ASSET PURCHASE AGREEMENT between AGILENT TECHNOLOGIES, INC. and ARGOS ACQUISITION PTE. LTD.

Exhibit 2.1

 

Execution Version

 

ASSET PURCHASE AGREEMENT

 

between

 

AGILENT TECHNOLOGIES, INC.

 

and

 

ARGOS ACQUISITION PTE. LTD.

 

Dated as of August 14, 2005

TABLE OF CONTENTS

 

 

i

 

ii

 

 

iii

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement is dated as of August 14, 2005 (the “ Agreement ”), between Agilent Technologies, Inc., a Delaware corporation (“ Seller ”), and Argos Acquisition Pte. Ltd, a company organized under the laws of Singapore (“ Purchaser ”) (each, a “ Party ” and collectively, the “ Parties ”).

 

W I T N E S S E T H:

 

WHEREAS , Seller and certain direct and indirect Subsidiaries of Seller are engaged in, among other things, the Business (as defined below); and

 

WHEREAS , Purchaser, through itself and one or more of its direct or indirect Subsidiaries, desires to purchase and assume, and Seller, through itself and one or more of its direct or indirect Subsidiaries, desires to sell, transfer and assign the Purchased Assets, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights and Assumed Liabilities of the Business to Purchaser and one or more of its Subsidiaries, upon the terms and subject to the conditions specified in this Agreement.

 

NOW, THEREFORE , in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

ARTICLE I

 

DEFINITIONS AND RULES OF CONSTRUCTION

 

1.1 Definitions .

 

Unless otherwise provided herein, capitalized terms used in this Agreement have the meanings ascribed to them by definition in this Agreement or in Annex A .

 

1.2 Rules of Construction .

 

(a) This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.

 

(b) The words “hereof, “herein” and “hereunder” and words of similar import when used in this Agreement will refer to this Agreement as a whole (including any annexes, exhibits and schedules to this Agreement) and not to any particular provision of this Agreement, and section and subsection references are to this Agreement unless otherwise specified. The words “include”, “including”, or “includes” when used herein shall be deemed in each case to be followed by the words “without limitation” or words having similar import. The headings and table of contents in this Agreement are included for convenience of reference only and will not limit or otherwise affect the meaning or interpretation of this Agreement. The meanings given to terms defined herein will be equally applicable to both the singular and plural forms of such terms.

 

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ARTICLE II

 

SALE OF ASSETS AND ASSUMPTION OF LIABILITIES

 

2.1 Asset Purchase .

 

(a) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall or shall cause one or more of its Subsidiaries to sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase, acquire and accept from Seller or such Subsidiaries, all of Seller’s and such Subsidiaries’ respective right, title and interest in and to the Purchased Assets, subject to the terms of any leases existing as of the date of this Agreement with respect to any Purchased Assets as disclosed in Section 2.1(a) of the Disclosure Letter.

 

(b) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall or shall cause one or more of its Subsidiaries to sell, assign, transfer and convey to Purchaser, and Purchaser shall purchase and acquire from Seller or such Subsidiaries, as appropriate, the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights, including the right to pursue past damages based on third-party infringement of the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights, and also including the goodwill of the Business appurtenant to Trademarks included in the Transferred Business Intellectual Property, subject to the terms of any licenses granted to third parties existing as of the date of this Agreement (including corporate patent cross-licenses, all of which cross-licenses are disclosed in Section 2.1(b) of the Disclosure Letter) or any licenses granted after the date hereof not in violation of this Agreement with respect to such Transferred Business Intellectual Property and Transferred Business Intellectual Property Rights, and subject to the rights granted to Seller in the Intellectual Property License Agreement.

 

2.2 Assumption by Purchaser of Certain Liabilities; Retention by Seller of Remaining Liabilities .

 

(a) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Purchaser shall assume, pay, perform and discharge when due any and all liabilities, obligations, guarantees (including lease guarantees), commitments, damages, losses, debts, claims, demands, judgments or settlements of any nature or kind, whether known or unknown, fixed, accrued, absolute or contingent, liquidated or unliquidated, matured or unmatured, (collectively, “ Liabilities ”) of Seller and its Subsidiaries to the extent (but only to the extent) arising out of or relating to the Business, the Purchased Assets, the Transferred Business Intellectual Property or the Transferred Business Intellectual Property Rights, whether arising on, prior to or after the Closing Date, other than the Excluded Liabilities (the “ Assumed Liabilities ”). Without in any way limiting the generality of the foregoing, except to the extent any such Liability is an Excluded Liability, the Assumed Liabilities shall include the following:

 

(i) all Liabilities of Seller and its Subsidiaries arising on, prior to or after the Closing Date under the Assumed Contracts;

 

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(ii) all Liabilities arising on, prior to or after the Closing Date for any infringement or alleged infringement with respect to the Business of (A) the rights of any other Person relating to Technology or Intellectual Property Rights, or (B) any right of any other Person pursuant to any license, sublicense or agreement relating to Technology or Intellectual Property Rights;

 

(iii) all Liabilities of Seller and its Subsidiaries in respect of the Semiconductor Products sold by the Business at any time, including Liabilities for refunds, adjustments, allowances, repairs, exchanges, returns and warranty, merchantability and other claims arising on, prior to or after the Closing Date;

 

(iv) all accounts payable due to third parties incurred in connection with the operation of the Business as included in the calculation of Final Working Capital provided for in Section 3.3;

 

(v) except as provided in Section 2.2(b)(v) or as otherwise provided herein, all Liabilities of Seller and its Subsidiaries relating to any Transferred Employee;

 

(vi) all Business Environmental Liabilities;

 

(vii) all Liabilities of Seller and its Subsidiaries to the extent (but only to the extent) relating to the Camera Module Agreement or the Camera Module Business;

 

(viii) all Liabilities of Seller and its Subsidiaries relating to or arising under or in connection with Proceedings to the extent (but only to the extent) relating to the Business, the Purchased Assets or the other Assumed Liabilities, whether such Proceeding is brought prior to, on or after the Closing Date; and

 

(ix) all other Liabilities to the extent (but only to the extent) arising out of or relating to or incurred primarily in connection with the Business, including (A) the operation of the Business after the Closing Date, (B) the use of any of the Business Intellectual Property Rights by Purchaser or permissible licensees and (C) any condition arising on or prior to or after the Closing Date with respect to the Purchased Assets.

 

(b) Any other provision of this Agreement notwithstanding, Purchaser shall not be obligated to assume, pay, perform, discharge or be responsible for any of the following Liabilities of Seller or any of its Subsidiaries (collectively, the “ Excluded Liabilities ”):

 

(i) any Liability to the extent arising out of or relating to the operation or conduct by Seller or any of its Subsidiaries of any Retained Business or of any business other than the Business;

 

(ii) subject to the provisions of Sections 2.4, 2.5 and 2.6 hereof, any Liability to the extent arising out of or relating to any Excluded Asset;

 

(iii) any Liability in respect of Taxes that are to be borne by Seller pursuant to Section 6.13(b), any Liability for Taxes payable by Wavics Co., Ltd. (“ Wavics ”) or any

 

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of its Subsidiaries relating to a Pre-Closing Tax Period and any Liability in respect of deferred Taxes (from an accounting perspective);

 

(iv) except as provided for in Section 6.6 or 6.7, all Liabilities to or in respect of any current or former employees of Seller or any of its Subsidiaries other than Transferred Employees;

 

(v) except as provided for in Section 6.6 and 6.7, (A) all Liabilities under any Seller Plans, including any pension or retirement plan, severance plan, retention plan, workers compensation, medical, life insurance, disability or other welfare plan, expenses and benefits incurred or claimed in respect of any Transferred Employee or other current or former employee of Seller or any of its Subsidiaries, and any claims by such Transferred Employees, their covered dependents, or any other current or former employees of Seller or any of its Subsidiaries, for benefits or claims arising on or prior to the Closing Date (including any Liability with respect to the matter set forth as Item 11 of Section 4.6 of the Disclosure Letter), (B) all Liabilities arising out of or relating to any period prior to the Closing Date that would be required to be reflected on a balance sheet of the Business as of Closing prepared in accordance with generally accepted accounting principles applied in a manner consistent with the Audited Business Financial Statements, excluding accrued flexible time off (FTO), which shall be an Assumed Liability and (C) all Liabilities under the Seller Plan set forth in Section 2.2(b)(v) of the Disclosure Letter, whether arising prior to or after the Closing Date;

 

(vi) any cost or expense or any Liability of Seller or its Subsidiaries, incurred before, on or after the Closing Date to the extent arising out of the Restructuring;

 

(vii) any Indebtedness;

 

(viii) any Liability arising out of any Environmental Claim other than the Business Environmental Liabilities;

 

(ix) any Liability to any broker, finder or agent for any investment banking or brokerage fees, finder’s fees or commission and any other fees and expenses payable by Seller pursuant to Section 11.7 with respect to the transactions contemplated by this Agreement;

 

(x) Leases other than Leases of the Assigned Real Property or as otherwise provided in the Real Property Agreements;

 

(xi) any Liability to any of Seller or its Subsidiaries other than pursuant to this Agreement or the other Transaction Documents;

 

(xii) any Liability that would be required to be reflected as a current liability on a balance sheet of the Business as of Closing prepared in accordance with generally accepted accounting principles applied in a manner consistent with the Audited Business Financial Statements, other than current liabilities included in the calculation of Final Working Capital;

 

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(xiii) any Liability with respect to the matter set forth as item 3 of Section 4.6 of the Disclosure Letter, except to the extent that such Liability is included in the calculation of Final Working Capital as a current liability that is an Assumed Liability; and any Liability with respect to the matter set forth as item 4 of Section 4.6 of the Disclosure Letter; and

 

(xiv) except as provided in Sections 2.4, 2.5, 2.6, 6.6 or 6.7, any Liabilities with respect to Contracts other than Assumed Contracts.

 

2.3 Transfer of Purchased Assets, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights and Assumed Liabilities .

 

(a) The Purchased Assets, the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights shall be sold, conveyed, transferred, assigned and delivered, and the Assumed Liabilities shall be assumed, pursuant to transfer and assumption agreements and such other instruments in such form as may be necessary or appropriate to effect a conveyance of the Purchased Assets, the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights and an assumption of the Assumed Liabilities in the jurisdictions in which such transfers are to be made. In addition, Intellectual Property Rights under certain computer assisted design (CAD) tool software licenses (“ CAD Licenses ”) will be assigned or sublicensed to Purchaser to the extent provided in Section 6.18 hereof. Such transfer and assumption agreements shall be jointly prepared by the Parties and shall include: (i) a bill of sale in substantially the form attached hereto as Exhibit A (the “ Bill of Sale ”), (ii) an assignment and assumption agreement in substantially the form attached hereto as Exhibit B (the “ Assignment and Assumption Agreement ”), (iii) local asset transfer agreements for each jurisdiction other than the United States in which Purchased Assets, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights or Assumed Liabilities are located in substantially the form attached hereto as Exhibit C with only such deviations therefrom as are required by local Law (the “ Local Asset Transfer Agreements ”), and/or (iv) assignments in substantially the form attached hereto as Exhibit D (the “ Transferred Business Intellectual Property Rights Assignments ”) and (v) such other agreements as may reasonably be required to effect the purchase and assignment of the Purchased Assets, the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights and Assumed Liabilities, including where necessary separate agreements to effect the transfer of Real Property (collectively, clauses (i)–(v), the “ Ancillary Agreements ”) and shall be executed no later than at or as of the Closing by Seller and/or one or more of its Subsidiaries, as appropriate and Purchaser or one of its Subsidiaries. The Leases of the Assigned Real Property shall be assigned and delivered, and the related Assumed Liabilities shall be assumed, pursuant to the Lease Assignments.

 

(b) Notwithstanding the foregoing and unless otherwise stated in the Master Separation Agreement, promptly (but in any event no later than 30 days) following the Closing Date (or such later date with respect to the expiration of the Multi-Site License or other license pursuant to clause (i) of Section 2.6(b) or as otherwise mutually agreed to by the Parties), Purchaser will: (i) at Purchaser’s cost and expense, prepare such Purchased Assets located at any facilities currently occupied by Seller or any of its Subsidiaries which are not to be purchased, assigned, subleased, transferred to or otherwise occupied by Purchaser pursuant to this

 

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Agreement or the Master Separation Agreement (including the Licensed Real Property upon the expiration of the Multi-Site License or any Assigned Real Property licensed pursuant to Section 2.6(b) upon the expiration or termination of such license (each such facility, a “ Seller Facility ”) for relocation and relocate such Purchased Assets from the relevant Seller Facility; (ii) be responsible for all data transfer, delivery, transmission and reformatting costs and expenses related to the acquisition of assets such as those set forth in paragraph (h) of Exhibit M to the extent provided in the Master Separation Agreement, and (iii) indemnify, defend and reimburse Seller for all Seller Losses arising out of any damage to any Seller Facility or any injury suffered by any Person arising out of or related to Purchaser’s removal, detachment, disconnection, or transportation of the Purchased Assets. Subject to the terms of this Section 2.3(b), Seller agrees, and agrees to cause its Subsidiaries, to cooperate with Purchaser and provide Purchaser all assistance reasonably requested by Purchaser in connection with the planning and implementation of the transfer of Purchased Assets or any portion of any of them to such location as Purchaser shall designate. Purchased Assets shall be transported by or on behalf of Purchaser, and until all of the Purchased Assets are removed from a Seller Facility, Seller will, and will cause its Subsidiaries to, permit Purchaser and its authorized agents or representatives, upon prior notice, to have reasonable access to the Seller Facility to the extent necessary to disconnect, detach, remove, package and crate the Purchased Assets for transport. Purchaser shall be responsible for disconnecting and detaching all fixtures and equipment that are Purchased Assets from the floor, ceiling and walls of a Seller Facility so as to be freely removed from a Seller Facility by Purchaser. Purchaser shall be responsible for packaging and loading the Purchased Assets for transporting to and reinstalling the Purchased Assets at such location(s) as Purchaser shall determine. All risk of loss as to the Purchased Assets shall be borne by, and shall pass to, the Purchaser as of the Effective Time.

 

(c) Notwithstanding the foregoing, but subject to the Intellectual Property License Agreement, Seller and its Subsidiaries shall have no obligation to prosecute any Patents or Trademarks included in the Transferred Business Intellectual Property after the Closing Date, even if such Patents or Trademarks are the subject of any pending litigation relating to such Patents or Trademarks, and their obligations with respect to transfer of all such Patents or Trademarks shall be limited to the delivery of complete files relating thereto upon the reasonable request of Purchaser from time to time and the delivery of Transferred Business Intellectual Property Rights Assignments pursuant to Section 2.3(a).

 

2.4 Approvals and Consents .

 

(a) Notwithstanding anything to the contrary contained in this Agreement, and subject to the provisions of Sections 2.5 and 2.6, to the extent that the sale, conveyance, transfer, assignment or delivery or attempted sale, conveyance, transfer, assignment or delivery to Purchaser of any Purchased Asset would result in a violation of any applicable Law, would require any Consent or waiver of any Governmental Authority or third party and such Consent or waiver shall not have been obtained prior to the Closing, this Agreement shall not constitute a sale, conveyance, transfer, assignment or delivery, or an attempted sale, conveyance, transfer, assignment or delivery thereof if any of the foregoing would constitute a breach of applicable Law, any Contract or the rights of any third party; provided , however, that, subject to the satisfaction or waiver of the conditions contained in Article VII, the Closing shall occur notwithstanding the foregoing without any adjustment to the Purchase Price on account of such

 

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required authorization. Following the Closing, the Parties shall use commercially reasonable efforts, and shall cooperate with each other, to obtain promptly such Consent or waiver; provided , further , however, that neither Party nor any of its Subsidiaries shall be required to pay any consideration therefor.

 

(b) Once such Consent or waiver is obtained, Seller shall, or shall cause its Subsidiaries to, sell, assign, transfer, convey and license such Purchased Asset to Purchaser for no additional consideration. Applicable Transfer Taxes in connection with such sale, assignment, transfer, conveyance or license shall be paid in accordance with Section 6.13.

 

(c) To the extent that any Purchased Asset cannot be provided to Purchaser following the Closing pursuant to this Section 2.4, Purchaser and Seller shall use commercially reasonable efforts to enter into such arrangements (including subleasing, sublicensing or subcontracting) to provide to the Parties the economic (taking into account Tax costs and benefits) and, to the extent permitted under applicable Law, operational equivalent of obtaining such Consent or waiver and the performance by Purchaser of its obligations thereunder. To the extent permitted under applicable Law, Seller shall hold in trust for and pay to Purchaser promptly upon receipt thereof, such Purchased Assets and all income, proceeds and other monies received by Seller to the extent related to any such Purchased Asset in connection with the arrangements under this Section 2.4. Seller shall be permitted to set off against such amounts all direct costs associated with the retention and maintenance of such Purchased Assets. Notwithstanding the foregoing, Seller shall have no obligation whatsoever to retain any portion of the Business, other than any individual asset or Contract (but only until such time as the transfer thereof may be effected in accordance with this Agreement), in order to obtain any such Consent or waiver referred to in this Section 2.4 or elsewhere in this Agreement. Nothing in this Section 2.4 applies (i) to any Consent or waiver required under any Antitrust Regulations, which Consents and waivers shall be governed by Section 6.3 or (ii) to Consents or releases with respect to the Assigned Real Property or Subleased Real Property, such Consents and releases to be obtained pursuant to the provisions of Section 2.6.

 

2.5 Novation and Assignment .

 

(a) Each Party shall, and shall cause their respective Subsidiaries to use commercially reasonable efforts to obtain or to cause to be obtained any Consent, substitution, or amendment required to novate (including with respect to any federal governmental contract) or assign all rights and obligations under Assumed Contracts) and other obligations or liabilities of any nature whatsoever that constitute the Assumed Liabilities or to obtain in writing the unconditional release of all parties to such arrangements, so that, in any case, Purchaser will be solely responsible for such rights and Assumed Liabilities from and after the Closing Date, provided , however, that neither Party nor any of its Subsidiaries shall be obligated to pay any consideration therefor to any third party from whom such Consents, substitutions and amendments are requested.

 

(b) If either Party or any of its Subsidiaries is unable to obtain, or to cause to be obtained, any such required Consent, release, substitution or amendment, (i) Seller shall, or shall cause its Subsidiary to, continue to be bound by such Assumed Contracts and other obligations and, (ii) unless not permitted by the terms thereof or applicable Law, Purchaser shall, as agent or

 

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subcontractor for Seller or such Subsidiary, pay, perform and discharge fully, or cause to be paid, transferred or discharged all the obligations or other Liabilities of Seller or such Subsidiary thereunder from and after the Closing Date (except to the extent expressly otherwise provided herein or in the other Transaction Documents). Seller shall, without further consideration, pay and remit, or cause to be paid or remitted, to Purchaser promptly all money, rights and other consideration received by it in respect of such performance. If and when any such consent, approval, release, substitution or amendment shall be obtained or such agreement, lease, license or other rights or obligations shall otherwise become assignable or able to be novated, Seller shall, or shall cause such Subsidiary to, thereafter assign, or cause to be assigned, all its rights, obligations and other liabilities thereunder to Purchaser without receipt of further consideration and Purchaser shall, without the payment of any further consideration, assume such rights and obligations. Notwithstanding the foregoing, the provisions of this Section 2.5 shall not apply to Consents or releases with respect to the Assigned Real Property or Subleased Real Property, such Consents and releases to be obtained pursuant to the provisions of Section 2.6.

 

(c) To the extent reasonably required in order to perfect Seller’s or an Other Seller’s chain of title to the Transferred Business Intellectual Property as recorded at the United States Patent and Trademark Office (USPTO), or a corresponding office in a foreign country, upon Purchaser’s reasonable request Seller shall, and shall cause its applicable Subsidiaries to, use commercially reasonable efforts (but not including payment or the transfer of other consideration to any third party) to provide, obtain, or cause to be obtained, documents sufficient to evidence the chain of title conferring ownership of such Transferred Business Intellectual Property in Seller or an Other Seller in a form suitable for recordation with the USPTO, or a corresponding office in a foreign country, and to provide said documents to the Purchaser for filing and recordation by it, or, in the sole discretion of Seller or any Other Seller, to record, or to cause to be recorded, said documents.

 

2.6 Consents for Real Property Assignments .

 

(a) Promptly following execution of this Agreement, with respect to any Assigned Real Property or Subleased Real Property to which Seller or any of its Subsidiaries is the lessee, Seller shall or shall cause such Subsidiary to contact the Landlords of the Assigned Real Property or Subleased Real Property and seek each Landlord’s consent to the applicable lease assignment or sublease. Seller shall, or shall cause such Subsidiary to use commercially reasonable efforts to obtain such Consents in form reasonably acceptable to Purchaser, but shall not be required to commence judicial proceedings for a declaration that a required Landlord Consent has been unreasonably withheld or delayed. Seller or such Subsidiary shall have the right, in its sole and absolute discretion, but shall not be required, to pay any additional consideration or provide any additional security or guarantees to the Landlords. Purchaser shall cooperate with Seller or such Subsidiary in attempting to obtain the Consents set forth above, including (i) providing financial statements and references as may be reasonably requested by the relevant Landlords, (ii) entering into any amendments to the Leases of the Assigned Real Property or Subleased Real Property as may be reasonably requested by the relevant Landlords; provided such amendments could not reasonably be expected to increase the tenant’s liability or decrease the tenant’s rights thereunder or (iii) entering into direct Leases of the Assigned Real Property or Subleased Real Property with the relevant Landlords, if reasonably requested by such Landlords, on terms that are not materially more adverse to Purchaser in comparison to those of

 

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the applicable existing Lease or otherwise acceptable to Purchaser in its reasonable discretion. Purchaser shall not communicate directly with any of Seller’s, or its Subsidiaries’ Landlords without the prior written consent of Seller, such consent not to be unreasonably withheld.

 

(b) If, despite the efforts of the Parties as set forth above, a Landlord of an Assigned Real Property or Subleased Real Property other than a Business Critical Real Property fails to consent to the applicable lease assignment or sublease prior to the Closing Date, subject to Section 2.6(c):

 

(i) Purchaser shall be entitled to occupy the relevant Assigned Real Property or Subleased Real Property as a licensee upon the terms and conditions contained in the Lease with Seller or its Subsidiary with respect to such Assigned Real Property or Subleased Real Property. Such license shall not be revocable due to the relevant Landlord’s failure to consent, unless (A) the relevant Landlord formally, unconditionally refuses to consent and provides written notice stating that Purchaser’s occupancy pursuant to the license violates the Lease with respect to the Assigned Real Property or Subleased Real Property, and (B) an enforcement action or forfeiture by the relevant Landlord due to Purchaser’s occupation of such Assigned Real Property or Subleased Real Property cannot, in the reasonable opinion of Seller, be avoided other than by requiring Purchaser to immediately vacate the relevant Assigned Real Property or Subleased Real Property. In either such event, Seller may terminate the license by delivering written notice to Purchaser, and Purchaser shall vacate the relevant Assigned Real Property or Subleased Real Property immediately or by such other date as may be specified in a notice served by Seller, except that with respect to Business Significant Real Property, the Seller shall, or shall cause its Subsidiaries to, enter into the Multi-Site License with respect to such Business Significant Real Property. Purchaser shall be solely responsible for, and shall indemnify, defend, protect and hold harmless the Seller Indemnified Parties from all Seller Losses incurred as a consequence of Purchaser’s occupation of such Assigned Real Property or Subleased Real Property at any time after the Closing Date, other than such Seller Losses incurred as a result of any enforcement action taken by the relevant Landlord with respect to any breach by Seller or such Subsidiary of the relevant Lease by permitting Purchaser to so occupy the relevant Assigned Real Property or Subleased Real Property without obtaining the required consent (any such action, a “ Lease Enforcement Action ”). No Purchaser Indemnified Party shall be entitled to make any claim or demand against, or obtain reimbursement from, any Seller Indemnified Party with respect to any Purchaser Losses incurred as a consequence of being obliged to vacate an Assigned Real Property or Subleased Real Property or in obtaining alternative premises, including, without limitation, any enforcement action other than a Lease Enforcement Action which a Landlord may take against Purchaser.

