less than 3 Business Days’ prior written notice of its intention to repay a Documentary Credit issued to it, and, having given such notice, shall procure that the relevant Outstanding L/C Amount in respect of such Documentary Credit is reduced to zero and repaid in full by providing cash cover therefor (in accordance with Clause 5 ( Documentary Credits )) or by reducing the Outstanding L/C Amount of such Documentary Credit or by cancelling such Documentary Credit and returning the original to the L/C Bank or the Agent on behalf of the Lenders. 10. REPAYMENT OF TERM FACILITY OUTSTANDINGS 10.1 Repayment of A Facility Outstandings The Existing Borrower shall make such repayments as may be necessary to ensure that on each of the dates set out in the table below (each an “ A Facility Repayment Date ”) the aggregate Euro Amount of the A Facility Outstandings (as at the close of business in London on the Termination Date relating to the A Facility) is reduced by an amount equal to the percentage of such A Facility Outstandings set out in the table below provided that the final Repayment Date shall be the Final Maturity Date for the A Facility and the aggregate amount of all A Facility Outstandings shall be repayable on such A Facility Repayment Date. Repayment Dates Percentage of A Facility Outstandings Repayable 31 March 2004 1.625 per cent. 30 June 2004 1.625 per cent. 30 September 2004 1.625 per cent. 31 December 2004 1.625 per cent. 31 March 2005 3.375 per cent. 30 June 2005 3.375 per cent. 30 September 2005 3.375 per cent. 31 December 2005 3.375 per cent. 31 March 2006 3.375 per cent. 30 June 2006 3.375 per cent. 81 Repayment Dates Percentage of A Facility Outstandings Repayable 30 September 2006 3.375 per cent. 31 December 2006 3.375 per cent. 31 March 2007 5.5 per cent. 30 June 2007 5.5 per cent. 30 September 2007 5.5 per cent. 31 December 2007 5.5 per cent. 31 March 2008 5.5 per cent. 30 June 2008 5.5 per cent. 30 September 2008 5.5 per cent. 31 December 2008 5.5 per cent. 31 March 2009 5.625 per cent. 30 June 2009 5.625 per cent. 30 September 2009 5.625 per cent. 31 December 2009 5.625 per cent. Provided that in the event the Senior Subordinated Notes are not Refinanced on or before 1 November 2008, the Final Maturity Date with respect to the A Facility shall be 1 May 2009 and on and from 1 November 2008 the A Facility Repayment Dates and the percentage of the A Facility Outstandings payable on such dates shall be as follows: Repayment Dates Percentage of A Facility Outstandings 31 December 2008 9.00 per cent. 31 March 2009 9.00 per cent. 1 May 2009 10.2 [Intentionally deleted] 10.3 Repayment of D Facility Outstandings 10 per cent. The Existing Borrower shall make such repayments as may be necessary to ensure that on each of the dates set out in the table below (each a “ D Facilities Repayment Date ”) the aggregate Euro Amounts of the D1 Facility Outstandings and the D2 Facility Outstandings are each reduced by an amount equal to the percentage set out in the table below of the amounts which constituted D1 Facility Outstandings and D2 Facility Outstandings (or their 82 equivalent under Facilities that were converted into the D1 Facility and the D2 Facility on the Fifth Amendment and Restatement Date) (as applicable) on 29 September 2004, provided that the final Repayment Date shall be the Final Maturity Date for the D Facilities and the aggregate amount of all D Facility Outstandings shall be repayable on such D Facilities Repayment Date. Repayment Dates Percentage of D Facility Outstandings Repayable 30 September 2004 0.25 per cent. 31 December 2004 0.25 per cent. 31 March 2005 0.25 per cent. 30 June 2005 0.25 per cent. 30 September 2005 0.25 per cent. 31 December 2005 0.25 per cent. 31 March 2006 0.25 per cent. 30 June 2006 0.25 per cent. 30 September 2006 0.25 per cent. 31 December 2006 0.25 per cent. 31 March 2007 0.25 per cent. 30 June 2007 0.25 per cent. 30 September 2007 0.25 per cent. 31 December 2007 0.25 per cent. 31 March 2008 0.25 per cent. 30 June 2008 0.25 per cent. 30 September 2008 0.25 per cent. 31 December 2008 0.25 per cent. 31 March 2009 0.25 per cent. 30 June 2009 0.25 per cent. 30 September 2009 0.25 per cent. 31 December 2009 0.25 per cent. 83 Repayment Dates Percentage of D Facility Outstandings Repayable 31 March 2010 23.50 per cent. 30 June 2010 23.50 per cent. 30 September 2010 23.50 per cent. 31 December 2010 24.00 per cent. Provided that, in the event that the 12 1/4 per cent. Senior Subordinated Notes due 2009 are not Refinanced on or before 1 November 2008, the Final Maturity Date with respect to the D Facilities shall be 1 May 2009 and on and from 1 November 2008 the D Facilities Repayment Dates and the percentage of the D1 Facility Outstandings and D2 Facility Outstandings payable on such dates shall be as follows: Repayment Dates Percentage of D Facility Outstandings 31 December 2008 0.25 per cent. 31 March 2009 47.75 per cent. 1 May 2009 47.75 per cent. 10.4 Repayment of the Anton Acquisition Funds The relevant Borrower(s) shall make such repayments as may be necessary to ensure that on each of the dates set out in the table below (each an “ Anton Acquisition Funds Repayment Date ”) the aggregate amount of the Advance actually drawn down from the Anton Acquisition Funds is reduced by an amount equal to the percentage set out in the table below provided that the final Repayment Date shall be the Final Maturity Date for the D1 Facility and the aggregate amount of the Anton Acquisition Funds shall be repayable on such Anton Acquisition Funds Repayment Date. Repayment Dates Percentage of Anton Acquisition Funds 31 March 2007 0.25 per cent. 30 June 2007 0.25 per cent. 30 September 2007 0.25 per cent. 31 December 2007 0.25 per cent. 31 March 2008 0.25 per cent. 30 June 2008 0.25 per cent. 30 September 2008 0.25 per cent. 31 December 2008 0.25 per cent. 84 Repayment Dates Percentage of Anton Acquisition Funds 31 March 2009 0.25 per cent. 30 June 2009 0.25 per cent. 30 September 2009 0.25 per cent. 31 December 2009 0.25 per cent. 31 December 2010 97 per cent. 10.5 Repayment of Incremental Term Facility Outstandings The relevant Borrower shall be required to make, with respect to each Tranche of Incremental Term Facility Advances, to the extent then outstanding, scheduled amortisation payments of such Tranche of Incremental Term Facility Advances on the dates (the “ Incremental Term Facility Repayment Dates ”) and in the principal amounts set forth in the respective Incremental Term Facility Commitment Agreement (each such repayment, as the same may be reduced as provided in Clauses 12 ( Voluntary Prepayment ) and 13 ( Mandatory Prepayment ), an “ Incremental Term Facility Scheduled Repayment ”). 10.6 No Reborrowing of Term Facility Advances No Borrower may reborrow any part of any Term Facility which is repaid. 11. CANCELLATION 11.1 Voluntary Cancellation (a) Subject to Clause 11.2 ( Restriction ), a Borrower may, by giving to the Agent not less than 3 Business Days’ prior written notice to that effect, cancel the whole or any part (being a minimum amount of €1,000,000 and an integral multiple of €1,000,000) of any Available Facility and any such cancellation shall permanently reduce the relevant Available Commitments of the Lenders proportionately. (b) In the event of certain refusals by a Lender as provided in Clause 45.7 ( Replacement of non-Instructing Group Lender ) to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Instructing Group, a Borrower may, subject to the applicable requirements of Clause 45.7 ( Replacement of non-Instructing Group Lender ), upon five Business Days’ written notice by that Borrower to the Agent (which notice the Agent shall promptly transmit to each of the Lenders) terminate all or, as the case may be, any Commitment, if any, of such Lender, so long as: (i) the Outstandings with respect to such Commitment being cancelled, together with accrued and unpaid interest, fees and all other amounts, owing to such Lender (excluding amounts owing in respect of Outstandings of any other Facility maintained by such Lender which are not being repaid pursuant to Clause 45.7 ( Replacement