MASTER SEPARATION AND DISTRIBUTION AGREEMENT between AGILENT TECHNOLOGIES, INC. and VERIGY LTD.

 

TABLE OF CONTENTS

 

			Page
MASTER SEPARATION AND DISTRIBUTION AGREEMENT			1
ARTICLE I    DEFINITIONS AND RULES OF CONSTRUCTION			1
	1.1.	Definitions	1
	1.2.	Rules of Construction	1
ARTICLE II    PURCHASE PRICE AND ALLOCATION			2
	2.1.	Payment of Purchase Price	2
	2.2.	Allocation of Purchase Price	2
	2.3.	Receivables and Payables	2
ARTICLE III    DOCUMENTS AND ITEMS TO BE DELIVERED ON THE SEPARATION DATE			3
	3.1.	Documents to be Delivered by Agilent	3
	3.2.	Documents to Be Delivered by Verigy	3
	3.3.	Cash to be Transferred by Agilent	3
ARTICLE IV    THE IPO AND ACTIONS PENDING THE IPO			4
	4.1.	Transactions Prior to the IPO	4
	4.2.	Proceeds of the IPO	4
	4.3.	Conditions Precedent to Consummation of the IPO	4
ARTICLE V    THE DISTRIBUTION			5
	5.1.	The Distribution	5
	5.2.	Actions Prior to the Distribution	5
	5.3.	Conditions to Distribution	6
	5.4.	Certain Stockholder Matters	6
ARTICLE VI    FINANCIAL AND OTHER COVENANTS			7
	6.1.	Financial and Other Information	7
	6.2.	Other Covenants	13
	6.3.	Covenants Regarding the Incurrence of Indebtedness	14
	6.4.	Release of Lease Guarantees	14
ARTICLE VII    ACCESS TO INFORMATION			14
	7.1.	Restrictions on Disclosure of Information	14
	7.2.	Legally Required Disclosure of Information	15
	7.3.	Access to Information	15
	7.4.	Record Retention	16

 

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	7.5.	Production of Witnesses	16
	7.6.	Reimbursement	16
	7.7.	Other Agreements Regarding Access to Information	16
	7.8.	Acquisition of Verigy by another Person	17
ARTICLE VIII    ADDITIONAL COVENANTS AND OTHER MATTERS			17
	8.1.	Performance	17
	8.2.	Existing Litigation Matters	17
	8.3.	Insurance Matters	17
	8.4.	Export Control Compliance	19
	8.5.	Conduct of Business between Separation Date and the IPO Settlement Date	19
	8.6.	Conduct of Business between IPO Settlement Date and Distribution Date	19
ARTICLE IX    INDEMNIFICATION			19
	9.1.	Indemnification by Verigy Group	19
	9.2.	Indemnification by Agilent Group	20
	9.3.	Claim Procedure	20
	9.4.	Survival; Limitations	21
ARTICLE X    MISCELLANEOUS			22
	10.1.	Governing Law	22
	10.2.	Jurisdiction	23
	10.3.	Dispute Resolution	23
	10.4.	Notices	23
	10.5.	Binding Effect and Assignment	24
	10.6.	Severability	24
	10.7.	Entire Agreement	24
	10.8.	Counterparts	24
	10.9.	Expenses	25
	10.10.	Amendment	25
	10.11.	Waiver	25
	10.12.	Authority	25
	10.13.	Termination	25

 

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MASTER SEPARATION AND DISTRIBUTION AGREEMENT

 

THIS MASTER SEPARATION AND DISTRIBUTION AGREEMENT (the “ Agreement ”) is dated as of May 31, 2006, by and between Agilent Technologies, Inc., a Delaware corporation (“ Agilent ”), and Verigy Ltd., a company organized under the laws of Singapore (together with its successors and assigns, “ Verigy ”) (each, a “ Party ” and, collectively, the “ Parties ”).

 

W I T N E S S E T H:

 

WHEREAS , Agilent has determined that it would be appropriate, desirable and in the best interests of Agilent and Agilent’s stockholders to separate the Business from Agilent;

 

WHEREAS , it is the intent of the Parties, in accordance with the General Assignment and Assumption Agreement to be entered into between the Parties (the “ General Assignment and Assumption Agreement ”) and the other agreements and instruments provided for in this Agreement, that Agilent and its Subsidiaries convey to Verigy and its Subsidiaries substantially all of the business and assets of the Business and that Verigy and its Subsidiaries assume certain of the liabilities of Agilent and its Subsidiaries related to the Business (the “ Transfer ”);

 

WHEREAS, the Parties understand that Agilent has entered into certain asset purchase agreements, inventory purchase agreements and other agreements ancillary thereto (collectively, the “ Flextronics Transfer Agreements ”), with one or more subsidiaries or affiliates of Flextronics International Ltd. (“ Flextronics ”), which agreements contemplate the transfer of certain assets and employees relating to the Business from Agilent to Flextronics on or about the Separation Date;

 

WHEREAS , Verigy intends to offer and sell for its own account a limited number of Verigy Ordinary Shares pursuant to an initial public offering of such shares (the “ IPO ”), and in furtherance thereof, Verigy has previously filed the IPO Registration Statement with the SEC which has not yet become effective;

 

WHEREAS , Agilent intends, after the IPO, to distribute to holders of shares of Agilent Common Stock the outstanding Verigy Ordinary Shares then owned by Agilent (the “ Distribution ”); and

 

WHEREAS , the parties intend in this Agreement and the Transaction Documents to set forth the principal arrangements between them regarding the Transfer, the IPO and the Distribution:

 

NOW, THEREFORE , in consideration of the foregoing and the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby 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

 

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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.