 

(ii) For as long as Purchaser occupies or is entitled to occupy such Assigned Real Property or Subleased Real Property as licensee as provided above, Purchaser shall, effective as of the Closing Date: (A) pay Seller all rents, service charges, insurance premiums and other sums payable by Seller or such Subsidiary under the relevant Lease of the Assigned Real Property or Subleased Real Property, but only with respect to the portion of the Subleased Real Property occupied by Purchaser, (B) subject to the

 

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provisions of Section 2.2(b) hereof, observe and perform all of the covenants, obligations and conditions of Seller or such Subsidiary contained in the relevant Lease of the Assigned Real Property or Subleased Real Property and (C) indemnify, defend, protect and hold harmless each Seller Indemnified Party from and against all Seller Losses arising on account of any breach thereof by Purchaser, other than Seller Losses incurred as a result of a Lease Enforcement Action with respect to any breach by Seller or its Subsidiaries of the relevant Lease by permitting Purchaser to occupy the relevant Assigned Real Property or Subleased Real Property without obtaining consent.

 

(c) If, despite the efforts of the Parties as set forth above, a Landlord of an Assigned Real Property or Subleased Real Property other than a Business Critical Real Property formally and unconditionally refuses to consent to the applicable assignment or sublease and provides written notice stating that Purchaser’s occupancy violates the Lease with respect to such Assigned Real Property or Subleased Real Property:

 

(i) With respect to any such Assigned Real Property, without limiting the rights of Seller or any of its Subsidiaries as set forth in subparagraphs (ii) and (iii) below, Seller may, by written notice to Purchaser elect to apply to the relevant Landlord for consent to sublease to Purchaser all of the Assigned Real Property for the remainder of the relevant Lease term at a rent equal to the rent from time to time under the relevant Lease, and otherwise on substantially the same terms and conditions as the relevant Lease and pursuant to the terms of a reasonable sublease form prepared by Seller or such Subsidiary. If Seller makes such an election after the Closing Date (or before the Closing Date, if the Landlord consent is not received before the Closing Date), the provisions of Section 2.6(b) will apply; provided that upon receipt of the consent required to sublease the relevant Assigned Real Property, Seller shall, or shall cause such Subsidiary to sublease to Purchaser the Assigned Real Property as set forth herein. If Seller makes such an election before the Closing Date and the relevant Lease consent is obtained before the Closing Date, Seller shall sublease to Purchaser the relevant Assigned Real Property on the Closing Date as set forth above.

 

(ii) With respect to any Assigned Real Property or Subleased Real Property, other than a Business Critical Real Property or a Business Significant Real Property, if the Landlord takes such action prior to the Closing Date, Seller may elect by written notice to Purchaser to delete the relevant Assigned Real Property or Subleased Real Property from this Agreement. In such case, on the Closing Date, Seller shall not assign or sublease such Assigned Real Property or Subleased Real Property to Purchaser.

 

(iii) If Purchaser is occupying the applicable Assigned Real Property or Subleased Real Property as set forth in Section 2.6(b), Seller may elect by written notice to Purchaser to require Purchaser to vacate the relevant Assigned Real Property or Subleased Real Property, other than a Business Significant Real Property, immediately or by such other date as may be specified in the notice served by Seller as set forth in Section 2.6(b).

 

(d) Notwithstanding anything to the contrary otherwise contained herein, the provisions of Section 2.6(b) and Section 2.6(c) shall not apply with respect to the Assigned Real

 

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Property and Subleased Real Property set forth in Section 2.6(d) of the Disclosure Letter (such Assigned Real Property and Subleased Real Property, collectively, the “ Business Critical Real Property ”).

 

(e) To the extent that the provisions of this Section 2.6 conflict with the provisions of Sections 2.4, 2.5, 6.3 or 11.7 of this Agreement, the provisions of this Section 2.6 shall apply as to Real Property.

 

2.7 Missing Consents.

 

Not less than three (3) Business Days prior to the Closing, Seller shall deliver a supplement to the Disclosure Letter, which supplement shall identify the Consents with respect to the Assumed Material Contracts or the Assigned Real Property or Subleased Real Property that to Seller’s knowledge have not been obtained and are subject to the provisions of Sections 2.4, 2.5 and 2.6 hereof.

 

ARTICLE III

 

PURCHASE PRICE AND ADJUSTMENTS

 

3.1 Purchase Price.

 

The purchase price in respect of the purchase and sale transactions hereunder shall be (a) an amount in cash equal to (1) Two Billion Six Hundred Sixty Million Dollars and no cents ($2,660,000,000), minus (2) in the event (and only in the event) that the Closing occurs on or prior to December 16, 2005, and 7/31/05 Adjusted EBITDA is less than the Reference Adjusted EBITDA, 10.2386 multiplied by the amount by which 7/31/05 Adjusted EBITDA is less than the Reference Adjusted EBITDA (the “ 7/31/05 Adjusted EBITDA Deficiency Amount ”) minus (3) in the event (and only in the event) that the Closing occurs after December 16, 2005 and either (x) there is a 7/31/05 Adjusted EBITDA Deficiency or (y) 10/31/05 Adjusted EBITDA is less than the Reference Adjusted EBITDA, the greater of (I) the 7/31/05 Adjusted EBITDA Deficiency Amount and (II) 5.5 multiplied by the amount by which 10/31/05 Adjusted EBITDA is less than the Reference Adjusted EBITDA (the “ 10/31/05 Adjusted EBITDA Deficiency Amount ”) (such amount, the “ Purchase Price ”) and (b) the assumption of the Assumed Liabilities, which comprises the respective purchase price to be paid for the Purchased Assets, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights and the covenant not to compete contained in Section 6.9 in each respective jurisdiction as provided in the Allocation Schedule. For purposes hereof, “ Reference Adjusted EBITDA ” shall mean Two Hundred Fifty Nine Million Eight Hundred Thousand Dollars and no cents ($259,800,000) and “Adjusted EBITDA Deficiency Amount” shall mean any required deduction pursuant to clause (2) or (3).

 

3.2 Payment of Purchase Price.

 

(a) On the Closing Date, Purchaser shall pay to Seller (for its own account and as agent for any Other Seller unless otherwise provided in any Local Asset Transfer Agreement) the sum of (i) Two Billion Six Hundred Sixty Million Dollars and no cents ($2,660,000,000),

 

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(ii) plus or minus, as applicable, the amount by which Estimated Working Capital (as defined below) at the opening of business on the Closing Date (without giving effect to the Closing) is more than or less than Three Hundred Seventy-Six Million Nine Hundred Thousand Dollars and No Cents ($376,900,000) (the “ Reference Working Capital ”), (iii) minus, if applicable, the amount of the Adjusted EBITDA Deficiency Amount, if any (or if the Adjusted EBITDA Deficiency Amount is not yet determined in accordance with Section 3.4, the Estimated Adjusted EBITDA Deficiency Amount (as defined below), if any) (iv) minus, the Rollover Option Amount (as defined below), if any, and (v) minus, if applicable, the amount of any reduction in the Purchase Price pursuant to Section 2.1(f) of Schedule 6.7 hereto. Such amount provided for in the immediately preceding sentence shall be payable in United States dollars in immediately available federal funds to such bank account or accounts as shall be designated in writing by Seller no later than the second Business Day prior to the Closing.

 

(b) For purposes of this Agreement:

 

“ Dispute Promissory Note ” shall mean a promissory note issued by Purchaser (or if different, the Affiliate of Purchaser which has issued the common equity securities to the equity participants pursuant to the Equity Commitment Letters), which note will (i) bear interest at the Prime Rate as in effect from time to time (but without duplication of interest payable pursuant to Section 3.4(g)), payable at the same time as the related principal, (ii) will be payable at the time, and to the extent, any adjustment is payable by Purchaser to the Seller in accordance with Section 3.4(g) (with the note cancelled to the extent any such principal and interest is not paid by operation of such section), (iii) prior to the date of issuance of such note the issuer thereof shall have obtained unconditional written commitments by the equity owners of the issuer or Affiliates thereof to purchase for cash additional equity securities of the issuer in an amount equal to at least the principal amount of the Dispute Promissory Note plus three months interest, which commitments may not be terminated or otherwise modified prior to the resolution of the related dispute regarding Adjusted EBITDA, and (iv) otherwise, as to the note and the equity commitment provided for in clause (iii), in form and substance reasonably satisfactory to Purchaser and Seller.

 

“ Estimated Adjusted EBITDA Deficiency Amount ” shall mean the amount of the Adjusted EBITDA Deficiency Amount (if any) derived from the Estimated Adjusted EBITDA Final Calculations, as such amount may be modified by the parties in good faith in accordance with the review procedures set forth in Section 3.4; provided , however, that if as of the Closing Date the difference between the Adjusted EBITDA Deficiency Amount calculated based on the then applicable Estimated Adjusted EBITDA Final Calculations (the “ Proposed Seller Adjustment Amount ”) and that based on the then applicable EBITDA Proposed Adjustment Notice (the “ Proposed Purchaser Adjustment Amount ”) is greater than $25.0 million, then, at the sole election of the Purchaser, the Estimated Adjusted EBITDA Deficiency Amount for purposes of the payments to be made at Closing in accordance with Section 3.2(a)(iii) shall be either: (i) an amount equal to the average of the Proposed Purchaser Adjustment Amount and the Seller Proposed Adjustment Amount or (ii) an amount equal to the full Proposed Purchaser Adjustment Amount, provided that, if Purchaser elects this clause (ii), it must also deliver to Seller on the Closing Date a Dispute Promissory Note in a principal amount equal to the full difference between the Proposed Purchaser Adjustment Amount and the Proposed Seller Adjustment Amount.

 

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“ Rollover Option Amount ” means the aggregate sum of the excess of the closing sales price of Seller’s common stock as reported on the NYSE for the trading day immediately prior to the Closing Date over the per share exercise price for each Seller stock option subject to the Option Rollover.

 

“ Estimated Working Capital ” shall be based on an estimated calculation of Working Capital as of the opening of business on the Closing Date (without giving effect to the Closing) as calculated in good faith by Seller and set forth in a certificate delivered by Seller to Purchaser, together with reasonable supporting documentation for the calculation thereof, not less than seven (7) days prior to the Closing Date, it being agreed that at the time of the delivery of such certificate and continuing thereafter Seller shall provide a reasonable opportunity for Purchaser to review such supporting documentation and discuss it in good faith with responsible representatives of Seller

 

3.3 Working Capital Adjustment.

 

(a) Purchaser and Seller agree that to the extent that the Final Working Capital exceeds the Estimated Working Capital, Purchaser shall pay to Seller (on behalf of itself and as agent for any Other Seller) such excess (the “ Working Capital Excess Amount ”), and to the extent that the Final Working Capital is less than the Estimated Working Capital, Seller (on behalf of itself and as agent for any Other Seller) shall pay to Purchaser such shortfall (the “ Working Capital Deficiency Amount ”), in each case pursuant to the terms of this Section 3.3. For purposes of this Agreement, “ Final Working Capital ” shall mean Working Capital as of the opening of business on the Closing Date (without giving effect to the Closing) as determined pursuant to this Section 3.3. As used herein, “ Working Capital ” means the sum of (i) those Purchased Assets representing current assets consisting of trade accounts receivable and up to $20.0 million of other accounts receivable (“ Sundry Receivables ”) (in each case determined net of any applicable unapplied cash receipts, price protection, product returns and any other GAAP reserves and an allowance for doubtful accounts), and inventory, net of GAAP reserves, less (ii) all Assumed Liabilities that would be required to be reflected as current liabilities on a balance sheet of the Business as of the opening of business on the Closing Date (and without giving effect to the Closing) prepared in accordance with GAAP, excluding accrued FTO, post-retirement healthcare benefits and pension liabilities, provided that all contractual obligations to suppliers, vendors and customers in their capacity as such that would be required to be reflected as liabilities on a balance sheet of the Business as of the opening of business on the Closing Date (and without giving effect to the Closing) prepared in accordance with GAAP will be considered current liabilities for purposes of this clause (ii) and provided further that in no event shall a Section 6.7(g) Obligation or any Investment Interest, or the proceeds therefrom, be deemed an account receivable.

 

(b) As promptly as practicable following the Closing, but in no event later than 90 days following the Closing Date, Seller shall: (i) prepare and deliver to Purchaser (A) the Closing Balance Sheet, (B) a calculation of Working Capital as of the opening of business on the Closing Date (without giving effect to the Closing) (the “ Final Closing Statement of Working Capital ”), (C) a calculation of the Working Capital Excess Amount or the Working Capital Deficiency Amount, if any, and (D) a certificate of the Chief Financial Officer of Seller stating that the Final Closing Statement of Working Capital, Working Capital Excess Amount or

 

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Working Capital Deficiency Amount, if any (collectively, the “ Final Calculations ”) each have been prepared or calculated, as appropriate, in accordance with this Section 3.3 and (ii) make available to Purchaser all relevant books and records relating to the Final Calculations. Purchaser shall cooperate with Seller in the preparation of the Closing Balance Sheet and the Final Closing Statement of Working Capital and the calculation of the Working Capital Excess Amount or the Working Capital Deficiency Amount, if any, as the case may be. Without limiting the generality of the foregoing, Purchaser shall provide Seller and its representatives with reasonable access, during normal business hours, to the facilities, personnel and accounting records of the Business acquired by Purchaser, to the extent reasonably necessary to permit Seller to prepare the Final Calculations.

 

(c) During the 30-day period following Purchaser’s receipt of the Final Calculations (the “ Working Capital Review Period ”), Purchaser and its representatives, including its independent auditors, shall be afforded the opportunity to review the Final Calculations and related supporting documentation. To the extent Seller or any of its Subsidiaries retains any information of the Business, Seller or such Subsidiary shall provide reasonable assistance to Purchaser or any representatives, including its independent auditors, in connection with such review.

 

(d) If Purchaser believes that the Final Calculations (i) were not prepared or calculated, as appropriate, in accordance with this Section 3.3 and (ii) are incorrect, Purchaser shall deliver to Seller, prior to the expiration of the Working Capital Review Period, a proposed adjustment notice (“ Working Capital Proposed Adjustment Notice ”) which shall contain, in reasonable detail, the alleged error and support for such belief and the adjustment thereof, together with a certificate of a responsible officer of Purchaser stating that the calculations in the Working Capital Proposed Adjustment Notice have been calculated in accordance with this Section 3.3. If the Working Capital Proposed Adjustment Notice is not delivered to Seller prior to the expiration of the Working Capital Review Period, the Final Calculations shall become final, binding and conclusive on all Parties.

 

(e) If a Working Capital Proposed Adjustment Notice is delivered within the period set forth in Section 3.3(d), Purchaser and Seller shall negotiate in good faith to resolve such dispute for a 30-day period (the “ Working Capital Discussion Period ”), commencing on the date Seller receives the Working Capital Proposed Adjustment Notice, to resolve such dispute. If Purchaser and Seller cannot resolve such dispute within such 30-day period, Purchaser and Seller shall retain Ernst & Young LLP to act as the arbitrator (the “ Working Capital Arbitrator ”) of such dispute; provided , however, that if either Party shall reasonably discover a conflict of interest (including the resulting loss of independence of an auditor to any Party) associated with Ernst & Young LLP, the Parties shall retain KPMG LLP to act as the Working Capital Arbitrator, unless such alternative Working Capital Arbitrator is also subject to a conflict of interest, in which event the Working Capital Arbitrator shall be mutually agreed upon by the Parties. The Parties shall retain the Working Capital Arbitrator no later than five (5) Business Days following the expiration of the Working Capital Discussion Period. In the event of a failure to retain the Working Capital Arbitrator during such time period, either Party, acting individually, shall have the right to retain the Working Capital Arbitrator on behalf of both Parties. Any arbitration shall be conducted in Santa Clara County, California, and such proceedings shall be in English. The Working Capital Arbitrator shall act promptly to resolve

 

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any dispute in accordance with the terms of this Agreement, it being understood that the sole issues for the Working Capital Arbitrator shall be whether the Final Calculations (i) were not prepared or calculated, as appropriate, in accordance with this Section 3.3 and (ii) as a result, are incorrect. The Working Capital Arbitrator shall issue its written decision as promptly as practicable and in any event within 30 days after the appointment of such Working Capital Arbitrator, which decision shall be final, binding and conclusive on both Purchaser and Seller; provided that in no event shall any disputed item or amount be more in terms of Working Capital than that provided in the Final Calculations or less in terms of Working Capital than that provided in the Working Capital Proposed Adjustment Notice. Purchaser and Seller shall cooperate with the Working Capital Arbitrator in connection with this Section 3.3(e). Without limiting the generality of the foregoing, Purchaser and Seller shall each promptly provide, or cause to be provided, to the Working Capital Arbitrator all information, and to make available at the arbitration proceeding all personnel, as are reasonably necessary to permit the Working Capital Arbitrator to resolve any disputes pursuant to this Section 3.3(e). The expenses of the Working Capital Arbitrator in resolving any disputes under this Section 3.3(e) shall be borne equally by Purchaser and Seller.

 

(f) If the Final Calculations, as may be adjusted pursuant to Section 3.3(e), result in a Working Capital Deficiency Amount, then Seller shall pay to an account designated by Purchaser in immediately available funds an amount equal to the Working Capital Deficiency Amount, plus interest thereon from the Closing Date through the date of payment at the Prime Rate as in effect from time to time during such period. If the Final Calculations, as may be adjusted pursuant to Section 3.3(e), result in an Working Capital Excess Amount, then Purchaser shall pay to an account designated by Seller in immediately available funds an amount equal to the Working Capital Excess Amount, plus interest thereon from the Closing Date through the date of payment at the Prime Rate as in effect from time to time during such period. All payments under this Section 3.3(f) shall be made within ten (10) Business Days of the Final Calculations becoming final and binding in accordance with Section 3.3(d) or Section 3.3(e). The payment of any amounts pursuant to this Section 3.3(f) shall not be subject to any set-offs, hold-backs, escrows or other reductions or restrictions.

 

3.4 Adjusted EBITDA.

 

(a) For purposes of this Section 3.4, the following terms shall have the following meanings:

 

“ Adjusted EBITDA ” means, for the twelve months ended July 31, 2005 or October 31, 2005, as applicable, the sum of the following (without duplication):

 

(i) EBIT; minus

 

(ii) Camera Module EBIT; plus

 

(iii) Camera Module Asset Impairments; plus

 

(iv) Special Charges; plus

 

(v) Transaction Expenses; minus

 

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(vi) Investment and Other Non-Operating Gains or Losses; minus

 

(vii) Excluded Business EBIT, plus

 

(viii) Depreciation and Amortization; plus

 

(ix) GIO Allocations; minus

 

(x) Stand-Alone Costs Estimate; plus

 

(xi) Stand-Alone Depreciation and Amortization.

 

“ Allocated Asset Impairments and Severance ” means, for any period, all expenses and asset impairments of Seller and its Subsidiaries that are allocated to the Business that arise from or relate to (i) severance payments pursuant to the Seller U.S. Redeployment Workforce Management Severance Benefits Plan, the Seller Voluntary Severance Incentive Plan, any Non-U.S. Benefit Plan or applicable law governing the severance obligations of Seller or its Subsidiaries with respect to employees not eligible to participate in such plans, and (ii) asset impairments and expenses arising from restructurings undertaken by the Seller and its Subsidiaries, in each case to the extent reflected in EBIT for such period; provided , however, that the foregoing (x) may not include any amounts reflected in the Statement of Operating Revenues and Expenses included in the Business Financial Statements and (y) must have been included in the “non-GAAP adjustments” externally reported by Seller as adjustments to arrive at “non-GAAP net income.”

 

“ Allocated Other Seller Corporate Expenses ” means, for any period, corporate expenses relating to public relations, corporate donations or other corporate expenses incurred for the purpose of supporting the brand, reputation or image of Seller generally allocated by Seller to the Business that are not included in GIO Allocations, in each case to the extent reflected in EBIT for such period; provided , however, that the foregoing may not include any amounts reflected in the Business Financial Statements.

 

“ Asset Impairments, Severance and Write-Down of Nikon Stepper ” means, for any period, all expenses and asset impairments arising from or relating to (i) severance payments pursuant to the Seller U.S. Redeployment Workforce Management Severance Benefits Plan and the Seller Voluntary Severance Incentive Plan, any Non-U.S. Benefit Plan or applicable law governing the severance obligations of Seller or its Subsidiaries with respect to employees not eligible to participate in such plans, and (ii) asset impairments and expenses arising from restructurings undertaken by the Business, including those matters described in Section 3.4 of the Disclosure Letter, in each case except for any such expenses and asset impairments included under the definition of Allocated Asset Impairments and Severance and only to the extent reflected in EBIT for such period; provided , however, that the foregoing (x) may not include any amounts reflected in the Statement of Operating Revenues and Expenses included in the Business Financial Statements and (y) must have been included in the “non-GAAP adjustments” externally reported by Seller as adjustments to arrive at “non-GAAP net income.”

 

“ Camera Module Asset Impairments ” means, for any period, the amount of all asset impairments arising from or incurred in connection with the Camera Module Business and/or the disposition of the Camera Module Business, including the write-down or write-off (net of any

 

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related reserve reversal, recovery or other adjustment) of inventory, cleanroom assets and goodwill recorded during the fiscal quarters ended October 31, 2004, January 31, 2005, April 30, 2005 and July 31, 2005, and excluding the Post-Sale Inventory Write-Off, in each case to the extent reflected in EBIT for such period.

 

“ Camera Module Business ” means the “Business,” as such term is defined in the Asset Purchase Agreement dated October 27, 2004 between Seller and Flextronics, as amended.

 

“ Camera Module EBIT ” means, for any period, the amount of EBIT relating to the Camera Module Business for such period (with such EBIT not being affected by any redeployment of resources, employees or assets associated with the Camera Module Business to other operations of the Business after the sale of the Camera Module Business); provided that Camera Module EBIT shall only include amounts that are reflected in the calculation of EBIT for such period. For the avoidance of doubt, if this amount is a loss, it will be reflected as a negative number for purposes of calculating Adjusted EBITDA (e.g. if EBIT equals $100 million and the Camera Module EBIT equals negative $25 million, the sum of clauses (i) and (ii) of the definition of “Adjusted EBITDA” will equal $125 million).

 

“ Depreciation and Amortization ” means, for any period, the depreciation and amortization expense included in EBIT for such period, other than any depreciation and amortization expense included in GIO Allocations, Allocated Asset Impairments and Severance, Asset Impairments, Severance and Write-Down of Nikon Stepper, Camera Module EBIT or Excluded Business EBIT.