of non-Instructing Group Lender )) are repaid 85 concurrently with the effectiveness of such termination (at which time Part I of Schedule 1 ( Lenders and Commitments ) shall be deemed modified to reflect such changed amounts); and (ii) after giving effect to such termination (and other adjustments to each Lender’s Proportion of the Revolving Facility Commitment and/or related L/C Proportion of the remaining Lenders as contemplated below), none of the Revolving Facility Outstandings of any remaining Lender shall exceed its Revolving Facility Commitment. (c) After giving effect to the termination of the Commitments of any Lender pursuant to the provisions of paragraph (b) above, unless the respective Lender continues to have Term Facility Outstandings or other Commitments (if any) hereunder, such Lender shall no longer constitute a “Lender” for purposes of this Agreement, except with respect to indemnifications under this Agreement (including, without limitation, Clauses 18 ( Taxes ), 19 ( Increased Costs ), 33 ( Borrower’s Indemnities ), 37 ( Sharing Among the Finance Parties ) and 40 ( Costs and Expenses )), which shall survive as to such repaid Lender. (d) Immediately after the Revolving Facility Commitment of any Lender is terminated pursuant to paragraph (b) above, there shall occur automatic consequential adjustments (as determined by the Agent) in each Lender’s Proportion of Revolving Facility Commitments (and as a result thereof in the related L/C Proportions) of the remaining Revolving Facility Lenders. 11.2 Restriction The Borrowers may not give a notice of cancellation pursuant to Clause 11.1 ( Voluntary Cancellation ) in respect of any amount of the Available Term Facilities required to refinance, in full, the Existing Credit Agreement. 11.3 Notice of Cancellation Any notice of cancellation given by any of the Borrowers pursuant to Clause 11.1 ( Voluntary Cancellation ) shall be irrevocable and shall specify the date upon which such cancellation is to be made and the amount of such cancellation. 11.4 Cancellation of Available Commitments On each Termination Date any Available Commitments in respect of the Facility to which such Termination Date relates shall automatically be cancelled and the Commitment of each Lender in relation to such Facility shall automatically be reduced to zero. 12. VOLUNTARY PREPAYMENT 12.1 Voluntary Prepayment (a) Each Borrower shall, if it (or the Parent on its behalf) has given to the Agent not less than 3 Business Days’ prior written notice to that effect, repay an Advance in whole or in part (but if in part, in an amount that reduces the Euro Amount of the relevant Advance by a minimum amount of €1,000,000 and an integral multiple of 86 € 1,000,000) together with accrued interest on the amount repaid without premium or penalty but subject to the payment of any Break Costs. (b) 12.2 In the event of certain refusals by a Lender as provided in Clause 45.7 ( Replacement of non-Instructing Group Lender ) to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Instructing Group, the relevant Borrower may, upon five Business Days’ written notice by an Authorised Representative of that Borrower to the Agent (which notice the Agent shall promptly transmit to each of the Lenders) repay all Outstandings, together with accrued and unpaid interest, fees, and other amounts owing to such Lender (or owing to such Lender with respect to each Facility which gave rise to the need to obtain such Lender’s individual consent) in accordance with, and subject to the requirements of, Clause 45.7 ( Replacement of non-Instructing Group Lender ) so long as: (i) in the case of the repayment of Revolving Facility Outstandings of any Lender pursuant to this paragraph (b), the Revolving Facility Commitment of such Lender (if any), is terminated concurrently with such repayment (at which time Part I of Schedule 1 ( Lenders and Commitments ) shall be deemed modified to reflect the changed Revolving Facility Commitments); and (ii) in the case of the repayment of any Term Facility Outstandings of any Lender pursuant to this paragraph (b), the Term Facility Commitment of such Lender (if any) is terminated concurrently with such repayment (at which time Part I of Schedule 1 ( Lenders and Commitments ) shall be deemed modified to reflect the changed Term Facility Commitments). Right of Prepayment and Cancellation in relation to a single Lender If any Lender is owed any amounts as set out in paragraph (b) of Clause 21.1 ( Replacement of Lenders ), the Borrowers shall have the rights as set out in Clause 21.1 ( Replacement of Lenders ). 12.3 Application of Voluntary Prepayments (a) Order of Application : Any repayment made pursuant to paragraph (a) of Clause 12.1 ( Voluntary Prepayment ) in respect of a Term Facility Advance shall, subject to the provisions of paragraph (b) ( Waivable Voluntary Repayment ) of this Clause 12.3, be applied either: (i) to the prepayment of A Facility Advances, D1 Facility Advances, D2 Facility Advances and any Incremental Term Facility Advances pro rata to the respective Term Facility Outstandings; in relation to each Facility such prepayment shall be applied against all remaining Scheduled Repayments of such Facility pro rata to the respective amounts of such Scheduled Repayments; or (ii) if the Borrowers so elect, in the following order: (A) first to the prepayment, in direct order of maturity, of Scheduled Repayments of Term Facilities which will be due within 15 months 87 after the date of the respective voluntary prepayment, applied in respect of each Scheduled Repayment Date to repay in full all Scheduled Repayments of all Term Facilities due on such Scheduled Repayment Date or, if the prepayment is insufficient to make such repayment in full in respect of a Scheduled Repayment Date, to the Scheduled Repayments for each Facility due on such Scheduled Prepayment Date pro rata to the relative amounts of such Scheduled Repayments; and (B) (b) second, to the prepayment of A Facility Advances, D1 Facility Advances, D2 Facility Advances and any Incremental Term Facility Advances pro rata to the relevant Term Facility Outstandings (as reduced by the prepayments referred to in paragraph (A) above); in relation to each Facility such prepayment shall be applied against all remaining Scheduled Repayments of such Facility pro rata to the respective amounts of such Scheduled Repayments. Waivable Voluntary Repayment : In relation to any repayment made pursuant to Clause 12.1 ( Voluntary Prepayment ) in respect of a Term Facility Advance and without prejudice to paragraph (a) above, which is required to be applied to D Facility Advances, if on or prior to the date of the respective voluntary repayment pursuant to this Clause 12, the Existing Borrower has given the Agent written notification that it has elected to give each Lender with D Facility Outstandings the right to waive such Lender’s rights to receive such repayment (the “ Waivable Voluntary Repayment ”) the Agent shall notify such Lenders of such receipt and the amount of the repayments to be applied to each such Lender’s Proportion of D Facility Outstandings, provided that in no event shall the aggregate amount of any Waivable Voluntary Repayment exceed the aggregate principal amount of Term Facility Outstandings (excluding D Facility Outstandings) after giving effect to any applications of payments (other than any reallocation of the respective Waivable Voluntary Repayment pursuant to this sub-paragraph (b)) to such other Term Facility Outstandings as a result of the repayments then being made pursuant to this Clause 12. Waive Mechanics : In the event any Lender with D Facility Outstandings desires to waive its right to receive any such Waivable Voluntary Repayment in whole or in part, such Lender shall so advise the Agent no later than 5:00 p.m. five Business Days after the date of such notice from the Agent which notice shall also include the amount the Lender desires to receive with respect to its D Facility Outstandings. If the Lender does not reply to the Agent within such five Business Day period, it will be deemed acceptance of the total payment. If