AMENDMENT NO. 2 TO ASSET AND STOCK PURCHASE AGREEMENT

Exhibit 10.6

ASSET AND STOCK PURCHASE AGREEMENT

dated as of

January 8, 2006

between

TEXAS INSTRUMENTS INCORPORATED

and

S&C PURCHASE CORP.

TABLE OF CONTENTS

 

 

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DISCLOSURE SCHEDULE

SCHEDULE 4.05    Commitment Letters

 

 

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ASSET AND STOCK PURCHASE AGREEMENT

AGREEMENT (this “ Agreement ”) dated as of January 8, 2006 between Texas Instruments Incorporated, a Delaware corporation (“ Seller ”), and S&C Purchase Corp., a Delaware corporation (“ Buyer ”).

W I T N E S S E T H :

WHEREAS, Buyer desires to purchase the Shares (as defined below) and the Purchased Assets (as defined below) and assume the Assumed Liabilities (as defined below) from Seller and its Subsidiaries, and Seller and its Subsidiaries desire to sell the Shares and the Purchased Assets and transfer the Assumed Liabilities to Buyer, upon the terms and subject to the conditions hereinafter set forth;

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE 1

D EFINITIONS

Section 1.01 . Definitions. (a) As used herein, the following terms have the following meanings:

“ Accounting Policies ” means GAAP, applied in a manner consistent with the accounting policies, principles, practices and methodologies used in the preparation of the Audited Balance Sheet.

“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person. For purposes of this definition, “ control ” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “ controlling ” and “ controlled ” have correlative meanings.

“ Applicable Law ” means, with respect to any Person, any federal, state, local or foreign law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, determination, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

“ Assignment and Assumption Agreement ” means an Assignment and Assumption Agreement between Buyer and Seller in substantially the form

attached hereto as Exhibit A with such changes as Buyer and Seller may agree upon, together with any other documents of conveyance entered into pursuant to Section 2.09(c)(vi).

“ Audited Balance Sheet ” means the audited balance sheet of the Business as of December 31, 2004.

“ Balance Sheet Date ” means December 31, 2004.

“ Base Working Capital ” means $199,000,000.

“ Business ” means the Control Business and the Sensor Business. The Business does not include the RFID Business.

“ Business Day ” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York and London, England are authorized or required by Applicable Law to close.

“ Business Employee ” means any employee of Seller or any of its Subsidiaries or Affiliates who is employed primarily in connection with the Business, (i) including, for the avoidance of doubt, the individuals named in Section 1.01(a)(i) of the Disclosure Schedule, but (ii) excluding the individuals named in Section 1.01(a)(ii) of the Disclosure Schedule, and such employees of the Retained Businesses as Seller and Buyer may agree to treat as Business Employees prior to the Closing.

“ Business Intellectual Property Rights ” means the Business Patents and the Other Business Intellectual Property Rights.

“ Business Patents ” means the Patents listed in Section 2.02(h) of the Disclosure Schedule.

“ Closing Date ” means the date on which the Closing occurs. The Closing shall be deemed to occur at 12:01 a.m. on the date that is the Closing Date.

“ Code ” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“ Competition Laws ” means statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization, lessening of competition or restraint of trade.

“Consent” means any authorization, approval, order, license, qualification, permit, franchise, certification, waiver or other consent of any third Person or any Governmental Authority.

 

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“ Control Business ” means the business conducted by the Controls business unit of Seller and Seller’s Subsidiaries involving the design, development, sale, manufacturing and marketing of Control Products.

“ Control Products ” means (i) electromechanical products designed to control heat, current or arcing, including in commercial and residential heating and air conditioning systems, refrigeration appliances, lighting, aerospace or industrial products, and also including motor protectors, circuit breakers, lighting protection, arc-fault circuit protectors, precision switches, thermostats or semiconductor burn-in test sockets, (ii) electronic control modules or board level solutions in heating, ventilation, air conditioning or refrigeration systems, including for gas ignition, defrost control, electric heat, fan sequencing, system monitoring, or compressor control and protection or (iii) control products intended for applications addressed by products that are currently marketed or under development by the Controls business unit of Seller and its Subsidiaries.

“ Cross License Agreement ” means a Cross License Agreement between Buyer and Seller in the form attached hereto as Exhibit B.

“ Current Product ” means any (i) Sensor Product or Control Product, or any component thereof, that was manufactured, marketed, sold, offered for sale, distributed or otherwise transferred by the Business, or with respect to which the Business has substantially completed its development efforts, as of the Closing Date and (ii) future Sensor Product, Control Product or component that is an extension, modification, derivation, replacement or successor of such Sensor Product, Control Product or component and does not infringe or misappropriate Intellectual Property Rights of a third party in a manner that is materially different from its predecessor.

“ Disclosure Schedule ” means the disclosure schedule delivered by Seller to Buyer concurrently with the execution and delivery of this Agreement and attached hereto.

“ Economic Detriment ” means (i) any Tax, penalty, cost, expense or other adverse economic impact on Buyer or its Affiliates (including the Purchased Subsidiaries), except to the extent of invoiced out-of-pocket expenses for which Buyer is reimbursed by Seller on an after-tax basis, (ii) any restriction, reduction or other impairment of any Purchased Subsidiary’s ability after the Closing Date directly or indirectly to dividend, distribute or otherwise repatriate cash (other than by reductions (but in any event not below zero) of statutory retained earnings accrued and available for distributions prior to the Closing Date) or (iii) prior to the Closing any change in current assets (except cash) or liabilities from those consistent with historical levels maintained in the ordinary course of business. Notwithstanding the foregoing, in connection with any transfer of Purchased Subsidiary Pre-Closing Cash pursuant to Section 2.06(a)(i) or 2.06(b)(ii), the reduction in cash by the amount transferred shall not in and of itself be deemed an Economic Detriment.

 

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“ Employee Plan ” means any “employee benefit plan”, as defined in Section 3(3) of ERISA, and any employment, severance or similar contract, plan, arrangement or policy and each other plan or arrangement providing for cash or equity compensation, profit-sharing, incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements), health or medical benefits, disability or sick leave benefits and post-employment or retirement, or other benefits, in each case which is maintained, sponsored, administered or contributed to by Seller or any Subsidiary of Seller (or any ERISA Affiliate of Seller or any Subsidiary of Seller) and (i) covers any current or former Business Employee who is based primarily in the United States, (ii) with respect to which any Purchased Subsidiary has any material current or future Liability or (iii) which would otherwise constitute an Assumed Liability.

“ Environmental Laws ” means any Applicable Law as in effect on or prior to the Closing Date relating to the environment, pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials or to public or workplace health or safety.

“ Environmental Liabilities ” means any and all Liabilities or commitments primarily arising in connection with or relating to the Business (as currently or previously conducted), the Purchased Assets, the Purchased Subsidiaries or any activities or operations occurring or conducted at the Real Property, which arise under or relate to any Environmental Law.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

“ ERISA Affiliate ” of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Excluded Environmental Liabilities ” means any Environmental Liabilities attributable or relating to, resulting from, or caused by (i) any real property or facility now or previously owned, leased or operated by the Purchased Subsidiaries or by Seller or any Affiliate of the Seller with respect to the Business (other than (A) the Real Property, (B) except as otherwise provided in clause (ii), the Kuala Lumpur, Malaysia facility currently shared by a Retained Business and the Business, but only to the extent arising out of the operation of the Business or (C) any other Purchased Asset, but only to the extent arising out of the operation

 

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of the Business); (ii) any Retained Business (including the Known Kuala Lumpur Contamination and any other Environmental Liabilities to the extent arising from the conduct of any Retained Business at any facility currently shared by such Retained Business and the Business); and (iii) the offsite treatment, storage, disposal or arrangement for disposal of hazardous substances, wastes or materials by Seller or any Affiliate of Seller with respect to the Business (including any such hazardous substances, wastes or materials generated in connection with operations upon the Real Property) or by any Purchased Subsidiary, in each case prior to the Closing.

“ Excluded Representations ” means, as to Seller or Buyer, as applicable, the representations set forth in Section 3.01 ( Corporate Existence and Power ), Section 3.02 ( Corporate Authorization ), Section 3.17 ( Finders’ Fees ), Section 4.01 ( Corporate Existence and Power ), Section 4.02 ( Corporate Authorization ), Section 4.07 ( Finders’ Fees ) and Section 8.01 ( Tax Matters ).

“ GAAP ” means generally accepted accounting principles in the United States.

“ Governmental Authority ” means any transnational, domestic or foreign federal, state or local, governmental authority, department, court, agency or official, including any political subdivision thereof and any arbitral body the decrees of which have the force of law.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“ Identified Environmental Liability ” means Environmental Liabilities arising out of those matters described in Section 3.20(b) of the Disclosure Schedule.