 

“ EBIT ” means net income of the Business, plus net interest expense of the Business, plus income tax expense of the Business, determined in accordance with GAAP.

 

“ Excluded Business EBIT ” means, for any period, EBIT attributable to any business not being acquired by Purchaser (other than the Camera Module Business), in each case to the extent reflected in EBIT for such period. For the avoidance of doubt, if this amount is a loss, it will be reflected as a negative number for purposes of calculating Adjusted EBITDA ( e.g., if EBIT equals $100 million and the Excluded Business EBIT equals negative $5 million, the sum of clause (i) and (vii) of the definition of “Adjusted EBITDA” will equal $105 million).

 

“ Flextronics ” means Flextronics Sales and Marketing (A-P) Ltd.

 

“ GIO Allocations ” means, for any period, expenses allocated by Seller to the Business for such period, to the extent reflected in EBIT for such period and consistent with the historical practice of Seller as reflected in the Business Financial Statements. For the avoidance of doubt, GIO Allocated Costs shall (i) be described as such in the Audited Business Financial Statements, and (ii) not include Allocated Asset Impairments and Severance and Allocated Other Seller Corporate Expenses or any GIO included in Camera Module EBIT.

 

“ Investment and Other Non-Operating Gains or Losses ” means, for any period, to the extent reflected in EBIT for that period, (i) gain or loss arising from the sale of investment securities or other non-current assets, (ii) equity in income of non-consolidated subsidiaries, (iii) dividends from investments, (iv) other or non-operating gain or income and (v) non-operating loss or expense provided that, in case of clause (v) such item may not include any amounts reflected in the Business Financial Statements. For the avoidance of doubt, if the amount in clause (i) is a loss or there is any amount pursuant to clause (v), it will be reflected as negative number for purposes of calculating, Adjusted EBITDA.

 

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“ Post-Sale Inventory Write-Off ” means, for any period, the amount of any expense relating to the write-down or write-off (net of any related reserve reversal, recovery or other adjustment) of inventory relating to the Camera Module Business recorded during such period, to the extent reflected in EBIT for such period.

 

“ 7/31/05 Adjusted EBITDA ” means Adjusted EBITDA for the twelve months ended July 31, 2005.

 

“ Special Charges ” means for any period, the sum of:

 

Post-Sale Inventory Write-Off; plus

 

Asset Impairments, Severance and Write-Down of Nikon Stepper; plus

 

Wavics Charges; plus

 

Allocated Other Seller Corporate Expenses; plus

 

Allocated Asset Impairments and Severance; plus

 

Specified Charges.

 

“ Specified Charges ” means, for any period, any charges or expenses relating to the write-down of investment securities and other non-cash impairment charges of non-current assets and non-cash stock compensation charges, in each case to the extent reflected in EBIT for such period and not otherwise included in clauses (ii) through (ix) of the definition of “Adjusted EBITDA.”

 

“ Stand-Alone Costs Estimate ” means, for any period, One Hundred Eighty Million Seven Hundred Thousand Dollars and no cents ($180,700,000).

 

“ Stand-Alone Depreciation and Amortization ” means, for any period, Twenty Four Million Dollars and no cents ($24,000,000).

 

“ 10/31/05 Adjusted EBITDA ” means Adjusted EBITDA for the twelve months ended October 31, 2005.

 

“ Transaction Expenses ” means, for any period, (i) all out-of-pocket expenses consisting of fees and expenses of Seller’s financial advisor, outside attorneys, accountants and other advisors, arising out of the negotiation and execution of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby and (ii) in the case of 10/31/05 Adjusted EBITDA only, all other expenses accrued in the fiscal quarter ended October 31, 2005 arising out of the negotiation and execution of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby, including all employee retention payments (including those referenced in Section 4.17 of the Disclosure Letter) and severance expenses, in each case to the extent reflected in EBIT for such period.

 

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“ Wavics Charges ” means, for any period, the amount relating to charges and expenses for (i) bonuses paid to employees of Wavics, Inc. and its Subsidiaries in connection with the acquisition by Seller of Wavics, Inc. pursuant to the Asset Purchase Agreement dated as of January 20, 2005, and (ii) the write-down or write-off of in-process research and development during the fiscal quarter ended April 30, 2005, in each case to the extent reflected in EBIT for such period.

 

(b) For purposes of this Section 3.4, EBIT for the twelve-month period ended on July 31, 2005 will be calculated by taking:

 

(i) EBIT from the Audited Business Financial Statements for the nine months ended July 31, 2005; plus

 

(ii) EBIT from the Audited Business Financial Statements for the year ended October 31, 2004; minus

 

(iii) EBIT from the Unaudited Business Financial Statements for the nine months ended July 31, 2004.

 

All amounts set forth in clauses (ii) through (ix) and clause (xi) of the definition of “Adjusted EBITDA” will be derived from and supported by Seller’s accounting records, and the Parties acknowledge and agree that such amounts need not comply with the requirements set forth in Regulation S-X of the Securities Act and that the adjustments provided in clauses (ii) through (xi) of such definition may or may not be consistent with the adjustments that would be reflected in an offering document relating to the sale of securities.

 

(c) As promptly as reasonably practical, but in no event later than five Business Days after the date of delivery of the relevant Audited Business Financial Statements, Seller shall prepare and deliver to Purchaser (i) a calculation, in reasonable detail, of 7/31/05 Adjusted EBITDA and, if applicable, 10/31/05 Adjusted EBITDA and the Estimated Adjusted EBITDA Deficiency Amount, if any, and (ii) a certificate of the Chief Financial Officer of Seller stating that 7/31/05 Adjusted EBITDA and, if applicable, 10/31/05 Adjusted EBITDA and the Adjusted EBITDA Deficiency Amount, if any (collectively, the “ Estimated Adjusted EBITDA Final Calculations ”) each have been derived from and are supported by Seller’s accounting records.

 

(d) During the 15-day period following the delivery of the Estimated Adjusted EBITDA Final Calculations and the Audited Business Financial Statements, whichever is later (the “ Adjusted EBITDA Review Period ”), Purchaser and its representatives, including its independent auditors, shall be afforded the opportunity to review the Adjusted EBITDA Final Calculations and related supporting documentation. Seller or such Subsidiary shall make available to Purchaser all relevant books and records relating to the Adjusted EBITDA Final Calculations, shall facilitate access to the audit workpapers of Seller’s independent auditors and responsible representatives of Seller and its independent auditors, and shall otherwise provide reasonable assistance to Purchaser or any representatives, including its independent auditors, in connection with such review. The 15-day Adjusted EBITDA Review Period shall be extended to the extent the foregoing requisite access to books, records and personnel and assistance has not been reasonably provided.

 

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(e) If Purchaser believes that any Estimated Adjusted EBITDA Final Calculations (i) were not prepared or calculated, as appropriate, in accordance with this Section 3.4(b) and (ii) are incorrect, Purchaser shall deliver to Seller, prior to the expiration of the Adjusted EBITDA Review Period, a proposed adjustment notice (“ Adjusted EBITDA Proposed Adjustment Notice ”) which shall contain, in reasonable detail, the alleged error and support for such belief and the adjustment thereof, together with a certificate of a responsible officer of Purchaser stating that the calculations in the Adjusted EBITDA Proposed Adjustment Notice have been calculated in accordance with this Section 3.4. If the Adjusted EBITDA Proposed Adjustment Notice is not delivered to Seller prior to the expiration of the Adjusted EBITDA Review Period, the Estimated Adjusted EBITDA Final Calculations shall become final, binding and conclusive on all Parties (as finally determined in accordance with this Section 3.4, the “ Adjusted EBITDA Final Calculations ”).

 

(f) If an Adjusted EBITDA Proposed Adjustment Notice is delivered within the period set forth in Section 3.4(d), Purchaser and Seller shall negotiate in good faith to resolve such dispute for a ten (10)-day period (the “ Adjusted EBITDA Discussion Period ”), commencing on the date Seller receives the Adjusted EBITDA Proposed Adjustment Notice, to resolve such dispute. If Purchaser and Seller cannot resolve such dispute within such ten (10)-day period, Purchaser and Seller shall retain Ernst & Young LLP to act as the arbitrator (the “ Adjusted EBITDA Arbitrator ”) of such dispute; provided , however, that if either Party shall reasonably discover a conflict of interest (including the resulting loss of independence of an auditor to any Party) associated with Ernst & Young LLP, the Parties shall retain KPMG LLP to act as the Adjusted EBITDA Arbitrator, unless such alternative Adjusted EBITDA Arbitrator is also subject to a conflict of interest, in which event the Adjusted EBITDA Arbitrator shall be mutually agreed upon by the Parties. The Parties shall retain the Adjusted EBITDA Arbitrator immediately following the expiration of the Adjusted EBITDA Discussion Period. In the event of a failure to so retain the Adjusted EBITDA Arbitrator, either Party, acting individually, shall have the right to retain the Adjusted EBITDA Arbitrator on behalf of both Parties. Any arbitration shall be conducted in Santa Clara County, California, and such proceedings shall be in English. The Adjusted EBITDA Arbitrator shall act promptly to resolve any dispute in accordance with the terms of this Agreement, it being understood that the sole issues for the Adjusted EBITDA Arbitrator shall be whether the Estimated Adjusted EBITDA Final Calculations (i) were not prepared or calculated, as appropriate, in accordance with this Section 3.4 and (ii) as a result, are incorrect. The Adjusted EBITDA Arbitrator shall issue its written decision as promptly as practicable and in any event within ten (10) days after the appointment of such Adjusted EBITDA Arbitrator, which decision shall be final, binding and conclusive on both Purchaser and Seller; provided that in no event shall any disputed item or amount result in Adjusted EBITDA greater than that provided in the Estimated Adjusted EBITDA Final Calculations or less than that provided in the Adjusted EBITDA Proposed Adjustment Notice. Purchaser and Seller shall cooperate with the Adjusted EBITDA Arbitrator in connection with this Section 3.4(f). Without limiting the generality of the foregoing, Purchaser and Seller shall each promptly provide, or cause to be provided, to the Adjusted EBITDA Arbitrator all information, and to make available at the arbitration proceeding all personnel, as are reasonably necessary to permit the Adjusted EBITDA Arbitrator to resolve any disputes pursuant to this Section 3.4(f) and determine the Adjusted EBITDA Final Calculations and final Adjusted EBITDA. The expenses of the Adjusted EBITDA Arbitrator in resolving any disputes under this Section 3.4(f) shall be borne equally by Purchaser and Seller.

 

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(g) If the Adjusted EBITDA Final Calculations, as adjusted pursuant to Section 3.4(f) are (i) not determined prior to the Closing Date in accordance with such Section 3.4(f), and (ii) result in the calculation of an Adjusted EBITDA Deficiency Amount that (x) is greater than the Estimated Adjusted EBITDA Deficiency Amount prior to such adjustment, then Seller shall pay to an account designated by Purchaser in immediately available funds an amount equal to such adjustment, plus interest thereon from the Closing Date through the date of payment at the Prime Rate as in effect from time to time during such period or (y) is less than the Estimated Adjusted EBITDA Deficiency Amount prior to such adjustment, then the Purchaser shall pay to an account designated by Purchaser in immediately available funds an amount equal to such adjustment, plus interest thereon from the Closing Date through the date of payment at the Prime Rate as in effect from time to time during such period. If a Dispute Promissory Note was issued, upon payment of the amount required to be paid by Purchaser by the immediately preceding sentence (if any), such note shall be cancelled and returned by Seller to Purchaser. All payments under this Section 3.4(g) shall be made within ten (10) Business Days of the Adjusted EBITDA Final Calculations becoming final and binding in accordance with Section 3.4(e) or Section 3.4(f). The payment of any amounts pursuant to this Section 3.4(g) shall not be subject to any set-offs, hold-backs, escrows or other reductions or restrictions. In the event that any amounts are required to be paid pursuant to this Section 3.4(g), the Adjusted EBITDA Deficiency Amount and related determination of 7/31/05 Adjusted EBITDA or 10/31/05 Adjusted EBITDA, as adjusted pursuant to Section 3.4(f), shall be considered the Adjusted EBITDA Deficiency Amount, 7/31/05 Adjusted EBITDA or 10/31/05 Adjusted EBITDA, as the case may be, for all purposes of this Agreement.

 

3.5 Allocation of Purchase Price .

 

(a) Seller and Purchaser agree to allocate the Purchase Price (and all other capitalizable costs) among the Purchased Assets, the Transferred Business Intellectual Property, the Transferred Intellectual Property Rights and the covenant not to compete contained in Section 6.9 for all purposes (including financial accounting and Tax purposes (except as otherwise required by generally accepted accounting principles)) in accordance with an allocation schedule (the “ Allocation Schedule ”) prepared jointly by Seller and Purchaser in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder. Seller and Purchaser agree to cooperate with each other in the preparation of, and to negotiate in good faith to resolve any dispute with respect to, the Allocation Schedule; provided , however, that in the event that Seller and Purchaser cannot reach agreement with respect to the Allocation Schedule within thirty (30) days prior to the Closing Date, an internationally recognized accounting firm mutually agreed upon by Purchaser and Seller shall prepare the Allocation Schedule. The costs related to having the accounting firm prepare the Allocation Schedule shall be borne equally by Purchaser and Seller.

 

(b) If an adjustment is made to the Purchase Price pursuant to Section 3.3, the Allocation Schedule shall be adjusted in accordance with Section 1060 of the Code and as mutually agreed by Purchaser and Seller. In the event that an agreement with respect to any adjustment is not reached within thirty (30) days after the later of (i) the date the Final Calculations become binding pursuant to Section 3.3 and (ii) the date the Adjusted EBITDA Final Calculations become binding pursuant to Section 3.4, any disputed items shall be resolved in the manner described in Section 3.5(a). Not later than ten (10) days prior to the filing of their

 

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respective IRS Forms 8594 relating to this transaction, each Party shall deliver to the other Party a copy of its IRS Form 8594.

 

(c) Purchaser and Seller shall be bound by such Allocation Schedule and shall file, according to Section 1060 of the Code, all returns (including, without limitation, filing Form 8594) and reports with respect to the transactions contemplated by this Agreement (including, without limitation, all federal, state and local Tax returns) on the basis of such allocation. In addition, Purchaser and Seller shall act in accordance with the Allocation Schedule in the course of any Tax audit, Tax review or Tax litigation relating thereto, and take no position and cause their affiliates to take no position inconsistent with the Allocation Schedule for income Tax purposes, including United States federal and state income Tax and foreign income Tax, unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Purchaser, subject to the disclosures and exceptions set forth in the disclosure letter delivered by Seller to Purchaser on the date hereof and attached hereto (the “ Disclosure Letter ”), as follows:

 

4.1 Corporate Existence .

 

Seller and each of its Subsidiaries party to the other Transaction Documents (such Subsidiaries, collectively, the “ Other Sellers ”) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Seller and each Other Seller has the requisite corporate, partnership or similar power and authority to execute and deliver this Agreement and each of the other Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby and to carry on the Business as the same is now being conducted by it.

 

4.2 Corporate Authority .

 

(a) This Agreement, the Ancillary Agreements and the other agreements, instruments and documents to be executed and delivered in connection herewith, including the Master Separation Agreement, (collectively with this Agreement, the “ Transaction Documents ”) to which Seller or any Other Seller is (or becomes) a party and the consummation of the transactions contemplated hereby and thereby involving such Persons have been duly authorized by Seller and will be duly authorized by each applicable Other Seller by all requisite corporate, partnership or other action prior to Closing and no other proceedings on the part of Seller or its stockholders are (and no other proceedings on the part of any Other Seller or any of its equity holders will be) necessary for Seller or any Other Seller to authorize the execution or delivery of this Agreement or any of the other Transaction Documents or to perform any of their obligations hereunder or thereunder. Seller has, and each of the Other Sellers will have at or prior to the Closing, full corporate or other organizational (as applicable) power and authority to execute and deliver the other Transaction Documents to which it is a party and to perform its obligations

 

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hereunder or thereunder. This Agreement has been duly executed and delivered by Seller, and the other Transaction Documents will be duly executed and delivered by Seller and any Other Seller party thereto, and this Agreement constitutes, and the other Transaction Documents when so executed and delivered will constitute, a valid and legally binding obligation of Seller and/or any Other Seller, enforceable against it or them, as the case may be, in accordance with its terms, except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at law).

 

(b) Except (i) for required filings under the HSR Act, and any other applicable Laws or regulations relating to antitrust or competition (collectively, “ Antitrust Regulations ”) and (ii) if determined to be necessary by Seller, the filing of this Agreement with the Securities and Exchange Commission (the “ SEC ”), the execution and delivery of this Agreement and the other Transaction Documents by Seller and/or each of the Other Sellers, the performance by Seller and each Other Seller of its respective obligations hereunder and thereunder and the consummation by Seller and each of the Other Sellers of the transactions contemplated hereby and thereby do not and will not (A) violate or conflict with any provision of the respective certificate of incorporation or by-laws or similar organizational documents of Seller or any Other Seller, (B) result in any material violation or material breach of, or constitute any material default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or a loss of a material benefit under, require that any Consent be obtained or result in the creation of any Lien under, any material Contract, including material Assumed Contracts, to which Seller or any Other Seller is a party or to which any assets of Seller are subject, or (C) materially violate, conflict with or result in any breach under any provision of any material Law applicable to Seller or any Other Seller or any of their respective properties or assets.

 

4.3 Governmental Approvals and Consents .

 

Except for any requirements under any Antitrust Regulations, no material Consent, order, or license from, material notice to or material registration, declaration or filing with, any United States, supranational or foreign, federal, state, provincial, municipal or local government, government agency, court of competent jurisdiction, administrative agency or commission or other governmental or regulatory authority or instrumentality (“ Governmental Authority ”), is required on the part of Seller or any Other Seller in connection with the execution, delivery or performance of this Agreement or any of the other Transaction Documents or the consummation of the transactions contemplated hereby and thereby. Seller and each Other Seller is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect.

 

4.4 Properties .

 

(a) Seller or one or more of the Other Sellers has, or at the Closing will have, and Purchaser will at the Closing acquire, good and valid title to the Purchased Assets, free and clear

 

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of all Liens, except Permitted Liens and Liens arising out of any actions of Purchaser and its Subsidiaries.

 

(b) Section 4.4(b) of the Disclosure Letter contains a list of the Real Property. The Real Property is the only real property owned, leased, subleased or licensed by Seller or the Other Sellers and necessary for the operation of the Business.

 

(c) Section 4.4(c) of the Disclosure Letter contains a list of all Owned Real Property to be transferred to Purchaser pursuant to the Deeds (“ Transferred Real Property ”).

 

(d) Section 4.4(d) of the Disclosure Letter contains a list of all Real Property to be assigned to Purchaser in accordance with Article II (“ Assigned Real Property ”). True and complete copies of each Lease relating to each Assigned Real Property have been delivered, or made available, to Purchaser or its counsel. None of Seller or the Other Sellers has received a written notice from any Landlord of any default (or condition or event which, after notice or lapse of time or both, would constitute a default) under any such Lease relating to or otherwise affecting the Assigned Real Property.

 

(e) Section 4.4(e) of the Disclosure Letter contains a list of all Real Property to be subleased to Purchaser in accordance with Article II (“ Subleased Real Property ”) and a description of the portion thereof to be subleased to Purchaser and the nature of such sublease. True and complete copies of each Lease relating to each Subleased Real Property have been delivered, or made available, to Purchaser or its counsel. None of Seller or the Other Sellers has received a written notice from any Landlord of any default (or condition or event which, after notice or lapse of time or both, would constitute a default) under any such Lease relating to the Subleased Real Property. With respect to the Subleased Real Property at Bayan Leaps Free Industrial Zone, 11900 Penang, Malaysia (the “Penang Property”), there is no term or condition set forth in the leases and/or other instruments and agreements pursuant to which Seller occupies and has the right to utilize the Penang Property that, following the consummation of the transactions contemplated by this Agreement (including the sublease or subleases by Seller to Purchaser of the Penang Property in accordance with the terms set forth on Exhibit H-3) that would prevent or hinder Purchaser’s occupancy or utilization of the Penang Property immediately following the Closing in substantially the same manner as the Penang Property is currently occupied and utilized by Seller and the Other Sellers immediately prior to the Closing.

 

(f) Section 4.4(f) of the Disclosure Letter contains a list of all Real Property a portion of which will be leased to Purchaser on the Closing Date in accordance with Section 6.8(b) (the “ Leased Real Property ”) and a description of the portion thereof to be leased to Purchaser and the nature of such Lease.

 

(g) Section 4.4(g) of the Disclosure Letter contains a list of all Real Property a portion of which will be licensed to Purchaser on the Closing Date in accordance with Section 6.8(b) (the “ Licensed Real Property ”) and a description of the portion thereof to be licensed to Purchaser (the Transferred Real Property, the Assigned Real Property, the Subleased Real Property, the Leased Real Property and the Licensed Real Property, collectively, the “ Real Property ”). True and complete copies of each Lease relating to each Licensed Real Property, where applicable, have been delivered, or made available, to Purchaser or its counsel. None of

 

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Seller or the Other Sellers has received a written notice from any Landlord of any default (or condition or event which, after notice or lapse of time or both, would constitute a default) under any such Lease relating to the Licensed Real Property.

 

(h) Each of the Leases with respect to the Assigned Real Property, the Subleased Real Property and the Licensed Real Property is in full force and effect without modification or amendment from the form delivered, or made available, to Purchaser or its counsel and are valid, binding and enforceable in accordance with their respective terms except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at law). Seller and its Subsidiaries party to the Leases have performed all material obligations required to be performed by them to date under such Leases, and are not (with or without the lapse of time or the giving of notice, or both) in material breach or material default thereunder and, to the knowledge of Seller, no other party to such Leases is (with or without the lapse of time or the giving of notice, or both) in material breach or material default thereunder. Except pursuant to documentation delivered, or made available, to Purchaser or its counsel, Seller and the Other Sellers have not assigned their interest under such Leases, or entered into any subleases for all or a part of the space demised thereby, to any third party. All material construction work and alterations required to be performed by the Tenant under such Leases has been completed.

 

(i) The plants, buildings and other structures included in the Purchased Assets (i) have no material defects, (ii) are in good operating condition and repair (giving due account to the age and length of use of same), ordinary wear and tear excepted, (iii) are suitable for use in connection with the Business, and (iv) are structurally sound, except where failure of any of the representations in clauses (i) – (iv) hereof could not be reasonably expected to materially adversely affect the conduct of the Business at the applicable Real Property.

 

(j) The plants, buildings and structures included in the Purchased Assets have access to (i) public roads or valid easements over private streets or private property for such ingress to and egress from all such plants, buildings and structures and (ii) water supply, storm and sanitary sewer facilities, telephone, gas and electrical connections, fire protection, drainage and other public utilities, in each case as is necessary for the conduct of the Business, except where failure of any of the representations in clauses (i) and (ii) hereof could not be reasonably expected to materially adversely affect the conduct of the Business at the applicable Real Property. None of the structures on the Real Property substantially encroaches upon real property of another Person, and no structure of any other Person substantially encroaches upon any Real Property, except where any such encroachment could not reasonably be expected to have a Seller Material Adverse Effect.

