EMPLOYEE MATTERS AGREEMENT

 

Table of Contents

 

			Page
ARTICLE I—DEFINITIONS AND RULES OF CONSTRUCTION			1
1.1		Definitions	1
1.2		Rules of Construction	1
ARTICLE II—GENERAL PRINCIPLES			2
2.1		Transfer of Employees to Verigy	2
2.2		Assumption of Liabilities by Verigy	2
2.3		Establishment of Verigy Plans	2
2.4		Verigy Under No Obligation to Maintain Plans	3
2.5		Terms of Participation by Verigy Transferred Employees in Verigy Plans	3
2.6		Non-United States Plans	3
2.7		Certain Non-United States National Employees	3
2.8		Non-United States Employees	4
2.9		Certain Non-United States Employee Relations and Benefits	4
ARTICLE III—RETIREMENT PLANS			4
3.1		Agilent Retirement lan	4
3.2		Agilent Deferred Profit Sharing Plan	5
3.3		Agilent 401(k) Plan	5
3.4		Governing Principles for the Non-United States Retirement Benefits	5
3.5		Non-United States Pension Plans	6
3.6		Verigy’s Non-United States Retirement Benefit Plans	7
3.7		Non-United States Retirement Benefits to be Provided by Verigy Include Past Service	8
3.8		Undertakings by Verigy	9
3.9		Claims in Relation to Non-United States Retirement Benefits	9
ARTICLE IV—NON-QUALIFIED AND OTHER PLANS			10
4.1		Excess Retirement Benefit Plan	10
4.2		Deferred Compensation Plan	10
4.3		2005 Deferred Compensation Plan	10
4.4		International Relocation Benefit Plan	11
4.5		Guaranteed Relocation Subsidies	11
4.6		Establishment of Verigy TFR Plan in Italy	11

 

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ARTICLE V—HEALTH AND WELFARE PLANS		11
5.1	Health, Dental and Vision Plans	11
5.2	Group Universal Life and Group Long Term Care Insurance Plans	12
5.3	Retiree Medical Plans	12
5.4	Flexible Spending Account Plans	12
5.5	Business Travel Accident Insurance Plan	12
5.6	COBRA	13
5.7	Leave of Absence Programs and FMLA	13
5.8	Workers’ Compensation Program	13
5.9	Non-United States Health and Welfare Plans	13
ARTICLE VI—EQUITY AND OTHER COMPENSATION		14
6.1	Agilent Options	14
6.2	Verigy Options—Initial Grants	14
6.3	Agilent Restricted Stock	15
6.4	Employee Stock Purchase Plan	15
6.5	Variable Pay Plan	15
6.6	Service Award Program	15
ARTICLE VII—FRINGE AND OTHER BENEFITS		15
7.1	Employee Assistance Program	15
7.2	Educational Assistance Program	15
7.3	Adoption Assistance Program	15
7.4	Credit Union	16
7.5	Other Fringe Benefits	16
ARTICLE VIII—ADMINISTRATIVE PROVISIONS		16
8.1	Beneficiary Designations	16
8.2	Requests for IRS Opinions	16
8.3	Fiduciary Matters	16
8.4	Consent of Third Parties	16
8.5	World Wide Web	17
ARTICLE IX—EMPLOYMENT-RELATED MATTERS		17
9.1	HR Data Support Systems	17
9.2	Confidentiality and Proprietary Information	17
9.3	FTO Policy	17

 

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9.4	Accrued Payroll, Bonuses, Variable Pay and Commissions	18
9.5	Payroll and Withholding	18
9.6	Personnel and Pay Records	18
9.7	Unemployment Insurance Program	19
9.8	Employment Litigation	19
ARTICLE X—MISCELLANEOUS		19
10.1	Effect if Payroll, Transfer, IPO and/or Distribution Does Not Occur	19
10.2	Relationship of Parties	20
10.3	Affiliates	20
10.4	Entire Agreement	20
10.5	Cooperation	20
10.6	Third Party Beneficiaries	20
10.7	Non-Solicitation	20
10.8	Breaches, Indemnification and Termination	21
10.9	Conflict	21

 

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EMPLOYEE MATTERS AGREEMENT

 

THIS EMPLOYEE MATTERS AGREEMENT (the “ Agreement ”), is dated as of June 1, 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 , the Parties have entered into a Master Separation and Distribution Agreement dated as of May 31, 2006 (the “ Master Separation Agreement ”) providing for, among other things, the transfer substantially all of the business and assets of the Business (as defined in the Master Separation Agreement) from Agilent and certain of its Affiliates to Verigy and certain of its Affiliates;