“ Indebtedness ” means (i) all obligations for borrowed money, (ii) all obligations evidenced by notes, bonds, debentures or other instruments, (iii) all obligations under any hedging or swap obligation or other similar arrangement, (iv) all obligations (other than operating leases) secured by a Lien on Purchased Assets or Assets of a Purchased Subsidiary, other than a Lien described in clause (i), (iii) or (iv) of the definition of Permitted Liens, (v) all obligations for the deferred purchase price of property or services (other than current liabilities incurred in the ordinary course of business), (vi) all commitments by which a Person assures a creditor against loss (including contingent reimbursement obligations regarding letters of credit), (vii) all obligations under capitalized leases, (viii) all guarantees (other than product warranties made in the ordinary course of business), including guarantees of any items set forth in clauses (i) through (vii), and (ix) all outstanding prepayment premiums, if any, and accrued interest, fees and expenses related to any of the items set forth in clauses (i) through (ix).

 

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“ Intellectual Property Right ” means any Patent, trademark, service mark, all goodwill associated with each of such marks, trade name, trade dress, internet domain name, mask work, trade secret, copyright, know-how, software (including any registrations or applications for registration of any of the foregoing) or any other similar type of proprietary intellectual property right and the right to sue and recover for any past, present, or future infringements or misappropriations thereof.

“ International Plan ” means any employment, severance or similar contract, plan, arrangement or policy and each other plan or arrangement providing for cash or equity compensation, profit-sharing, incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements), health or medical benefits, disability or sick leave benefits and post-employment or retirement benefits, in each case which is maintained, administered or contributed to by Seller or any Subsidiary of Seller (or any Affiliate of Seller or any Subsidiary of Seller) and (i) covers any current or former Business Employee who is based primarily in a country other than the United States, (ii) with respect to which any Purchased Subsidiary has any material Liability or (iii) which would otherwise constitute an Assumed Liability, and in any event is not an Employee Plan.

“ knowledge of Seller ,” “ Seller’s knowledge ” or any other similar knowledge qualification in this Agreement means to the actual knowledge, after reasonable inquiry of appropriate personnel (including members of the legal department), of Thomas Wroe, Jr., Gene A. Carlone, Martha N. Sullivan, Robert E. Kearney, Dick Dane, Jim Armstrong or Donna Kimmel.

“ Known Kuala Lumpur Contamination ” means conditions of contamination in the soil and groundwater identified prior to the date hereof at, on or under the Kuala Lumpur, Malaysia facility currently shared by a Retained Business and the Business.

“ Latest Balance Sheet ” means the unaudited balance sheet of the Business as of September 30, 2005.

“ Leased Real Property ” means all of Seller’s and its Subsidiaries’ right, title and interest in all leases, subleases, licenses, concessions and other agreements (the “ Leases ”), pursuant to which Seller or one of its Subsidiaries holds a leasehold or subleasehold estate in, or is granted the right to use or occupy, any land, buildings, structures, improvements, fixtures or other interest in real property used or held for use primarily by the Business, including the right to all security deposits and other amounts and instruments deposited by or on behalf of Seller or one of its Subsidiaries thereunder.

 

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“ Leasehold Improvements ” means all buildings, structures, improvements and fixtures located on any Leased Real Property which are owned by Seller or one of its Subsidiaries, regardless of whether title to such buildings, structures, improvements or fixtures are subject to reversion to the landlord or other third party upon the expiration or termination of the Lease for such Leased Real Property.

“ Liability ” means any liability, debt or obligation of any kind, character, or description, and whether known or unknown, accrued, absolute, contingent or otherwise, and regardless of when asserted or by whom.

“ License Side Agreement ” means the License Side Agreement dated the date hereof between Seller and Buyer.

“ Lien ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, option, right of first refusal, right of first offer or encumbrance in respect of such property or asset.

“ Material Adverse Effect ” means a material adverse effect on the business, financial condition or results of operations of the Business, except for any such effect (i) to the extent relating to any Excluded Asset or Excluded Liability and for which Buyer, its Subsidiaries and the Purchased Subsidiaries will have no Liability following the Closing in accordance with the terms of this Agreement or (ii) resulting from or arising in connection with (A) the announcement of this Agreement or the consummation of the transactions specifically contemplated hereby, (B) changes or effects affecting generally the industries in which the Business operates, (C) changes in Applicable Laws or accounting standards, principles or interpretations of general application, (D) changes in economic, regulatory or political conditions generally or (E) changes attributable to actions or omissions of Buyer or any of its Affiliates, other than any action or omission specifically contemplated by this Agreement; provided that the changes or effects described in clauses (B) through (D) shall be disregarded only to the extent that the effect or change is not disproportionately adverse to the Business compared to other Persons operating in the industries in which the Business operates, taking into account the market position and geographic scope of the Business.

“ MEMS Product ” means a product integrating (i) sensors, actuators and/or micromechanical elements and (ii) electronics, on a common silicon substrate; wherein such product is fabricated using a combination of integrated circuit process sequences ( e.g. , CMOS, Bipolar, or BICMOS processes), and at least one substantial “micromachining” process step (wherein such “micromachining” process step is not a Semiconductor Process step).

 

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“ 1934 Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ Other Business Intellectual Property Rights ” means all Intellectual Property Rights (other than Patents) owned by Seller or any of its Subsidiaries and developed by, or used or held for use exclusively in, the Control Business or the Sensor Business (including any invention disclosure which is not the subject of a filing with the United States Patent and Trademark Office (or foreign equivalent) as of the Closing Date).

“ Owned Real Property ” means all land, together with all buildings, structures, improvements and fixtures located thereon, and all easements and other rights and interests appurtenant thereto owned by Seller or one of its Subsidiaries and used or held for use primarily by the Business.

“ Patent ” means any issued patent or pending patent application (including any provisional patent application), and any and all divisionals, continuations, continuations-in-part, reissues, renewals, reexaminations, and extensions thereof, any counterparts claiming priority therefrom, utility models, patents of importation/confirmation, supplementary protection certificates, certificates of invention and similar statutory rights.

“ Person ” means an individual, corporation, partnership, limited liability company, association, joint venture, trust or other entity or organization, including a Governmental Authority.

“ Portfolio Cross-License ” means a non-exclusive Patent cross-license covering at least a majority of Seller’s Patent portfolio and entered into in the normal course of Seller’s Patent licensing business.

“ Pre-Closing Tax Period ” means (i) any Tax period ending on or before the Closing Date and (ii) with respect to a Tax period that commences before but ends after the Closing Date, the portion of such period up to and including the Closing Date.

“ Purchased Subsidiaries ” means Texas Instrumentos Eletronicos do Brasil Limitada; Texas Instruments (Changzhou) Co., Ltd.; Texas Instruments (China) Company Limited; Texas Instruments Korea Limited (“ TI Korea ”) and Texas Instruments Italia S.p.A (“ TI Italia ”).

 

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“ Purchased Subsidiary Liability ” means any Liability of any Purchased Subsidiary which would fall within the definition of an Excluded Liability were it a Liability of the Seller or a Retained Subsidiary.

“ Replacement Guarantee ” means the guarantee to be entered into by Seller or a Subsidiary of Seller prior to the Closing Date in connection with the sale by Engineered Materials Solutions, Inc. of its contacts business to a joint venture of Checon Corporation and Shivalik Bimetal Controls Ltd., such guarantee to be fully secured by collateral of such joint venture (and include reasonable mechanics for the guarantor from time to time to verify the adequacy of the collateral securing its guarantee), limit the liability of the guarantor to $5 million and otherwise be in form and substance reasonably acceptable to Buyer (it being understood that Buyer shall be entitled to participate in the discussions with respect to the form and substance of such guarantee on and after the date hereof and prior to the execution thereof).

“ Representative ” means, with respect to any Person, such Person’s directors, officers, employees, counsel, financial advisors, auditors, agents and other authorized representatives.

“ Retained Businesses ” means all businesses now, previously or hereafter conducted by Seller or any of its Subsidiaries other than the Business. The Retained Businesses include the RFID Business.

“ Retained Subsidiaries ” means all of the Subsidiaries of Seller other than the Purchased Subsidiaries.

“ RFID Business ” means the business of designing, developing, licensing, manufacturing, marketing and selling radio frequency identification systems as conducted by Seller and its Subsidiaries.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Semiconductor Activities ” means the design, development, use and distribution of (i) design, automation, application or other software embodied in or operating on or in any way relating to the manufacture, or use of, any Semiconductor Product and (ii) application notes, reference designs, emulators, evaluation modules (EVMs), and marketing materials directly relating to the sales, marketing or use of any Semiconductor Product.