 

ARTICLE II

 

PURCHASE PRICE AND ALLOCATION

 

2.1     Payment of Purchase Price .

 

The total consideration in respect of the Transfer contemplated by this Agreement and the General Assignment and Assumption Agreement shall consist of (i) a cash payment equal to $535 million (the “ Purchase Price ”) and (ii) the assumption of liabilities specified in the General Assignment and Assumption Agreement. The Purchase Price shall be payable by Verigy to Agilent on the Separation Date in United States dollars (or in other currencies in certain foreign jurisdictions) in immediately available federal funds to such bank account or accounts as shall be designated in writing by Agilent no later than the second Business Day prior to the Separation Date or as otherwise set forth in the applicable Ancillary Agreement.

 

2.2     Allocation of Purchase Price .

 

(a)   The Agilent Tax Group and the Verigy Tax Group agree to allocate the total consideration described in Section 2.1 (and all other capitalizable costs) among the Transferred Assets, the Transferred Intellectual Property Rights 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 the Agilent Tax Group and the Verigy Tax Group in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder. The Agilent Tax Group and the Verigy Tax Group 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.

 

(b)   The Verigy Tax Group and the Agilent Tax Group 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, the Verigy Tax Group and the Agilent Tax Group 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.

 

2.3.     Receivables and Payables .

 

Agilent shall pay to Verigy any payments received by Agilent or any of its Subsidiaries after the Separation Date in respect of accounts receivable of Verigy arising on, prior to or after the Separation Date within five (5) Business Days of Agilent’s receipt thereof. To the extent that any accounts payable are included in the Assumed Liabilities, Agilent will pay such accounts payable on behalf of Verigy after the Separation Date, provided that any such payments will be made by Agilent only at such times and in such amounts as are directed by Verigy. Verigy will reimburse Agilent for any such amounts paid by Agilent at Verigy’s direction within five (5) Business Days of such payments.

 

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ARTICLE III

 

DOCUMENTS AND ITEMS TO BE DELIVERED ON THE SEPARATION DATE

 

3.1.     Documents to be Delivered by Agilent.     On or prior to the Separation Date, or such later date as agreed to by the Parties, Agilent will deliver, or will cause its appropriate Subsidiaries to deliver, to Verigy all of the following items and agreements (collectively, together with all agreements and documents contemplated by such agreements, the “ Transaction Documents ”):

 

(a)   a duly executed General Assignment and Assumption Agreement substantially in the form attached hereto as Exhibit A ;

 

(b)   Certificates representing the stock and/or investments in the Subsidiaries and other holdings of Agilent set forth on Schedule 1 with duly executed stock powers in the form proper for transfer;

 

(c)   a duly executed Intellectual Property Matters Agreement substantially in the form attached hereto as Exhibit B-1 and a duly executed Manufacturing Trademark License Agreement substantially in the form attached hereto as Exhibit B-2 ;

 

(d)   a duly executed Employee Matters Agreement substantially in the form attached hereto as Exhibit C ;

 

(e)   a duly executed Tax Sharing Agreement substantially in the form attached hereto as Exhibit D ;

 

(f)    a duly executed Transition Services Agreement substantially in the form attached hereto as Exhibit E ;

 

(g)   a duly executed loan agreement (the “ Loan Facility Agreement ”) substantially in form attached hereto as Exhibit F .

 

(h)   a duly executed Share Subscription Agreement substantially in the form attached hereto as Exhibit G ;

 

(i)    resignations of each person who is an officer of Verigy or an officer or director of any of its Subsidiaries, immediately prior to the Separation Date, and who will be employees of Agilent from and after the Separation Date; and

 

(j)    such other agreements, documents or instruments as the Parties may agree are necessary or desirable in order to achieve the purposes hereof.

 

3.2     Documents to Be Delivered by Verigy .    As of the Separation Date, Verigy will or will cause its appropriate Subsidiaries to deliver to Agilent all of the following:

 

(a)   in each case where Verigy is a party to any agreement or instrument referred to in Section 3.1, a duly executed counterpart of such agreement or instrument; and

 

(b)   resignations of each person who is an officer or director of Agilent or its Subsidiaries (other than Verigy or any of its Subsidiaries) immediately prior to the Separation Date, and who will be employees of Verigy from and after the Separation Date.

 

3.3     Cash to be Contributed by Agilent.     On or prior to the Separation Date, or such later date as may be mutually agreed to by the Parties, Agilent shall make a capital contribution to Verigy in the amount of $535 million pursuant to the terms of the Share Subscription Agreement referenced in Section 3.1(h).

 

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ARTICLE IV

 

THE IPO AND ACTIONS PENDING THE IPO

 

4.1     Transactions Prior to the IPO .    Subject to the conditions hereof, Agilent and Verigy will use their commercially reasonable efforts to consummate the IPO, including, without limitation, by taking the actions specified in this Section 4.1.