the Lender does not specify an amount it wishes to receive, it will be deemed acceptance of 100 per cent. of the total payment. In the event that any such Lender waives its rights to any such Waivable Voluntary Repayment, the Agent shall apply 100 per cent. of the amount so waived by such Lenders to: (x) repay the Term Facility Outstandings (excluding the D Facility Outstandings) in accordance with sub-paragraph (a) above; and (y) to the extent in excess of the amount to be applied pursuant to preceding clause (x), to reduce the Available Revolving Facility on a pro rata basis based on the relative amounts of the Available Revolving Facility and the 88 Revolving Facility Outstandings (in each case as in effect before giving effect to such reduction). Cash Collateral : If the Existing Borrower elects to give the notice described above in this sub-paragraph (b) with respect to any voluntary repayment, the amount of the respective Waivable Voluntary Repayment shall be deposited with the Agent on the date the voluntary repayment is otherwise made pursuant to sub-paragraph (a) above (and held by the Agent as cash collateral for the D Facility Outstandings and, but only to the extent Lenders with D Facility Outstandings waive their right to receive their share of the Waivable Voluntary Repayment, for the benefit of all Lenders in a cash collateral account which shall permit the investment thereof in Cash Equivalents reasonably satisfactory to the Agent until the proceeds are applied to the applicable Outstandings) and the respective repayment shall not be required to be made until the seventh Business Day occurring after the date the respective repayment would otherwise have been required to be made. Partial Waiver of Repayment : Notwithstanding anything to the contrary contained above, if one or more Lenders holding D Facility Outstandings waives its right to receive all or any part of any Waivable Voluntary Repayment, but less than all the Lenders holding the respective D Facility Outstandings waive in full their right to receive 100 per cent. of the total payment otherwise required with respect to the respective D Facility Outstandings, then of the amount actually applied to the repayment of the respective D Facility Outstandings of Lenders which have waived in part, but not in full, their right to receive 100 per cent. of such repayment, such amount shall be applied to each D Facility Advance of the respective D Facility Outstandings on a pro rata basis (so that each Lender holding D Facility Outstandings shall, after giving effect to the application of the respective repayment, maintain the same percentage (as determined for such Lender, but not the same percentage as the other Lenders hold and not the same percentage held by such Lender prior to repayment) of each D Facility Advance which remains outstanding after giving effect to such application). For the avoidance of doubt any amount to be applied in accordance with this paragraph shall only apply to such portion (if any) of the D Facility Outstandings which such D Facility Lender has not waived. 12.4 Release from Obligation to make Advances A Lender for whose account a repayment is to be made under Clause 12.2 ( Right of Prepayment and Cancellation in relation to a single Lender) shall not be obliged to participate in the making of Advances (including Revolving Facility Advances) or in the issue or counter-guarantee in respect of Documentary Credits on or after the date upon which the Agent receives the relevant notice of intention to repay such Lender’s share of the Outstandings, on which date all of such Lender’s Available Commitments shall be cancelled and all of its Commitments shall be reduced to zero. 12.5 Notice of Repayment Any notice of repayment given by the Borrowers or the Parent, as the case may be, pursuant to Clauses 12.1 ( Voluntary Prepayment ) or 12.2 ( Right of Prepayment and Cancellation in relation to a single Lender ) shall be irrevocable, shall specify the date upon which such repayment is to be made and the amount of such repayment and shall oblige that Borrower to make such repayment on such date. 89 12.6 Restrictions on Repayment No Obligor shall repay all or any part of any Advance (including, at any time, a Revolving Facility Advance) except at the times and in the manner expressly provided for in this Agreement. 12.7 Cancellation upon Repayment No amount repaid under this Agreement may subsequently be reborrowed other than any amount of a Revolving Facility Advance or, as the case may be, a Swingline Facility Advance repaid in accordance with Clause 9.1 ( Repayment of Revolving Facility Advances ) and upon any repayment (other than in respect of a Revolving Facility Advance, as aforesaid) the availability of the relevant Facility shall be reduced by an amount corresponding to the amount of such repayment and the Available Commitment of each Lender in relation to that Facility shall be cancelled in an amount equal to such Lender’s Proportion of the amount repaid. In the event the proceeds of any repayment applied in accordance with Clauses 12 ( Voluntary Prepayment ) and 13 ( Mandatory Prepayment ) exceeds the amount of Term Facility Outstandings at such time, any such excess shall be applied to permanently reduce the Available Revolving Facility. 13. MANDATORY PREPAYMENT 13.1 Repayment from Net Proceeds (a) Equity Issue: The Parent shall procure that on each date on which the Parent or any of its Subsidiaries (other than a member of the CEAL Group to which the CEAL Exception Conditions apply) receives any net cash proceeds from any sale or issuance of Preferred Stock or common equity of (or cash capital contributions to) the Parent or any of its Subsidiaries an amount equal to 50 per cent. of the Net Cash Proceeds of the respective equity issuance or capital contribution shall be applied in accordance with Clause 13.3 ( Application of Mandatory Prepayments ), other than in relation to: (i) the issuances of the Parent Common Stock in accordance with any employee incentive plan of the Parent and its Subsidiaries (including as a result of the exercise of any options with respect thereto) in an aggregate amount not to exceed €30,000,000 in any fiscal year of the Parent; (ii) the equity contributions to any Subsidiary of the Parent made by the Parent or any other Subsidiary of the Parent; (iii) the issuance of shares specifically for the Refinancing of the Senior Subordinated Notes and/or the Parent Preferred Stock and/or New Senior Subordinated Notes; and (iv) the issuance of the Parent Common Stock in an aggregate amount not to exceed €3,000,000 in any fiscal year of the Parent. For the avoidance of doubt any Net Cash Proceeds from any sale or issuance of Preferred Stock or common equity of (or cash capital contributions to) the Parent held in escrow with a commercial bank which is a Lender with a rating of A1/P1 from S&P shall not be required to be applied in accordance with Clause 13.3 ( Application of Mandatory Prepayments ) until such proceeds are released from escrow. 