“ Semiconductor Process ” means any system, method, process, software or hardware, material, structure, apparatus, device, composition, or improvement, for or relating to the manufacture, assembly or test of a semiconductor device.

 

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“ Semiconductor Product ” means any semiconductor product or other product made using a Semiconductor Process, such as discretes, integrated circuits, MEMS Products and radio frequency identification products. Semiconductor Product also means chipsets or combinations of discretes and/or integrated circuits which are incorporated in board-level products, or in assemblies or systems, but in any event does not mean any portion of any such board-level product, assembly or system which is not a chipset, discrete or integrated circuit. Semiconductor Products includes any software which is incorporated in, or specific to any of the foregoing which are Semiconductor Products.

“ Sensor Business ” means the business conducted by the Sensor business unit of Seller and Seller’s Subsidiaries involving the design, development, sale, manufacturing and marketing of Sensor Products (excluding the Tire Pressure Sensor Products).

“ Sensor Products ” means (i) pressure, position, force, gas or acceleration sensors or pressure switches, in each case for transportation, industrial or heating, ventilation, air conditioning or refrigeration applications or (ii) sensor products intended for applications that are addressed by products currently marketed or under development by the Sensors business unit of Seller and its Subsidiaries.

“ Shares ” means all of the outstanding shares of capital stock of, or other equity interests in, the Purchased Subsidiaries.

“ Subsidiary ” means, with respect to any Person, any entity of which, and only for so long as, securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.

“ Tax ” means (i) any tax, governmental fee or other like assessment or charge of any kind whatsoever (including withholding on amounts paid to or by any Person), together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority (a “ Taxing Authority ”) responsible for the imposition of any such tax (domestic or foreign), or (ii) Liability for the payment of any amounts of the type described in (i) as a result of being party to any agreement or any express or implied obligation to indemnify any other Person.

“ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

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“Transaction Documents ” means this Agreement, the Assignment and Assumption Agreement, the Cross License Agreement, the License Side Agreement and the Transition Services Agreement.

“ Transferred Indebtedness ” means the Indebtedness listed in Section 1.01(b) of the Disclosure Schedule.

“ Transition Services Agreement ” means a Transition Services Agreement between Buyer and Seller in substantially the form attached hereto as Exhibit C with such changes as Buyer and Seller may agree upon.

(b) Each of the following terms is defined in the Section set forth opposite such term:

 

 

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Section 1.02 . Other Definitional and Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. When the words “not to be unreasonably withheld” are used in this Agreement, they shall be deemed to be followed by the phrase “, conditioned or delayed”, whether or not they are in fact followed by that phrase or a phrase of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person.

 

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References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “law” or “laws” shall be deemed to include any and all Applicable Law.

ARTICLE 2

P URCHASE A ND S ALE

Section 2.01. Purchase and Sale of the Shares . Upon the terms and subject to the conditions of this Agreement, Seller agrees to, and to cause its Subsidiaries to, sell to Buyer, and Buyer agrees to purchase from Seller and its Subsidiaries, the Shares at the Closing.

Section 2.02 . Purchase and Sale of the Purchased Assets. Except as otherwise provided below, upon the terms and subject to the conditions of this Agreement, Buyer agrees to purchase from Seller and the Retained Subsidiaries and Seller agrees to, and to cause the Retained Subsidiaries to, sell, convey, transfer, assign and deliver, or cause to be sold, conveyed, transferred, assigned and delivered, to Buyer at the Closing, free and clear of any Liens, other than Permitted Liens, all of Seller’s and the Retained Subsidiaries’ right, title and interest in, to and under all of the assets, rights, properties and business, of every kind and description, owned, held or used primarily in the conduct of the Business by Seller or any of the Retained Subsidiaries as the same shall exist on the Closing Date, except for the Excluded Assets (the “ Purchased Assets ”). The Purchased Assets include all right, title and interest of Seller and the Retained Subsidiaries in, to and under the following that are owned, held or used primarily in the conduct of the Business:

(a) the Owned Real Property and the Leased Real Property (including all Leasehold Improvements thereon) listed in Section 3.13 of the Disclosure Schedule;

(b) all personal property and interests therein (including machinery, equipment, furniture, office furnishings and vehicles) located at (i) the Owned Real Property and Leased Real Property described in clause (a) above or (ii) that portion of any facility used by the Business other than such Owned Real Property or Leased Real Property;

(c) all raw materials, work-in-process, finished goods, supplies, spare parts, packaging and other inventories, except for work-in-process and finished goods produced by any Retained Business for which the Business has not yet taken ownership in accordance with the commercial arrangements relating thereto, but including work-in-process and finished goods produced by the Business for which the Retained Businesses have not yet taken ownership in accordance with the commercial arrangements relating thereto;

 

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(d) all rights (including rights in respect of non-performance or breach) under all contracts, agreements, leases, licenses (excluding Portfolio Cross-Licenses), commitments, sales and purchase orders and other instruments, including all contracts listed in Section 3.10 of the Disclosure Schedule (collectively, the “ Contracts ”), including the capital lease relating to the Attleboro, Massachusetts facility;

(e) all trade accounts receivable and other receivables;

(f) all prepaid assets;

(g) all of the Shares;

(h) all Business Intellectual Property Rights;

(i) all licenses, permits, qualifications or other governmental authorizations transferable without consent of any Governmental Authority and such other licenses, permits, qualifications, or other governmental authorizations for which consent to transfer is obtained on or prior to (or, pursuant to Section 2.07, after) the Closing Date;

(j) all books, records, files and papers, whether in hard copy or computer format, including any information relating to any Tax imposed on the Purchased Assets or a Purchased Subsidiary;

(k) sales and promotional literature, customer lists, and other sales and marketing-related materials; and

(l) all claims, causes of action, judgments, reimbursements and demands.

Section 2.03. Excluded Assets . Buyer expressly understands and agrees that the following assets and properties of Seller and the Retained Subsidiaries (the “ Excluded Assets ”) shall be excluded from the Purchased Assets:

(a) all of Seller’s and the Retained Subsidiaries’ cash and cash equivalents on hand and in banks (except for such amounts, if any, as the parties may agree will be retained by the Purchased Subsidiaries and not constitute Purchased Subsidiary Pre-Closing Cash (the “ Transferred Cash ”));

 

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(b) insurance policies relating to the Business and all claims, credits, causes of action or rights thereunder (except for Buyer’s rights under Section 5.05);

(c) all Intellectual Property Rights (other than the Business Intellectual Property Rights), including the marks and names set forth in Section 2.03 of the Disclosure Schedule (the “ Seller Trademarks and Tradenames ”), and including all royalties and/or other license payments under any Portfolio Cross-License;

(d) all books, records, files and papers, whether in hard copy or computer format, prepared in connection with this Agreement or the transactions contemplated hereby (other than confidentiality agreements with any Person relating to the Business, copies of which will be made available to Buyer at the Closing (it being understood that the portion of such copies not relating to the Business may be redacted)) and all minute books and corporate records of Seller and the Retained Subsidiaries;

(e) the property and assets described in Section 2.03 of the Disclosure Schedule;

(f) all rights of Seller or any of the Retained Subsidiaries arising under the Transaction Documents or the transactions contemplated thereby;

(g) all Purchased Assets sold or otherwise disposed of in the ordinary course of business during the period from the date hereof until the Closing Date in compliance with the terms hereof; and

(h) all of Seller’s and the Retained Subsidiaries’ claims for and rights to receive Tax refunds relating to the Business arising on or prior to the Closing Date.

Section 2.04. Assumed Liabilities . Upon the terms and subject to the conditions of this Agreement, Buyer agrees, effective at the time of the Closing, to assume all contracts and Liabilities of Seller or any of the Retained Subsidiaries of any kind, character or description (whether known or unknown, accrued, absolute, contingent or otherwise) primarily relating to or arising out of the Purchased Assets or the conduct of the Business, except for the Excluded Liabilities (the “ Assumed Liabilities ”), including the following:

(a) all Liabilities set forth on the Latest Balance Sheet to the extent not satisfied prior to the Closing Date;

 

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(b) subject to Section 2.07, all Liabilities of Seller or any of the Retained Subsidiaries arising under the Contracts;

(c) all Environmental Liabilities (other than the Excluded Environmental Liabilities);

(d) all Liabilities arising out of any action, suit, investigation or proceeding before any arbitrator or any Governmental Authority, including all actions, suits, investigations and proceedings listed in Section 3.11 of the Disclosure Schedule;

(e) all Liabilities relating to any products manufactured or sold on or prior to the Closing Date, including warranty obligations and product Liabilities;

(f) all Liabilities and commitments assumed by Buyer, or for which Buyer is otherwise responsible, pursuant to Section 8.02;

(g) the Transferred Indebtedness; and

(h) all Liabilities and commitments relating to current or former Business Employees, other than any such Liabilities and commitments that are expressly excluded pursuant to Section 2.05(d).

