Exhibit 10.9
TRANSITION SERVICES
AGREEMENT
dated as of
April 27, 2006
between
TEXAS INSTRUMENTS
INCORPORATED
and
SENSATA TECHNOLOGIES
B.V.
TRANSITION SERVICES
AGREEMENT
TRANSITION SERVICES AGREEMENT
(inclusive of all annexes, exhibits and schedules, this “
Agreement ”) dated as of April 27, 2006 between
Texas Instruments Incorporated, a Delaware corporation (“
Seller ”), and Sensata Technologies B.V., a Dutch
private limited liability company (“ Buyer
”).
W I T N E S S E T
H:
WHEREAS, pursuant to that certain
Asset and Stock Purchase Agreement dated as of January 8, 2006
between Buyer (as assignee of S&C Purchase Corp. effective as
of February 8, 2006) and Seller (as amended, the “
Purchase Agreement ”), Seller and its Subsidiaries
have agreed to sell to Buyer the Shares and the Purchased Assets,
and Buyer has agreed to purchase the Shares and the Purchased
Assets and to assume the Assumed Liabilities from Seller and its
Subsidiaries as provided therein;
WHEREAS, given the historical
interconnections between the Purchased Subsidiaries and the
Purchased Assets, on the one hand, and Seller and its Subsidiaries,
on the other, Buyer and Seller desire to provide certain support,
services, goods and facilities to each other in order to promote
the smooth and efficient functional separation of the Purchased
Subsidiaries and the Purchased Assets from the Retained Businesses
and the efficient operation of Buyer’s and Seller’s
respective businesses during such separation;
WHEREAS, in connection therewith,
Buyer and Seller desire to enter into this Agreement pursuant to
which Buyer and Seller will provide certain transition services to
each other as set forth herein or as the parties may otherwise
agree in writing; and
NOW, THEREFORE, the parties agree as
follows:
ARTICLE 1
N ATURE OF THE A GREEMENT
Section 1.01. Intent .
Each of the Business and one or more of Seller’s Retained
Businesses, particularly the RFID Business, will be affected by the
consummation of the transactions contemplated by the Purchase
Agreement and, following consummation of the transactions, may not
have access to certain support and services as before such
consummation. It is the intent of the parties to this Agreement to
provide for the smooth and efficient functional separation of the
Purchased Subsidiaries, Purchased Assets and Assumed Liabilities
from the Retained Businesses and for the efficient operation of the
Business and the Retained Businesses during such separation. To
that end, each of Buyer and Seller will share various facilities,
as described on and subject to the terms and conditions set forth
on Annex A (Real Property Owned and Leased), and provide
various support, services and goods to each
other in the areas of Facilities Related Services, Finance and
Accounting, Human Resources, Information Technology Systems
Services, Warehousing and Logistics, Records Retention and Security
Consulting, Investigative and Access Control Services, as described
on and subject to the terms and conditions set forth on
Annex B – H, respectively, and Seller and Buyer will
provide the services of certain employees as provided on Annex I
(Leased Employees) (collectively, the “ Transition
Services ,” and each a “ Transition Service
”).
Where the express terms set forth on
Annexes, or in any supplemental agreement that the parties may
enter into with respect to such services (each, including the IT
Services Agreement between Buyer and Seller dated as of the date
hereof, a “ Supplemental Agreement ”), and those
otherwise expressly set forth in this Agreement, are in direct
conflict the terms set forth on Annexes or the Supplemental
Agreement will control. In the event of any conflict between any
preprinted terms on a purchase order relating to the Transition
Services, and any goods sold in connection therewith, and the terms
of this Agreement, the Annexes or any Supplemental Agreement, the
terms of this Agreement, the Annexes or the Supplemental Agreement
will control.