 

WHEREAS , certain individuals who work in or are assigned to the Business and are directly employed by Agilent or its Affiliates shall become employees of Verigy or its Affiliates pursuant to this Agreement or by operation of applicable Law;

 

WHEREAS , the Parties hereto wish to set forth their agreement as to certain matters regarding the treatment of, and the compensation and employee benefits provided to, those former employees of Agilent or its Affiliates who become employees of Verigy or its Affiliates as described above, pursuant to the terms of this Agreement or by operation of applicable Law; and

 

WHEREAS, the non-United States Affiliates of Agilent and Verigy, as applicable, have or will enter into separate Local Asset Transfer Agreements that may, among other items, specify the terms under which Verigy and Agilent agree to allocate between them all assets, Liabilities, and responsibilities under, relating to, or arising from Non-United States Plans and certain employment matters.

 

NOW, THEREFORE , in consideration of the foregoing and the mutual covenants and agreements set forth below and in the Master Separation Agreement and for 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 and not defined herein shall have the respective meanings assigned to them in the Master Separation Agreement, the General Assignment and Assumption Agreement entered into by the Parties, dated as of June 1, 2006, the preceding portions of 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

 

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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

 

GENERAL PRINCIPLES

 

2.1     Transfer of Employees to Verigy .

 

(a)   On the Separation Date, Agilent shall transfer to Verigy (or the appropriate Verigy Affiliate) any individual who is (i) either actively employed by, or on a leave of absence not otherwise described in Section 2.1(c) below from, the Business on the Separation Date, except for those employees specifically designated by Agilent (as agreed to by Verigy, which agreement shall not be unreasonably withheld) to transfer to Verigy after the Separation Date (“Hold-back Verigy Employees”) or (ii) any other individual designated by Agilent (and agreed to by Verigy, which agreement shall not be unreasonably withheld).

 

(b)   From time to time between the Separation Date and the Distribution Date, Agilent shall transfer to Verigy (or the appropriate Verigy Affiliate) (i) any individual who is actively employed by, or on a leave of absence not otherwise described in Section 2.1(c) below from the Agilent Group and who, at any time after the Separation Date and before the Distribution Date, is designated by Agilent (and agreed to by Verigy, which agreement shall not be unreasonably withheld) to move to the employ of the Verigy Group from the Agilent Group and (ii) any Hold-back Verigy Employees.

 

(c)   Agilent shall transfer to Verigy (or the appropriate Verigy Affiliate) any individual who was employed in the United States and on a paid or unpaid medical leave of absence, short-term disability, California Paid Leave of Absence, FMLA leave or military leave of absence from the Business on the Separation Date, if and when such individual returns to active employment.

 

2.2     Assumption of Liabilities by Verigy .

 

(a)   Except as otherwise expressly provided in this Agreement, or as otherwise mutually agreed upon by Agilent and Verigy from time to time, Verigy hereby assumes and/or retains all Liabilities relating to all individuals who, as of Distribution Date (or, if applicable, the date of transfer to Verigy pursuant to Section 2.1(c)), are Verigy Transferred Employees or Verigy Employees (but not Agilent Employees), to the extent such Liabilities relate to or result from such individuals’ employment by Verigy or Agilent and its Affiliates, or any of their respective predecessors, and, except as otherwise expressly provided in this Agreement or any of the Ancillary Agreements, Verigy hereby waives any rights to any assets related to such Liabilities. All of the Liabilities assumed and/or retained by Verigy under this Agreement, either under this Section 2.2 or under any other section of this Agreement, are referred to as the “ Assumed Transferred Employee Liabilities .” Except as set forth herein, such assumption and/or retention of the Assumed Transferred Employee Liabilities shall be effective as of the Separation Date.

 

(b)   All Liabilities that relate to individuals who are Verigy Transferred Employees or other Verigy Employees and that are specifically assumed and/or retained by Agilent and/or its Affiliates pursuant to the terms of this Agreement are referred to as the “ Excluded Transferred Employee Liabilities .” The Assumed Transferred Employee Liabilities shall exclude all Excluded Transferred Employee Liabilities.

 

2.3     Establishment of Verigy Plans .

 

Effective as of the Separation Date or such other date as Agilent and Verigy may mutually agree, Verigy shall adopt the Verigy Plans specified on Exhibit A hereto.