Buyer’s obligations under this Section 2.04 shall not be subject to offset or reduction, whether by reason of any actual or alleged breach of any representation, warranty or covenant contained in the Transaction Documents or any other agreement or document delivered in connection herewith or therewith or any right to indemnification hereunder or otherwise.

Section 2.05. Excluded Liabilities . Buyer is assuming only the Assumed Liabilities from Seller and the Retained Subsidiaries and is not assuming any other Liability of Seller or any of the Retained Subsidiaries of whatever nature, whether presently in existence or arising hereafter. All such other Liabilities shall be retained by and remain Liabilities of Seller or the Retained Subsidiaries, as applicable (all such Liabilities not being assumed being herein referred to as the “ Excluded Liabilities ”), including the following (which shall be Excluded Liabilities):

(a) all Liabilities to the extent arising out of or relating to the operation or conduct by Seller or any of its Subsidiaries of any Retained Business;

(b) all Liabilities to the extent arising out of or relating to any Excluded Asset;

 

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(c) all Liabilities and commitments in respect of Taxes, other than those Liabilities and commitments for which Buyer is responsible pursuant to Section 8.02;

(d) all Liabilities and commitments relating to (i) current or former employees of Seller, any of the Purchased Subsidiaries or any of the Retained Subsidiaries other than, in each case, Business Employees, (ii) current or former Business Employees (A) that are expressly retained by Seller pursuant to Article 9 or Section 2.05(d) of the Disclosure Schedule or (B) for which a specific prepaid asset ( e.g. , an insurance policy), if any, is not sold, conveyed, transferred, assigned or delivered to Buyer, subject to the terms and conditions of the applicable Employee Plan or International Plan (in the case of a Liability or commitment relating to an Employee Plan or International Plan); (iii) Business Employees who, as of the Closing Date, are on a leave of absence resulting from a reduction in force or a “bridging” of age and/or service credit for purposes of an Employee Plan; (iv) compensation deferred by Business Employees prior to the Closing Date; (v) in respect of former Business Employees, the Seller Supplemental Pension Plan and (vi) stock option and other equity-based compensation plans of Seller;

(e) all Indebtedness (other than the Transferred Indebtedness) including all Liabilities arising out of or relating to any guarantee or consignment arrangements involving Seller and Engineered Materials Solutions, Inc., other than the Replacement Guarantee;

(f) all obligations to any broker, finder or agent for any investment banking or brokerage fees, finders fees or commission relating to the transactions contemplated by this Agreement and any other fees and expenses for which Seller is responsible pursuant to Section 13.03;

(g) all indemnification obligations owed to any Person who is or was an officer or director of Seller or any Subsidiary prior to the Closing in respect of actions or omissions occurring prior to the Closing;

(h) all Liabilities incurred in connection with effecting the Restructuring (including Transfer Taxes and the cost of obtaining required consents from third parties);

(i) all Excluded Environmental Liabilities;

(j) all obligations under employee benefit arrangements, employment agreements or other similar arrangements which come due as a result of the transactions contemplated hereby, including any stay or transaction bonus; and

 

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(k) all Liabilities arising out of intentional violations of Applicable Law that are punishable by a material criminal fine or imprisonment.

Section 2.06 . Restructuring. (a) Prior to the Closing, Seller shall cause:

(i) each Purchased Subsidiary to convey, transfer, assign and deliver to Seller or a Retained Subsidiary all of such Purchased Subsidiary’s right, title and interest in, to and under (A) the assets, properties and business, of every kind and description, that are not owned, held or used primarily in the conduct of the Business by such Purchased Subsidiary, including all right, title and interest of such Purchased Subsidiary in, to and under the assets and properties listed in Section 2.06(a)(i) of the Disclosure Schedule and (B) all cash and cash equivalents on hand and in banks as of the close of business on the Business Day immediately prior to the Closing Date except for any Transferred Cash (the “ Purchased Subsidiary Pre-Closing Cash ”). All such assets, properties and business shall be deemed to be Excluded Assets for all purposes of this Agreement. Notwithstanding anything to the contrary in this Section or elsewhere in this Agreement, prior to the Closing Seller shall not, and shall cause its Subsidiaries not to, directly or indirectly convey, transfer, assign or deliver, nor enter into any transaction or series of transactions having the purpose or effect of directly or indirectly transferring, dividending, distributing or otherwise repatriating, any Purchased Subsidiary Pre-Closing Cash, in each case to the extent such action or transaction would have any Economic Detriment;

(ii) all contracts and Liabilities of each Purchased Subsidiary of any kind, character or description (whether known or unknown, accrued, absolute, contingent or otherwise) that do not primarily relate to or arise out of the conduct of the Business or which are Purchased Subsidiary Liabilities, including all contracts and Liabilities listed in Section 2.06(a)(ii) of the Disclosure Schedule, to be assumed by Seller or a Retained Subsidiary. All of such contracts and Liabilities shall be deemed to be Excluded Liabilities for all purposes of this Agreement; and

(iii) each Purchased Subsidiary to transfer to Seller or a Retained Subsidiary (or otherwise terminate the employment of) any employee who is not a Business Employee. For the avoidance of doubt, all Liabilities and commitments relating to such employees shall be deemed to be Excluded Liabilities for all purposes of this Agreement.

(b) If the transactions contemplated by Section 2.06(a) (the “ Restructuring ”) are not completed on or prior to the Closing Date, then

 

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(i) the Closing shall nonetheless be consummated (unless the Restructuring has not been consummated with respect to TI Korea, in which case the Closing shall not be consummated until the Restructuring with respect to TI Korea has been completed) and the Shares transferred to Buyer, but if the Restructuring has not been completed with respect to TI Italia, then the Shares of TI Italia shall be retained by Seller and shall not be transferred to Buyer at the Closing;

(ii) each of Buyer and Seller shall, and shall cause its Subsidiaries to, use its reasonable efforts (but without the payment of money by Buyer) to complete the Restructuring as soon as reasonably practicable following the Closing Date, including Buyer causing the Purchased Subsidiaries to implement arrangements (such as, for example, payment of dividends or the making of intercompany loans) to facilitate the transfer of any remaining Purchased Subsidiary Pre-Closing Cash to Seller; provided that Buyer and its Affiliates (including the Purchased Subsidiaries) will not be required to take any action that would have an Economic Detriment. In addition, following the Closing Buyer shall, and shall cause the Purchased Subsidiaries to, hold all Purchased Subsidiary Pre-Closing Cash in segregated accounts (and provide Seller with monthly statements for such accounts promptly following receipt thereof) and take reasonable steps to ensure that other cash of the Business will not be comingled with the Purchased Subsidiary Pre-Closing Cash;

(iii) Seller shall receive the benefits of each Excluded Asset and bear the burdens of ownership of each Excluded Liability with respect to which the Restructuring has not been completed prior to the Closing from and including the Closing Date to and including the date on which the Restructuring is completed thereto (with any costs or expense associated with such arrangements incremental to what Buyer would bear had the Restructuring occurred at Closing to be borne by Seller);

(iv) if the Shares of TI Italia are not transferred to Buyer at the Closing in accordance with clause (i) above, (A) Buyer shall receive the benefits and bear the burdens of ownership of the Business to the extent conducted by TI Italia from and including the Closing Date to and including the date on which such Shares are so transferred to Buyer (with any costs or expense associated with such arrangements incremental to what Buyer would bear had the Restructuring occurred at the Closing to be borne by Seller) and (B) Seller shall transfer such Shares to Buyer (in the manner contemplated by Section 2.09(c)(v)) without the payment by Buyer of any additional consideration therefor promptly following the completion of the Restructuring with respect to TI Italia; and

 

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(v) Seller and Buyer shall cooperate in a mutually agreeable manner and enter into such amendments to the Transaction Documents and additional agreements as may be reasonably necessary so as to implement the foregoing.