90 (b) Asset Sale: The Parent shall procure that on each date upon which the Parent or any of its Subsidiaries (other than a member of the CEAL Group to which the CEAL Exception Conditions apply) receives Net Sale Proceeds from any Asset Sale (including, for the avoidance of doubt, in relation to any sale, lease or disposal of CEAL or all or substantially all of the assets of the CEAL Group) , an amount equal to 100 per cent. of the Net Sale Proceeds from such Asset Sale shall be applied in accordance with Clause 13.3 ( Application of Mandatory Prepayments ) provided that (save in respect of any Asset Sale in relation to any sale, lease or disposal of CEAL or all or substantially all of the assets of the CEAL Group), so long as no Default or Event of Default then exists, up to €50,000,000 of the Net Sale Proceeds of Asset Sales (other than in relation to any sale, lease or disposal of CEAL or all or substantially all of the assets of the CEAL Group) effected in accordance with Clause 26.2 ( Consolidation, Merger, Purchase or Sale of Assets, etc. ) shall not be required to be applied in accordance with Clause 13.3 ( Application of Mandatory Prepayments ) on the date of the receipt thereof to the extent that such Net Sale Proceeds shall be used (A) to effect Permitted Acquisitions, (B) to purchase replacement equipment and/or (C) make additional Capital Expenditures, in each case in accordance with the requirements of this Agreement, within 360 days following such date and if all or any portion of such Net Sale Proceeds not so required to be applied are not so utilised within 360 days after the date of the receipt of such Net Sale Proceeds, then such remaining portion shall be applied on the date falling 360 days after the date of receipt of such Net Sale Proceeds in accordance with the requirements of this paragraph (b). Concurrently with each delivery of financial statements pursuant to paragraph (a) ( Quarterly Financial Statements ) or (b) ( Annual Financial Statements ) of Clause 23.1 ( Information Covenants ), the Parent shall also deliver a certificate setting forth in reasonable detail the calculation of: (1) the dates and amount of Net Sale Proceeds for each Assets Sale which occurred during the respective fiscal quarter or year, which Net Sale Proceeds were not applied to repay principal of Term Facility Outstandings (or to reduce Commitments) pursuant to this paragraph (b)); (2) the amount of Net Sale Proceeds from Asset Sales previously effected (identifying the date of the respective Asset Sales) applied during the respective fiscal quarter or year pursuant to this paragraph (b); and (3) any amount of Net Sale Proceeds in respect of which the 360 day period referenced above has lapsed during the respective fiscal quarter or year without the Net Sale Proceeds having been applied as contemplated by this paragraph (b). Notwithstanding anything to the contrary above, in cases where the amount required to be repaid by any Borrower on any date pursuant to the foregoing would be less than €1,000,000, the relevant Borrower may defer the required repayment until the first date upon which the aggregate amount which would be required to be applied pursuant to this paragraph (b) would equal or exceed €1,000,000. For the avoidance of doubt any Net Sale Proceeds held in escrow with a commercial bank which is a Lender with a rating of A1/P1 from S&P shall not be required to be 91 applied in accordance with Clause 13.3 ( Application of Mandatory Prepayments ) until such Net Sale Proceeds are released from escrow. (c) Indebtedness: The Parent shall procure that on each date on which the Parent or any of its Subsidiaries (other than a member of the CEAL Group to which the CEAL Exception Conditions apply) receives any cash proceeds from any incurrence of Indebtedness (other than Indebtedness permitted in accordance with Clause 26.4 ( Indebtedness ) and Indebtedness under any Finance Document) for borrowed money, an amount equal to 100 per cent. of the Net Cash Proceeds of such Indebtedness shall be applied in accordance with Clause 13.3 ( Application of Mandatory Prepayments ). For the avoidance of doubt any Net Sale Proceeds held in escrow with a commercial bank which is a Lender with a rating of Al/P1 from S&P shall not be required to be applied in accordance with Clause 13.3 ( Application of Mandatory Prepayments ) until such Net Sale Proceeds are released from escrow. (d) Insurance Claims: The Parent shall procure that within 10 days following each date on which the Parent or any of its Subsidiaries (other than a member of the CEAL Group to which the CEAL Exception Conditions apply) receives any proceeds from any Recovery Event, an amount equal to 100 per cent. of the proceeds of such Recovery Event (net of reasonable costs including, without limitation, legal costs and expenses, and taxes incurred in connection with such Recovery Event) shall be applied in accordance with Clause 13.3 ( Application of Mandatory Prepayments ) provided that: (i) any net proceeds from Recovery Events received by the Parent and/or its Subsidiaries during any fiscal year of the Parent equal to or less than €10,000,000 shall be excluded; and (ii) if the net proceeds from Recovery Events received by the Parent and its Subsidiaries when aggregated with the net proceeds received from any other Recovery Events during any fiscal year of the Parent are greater than €10,000,000, then so long as no Default or Event of Default then exists and to the extent that: (A) the amount of such proceeds which are in excess of €10,000,000, together with other cash available to the Parent and permitted to be spent by it on Capital Expenditures during the relevant period pursuant to Clause 24.1 ( Capital Expenditures ) (without regard to Clause 24.1(c)(i) ( Capital Expenditures ) in the case of such other cash), equals 100 per cent. of the cost of replacement or restoration of the properties or assets in respect of which such proceeds were paid as determined by the Parent in good faith; (B) the Parent has delivered to the Agent a certificate on or prior to the date the payment would otherwise be required pursuant to this Clause 13.1 (d) certifying its determination as required by sub-paragraph (A); and (C) the Parent has delivered to the Agent such evidence as the Agent may reasonably request in form, scope and substance reasonably 92 satisfactory to the Agent establishing that the Parent reasonably expects to have sufficient resources available to it (including, without limitation, cash, revenues and insurance proceeds, such that the Parent and its Subsidiaries can reasonably be expected to satisfy all obligations of the Parent and its Subsidiaries without any unreasonable delay or extension thereof) for the period from the date of the event giving rise to the Recovery Event and continuing through the completion of the replacement or restoration of respective properties or assets, then the entire amount of the proceeds of such Recovery Event shall be deposited with the Agent pursuant to a cash collateral arrangement reasonably satisfactory to the Agent and the Parent whereby such proceeds shall be disbursed to the Parent or its order from time to time as needed to pay actual costs incurred by it in connection with the replacement or restoration of the respective properties or assets (pursuant to such reasonable certification requirements as may be established by the Agent), provided further that at any time while an Event of Default has occurred and is continuing, the Instructing Group may direct the Agent (in which case the Agent shall, and is hereby authorised by the Parent and the Borrowers to, follow said directions) to apply any proceeds then on deposit in such collateral account to the repayment of the Outstandings hereunder in the same manner as proceeds would be applied pursuant to Clause 6.3 ( Application of Proceeds ) of the Intercreditor Deed and provided further, that if any portion of such proceeds is not required to be applied as required by the Instructing Group and such proceeds are either (aa) not so used or committed to be so used within one year after the date of the respective Recovery Event, such proceeds shall be applied on the first anniversary date of the respective Recovery Event or (bb) if committed to be used within one year after the date of receipt of such proceeds and not so used within two years after the date of the respective Recovery Event, such proceeds shall be applied on the second anniversary date of the respective Recovery Event, in each case in accordance with the requirements of Clause 13.3 ( Application of Mandatory Prepayments ). For the avoidance of doubt any Net Sale Proceeds held in escrow with a commercial bank which is a Lender with a rating of A1/P1 from S&P shall not be required to be applied in accordance with Clause 13.3 ( Application of Mandatory Prepayments ) until such Net Sale Proceeds are released from escrow. (e) Permitted Receivables Transactions: On each date upon which the Parent or any of its Subsidiaries (other than a member of the CEAL Group to which the CEAL Exception Conditions apply) receives Permitted Receivables Transaction Proceeds, the Parent or the relevant Subsidiary shall: (i) so long as