 

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2.4     Verigy Under No Obligation to Maintain Plans .

 

Except as specified otherwise in this Agreement, nothing in this Agreement shall preclude Verigy, at any time after the Separation Date, from amending, merging, modifying, terminating, eliminating, reducing or otherwise altering, in any respect, any Verigy Plan or any benefit under any Verigy Plan (to the extent permitted by Applicable Local Law); provided, however, that no change to a Verigy Plan prior to the Distribution Date may be announced or implemented without the prior written consent of Agilent.

 

2.5     Terms of Participation by Verigy Transferred Employees in Verigy Plans .

 

Verigy shall provide each Verigy Transferred Employee or other Verigy Employee who is transferred to Verigy in accordance with Section 2.1 hereof with full credit for all purposes under the Verigy Plans, for (a) service with Agilent and its Affiliates prior to the Agilent Participation Discontinuance Date, other than for purposes of determining benefit accruals under any defined benefit plan (except as otherwise provided in Sections 3.4-3.9 hereof), and (b) service credited under the corresponding Agilent Plans for employment other than with Agilent and its Affiliates; provided, however, that in no event shall Verigy be required to provide any service or any other benefit-affecting credits to any Verigy Transferred Employee or other Verigy Employee to the extent that the provision of such credits would result in any duplication of benefits.

 

2.6     Non-United States Plans .

 

Agilent and Verigy each authorize their non-United States Affiliates to enter into a separate Local Asset Transfer Agreement with the counterpart of the other party. Agilent and Verigy intend that the Local Asset Transfer Agreements will generally specify the terms under which Agilent and Verigy agree to allocate between them all assets, Liabilities and responsibilities under, relating to, or arising from Non-United States Plans and certain employment matters. To the extent, however, that any such Local Asset Transfer Agreement does not address a particular principle or plan, then the intent of the parties relating to comparable United States matters or issues as reflected in this Agreement shall govern (to the extent permitted by Applicable Local Law). Notwithstanding the foregoing, Agilent intends to retain the Liabilities under the Non-United States Plans for all Verigy Employees as of the Separation Date expressly retained under the terms of this Agreement, except to the extent such Liabilities are required under Applicable Local Law or a Local Asset Transfer Agreement to be transferred to and assumed by Verigy or a member of the Verigy Group.

 

2.7     Certain Non-United States National Employees .

 

The Parties recognize that certain of the Verigy Transferred Employees and possibly other Verigy Employees are in nonimmigrant visa status or have applications for lawful permanent residence pending with the relevant governmental authorities (the “ Affected Non-United States National Employees ”). The Parties further recognize that new or amended petitions with respect to such Affected Non-United States National Employees may be required in certain of these cases, unless Verigy (or Verigy’s Affiliates, as the case may be), are deemed the “successor-in-interest” to Agilent (as such term is used in pronouncements by the United States Citizenship and Immigration Service (“ USCIS ”)) with respect to such Affected Non-United States National Employees. Accordingly, Verigy hereby expressly agrees to assume, and Agilent hereby assigns, all of the immigration-related Liabilities of the Affected Non-United States National Employees (including, without limitation, any obligations, Liabilities and undertakings arising from or under attestations made in each certified and still effective Labor Condition Application (“ LCA ”) filed by Agilent with respect to any such Affected Non-United States National Employees). The Parties each agree to take such actions as may reasonably be requested at and following the Separation Date to document to the USCIS or such other governmental agency, as the case may be, as may be necessary, the “successor-in-interest” relationship with respect to any Affected Non-United States National Employees.

 

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2.8     Non-United States Employees.     In addition to Section 2.7 above as applicable to non-United States employees, this Section 2.8 applies only to Non-United States Transferred Employees.

 

(a)   This Section 2.8 and Sections 3.4 through 3.9 shall contain covenants and agreements of the Parties on and as of the Separation Date with respect to:

 

(i)    the Non-United States Transferred Employees; and

 

(ii)   Non-United States Plans listed in Exhibit B provided or covering such Non-United States Transferred Employees.

 

(b)   Agilent and Verigy and their respective Affiliates shall comply with all obligations either under the Transfer Regulations or other Applicable Local Laws to notify and/or consult with non-United States employees and / or employee representatives, unions, work 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. Agilent and Verigy 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.