Section 2.07. Limitation on Assignment of Purchased Assets . Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Purchased Asset or any right thereunder as to which the transfer or attempted assignment, without obtaining any Consent of, or other action by, any third party or any Governmental Authority, would constitute a breach or in any way adversely affect the rights of Buyer or Seller or any of their respective Affiliates thereunder or subject any of the foregoing to civil or criminal liability. Seller and Buyer will use their reasonable efforts (but without any payment of money by Buyer) to obtain the Consent of the other parties to any such Purchased Asset or any claim or right or any benefit arising thereunder for the assignment thereof to Buyer as Buyer may request. If such Consent is not obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of Seller or its Affiliates thereunder so that Buyer would not in fact receive all such rights, Seller and Buyer will cooperate in an arrangement reasonably acceptable to both parties under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement in the same manner as if such Purchased Asset were transferred to Buyer at the Closing, including sub-contracting, sub-licensing, or sub-leasing to Buyer, or under which Seller would enforce for the benefit of Buyer, with Buyer assuming Seller’s obligations, any and all rights of Seller or its Affiliates against a third party thereto (with any out-of-pocket incremental costs or expenses associated with such arrangements to be borne by Seller). Seller will promptly pay to Buyer when received all monies received by Seller under any Purchased Asset or any claim or right or any benefit arising thereunder, except to the extent the same represents an Excluded Asset. Seller will continue to use its reasonable efforts to obtain any such required Consent or approval, and promptly upon receipt of such Consent will transfer and assign such Purchased Asset and such rights therein to Buyer without the payment by Buyer of any additional consideration.

Section 2.08. Purchase Price; Allocation of Purchase Price . (a) The purchase price for the Purchased Assets and the Shares (the “ Purchase Price ”) is $3,000,000,000 (three billion dollars) in cash. The Purchase Price shall be paid as provided in Section 2.09 and shall be subject to adjustment as provided in Sections 2.09 and 2.11. Seller shall be treated as receiving a portion of the Purchase Price as agent for its Affiliates actually selling the Purchased Assets and the Shares consistent with the allocation of the Purchase Price pursuant to the Allocation Statement.

 

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(b) As soon as practicable after the Closing, Buyer shall deliver to Seller a statement (the “ Allocation Statement ”), allocating the Purchase Price (plus Assumed Liabilities, to the extent properly taken into account under Section 1060 of the Code) among the Purchased Assets and the Shares in accordance with Section 1060 of the Code and the principles and methodology set forth and illustrated in Section 2.08 of the Disclosure Schedule (the “ Allocation Methodology ”); provided that the parties may agree to amend or adjust such methodology to the extent that the parties mutually determine necessary to properly reflect the fair market value of the Purchased Assets and the Shares. If within 10 days after the delivery of the Allocation Statement Seller notifies Buyer in writing that Seller objects to the allocation set forth in the Allocation Statement because it is inconsistent with the Allocation Methodology, Buyer and Seller shall use their best efforts to revise the allocation specified in the Allocation Statement to the mutual satisfaction of Buyer and Seller within 20 days. In the event that Buyer and Seller are unable to resolve such dispute within 20 days, Buyer and Seller shall jointly retain Deloitte & Touche LLP (the “ Accounting Referee ”) to resolve the disputed items and the Accounting Referee shall determine an allocation that is most consistent with the Allocation Methodology. Upon resolution of the disputed items, the allocation reflected on the Allocation Statement shall be adjusted to reflect such resolution. The costs, fees and expenses of such Accounting Referee shall be borne equally by Buyer and Seller. If any Taxing Authority or other Governmental Authority requires a third party appraisal of all or part of the Purchased Assets or the Shares, Buyer shall bear the responsibility for obtaining such appraisal and the allocation set forth on the Allocation Statement shall be adjusted to the extent necessary to reflect the results of such appraisal.

(c) Seller and Buyer agree to (i) be bound by the Allocation Statement (as it may be adjusted as provided in Section 2.08(b)) and (ii) act in accordance with the allocation established pursuant to Section 2.08(b) in the preparation, filing and audit of any Tax return (including filing Form 8594 with its federal income Tax return for the taxable year that includes the date of the Closing).

(d) If an adjustment is made with respect to the Purchase Price pursuant to Section 2.11, the Allocation Statement shall be adjusted by mutual agreement of the parties in accordance with Section 1060 of the Code and the Allocation Methodology. In the event that an agreement is not reached within 20 days after the determination of Final Working Capital, any disputed items shall be resolved in the manner described in Section 2.08(b). Buyer and Seller agree to file any additional information return required to be filed pursuant to Section 1060 of the Code and to treat the Allocation Statement as adjusted in the manner described in Section 2.08(b).

 

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(e) Not later than 30 days prior to the filing of their respective Forms 8594 relating to this transaction, each party shall deliver to the other party a copy of its Form 8594.

Section 2.09. Closing . (a) The closing (the “ Closing ”) of the purchase and sale of the Shares and the Purchased Assets and the assumption of the Assumed Liabilities hereunder shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, as soon as possible, but in no event later than five Business Days, after satisfaction (or, to the extent permitted by Applicable Law, waiver) of the conditions set forth in Article 10 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or, to the extent permitted by Applicable Law, waiver of those conditions), or at such other time or place as Buyer and Seller may agree.

(b) At least five Business Days prior to the Closing Date, Seller shall deliver to Buyer a certificate setting forth Seller’s good faith estimate of Closing Working Capital (such estimate, the “ Estimated Working Capital ”); provided that Estimated Working Capital shall not in any event exceed $200,000,000.

(c) At the Closing:

(i) Buyer shall deliver to Seller, in immediately available funds by wire transfer to an account or accounts designated by Seller by notice to Buyer not later than two Business Days prior to the Closing Date, an amount equal to the Purchase Price (A)  plus , as an adjustment to the Purchase Price, if Estimated Working Capital exceeds Base Working Capital, the amount of such excess or (B)  minus , as an adjustment to the Purchase Price, if Base Working Capital exceeds Estimated Working Capital, the amount of such excess;

(ii) Seller and Buyer shall enter into the Transaction Documents (other than this Agreement and the License Side Agreement);

(iii) Seller shall, or shall cause its Subsidiaries to, deliver to Buyer certificates for the Shares (to the extent that the Shares are represented by certificates) duly endorsed or accompanied by stock powers duly endorsed in blank, with any required transfer stamps affixed thereto;

(iv) Seller shall deliver certificates, in form and substance reasonably satisfactory to Buyer, from Seller and its relevant Subsidiaries, duly executed and acknowledged, certifying that the transactions contemplated by this Agreement are exempt from withholding under Section 1445 of the Code;

 

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(v) Seller shall deliver an opinion of its internal counsel, which opinion shall be in customary form, subject to customary assumptions and exceptions and otherwise reasonably acceptable to Buyer, with respect to the corporate existence of Seller and the corporate authorization of Seller and non-contravention of Seller’s organizational documents with respect to the execution, delivery and performance by Seller of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby; and

(vi) Seller shall, or shall cause its Subsidiaries to, deliver to Buyer such deeds, bills of sale, endorsements, consents, assignments and other good and sufficient instruments of conveyance and assignment as the parties and their respective counsel shall deem reasonably necessary to vest in Buyer all right, title and interest in, to and under the Purchased Assets and to evidence Buyer’s assumption of the Assumed Liabilities.

Section 2.10. Closing Statement . (a) As promptly as practicable, but no later than 75 days, after the Closing Date, Seller will cause to be prepared and delivered to Buyer a closing statement (the “ Closing Statement ”) prepared in accordance with the Accounting Policies, with such adjustments as are set forth in Section 2.10(a) of the Disclosure Schedule, and setting forth the current portion of a balance sheet for the Business as of the Closing and Seller’s calculation of Closing Working Capital as of the close of business on the date immediately preceding the Closing Date. “ Closing Working Capital ” means, with respect to the Business, the excess of (i) Transferred Cash, accounts receivable, inventory and prepaid expenses and other current assets of the Business that constitute either Purchased Assets or assets of the Purchased Subsidiaries that are not Excluded Assets, less (ii) accounts payable, accrued expenses and other current liabilities of the Business that constitute (A) Assumed Liabilities, (B) payables, expenses or liabilities of the Purchased Subsidiaries that are not Excluded Liabilities or Purchased Subsidiary Liabilities or (C) payables, expenses or Liabilities for social security and other employee taxes and value added, sale and use taxes of the Purchased Subsidiaries, excluding the effect (including the Tax effect) of any act, event or transaction after the Closing not in the ordinary course of business of the Business and any provision for deferred income Tax assets or liabilities. Section 2.10(a) of the Disclosure Schedule (the “ Sample Working Capital Calculation ”) sets forth, for illustrative purposes only, an example of the calculation of Closing Working Capital as of December 31, 2004.

(b) If Buyer disagrees with Seller’s calculation of Closing Working Capital delivered pursuant to Section 2.10(a), Buyer may, within 45 days after delivery of the documents referred to in Section 2.10(a), deliver a notice to Seller disagreeing with such calculation and which specifies Buyer’s calculation of such amount and, in reasonable detail, Buyer’s grounds for such disagreement. Any such notice of disagreement shall specify those items or amounts as to which

 

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Buyer disagrees (each, a “ Disputed Item ”), and Buyer shall be deemed to have agreed with all other items and amounts contained in the Closing Statement and the calculation of Closing Working Capital delivered pursuant to Section 2.10(a).