no Event of Default has occurred and is continuing at the time of receipt by the Parent or any of its Subsidiaries, as the case may be, of such Permitted Receivables Transaction Proceeds: (A) if the amount of Adjusted Permitted Receivables Transaction Outstandings is less than or equal to €200,000,000, be permitted to 93 retain 100% of the relevant Permitted Receivables Transaction Proceeds; or (B) if the amount of Adjusted Permitted Receivables Transaction Outstandings is greater than €200,000,000 but less than or equal to €300,000,000, be required to apply in accordance with Clause 13.3 ( Application of Mandatory Prepayments ) the relevant Applicable Proceeds in an amount equal to 50 per cent. of the amount of such Adjusted Permitted Receivables Transaction Outstandings less the higher of (i) €200,000,000 and (ii) the Adjusted Permitted Receivables Transaction Outstandings prior to receipt of such Applicable Proceeds; or (C) if the amount of Adjusted Permitted Receivables Transaction Outstandings is greater than €300,000,000, be required to apply in accordance with Clause 13.3 ( Application of Mandatory Prepayments ) the relevant Applicable Proceeds in an amount equal to 100 per cent. of the amount of such Adjusted Permitted Receivables Transaction Outstandings less the higher of (i) €300,000,000 and (ii) the Adjusted Permitted Receivables Transaction Outstandings prior to receipt of such Applicable Proceeds and, if prior to such receipt, the aggregate Adjusted Permitted Receivables Transaction Outstandings were less than or equal to €300,000,000 an amount equal to 50 per cent. of the difference between €300,000,000 and the higher of (i) €200,000,000 and (ii) the Adjusted Permitted Receivables Transaction Outstandings prior to receipt of such Applicable Proceeds; and provided that the maximum aggregate amount of all Applicable Proceeds to be retained by the Parent and its Subsidiaries shall not exceed €250,000,000; and (ii) if at any time an Event of Default has occurred and is continuing, be required to apply in accordance with Clause 13.3 ( Application of Mandatory Prepayments ) an amount equal to 100 per cent. of such Permitted Receivables Transaction Proceeds received after the occurrence of such Event of Default, to the extent that the amount of the Permitted Receivables Transaction Outstandings immediately following receipt of such Permitted Receivables Transaction Proceeds exceeds the amount of the Permitted Receivables Transaction Outstandings immediately before receipt of such Permitted Receivables Transaction Proceeds. Notwithstanding anything to the contrary contained in this paragraph (e), in cases where the amount required to be repaid by any Borrower on any date would be less than €1,000,000, the relevant Borrower may defer the respective required repayment until the first date upon which the aggregate amount which would (but for this sentence) be required to be applied pursuant to this paragraph (e) (giving effect to the receipt of proceeds on such date, together with any such proceeds received prior to such date which have not yet been applied pursuant to this paragraph (e) and any receipts thereafter) would equal or exceed €1,000,000. 94 For the purposes of this Clause 13.1(e): “ Applicable Proceeds ” means Permitted Receivables Transaction Proceeds but excluding in any event proceeds of subsequent sales of Receivables Facility Assets pursuant to a Permitted Receivables Transaction after the initial sale date except to the extent to which the respective sale increases Permitted Receivables Transaction Outstandings under Permitted Receivables Transactions (including for the avoidance of doubt, any Permitted Receivables Transaction entered into prior to the Fifth Amendment and Restatement Effective Date) to an amount in excess of the highest amount of Permitted Receivables Transaction Outstandings previously attained “ Adjusted Permitted Receivables Transaction Outstandings ” means, at any time, the highest amount of Permitted Receivables Transaction Outstandings attained on or prior to such time. 13.2 Repayment from Excess Cash Flow The Parent shall procure that on each Excess Cash Flow Payment Date, an amount equal to the Applicable Excess Cash Flow Percentage of Excess Cash Flow (other than any amounts from Excess Cash Flow previously applied in accordance with Clause 12.3 ( Application of Voluntary Prepayments )) for the relevant Excess Cash Flow Payment Period shall be applied in accordance with Clause 13.3 ( Application of Mandatory Prepayments ). 13.3 Application of Mandatory Prepayments (a) Order of Application Each amount referred to in Clause 13.1 ( Repayment from Net Proceeds ) or Clause 13.2 ( Repayment from Excess Cash Flow ) shall, subject to the provisions of paragraph (b) of Clause 13.3 ( Bond Offerings ) and to the provisions of paragraph (c) ( Waivable Mandatory Repayment ) of this Clause 13.3, be applied: (i) first, to the prepayment of A Facility Advances, D1 Facility Advances, D2 Facility Advances and Incremental Term Facility Advances pro rata to the respective Term Facility Outstandings; in relation to each Facility such prepayment shall be applied either: (A) against all remaining Scheduled Repayments of such Facility pro rata to the respective amounts of such Scheduled Repayments; or (B) if the Borrower so elects, in the following order: (I) first, to the prepayment, in direct order of maturity of Scheduled Repayments for such Facility which will be due within 15 months after the date of mandatory prepayment; and (II) thereafter, to the prepayment of all remaining Scheduled Repayments of such Facility pro rata to the respective amounts of such Scheduled Repayments; and 95 (ii) (b) (c) second, to repay Revolving Facility Outstandings with a corresponding permanent reduction in Revolving Facility Commitments. Bond Offerings : Notwithstanding the provisions of paragraphs (a) above, the first €70,000,000 of Net Cash Proceeds referred to in paragraph (c) ( Indebtedness ) of Clause 13.1 ( Repayment from Net Proceeds ) received from any incurrence of Indebtedness relating to any issuance of bonds by the Parent or any of its Subsidiaries at any time during the period ending on the date falling 6 months after the Effective Date shall, subject to the provisions of paragraph (c) of this Clause 13.3, be applied: (i) first, to the prepayment of D1 Facility Advances and D2 Facility Advances, pro rata to the D Facility Outstandings and against all remaining Scheduled Repayments of each such Facility pro rata to the respective amounts of such Scheduled Repayments; and (ii) second, to the prepayment of A Facility Advances, D1 Facility Advances and D2 Facility Advances, pro rata to the respective Term Facility Outstandings; in relation to each Facility such prepayment shall be applied against all remaining Scheduled Repayments of such Facility pro rata to the respective amounts of such Scheduled Repayments. Waivable Mandatory Repayment : In relation to any repayment made pursuant to Clause 13.1 ( Repayment from Net Proceeds ) or Clause 13.2 ( Repayment from Excess Cash Flow ) which is required to be applied to D Facility Advances, if on or prior to the date of such repayment pursuant to this Clause 13, the Existing Borrower has given the Agent written notification that it has elected to give each Lender with D Facility Outstandings the right to waive such Lender’s rights to receive such repayment (the “ Waivable Mandatory Repayment ”) the Agent shall notify such Lenders of such receipt and the amount of the repayments to be applied to each such Lender’s Proportion of D Facility Outstandings, provided that in no event shall the aggregate amount of any Waivable Mandatory Repayment exceed the sum of (x) the aggregate principal amount of Term Facility Outstandings (excluding D Facility Outstandings) after giving effect to any applications of payments (other than any reallocation of the respective Waivable Mandatory Repayment pursuant to this paragraph (c)) to such other Term Facility Outstandings as a result of the repayments then being made pursuant to this Clause 13 and (y) the Available Revolving Facility as same