 

4.5 Contracts .

 

(a) Except as set forth on Section 4.5(a) of the Disclosure Letter, no Assumed Contract in effect as of the date of this Agreement constitutes (any Contract specified in Section 4.5(a) of the Disclosure Letter is referred to as an “ Assumed Material Contract ”):

 

(i) any Contract to which Seller or any of its Subsidiaries is a party limiting in any material respect the right of Seller or its Subsidiaries to engage in any material line of business or to compete with any Person, in each case which would apply to the activities of Purchaser after the Closing with respect to the Business;

 

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(ii) a lease, sublease or similar Contract with any Person under which (A) Seller or any of its Subsidiaries is lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by any Person or (B) Seller or any of its Subsidiaries is a lessor or sublessor of, or makes available for use by any Person, any machinery, equipment, vehicle or other tangible personal property owned or leased by Seller or its Subsidiaries in any such case that has an aggregate future liability or receivable, as the case may be, in any fiscal year in excess of $2,000,000 and is not terminable by Seller or any of its Subsidiaries by notice of not more than 60 days for a cost of less than $2,000,000;

 

(iii) (A) a continuing Contract for the future purchase by Seller or its Subsidiaries of materials, supplies, equipment or services (other than purchase orders for inventory (i.e., raw materials, work in process and finished goods) in the ordinary course of business), (B) a management, consulting or other similar Contract for services to be provided to Seller or any of its Subsidiaries or (C) an advertising agreement or arrangement, in any such case that has an aggregate future liability in any fiscal year to any Person in excess of $2,000,000 and is not terminable by Seller or any of its Subsidiaries by notice of not more than 60 days for a cost of less than $2,000,000;

 

(iv) a Contract (including any take-or-pay or keepwell agreement) under which (A) any Person has guaranteed indebtedness, liabilities or obligations of Seller or its Subsidiaries or (B) Seller or any of its Subsidiaries has guaranteed indebtedness, liabilities or obligations of any other Person (in each case other than endorsements for the purpose of collection in the ordinary course of business), in each case in excess of $2,000,000 individually or $10,000,000 in the aggregate;

 

(v) a Contract under which Seller or any of its Subsidiaries has, directly or indirectly, made any advance, loan, extension of credit or capital contribution to, or other investment (other than the Investment Interests) in, any Person (other than extensions of trade credit in the ordinary course of business and loans to employees in the ordinary course of business consistent with past practice not in excess of $200,000 per employee) in excess of $2,000,000 individually or $10,000,000 in the aggregate;

 

(vi) a Contract granting a Lien upon any property (tangible or intangible) used in connection with the Business or any other Purchased Asset which Lien secures an obligation in excess of $2,000,000, other than Permitted Liens;

 

(vii) a Contract with (A) Seller or any of Seller’s Subsidiaries or (B) any officer, director, employee or Affiliate of Seller or any of Seller’s Subsidiaries;

 

(viii) a Contract providing for the services of any dealer, distributor, sales representative, franchise or similar representative that involved the payment or receipt in

 

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the fiscal year ended October 31, 2004 or the nine months ended July 31, 2005 in excess of $2,000,000 by Seller or any of its Subsidiaries, other than such contracts (including with original equipment manufacturers) entered into in the ordinary course of business; or

 

(ix) a Contract to which Seller or any Seller Subsidiary is a party pertaining to the Business that is material to the Business and not made in the ordinary course of business.

 

(b) All Assumed Material Contracts are valid, binding and in full force and effect with respect to Seller or its Subsidiary party thereto, and have not been amended or modified in any material respect except as set forth therein. Seller has made available to Purchaser or its counsel true and correct copies of all Assumed Material Contracts as in effect on the date hereof. Seller or its Subsidiary party thereto has performed all material obligations required to be performed by it under the Assumed Material Contracts, and it is not (with or without the lapse of time or the giving of notice, or both) in material breach or material default thereunder and, to the knowledge of Seller, no other party to any Assumed Material Contract is (with or without the lapse of time or the giving of notice, or both) in material breach or material default thereunder.

 

(c) Notwithstanding the foregoing, the provisions of this Section 4.5 shall not apply to Business Intellectual Property Rights (which are addressed in Section 4.7), Real Property (which are addressed in by Section 4.4), Seller Plans (which are addressed in Section 4.10), and Non-U.S. Benefit Plans (which are addressed in Section 4.11).

 

4.6 Litigation .

 

Neither Seller nor any Other Seller is subject to any order, judgment, stipulation, injunction, decree or agreement with any Governmental Authority, which would reasonably be expected to prevent or materially interfere with or delay the consummation of any of the transactions contemplated by the Transaction Documents or would reasonably be expected to have a Seller Material Adverse Effect. No Proceeding is pending or, to the knowledge of Seller, threatened against Seller or any Other Seller which would reasonably be expected to prevent or materially interfere with or delay the consummation of the transactions contemplated hereby or by any of the other Transaction Documents. Except as set forth on Section 4.6 of the Disclosure Letter, there are no Proceedings pending or, to the knowledge of Seller, threatened against Seller or any Other Sellers in respect of the Business, the Purchased Assets, the Business Intellectual Property Rights or the Seller Plans, except for (a) any pending or threatened Proceeding that (i) seeks less than $1,000,000 in damages (excluding any class or similar representative actions or any instance in which a Proceeding involving the same or similar allegations represent aggregate damages in excess of such amount) and (ii) does not seek injunctive or other similar relief, or (b) Proceedings commenced following the date hereof which would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect.

 

4.7 Business Intellectual Property Rights .

 

(a) Section 4.7(a) of the Disclosure Letter sets forth a list of all material Business Intellectual Property Licenses identified by Seller as of the date hereof. Seller and Purchaser shall reasonably cooperate to prepare a revised list of Business Intellectual Property Licenses

 

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prior to the Closing Date, with the intention that such list shall be as complete and accurate as is practicable under the circumstances. To the knowledge of Seller, (i) the Business Intellectual Property Licenses set forth in Section 4.7(a) of the Disclosure Letter are valid and in full force and effect and (ii) neither Seller nor such Other Seller, nor any other party thereto, is in material default or material breach thereunder, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or affecting the enforcement of creditors’ rights generally, by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law) or by the implied covenant of good faith and fair dealing.

 

(b) Seller or an Other Seller owns the Transferred Business Intellectual Property free and clear of any Liens.

 

(c) No Proceedings have been instituted or are pending against Seller or any Other Seller or, to the knowledge of Seller, threatened, which challenge the rights of Seller or any of the Other Sellers with respect to use or ownership of the Transferred Business Technology, Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights.

 

(d) None of the Transferred Business Technology, Transferred Business Intellectual Property, or Transferred Business Intellectual Property Rights is subject to any outstanding judgment, decree, order, writ, award, injunction or determination of an arbitrator or court or other Governmental Authority affecting the rights of Seller or any of the Other Sellers with respect thereto.

 

(e) To the knowledge of Seller, neither Seller nor any Other Seller, nor the use by Seller or any Other Seller of the Transferred Business Technology, Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights, has, in connection with the Business, infringed or violated in any material respects the valid Intellectual Property Rights of any third party, and no other term of this Agreement shall be interpreted to be inconsistent with the foregoing.

 

(f) As of the date hereof, Neither Seller nor any Other Seller has received any notice nor is there any pending litigation, to which Seller or any Other Seller is a party, alleging (i) that Seller or any Other Seller’s use of the Transferred Business Technology, Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights violates any valid Intellectual Property Right of any third party material to the Business, (ii) invalidity of the Transferred Business Intellectual Property, or (iii) ownership of the Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights by a third party.

 

(g) To the knowledge of Seller, there is no material unauthorized use, misappropriation or infringement of any material Transferred Business Intellectual Property by any third party, including by any employee or former employee of Seller or an Other Seller.

 

(h) Seller and each Other Seller have taken commercially reasonable steps to preserve the confidentiality of its Trade Secrets that relate to the Business. Neither Seller nor any Other Seller is under any obligation to disclose, its material proprietary software of the Business in source code form, except to parties that have agreed to preserve the confidentiality of such

 

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source code. Neither Seller nor any of its Subsidiaries has intentionally incorporated any disabling device or mechanism in the Semiconductor Products.

 

(i) Neither Seller nor any Other Seller has received any notice nor is there any pending litigation alleging that Seller or any Other Seller is obligated to indemnify a third party for alleged infringements or violations of Intellectual Property Rights of any other third party, except for any such infringements or violations which would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect.

 

4.8 Finders; Brokers .

 

With the exception of fees and expenses payable to Goldman, Sachs & Co., for which Seller shall be solely responsible, none of Seller or any Other Seller has employed any finder or broker in connection with the Purchase who would have a valid claim for a fee or commission from Purchaser in connection with the negotiation, execution or delivery of this Agreement or any of the other Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby.

 

4.9 Tax Matters .

 

(a) (i) Neither Seller nor any Other Seller is currently engaged and has not been engaged during the three year period ending on the Closing Date, in any material disputes with any Governmental Authority with respect to Taxes attributable to the Purchased Assets, the Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights, (ii) no Governmental Authority has proposed to make or has made any material adjustment with respect to Taxes attributable to the Purchased Assets, Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights and (iii) none of the Purchased Assets is “tax-exempt use property” within the meaning of Section 168(h) of the Code.

 

(b) There is no material liability for any unpaid Taxes in respect of the Purchased Assets, the Transferred Business Intellectual Property or the Transferred Business Intellectual Property Rights.

 

(c) None of the Purchased Assets, the Transferred Business Intellectual Property or the Transferred Business Intellectual Property Rights (i) is property that is required to be treated for Tax purposes as being owned by any other Person (other than those Purchased Assets that are leased); (ii) is tax-exempt bond financed property within the meaning of Section 168 of the Code; or (iii) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code.

 

(d) After the Closing Date, none of the Purchased Assets or the Business will be bound by any Tax-sharing agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date.

 

(e) Seller and each Other Seller has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party.

 

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4.10 Employment and Benefits .

 

(a) Section 4.10(a) of the Disclosure Letter sets forth a correct and complete list of each material Seller Plan.

 

(b) With respect to each material Seller Plan, Seller has provided or made available to Purchaser or its counsel (i) a current summary plan description with respect to any Seller Plan subject to ERISA and (ii) a current summary description or plan document with respect to any Seller Plans not subject to ERISA.

 

(c) The Seller Plans are in compliance in all respects with all applicable requirements of ERISA, the Code, and other applicable Laws of the United States and have been administered in material accordance with their terms and such Laws, except where the failure to so comply has not had and would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect. Seller’s 401(k) plan has received a determination letter from the IRS stating that it qualifies under Section 401(a) of the Code, and its trust is exempt from United States Taxation under Section 501(a) of the Code, and nothing has occurred since the date of such determination letter that would, individually or in the aggregate, reasonably be expected to result in the loss of such qualification or exempt status. Seller has provided or made available to Purchaser copies of any Internal Revenue Service determination letters with respect to each Seller Plan.

 

(d) There are no pending or, to the knowledge of Seller, threatened claims or litigation with respect to any Seller Plans, other than ordinary and usual claims for benefits by participants and beneficiaries, that would, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect.

 

(e) None of Seller, any Subsidiary of Seller, or any ERISA Affiliate of Seller contributes to, or has in the past contributed to, any multiemployer plan, as defined in Section 3(37) of ERISA.

 

(f) No unsatisfied liability or withdrawal liability under Title IV of ERISA has been or is expected to be incurred by Seller or any Other Seller with respect to any ongoing, frozen or terminated “single-employer plan”, within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by either Seller or any of its Subsidiaries or any entity which is considered one employer with Seller under Section 414 of the Code (an “ ERISA Affiliate ”) that would reasonably be expected to have a Seller Material Adverse Effect.

 

(g) The consummation of the transactions described in this Agreement, in and of themselves, will not (A) other than as provided in Section 6.6, accelerate the time of payment or vesting or trigger any payment or funding (through a trust or otherwise) of compensation or benefits under, or materially increase the amount payable or create any other material obligation pursuant to, any of the Seller Plans or (B) result in payments under any of the Seller Plans which would not be deductible under Section 280G of the Code.

 

(h) Each individual falling within the definition of Business Employee performs all or substantially all of his or her services for the Seller and its Subsidiaries for or on behalf of the Business.

 

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4.11 Non-U.S. Benefit Plans .

 

This Section 4.11 shall apply to Non-U.S. Benefit Plans.

 

(a) With respect to each material Non-U.S. Benefit Plan, Seller has provided or made available to Purchaser or its counsel a current summary description thereof. As soon as practicable following the date hereof, but no later than eighteen (18) days following the date of this Agreement, Seller will deliver to Purchaser copies of all documents governing the material Non-U.S. Benefit Plans with respect to which Purchaser shall incur or have a reasonable likelihood of incurring any Liability after the Closing and copies of all material documents governing the other Non-U.S. Benefit Plans with respect to which Purchaser shall incur or have a reasonable likelihood of incurring any Liability after the Closing, including any financing vehicles underlying the Non-U.S. Benefit Plans, and a list of each material insurance policy maintained by Seller or any Other Seller with respect to any of such Non-U.S. Benefit Plans with respect to which Purchaser shall incur or have a reasonable likelihood of incurring any Liability after the Closing.

 

(b) Each of the Non-U.S. Benefit Plans has been maintained, operated and administered in material compliance with its terms and the provisions of applicable Law.

 

(c) Each Non-U.S. Benefit Plan which must be registered or qualified in the country in which it is maintained has received or timely applied for such registration or qualification, and, to Seller’s knowledge, such Non-U.S. Benefit Plan has not been amended since the date of its most recent registration or qualification (or application therefor) in a manner that would require a new registration or qualification, except where the failure to so comply has not had and would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect.

 

(d) There are no pending or, to the knowledge of Seller, threatened claims, litigation or arbitration proceedings with respect to any Non-U.S. Benefit Plans, other than ordinary and usual claims for benefits by participants and beneficiaries, that have not had and would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect. All contributions, premiums, expenses and other payments required to be made by Seller or its Affiliates in connection with the Non-U.S. Benefit Plans by the Closing Date have been made, except where the failure to make such payment would not reasonably be expected to have a Seller Material Adverse Effect.

 

(e) The consummation of the transactions described in this Agreement, in and of themselves, will not, other than as provided by Law, accelerate the time of payment or vesting or trigger any payment or funding (through a trust or otherwise) of compensation or benefits under, or materially increase the amount payable or create any other material obligation pursuant to, any of the Non-U.S. Benefit Plans or any other of Seller’s employee benefit plans that provide benefits to the Non-U.S. Employees other than Retirement Benefits.

 

(f) No Business Employee who commenced employment with Seller or its Affiliates following January 1, 1995 has been eligible to participate in the Pensionsplan der Agilent Technologies Deutschland GmbH, as amended from time to time. Prior to the adoption of the

 

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Pensionsplan der Agilent Technologies Deutschland GmbH on August 1, 1982, no other plan, program or agreement provided Retirement Benefits for Business Employees employed by Seller or its Affiliates in Germany.

 

4.12 Compliance with Laws.

 

The Business is being and has been conducted by Seller and its Subsidiaries in material compliance with the Laws applicable thereto. Seller and its Subsidiaries each have all material permits, licenses, registrations, certificates, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals (collectively, “ Permits ”) necessary to conduct the Business as presently conducted.

 

4.13 Labor Matters .

 

As of the date of this Agreement, neither Seller nor any Other Seller is (a) a party to any collective bargaining agreement in respect of the Business in the United States, Singapore, or Malaysia (collectively, the “ Key Jurisdictions ”), (b) subject to a legal duty to bargain (exclusive of any notification and consultation obligations) with any trade union on behalf of the Business Employees in the Key Jurisdictions or (c) to the knowledge of Seller, the object of any attempt to organize the Business Employees for collective bargaining purposes or presently operating under an expired collective bargaining agreement in the Key Jurisdictions. As of the current time and within the last 24 months, neither Seller nor any Other Seller in respect of the Business is or has been a party to or subject to any material strike, work stoppage, organizing attempt, picketing, boycott or similar activity.

 

4.14 Environmental Matters.

 

Except as disclosed in Section 4.14 of the Disclosure Letter: (a) Seller and each Other Seller in respect of the Business, the Real Property, the Purchased Assets and the Hazardous Materials Activities relating to the Real Property are and have been in material compliance with all Environmental Laws, including the possession of, and the compliance with, all material Permits required under Environmental Laws; (b) there has not been any Release of Hazardous Materials at or from any of the Business Facilities in violation of Environmental Laws or in a manner that would reasonably be expected to give rise to a material liability under any Environmental Laws; (c) neither Seller nor any Subsidiary of Seller has received any Environmental Claim relating to the Business or the Real Property, and to the knowledge of Seller, there are no Environmental Claims threatened against the Business or any of the Real Property; (d) Seller has, to its knowledge, delivered to Purchaser, or has otherwise made available to Purchaser or its counsel, true, complete and correct copies of all material environmental reports, studies, assessments, audits, sampling data, correspondence alleging any violation of Environmental Laws and other Environmental Claims in their possession relating to the Purchased Assets, the Real Property and the Business; and (e) no Person with an indemnity or contribution obligation to Seller or any Other Seller relating to compliance with or liability under Environmental Law is in material default with respect to any such material obligation relating to the Business or the Real Property.

 

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4.15 Financial Information; Undisclosed Liabilities .

 

(a) Section 4.15(a) of the Disclosure Letter contains a statement setting forth specified Purchased Net Assets as of October 31, 2004 and April 30, 2005 (the “ Statement of Purchased Net Assets ”) and a statement of operating revenues and expenses for the twelve-month period ended October 31, 2004 and the six-month period ended April 30, 2005 (the “ Statement of Operating Revenue and Expenses ” and, together with the Statement of Purchased Net Assets, the “ Business Financial Statements ”). The Business Financial Statements (i) have been prepared in accordance with the accounting principles and procedures set forth in the notes to the Business Financial Statements, (ii) are derived from the unaudited consolidated financial statements of Seller and its Subsidiaries for the twelve (12) months and six (6) months and as of the periods ended October 31, 2004 and April 30, 2005, respectively, and (iii) fairly present in all material respects the Purchased Assets and Assumed Liabilities as of the date of such Business Financial Statements and the results of operations of the Business for the period covered by the Business Financial Statements in accordance with the accounting principles and procedures set forth in the notes to the Business Financial Statements. The segment information as to total net revenue and income from operations for the semiconductor product segment included in Seller’s Report on Form 10-Q for the quarterly period ended April 30, 2005 and Report on Form 10-K for the annual period ended October 31, 2004 has been prepared in the manner described in such Report on Form 10-Q or Report on Form 10-K, as the case may be.

 

(b) The Audited Business Financial Statements will present fairly in all material respects the consolidated financial condition, cash flows and results of operations of the Business, as of the dates and for the periods indicated. The Audited Business Financial Statements will be prepared in accordance with GAAP, consistently applied except where expressly indicated, and comply in all respects to the requirements for the form and substance of financial statements set forth in Regulation S-X of the Securities and Exchange Act.

 

(c) The Assumed Liabilities do not include any Liabilities of a nature required by GAAP to be reflected in a consolidated corporate balance sheet or the notes thereto, except Liabilities that (i) will be accrued or reserved against in the Audited Business Financial Statements, (ii) were incurred in the ordinary course of business since July 31, 2005, or (iii) have not had, and would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect.

 

4.16 Equity Interests . Section 4.16 of the Disclosure Letter sets forth the capital stock, other equity interests or convertible notes (the “ Investment Interests ”) in any corporation, partnership or other entity that are included in the Purchased Assets. At the time of the Closing, Seller or one of the Other Sellers will have good and marketable title to all such Investment Interests described in Section 4.16 of the Disclosure Letter, free and clear of all Liens except Permitted Liens. Seller has made available to Purchaser prior to the date hereof true and complete copies of all Contracts to which Seller or any other Seller is a party with respect to the Investment Interests. Neither Seller nor any Other Seller (i) has any obligation to make any investment in, capital contribution or loan to, or guarantee for the benefit of, any Person in respect of any Investment Interests or (ii) is party to any Contract granting any other party a right of first refusal or right of first offer with respect to the sale or transfer by Seller or any Other Seller of any Investment Interest.

 

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4.17 Absence of Changes .

 

Except as otherwise disclosed in this Agreement or the exhibits or schedules hereto, since October 31, 2004, Seller and the Other Sellers have conducted the Business in all material respects in the ordinary course of business, and other than in the ordinary course of business have not: (a) sold, assigned, pledged, hypothecated or otherwise transferred any of the Purchased Assets, other than such sales, assignments, pledges, hypothecations or other transfers in the ordinary course of business; (b) suffered any material damage, destruction or other casualty loss (not covered by insurance) on or prior to the date of this Agreement; (c) increased the compensation payable or to become payable by Seller or any Subsidiary to any Business Employee, (d) increased the level of benefits under any employee benefit plan, payment or arrangement for any Business Employee; (e) cancelled, compromised, released or assigned any material indebtedness owed to the Business or any material claims held by the Business, (f) sold, transferred, licensed or otherwise conveyed or disposed of any Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights, (g) changed any method of accounting or accounting practice by Seller with respect to the Business except for any such change after the date hereof required by reason of a concurrent change in GAAP, (h) granted any allowances or discounts outside the ordinary course of business or sold inventory materially in excess of reasonably anticipated consumption for the near term outside the ordinary course of business, or (i) entered into an agreement to do any of the foregoing. Since October 31, 2004 through the date hereof, Seller and its Subsidiaries have not suffered any Seller Material Adverse Effect.

 

4.18 Related Party Transactions .

 

Section 4.18 of the Disclosure Letter lists all material agreements, contracts, or other arrangements between the Business and any other business or division of Seller or its Subsidiaries as of the date hereof.

 

4.19 Sufficiency of Assets .

 

The transfer of the Purchased Assets, the Transferred Business Intellectual Property, the Transferred Business Intellectual Property Rights, and the Transferred Real Property, together with (ii) the Licensed Business Intellectual Property Rights, Licensed Business Technology, Assigned Real Property, the Leased Real Property, the Subleased Real Property and the Licensed Real Property and the other rights, licenses, services and benefits to be provided pursuant to this Agreement and the other Transaction Documents, constitute all of the assets, properties and rights owned, leased or licensed by Seller and its Subsidiaries necessary to conduct the Business in all material respects as currently conducted, in each case other than (A) the Excluded Assets described in Exhibit K, (B) any Contracts or other assets or rights that pursuant to Section 2.4, 2.5 or 2.6 are not transferred to Purchaser, (C) the assets, properties and rights used to perform the services that are the subject of the Master Separation Agreement and (D) as provided in Section 4.19 of the Disclosure Letter.

 

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4.20 Location of Assets .

 

Section 4.20(a) of the Disclosure Letter lists all addresses and/or locations of any material tangible assets in the possession of the Seller and/or any of its Subsidiaries that are included in the Purchased Assets. Section 4.20(b) of the Disclosure Letter lists all locations of any material tangible assets in the possession of any third party that are included in the Purchased Assets.

 

4.21 Restrictions on Business Activities .

 

There is no Contract to which Seller or any of its Subsidiaries is a party or is otherwise subject limiting in any material respect the right of Seller or its Subsidiaries to engage in any line of business or to compete with any Person (including the Person set forth in Section 4.21(a) of the Disclosure Letter), in each case which would apply to the activities of Purchaser after the Closing with respect to the Business.