(c) If a notice of disagreement shall be duly delivered pursuant to Section 2.10(b), Buyer and Seller shall, during the 15 days following such delivery, use their reasonable efforts to reach agreement on the Disputed Items or amounts in order to determine Closing Working Capital. If Buyer and Seller are unable to reach such agreement during such period, they shall promptly thereafter jointly retain the Accounting Referee and cause the Accounting Referee promptly to review this Agreement and the Disputed Items for the purpose of calculating Closing Working Capital. In making such calculation, the Accounting Referee shall consider only the Disputed Items, and the determination of the Accounting Referee with respect to each Disputed Item shall be an amount within the range established with respect to such Disputed Item by Seller’s calculation delivered pursuant to Section 2.10(a), on the one hand, and Buyer’s calculation delivered pursuant to Section 2.10(b), on the other hand. The Accounting Referee shall deliver to Buyer and Seller, as promptly as practicable, a report setting forth such calculation. Such report shall be final and binding upon Buyer and Seller (absent manifest error). The cost of such review and report shall be borne (i) by Seller if the difference between Final Working Capital and Closing Working Capital as set forth in Seller’s calculation of Closing Working Capital delivered pursuant to Section 2.10(a) is greater than the difference between Final Working Capital and Closing Working Capital as set forth in Buyer’s calculation of Closing Working Capital delivered pursuant to Section 2.10(b), (ii) by Buyer if the first such difference is less than the second such difference and (iii) otherwise equally by Buyer and Seller.

(d) Buyer and Seller agree that they will cooperate and assist in the preparation of the Closing Statement and the calculation of Closing Working Capital and in the conduct of the reviews referred to in this Section 2.10, including by making available to the other party and its Representatives, to the extent reasonably requested, reasonable access to books, records, work papers, personnel and Representatives in connection with such party’s review and preparation of the Closing Statement. If Seller fails to substantially comply in a timely manner with requests made by Buyer pursuant to the immediately preceding sentence, the 45-day objection period referred to in Section 2.10(b) shall be extended for such period of time as is reasonably necessary to enable Buyer to complete its review of the Closing Statement.

Section 2.11. Adjustment of Purchase Price . (a) If Estimated Working Capital exceeds Final Working Capital, Seller shall pay to Buyer, as an adjustment to the Purchase Price, in the manner and with interest as provided in Section 2.11(b), the amount of such excess. If Final Working Capital exceeds Estimated Working Capital, Buyer shall pay to Seller, in the manner and with

 

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interest as provided in Section 2.11(b), the amount of such excess. “ Final Working Capital ” means Closing Working Capital (i) as shown in Seller’s calculation delivered pursuant to Section 2.10(a) if no notice of disagreement with respect thereto is duly delivered pursuant to Section 2.10(b); or (ii) if such a notice of disagreement is delivered, (A) as agreed by Buyer and Seller pursuant to Section 2.10(c) or (B) in the absence of such agreement, as shown in the Accounting Referee’s calculation delivered pursuant to Section 2.10(c); provided that in no event shall Final Working Capital be more than Seller’s calculation of Closing Working Capital delivered pursuant to Section 2.10(a) or less than Buyer’s calculation of Closing Working Capital delivered pursuant to Section 2.10(b).

(b) Any payment pursuant to Section 2.11(a) shall be made at a mutually convenient time and place within 10 days after Final Working Capital has been determined by delivery by Buyer or Seller, as the case may be, by wire transfer of immediately available funds to such account or accounts of such other party as may be designated by such other party. The amount of any payment to be made pursuant to this Section 2.11 shall bear interest from and including the Closing Date to but excluding the date of payment at a rate per annum equal to the Prime Rate as published in The Wall Street Journal in effect as of the Closing Date. Such interest shall be payable at the same time as the payment to which it relates and shall be calculated on the basis of a year of 365 days and the actual number of days elapsed.

ARTICLE 3

R EPRESENTATIONS AND W ARRANTIES OF S ELLER

Except as set forth in the Disclosure Schedule, Seller represents and warrants to Buyer, as of the date hereof and as of the Closing, that:

Section 3.01. Corporate Existence and Power . Seller is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate powers and all material governmental licenses, authorizations, permits, consents and approvals required to carry on the Business as now conducted.

Section 3.02. Corporate Authorization . The execution, delivery and performance by Seller of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby are within Seller’s corporate powers and authority and have been duly authorized by all necessary corporate action on the part of Seller. This Agreement has been duly and validly executed and delivered by Seller and constitutes a valid and binding agreement of Seller. Each other Transaction Document will be duly and validly executed by Seller at or prior to the Closing and, upon such execution and delivery by Seller

 

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and the due and valid execution and delivery of such Transaction Document by each other party thereto, will constitute a valid and binding agreement of Seller, enforceable against Seller in accordance with its terms.

Section 3.03. Governmental Authorization . The execution, delivery and performance by Seller of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby require no action by or in respect of, or filing with, any Governmental Authority other than (i) compliance with any applicable requirements of the HSR Act, any other Competition Laws and the 1934 Act and (ii) any such action or filing as to which the failure to make or obtain would not be material to the Business.

Section 3.04. Noncontravention . The execution, delivery and performance by Seller of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby do not and will not (i) violate the certificate of incorporation or bylaws of Seller or any Subsidiary, (ii) assuming compliance with the matters referred to in Section 3.03, violate any Applicable Law in any material respect, (iii) assuming the obtaining of all Required Consents, constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation or to a loss of any benefit relating to the Business to which Seller or any of its Subsidiaries is entitled under any provision of any agreement or other instrument binding upon Seller or any of its Subsidiaries, except for such matters as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or (iv) result in the creation or imposition of any Lien on any Purchased Asset, except for Permitted Liens.

Section 3.05. Required Consents . Section 3.05 of the Disclosure Schedule sets forth each agreement required to be set forth in Section 3.10(a) of the Disclosure Schedule requiring a consent or other action by any Person as a result of the execution, delivery and performance of this Agreement (the “ Required Consents ”).

Section 3.06 . Purchased Subsidiaries. (a) Each Purchased Subsidiary is duly organized and validly existing under the laws of its jurisdiction of organization and has all organizational powers and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted.

(b) All of the Shares are owned beneficially and of record by Seller and its Subsidiaries, free and clear of any Lien, and Seller or its Subsidiaries, as applicable, will transfer and deliver to Buyer at the Closing valid title to the Shares free and clear of any Lien. There are no outstanding (i) securities of Seller or any Subsidiary convertible into or exchangeable for shares of capital stock or voting securities of any Purchased Subsidiary or (ii) options or other rights to

 

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acquire from Seller or any Purchased Subsidiary, or other obligation of Seller or any Subsidiary to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of any Purchased Subsidiary (the items in clauses 3.06(b)(i) and 3.06(b)(ii) being referred to collectively as the “ Purchased Subsidiary Securities ”). There are no outstanding obligations of Seller or any Subsidiary to repurchase, redeem or otherwise acquire any outstanding Purchased Subsidiary Securities. No applicable securities law was violated in connection with the offering, sale or issuance of the Shares to Seller or any of its Subsidiaries. None of the Shares have been issued in violation of, and none are subject to, any purchase option, call, right of first refusal, preemptive, subscription, or other similar right. Neither the Seller nor any of its Subsidiaries is party to any arrangement granting to any Person any stock appreciation, phantom stock or other similar right with respect to the Shares or the Purchased Subsidiaries.

Section 3.07. Financial Statements . The audited balance sheets as of December 31, 2003 and December 31, 2004 and the related audited statements of income and cash flows for the years ended December 31, 2003 and December 31, 2004, and the unaudited interim balance sheet as of September 30, 2005 and the related unaudited interim statements of income and cash flows for the nine months ended September 30, 2005 for the Business, true and complete copies of which are set forth in Section 3.07 of the Disclosure Schedule, together with the Supplemental Financial Statements delivered pursuant to Section 5.02(a), fairly present, in conformity with GAAP applied on a consistent basis and the books and records of the Business (except as may be indicated in the notes thereto), the financial position of the Business as of the dates thereof and its results of operations and cash flows for the periods then ended (subject to normal year-end adjustments and the absence of notes in the case of any unaudited interim financial statements, none of which would be, individually or in the aggregate, material).