will be in effect after giving effect to any reductions thereto (other than as a result of any reallocation of the respective Waivable Mandatory Repayment pursuant to this Clause 13) concurrently being made. Waiver Mechanics : In the event any such Lender with D Facility Outstandings desires to waive such Lender’s right to receive any such Waivable Mandatory Repayment in whole or in part, such Lender shall so advise the Agent no later than 5:00 p.m. five Business Days after the date of such notice from the Agent which notice shall also include the amount the Lender desires to receive with respect to its D Facility Outstandings. If the Lender does not reply to the Agent within such five Business Day period, it will be deemed acceptance of the total payment. If the Lender does not specify an amount it wishes to receive, it will be deemed acceptance of 100 per cent. of the total payment. In the event that any such Lender waives such Lender’s rights to any such Waivable Mandatory Repayment, the Agent shall apply 100 per cent. of the amount so waived by such Lenders to (x) repay the Term Facility 96 Outstandings (excluding the D Facility Outstandings) in accordance with paragraph (a) above and (y) to the extent in excess of the amount to be applied pursuant to preceding clause (x), to reduce the Available Revolving Facility on a pro rata basis based on the relative amounts of the Available Revolving Facility and the Revolving Facility Outstandings (in each case as in effect before giving effect to such reduction). Cash Collateral : If the Existing Borrower elects to give the notice described above in this paragraph (c) with respect to any such repayment, the amount of the respective Waivable Mandatory Repayment shall be deposited with the Agent on the date such repayment is otherwise made pursuant to paragraph (a) above (and held by the Agent as cash collateral for the D Facility Outstandings and, but only to the extent Lenders with D Facility Outstandings waive their right to receive their share of the Waivable Mandatory Repayment, for the benefit of all Lenders in a cash collateral account which shall permit the investment thereof in Cash Equivalents reasonably satisfactory to the Agent until the proceeds are applied to the applicable Outstandings) and the respective repayment shall not be required to be made until the seventh Business Day occurring after the date the respective repayment would otherwise have been required to be made. Partial Waiver of Repayment : Notwithstanding anything to the contrary contained above, if one or more Lenders holding D Facility Outstandings waives its right to receive all or any part of any Waivable Mandatory Repayment, but less than all the Lenders holding the respective D Facility Outstandings waive in full their right to receive 100 per cent. of the total payment otherwise required with respect to the respective D Facility Outstandings, then of the amount actually applied to the repayment of the respective D Facility Outstandings of Lenders which have waived in part, but not in full, their right to receive 100 per cent. of such repayment, such amount shall be applied to each D Facility Advance of the respective D Facility Outstandings, on a pro rata basis (so that each Lender holding D Facility Outstandings shall, after giving effect to the application of the respective repayment, maintain the same percentage (as determined for such Lender, but not the same percentage as the other Lenders hold and not the same percentage held by such Lender prior to repayment) of each D Facility Advance which remains outstanding after giving effect to such application). For the avoidance of doubt any amount to be applied in accordance with this paragraph shall only apply to such portion (if any) of the D Facility Outstandings which such D Facility Lender has not waived. (d) Revolving Facility : Any repayment of any Revolving Facility Outstandings under this Agreement shall be applied first against Revolving Facility Advances and when all Revolving Facility Advances have been repaid in full, to provide cash collateral in respect of any Outstanding L/C Amounts. 14. INTEREST ON REVOLVING AND SWINGLINE FACILITY ADVANCES 14.1 Interest Payment Date for Revolving Facility Advances On each Repayment Date (and, if the Term of any Revolving Facility Advance exceeds 3 months, on the expiry of each period of 3 months during such Term) each Borrower shall pay accrued interest on each Revolving Facility Advance made to it. 97 14.2 Interest Rate for Revolving Facility Advances The rate of interest applicable to each Revolving Facility Advance during its Term shall be the rate per annum which is the sum of the Applicable Margin for the Revolving Facility, the Associated Costs Rate for such Advance at such time and EURIBOR or, in relation to any Revolving Facility Advance denominated in an Optional Currency, LIBOR, for the relevant Term. 14.3 Interest Rate for Swingline Facility Advances The rate of interest applicable to each Swingline Facility Advance during its Term shall be the rate per annum which is the sum of the Associated Costs Rate for such Advance at such time and: (a) (b) in relation to a Dollar Swingline Facility Advance, the sum of the Applicable Margin for Dollar Swingline Facility Advances and the higher of (i) the Prime Lending Rate at such time and (ii) the sum of 0.50 per cent. and the Federal Funds Rate at such time; and in relation to a Euro Swingline Facility Advance, the sum of the Applicable Margin for Euro Swingline Facility Advances and EURIBOR at such time, for the relevant Term. 14.4 Applicable Margin Ratchet for Revolving Facility Advances after Event of Default Upon the occurrence of any Event of Default, the Applicable Margin for the Revolving Facility and the Swingline Facility shall revert to the Revolving Facility Margin so long as such Event of Default is continuing. 15. INTEREST ON TERM FACILITY ADVANCES 15.1 Interest Periods for Term Facility Advances The period for which a Term Facility Advance is outstanding shall be divided into successive periods (each an “ Interest Period ”) each of which (other than the first) shall start on the last day of the preceding such period and any Interest Period which begins during or at the same time as any other Interest Period in respect of a Term Facility Advance made under the same Term Facility shall end at the same time as that other Interest Period. 15.2 Duration The duration of each Interest Period shall, save as otherwise provided in this Agreement, be 1, 2, 3 or 6 months, in each case as the Authorised Representative of the applicable Borrower may by not less than three Business Days’ prior notice to the Agent select or such other period as the Lenders may agree, provided that: (a) if that Borrower (or the Parent) fails to give such notice of selection in relation to an Interest Period, the duration of that Interest Period shall, subject to the other provisions of this Clause 15, be 1 month; 98 (b) prior to the Syndication Date, unless the Agent otherwise specifies, the duration of each Interest Period shall be 1 month (or, if less, such duration necessary to ensure that such Interest Period ends on the Syndication Date); and (c) any Interest Period that would otherwise end during the month preceding or extend beyond a Repayment Date relating to the relevant Term Facility Outstandings shall be of such duration that it shall end on that Repayment Date if necessary to ensure that there are Advances under the relevant Facility with Interest Periods ending on the relevant Repayment Date in a sufficient aggregate amount to make the repayment due on that Repayment Date. 15.3 Division of Term Facility Advances Subject to the requirements of Clause 15.2 ( Duration ) a Borrower may, by not less than 5 Business Days’ prior notice to the Agent, direct that any Term Facility Advance borrowed by it shall, at the beginning of the next Interest Period relating to it, be divided into (and thereafter, save as otherwise provided in this Agreement, be treated in all respects as) two or more Advances in such amounts (equal in aggregate to the Euro Amount of the Term Facility Advance being so divided) as shall be specified by that Borrower in such notice provided that that Borrower shall not be entitled to make such a direction if any Term Facility Advance thereby coming into existence would have a Euro Amount of less than €1,000,000. 