 

2.9     Certain Non-United States Employee Relations and Benefits .    Notwithstanding anything herein to the contrary, the parties intend that there shall be continuity of employment with respect to certain Business Employees as follows:

 

(a)   Non-United States Transferred Employees who are Automatic Transferred Employees shall not be terminated upon the Separation Date and the rights, powers, duties, liabilities and obligations of Agilent or its relevant Affiliates to the employees in respect of the material terms of employment with the employees in force immediately before the Separation Date shall be transferred to Verigy or its relevant Affiliates in accordance with Applicable Local Laws.

 

(b)   Verigy or its Affiliates shall offer employment to each Non-United States Transferred Employee who is not an Automatic Transferred Employee effective on the Separation Date. Each such offer shall be at the same general location and on substantially the same terms and conditions of employment in the aggregate as those provided to such employees by Agilent or its Affiliates immediately prior to the Separation Date (unless otherwise required by Applicable Local Law, in which case such offer shall comply with Applicable Local Law) (the “Current Employment Terms”). Notwithstanding anything to the contrary, all offers pursuant to this Section 2.9(b) 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 Agilent and its Affiliates as a result of any requirements of Applicable Local Law.

 

(c)   Verigy shall assume and shall indemnify Agilent and its Affiliates against all Liabilities and obligations to provide any severance or similar payments to any Non-United States Transferred Employees who are entitled to severance or similar payments under Applicable Local Law due to Verigy’s noncompliance with this Section 2.9.

 

(d)   Verigy shall give credit to Non-United States Transferred Employees for all service with Agilent or its Affiliates and any of their legal predecessors, including but not limited to Hewlett-Packard Company or its Affiliates.

 

ARTICLE III

 

RETIREMENT PLANS

 

3.1     Agilent Retirement Plan .

 

(a)   Verigy Transferred Employees and other Verigy Employees shall cease to accrue benefits and to otherwise actively participate in the Agilent RP as of the applicable Agilent Participation

 

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Discontinuance Date. Verigy shall not assume any Liabilities for benefits provided under the terms of the Agilent RP.

 

(b)   As soon as practicable after the Distribution Date, Verigy Transferred Employees and other Verigy Employees who are eligible to receive their vested accrued benefit under the Agilent RP may elect to take such a distribution from such plan, pursuant to the terms thereof.

 

3.2     Agilent Deferred Profit Sharing Plan .

 

(a)   Verigy Transferred Employees and other Verigy Employees shall cease to accrue benefits and to otherwise actively participate in the Agilent Deferred Profit Sharing Plan as of the applicable Agilent Participation Discontinuance Date. Verigy shall not assume any Liabilities for benefits provided under the terms of the Agilent Deferred Profit Sharing Plan.

 

(b)   As soon as practicable after the Distribution Date, Verigy Transferred Employees and other Verigy Employees who are eligible to receive their vested accrued benefit under the Agilent Deferred Profit Sharing Plan may elect to take such a distribution from such plan, pursuant to the terms thereof.

 

3.3     Agilent 401(k) Plan .

 

(a)   Verigy Transferred Employees and other Verigy Employees shall cease active participation in the Agilent 401(k) Plan as of the applicable Agilent Participation Discontinuance Date. Effective as of the applicable Agilent Participation Discontinuance Date, the Verigy Transferred Employees and other Verigy Employees shall be eligible to commence participation in a qualified defined contribution plan sponsored by Verigy (the “ Verigy 401(k) Plan ”), subject to the terms thereof. Any service requirements contained in the Verigy 401(k) Plan with respect to eligibility to participate generally or eligibility to share in any employer contributions thereunder shall be substantially identical to such requirements in the Agilent 401(k) Plan. The Verigy 401(k) Plan shall provide for an employer matching contribution expressed as (A) a 100% match on each participant’s pre-tax contributions to the plan (not to exceed 3% of the participant’s eligible compensation) and (B) a 50% match on each participant’s pre-tax contributions to the plan (not to exceed an additional 2% of the participant’s eligible compensation) and a discretionary annual employer profit sharing contribution based on the profitability of Verigy with respect to that year.

 

(b)   As soon as is reasonably practicable following (i) the Separation Date (with respect to Verigy Transferred Employees and other Verigy Employees transferring on the Separation Date) and (ii) the date of the employee’s transfer to Verigy (with respect to Verigy Transferred Employees and other Verigy Employees transferring after the Separation Date and prior to the Distribution Date), Agilent and Verigy shall cause a trust-to-trust transfer of assets and Liabilities related to the Verigy Transferred Employees and other Verigy Employees (including any outstanding loans, and shares of Agilent and Verigy common stock for investment in Agilent and Verigy Common Stock Funds to be maintained under the Verigy 401(k) Plan) from the trust maintained under the Agilent 401(k) Plan to the trust maintained under the Verigy 401(k) Plan, in accordance with Sections 401(a)(12), 411(d)(6) and 414(1) of the Code.