Section 3.08. Absence of Certain Changes . Since the Balance Sheet Date, the Business has been conducted in the ordinary course consistent with past practices and there has not been:

(a) any event, occurrence or development which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect;

(b) any incurrence, assumption or guarantee by Seller or any of its Subsidiaries of any Indebtedness with respect to the Business other than in the ordinary course of business consistent with past practices;

 

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(c) any creation or other incurrence of any Lien on any material Purchased Asset or any material asset of any Purchased Subsidiary other than Permitted Liens;

(d) any transaction or commitment made, or any contract or agreement entered into, by Seller or any of its Subsidiaries relating to and material to the Business, other than transactions and commitments in the ordinary course of business consistent with past practices and those contemplated by the Transaction Documents;

(e) any material change in any method of accounting or accounting practice by Seller or any of its Subsidiaries with respect to the Business except for any such change required by reason of a concurrent change in GAAP;

(f) any (i) employment, deferred compensation, severance, retirement or other similar agreement entered into with any (A) executive Business Employee or (B) any non-executive Business Employee whose annual base salary exceeds $125,000 (or any amendment to any such existing agreement), (ii) grant of any severance or termination pay to any such Business Employee or (iii) increase in compensation payable to any such Business Employee, in each case for non-executive Business Employees other than in the ordinary course of business consistent with past practices;

(g) any material damage, casualty, or loss with respect to any of the Purchased Assets in excess of $3,000,000, other than those covered by insurance;

(h) any sale, transfer, lease, license, or other disposal of any assets of the Business or of any Purchased Subsidiary for an amount in excess of $3,000,000, other than the sale of inventory and obsolete equipment in the ordinary course of business consistent with past practice;

(i) any material reduction in capital expenditures relative to the capital expenditure budget in a manner inconsistent with past practices;

(j) any acceleration of collection of accounts receivable or delaying of payment of accounts payable, in each case in any material respect and other than in the ordinary course of business consistent with past practice;

 

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(k) any extension of Indebtedness to any Person in connection with the Business in excess of $5,000,000 in the aggregate other than the creation of accounts receivable in the ordinary course of Business; or

(l) any amendment, termination, cancellation, or compromise or any material claims relating to the Business, or waiver of any right that is material to the Business.

Section 3.09 . No Undisclosed Material Liabilities. There are no Liabilities of the Seller or its Subsidiaries (including the Purchased Subsidiaries) relating to or arising out of the Purchased Assets or the conduct of the Business, that in each case would constitute Assumed Liabilities at the Closing or any Purchased Subsidiary Liability, of any kind, other than:

(a) Liabilities provided for in the Latest Balance Sheet or disclosed in the notes thereto;

(b) Liabilities disclosed in the Disclosure Schedule;

(c) Liabilities arising in the ordinary course of business in accordance with the terms of any contract or agreement binding upon the Business;

(d) Liabilities (other than for tort) incurred in the ordinary course of business since the date of the Latest Balance Sheet; and

(e) other undisclosed Liabilities which, individually or in the aggregate, are not material to the Business;

provided that Seller shall have no liability under this Section 3.09 with respect to any subject matter as to which another Section in this Article 3 (other than Section 3.11) contains a specific representation.

Section 3.10. Material Contracts . (a) With respect to the Business, neither Seller nor any of its Subsidiaries is a party to or bound by:

(i) any lease (whether of real or personal property) requiring (A) annual rentals of $5,000,000 or more or (B) aggregate payments by or to Seller and its Subsidiaries of $10,000,000 or more, in the case of each of clauses (A) and (B) that cannot be terminated on not more than 120 days’ notice without payment by any of Seller or its Subsidiaries of any material penalty;

(ii) except for the agreements described in clause (iii) below, any agreement for the purchase of materials, supplies, goods, services, equipment or other assets, or any other agreement under which either (A)

 

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since January 1, 2005 there have been payments to or by Seller or any of its Subsidiaries of $5,000,000 or more or (B) aggregate payments to or by Seller or any of its Subsidiaries of $10,000,000 or more are required, in each case that cannot be terminated on not more than 120 days’ notice without payment by Seller or any of its Subsidiaries of any material penalty;

(iii) except for the agreements described in clause (ii) above, any sales, distribution or other similar agreement providing for the sale to or by Seller or any of its Subsidiaries of materials, supplies, goods, services, equipment or other assets under which since January 1, 2005 there have been payments by or to Seller or any of its Subsidiaries of $5,000,000 or more;

(iv) any material partnership, joint venture or other similar agreement or arrangement;

(v) any agreement relating to the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets or otherwise) or any assets involving consideration in excess of $5,000,000, except for purchases of inventory, capital expenditures or sales of inventory or obsolete equipment, in each case in the ordinary course of business consistent with past practices;

(vi) any agreement relating to the incurrence of Indebtedness, except any such agreement (A) with an aggregate outstanding principal amount not exceeding $5,000,000 or (B) entered into subsequent to the date of, and not in violation of, this Agreement;

(vii) any material agreement between the Business on the one hand, and other business units of Seller or any Affiliate of Seller, on the other hand, that will not be terminated at or prior to the Closing without creation of any liability that would be an Assumed Liability;

(viii) any employment, deferred compensation, severance, retirement or other similar agreement entered into with any executive Business Employee or any other Business Employee whose annual base salary exceeds $125,000;

(ix) any agreement relating to the extension of Indebtedness to, or the making of an equity investment in, any Person, in each case in excess of $5 million in the aggregate, other than the creation of accounts receivable in the ordinary course of business;

 

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(x) any agreement that limits in any material respect the freedom of the Business to compete in any line of business or with any Person or in any area, other than confidentiality agreements entered into in the ordinary course of business consistent with past practice; or

(xi) any other agreement not required to be disclosed pursuant to clauses (i) through (x) above the termination or lapse of which would reasonably be expected to have a Material Adverse Effect.

(b) Each Contract required to be set forth in Section 3.10 of the Disclosure Schedule is a valid and binding agreement of Seller or its applicable Subsidiary, and, to the knowledge of Seller, the other parties thereto and is in full force and effect. None of Seller or any of its Subsidiaries or, to the knowledge of Seller, any other party thereto is in default or breach in any respect under the terms of any such Contract, except for any such defaults or breaches which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 3.11. Litigation . There is no action, suit, investigation or proceeding pending by or against, or to the knowledge of Seller, threatened by or against or affecting, the Business or any Purchased Asset or asset of a Purchased Subsidiary before any arbitrator or any Governmental Authority, which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and neither Seller nor its Subsidiaries is bound by any outstanding material order, injunction, judgment, arbitration award, or ruling that is material to the Business.

Section 3.12. Compliance with Laws and Court Orders . Neither Seller nor any of its Subsidiaries is in, or has during the previous three years been in, violation of any Applicable Law relating to the Purchased Assets, the Purchased Subsidiaries or the conduct of the Business, except for violations that have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 3.13. Properties; Liens . (a) Section 3.13 of the Disclosure Schedule lists the street addresses of all Owned Real Property and all Leased Real Property (the “ Real Property ”).

(b) Seller or a Subsidiary of Seller, as the case may be, has good and, subject to Permitted Liens, marketable title to all Owned Real Property and all Leasehold Improvements and a valid leasehold interest in all Leased Real Property. Seller or a Subsidiary of Seller, as the case may be, has good and marketable title, or a valid leasehold interest in, all Purchased Assets and all assets of the Purchased Subsidiaries which constitute personal property, except for properties and assets sold since the Balance Sheet Date in the ordinary course of business consistent with past practices or where the failure to have such good title or valid leasehold interests would not, be material to the Business.

 

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(c) No Purchased Asset or asset of a Purchased Subsidiary is subject to any Lien, except for:

(i) Liens disclosed in Section 3.13 of the Disclosure Schedule;

(ii) Liens disclosed on the Latest Balance Sheet or notes thereto or securing liabilities reflected on the Latest Balance Sheet or notes thereto;

(iii) Liens for Taxes, assessments and similar charges that are not yet due or are being contested in good faith;

(iv) mechanic’s, materialman’s, carrier’s, repairer’s and other similar Liens arising or incurred in the ordinary course of business for amounts that are not yet due and payable or are being contested in good faith; or

(v) other Liens that do not materially interfere with the use of any Owned Real Property or any other asset that is material to the Business (clauses (i) - (v) of this Section 3.13(c) are, collectively, the “ Permitted Liens ”).

(d) All of the Purchased Assets and all assets of the Purchased Subsidiaries are in good operating condition and repair, ordinary wear and tear excepted, other than such states of disrepair which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 3.14. Intellectual Property . (a) Section 3.14(a) of the Disclosure Schedule contains a list of all registrations and applications for registration included in the Business Intellectual Property Rights (the “ Registered Business Intellectual Property Rights ”) and all material licenses (other than the Portfolio Cross-Licenses) or other material agreements relating to the Business Intellectual Property Rights that are included in the Purchased Assets.