15.4 Payment of Interest for Term Facility Advances On the last day of each Interest Period (or if such day is not a Business Day, on the immediately succeeding Business Day in the then current calendar month (if there is one) or the preceding Business Day (if there is not)), and if the relevant Interest Period exceeds 3 months, on the expiry of each 3 month period during that Interest Period, each Borrower shall pay accrued interest on the Term Facility Advance to which such Interest Period relates. 15.5 Interest Rate for Term Facility Advances The rate of interest applicable to a Term Facility Advance at any time during an Interest Period relating to it shall be the rate per annum which is the sum of the Applicable Margin for the relevant Term Facilities, the Associated Costs Rate for such Advance at such time and EURIBOR or, in relation to any Term Facility Advance then denominated in an Optional Currency, LIBOR, for such Interest Period. 15.6 Applicable Margin Ratchet for Term Facility Advances after Event of Default Upon the occurrence of any Event of Default, the Applicable Margin with respect to the A Facility shall revert to the A Facility Margin so long as the Event of Default is continuing. 16. MARKET DISRUPTION AND ALTERNATIVE INTEREST RATES 16.1 Market Disruption If, in relation to any Interest Period or Term: (a) the Relevant Interbank Rate is to be determined by reference to the Reference Banks or Federal Funds brokers, as the case may be, and, at or about 11.00 a.m. on the Quotation Date for such Interest Period or Term, none or only one of the Reference 99 Banks or Federal Funds brokers, as the case may be, supplies a rate for the purpose of determining the Relevant Interbank Rate for the relevant period; or (b) before the close of business in London on the Quotation Date for such Interest Period or Term (or in relation to a Swingline Advance, before 1:00 p.m. on any day), the Agent has been notified by a Lender or each of a group of Lenders to whom in aggregate 35 per cent. or more of the relevant Advance is owed (or, in the case of an undrawn Advance, if made, would be owed) that the cost to it of obtaining matching deposits for the relevant Advance in the Relevant Interbank Market would be in excess of the Relevant Interbank Rate, then the Agent shall notify the Parent and the Lenders of such event and, notwithstanding anything to the contrary in this Agreement, Clause 16.2 ( Substitute Interest Period and Interest Rate ) shall apply (if the relevant Advance is a Term Facility Advance which is already outstanding or a Rollover Advance). If either paragraph (a) or (b) applies to a proposed Advance other than a Rollover Advance, such Advance shall not be made. 16.2 Substitute Interest Period and Interest Rate (a) If paragraph (a) of Clause 16.1 ( Market Disruption ) applies (i) to an Advance (other than a Swingline Advance), the duration of the relevant Interest Period or Term shall be 1 month, (ii) to a Swingline Advance, the duration of the relevant Term shall be 5 Business Days or (iii) in each case, if less, such that it shall end on the next succeeding Repayment Date. (b) If either paragraph of Clause 16.1 ( Market Disruption ) applies to an Advance, the rate of interest applicable to each Lender’s portion of such Advance during the relevant Interest Period or Term shall (subject to any agreement reached pursuant to Clause 16.3 ( Alternative Rate )) be the rate per annum which is the sum of: (i) 16.3 the Applicable Margin; (ii) the rate per annum notified to the Agent by such Lender before the last day of such Interest Period or Term to be that which expresses as a percentage rate per annum the cost to such Lender of funding from whatever sources it may select its portion of such Advance during such Interest Period or Term; and (iii) the Associated Costs Rate, if any, applicable to such Lender’s participation in the relevant Advance. Alternative Rate If: (a) Clause 16.1 ( Market Disruption ) applies; or (b) by reason of circumstances affecting the Relevant Interbank Market during any period of 3 consecutive Business Days, the Relevant Interbank Rate (as appropriate) is not available to prime banks in the Relevant Interbank Market, 100 then, if the Agent or the Parent so requires, the Agent and the Parent shall enter into negotiations with a view to agreeing an alternative basis within one month: (i) for determining the rate of interest from time to time applicable to Advances; and/or (ii) upon which the Advances may be maintained (whether in euro or some other currency) thereafter, and any such alternative basis that is agreed shall take effect in accordance with its terms and be binding on each party to this Agreement, provided that the Agent may not agree any such alternative basis without the prior consent of each Lender. 17. COMMISSIONS AND FEES 17.1 Commitment Fees The Existing Borrower shall pay to the Agent for the account of each Arranger (with respect to the period from the date of the Commitment Letter) and each Lender (with respect to the period from the Effective Date), a commitment commission on the aggregate amount of such Lender’s Available Commitment (if any) in respect of each Facility, from day to day during the period beginning on the date of the Commitment Letter and ending on the relevant Termination Date, such commitment commission to be calculated at the applicable percentage rate per annum set out below and payable on the Initial Borrowing Date and thereafter in arrear on the last day of each successive period of 3 months which ends during such period and on the Termination Date for the relevant Facility. Facility Percentage Rate Revolving 0.75 per cent . A 0.50 per cent. B 0.50 per cent . D 0.50 per cent . For the purposes of this Clause 17.1, Available Commitment shall include the commitment of the Arrangers under the Commitment Letter (it being agreed that the undrawn and uncancelled commitment under the Commitment Letter is for an amount not exceeding €730,000,000). 17.2 Underwriting Fee The Existing Borrower shall pay to the Arrangers the fees specified in the letter dated on or about the date of the Commitment Letter from the Arrangers to the Parent and the Existing Borrower at the times and in the amounts specified in such letter. 17.3 Agency Fee The Existing Borrower shall pay to the Agent for its own account the fees specified in the letter dated on or about the date of the Commitment Letter from the Agent to the Parent and the Existing Borrower at the times and in the amounts specified in such letter. 101 17.4 Incremental Facility Fee The relevant Borrower(s) shall pay to the relevant Incremental Revolving Facility Lender or Incremental Term Facility Lender, as the case may be, for its own account the fees agreed between such Borrower(s) and the relevant Lender at the times and in the amount specified in the relevant Incremental Facility Commitment Agreement. 