 

(a)   Verigy will file such amendments or supplements to the IPO Registration Statement as may be necessary in order to cause the IPO Registration Statement to become and remain effective as required by applicable law or by the Underwriters, including, without limitation, filing such amendments and supplements thereto as may be required by the Underwriting Agreement, the SEC or applicable securities laws. Agilent and Verigy will also cooperate in preparing, filing with the SEC and causing to become effective a registration statement registering the Verigy Ordinary Shares under the Exchange Act, and any registration statements or amendments thereto which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the IPO, the Distribution or the other transactions contemplated by this Agreement and the Transaction Documents.

 

(b)   Verigy will enter into the Underwriting Agreement, in form and substance reasonably satisfactory to Verigy, and Verigy will comply with its obligations thereunder.

 

(c)   Verigy will use its commercially reasonable efforts to take all such action as may be necessary or appropriate under applicable state securities and blue sky laws of the United States (and any comparable laws under any foreign jurisdictions) in connection with the IPO.

 

(d)   Verigy will prepare, file and use commercially reasonable efforts to seek to make effective, an application for listing of the Verigy Ordinary Shares to be issued in the IPO on the Nasdaq National Market, subject to official notice of issuance.

 

(e)   Verigy and Agilent will participate in the preparation of materials and presentations that Agilent, Verigy and the Underwriters may deem necessary or desirable.

 

(f)    Verigy will cooperate in all respects with Agilent in connection with the pricing and timing of the Verigy Ordinary Shares to be issued in the IPO and will, at Agilent’s direction, promptly take any and all actions necessary or desirable to consummate the IPO as contemplated by the IPO Registration Statement and the Underwriting Agreement.

 

4.2     Proceeds of the IPO .    Except as may be otherwise agreed by the parties, the IPO will be a primary offering of Verigy Ordinary Shares, and the net proceeds of the IPO will be used as described in the IPO Registration Statement in the section entitled “Use of Proceeds”.

 

4.3     Conditions Precedent to Consummation of the IPO .    The obligations of the Parties to consummate the IPO will be subject to such conditions as Agilent will determine in its sole and absolute discretion, which conditions will be for the sole benefit of Agilent, may be waived by Agilent in its sole and absolute discretion, and any determination by Agilent regarding the satisfaction or waiver of any of such conditions will be conclusive. Such conditions will include, without limitation, the following:

 

(a)   The IPO Registration Statement will have been declared effective by the SEC, and there will be no stop order in effect with respect thereto and no proceeding for that purpose will have been instituted by the SEC;

 

(b)   The actions and filings with regard to state securities and blue sky laws of the United States (and any comparable laws under any foreign jurisdictions) referred to in Section 4.1 will have been taken and, where applicable, have become effective or been accepted;

 

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(c)   The Verigy Ordinary Shares to be issued in the IPO will have been accepted for listing on the Nasdaq National Market, on official notice of issuance;

 

(d)   Verigy will have entered into the Underwriting Agreement and all conditions to the obligations of Verigy and the Underwriters thereunder will have been satisfied or waived;

 

(e)   Agilent will be satisfied in its sole and absolute discretion that (i) it will possess Tax Control of Verigy immediately following the consummation of the IPO, (ii) to the extent applicable as of the time the IPO is consummated, the other conditions for a distribution qualifying under Section 355 of the Code will be satisfied or can reasonably be anticipated to be satisfied, and (iii) there will be no event or condition that may cause any of such conditions not to be satisfied as of the time of the Distribution or thereafter;

 

(f)    No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the IPO or any of the other transactions contemplated by this Agreement or any Transaction Document will be in effect;

 

(g)   Agilent will have determined that the terms of the IPO, including the timing and pricing thereof, and other material matters in connection therewith, are acceptable to Agilent; and

 

(h)   This Agreement will not have been terminated.

 

ARTICLE V

 

THE DISTRIBUTION

 

5.1     The Distribution .    Agilent will, in its sole and absolute discretion, determine the date of the consummation of the Distribution and all terms of the Distribution, including without limitation, the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution and the timing of and conditions to the consummation of the Distribution. In addition, Agilent may, at any time and from time to time until the completion of the Distribution, modify or change the terms of the Distribution, including, without limitation, by accelerating or delaying the timing of the consummation of all or part of the Distribution. Verigy will cooperate with Agilent in all respects to accomplish the Distribution and will, at Agilent’s direction, promptly take any and all reasonable actions necessary or desirable to effect the Distribution, including, without limitation, to the extent necessary, the registration under the Securities Act and the Exchange Act of the Verigy Ordinary Shares on an appropriate registration form or forms to be designated by Agilent. Agilent will select any investment banker(s) and manager(s) in connection with the Distribution, as well as any financial printer, solicitation and/or exchange agent and financial, legal, accounting and other advisors for Agilent, provided, however, that nothing in this Agreement will prohibit Verigy from engaging (at its own expense) its own financial, legal, accounting and other advisors in connection with the Distribution.

 

5.2     Actions Prior to the Distribution .    In connection with the Distribution, the parties will take the actions set forth in this Section 5.2.