 

4.22 Insurance .

 

Section 4.22 of the Disclosure Letter lists all insurance policies of Seller or its Subsidiaries covering the Business as of the date hereof. All such policies are in full force and effect and Seller or any of its Subsidiaries being provided insurance benefits thereunder has complied in all material respects with the provisions of such policies and as of the date hereof Seller has not received any written notice from any of its insurance brokers or carriers for such policies that such broker or carrier will not be willing or able to renew its existing coverage.

 

4.23 Customers .

 

Section 4.23 of the Disclosure Letter sets forth the ten (10) largest end-user customers (meaning original equipment manufacturers) by revenue of the Business for the fiscal year ended October 31, 2004 and for the six-month period ended April 30, 2005. As of the date hereof, neither Seller nor any of its Subsidiaries has received written notification that any such customer of the Business intends to terminate or materially adversely change its relationship with the Business.

 

4.24 Suppliers .

 

Section 4.24 of the Disclosure Letter sets forth the ten (10) largest suppliers of goods and services to the Business for the fiscal year ended October 31, 2004 and for the six-month period ended April 30, 2005. As of the date hereof, neither Seller nor any of its Subsidiaries has received written notification that any such supplier intends to terminate or materially adversely change its relationship with the Business.

 

4.25 Products .

 

The Semiconductor Products constitute all of the products currently manufactured, sold or being developed by Seller’s semiconductor products group as described in Seller’s most recent annual report on Form 10-K filed prior to the date hereof, except for (a) any products of LumiLeds Lighting, (b) any products of the divested camera module business, (c) any Lateral Flow Assay, Remote Management and Diagnostics, Embedded Test, Continuous Test and

 

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Management or Smart Optics products, (d) such other products as are set forth in Section 4.25 of the Disclosure Letter, and (e) such changes in products as have occurred in the ordinary course of business after the date of filing of such Form 10-K.

 

4.26 No Other Representations or Warranties.

 

Except for the representations and warranties contained in this Article IV or in the other Transaction Documents, Purchaser acknowledges and agrees that none of Seller, any Subsidiaries or Affiliates of Seller nor any other Person makes any other express, implied or statutory representation or warranty with respect to the Business, the Purchased Assets, the Transferred Business Intellectual Property, Transferred Business Technology, the Assumed Liabilities or otherwise, including any implied warranties of merchantability, fitness for a particular purpose, title, enforceability or non-infringement, including as to (a) the physical condition or usefulness for a particular purpose of the real or tangible personal property included in the Purchased Assets, (b) the use of the Purchased Assets and Transferred Business Intellectual Property Rights and Transferred Business Technology, and the operation of the Business by Purchaser after the Closing in any manner other than as used and operated by Seller or its Subsidiaries, or (c) the probable success or profitability of the ownership, use or operation of the Business by Purchaser after the Closing. Except for the representations and warranties contained in this Article IV or in the other Transaction Documents, all Purchased Assets are conveyed on an “AS IS” and “WHERE IS” basis. Except for the representations and warranties contained in this Article IV or in the other Transaction Document and the indemnification obligations set forth in Article IX hereof, neither Seller nor any other Person will have or be subject to any liability or indemnification obligation to Purchaser or any other Person for any information provided to the Purchaser or its representatives relating to the Business or otherwise in expectation of the transactions contemplated by this Agreement, including the confidential memorandum or other material prepared by Goldman, Sachs & Co. related to the Business and any information, document, or material made available to Purchaser or its counsel or other representatives in Purchaser’s due diligence review, including in certain “data rooms” (electronic or otherwise) or management presentations. The representations, warranties, covenants and obligations of Purchaser, and the rights and remedies that may be exercised by Purchaser shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of, Purchaser or any of its representatives.

 

ARTICLE V

 

REPRESENTATIONS OF PURCHASER

 

Purchaser represents and warrants to Seller, subject to the disclosures and exceptions set forth in the disclosure letter delivered by Purchaser to Seller on the date hereof and attached hereto (the “ Purchaser Disclosure Letter ”), as follows:

 

5.1 Corporate Existence.

 

Purchaser is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has the requisite power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to perform its

 

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obligations hereunder and thereunder. Purchaser has the requisite corporate power and authority to own, lease and operate the Purchased Assets and the Transferred Business Intellectual Property Rights and to assume the Assumed Liabilities, and to carry on the Business in substantially the same manner as the same is now being conducted by Seller and its Subsidiaries.

 

5.2 Corporate Authority.

 

(a) This Agreement and the other Transaction Documents to which Purchaser is a party and the consummation of the transactions contemplated hereby and thereby involving Purchaser have been duly authorized by Purchaser by all requisite corporate, partnership or other action. Purchaser has full power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder. This Agreement has been duly executed and delivered by Purchaser, and the other Transaction Documents will be duly executed and delivered by Purchaser, and this Agreement constitutes, and the other Transaction Documents when so executed and delivered will constitute, a valid and legally binding obligation of Purchaser, enforceable against it in accordance with its terms except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at Law) and the implied covenant of good faith and fair dealing.

 

(b) Except for the required filings under the applicable Antitrust Regulations, the execution and delivery of this Agreement and the other Transaction Documents by Purchaser, the performance by Purchaser of its obligations hereunder and thereunder and the consummation by Purchaser of the transactions contemplated hereby and thereby do not and will not (A) violate or conflict with any provision of the respective certificate of incorporation or by-laws or similar organizational documents of Purchaser, (B) result in any violation or breach or constitute any default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a material benefit under, or result in the creation of any Lien under any contract, indenture, mortgage, lease, note or other agreement or instrument to which Purchaser is subject or is a party, or (C) violate, conflict with or result in any breach under any provision of any Law applicable to Purchaser or any of its properties or assets, except, in the case of clauses (B) and (C), to the extent that any such default, violation, conflict, breach or loss would not reasonably be expected to have a Purchaser Material Adverse Effect.

 

5.3 Governmental Approvals and Consents .

 

Purchaser is not subject to any order, judgment, decree, stipulation, injunction or agreement with any Governmental Authority which would prevent or materially interfere with or delay the consummation of the Purchase or would be reasonably likely to have a Purchaser Material Adverse Effect. No claim, legal action, suit, arbitration, governmental investigation, action or other legal or administrative proceeding is pending or, to the knowledge of Purchaser, threatened against Purchaser which would prevent or materially interfere with or delay the consummation of the Purchase. Except for any requirements under any Antitrust Regulations, no consent, approval, order or authorization of, license or permit from, notice to or registration, declaration or filing with, any Governmental Authority, is required on the part of Purchaser in

 

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connection with the execution, delivery or performance of this Agreement or any of the other Transaction Documents or the consummation of the transactions contemplated hereby and thereby except for such consents, approvals, orders or authorizations of, licenses or permits, filings or notices which have been obtained and remain in full force and effect and those with respect to which the failure to have obtained or to remain in full force and effect would not have a Purchaser Material Adverse Effect. To the knowledge of Purchaser, there are no filings of the nature contemplated by Sections 4.2 and 4.2(b) required to be made by Purchaser in connection with the Purchase or the other transactions contemplated hereby on account of the business or operations of Purchaser, other than the filings expressly contemplated by Sections 4.2 and 4.2(b) read together with the Disclosure Letter.

 

5.4 Financial Capacity .

 

(a) Purchaser has delivered to Seller complete and correct copies of (i) a fully executed commitment letter (the “ Debt Commitment Letter ”) from Lehman Brothers, Inc., Lehman Commercial Paper Inc. and Citigroup Global Markets Inc. (the “ Lender ”), pursuant to which such Lender has committed, upon the terms and subject to the conditions set forth therein, to provide debt financing to Purchaser in the amount of up to $1,725 million in connection with the transactions contemplated by this Agreement (together with $250 million of on-going working capital financing) and (ii) fully executed commitment letters (collectively, the “ Equity Commitment Letters ”) from KKR Millennium Fund (Overseas), Limited Partnership, KKR European Fund, Limited Partnership, Silver Lake Partners II Cayman, L.P., Geyser Investment Pte. Ltd. and Seletar Investments Pte. Ltd. (the “ Equity Participants ”) pursuant to which each has severally committed, upon the terms and subject to the conditions set forth therein, to make an equity investment in Purchaser in the amount set forth in their respective letters which amounts aggregate $1,300 million in connection with the transactions contemplated by this Agreement. The Debt Commitment Letter and the Equity Commitment Letters (and any replacement commitment obtained pursuant to Section 6.15(c) ) are hereinafter referred to collectively as the “ Commitment Letters .” The Commitment Letters are in full force and effect as of the date hereof and all commitment fees due and payable thereunder have been paid in full.

 

(b) Neither the equity investment contemplated by the Equity Commitment Letters, nor the commitments to provide debt financing contemplated by the Debt Commitment Letter, is subject to any condition precedent or other restriction limiting the availability of such investment or financing other than as expressly set forth in the relevant Commitment Letter. As of the date hereof, Purchaser has no reason to believe that any of the conditions set forth in any of the Commitment Letters will not be satisfied on or prior to the Closing Date.

 

5.5 Finders; Brokers.

 

None of Purchaser nor any of its Affiliates has employed any finder or broker in connection with the Purchase who would have a valid claim for a fee or commission from Seller in connection with the negotiation, execution or delivery of this Agreement or any of the other Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby.

 

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5.6 Purchase for Investment.

 

With respect to any Investment Interest listed on Section 4.15(a) of the Disclosure Letter, Purchaser is aware that such Investment Interest was not registered under the Securities Act, or any other applicable securities Laws, and was issued pursuant to exemptions therefrom. Purchaser is purchasing any Investment Interest solely for investment, with no present intention to distribute any such Investment Interest to any Person, and Purchaser will not sell or otherwise dispose of such Investment Interest except in compliance with the registration requirements or exemption provisions under the Securities Act and the rules and regulations promulgated thereunder, or any other applicable securities Laws.

 

5.7 No Other Representations or Warranties.

 

Except for the representations and warranties contained in this Article V, neither Purchaser nor any other Person makes any other express or implied representation or warranty on behalf of Purchaser.

 

ARTICLE VI

 

AGREEMENTS OF PURCHASER AND SELLER

 

6.1 Operation of the Business.

 

Except as otherwise contemplated by this Agreement or as disclosed in Section 6.1 of the Disclosure Letter, Seller covenants that, in respect of the Business (it being understood that nothing in this Section 6.1 shall in any way limit Seller’s or any of its Subsidiaries’ operation of the Retained Business), until the Closing it will, and it will cause its Subsidiaries to, use commercially reasonable efforts to maintain and preserve intact the Business in all material respects and to maintain in all material respects the ordinary and customary relationships of the Business with its suppliers, customers and others having business relationships with it with a view toward preserving for Purchaser after the Closing Date the Business, the Purchased Assets, the Transferred Business Intellectual Property, the Transferred Business Intellectual Property Rights and the goodwill associated therewith, provided that Purchaser agrees and acknowledges that Seller shall have the right to terminate all of the agreements and arrangements set forth in Section 4.18 of the Disclosure Letter as of the Closing Date except to the extent otherwise provided in this Agreement or the other Transaction Documents. Except as otherwise provided in this Agreement or as disclosed in Section 6.1 of the Disclosure Letter, from the date hereof until the Closing, without the prior written approval of Purchaser (which approval shall not be unreasonably withheld) Seller shall, and it shall cause its Subsidiaries in respect of the Business to, continue to operate and conduct the Business in the ordinary course of business consistent with past practice. Except as otherwise contemplated by this Agreement or as disclosed in Section 6.1 of the Disclosure Letter, without limiting the generality of the foregoing, Seller shall not and shall cause its Subsidiaries not to, without the prior written approval of Purchaser (which approval shall not be unreasonably withheld), take any of the following actions with respect to the Purchased Assets, the Transferred Business Intellectual Property, the Transferred Business Intellectual Property Rights or the Business:

 

(a) transfer, sell, lease, license or otherwise convey or dispose of, or subject to any Lien (other than Permitted Liens) on, any of the Purchased Assets, other than (i) sales of inventory in the ordinary course of business, (ii) other transfers, leases, licenses and dispositions made in the ordinary course of business, or (iii) Permitted Liens;

 

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(b) grant any increase in the compensation or benefits arrangements of a Business Employee or under any Seller Plan, except for increases in the compensation or benefits of such employees: (A) in the ordinary course of business (excluding severance or bonuses, in either case payable by Seller upon consummation of the transactions contemplated by this Agreement, for Business Employees covered by parts (i) and (iii), but not part (ii) of such definition), (B) as a result of collective bargaining or other agreements with such employees as in effect on the date hereof, or (C) as required by applicable Law from time to time in effect or by any employee benefit plan, program or arrangement sponsored by Seller or one of its Subsidiaries as in effect on the date hereof or hire new Business Employees other than in the ordinary course of business;

 

(c) cancel, compromise, release or assign any Indebtedness owed to the Business or any claims held by the Business, other than in the ordinary course of business consistent with past practice;

 

(d) terminate (other than by expiration) or amend or modify (other than by automatic extension or renewal if deemed an amendment or modification of any such contract) in any material respect the terms of any Assumed Material Contract or any Lease with respect to the Assigned Real Property, the Leased Real Property or the Licensed Real Property other than in the ordinary course of business consistent with past practice;

 

(e) sell, transfer, license or otherwise convey or dispose of, or incur or suffer the imposition of any Lien (other than Permitted Liens) on, any Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights, other than non-exclusive licenses in connection with sales or licenses of products in the ordinary course of business consistent with past practice;

 

(f) enter into any material financing or guarantee arrangement, agreement or undertaking with any customer of the Business or any financial institution, leasing company or similar business that permits recourse to Purchaser or any of its Subsidiaries which would constitute an Assumed Liability;

 

(g) grant any allowances or discounts outside the ordinary course of business or sell inventory materially in excess of reasonably anticipated consumption for the near term outside the ordinary course of business;

 

(h) commence or settle any material Proceeding outside the ordinary course of business;

 

(i) make or fail to make any material capital expenditures or commitment therefor as set forth in Section 6.1(i) of the Disclosure Letter; or

 

(j) agree or commit to do any of the foregoing.

 

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Not less than five (5) Business Days prior to the Closing, Seller shall deliver to Purchaser a supplement to Section 4.5(a) of the Disclosure Letter, which shall identify those Contracts entered into by Seller or its Subsidiaries after the date of this Agreement not in violation of the terms hereof which would have constituted “Assumed Material Contracts” if such Contracts had been in effect as of the date hereof, and such Contracts identified on such supplement to Section 4.5(a) of the Disclosure Letter shall be deemed “Assumed Material Contracts” for all purposes hereof so long as such Contracts were entered into in accordance with the terms hereof.

 

6.2 Investigation of Business; Confidentiality .

 

(a) Until the Closing, Seller shall, and shall cause its Subsidiaries to, permit Purchaser and its authorized agents or representatives and financing sources to have reasonable access to the properties, books, records, Contracts and such financial (including working papers) and operating data of the Business and the Business Employees as Purchaser may reasonably request, at reasonable hours to review information and documentation and ask questions relative to the properties, books, contracts, commitments and other records of the Business and to conduct any other reasonable investigations; provided , that such investigation shall only be upon reasonable notice and shall not unreasonably disrupt the personnel and operations of Seller and its Subsidiaries, shall comply with the reasonable security and insurance requirements of Seller and its Subsidiaries and shall be at Purchaser’s sole risk and expense. Notwithstanding the foregoing, Seller and its Subsidiaries shall have no obligation to disclose any information the disclosure of which is subject to a confidentiality obligation in favor of any third party; provided that Seller shall use its reasonable commercial efforts to obtain waivers under such agreements or implement requisite procedures to enable the provision of reasonable access to such information without violating such obligations. All requests for access to the offices, properties, books and records of Seller and its Subsidiaries shall be made to such representatives of Seller or its Subsidiaries as Seller shall designate, who shall be solely responsible for coordinating all such requests and all access permitted hereunder. It is further agreed that neither Purchaser nor any of its Affiliates, agents or representatives shall contact any of the employees, customers (including dealers and distributors), suppliers, joint venture partners or other Subsidiaries or Affiliates of Seller in connection with the transactions contemplated hereby, whether in person or by telephone, electronic or other mail or other means of communication, without the specific prior authorization of such representatives of Seller, which shall not be unreasonably withheld. Notwithstanding the foregoing, neither Seller nor any of its Subsidiaries shall be required to provide access to or disclose information where such access or disclosure would waive the attorney-client privilege of Seller or its Subsidiaries or contravene any Law or binding agreement entered into prior to the date of this Agreement. The relevant parties shall make appropriate substitute disclosure arrangements under the circumstances in which the restrictions of the preceding sentence apply.

 

(b) The Parties expressly acknowledge and agree that this Agreement and its terms and all information, whether written or oral, furnished by either Party to the other Party or any Affiliate of such other Party in connection with the negotiation of this Agreement or pursuant to Section 6.5 (“ Confidential Information ”) shall be treated as “confidential information” under that certain Confidential Disclosure Agreement between the Parties.

 

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6.3 Necessary Efforts; No Inconsistent Action .

 

(a) Subject to Section 6.3(b) and the other terms and conditions of this Agreement, Seller and Purchaser agree, and Seller agrees to cause its Subsidiaries, to use their respective reasonable commercial efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Law to consummate and make effective the transactions contemplated by the Transaction Documents and to use its reasonable commercial efforts to cause the conditions to each Party’s obligation to close the transactions contemplated hereby as set forth in Article VII to be satisfied, including all actions necessary to obtain (i) all licenses, certificates, permits, approvals, clearances, expirations, waivers or terminations of applicable waiting periods, authorizations, qualifications and orders (each a “ Consent ”) of any Governmental Authority required for the satisfaction of the conditions set forth in Section 7.1(b), and (ii) all other Consents (it being understood that the failure to obtain any such Consents contemplated by this clause (ii) shall not, by itself, cause the condition set forth in Section 7.3(b) to be deemed not to be satisfied and it being further understood that neither Party nor any of their respective Subsidiaries shall be required to expend any money other than for filing fees or expenses or de minimus costs or expenses or agree to any restrictions in order to obtain any Consents) necessary in connection with the consummation of the transactions contemplated by the Transaction Documents; provided , however, that in no event shall Seller or any of its Subsidiaries be required or expected to retain any of the Purchased Assets (including assets that would be Purchased Assets but for the inability to obtain a Consent). Each of Seller and Purchaser agree that each Party will be given prior notice of and a reasonable opportunity to consult with the other Party regarding contacts with Governmental Authorities regarding Antitrust Regulations or related matters. The Parties shall cooperate fully with each other to the extent necessary in connection with the foregoing.

 

(b) In connection with the efforts referenced in Section 6.3(a), Purchaser and Seller shall timely and promptly make all filings which may be required for the satisfaction of the condition set forth in Section 7.1(b) by each of them in connection with the consummation of the transactions contemplated hereby. In furtherance and not in limitation of the foregoing, each of Seller and Purchaser shall file Notification and Report Forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), or any other similar filings under Antitrust Regulations in the United States, any state thereof, any foreign country or the European Union as promptly as practicable following the date of this Agreement and in any event no later than (i) fifteen (15) Business Days following the date of this Agreement, in the case of Notification and Report Forms under the HSR Act, and (ii) the time prescribed by applicable law in the case of requirements under other applicable Antitrust Regulations to the extent a time is prescribed and, if no time is prescribed, as promptly as reasonably practicable. In addition, Purchaser and Seller agree, and Seller shall cause each of its Subsidiaries, to cooperate and to use their reasonable best commercial efforts and take all actions necessary to: obtain any Consents from Governmental Authorities required for the Closing contemplated by Section 6.3(a)(i) above (including through compliance with the HSR Act and any applicable foreign governmental reports, applications or notifications required by the Antitrust Regulations), to respond as promptly as practicable to any requests for information from any Governmental Authority, and to avoid and/or overcome any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any judgment, injunction or other order (whether temporary, preliminary or permanent) that restricts,

 

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prevents or prohibits, or could restrict, prevent or prohibit, the consummation of the transactions contemplated by this Agreement; provided , however, that in no event shall Seller or any of its Subsidiaries be required or expected to retain any of the Purchased Assets (including assets that would be Purchased Assets but for the inability to obtain a Consent) in order to comply with its obligations in respect of the foregoing; and provided , further , that in no event shall Purchaser or any of its Subsidiaries be required to take any actions which would, individually or in the aggregate, have a material adverse effect on the Business following the Closing in order to comply with its obligations in respect of the foregoing. Each Party shall furnish to the other such necessary information and assistance as the other Party may reasonably request in connection with the preparation of any necessary filings or submissions by it to any Governmental Authority. Except as prohibited or restricted by Law or any Antitrust Regulations, each Party or its attorneys shall provide the other Party or its attorneys the opportunity to make copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between such Party or its representatives, on the one hand, and any Governmental Authority, on the other hand, with respect to this Agreement, the Transaction Documents or the transactions contemplated hereby or thereby. Without in any way limiting the foregoing, the Parties will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any Party in connection with proceedings under or relating to the HSR Act or any other Antitrust Regulation.

 

(c) Each of Purchaser and Seller shall notify and keep the other advised as to (i) any material communication from the Federal Trade Commission (the “ FTC ”), the Antitrust Division of the United States Department of Justice (the “ DOJ ”) or any other Governmental Authority regarding any of the transactions contemplated hereby, (ii) any litigation or administrative proceeding pending and known to such Party, or to its knowledge threatened, which challenges, or would challenge, the transactions contemplated hereby and (iii) any event or circumstance which, to its knowledge, would constitute a breach of its respective representations and warranties in this Agreement; provided , however , that the failure of Seller or Purchaser to comply with this Section 6.3(c) shall not subject Seller or Purchaser to any liability hereunder in respect of any claim asserted after the relevant expiration date for the relevant representation or warranty; and provided further , that Purchaser may not separately recover pursuant to Article IX or otherwise for both a breach of this Section 6.3(c) and any related breach of the relevant representation or warranty. Subject to the provisions of Article X hereof, Seller and Purchaser shall not take any action inconsistent with their obligations under this Agreement or, without prejudice to Purchaser’s rights under this Agreement, which would materially hinder or delay the consummation of the transactions contemplated by this Agreement.

 

6.4 Public Disclosures .

 

Unless otherwise required by Law or the rules and regulations of any stock exchange or quotation services on which such Party’s stock is traded or quoted, prior to the Closing Date, no news release or other public announcement pertaining to the transactions contemplated by this Agreement will be made by or on behalf of any Party or its Affiliates without the prior written approval of the other Party (which approval shall not be unreasonably withheld, conditioned or delayed). If in the judgment of either Party such a news release or public announcement is required by Law or the rules or regulations of any stock exchange on which such Party’s stock is

 

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traded, the Party intending to make such release or announcement shall to the extent practicable use reasonable commercial efforts to provide prior written notice to the other Party of the contents of such release or announcement and to allow the other Party reasonable time to comment on such release or announcement in advance of such issuance.