 

(c)   On the dates of the transfers of assets and Liabilities provided in Section 3.3(b), Verigy shall assume all such Liabilities under, related to or resulting from the Agilent 401(k) Plan and described in Section 2.2 hereof.

 

3.4     Governing Principles for the Non-United States Retirement Benefits .

 

The following governing principles shall apply with respect to the treatment of the Non-United States Retirement Plans of Non-United States Transferred Employees under this Agreement:

 

(a)   Verigy and its Affiliates shall satisfy the applicable conditions provided in Section 3.6.

 

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(b)   All transfers of assets and/or cash, as applicable under this Section 3.4 shall be subject to Verigy or its Affiliates fulfilling its or their obligations in Section 3.7(a).

 

(c)   Liabilities in respect of any Non-United States Retirement Plan, including past service Liabilities, shall only be assumed by or transferred to Verigy or a Verigy Subsidiary to the extent required by Applicable Local Law. As of the date hereof, the only Non-United States Retirement Plans with respect to which Verigy or its Affiliates shall be required to assume or have transferred to it any past-service Liabilities are the Material Plans.

 

(d)   Transfers of assets and/or cash, as applicable, under this Section 3.4 shall only be made to the extent that (i) Applicable Local Law requires the transfer to or assumption by Verigy, one of its Affiliates or a Verigy Plan of the past service Liabilities of the relevant Non-United States Transferred Employees, and (ii) Verigy, its Affiliates or a Verigy Plan does in fact assume such past service Liabilities.

 

(e)   No transfer of assets and/or cash, as applicable, under this Section 3.4 shall be made in respect of contributory and non-contributory retirement plans required by Applicable Local Law if the funds are held by a non-associated third party, state-run entity or a national centralized fund.

 

(f)    Whenever possible under Applicable Local Law, Verigy, Agilent, and their respective Affiliates shall use their commercially reasonable best efforts to ensure that the transfer of assets from an Agilent Non-United States Retirement Plan can be made to a Verigy Plan.

 

(g)   In the case of any defined benefit or defined contribution Non-United States Retirement Plan in which Liabilities, including past service Liabilities, are not required to be transferred under Applicable Local Law, Agilent or its Subsidiary shall retain such Liabilities.

 

(h)   The mechanics of giving effect to the governing principles and other terms of Sections 3.4 through 3.9 shall be determined by and be consistent with the requirements of Applicable Local Law.

 

3.5     Non-United States Retirement Plans .

 

Except as otherwise provided in this Agreement, or the Master Separation Agreement, Agilent or the local Agilent entity shall retain and be solely responsible for all Liabilities under, relating to, or arising from the Non-United States Retirement Plans prior to the Separation Date with respect to each Verigy Non-United States Transferred Employees.

 

(a)     Defined Benefit Plans .    In the case of any defined benefit Non-United States Retirement Plan in which past service Liabilities are required to be transferred under Applicable Local Law, at Agilent’s option (and subject to Applicable Local Law), Agilent shall (i) transfer assets from such Plan to an appropriate Verigy Plan, (ii) make a cash payment to Verigy, or (iii) any combination of the foregoing. The total amount of such asset transfer or payment for any Non-United States Retirement Plan shall be equal to the value of the past service Liabilities transferred for the Verigy Employees on the Separation Date, and adjusted for any Non-United States Transferred Employees whose employment with Verigy or a Verigy Subsidiary begins after the Separation Date and before the Distribution Date, as calculated in accordance with the assumptions set out in Section 3.5(b), adjusted for the period from and including the Separation Date (or later date of employment for any Non-United States Transferred Employees whose employment with Verigy or a Verigy Subsidiary begins after the Separation Date) to the day immediately before the Payment Date by the discount rate provided in Exhibit C (the adjusted amount being the “ Transfer Amount ”).