 

(a)   Agilent and Verigy will prepare and mail, prior to any Distribution Date, to the holders of Agilent Common Stock, such information concerning Verigy and the Distribution and such other matters as Agilent reasonably determines and as may be required by law. Agilent and Verigy will prepare, and Verigy will, to the extent required by applicable law, file with the SEC any such documentation that Agilent determines is necessary or desirable to effect the Distribution, and Agilent and Verigy will each use its commercially reasonable efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable.

 

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(b)   Verigy will use its commercially reasonable efforts to take all such action as may be necessary or desirable under applicable state securities and blue sky laws of the United States (and any comparable laws under any foreign jurisdictions) in connection with the Distribution.

 

(c)   Verigy will prepare, file and use commercially reasonable efforts to seek to make effective, an application for listing of the Verigy Ordinary Shares to be distributed in the Distribution on the Nasdaq National Market, subject to official notice of issuance.

 

(d)   Verigy will take all reasonable steps necessary or desirable to cause the conditions set forth in Section 5.3 to be satisfied and to effect the Distribution.

 

5.3     Conditions to Distribution .    The consummation of the Distribution will be subject to the satisfaction, or waiver by Agilent in its sole and absolute discretion, of the conditions set forth in this Section 5.3. Any determination by Agilent regarding the satisfaction or waiver of any of such conditions will be conclusive. For the avoidance of doubt, in the event that Agilent determines not to consummate the Distribution because one or more of such conditions is not satisfied or for any other reason, such determination by Agilent will not affect the effectiveness of the Transfer or the IPO.

 

(a)   The receipt by Agilent, in form and substance satisfactory to it, of an opinion from its Tax Advisor that the Distribution should qualify as a distribution under Section 355 of the Code, subject to Section 367 of the Code, and such other matters as Agilent may determine to be necessary or advisable in its sole and absolute discretion.

 

(b)   The receipt of any governmental approvals and material consents necessary to consummate the Distribution, which approvals and consents will be in full force and effect.

 

(c)   No order, injunction, decree or regulation issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution will be in effect and no other event outside the control of Agilent will have occurred or failed to occur that prevents the consummation of the Distribution.

 

(d)   The actions and filings necessary or appropriate under applicable securities laws in connection with the Distribution will have been taken or made, and, where applicable, have become effective or been accepted.

 

(e)   The Verigy Ordinary Shares to be distributed in the Distribution will have been accepted for listing on the Nasdaq National Market, subject to official notice of issuance.

 

(f)    The receipt by Agilent, in form and substance satisfactory to it, of (i) an opinion from Delaware counsel, selected by Agilent in its sole and absolute discretion, regarding the appropriateness of the determination by the Agilent Board of Directors that Agilent has sufficient surplus under Delaware law to permit the Distribution and (ii) appropriate certificates from Verigy with respect to factual matters required by the advisors to render the opinions referenced in (i).

 

5.4     Certain Stockholder Matters .

 

(a)   Subject to Section 5.3 hereof, on or prior to the Distribution Date, Agilent will deliver to a distribution agent to be appointed by Agilent (the “ Distribution Agent ”) for the benefit of holders of record of Agilent Common Stock on the Record Date, a single share certificate, endorsed by Agilent in blank, representing all of the outstanding Verigy Ordinary Shares then owned by Agilent, and Agilent will instruct the Distribution Agent to deliver to the Verigy Transfer Agent true, correct and complete copies of the stock and transfer records reflecting the holders of Agilent Common Stock entitled to receive Verigy Ordinary Shares in connection with the Distribution. Agilent will cause its transfer agent to instruct the Distribution Agent to distribute on the Distribution Date or as soon as reasonably practicable thereafter the appropriate number of Verigy Ordinary Shares to each such holder or designated transferee(s) of such holder. Agilent will cooperate, and will instruct the Distribution Agent

 

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to cooperate, with Verigy and the Verigy Transfer Agent, and Verigy will cooperate, and will instruct the Verigy Transfer Agent to cooperate, with Agilent and the Distribution Agent, in connection with all aspects of the Distribution and all other matters relating to the issuance and delivery of certificates representing, or other evidence of ownership of, the Verigy Ordinary Shares to be distributed to the holders of Agilent Common Stock in connection with the Distribution.

 

(b)   Subject to Section 5.4(d), each holder of Agilent Common Stock on the Record Date (or such holder’s designated transferee(s)) will be entitled to receive in the Distribution a number of Verigy Ordinary Shares equal to the number of shares of Agilent Common Stock held by such holder on the Record Date, multiplied by a fraction, (i) the numerator of which is the number of Verigy Ordinary Shares beneficially owned by Agilent or any other member of the Agilent Group on the Record Date, and (ii) the denominator of which is the number of shares of Agilent Common Stock outstanding on the Record Date.

 

(c)   Until such Verigy Ordinary Shares are duly transferred in accordance with applicable law, from and after the Distribution Date, Verigy will regard the Persons entitled to receive such Verigy Ordinary Shares as record holders of Verigy Ordinary Shares in accordance with the terms of the Distribution without requiring any action on the part of such Persons. Verigy agrees that, subject to any transfers of such stock, (i) each such holder will be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, the Verigy Ordinary Shares then held by such holder, and (ii) each such holder will be entitled, without any action on the part of such holder, to receive one or more certificates representing, or other evidence of ownership of, the Verigy Ordinary Shares then held by such holder.