ARTICLE 2
T RANSITION S ERVICES
Section 2.01 . Transition
Services. Subject to the terms and conditions set forth herein
or in a Supplemental Agreement, (a) beginning on the date
hereof and during the period set forth on the respective Annex (as
such period may be extended in accordance with the respective
Annex) or until earlier terminated in accordance with this
Agreement (with respect to each Transition Service, the “
Transition Period ”), Buyer and Seller each will
provide, or cause one or more of its respective Affiliates to
provide (in each case, the party providing the services or leasing
or subleasing the personal or real property (as lessor), the
“ Provider ”), to the other party or its
Affiliates (in each case, the party receiving the services or
leasing or subleasing the personal or real property (as lessee),
the “ Recipient ”), as requested, the Transition
Services (with respect to the Business in the case of Buyer and
with respect to the Retained Businesses in the case of Seller) on
the terms and conditions set forth herein (including the Annexes
hereto and in any Supplemental Agreements), which will be of like
kind and amount and provided in the manner and at a relative level
of service, for the same purposes and with the same degree of care,
skill and attention, including, without limitation, with respect to
the quality and timeliness of such services, in all material
respects, as provided by Seller or one or more of its Affiliates to
the Business or by the Business to Seller or its Affiliates
immediately prior to the date hereof and as such services have
historically been so provided; provided that, notwithstanding
anything herein to the contrary, the Transition Services to be
provided by Buyer shall be limited to those which the Business
and/or the
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Purchased Subsidiaries historically have
provided to Seller or its Affiliates, even if a service not so
historically provided is described in the Annexes hereto or any
Supplemental Agreement, and (b) Buyer and Seller each agree to
purchase and pay for such Transition Services as provided herein.
For the avoidance of doubt, to the extent employees historically
employed by Seller’s Retained Businesses performed services
for the Retained Business but become employed by the Business in
connection with the separation of the Business from the Retained
Businesses, such persons may be called upon to perform such
services previously performed for the Retained Business as a
Transition Service by the Business to Seller upon such persons
becoming part of the Business, notwithstanding that such services
have not historically been provided by the Business to
Seller’s Retained Businesses because such employees
historically were part of the Retained Businesses.
Section 2.02 . Title to
Equipment, Management and Control. (a) Unless otherwise
specified on an Annex or in any Supplemental Agreement, all
procedures, methods, systems, strategies, tools, equipment,
facilities and other resources used by Provider and any of its
Affiliates in connection with the provision of the Transition
Services (collectively, the “ Equipment ”) will
remain the property of Provider and its Affiliates and will at all
times be under the sole direction and control of Provider and its
Affiliates. Notwithstanding the foregoing, nothing in this
Agreement will modify the allocation of Purchased Assets and
Assumed Liabilities to Buyer and of Excluded Assets and Excluded
Liabilities to Seller under the Purchase Agreement.
(b) Unless otherwise specified on an
Annex or in a Supplemental Agreement (including, without
limitation, Annex I), management of, and control over, the
provision of the Transition Services (including the determination
or designation at any time of the Equipment, employees, vendors,
suppliers, contractors, other representatives and other resources
of Provider and its Affiliates to be used in connection with the
provision of the Transition Services) will reside solely with
Provider. Without limiting the generality of the foregoing, all
labor matters relating to any employees of Provider and its
Affiliates will be within the exclusive direction, control and
supervision of Provider and its Affiliates and Provider and its
Affiliates shall have the sole right to exercise all authority with
the respect to the employment (including termination of
employment), assignment and compensation of all such employees, and
Recipient will take no action affecting such matters. No employees,
representatives or independent contractor of Provider and its
Affiliates shall be deemed employees, representatives or
independent contractors of Recipient or its Affiliates.
Notwithstanding the foregoing, Provider will respond to and
address, in accordance with historical practices, reasonable
directions and concerns regarding any of the foregoing raised by
Recipient.
Section 2.03 .