17.5 Documentary Credit Fee The relevant Borrower shall, in respect of each Documentary Credit, pay to the Agent for the account of each Indemnifying Lender (for distribution in proportion to each Indemnifying Lender’s L/C Proportion of such Documentary Credit) a documentary credit fee (a) at any time prior to the occurrence of a Sharing Event, in the currency in which the relevant Documentary Credit is denominated and (b) at any time on or after the occurrence of a Sharing Event, in euros, at a rate 0.25 per cent. per annum applied on the Outstanding L/C Amount in relation to such Documentary Credit. Such documentary credit fee shall be paid in arrear on the last Business Day of each March, June, September and December which begins during the Term of the relevant Documentary Credit and on the relevant Expiry Date. Accrued Documentary Credit fees shall also be payable on the cancelled amount of any Revolving Facility Commitment at the time such cancellation is effective, if the Revolving Facility Commitment is cancelled in full and a Documentary Credit is repaid in full. 17.6 L/C Bank Fee The relevant Borrower shall pay to the L/C Bank a fronting fee (a) at any time prior to the occurrence of a Sharing Event, in the currency in which the relevant Documentary Credit is denominated and (b) at any time on or after the occurrence of a Sharing Event, in euros, at a rate 0.25 per cent. per annum applied on the Outstanding L/C Amount in relation to such Documentary Credit provided that in no event shall such fronting fee be less than €500 (or its equivalent). Such fronting fee shall be paid in arrear on the last Business Day of each March, June, September and December which begins during the Term of the relevant Documentary Credit and on the relevant Expiry Date. Accrued fronting fees shall also be payable on the cancelled amount of any Revolving Facility Commitment at the time such cancellation is effective, if the Revolving Facility Commitment is cancelled in full and a Documentary Credit is repaid in full. 18. TAXES 18.1 Tax Gross-up (a) Except as provided in paragraph (c) below, each payment made by an Obligor under a Finance Document shall be made by it without reduction for any Tax Deduction. In the event of a Tax Deduction, the amount of the payment due shall, unless paragraph (c) below applies, be increased to an amount so that, after the required Tax Deduction is made, the payee receives an amount equal to the amount it would have received had no Tax Deduction been required. (b) If a Tax Deduction is required by Law to be made by the Agent or the Security Trustee from any payment to any Finance Party which represents an amount or amounts received from an Obligor, that Obligor shall, unless paragraph (c) below applies, pay directly to that Finance Party an amount which, after making the required 102 Tax Deduction enables the payee of that amount to receive an amount equal to the payment which it would have received if no Tax Deduction had been required. (c) An Obligor is not required to make a Tax Payment to a Lender under paragraphs (a) or (b) above for a Tax Deduction in respect of any payment to that Lender under the Finance Documents where that Lender has not provided forms required to be provided under paragraph (e) or (f) hereof with respect to that payment. (d) An Obligor shall timely deposit any Tax Deduction it makes to the relevant taxing authority. Within 45 days, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment to which such Tax Deduction or payment relates a certification of receipt of payment by the relevant taxing authority or other evidence which is reasonably satisfactory to that Finance Party that the Tax Deduction or other payment has been made to the relevant tax authority. (e) Each Lender (other than a U.S. Lender) shall deliver to the Existing Borrower and the Parent on or before the Initial Borrowing Date (if sooner, the date of the first payment, to such Lender under any of the Finance Documents) two accurate and complete original signed copies of: (i) (ii) (f) a duly completed United States of America Internal Revenue Service Form W-8BEN (or such Form as may replace it) relating to exemption from withholding in respect of payments made by the Existing Borrower to that Lender under the Finance Documents: (A) claiming that Lender’s entitlement to the United States federal “portfolio interest exemption” in relation to payment of interest on participations in Advances to the Existing Borrower; or (B) certifying that that Lender is entitled to a complete exemption from the United States taxation under a Double Taxation Treaty; or a duly completed United States of America Internal Revenue Service Form W-8ECI (or such Form as may replace it) certifying that the payments made by the Existing Borrower to that Lender under the Finance Documents are effectively connected with the conduct by that Lender of a trade or business within the United States of America. Each Lender agrees that when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the Existing Borrower and the Parent two new accurate and complete original signed copies of the relevant Internal Revenue Service Form referred to above or any alternative certification specified above and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under the Finance Documents, or it shall immediately notify the Existing Borrower and the Agent of its inability to deliver any such Form or certification, in which case such Lender shall not be required to provide forms described in this paragraph (f). 103 18.2 Tax Indemnity The Obligors agree jointly and severally to indemnify and hold harmless each Lender in respect of any taxes that are described in the definition of “Tax Deduction” and taxes imposed on or measured by the net income or net profits of such Lender in respect of the amounts paid pursuant to paragraphs (a) and (b) of Clause 18.1 ( Tax Gross-Up ) and this Clause 18.2. 18.3 Tax Credit (a) If an Obligor makes a Tax Payment and the relevant Finance Party determines that: (i) a Tax Credit is attributable to that Tax Payment; and (ii) that Finance Party has obtained, utilised and retained that Tax Credit, the Finance Party shall (subject to paragraph (b) below and to the extent that such Finance Party can do so without prejudicing the availability and/or the amount of the Tax Credit and the right of that Finance Party to obtain any other benefit, relief or allowance which may be available to it) pay to the Obligor such amount which that Finance Party determines will leave it (after that payment) in the same after-tax position as it would have been in had the Tax Payment not been made by the Obligor. (b) (c) (i) Each Finance Party shall have an absolute discretion, consistent with the policies of such Finance Party, as to the time at which and the order and manner in which it realises or utilises any Tax Credits and shall not be obliged to arrange its business or its tax affairs in any particular way in order to be eligible for any credit or refund or similar benefit. (ii) No Finance Party shall be obliged to disclose to any other person any information regarding its business, tax affairs or tax computations (including its tax returns). (iii) If a Finance Party has made a payment to an Obligor pursuant to this Clause 18.3 on account of a Tax Credit and such Tax Credit is subsequently reduced or disallowed that Obligor shall, on demand, pay to that Finance Party the amount which that Finance Party determines will put it (after that payment is received) in the same after-tax position as it would have been in had no such payment been made to that Obligor. No Finance Party shall be obliged to make any payment under this Clause 18.3 if, by doing so, it would contravene the terms of any applicable Law or any notice, direction or requirement of any governmental or regulatory authority (whether or not having the force of law). 19. INCREASED COSTS 19.1 Increased Costs Subject to Clause 19.3 ( Exceptions ), the relevant Borrower shall within 5 Business Days of a written demand by the Agent, pay for the account of a Finance Party the amount of any 104 Increased Cost incurred by that Finance Party or any of its Affiliates as a result (direct or indirect) of: (a) the introduction or implementation of or any change in (or in the interpretation, administration or application of) any Law of any central bank, including the European Central Bank, the Financial Services Authority or any other fiscal, monetary, regulatory or other authority; (b) compliance with any Law made after the date of this Agreement; or (c) the implementation of economic or monetary union by any Member State which is not already a Participating Member State. 19.2 Increased Costs Claims (a) A Finance Party intending to make a claim pursuant to Clause 19.1 ( Increased Costs ) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Parent. (b) Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs although failure to give such certificate shall not release or diminish the relevant Borrowers’ obligations to pay the Increased Costs. 19.3 Exceptions Clause 19.1 ( Increased Costs