 

(d)   Notwithstanding anything to the contrary in this Section 5.4, in the event that the Distribution is not made in the form of a pro rata distribution of Verigy Ordinary Shares to holders of Agilent Common Stock, the above provisions of this Section 5.4 will not apply to the Distribution.

 

ARTICLE VI

 

FINANCIAL AND OTHER COVENANTS

 

6.1     Financial and Other Information .

 

(a)     Financial Information .    Verigy agrees that, for so long as Agilent is required to consolidate the results of operations and financial position of Verigy and any other members of the Verigy Group or to account for its investment in Verigy under the equity method of accounting (determined in accordance with generally accepted accounting principles consistently applied and consistent with SEC reporting requirements):

 

(i)     Disclosure of Financial Controls .    Verigy will, and will cause each other member of the Verigy Group to, maintain, as of and after the Separation Date, disclosure controls and procedures and internal control over financial reporting as defined in Exchange Act Rule 13a-15 promulgated under the Exchange Act; Verigy will cause each of its principal executive officer and its principal financial officer to sign and deliver certifications to Verigy’s periodic reports and will include the certifications in Verigy’s periodic reports, as and when required pursuant to Exchange Act Rule 13a-14 and Item 601 of Regulation S-K; Verigy will cause its management to evaluate Verigy’s disclosure controls and procedures and internal control over financial reporting (including any change in internal control over financial reporting) as and when required pursuant to Exchange Act Rule 13a-15; Verigy will disclose in its periodic reports filed with the SEC information concerning Verigy management’s responsibilities for and evaluation of Verigy’s disclosure controls and procedures and internal control over financial reporting (including, without limitation, the annual management report and attestation report of Verigy’s independent auditors relating to internal control over financial reporting) as and when required under Items 307 and

 

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308 of Regulation S-K and other applicable SEC rules; and, without limiting the general application of the foregoing, Verigy will, and will cause each other member of the Verigy Group to, maintain as of and after the Separation Date internal systems and procedures that will provide reasonable assurance that (A) the Financial Statements are reliable and timely prepared in accordance with GAAP and applicable law, (B) all transactions of members of the Verigy Group are recorded as necessary to permit the preparation of the Financial Statements, (C) the receipts and expenditures of members of the Verigy Group are authorized at the appropriate level within Verigy, and (D) unauthorized use or disposition of the assets of any member of the Verigy Group that could have material effect on the Financial Statements is prevented or detected in a timely manner (it being understood that the foregoing shall not require Verigy to comply with Section 404 of the Sarbanes-Oxley Act of 2002 as of an earlier date than it would otherwise be required to so comply under applicable law).

 

(ii)     Fiscal Year .    Verigy will, and will cause each member of the Verigy Group to, maintain a fiscal year that commences and ends on the same calendar days as Agilent’s fiscal year commences and ends, and to maintain monthly accounting periods that commence and end on the same calendar days as Agilent’s monthly accounting periods commence and end.

 

(iii)     Monthly Financial Reports .    For each monthly accounting period after the Separation Date, Verigy shall use its reasonable best efforts to comply with Agilent’s standard financial reporting timeline for the provision of consolidated income statements, balance sheets and cash flows of Verigy and each Verigy Affiliate that is consolidated with Verigy for such period, in such format and detail as Agilent may request; provided that in any case Verigy shall provide such financial information not later than eight (8) Business Days following the end of each monthly accounting period of Verigy.

 

(iv)     Quarterly Financial Statements .    As soon as practicable and within Agilent’s standard financial reporting timeline, and in any event no later than ten (10) Business Days prior to the date on which Agilent has notified Verigy that Agilent intends to file its Form 10-Q or other document containing quarterly financial statements with the SEC, Verigy will deliver to Agilent drafts of (A) the consolidated financial statements of the Verigy Group (and notes thereto) for such periods and for the period from the beginning of the current fiscal year to the end of such quarter, setting forth in each case in comparative form for each such fiscal quarter of Verigy the consolidated figures (and notes thereto) for the corresponding quarter and periods of the previous fiscal year and all in reasonable detail and prepared in accordance with Article 10 of Regulation S-X and GAAP, and (B) a discussion and analysis by management of the Verigy Group’s financial condition and results of operations for such fiscal period, including, without limitation, an explanation of any material period-to-period change and any off-balance sheet transactions, all in reasonable detail and prepared in accordance with Item 303(b) of Regulation S-K; provided , however , that the foregoing requirement shall not apply to the first quarterly reporting period of Verigy following the IPO if Verigy is not required by the Exchange Act to file its Form 10-Q for such period within forty-five (45) days of the end of such quarter. The information set forth in (A) and (B) above is referred to in this Agreement as the “ Quarterly Financial Statements .” No later than three (3) Business Days prior to the date on which Agilent has notified Verigy that Agilent intends to file the Agilent quarterly financial statements with the SEC, Verigy will use its commercially reasonable efforts to deliver to Agilent the final form of the Verigy Quarterly Financial Statements and certifications thereof by the principal executive and financial officers of Verigy in substantially the forms required under SEC rules for periodic reports and in form and substance satisfactory to Agilent; provided , however , that Verigy may continue to revise such Quarterly Financial Statements prior to the filing thereof in order to make corrections and changes which corrections and changes will be delivered by Verigy to Agilent as soon as practicable, and in any event within eight (8) hours thereafter; provided , further , that Agilent’s and