(b)(i) Seller or a Subsidiary of Seller owns or has a valid right to use the Business Intellectual Property Rights, (ii) no proceedings have been instituted, are pending or, to the knowledge of Seller, threatened which challenge any rights in respect of any of the Business Intellectual Property Rights or the validity thereof or assert that the operation of the Business infringes the Intellectual Property Rights of any other Person, and (iii) none of the Business Intellectual Property Rights, as used by Seller or its Subsidiaries, or the conduct of the Business as it is currently conducted by Seller or its Subsidiaries infringes upon the Intellectual Property Rights (other than Patents) of others or, to the knowledge of Seller, the Patents of others.

 

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(c) No Business Intellectual Property Right is subject to any outstanding judgment, injunction, order, decree or agreement restricting the use thereof by Seller (or Buyer, to Seller’s knowledge) with respect to the Business or restricting the licensing (except for such restrictions as exist by reason of the Portfolio Cross-Licenses and the Cross-License Agreement) thereof by Seller (or Buyer, to Seller’s knowledge) to any third party.

(d) The Business Intellectual Property Rights together with the Intellectual Property Rights licensed to Buyer pursuant to the Cross License Agreement constitute all of the Intellectual Property Rights other than Patents and, to the knowledge of Seller, all Patents, used by the Business as currently conducted by Seller and its Subsidiaries and, together with those rights and services to be provided by Seller to Buyer pursuant to the Transition Services Agreement, are Intellectual Property Rights other than Patents and, to the knowledge of Seller, Patents sufficient for Buyer to conduct the Business as currently conducted.

Section 3.15 . Sufficiency of Purchased Assets. The Purchased Assets together with the property and assets of the Purchased Subsidiaries (other than those that Seller contemplates transferring out of a Purchased Subsidiary pursuant to Section 2.06(a)(i)) constitute all of the property and assets (tangible and intangible, but excluding all Intellectual Property Rights) used or held for use primarily in the conduct of the Business by Seller or any of its Subsidiaries as it is conducted as of the date hereof except for the Excluded Assets, and, together with the services, occupancy and other rights to be provided to Buyer pursuant to the Transition Services Agreement, are adequate in all material respects for Buyer to conduct the Business as currently conducted by Seller and its Subsidiaries. No representations or warranties are made under this Section 3.15 with respect to Intellectual Property Rights, which are exclusively the subject of Section 3.14. For purposes of Article 11, the accuracy of the representations and warranties in Section 3.14(d) and this Section 3.15 shall be determined without exception or carve-out for the failure to obtain any Consent from any third party or Governmental Authority, whether or not the requirement therefor is disclosed in the Disclosure Schedule; provided that Buyer shall have complied in all material respects with its obligations pursuant to Sections 2.07 and 7.01 with respect to the obtaining of such Consent.

Section 3.16. Permits. Seller and its Subsidiaries possess all material permits, approvals, orders authorizations, consents, licenses, certificates, franchises, exemption of, or filings or registrations with, or issued by, any Governmental Authority necessary for the operation of the Business as currently conducted.

 

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Section 3.17. Finders’ Fees . Except for Morgan Stanley & Co. Incorporated and Lazard Frères & Co. LLC, each of whose fees will be paid by Seller, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Seller who might be entitled to any fee or commission in connection with the transactions contemplated by the Transaction Documents for which Buyer or any of its Affiliates would be responsible.

Section 3.18. Employee Benefit Plans . (a) Seller has made available to Buyer copies of (i) each material Employee Plan together with the most recent annual report (Form 5500 including, if applicable, Schedule B thereto) and Form 990, if applicable, prepared in connection with any such plan and (ii) each material International Plan. Section 3.18 of the Disclosure Schedule sets forth a list of all the material Employee Plans and material International Plans.

(b) None of Seller, any Subsidiary of Seller, any of their ERISA Affiliates or any predecessor thereof, maintains, administers or contributes to, or has in the past maintained, administered or contributed to, any Employee Plan subject to Title IV of ERISA.

(c) None of Seller, any Subsidiary of Seller, any of their ERISA Affiliates or any predecessor thereof contributes to, or has in the past contributed to, any multiemployer plan, as defined in Section 3(37) of ERISA.

(d) Each Employee Plan which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter, or has pending or has time remaining in which to file, an application for such determination from the Internal Revenue Service, and to the knowledge of Seller there is no reason why any such determination letter should be revoked or not be reissued. Seller has made available to Buyer copies of the most recent Internal Revenue Service determination letters with respect to each such Employee Plan. Each Employee Plan has been maintained, funded and administered in compliance with its terms and with any Applicable Law, except for instances of non-compliance as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. With respect to each Employee Plan, all contributions and premium payments that are due have been made within the time periods prescribed by ERISA and the Code, except for any such contribution or payment which the failure to make would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No events have occurred with respect to any Employee Plan that could result in payment or assessment by or against the Business, any Purchased Asset or any Purchased Subsidiary, or Buyer or any of its Affiliates of any excise taxes under Sections 4972, 4975, 4976, 4977, 4979, 4980B, 4980D, 4980E or 5000 of the Code, except for excise taxes as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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(e) No Purchased Subsidiary has any material Liability under Section 302 or Title IV of ERISA or Section 412 of the Code. None of Seller, any Retained Subsidiary or any of their ERISA Affiliates has any material Liability under Section 302 or Title IV of ERISA or Section 412 of the Code that could become a material Liability of Buyer, any Purchased Subsidiary or any of their Affiliates.

(f) Seller has (or has caused its Subsidiaries to have) performed all obligations required with respect to each International Plan, except for any such obligation as to which the failure to perform would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each International Plan has been maintained in compliance with its terms and with any Applicable Law, except for instances of non-compliance as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. All payments (including premiums due) and all employer and employee contributions required to have been collected in respect of each International Plan have been paid when due, or if applicable, accrued on the balance sheet of Seller and its Affiliates, except for any such payment, contribution or accrual as to which the failure to make would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 3.19 . Employee and Labor Matters. (a) To the knowledge of Seller, no Business Employee whose annual base salary exceeds $125,000 (i) has any present intention to terminate his or her employment with the Business within 12 months of the Closing Date, or (ii) is a party to any confidentiality, non-competition, proprietary rights or other such agreement with any other Person besides the Seller or any of its Subsidiaries, as applicable, that would be material to the performance of his or her employment duties.

(b)(i) Neither the Seller nor any of its Subsidiaries is party to any collective bargaining agreement with respect to the Business or any Business Employee; (ii) no union organizing efforts are underway or, to the knowledge of the Seller, threatened, and no other question concerning labor representation exists with respect to the Business or any Business Employee; and (iii) no material labor dispute has occurred in the past three years, and no material labor dispute is underway or, to the knowledge of the Seller, threatened, in each case with respect to the Business.

Section 3.20. Environmental Compliance . Except as to matters that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:

(a)(i) no written notice, order, request for information, complaint or penalty has been received by Seller or any of its Subsidiaries, and (ii) there are no judicial, administrative or other actions, suits or

 

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proceedings pending or threatened, in the case of each of (i) and (ii), which allege a violation of any Environmental Law or allege the existence of any Environmental Liabilities and relate to the Purchased Assets, the Business or the assets of the Purchased Subsidiaries; and

(b) Seller and its Subsidiaries have obtained or caused to be obtained all environmental permits necessary for the operation of the Purchased Assets, the Business and the assets of the Purchased Subsidiaries to comply with all applicable Environmental Laws and Seller and its Subsidiaries are in compliance, and have for the previous three years been in compliance, with the terms of such permits and, with respect to the operation of the Purchased Assets, the Business and the assets of the Purchased Subsidiaries, with all other applicable Environmental Laws;

(c) With respect to the Purchased Assets, the Business, or the assets of the Purchased Subsidiaries, none of Seller or its Subsidiaries has at any time prior to the Closing treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, released, or exposed any Person to, any hazardous substance, material or waste, and no hazardous substances, waste or material at any time prior to the Closing has been released at, on, under or from any Real Property, in each case so as to give rise to any material Liability, including any such liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees or material investigative, corrective or remedial obligations, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any other Environmental Law; and

(d) Seller has furnished to Buyer all environmental audits and other written assessments and reports bearing on material environmental liabilities, in each case relating to the current operations and facilities of the Business and which are in its or its Subsidiaries’ possession or under its or their reasonable control.

Section 3.21 . Insurance. Section 3.21 of the Disclosure Schedule lists and briefly describes the material components of the insurance coverage maintained and owned by Seller with respect to the Business. All of such insurance policies are in full force and effect, and the Seller and its Subsidiaries are not in default in any material respect with respect to their obligations under any such insurance policies.

Section 3.22 . Customer and Supplier Relationships. To Seller’s knowledge, Section 3.22 of the Disclosure Schedule con