 

Subject to Applicable Local Law and except for the Material Plan in France, no less than eighty percent (80%) of the Transfer Amount, as estimated by Agilent’s Actuary in good faith as of the Separation Date, will be transferred (whether through an asset transfer or payment) as soon as practicable on or after the Separation Date. The final transfer or payment of the remainder of the Transfer Amount shall be consummated and/or such payment be made no later than 30 days following

 

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the date as of which the determination of past service Liabilities under Section 3.5(b) is completed; except, however, that the entire asset transfer for the Material Plan in France shall be made as soon as practicable after November 1, 2006.

 

(i)    Notwithstanding the other provisions of Section 3.4 through 3.9, if within any defined benefit Non-United States Retirement Plan there is a Members’ Voluntary Fund, such fund, benefits payable from it, contributions payable to it, and any transfer payment made from it shall be disregarded for all other purposes of calculating the relevant Transfer Amount.

 

(ii)   Agilent shall use commercially reasonable efforts to provide that the part of the Members’ Voluntary Fund attributable to the relevant Non-United States Transferred Employees is transferred to the relevant Verigy Plan at the same time as the Transfer Amount (if any) in respect of those Non-United States Transferred Employees’ defined benefit Non-United States Retirement Benefits.

 

(b)     Actuarial Calculation .    With respect to the Material Plans and any other defined benefit pension Plans for which past service Liabilities must be assumed by Verigy or one of its Affiliates, the past service Liabilities for Non-United States Transferred Employees to be so transferred shall be calculated as of the Separation Date (or later date of employment for any Non-United States Transferred Employees whose employment with Verigy or a Verigy Subsidiary begins after the Separation Date) on an Accumulated Benefit Obligation (“ ABO ”) SFAS 87 basis, using Agilent’s May 31, 2006 interim assumptions, as set forth in Exhibit C hereto. If there is a required method for calculating Liabilities upon transfer under Applicable Local Law, such Applicable Local Law requirements will be applied.

 

Agilent’s Actuary shall make its initial determination of the Transfer Amount on or before the Separation Date. Not later than 30 days following the Distribution Date Agilent’s Actuary shall make its final determination of the Transfer Amount. Verigy’s Actuary shall then have a period of 30 days to review such determination for completeness and submit its findings in writing. The determination by Agilent’s Actuary shall be final and binding on the parties unless and to the extent the Verigy’s Actuary finds missing, incomplete or inaccurate data, in which case a revised calculation shall be performed by Agilent’s Actuary using the additional, complete and accurate data within 30 days of the date that Verigy’s Actuary submits its findings. Such revised calculation shall be final and binding on the parties.

 

(c)     Defined Contribution Plans .    As of the Separation Date, the Non-United States Verigy Employees will commence participation in an applicable local Verigy defined contribution Plan. In the case of any defined contribution Non-United States Retirement Benefit Plan, to the extent required by Applicable Local Law, Agilent shall transfer the assets credited to each Non-United States Transferred Employee who participates in such Plan to an appropriate Verigy defined contribution Plan, or, if such transfer of assets is not reasonably practicable, at Agilent’s option, Agilent may make a cash payment to Verigy in an amount equal to the value of the assets which would otherwise have been transferred, provided that, effective as of the Transfer Date, Verigy assumes Liability for the past service benefits of the relevant Non-United States Transferred Employees. In the case of a defined contribution Non-United States Retirement Plan funded through one or more assignable insurance contracts, the amount of any such transfer in respect of each Non-United States Transferred Employee shall be equal to the mathematical reserve of such arrangement attributable to such Non-United States Transferred Employee. In each case, the Transfer Amount shall be designated for such Non-United States Transferred Employee in the relevant Verigy Plan.

 

3.6     Verigy’s Non-United States Defined Benefit Retirement Plans .

 

In respect of each proposed transfer of assets and/or cash as described under Section 3.5(a) or (b) above, Verigy shall satisfy the conditions set forth below for a period of not less than one year following the Separation Date. Verigy shall provide written confirmation to Agilent on or before the

 

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Separation Date that it has complied with the conditions set out in this Section 3.6. These conditions are that:

 

(i)    Verigy or one of its Affiliates shall, on or before the Transfer Date, establish a new Verigy Plan (“ New Plan ”) to receive the proposed transfer;

 