 

6.5 Access to Records and Personnel .

 

(a) Exchange of Information . After the execution of this Agreement, to the extent permissible under applicable Law, Seller agrees to provide, or cause to be provided, to Purchaser, as soon as reasonably practicable after written request therefor and at Purchaser’s sole expense, (x) reasonable access (including using reasonable commercial efforts to give access to third parties possessing information), during normal business hours, to the Seller’s employees and (y) such information that the Purchaser reasonably needs to comply with its obligations under Section 6.6(a)(ii) of this Agreement. After the Closing, each Party agrees to provide, or cause to be provided, to each other, as soon as reasonably practicable after written request therefor and at the requesting Party’s sole expense, reasonable access (including using reasonable commercial efforts to give access to third parties possessing information), during normal business hours, to the other Party’s employees and to any books, records, documents, files and correspondence in the possession or under the control of the other Party that the requesting Party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting Party (including under applicable securities Laws) by a Governmental Authority having jurisdiction over the requesting Party, (ii) for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy Tax, audit, accounting, claims, regulatory, litigation or other similar requirements or (iii) to comply with its obligations under this Agreement; provided , however, that no Party shall be required to provide access to or disclose information where such access or disclosure would violate any Law or agreement, or waive any attorney-client or other similar privilege, and each Party may redact information regarding itself or its Subsidiaries or otherwise not relating to the other Party and its Subsidiaries, and, in the event such provision of information could reasonably be expected to violate any Law or agreement or waive any attorney-client or other similar privilege, the Parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.

 

(b) Financial and Other Information . After the Closing, each Party shall provide, or cause to be provided, as soon as reasonably practicable after written request therefor, to the other Party such financial and other data and information reasonably available and in its possession (in such form as is reasonably available to it) as is reasonably requested by the other Party and reasonably necessary in order for such other Party to prepare required financial statements and reports or filings, including Tax Returns, to be provided to any third party or filed with any Governmental Authority; provided that the out-of-pocket cost to prepare any financial statements after the Closing except those specifically provided for in Section 6.16 shall be borne solely by Purchaser.

 

(c) Ownership of Information . Any information owned by a party that is provided to a requesting party pursuant to this Section 6.5 shall be deemed to remain the property of the providing party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such information.

 

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(d) Record Retention . Except as otherwise provided herein, each Party agrees to use its reasonable commercial efforts to retain the books, records, documents, instruments, accounts, correspondence, writings, evidences of title and other papers relating to the Business, the Purchased Assets, the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights (the “ Books and Records ”) in their respective possession or control for a commercially reasonable period of time, as set forth in their regular document retention policies, following the Closing Date or for such longer period as may be required by Law or as may be reasonably requested in writing by any Party, or until the expiration of the relevant representation or warranty under any of the Transaction Documents and any related claim of indemnification related thereto. Notwithstanding the foregoing, any Party may destroy or otherwise dispose of any Books and Records not in accordance with its retention policy, provided that, prior to such destruction or disposal (i) such Party shall provide no less than 90 nor more than 120 days’ prior written notice to the other Party of any such proposed destruction or disposal (which notice shall specify in detail which of the Books and Records is proposed to be so destroyed or disposed of), and (ii) if a recipient of such notice shall request in writing prior to the scheduled date for such destruction or disposal that any of the information proposed to be destroyed or disposed of be delivered to such recipient, such Party proposing the destruction or disposal shall, as promptly as practicable, arrange for the delivery of such of the Books and Records as was requested by the recipient (it being understood that all reasonable out of pocket costs associated with the delivery of the requested Books and Records shall be paid by such recipient).

 

(e) Limitation of Liability . No Party shall have any liability to any other Party in the event that any information exchanged or provided pursuant to this Section 6.5 is found to be inaccurate. No Party shall have any liability to any other Party if any information is destroyed or lost after reasonable commercial efforts by such Party to comply with the provisions of Section 6.5(d).

 

(f) Other Agreements Providing For Exchange of Information . The rights and obligations granted under this Section 6.5 are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of information set forth in this Agreement.

 

(g) Production of Witnesses; Records; Cooperation . In the case of a legal or other proceeding between one Party and a third party relating to the Business, Purchased Assets, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights, Licensed Business Intellectual Property Rights, Licensed Business Technology, Transferred Real Property, Leased Real Property, Assumed Liabilities, Excluded Liabilities, this Agreement (including any matters subject to indemnification hereunder) or the transactions contemplated hereby, or any other Transaction Documents, each Party shall use its reasonable commercial efforts to make available to the other Party, upon written request, the former (to the extent practicable), current (to the extent practicable) and future officers, employees, other personnel and agents of such Party as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available (other than materials covered by the attorney-client privilege), to the extent that any such Person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any legal, administrative or

 

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other proceeding in which the requesting Party may from time to time be involved, regardless of whether such legal, administrative or other proceeding is a matter with respect to which indemnification may be sought hereunder. The requesting Party shall bear all out-of-pocket costs and expenses in connection with the foregoing. The foregoing shall not limit any of rights of the Parties in respect of the foregoing under Section 9.4.

 

(h) Confidential Information . Nothing in this Section 6.5 shall require either Party to violate any agreement with any third parties regarding the confidentiality of confidential and proprietary information; provided , however, that in the event that either Party is required under this Section 6.5 to disclose any such information, that Party shall use all commercially reasonable efforts to seek to obtain such third party’s consent to the disclosure of such information and implement requisite procedures to enable the disclosure of such information.

 

6.6 Employee Relations and Benefits .

 

(a) The Parties intend that there shall be continuity of employment with respect to all Business Employees as follows:

 

(i) Automatic Transferred Employees shall not be terminated upon Closing and the rights, powers, duties, liabilities and obligations of Seller (or the relevant Subsidiary of Seller) to the employees in respect of the material terms of employment with the employees in force immediately before Closing shall be transferred to Purchaser in accordance with local employment Laws.

 

(ii) For non-Automatic Transferred Employees, Purchaser shall offer employment to each Business Employee effective on the Closing Date, each such offer to be at the same general location and substantially the same terms and conditions of employment, including (A) the same or superior base salary or base wage rate, (B) substantially the same position, and (C) cash bonus and other non-equity based incentive compensation opportunities substantially similar in the aggregate as those provided to such employees by Seller or its Subsidiaries immediately prior to the Closing Date (unless otherwise required by local Law, in which case such offer shall comply with local law) (the “ Current Employment Terms ”). Notwithstanding anything to the contrary, all offers pursuant to this Section 6.6(a)(ii) to employees in jurisdictions outside the United States will be on such terms as are necessary to avoid giving rise to any severance or similar Liabilities of Seller and its Subsidiaries as a result of any requirements of applicable local Law.

 

(iii) Seller shall not, and shall cause its Subsidiaries not to (and shall not encourage or assist its Affiliates to), engage in any activity intended to discourage any Business Employee from accepting an offer of employment from Purchaser and/or one of its Subsidiaries, and Seller shall not, and shall cause its Subsidiaries not to (and shall not encourage or assist its Affiliates to), offer employment with any business of Seller or any of its Subsidiaries or Affiliates (other than the Business) after the date hereof and prior to the Closing Date (other than Business Employees who have applied for a position with Seller or one of its Subsidiaries or Affiliates outside the Business prior to the date hereof, who are listed in Section 6.6(a)(iii) of the Disclosure Letter to the extent permitted by

 

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local Law); provided , however, that Seller and its Subsidiaries shall be permitted to take any action they are legally required to take in order to comply with local employment Laws.

 

(iv) Those employees who are transferred to Purchaser and/or one of its Subsidiaries in accordance with clause (i) above and those who accept the offer of employment from Purchaser and/or one of its Subsidiaries in accordance with clause (ii) above and, in each case, who commence employment with Purchaser and/or one of its Subsidiaries shall be referred to herein as “ Transferred Employees .” For purposes hereof, “commence employment” shall mean the date that such employees become employed by Purchaser, which for Automatic Transferred Employees is the Closing Date, and for non-Automatic Transferred Employees is the effective date of the offer of employment.

 

(v) Starting on the Closing Date and ending on the date one (1) year after the Closing Date or any longer period as required under local employment Laws, each Transferred Employee who remains employed by Purchaser and/or one of its Subsidiaries shall be employed by Purchaser and/or one of its Subsidiaries on terms no less favorable than the Current Employment Terms and participate in employee benefit plans, agreements, programs, policies and arrangements of Purchaser and/or one of its Subsidiaries (the “ Purchaser Plans ”) that are substantially similar in the aggregate to the employee benefit plans, programs, policies and arrangements in effect immediately prior to the Closing Date with respect to such Transferred Employee and not inconsistent with the Current Employment Terms, and shall be offered any other additional terms and conditions of employment by Purchaser and/or one of its Subsidiaries required by local employment Laws; provided , however, that nothing herein shall obligate Purchaser or one of its Subsidiaries to provide the Transferred Employees with retiree medical benefits unless required to do so by local Laws or any defined benefit pension plans; and provided , further , that Purchaser shall provide U.S. Transferred Employees with the retiree medical accounts described in Section 6.6(a)(v) of the Disclosure Letter.

 

(vi) Notwithstanding anything to the contrary in this Agreement, starting on the Closing Date, Purchaser shall, for a period ending on the date one (1) year after the Closing Date, maintain a severance pay practice for the benefit of each Transferred Employee that is no less favorable than the severance pay practice provided in Section 6.6(a)(vi) of the Disclosure Letter. Purchaser shall assume and shall indemnify Seller and its Subsidiaries against all liabilities and obligations to provide any severance or similar payments to (A) any Automatic Transferred Employees, (B) any Non-U.S. Employees who are entitled to severance or similar payments under applicable local Laws due to Purchaser’s noncompliance with Sections 6.6 or 6.7 , and (C) except as otherwise provided in Section 6.6(j) or with respect to any payments under a Seller Plan, any Transferred Employee whose employment is terminated by Purchaser or its Subsidiaries following the Closing Date.

 

(b) Seller shall retain responsibility for and continue to pay all medical, life insurance, disability and other welfare plan expenses and benefits for each Transferred Employee with respect to claims incurred by such Transferred Employees or their covered dependents prior to the Closing Date. Expenses and benefits with respect to claims incurred by Transferred

 

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Employees or their covered dependents on or after the Closing Date shall be the responsibility of Purchaser. For purposes of this paragraph, a claim is deemed incurred: in the case of medical or dental benefits, when the services that are the subject of the claim are performed; in the case of life insurance, when the death occurs; in the case of long-term disability benefits, when the disability occurs; in the case of workers compensation benefits, when the event giving rise to the benefits occurs; and otherwise, at the time the Transferred Employee or covered dependent becomes entitled to payment of a benefit (assuming that all procedural requirements are satisfied and claims applications properly and timely completed and submitted).

 

(c) With respect to any plan that is a “welfare benefit plan” (as defined in Section 3(1) of ERISA), or any plan that would be a “welfare benefit plan” (as defined in Section 3(1) of ERISA) if it were subject to ERISA, maintained by Purchaser, Purchaser shall (i) cause there to be waived any pre-existing condition and waiting periods and (ii) give effect, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, such employees during the plan year of the applicable plan sponsored by Seller or one of its Subsidiaries during which the Closing occurs with respect to similar plans maintained by Seller and its Affiliates immediately prior to the Closing Date.

 

(d) Transferred Employees shall be given credit for all service with Seller, any of its Subsidiaries, and any predecessor employer for which Seller credited service, including without limitation the Hewlett-Packard Company or its Subsidiaries, to the same extent as such service was credited for such purpose by Seller, under each Purchaser Plan in which such Transferred Employees are eligible to participate for purposes of eligibility, vesting and benefits accrual (other than under any equity or quasi-equity compensation plan or under a defined benefit pension plan either (A) in which no assets are transferred or for which no other compensation, including an adjustment to the Purchase Price, is received by Purchaser pursuant to this Agreement or (B) which would result in the duplication of benefits accrual for the same period of service).

 

(e) Except as required by applicable Law or as may be agreed to by Seller and Purchaser, as of the Closing Date the Transferred Employees shall cease to accrue further benefits under the employee benefit plans and arrangements maintained by Seller and its Subsidiaries and shall commence participation in the Purchaser Plans. Seller shall take all necessary actions to fully vest the Transferred Employees in their account balances under the Seller 401(k) plan or Seller Retirement Plan and allow such Transferred Employees to rollover any associated loan notes to the extent permitted under the Seller 401(k) plan. Purchaser shall take all steps necessary to permit each such Transferred Employee who has received an eligible rollover distribution (as defined in Section 402(c)(4) of the Code) from the Seller 401(k) Plan and the Seller Retirement Plan, if any, to roll such eligible rollover distribution, including any associated loans, as part of any lump sum distribution to the extent permitted by the Seller 401(k) Plan and the Seller Retirement Plan into an account under a 401(k) plan maintained by Purchaser (the “ Purchaser’s 401(k) Plan ”). Notwithstanding the foregoing, Seller and Purchaser may mutually agree following the date hereof, but prior to the Closing Date, to provide for a trust to trust transfer of the account balances of Transferred Employees under the Seller 401(k) Plan to the Purchaser’s 401(k) Plan.

 

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(f) Promptly after the Closing, Seller shall transfer and Purchaser shall accept the flexible spending account elections and accounts (maintained pursuant to Code Sections 105 and 129) of the Transferred Employees under Seller’s Section 125 plan flexible spending arrangement. Promptly after the Closing, Seller shall cause to be transferred to Purchaser the aggregate net cash amount (determined immediately prior to the Closing) for contributions paid (but not yet reimbursed or subject to a pending claim for reimbursement) by or on behalf of the Transferred Employees under Seller’s Section 125 plan flexible spending arrangement.

 

(g) With respect to any accrued but unused vacation time (including flexible time off and sick pay) as of the Closing Date to which any Transferred Employee is entitled pursuant to the vacation policy immediately prior to the Closing Date (the “ Vacation Policy ”), to the extent permitted by law, Purchaser shall assume the liability for such accrued but unused vacation time and allow such Transferred Employee to use such accrued vacation; provided , however, that Purchaser shall be liable for and pay in cash an amount equal to such accrued but unused vacation time to any Transferred Employee whose employment terminates for any reason subsequent to the Closing Date and Purchaser shall indemnify Seller for an amount equal to such accrued but unused vacation time paid by Seller to any Transferred Employee who is entitled to an accrued but unused vacation time payout on termination under local Law and who elects not to transfer such accrued but unused vacation time, provided that such vacation time is included in the accrual for FTO recorded in the Final Working Capital.

 

(h) Seller shall retain full responsibility for compliance with those provisions of the Worker’s Adjustment and Retraining Notification Act of 1988, as amended (“ WARN Act ”) or any comparable provision of state or local law that are binding upon Seller under any such law and shall indemnify Purchaser for any Liabilities and Losses related thereto.

 

(i) Purchaser shall indemnify and hold harmless Seller and its Subsidiaries with respect to any liability under COBRA or similar applicable Laws in the United States arising from the actions (or inactions) of Purchaser or its Subsidiaries after the Closing Date. Seller shall retain all liabilities, including with respect to any “qualifying event,” (as defined under COBRA) incurred on or prior to the Closing Date or arising as a result of the transactions described herein.

 

(j) Purchaser shall have no liabilities associated with any retention or severance plans entered into by Seller or its Subsidiaries with regard to any Designated Employee. “ Designated Employees ” are Business Employees who have been chosen by Seller and/or its Subsidiaries for retention or dismissal under any current retention or severance plan of Seller prior to the Closing Date, but either whose period of retention has not been completed prior to the Closing Date or whose dismissal has not been carried out prior to the Closing Date; provided , however, that Designated Employees shall not include any employee chosen by Seller, after consultation with Purchaser, as a result of the transactions contemplated by this Agreement. Seller’s liability with regard to Designated Employees is subject to the rules of the retention and severance plans of Seller as in force prior to or on the Closing Date.

 

(k) Seller shall take all actions necessary so that effective as of the Closing, all unvested Seller stock options held by Transferred Employees shall vest in full. Purchaser and Seller shall cooperate to provide for the substitution of options to purchase the capital stock of

 

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Purchaser or one of its Affiliates for Seller stock options with respect to which Transferred Employees have waived their right to exercise (such substitutions, the “ Option Rollover ”). Purchaser shall indemnify Seller for any Liabilities incurred by Seller as a result of employee claims against Seller arising out of the Seller stock options waived and the Option Rollover.

 

(l) The Parties acknowledge and agree that all provisions contained in this Section 6.6 with respect to employees are included for the sole benefit of the respective Parties and shall not create any right (i) in any other Person, including, without limitation, any employees, former employees, any participant in any Seller Plan or any beneficiary thereof or (ii) to continued employment with Seller or Purchaser.

 

6.7 Non-U.S. Employees .

 

In addition to Section 6.6 as applicable to Non-U.S. Employees, this Section 6.7 applies only to Non-U.S. Employees and certain former non-U.S. Employees (“ Non-U.S. Former Employees ”).

 

(a) This Section 6.7 and Section 6.7(a) of the Disclosure Letter shall contain covenants and agreements of the Parties on and as of the Closing Date with respect to:

 

(i) the Non-U.S. Employees; and

 

(ii) Non-U.S. Benefit Plans listed in Section 6.7(a)(ii) of the Disclosure Letter, which shall be provided to Purchaser within thirty (30) days following the date of this Agreement, provided or covering such Non-U.S. Employees and Non-U.S. Former Employees.

 

(b) Seller and Purchaser and their respective Subsidiaries shall comply with all obligations either under the Transfer Regulations or other applicable Laws to notify and/or consult with Non-U.S. Employees or employee representatives, unions, works councils or other employee representative bodies, if any, and shall provide such information to the other Party as is required by that Party to comply with its notification and/or consultation obligations. Seller and Purchaser shall indemnify each other against all Losses resulting from any failure of the other to notify and/or consult or to provide such information in a timely manner.

 

(c) Seller and its Subsidiaries will not, without Purchaser’s consent, make any material changes to the working conditions of the Non-U.S. Employees that have not either been announced or agreed to under a collectively bargained agreement between the signing of this Agreement and the Closing Date.

 

(d) Seller shall provide Purchaser with a supplemental schedule of collective bargaining agreements in those countries that are not covered by Section 4.13 of the Disclosure Letter no later than 30 days prior to the Closing Date.

 

(e) The Parties acknowledge and agree that all provisions contained in this Section 6.7 with respect to employees are included for the sole benefit of the respective Parties and shall not create any right (i) in any other Person, including, without limitation, any

 

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employees, former employees, any participant in any Seller Plan or any beneficiary thereof or (ii) to continued employment with Seller or Purchaser.

 

(f) Seller shall pay or make arrangements for the payment through Purchaser of the obligations described in Section 2.2(b)(v) of the Disclosure Letter.

 

(g) Seller and Purchaser agree that to the extent the transactions contemplated by this Agreement would result in an acceleration of maturity of amounts payable under obligations described in Section 6.7(g) of the Disclosure Letter (the “ Section 6.7(g) Obligations ”), unless otherwise required by law, Seller and Purchaser will waive any such acceleration and to the extent necessary will amend or modify such Section 6.7(g) Obligations to provide for such Section 6.7(g) Obligations when held by Purchaser after the Closing to mature on the same terms as would have applied to such Section 6.7(g) Obligations if the transactions contemplated hereby did not occur.

 

6.8 Closing Arrangements.

 

(a) Concurrently with the execution hereof, the Parties are executing and delivering a separation services agreement (the “ Master Separation Agreement ”) in the form attached hereto as Exhibit E .

 

(b) At the Closing, Purchaser and Seller shall, or Seller shall cause the applicable Other Seller to, execute and deliver the following agreements with respect to the Real Property (the “ Real Property Agreements ”):

 

(i) The Deed with respect to the Transferred Real Property substantially in the form attached hereto as Exhibit F (the “ Deed ”).

 

(ii) Lease Assignments with respect to the Assigned Real Property substantially in the form attached hereto as Exhibit G with such deviations therefrom or substitutes therefor as are required by local law (the “ Lease Assignments ”).

 

(iii) (A) a Lease with respect to the Leased Real Property in Boeblingen, Germany referred to in Section 4.4(f) of the Disclosure Letter substantially in the form attached hereto as Exhibit H-1, with such deviations therefrom as are required by local law, (B) a Lease in form and substance reasonably satisfactory to both Seller and Purchaser reflecting the terms set forth in Section 4.4(f) of the Disclosure Letter for the San Jose, California property referred to in Section 4.4.(f) of the Disclosure Letter, (C) a sublease in form and substance reasonably satisfactory to both Seller and Purchaser incorporating the terms set forth in Exhibit H-2 for the Yishun, Singapore property referred to in Section 4.4(e) of the Disclosure Letter, (D) a tenancy (or sublease if required) in form and substance reasonably satisfactory to both Seller and Purchaser incorporating the terms set forth in Exhibit H-3 for the Penang Property, (E) a sublease in form and substance reasonably satisfactory to both Seller and Purchaser incorporating the terms set forth in Exhibit H-4 for the Roseville, California property referred to in Section 4.4(e) of the Disclosure Letter, (F) a tenancy or sublease if required in form and substance reasonably satisfactory to both Seller and Purchaser incorporating the terms set forth in Exhibit H-5 for the Guragon, India property referred to in Section 4.4.(e) of the

 

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Disclosure Letter, (G) a sublease in form and substance reasonably satisfactory to both Seller and Purchaser reflecting the terms set forth in Section 4.4(e) of the Disclosure Letter for the Takaido, Japan property referred to in Section 4.4.(e) of the Disclosure Letter, and (H) a sublease in form and substance reasonably satisfactory to both Seller and Purchaser reflecting the terms set forth in Section 4.4(e) of the Disclosure Letter for the Shanghai, China property referred to in Section 4.4.(e) of the Disclosure Letter.

 

(iv) A Multi-Site License with respect to the Licensed Real Property and Business Significant Real Property to the extent provided by Section 2.6 substantially in the form attached hereto as Exhibit I (the “ Multi-Site License ”).

 

(v) Transfer Tax forms required by applicable Governmental Authorities.

 

(vi) Customary title affidavits, in a form reasonably agreed to by Seller, in order to induce a reputable title company to provide Purchaser with title insurance policies insuring Purchaser’s fee or leasehold title to the Real Property, subject only to Permitted Liens. Notwithstanding the foregoing, Seller will not be obligated to make any statement or representation in any such title affidavit other than those contained in this Agreement or that could otherwise expand the scope of Seller’s liability under this Agreement.

 

(vii) A current ALTA survey of the Fort Collins, Colorado property referred to in Section 4.4(c) of the Disclosure Letter, together with a surveyor’s certificate in connection therewith.

 

(c) The Parties shall negotiate in good faith and use all commercially reasonable efforts to agree upon the final forms of leases for the properties set forth in Section 6.8(b)(iii)(B) through (H), inclusive, as expeditiously as possibly, and in any event no later than sixty (60) days from the date hereof.

 

(d) Prior to Closing, all risk of loss or damage to the Real Property shall be borne solely by Seller. In the event that Seller’s Lease with respect to a particular piece of Real Property, other than a Business Critical Real Property, to be assigned or subleased above is terminated prior to the Closing Date, notwithstanding anything to the contrary in this Agreement, (i) Seller shall not be required to assign, sublease or license such Real Property (and any condition precedent in Section 7.2(e) and Section 7.3(e) shall not apply to such property), (ii) Purchaser shall not be required to accept an assignment, sublease or license of such Real Property (and any condition precedent in Section 7.2(e) and Section 7.3(e) shall not apply to such property) and (iii) neither Party shall have any further liability with respect to such Real Property hereunder.