 

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Verigy’s financial Representatives will actively consult with each other regarding any changes which Verigy may consider making to its Quarterly Financial Statements and related disclosures during the two (2) Business Days immediately prior to any anticipated filing with the SEC, to the extent that such changes would have an effect upon Agilent’s financial statements or related disclosures. In addition to the foregoing, no Quarterly Financial Statement or any other document which refers, or contains information not previously publicly disclosed with respect to the ownership of Verigy by Agilent, the separation of Verigy from Agilent or the Distribution will be filed with the SEC or otherwise made public by any Verigy Group member without the prior written consent of Agilent, which will not be unreasonably withheld. Agilent and Verigy will cooperate with each other and use commercially reasonable efforts to file their respective quarterly reports on the same day; provided , however , that the foregoing requirement shall not apply to the first quarterly reporting period of Verigy following the IPO if Verigy is not required by the Exchange Act to file its Form 10-Q for such period within forty-five (45) days of the end of such quarter.

 

(v)     Annual Financial Statements .    As soon as practicable and within Agilent’s standard financial reporting timeline, and in any event no later than ten (10) Business Days prior to the date on which Agilent has notified Verigy that Agilent intends to file its Form 10-K or other document containing annual financial statements with the SEC, Verigy will deliver to Agilent (A) drafts of the consolidated financial statements of the Verigy Group (and notes thereto) for such year, setting forth in each case in comparative form the consolidated figures (and notes thereto) for the previous fiscal year and all in reasonable detail and prepared in accordance with Regulation S-X and GAAP and (B) a discussion and analysis by management of the Verigy Group’s financial condition and results of operations for such year, including, without limitation, an explanation of any material period-to-period change and any off-balance sheet transactions, all in reasonable detail and prepared in accordance with Item 303(a) of Regulation S-K. The information set forth in (A) and (B) above is referred to in this Agreement as the “ Annual Financial Statements .” Verigy will deliver to Agilent all revisions to such drafts as soon as any such revisions are prepared or made. No later than three (3) Business Days prior to the date on which Agilent has notified Verigy that Agilent intends to file the Agilent annual financial statements with the SEC, Verigy will deliver to Agilent the final form of the Verigy Annual Financial Statements and certifications thereof by the principal executive and financial officers of Verigy in substantially the forms required under SEC rules for periodic reports and in form and substance satisfactory to Agilent; provided , however , that Verigy may continue to revise such Annual Financial Statements prior to the filing thereof in order to make corrections and changes which corrections and changes will be delivered by Verigy to Agilent as soon as practicable, and in any event within eight (8) hours thereafter; provided , further , that Agilent and Verigy financial Representatives will actively consult with each other regarding any changes (whether or not substantive) which Verigy may consider making to its Annual Financial Statements and related disclosures during the three (3) Business Days immediately prior to any anticipated filing with the SEC, to the extent such changes would have an effect upon Agilent’s financial statements or related disclosures. In addition to the foregoing, no Annual Financial Statement or any other document which refers, or contains information not previously publicly disclosed with respect, to the ownership of Verigy by Agilent, the separation of Verigy from Agilent or the Distribution will be filed with the SEC or otherwise made public by any Verigy Group member without the prior consent of Agilent, which will not be unreasonably withheld. In any event, Verigy will use its commercially reasonable efforts to deliver to Agilent, no later than three (3) days prior to the date that on which Agilent has notified Verigy that Agilent intends to file the Agilent annual financial statements with the SEC, the final form of the Annual Financial Statements accompanied by an opinion thereon by Verigy’s independent certified public accountants. Agilent and Verigy will cooperate with each other and use commercially reasonable efforts to file their respective annual reports on the same day.

 

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(vi)     Affiliate Financial Statements .    Verigy will use its commercially reasonable efforts to deliver to Agilent all Quarterly and Annual Financial Statements of each Verigy Affiliate which is itself required to file financial statements with the SEC or otherwise make such financial statements publicly available, with such financial statements to be provided in the same manner and detail and on the same time schedule as those financial statements of Verigy required to be delivered to Agilent pursuant to this Section 6.1.

 

(vii)     Conformance with Agilent Financial Presentation .    All information provided by any Verigy Group member to Agilent or filed with the SEC pursuant to Section 6.1(a)(iii) through (vi) inclusive will be consistent in terms of format and detail and otherwise with Agilent’s policies with respect to the application of GAAP and practices with respect to the provision of such financial information by such Verigy Group member to Agilent, with such changes therein as may be requested by Agilent from time to time consistent with changes in such accounting principles and practices.