(ii)   Verigy or one of its Affiliates shall provide that an amount equal to the relevant Transfer Amount (together with income on that amount accruing from the Transfer Date, less any payment made out of the New Plan in respect of benefits payable to and in respect of the Non-United States Transferred Employees attributable to the transfer credits granted to the Non-United States Transferred Employees in the New Plan, and less an amount which the trustees or administrators of the New Plan consider to be appropriate to meet the expenses attributable to the New Plan) shall be applied solely for providing or securing pensions and other benefits for the Non-United States Transferred Employees and their beneficiaries; provided, however, that the relevant Transfer Amount shall not be applied to pay any pension or other benefits to Non-United States Transferred Employees that accrue after the Separation Date until all the Non-United States Transferred Employees and their beneficiaries have been paid their benefits payable attributable to the transfer credits granted under the New Plan; and

 

(iii)  Verigy or one of its Affiliates shall, on or before the Transfer Date, establish a new contractual trust related to the Material Plans covering Non-United States Transferred Employees and their beneficiaries in Germany. The assets held by such contractual trust shall qualify as “plan assets” under GAAP or IFRS.

 

3.7     Non-United States Retirement Benefits to be Provided by Verigy Include Past Service.

 

(a)     Benefits for Past Service .    If Verigy or one of its Affiliates shall provide Non-United States Retirement Benefits for any Non-United States Transferred Employee in respect of service prior to the Separation Date, such Non-United States Retirement Benefits shall be equivalent in value (on the actuarial basis used for calculating the relevant transfer provided in Exhibit C) to that Non-United States Transferred Employee’s Non-United States Retirement Benefits immediately before the Separation Date. If Agilent so requests in writing, Verigy shall instruct Verigy’s Actuary to issue a certificate to Agilent to this effect.

 

(b)     Transfers of Assets in Respect of Past Service .

 

(i)    Agilent and Verigy shall cooperate to ensure that, subject to Applicable Local Law, Non-United States Retirement Benefits and related assets in respect of service prior to the Separation Date transfer to Verigy or one of its Affiliates in accordance with the applicable governing principles set forth in Sections 3.4 through 3.9 hereof. Where any transfer of Non-United States Retirement Benefits or assets in respect of those rights requires the approval or consent of any regulatory body or third party (including any Non-United States Transferred Employee), Agilent and Verigy shall each use all commercially reasonable efforts to cooperate to obtain such approval and consent.

 

(ii)   Subject to Applicable Local Law, where any transfer pursuant to Sections 3.4 through 3.9 is to be made from Agilent’s defined contribution Non-United States Retirement Plan to a Verigy defined contribution Plan, Verigy or one of its Affiliates shall provide that that part of the Transfer Amount which is attributable to the past service benefits of each Non-United States Transferred Employee shall be allocated to an individual account set up for such Non-United States Transferred Employee in the Verigy defined contribution Plan.

 

(iii)  Subject to Applicable Local Law, Agilent and Verigy shall each use commercially reasonable efforts to provide that each transfer takes place promptly after the valuation of the liabilities (in accordance with the assumptions set out in Section 3.5(b)) has been completed in

 

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accordance with Sections 3.4 through 3.9 hereof. The Transfer Date and Payment Date shall be agreed to by Agilent and Verigy (or, in default of agreement, determined under Section 3.5(b)) no later than 30 days following the final determination of past service liabilities under Section 3.5(b).

 

(iv)  Agilent and Verigy and their Affiliates shall each use commercially reasonable efforts to provide that any information reasonably required by Agilent’s Actuary or Verigy’s Actuary for the purpose of undertaking and agreeing to each Transfer Amount shall, to the extent this is within the power or control of Agilent, Verigy and their Affiliates, respectively, be supplied to such actuary and that any such information so supplied shall be true, complete and accurate in all material respects; and shall each use commercially reasonable efforts to provide that its actuary acts promptly and such calculations are completed promptly.

 

3.8     Undertakings by Verigy and Agilent .

 

Neither Verigy, Agilent nor any of their respective Affiliates shall take any actions, whether directly or indirectly, on or after the date of this Agreement that could result in an increase of the amount of Liabilities to be assumed or transferred or assets to be transferred from or in respect of any Non-United States Retirement Plan pursuant to this Agreement, except as may be required under Applicable Local Law.

 

3.9     Claims in Relation to Non-United States Retirement Benefits .

 

(a)   For the purposes of this paragraph:

 

(i)    ” Relevant Claim ” means a claim by a Covered Person relating to Non-United States Retirement Benefits attributable to any period of employment prior to the Separation Date, and which have transferred to Verigy or one of its Affiliates, but not including any claims based on the grounds that a Covered Person was denied access to a Non-United States Retirement Plan prior to the Separation Date, claims arising out of any default of Agilent or one of its Affiliates prior to the Separation Date, and claims relating to any Non-United States Retirement Benefits which do not transfer to Verigy.