 

(e) While Seller or its Subsidiary intends to grant to Purchaser or its Subsidiary at the Closing two separate subtenancies in respect of the Primary Parcel and the Other Penang Parcel (together, the “Subleased Penang Parcels”), Seller has advised Purchaser that Seller intends to make application to the relevant authorities to subdivide the portion of the Penang Property that encompasses the Primary Penang Parcel as soon as practicable after Closing. As soon as practicable following the final subdivision of the Primary Penang Parcel under applicable Law,

 

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the Primary Penang Parcel shall be transferred to Purchaser (the “ Penang Transfer ”) at a nominal purchase price of $1.00 in accordance with the subtenancy agreement and subject to the provisions set forth therein (including any documents or other instruments referenced therein). Purchaser hereby agrees to cooperate, and will cause its applicable Subsidiary to cooperate, with all reasonable requests of Seller in connection with the consummation of the various transactions described herein, and agrees to enter into, or will cause any applicable Subsidiary to enter into, such documents and other transfer instruments as are reasonably necessary to carry out the intent of this Section 6.8(e) consistent with the terms of this Agreement, including any purchase and sale agreement that is reasonably necessary and appropriate under applicable Law and local practice in connection with Penang Transfer and such other documents, including relevant application forms and similar instruments to be submitted to any applicable Governmental Authority in connection with any consents or approvals required in connection therewith.

 

6.9 Non-Competition .

 

In order that Purchaser may have and enjoy the full benefit of the Business, Seller agrees that for a period of two (2) years commencing on the Closing Date, Seller will not, and will cause its Subsidiaries not to, without the express written approval of Purchaser, engage, directly or indirectly, in a Competing Business or acquire more than fifteen percent (15%) of the outstanding equity interest in any Business Competitor, in each case other than the Retained Business. For purposes of this Section 6.9: (i) “ Competing Business ” shall mean developing, manufacturing, selling or servicing any of the Semiconductor Products for or to third parties and (ii) ” Business Competitor ” shall mean any Person that derived more than 40% of its consolidated gross revenues from Competing Businesses during the four fiscal quarters prior to Seller’s or its Subsidiaries’ entering into an agreement providing for the investment in or acquisition of such Person, for which financial statements are available, provided that LumiLeds Lighting (and any successor thereto that is no more than fifty percent (50%) owned by Seller) shall not be a “Competing Business” or “Business Competitor” for purposes hereof. Notwithstanding the foregoing, neither Seller nor any of its Subsidiaries shall be precluded from: (a) engaging in those businesses that are engaged in as of the date of this Agreement by Seller or any Subsidiary of Seller through the Retained Business, and reasonably expected or foreseeable extensions of those businesses and the products manufactured or sold, and the services developed or provided in connection therewith; (b) acquiring, merging with or consolidating with an entity which, at the time of the parties’ agreement to enter into such transaction is not a Business Competitor and extensions of any business of such entity or its Subsidiaries; (c) being acquired by means of any business combination (including an asset purchase, merger or consolidation) by any Person; (d) engaging in any merger, consolidation or any other business combination with any Person not subject to clause (c) if the stockholders of the Seller immediately prior to consummation of such transaction will own 50% or less of the outstanding common stock of the resulting or surviving entity (or the parent thereof); (e) the development, manufacture, supply, distribution, sale, support and maintenance of Semiconductor Products as a component of a product sold by, or incidental to, a Retained Business, a reasonably expected or foreseeable extension of a Retained Business, or any other business of Seller and its Subsidiaries that is not itself a violation of Section 6.9; or (f) engaging in any Competing Business engaged in by Seller or its Subsidiaries as a result of any transaction contemplated by clause (b) or (d) and any extensions of such Competing Business. Following any acquisition as described in the foregoing clause (c), the provisions of this Section 6.9 shall continue to apply solely to Seller and its Subsidiaries, and not

 

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to any other Affiliates of Seller. Notwithstanding the foregoing, the provisions of this Section 6.9 shall not restrict Seller or any of its Subsidiaries from acquiring and operating any Business Competitor so long as (i) Seller or such Subsidiary divests all or a portion of the Competing Business conducted by such Business Competitor within one year of such transaction such that an acquisition by Seller or such Subsidiary of the retained portion of the Competing Business would be permissible under the terms of the foregoing clause (b); and (ii) while owned, Seller and its Subsidiaries do not provide such Business Competitor with any Licensed Business Technology or Licensed Business Intellectual Property Rights held by Seller or a Subsidiary prior to the date of such acquisition.

 

6.10 Non-Solicitation.

 

(a) Seller agrees that for a period of two (2) years from and after the Closing Date it shall not, and it shall cause each of its Subsidiaries not to (and shall not encourage or assist any of its Affiliates to), without the prior written consent of Purchaser, directly or indirectly, solicit to hire (or cause or seek to cause to leave the employ of Purchaser or any of its Subsidiaries) (i) any Transferred Employee or (ii) any other Person employed by Purchaser who became known to or was identified to Seller or any of its Affiliates prior to the Closing in connection with the transactions contemplated by this Agreement, unless in each case such Person ceased to be an employee of Purchaser or its Subsidiaries prior to such action by Seller or its Subsidiary, or, in the case of such Person’s voluntary termination of employment with Purchaser or any of its Subsidiaries, at least three (3) months prior to such action by Seller or its Subsidiary.

 

(b) Purchaser agrees that for a period of two (2) years from and after the Closing Date it shall not, and it shall cause its Subsidiaries not to (and shall not encourage or assist any of its Affiliates to), without the prior written consent of Seller, directly or indirectly, solicit to hire (or cause or seek to cause to leave the employ of Seller or any if its Subsidiaries) any Person that it or they know to be employed by Seller or any of its Subsidiaries as of the Closing Date unless such Person ceased to be an employee of Seller or such Subsidiary prior to such action by Purchaser or any of its Subsidiaries, or, in the case of such Person’s voluntary termination of employment with Seller or any of its Subsidiaries, at least three (3) months prior to such action by Purchaser or any of its Subsidiaries.

 

(c) Notwithstanding the foregoing, the restrictions set forth in Sections 6.10(a) and 6.10(b) shall not apply to (i) bona fide public advertisements for employment placed by any Party and not specifically targeted at the employees of any other Party, or (ii) any employee who is not a manager or an individual contributor who is engaged in the design of Semiconductor Products or processes. Section 6.10(a) shall not apply to any Person who is hired by Seller or any of its Subsidiaries (A) pursuant to any existing agreement with employee representatives (such as a works council agreement) by which Seller or such Subsidiary is bound or (B) as a result of actions required to be taken by Seller or any of its Subsidiaries in order to comply with local employment Laws.

 

6.11 Intellectual Property License Agreement.

 

At the Closing, Seller shall execute and deliver an agreement (the “ Intellectual Property License Agreement ”) in the form of the agreement attached hereto as Exhibit J .

 

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6.12 Insurance Matters .

 

Purchaser acknowledges that the policies and insurance coverage maintained on behalf of the Business are part of the corporate insurance program maintained by Seller (the “ Seller Corporate Policies ”), and such coverage will not be available or transferred to Purchaser (except with respect to Assumed Liabilities for which claims have been made by Seller or any of its Subsidiaries against third party insurers under such policies on or prior to the Closing Date, subject to Purchaser’s paying any applicable deductible with respect to such claim). In furtherance and not in limitation of the foregoing, Purchaser agrees not to bring any claim for recovery under any of the Seller Corporate Policies, whether or not Purchaser may be so entitled in accordance with the terms of such Seller Corporate Policies.

 

6.13 Tax Matters .

 

(a) Transfer Taxes .

 

(i) For purposes of this Agreement, the term “ Transfer Taxes ” shall mean all transfer, filing, recordation (including the cost of recording the assignment or transfer of Transferred Business Intellectual Property), ad valorem , value added, bulk sales, stamp duties, excise, license or similar fees or taxes. The liability for Transfer Taxes shall be borne one-half by Purchaser and one-half by Seller; provided , however, that Purchaser shall diligently pursue the recovery of any recoverable Transfer Taxes, and if Purchaser actually receives any recoverable Transfer Taxes, Purchaser shall promptly, but in no case later than twenty (20) days after such recovery, pay to Seller an amount equal to one-half of such recovered Transfer Taxes. Seller and Purchaser shall cooperate with each other in the provision of any information or preparation of any documentation that may be necessary or useful for obtaining any available mitigation, reduction or exemption from any Transfer Taxes.

 

(ii) Unless the Parties mutually agree otherwise, any Tax Returns that must be filed in connection with any Transfer Taxes shall be prepared by the Party that bears the responsibility for such Transfer Taxes, as provided in Section 6.13(a)(i) hereof. For any Tax Return required by law to be filed by a Party (the “ Filing Party ”) other than the Party that is responsible for preparing such Tax Return pursuant to this Section 6.13 (the “ Preparing Party ”), the Filing Party shall pay the Transfer Taxes shown on such Tax Return and shall collect the proper Tax from Preparing Party in accordance with Section 6.13(a)(i) hereof. The Preparing Party shall use its reasonable commercial efforts to provide to the Filing Party any Tax Returns which it is required to prepare and file at least ten days before such Tax Returns are due to be filed. Such Tax Returns shall be consistent with the allocation of the Purchase Price as determined pursuant to Section 3.4.

 

(b) Other Tax Returns and Payment of Taxes .

 

(i) Except as provided in Section 6.13(a), Seller shall be liable for and shall remit when due or cause to be remitted when due any amount of Taxes due in connection with the Purchased Assets, Transferred Business Intellectual Property, and Transferred Business Intellectual Property Rights for any taxable period ending on or before the

 

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Closing Date. Seller shall duly file or cause to be duly filed, any Tax Return required to be filed in respect of any Tax which it is required to pay pursuant to the immediately preceding sentence. Except as provided in Section 6.13(a), Seller shall be liable for any other Taxes of Seller for any taxable period (including any liability of Seller for the unpaid Taxes of any Person under Treas. Reg. §1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise).

 

(ii) Purchaser shall be liable for and shall remit when due or cause to be remitted when due any amount of Taxes due in connection with the Purchased Assets, Transferred Business Intellectual Property, and Transferred Business Intellectual Property Rights for any taxable period beginning after the Closing Date; provided , however, that for the avoidance of doubt Purchaser shall not be liable for any Income Taxes of Seller or any of Seller’s Subsidiaries not transferred to Purchaser. Purchaser shall duly file or cause to be duly filed, any Tax Return required to be filed in respect of any Tax which it is required to pay pursuant to the immediately preceding sentence.

 

(iii) Purchaser shall prepare or cause to be prepared and file or cause to be filed any Tax Returns with respect to the Purchased Assets, Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights for taxable periods which begin before the Closing Date and end after the Closing Date (a “ Straddle Period ”). Seller shall pay to Purchaser within five days after the date on which Taxes are paid with respect to a Straddle Period an amount equal to the portion of such Taxes which relates to the portion of such Straddle Period ending on the Closing Date. For purposes of this Section 6.13(b)(iii), in the case of any Taxes that are imposed on a periodic basis and are payable for a Straddle Period, the portion of such Tax that relates to the portion of such taxable period ending on the Closing Date shall (x) in the case of any Taxes other than Taxes based upon or related to income or receipts, be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on and including the Closing Date and the denominator of which is the number of days in the entire taxable period, and (y) in the case of any Tax based upon or related to income or receipts be deemed to be equal to the amount which would be payable if the relevant taxable period ended on and included the Closing Date. Any credits relating to a Straddle Period shall be taken into account as though the relevant taxable period ended on the Closing Date. All determinations necessary to give effect to the foregoing allocations shall be made in a manner consistent with the prior practice of Seller.

 

(c) Pre-Closing Settlement Payments . If, after the Closing, Purchaser or any of its Affiliates receives any refund that is an Excluded Asset or utilizes the benefit of any overpayment or prepayment of Taxes that are Excluded Assets, Purchaser shall, or shall cause such Affiliate to, promptly remit or cause to be remitted to Seller the entire amount of the refund or overpayment (including any interest paid by the Governmental Authority paying the refund or the overpayment, but net of any Taxes that may be due on such refund or interest amount after giving effect to any deductions in respect of the payment of such amounts to Seller) received or utilized by Purchaser or such Affiliate. If any such refund or benefit is subsequently reduced as a result of an adjustment required by any Governmental Authority, this Section 6.13(c) shall take such adjusted refund or benefit into account. If Purchaser or any of its Affiliates pays any

 

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amount to Seller pursuant to this Section 6.13(c) prior to such adjustment, Seller shall repay the difference between the amount paid and the adjusted amount of the refund or benefit, as the case may be, to Purchaser, if the adjusted amount is less than the amount paid by Purchaser or such Affiliate to Seller pursuant to this Section 6.13(c), and Purchaser shall pay the difference between the adjusted amount of the refund or benefit and the amount paid by Purchaser or such Affiliate to Seller if the amount paid by Purchaser or such Affiliate to Seller is less than the adjusted amount.

 

(d) Cooperation and Assistance .

 

(i) The Parties shall cooperate with each other in the filing of any Tax Returns and the conduct of any audit or other proceeding. They each shall execute and deliver such powers of attorney and make available such other documents as are reasonably necessary to carry out the intent of this Section 6.13.

 

(ii) If (A) either Party is liable under this Section 6.13, including any amounts due pursuant to Section 6.13(c), for any portion of a Tax shown due on any Tax Return required to be filed by the other Party pursuant to this Section 6.13, or (B) Seller is required to file any Tax Return with respect to Wavics or any of its Subsidiaries pursuant to this Section 6.13, the Party obligated to file such Tax Return pursuant to this Section 6.13 shall deliver a copy of the relevant portions of such Tax Return (taking into account any extensions, if applicable) to the liable Party. If the Parties disagree as to the treatment of any item shown on such Tax Return or with respect to any calculation with respect to any Tax Return to be filed pursuant to this Section 6.13, an independent public accounting firm acceptable to both Seller and Purchaser shall determine, consistent with Seller’s past practice (except as otherwise required by Law), how the disputed item is to be treated on such Tax Return.

 

(iii) Upon request or upon payment, each Party shall deliver to the tax director of the other Party certified copies of all receipts for any foreign Tax with respect to which such other Party or any of its Affiliates could claim a foreign tax credit and any supporting documents required in connection with claiming or supporting a claim for such a foreign tax credit.

 

(iv) The Parties shall retain records, documents, accounting data and other information in whatever form that are necessary for the preparation and filing, or for any Tax audit, of any and all Tax Returns with respect to any Taxes that relate to taxable periods that do not begin after the Closing Date. Such retention shall be in accordance with the record retention policy of the respective Party, but in no event shall any Party destroy or otherwise dispose of such records, documents, accounting data and other information prior to the expiration of the applicable statute of limitations (including extensions) and without first providing the other Party with a reasonable opportunity to review and copy the same. Each Party shall give any other Party reasonable access to all such records, documents, accounting data and other information as well as to its personnel and premises to the extent necessary for a reasonable review or a Tax audit of such Tax Returns and relevant to an obligation under this Section 6.13.

 

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(v) Seller shall use its reasonable commercial efforts to provide Purchaser with a clearance certificate or similar document(s) which may be required by any taxing authority to relieve Purchaser of any obligation to withhold any portion of the payments to Seller pursuant to this Agreement.

 

(e) Tax Controversies . A Party shall promptly notify the other Party in writing promptly (but in no event later than 30 days) (a “ Notification ”) upon receipt of notice of any pending or threatened audits or assessments with respect to Taxes for which such other Party (or any of its Affiliates) is liable under Section 6.13. Failure to give such Notification shall not relieve the indemnifying party from liability under Section 6.13, except if and to the extent that the indemnifying party is actually prejudiced thereby. Each Party shall be entitled to take control of the complete defense of any tax audit or administrative or court proceeding (a “ Tax Claim ”) relating to Taxes for which it may be liable, and to employ counsel of its choice at its expense; provided , that Seller and Purchaser shall jointly control the defense of any Tax Claim relating to Taxes with respect to a Straddle Period for which Taxes are allocated to both Seller and Purchaser under Section 6.13(b)(iii) of this Agreement. Notwithstanding the immediately preceding sentence, each Party shall be entitled to take control of the complete defense of any Tax Claim relating to Taxes for which it is obligated to file a Tax Return (but does not have any indemnification obligation hereunder) under this Section 6.13 (or by Law), and to employ counsel of its choice at its expense; provided , that such Party unconditionally releases in writing the other Party from its indemnification obligation hereunder with respect to such Tax Claim; provided further , that such Party shall take control of such Tax Claim within 60 days of the earlier of (x) the date on which such Notification is provided or (y) the date such Notification is due pursuant to the first sentence of this Section 6.13(e). If one Party takes control of any such audit or proceeding, the other Party shall be entitled to participate, at its expense, in the defense of such audit or proceeding, and the Party controlling such audit or proceeding shall consider in good faith any suggestions made or points raised by the other Party. Neither Party may agree to settle any claim for Taxes for which the other may be liable without the prior written consent of such other Party, which consent shall not be unreasonably withheld. This Section 6.13(e) shall govern to the extent it would otherwise be inconsistent with Section 9.3(a).

 

6.14 Mail Handling; Receivables and Payables .

 

(a) To the extent that Purchaser and/or any of its Subsidiaries receives any mail or packages addressed to Seller or its Subsidiaries and delivered to Purchaser not relating to the Business, the Purchased Assets, the Transferred Business Intellectual Property, the Transferred Business Intellectual Property Rights or the Assumed Liabilities, Purchaser shall promptly deliver such mail or packages to Seller. After the Closing Date, Purchaser may deliver to Seller any checks or drafts made payable to Seller or its Subsidiaries that constitutes a Purchased Asset, and Seller shall promptly deposit such checks or drafts, and, upon receipt of funds, reimburse Purchaser within five Business Days for the amounts of all such checks or drafts, or, if so requested by Purchaser, endorse such checks or drafts to Purchaser for collection. To the extent Seller or its Subsidiaries receives any mail or packages addressed and delivered to Seller or its Subsidiaries but relating to the Business, the Purchased Assets, the Transferred Business Intellectual Property, the Transferred Business Intellectual Property Rights or the Assumed Liabilities, Seller shall promptly deliver such mail or packages to Purchaser. After the Closing Date, to the extent that Purchaser receives cash or checks or drafts made payable to Purchaser

 

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that constitutes an Excluded Asset, Purchaser shall promptly use such cash to, or deposit such checks or drafts and upon receipt of funds from such checks or drafts, reimburse Seller within five Business days for such amount received, or, if so requested by Seller, endorse such checks or drafts to Seller for collection. Neither party may assert any set-off, hold-back, escrow or other restriction against any payment described in this Section 6.14.

 

(b) Seller shall promptly pay to Purchaser any payments received by Seller or any of its Subsidiaries in respect of accounts receivable of the Business reflected in the Final Working Capital or arising on or after the Closing Date; provided that to the extent such payments represent unapplied cash that reduces the amount of accounts receivable included in the Closing Balance Sheet, such amounts will be retained by Seller. To the extent that any accounts payable are included in the Assumed Liabilities, Seller will pay such accounts payable on behalf of Purchaser after the Closing provided that any such payments will be made by Seller only at such times and in such amounts as are directed by Purchaser. Purchaser will reimburse Seller for any such amounts paid by Seller at Purchaser’s direction within five Business Days of such payments.

 

6.15 Financing .

 

(a) Purchaser shall, at Purchaser’s expense, (i) use all reasonable efforts to fully satisfy, on a timely basis, each of the conditions precedent set forth in the Commitment Letters and (ii) fully enforce its rights under each Commitment Letter. Purchaser shall not, without the prior written consent of Seller (not to be unreasonably withheld, conditioned or delayed), waive any of its rights under or amend, or agree to waive any of its rights under or amend, either Commitment Letter if such waiver or amendment is reasonably likely to materially impair, materially delay or prevent the transactions contemplated by this Agreement.

 

(b) Purchaser shall keep Seller informed on a current basis with respect to all material activity concerning the status of the investment and financings contemplated by the Commitment Letters and shall give Seller prompt notice after becoming aware of any material adverse change with respect to such investment or financings. Without limiting the foregoing, Purchaser shall notify Seller promptly, and in any event within two Business Days, if at any time prior to the Closing Date (i) any Commitment Letter shall expire or be terminated for any reason, (ii) any Lender or an Equity Participant notifies Purchaser that it no longer intends to provide financing to Purchaser on terms set forth therein, or (iii) Purchaser otherwise determines that any condition precedent set forth in either Commitment Letter is not likely to be satisfied on or prior to the Closing Date.

 

(c) If any of the events set forth in Sections 6.15(b)(i) or 6.15(b) above(ii) above occurs with respect to any of the debt financing contemplated by the Debt Commitment Letters, Purchaser shall (subject to Section 6.15(a)) use its reasonable commercial efforts to obtain, and if obtained will accept and provide to Seller a copy of the related commitment letter, an alternative debt financing in an amount necessary to replace the corresponding amounts that are or will no longer be available as a result of such event; provided that Purchaser shall not be required to seek or accept any such replacement debt financing if the terms or conditions thereof are not substantially comparable to those terms and conditions in the debt financing to be replaced, and with respect to economic terms and conditions (including, without limitation, with respect to

 

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pricing, maturity or amortization), are not as favorable in all material respects to Purchaser as the terms and conditions for the debt financing that will be replaced, in each case as set forth in the relevant Debt Commitment Letter.

 

(d) Seller agrees, at its sole expense, to provide Purchaser with such cooperation in connection with the arrangement of the financings contemplated by the Debt Commitment Letter as may be reasonably requested by Purchaser, including:

 

(i) causing senior management of the Business to participate in meetings, due diligence sessions, management presentation sessions, “road shows” and sessions with rating agencies and providing assistance to Purchaser in connection with the preparation of offering memoranda, private placement memoranda, prospectuses and similar documents and all information (including financial information) customarily contained therein;

 

(ii) facilitating the pledge of collateral as contemplated by the Debt Commitment Letter effective as of the Closing;

 

(iii) using commercially reasonable efforts to cause Seller’s independent auditors to provide customary consents and comfort letters with respect to the Business Financial Statements, other financial information and such other matters that are customarily covered by auditors’ comfort letters, in connection with the completion of the financings contemplated by the Debt Commitment Letter;

 

(iv) permitting Purchaser’s representatives access to the supporting documentation available to Seller with respect to the preparation of the Audited Financial Statements and the Business Financial Statements and requesting that Seller’s independent auditors provide Purchaser’s representatives access to the auditors’ work papers relating to the Audited Financial Statements and the Business Financial Statements (to the extent applicable); and

 

(v) providing such financial and other information reasonably available and in its possession regarding the Business, the Purchased Assets, the Transferred Business Intellectual Property or the Transferred Business Intellectual Property Rights as may be required by the Debt Commitment Letter;

 

provided , that notwithstanding the foregoing Seller shall not be required to take any action that would materially interfere with the ongoing operations of Seller or its Subsidiaries, including the Business as well as other businesses of Seller or its Subsidiaries, and neither Seller nor any of its Subsidiaries shall be required to pay any commitment or other similar fee or incur any obligation to any third party in connection with such cooperation.

 

(e) Purchaser acknowledges and agrees that:

 

(i) except in the case of breach of a representation or warranty in Article IV, none of Seller, any of Seller’s Subsidiaries or any of their respective directors, officers, employees, representatives or agents shall have any Liability for any information (including information regarding the Business, the Purchased Assets, the Transferred

 

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Business Intellectual Property or the Transferred Business Intellectual Property Rights) included in offering or marketing material distributed, or otherwise made available, to investors in Purchaser or other participants in any financing related to the transactions contemplated by this Agreement;

 

(ii) each such prospective investor or participant will be advised that none of Seller, any of Seller’s Subsidiaries or any of their respective directors, officers, employees, representatives or agents makes any representation or warranty with respect to such information and disclaims any Liability therefor (and any written materials distributed or made available to such investors or participants will include appropriate legends to such effect); and

 

(iii) Purchaser shall indemnify and hold harmless each of Seller, Seller’s Affiliates and their respective directors, officers, employees, representatives or agents from and against any and all Losses suffered or incurred by any of them arising out of any third party claim relating to the financing contemplated by Section 6.15.