 

(viii)     Verigy Reports Generally .    Each Verigy Group member that files information with the SEC will deliver to Agilent: (A) substantially final drafts, as soon as the same are prepared, of (x) all reports, notices and proxy and information statements to be sent or made available by such Verigy Group member to its respective security holders, (y) all regular, periodic and other reports to be filed or furnished under Sections 13, 14 and 15 of the Exchange Act (including Reports on Forms 10-K, 10-Q and 8-K and Annual Reports to Shareholders), and (z) all registration statements and prospectuses to be filed by such Verigy Group member with the SEC or any securities exchange pursuant to the listed company manual (or similar requirements) of such exchange (collectively, the documents identified in clauses (x), (y) and (z) are referred to in this Agreement as “ Verigy Public Documents ”), and (B) as soon as practicable, but in no event later than four (4) Business Days (other than with respect to 8-Ks) prior to the earliest of the dates the same are printed, sent or filed, current drafts of all such Verigy Public Documents and, with respect to 8-Ks, as soon as practicable, but in no event later than two (2) Business Days prior to the earliest of the dates the same are printed, sent or filed in the case of planned 8-Ks and as soon as practicable, but in no event less than two (2) hours in the case of unplanned 8-Ks; provided , however , that Verigy may continue to revise such Verigy Public Documents prior to the filing thereof in order to make corrections and changes which corrections and changes will be delivered by Verigy to Agilent as soon as practicable, and in any event (other than in connection with unplanned 8-Ks) within eight (8) hours thereafter; provided , further , that Agilent and Verigy financial Representatives will actively consult with each other regarding any changes which Verigy may consider making to any of its Verigy Public Documents and related disclosures prior to any anticipated filing with the SEC, to the extent that such changes would have an effect upon Agilent’s financial statements or related disclosures. In addition to the foregoing, no Verigy Public Document or any other document which refers, or contains information not previously publicly disclosed with respect, to the ownership of Verigy by Agilent, the separation of Verigy from Agilent or the Distribution will be filed with the SEC or otherwise made public by any Verigy Group member without the prior consent of Agilent, which will not be unreasonably withheld.

 

(ix)     Budgets and Financial Projections .    Verigy will, as promptly as practicable and within Agilent’s standard budgeting timeline, deliver to Agilent copies of all annual and other budgets and financial projections (consistent in terms of format and detail and otherwise required by Agilent) relating to Verigy on a consolidated basis and will provide Agilent an opportunity to meet with management of Verigy to discuss such budgets and projections.

 

(x)     Other Information .    With reasonable promptness, Verigy will deliver to Agilent such additional financial and other information and data with respect to the Verigy Group and their business, properties, financial positions, results of operations and prospects as from time to time may be reasonably requested by Agilent.

 

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(xi)     Press Releases and Similar Information .    Verigy and Agilent will consult with each other as to the timing of their annual and quarterly earnings releases and any interim financial guidance for a current or future period and will give each other the opportunity to review the information therein relating to the Verigy Group and to comment thereon. Agilent and Verigy will make reasonable efforts to issue their respective annual and quarterly earnings releases at approximately the same time on the same date. No later than twenty-four (24) hours prior to the time and date that a party intends to publish its regular annual or quarterly earnings release or any financial guidance for a current or future period, such party will deliver to the other party copies of substantially final drafts (or relevant portions thereof) of all press releases and other statements to be made available by any member of that party’s Group to employees of any member of that party’s Group or to the public to the extent (and only to the extent) such releases and statements concern matters that could be reasonably likely to have a material financial impact on the earnings, results of operations, financial condition or prospects of any Verigy Group member. In addition, prior to the issuance of any such press release or public statement that meets the criteria set forth in the preceding two sentences, the issuing party will consult with the other party regarding any changes (other than typographical or other similar minor changes) to such substantially final drafts. Immediately following the issuance thereof, the issuing party will deliver to the other party copies of final drafts of all press releases and other public statements.

 

(xii)     Cooperation on Agilent Filings .    Verigy will cooperate fully, and will use its best efforts to cause Verigy’s Auditors to cooperate fully, with Agilent to the extent requested by Agilent in the preparation of Agilent’s public earnings or other press releases, Quarterly Reports on Form 10-Q, Annual Reports to Shareholders, Annual Reports on Form 10-K, any Current Reports on Form 8-K and any other proxy, information and registration statements, reports, notices, prospectuses and any other filings made by Agilent with the SEC, any national securities exchange or otherwise made publicly available (collectively, the “ Agilent Public Filings ”). Verigy agrees to provide to Agilent all information that Agilent reasonably requests in connection with any Agilent Public Filings or that, in the reasonable judgment of Agilent’s legal department, is required to be disclosed or incorporated by reference therein under any law, rule or regulation. Verigy will use its best efforts to provide such information in a timely manner on the dates requested by Agilent (which may be earlier than the dates on which Verigy otherwise would be required hereunder to have such information available) to enable Agilent to prepare, print and release all Agilent Public Filings on such dates as Agilent will determine but in no event later than as required by applicable law. Verigy will use its commercially reasonable efforts to cause Verigy’s Auditors to consent to any reference to them as experts in any Agilent Public Filings required under any law, rule or regulation. If and to the extent requested by Agilent, Verigy will diligently and promptly review all drafts of such Agilent Public Filings and prepare in a diligent and timely fashion any portion of such Agilent Public Filing pertaining to Verigy. Prior to any printing or public release of any Agilent Public Filing, an appropriate executive officer of Verigy will, if requested by Agilent, certify that (1) the information relating to any Verigy Group member or the Business in such Agilent Public Filing does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading and (2) the financial information relating to any Verigy Group member or the Business in such Agilent Public Filing fairly presents, in all material respects, the financial condition, results of operations and cash flows of such Verigy Group member or the Business, as the case may be, for the periods presented in the release or the Agilent Public Filing. Unless required by law, rule or regulation, Verigy will not publicly release any financial or other information which conflicts with the information with respect to any Verigy Group member or the Business that is included in any Agilent Public Filing without Agilent’s prior written consent, which will not be unreasonably withheld. Prior to the release or filing thereof, Agilent will provide Verigy with a draft of any portion of an Agilent Public Filing containing information relating to the Verigy Group and will give Verigy an opportunity to review such information and comment thereon; provided that Agilent will determine in its sole and absolute discretion the final form and content of all Agilent Public Filings.