 

(ii)   ” Covered Person ” means any Non-United States Transferred Employee (or any person whose benefits arise on the death of such person) whose Non-United States Retirement Benefits in respect of any period of service prior to Separation Date transfer from a Non-United States Retirement Plan to a Verigy Plan.

 

(iii)  ” Relevant Claim Liability ” means any Liability, loss, damage, cost, claim or reasonable expense arising out of or in connection with any Relevant Claim.

 

(b)   Verigy shall pay Agilent immediately upon demand an amount equal to any Relevant Claim Liability incurred or sustained by Agilent or a Non-United States Retirement Plan arising out of or in connection with any Relevant Claim (the “Liability Amount”).

 

(c)   To the extent that any Relevant Claim Liability relates to the value of any Non-United States Retirement Benefits, the amount of that Relevant Claim Liability shall be calculated using the actuarial method and assumptions provided in Exhibit C.

 

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(d)   Any Relevant Claim Liability determined in a currency other than United States dollars shall be converted into United States dollars at the payment date by Verigy in accordance with an appropriate exchange rate agreed to by Agilent and Verigy.

 

(e)   The time value of the Liability Amount shall be maintained by increasing it by an amount calculated as if there were interest at the Interest Rate on the Liability Amount under Section 3.9(b) for the period from the date as at which the amount of the Liability Amount has been quantified to the date payment is made to Agilent.

 

ARTICLE IV

 

NON-QUALIFIED AND OTHER PLANS

 

4.1     Excess Retirement Benefit Plan.

 

Agilent shall retain and be solely responsible for all Liabilities under, or relating to, or arising from, the Agilent Excess Retirement Benefit Plan with respect to each Verigy Transferred Employee and other Verigy Employee. As soon as practicable after the Distribution Date, Verigy Transferred Employees and other Verigy Employees who are eligible to receive their vested accrued benefit under the Agilent Excess Retirement Benefit Plan may elect to take such a distribution from such plan, pursuant to the terms thereof and consistent with the requirements of Section 409A of the Code.

 

4.2     Deferred Compensation Plan.

 

(a)     Establishment of Verigy Deferred Compensation Plan.     Effective as of the Separation Date, Verigy shall establish the Verigy Deferred Compensation Plan, the Material Features of which shall be substantially identical to the Agilent Deferred Compensation Plan.

 

(b)     Allocation and Assumption of Liabilities.     Agilent shall determine the amount of Liabilities under the Agilent Deferred Compensation Plan as of the Agilent Participation Discontinuance Date attributable to Verigy Transferred Employees and other Verigy Employees. Effective as of the Agilent Participation Discontinuance Date, Verigy shall assume all Liabilities under, related to or resulting from the Agilent Deferred Compensation Plan and described in Section 2.2 hereof, with respect to each Verigy Transferred Employee and other Verigy Employee who consents to the assumption of such Liabilities. If a Verigy Transferred Employee or other Verigy Employee does not consent to the assumption of such Liabilities, Agilent shall retain and solely be responsible for all such Liabilities under, or relating to, or arising from, the Agilent Deferred Compensation Plan with respect to such Verigy Transferred Employee or other Verigy Employee. Verigy agrees to notify Agilent of any Verigy Transferred Employee’s or other Verigy Employee’s termination of employment with Verigy for distribution purposes.

 

4.3     2005 Deferred Compensation Plan.

 

(a)     Establishment of Verigy 2006 Deferred Compensation Plan.     Effective as of the Separation Date, Verigy shall establish the Verigy 2006 Deferred Compensation Plan, the Material Features of which shall be substantially identical to the Agilent 2005 Deferred Compensation Plan.

 

(b)     Allocation and Assumption of Liabilities.     Agilent shall determine the amount of Liabilities under the Agilent 2005 Deferred Compensation Plan as of the Agilent Participation Discontinuance Date attributable to Verigy Transferred Employees and other Verigy Employees. Effective as of the Agilent Participation Discontinuance Date, Verigy shall assume all Liabilities under, related to or resulting from the Agilent 2005 Deferred Compensation Plan and described in Section 2.2 hereof, with respect to each Verigy Transferred Employee and other Verigy Employee who consents to the assumption of such Liabilities. If a Verigy Transferred Employee or other Verigy Employee does not consent to the assumption of such Liabilities, Agilent shall retain and solely be responsible for all such

 

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