 

(f) Nothing in this Agreement or the Confidentiality Agreement or the confidentiality agreements to which Seller and Affiliates of the parties to the Equity Commitment letters are party will prohibit any of the parties to the respective Equity Commitment Letters from syndicating their respective Equity Commitment Letters so long as such parties hold a majority of the equity commitments thereunder.

 

6.16 Preparation and Delivery of Financial Statements . Seller shall use its commercially reasonable efforts to prepare and deliver to Purchaser as soon as practicable the Audited Business Financial Statements and the Unaudited Business Financial Statements. Seller shall prepare and deliver to Purchaser, no later than ten (10) business days following the end of each month after July 31, 2005, monthly statements of revenue and expenses of the Business as currently prepared on a monthly basis for Seller, the form of which has been provided to Buyer.

 

6.17 Shared Contracts . Seller agrees to use its reasonable commercial efforts to seek the consent of the counterparty to any Contract which is used primarily in the Business but is not included within Assumed Contracts and to any Contract listed in Section M1 of the Disclosure Letter to partially assign or otherwise separate for the benefit of Purchaser the portion of such Contract relating to the Business.

 

6.18 Licenses .

 

(a) Seller and Purchaser shall reasonably cooperate in taking all actions required by the terms of certain corporate cross-licenses to which Seller is a party, as identified in a separate letter agreement between Seller and Purchaser dated the date hereof, in order to effect the sublicensing of rights by Seller to Purchaser or the grant of rights to Purchaser by the licensor of rights to Seller under those cross-licenses (the “ Third Party Licensor ”), in each case pertaining to the Business. Purchaser acknowledges that the rights to be sublicensed or licensed to it by the Third Party Licensor may be limited as set forth in such cross-licenses; that under the terms of certain of the cross-licenses the required actions may need to be taken after the Closing Date; and

 

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that Seller cannot control and is not responsible for the actions of any of the Third Party Licensors.

 

(b) In addition, with respect to the CAD Licenses that prior to the Closing Date are used in the Business, but that are not used exclusively in the Business, Seller and Purchaser shall cooperate diligently prior to the Closing Date to obtain the consent of the respective licensors of such CAD Licenses (the “ CAD Licensors ”) to a partial assignment, or grant of a sublicense by Seller or of a new license to Purchaser by the CAD Licensor, as the case may be, of Seller’s rights thereunder applicable to the Business. Purchaser acknowledges that any rights to be sublicensed to it may be limited as set forth in such CAD Licenses; that the terms of any new license to be granted to it by the CAD Licensors may be different from the terms of Seller’s existing licenses; and that Seller cannot control and is not responsible for the actions of any of the CAD Licensors. Seller and Purchaser further agree that any division of rights, responsibilities and credits (including credits for pre-paid fees) between them under the existing CAD Licenses or any successors thereto shall be in proportion to the actual usage (by seat count) of such licenses by the Business prior to the Closing Date, compared to the usage of such licenses by the Retained Business prior to the Closing Date.

 

6.19 NDAs . Seller and Purchaser agree that with respect to the confidentiality and proprietary development agreements to which Seller or its Subsidiaries is a party with the Transferred Employees and Labs Employees (the “ NDA s”), Seller will enter into a partial assignment with respect to such NDAs, assigning that portion of the NDAs relating to the Business to Purchaser.

 

ARTICLE VII

 

CONDITIONS TO CLOSING

 

7.1 Conditions Precedent to Obligations of Purchaser and Seller and the Other Sellers .

 

The respective obligations of the Parties to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by the Party for whose benefit such condition exists) on or prior to the Closing Date of each of the following conditions:

 

(a) No Injunction, etc. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law which is in effect on the Closing Date which has or would have the effect of prohibiting, enjoining or restraining the consummation of the transactions contemplated by this Agreement to occur on the Closing Date or otherwise making such transactions illegal; and

 

(b) Regulatory Authorizations . (i) All Consents of any Governmental Authorities listed in Section 7.1(b) of the Disclosure Letter shall have been obtained and shall be in full force and effect, and (ii) the applicable waiting period under the HSR Act shall have expired or been terminated.

 

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7.2 Conditions Precedent to Obligation of Seller and the Other Sellers .

 

The obligation of Seller and the Other Sellers to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by Seller) on or prior to the Closing Date of each of the following conditions:

 

(a) Accuracy of Purchaser’s Representations and Warranties . The representations and warranties of Purchaser contained in this Agreement (i) that are qualified as to “Purchaser Material Adverse Effect” shall be true and correct on the date of this Agreement and on the Closing Date as though made on the Closing Date (except to the extent such representations and warranties by their terms speak as of an earlier date, in which case they shall be true and correct as of such date); and (ii) that are not qualified as to “Purchaser Material Adverse Effect” shall be true and correct on the date of this Agreement and on the Closing Date (except to the extent such representations and warranties by their terms speak as of an earlier date, in which case they shall be true and correct as of such date), except for such failures to be true and correct which would not, individually or in the aggregate, have a Purchaser Material Adverse Effect; and Seller shall have received a certificate signed by an authorized officer of Purchaser to such effect.

 

(b) Covenants of Purchaser . Purchaser shall have complied in all material respects with all covenants contained in this Agreement and the other Transaction Documents to be performed by it prior to the Closing; and Seller shall have received a certificate dated as of the Closing Date and signed by an authorized officer of Purchaser to such effect.

 

(c) Local Asset Transfer Agreements and Ancillary Agreements . Purchaser shall have executed and delivered the Ancillary Agreements and other agreements and documents contemplated by Section 2.3 to the extent a party thereto, and each such agreement and document shall be in full force and effect and shall not have been breached in any material respect by Purchaser.

 

(d) License Agreements . Purchaser shall have executed and delivered the Intellectual Property License Agreement and the Manufacturing Trademark License Agreement, and each such agreement shall be in full force and effect and shall not have been breached in any material respect by Purchaser.

 

(e) Real Property Agreements . Purchaser shall have executed and delivered the Real Property Agreements to the extent a party thereto, and each such agreement shall be in full force and effect and shall not have been breached in any material respect by Purchaser.

 

(f) Master Separation Agreement . Purchaser shall have executed and delivered the Master Separation Agreement, and such agreement shall be in full force and effect and shall not have been breached in any material respect by Purchaser.

 

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7.3 Conditions Precedent to Obligation of Purchaser .

 

The obligation of Purchaser to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by Purchaser) on or prior to the Closing Date of each of the following conditions:

 

(a) Accuracy of Representations and Warranties of Seller . The representations and warranties of Seller contained in this Agreement and the other Transaction Documents (i) that are qualified as to “Seller Material Adverse Effect” shall be true and correct on the date of this Agreement and on the Closing Date as though made on the Closing Date (except to the extent such representations and warranties by their terms speak as of an earlier date, in which case they shall be true and correct as of such date); and (ii) that are not qualified as to “Seller Material Adverse Effect” shall be true and correct on the date of this Agreement and on the Closing Date (except to the extent such representations and warranties by their terms speak as of an earlier date, in which case they shall be true and correct as of such date), except for such failures to be true and correct which would not, individually or in the aggregate, have a Seller Material Adverse Effect; and Purchaser shall have received a certificate dated as of the Closing Date signed by an authorized officer of Seller to such effect.

 

(b) Covenants of Seller . Seller shall have complied in all material respects with all covenants contained in this Agreement and the other Transaction Documents to be performed by it prior to the Closing; and Purchaser shall have received a certificate dated as of the Closing Date and signed by an authorized officer of Seller to such effect.

 

(c) Transfer Agreements . Seller shall have executed and delivered or caused each of the relevant Other Sellers to execute and deliver, the Ancillary Agreements and other agreements and documents contemplated by Section 2.3(a) to the extent a party thereto, and each such agreement and document shall be in full force and effect and shall not have been breached in any material respect by Seller or the relevant Other Seller, as the case may be.

 

(d) License Agreements . Seller shall have executed and delivered the Intellectual Property License Agreement and the Manufacturing Trademark License Agreement, and each such agreement shall be in full force and effect and shall not have been breached in any material respect by Seller or the relevant Other Seller, as the case may be.

 

(e) Real Property Agreements . Seller shall have executed and delivered or caused each of the relevant Other Sellers to execute and deliver the Real Property Agreements to the extent a party thereto, and each such agreement shall be in full force and effect and shall not have been breached in any material respect by Seller or the relevant Other Seller, as the case may be.

 

(f) Master Separation Agreement . Seller shall have executed and delivered the Master Separation Agreement, and such agreement shall be in full force and effect and shall not have been breached in any material respect by Seller or the relevant Other Seller, as the case may be.

 

(g) Financing . All conditions precedent shall have been satisfied or, to the extent permitted, waived to Purchaser’s receipt of the financing contemplated by the Debt Commitment Letter on substantially the terms set forth in the Debt Commitment Letter or on such other terms as are reasonably satisfactory to Purchaser, provided that if (x) a condition under the Debt Commitment Letter is not satisfied solely because of a failure of Purchaser to obtain sufficient equity contributions which when combined with the proceeds from the financing contemplated by the Debt Commitment Letter would be sufficient to pay the Purchase Price, assuming all

 

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conditions to a funding in the Equity Commitment Letter have been satisfied, or (y) Purchaser’s breach of any provision of this Agreement or the Debt Commitment Letter, then the condition contained in this Section 7.3(g) shall be deemed satisfied or waived.

 

(h) Financial Statements . Seller shall have delivered the Audited Business Financial Statements to Purchaser.

 

(i) Consents . (i) Each of the Consents set forth on Section 7.3 of the Disclosure Letter shall have been obtained in a form reasonably acceptable to Purchaser and shall be in full force and effect and (ii) all other Consents required to be obtained in connection with the transactions contemplated by this Agreement shall be been obtained and shall be in full force and effect, except in the case of clause (ii) where the failure to obtain any such Consents has not had and could not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect.

 

(j) No Seller Material Adverse Effect . Since the date of this Agreement there shall have been no event, condition, change or development, or worsening of any existing event, condition, change or development (except as relates to Excluded Assets, the failure to transfer to Purchaser the Excluded Assets or any failure to obtain a consent with respect to CAD Licenses to the extent provided in Section 6.18 hereto) that, individually or in combination with any other event, condition, change, development or worsening thereof, has had or would reasonably be expected to have a Seller Material Adverse Effect.

 

(k) Tax Concession . Purchaser shall have received from the Economic Development Board of Singapore (the “ EDB ”) a tax concession agreement on terms not materially less favorable than those set forth in that certain In-Principle Support Letter from the EDB to Seller dated July 1, 2005 (the “ EDB Support Letter ”), and such agreement shall be in full force and effect.

 

(l) FIRPTA Certificate . Purchaser shall have received certification signed by Seller to the effect that Seller is not a “foreign person” as defined in Section 1445 of the Code.

 

ARTICLE VIII

 

CLOSING

 

8.1 Closing Date .

 

Unless this Agreement shall have been terminated pursuant to Article X hereof, the closing of the sale and transfer of the Purchased Assets and the other transactions hereunder (the “ Closing ”) shall take place at the offices of Simpson Thacher & Bartlett LLP, 3330 Hillview Avenue, in Palo Alto, California at 10:00 a.m., local time, and in such other places as are necessary to effect the transactions to be consummated at the Closing, on the second Business Day immediately following the satisfaction or, to the extent permitted, waiver of all of the conditions in Article VII (other than those conditions which by their nature are to be satisfied or, to the extent permitted, waived at the Closing but subject to the satisfaction or, to the extent permitted, waiver of such conditions), or at such other time, date and place as shall be fixed by

 

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mutual agreement of the Parties (such date of the Closing being herein referred to as the “Closing Date”). Notwithstanding the foregoing or any other provision of this Agreement to the contrary, in the event all the conditions in Article VII (other than those conditions which by their nature are to be satisfied or, to the extent permitted, waived at the Closing) have been so satisfied or waived, the Closing may be postponed at the election of Purchaser for up to sixty (60) days (the “ Extension Period ”) after delivery of the Audited Business Financial Statements pursuant to Section 6.16 hereof in order to facilitate the financing contemplated by the Debt Commitment Letters, provided that in the event the Audited Business Financial Statements are delivered less than sixty (60) days prior to December 15, 2005 or March 15, 2006, as the case may be, the Extension Period shall be reduced by one (1) day for each day less than such sixty (60) days that the Financial Statements are delivered, but in no event shall the Extension Period be less than forty-five (45) days. The effective time (“ Effective Time ”) of the Closing for tax, operational and all other matters shall be deemed to be 12:01 a.m., local time in each jurisdiction in which the Business is conducted, on the Closing Date.

 

8.2 Purchaser Obligations .

 

At the Closing, Purchaser shall, or shall cause one or more of its Subsidiaries to (i) deliver the Purchase Price (subject to adjustment for the Estimated Working Capital pursuant to Section 3.3(a)) to Seller as provided in Section 3.2 and (ii) execute and deliver to Seller the following in such form and substance as are reasonably acceptable to Seller:

 

(a) the documents described in Section 7.2;

 

(b) such instruments of conveyance with respect to the Purchased Assets, the Transferred Business Intellectual Property, the Transferred Business Intellectual Property Rights and Assumed Liabilities as are referred to in Section 2.3(a) and such other assignment and conveyance documents as shall be necessary to convey the Purchased Assets, the Transferred Business Intellectual Property, the Transferred Business Intellectual Property Rights and consummate the other transactions contemplated hereby in each jurisdiction; and

 

(c) such other documents and instruments as counsel for Purchaser and Seller mutually agree to be reasonably necessary to consummate the transactions described herein.

 

8.3 Seller Obligations .

 

At the Closing, Seller shall execute and deliver to Purchaser, and Seller shall cause such of its Subsidiaries as are party thereto to execute and deliver to Purchaser, the following in such form and substance as are reasonably acceptable to Purchaser:

 

(a) the documents described in Section 7.3;

 

(b) such instruments of conveyance with respect to the Purchased Assets, the Transferred Business Intellectual Property, the Transferred Business Intellectual Property Rights and Assumed Liabilities as are referred to in Section 2.3(a) and such other assignment and conveyance documents as shall be necessary to convey the Purchased Assets, the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights and consummate the other transactions contemplated hereby including the sublicense, transfer or

 

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acquisition of cross licenses and CAD Licenses as and to the extent provided in Section 6.18 in each jurisdiction; and

 

(c) such other documents and instruments as counsel for Purchaser and Seller mutually agree to be reasonably necessary to consummate the transactions described herein.

 

ARTICLE IX

 

INDEMNIFICATION

 

9.1 Indemnification .

 

(a) Following the Closing and subject to the terms and conditions of this Article IX, Seller shall for itself (where it is acting as Seller) and otherwise as agent for the Other Sellers indemnify, defend and hold harmless Purchaser, its Affiliates, and their respective officers, directors, employees, stockholders, assigns and successors (each, a “ Purchaser Indemnified Party ”) from and against, and shall compensate and reimburse each Purchaser Indemnified Party for, all Losses imposed upon or incurred by such Purchaser Indemnified Party (“ Purchaser Losses ”), with respect to (i) any failure of any representation or warranty of Seller set forth in this Agreement or in the certificate delivered pursuant to Section 7.2(a) to be true and correct, (ii) any breach of any covenant or agreement of Seller herein or (iii) any Excluded Liabilities, it being understood that each Purchaser Loss shall be calculated net of any Tax benefit realized by such Purchaser Indemnified Party, as set forth more fully in Section 9.3(c). Purchaser shall not be entitled to recover more than once for the same Purchaser Loss. In furtherance of the foregoing, to the extent that a Purchaser Loss has arisen from facts and circumstances which have reduced Adjusted EBITDA and have resulted in an Adjusted EBITDA Deficiency Amount reducing the Purchase Price, then Purchaser Losses which arose from such facts and circumstances shall be reduced to the extent such reduction of the Purchase Price was attributable to such facts and circumstances.

 

(b) Following the Closing and subject to the terms and conditions provided in this Article IX, Purchaser shall indemnify, defend and hold harmless Seller and its Affiliates and their respective officers, directors, employees, stockholders, assigns and successors (each, a “ Seller Indemnified Party ”) from and against, and shall compensate and reimburse each Seller Indemnified Party for, all Losses imposed upon or incurred by such Seller Indemnified Party (“ Seller Losses ”), with respect to (i) the failure of any representation or warranty of Purchaser set forth in this Agreement or in the certificate delivered pursuant to Section 7.3(a) to be true and correct, (ii) any breach of any covenant or agreement of by Purchaser herein or (iii) any of the Assumed Liabilities, it being understood that each Seller Loss shall be calculated net of any Tax benefit realized by such Seller Indemnified Party, as set forth more fully in Section 9.3(c). Seller shall not be entitled to recover more than once for the same Seller Loss.

 

(c) For purposes of the foregoing Sections 9.1(a)(i) and 9.1(b)(i), in determining the amount of any Purchaser Losses or Seller Losses, as the case may be, no effect shall be given to any qualification in the relevant representations and warranties as to materiality or Seller Material Adverse Effect (other than for purposes of clause (b) of Section 4.6, Section 4.7(i), Section 4.15(c) and the last sentence of Section 4.17, none of which shall be subject to this

 

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Section 9.1(c)); provided that full effect shall be given to all such qualifications for purposes of determining the existence of a breach of any representation or warranty.

 

(d) Notwithstanding the foregoing, Purchaser Losses and Seller Losses shall not include, and in no event shall any Purchaser Loss or Seller Loss be recoverable under the terms of this Agreement to the extent it consists of, punitive, special or exemplary damages, except to the extent such punitive, special or exemplary damages are awarded against any Purchaser Indemnified Party or Seller Indemnified Party, as the case may be, in a third-party claim.

 

(e) Notwithstanding the foregoing, (x) Purchaser shall not be entitled to indemnification for a breach of Section 4.15(a) or (b) to the extent (and only to the extent) such breach arises as a result of reclassification of the expenses (including expenses included in Camera Module EBIT) described in Section 9.1(e) of the Disclosure Letter incurred during the twelve months ended July 31, 2005, and (y) if a breach of Section 4.15(a) or (b) is based upon facts or circumstances which reduced Adjusted EBITDA for the twelve months ended July 31, 2005, then to the extent that Adjusted EBITDA for such period was greater than $259,800,000 Purchaser Losses arising from such breach to the extent it reduced Adjusted EBITDA shall be reduced by an amount equal to 10.2 multiplied by the amount that Adjusted EBITDA for such period exceeds $259,800,000, provided that in no event shall Purchaser Losses for all such breaches of Section 4.15(a) or (b) be reduced pursuant to this Section 9.1(e)(y) by more than $82,000,000 in the aggregate. For avoidance of doubt, this Section 9.1(e) shall not affect the last sentence of Section 9.1(a).

 

9.2 Certain Limitations .

 

(a) Notwithstanding anything contained herein to the contrary, Seller (on behalf of itself and as agent for the Other Sellers) shall not be obligated to indemnify Purchaser Indemnified Parties for aggregate Purchaser Losses under this Agreement pursuant to Section 9.1(a)(i) in excess of 10% of the Purchase Price; provided , however, that such limitation shall not apply with respect to a breach of a representation or warranty made by Seller in Section 4.1, 4.2(a), 4.8 or 4.9. In addition, Seller (on behalf of itself and as agent for the Other Sellers) shall not be obligated to indemnify Purchaser Indemnified Parties for aggregate Purchaser Losses under this Agreement (including pursuant to Section 9.1(a)(ii) or 9.1(a)(iii)) in excess of an amount equal to the Purchase Price.

 

(b) Notwithstanding anything contained herein to the contrary, Seller (on behalf of itself and as agent for the Other Sellers) shall not be obligated to indemnify Purchaser Indemnified Parties under this Agreement pursuant to Section 9.1(a)(i) (x) with respect to any individual Purchaser Loss or series of related Purchaser Losses of less than one hundred thousand dollars ($100,000) (the “ Minimum Amount ”) and (y) unless and until the aggregate Purchaser Losses (excluding individual Purchaser Losses or related Purchaser Losses less than the Minimum Amount) subject to such indemnification collectively exceed one percent (1.0%) of the Purchase Price (the “ Threshold ”), whereupon such indemnification shall be made by Seller only with respect to the amount of such Purchaser Losses (excluding individual Purchaser Losses or related Purchaser Losses less than the Minimum Amount) in excess of the Threshold; provided , however, that the Threshold shall not apply to any breach of a representation or warranty made by Seller in Sections 4.1, 4.2(a), 4.8 or 4.9.

 

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(c) The representations and warranties of Seller and Purchaser contained in Article IV and Article V, respectively, of this Agreement shall survive the Closing until March 31, 2007; provided that the representations and warranties set forth in Sections 4.1, 4.2(a), 4.8, 5.1, 5.2(a) and 5.5 shall survive indefinitely. The covenants and agreements contained in this Agreement shall survive the Closing until the date or dates explicitly specified therein or, if not so specified, until the expiration of the applicable statute of limitations with respect to the matters contained therein.

 

(d) The obligations to indemnify and hold harmless a Party pursuant to Sections 9.1(a)(i), 9.1(a)(ii), 9.1(b)(i) or 9.1(b)(i)(ii) shall terminate when the applicable representation, warranty or covenant terminates pursuant to Section 9.2(c); provided , however, that such obligations to indemnify and hold harmless shall not terminate with respect to any item as to which the Seller Indemnified Party or Purchaser Indemnified Party, as the case may be, to be indemnified (each, an “ Indemnified Party ”) shall have, before the expiration of the applicable survival period, previously made a claim by delivering a written notice (stating in reasonable detail the basis of such claim) to the Indemnifying Party.

 

9.3 Procedures for Third-Party Claims and Excluded Liabilities .

 

(a) General Procedures . Promptly (but in no event later than ten (10) days) after the receipt by any Indemnified Party of a notice of any Proceeding by any third party that may be subject to indemnification under this Article IX, including any Proceeding relating to any Excluded Liability or Assumed Liability, such Indemnified Party shall give written notice of such Proceeding to the indemnifying Party hereunder (the “ Indemnifying Party ”), stating in reasonable detail the nature and basis of each claim made in the Proceeding and the amount thereof, to the extent known, along with copies of the relevant documents received by the Indemnified Party evidencing the Proceeding and the basis for indemnification sought. Failure of the Indemnified Party to give such notice shall not relieve the Indemnifying Party from liability on account of this indemnification, except if and only to the extent that the Indemnifying Party is actually prejudiced thereby. Thereafter, the Indemnified Party shall deliver to the Indemnifying Party, promptly after the Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Proceeding. The Indemnifying Party shall have the right to assume the defense of the Indemnified Party against the third party claim upon written notice to the Indemnified Party delivered within thirty (30) days after receipt of the particular notice from the Indemnified Party; provided , however, that the Indemnifying Party shall not have the right to assume the defense of the third party claim if it seeks as a remedy the imposition of an equitable remedy that is binding upon Purchaser or the Business. So long a