 

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(b)     Auditors and Audits; Annual Statements and Accounting .    Verigy agrees that, for so long as Agilent is required to consolidate Verigy’s results of operations and financial position or to account for its investment in Verigy under the equity method of accounting (in accordance with GAAP):

 

(i)     Audit Timing .    Verigy will use its commercially reasonable efforts to enable its independent certified public accountants (“ Verigy’s Auditors ”) to complete their audit such that they will date their opinion on the Annual Financial Statements on the same date that Agilent’s independent certified public accountants (“ Agilent’s Auditors ”) date their opinion on Agilent’s audited annual financial statements (the “ Agilent Annual Statements ”), and to enable Agilent to meet its timetable for the printing, filing and public dissemination of the Agilent Annual Statements, all in accordance with Section 6.1(a) hereof and as required by applicable law.

 

(ii)     Information Needed by Agilent .    Verigy will use its best efforts to provide to Agilent on a timely basis all information that Agilent reasonably requires to meet its schedule for the preparation, printing, filing, and public dissemination of the Agilent Annual Statements and Agilent’s quarterly financial statements in accordance with Section 6.1(a) hereof and as required by applicable law. Without limiting the generality of the foregoing, Verigy will use its best efforts to provide all required financial information with respect to the Verigy Group to Verigy’s Auditors in a sufficient and reasonable time and in sufficient detail to permit Verigy’s Auditors to take all steps and perform all reviews necessary to provide sufficient assistance to Agilent’s Auditors with respect to information to be included or contained in the Agilent Annual Statements and Agilent’s quarterly financial statements.

 

(iii)     Access to Verigy Auditors .    Verigy will authorize Verigy’s Auditors to make available to Agilent’s Auditors both the personnel who performed, or are performing, the annual audit of Verigy and work papers related to the annual audit of Verigy, in all cases within a reasonable time prior to Verigy’s Auditors’ opinion date, so that Agilent’s Auditors are able to perform the procedures they consider necessary to take responsibility for the work of Verigy’s Auditors as it relates to Agilent’s Auditors’ report on Agilent’s statements, all within sufficient time to enable Agilent to meet its timetable for the printing, filing and public dissemination of the Agilent Annual Statements.

 

(iv)     Access to Records .    At Agilent’s request, Verigy will provide Agilent’s internal auditors with access to the Verigy Group’s books and records so that Agilent may conduct reasonable audits relating to the financial statements provided by Verigy under this Agreement as well as to the internal accounting controls and operations of the Verigy Group.

 

(v)     Notice of Changes .    Subject to Section 6.1(a)(vii), Verigy will give Agilent as much prior notice as reasonably practicable of any proposed determination of, or any significant changes in, Verigy’s accounting estimates or accounting principles. Verigy will consult with Agilent and, if requested by Agilent, Verigy will consult with Agilent’s Auditors with respect thereto. Verigy will not make any such determination or changes without Agilent’s prior written consent, which will not be unreasonably withheld, if such a determination or a change would be sufficiently material to be required to be disclosed in Verigy’s or Agilent’s financial statements as filed with the SEC or otherwise publicly disclosed therein.

 

(vi)     Accounting Changes Requested by Agilent .    Notwithstanding clause (vi) above, Verigy will make any changes in its accounting estimates or accounting principles that are requested by Agilent in order for Verigy’s accounting practices and principles to be consistent with those of Agilent.

 

(vii)     Special Reports of Deficiencies or Violations .    Verigy will report in reasonable detail to Agilent the following events or circumstances promptly after any executive officer of Verigy or any member of the Verigy Board of Directors becomes aware of such matter: (A) all actual or potential significant deficiencies and material weaknesses in the design or operation of internal

 

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control over financial reporting which are reasonably likely to adversely affect Verigy’s ability to record, process, summarize and report financial information; (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Verigy’s internal control over financial reporting; (C) any illegal act within the meaning of Section 10A(b) and (f) of the Exchange Act; and (D) any report of a material violation of law that an attorney representing any Verigy Group member has formally made to any officers or directors of Verigy pursuant to the SEC’s attorney conduct rules (17 C.F.R. Part 205).

 

6.2.     Other Covenants.     In addition to the other covenants contained in this Agreement and the Transaction Documents, Verigy hereby covenants and agrees that, for so long as Agilent beneficially owns at least fifty percent (50%) of the total voting power of all classes of then outstanding share capital of Verigy entitled to vote generally in the election of directors (“ Verigy Voting Shares ”):

 

(a)   Verigy will not, without the prior written consent of Agilent (which Agilent may w