Subcontractors. Unless otherwise specified in the applicable
Supplemental Agreement, Provider may, directly or through one or
more Affiliates, hire or engage one or more subcontractors or other
third parties
3
(each, a “ Subcontractor ”)
to perform all or any of its obligations under this Agreement (it
being understood that this Section 2.03 does not permit
Provider to substitute other facilities for, or otherwise change,
the particular facilities set forth on Annex (A)). If Provider
delegates any of its responsibilities under this Agreement to any
of its Affiliates or uses Subcontractors in the performance of its
obligations under this Agreement, then Provider will remain
ultimately and fully responsible to the same extent as if Provider
was performing such obligations itself, including ensuring that the
obligations with respect to the nature, quality and standards of
care set forth herein or in the applicable Supplemental Agreement
are satisfied with respect to any services provided by any
Affiliate or Subcontractor. Further, if Provider delegates any
Transition Service provided hereunder to a Subcontractor, Provider
will be responsible for any additional costs in excess of the costs
charged to Recipient prior to such delegation to a Subcontractor
for such Transition Service; provided, however, that if such
delegation to a Subcontractor is part of a general delegation of
such services encompassing both the Transition Service and the
performance of similar services for the applicable Retained
Businesses or the Business, as the case may be, then any such
additional costs for such Transition Service and such service for
the performance of similar services for the Retained Businesses or
the Business, as the case may be, will be borne by Provider and
Recipient pro rata based on their respective use of such
services.
Section 2.04 . Additional
and New Services. For four (4) months following the
Closing Date, Buyer and Seller may request that services not
described in this Agreement (including the Annexes) or any
Supplemental Agreement be added as Transition Services
hereunder.
(a) With respect to any such service
(and only such services) requested by Buyer or Seller that
(i) is reasonably necessary for Buyer to conduct the Business
with the Purchased Subsidiaries and Purchased Assets or for Seller
to conduct the Retained Businesses, and (ii) was provided by
Seller or its Affiliates to the Business or the Purchased
Subsidiaries, or by the Business or the Purchased Subsidiaries to
Seller’s Retained Businesses, as previously conducted at any
time during the twelve (12) months prior to Closing, such
service will be added as additional Transition Service hereunder
(each such service, an “ Additional Service ”).
Seller and Buyer agree to negotiate in good faith any terms and
conditions regarding the provision of any such Additional Service,
it being understood and agreed that (x) the cost for any such
Additional Service will be determined on a basis consistent with
the determination of pricing set forth in Section 3.01 below,
provided that any such Additional Service which, as of the Closing
Date, was included in any Transition Services for which an
Allocated Cost is already charged hereunder will be provided at no
additional cost (unless Seller can reasonably demonstrate such
Allocated Cost was reduced to reflect that such additional
Transition Service was not contemplated to be provided hereunder),
and (y) the term of providing such Additional Service will be
consistent with the period for which similar Transition Services
are provided as
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set forth on the Annexes hereto, but in no case
will the initial period for any such service other than an
information technology-related service exceed six (6) months,
which period may be extended for a period of up to an additional
six (6) months for such services as Recipient in good faith
determines continue to be needed after the expiration of the
initial period, and in no case will the initial period for any such
service which is an information technology-related service exceed
twelve (12) months, which period may be extended for a period
of up to an additional twelve (12) months for such information
technology-related services as Recipient in good faith determines
continue to be needed after the expiration of the initial
period.
(b) With respect to any such future
service requested by Buyer or Seller that (i) is reasonably
necessary for Buyer to conduct the Business with the Purchased
Subsidiaries and Purchased Assets or for Seller to conduct the
Retained Businesses, and (ii) any of Seller or its Affiliates
(with respect to Buyer requests) or Buyer or its Affiliates (with
respect to Seller requests, but only with the Purchased Assets and
Purchased Subsidiaries) is reasonably capable of providing, Seller
and Buyer will negotiate in good faith the addition of such service
(each, a “ New Service ”) to this Agreement (it
being understood neither party will be under any obligation to
provide such New Service), including the terms and conditions of
provision, cost and term of such New Service. The parties shall
work together in good faith to create, approve and follow mutually
agreeable (in form and substance) project plans with respect to any
such New Services to be provided hereunder.
(c) Notwithstanding any of the
foregoing, in no event will either party be required to provide any
Additional Services or New Services (i) that would be unlawful
for such party to provide or (ii) such as tax return
preparation, tax or other legal services (including SEC reporting),
corporate development and similar services that would require the
exercise of general management for the other party.
(d) All such Additional Services and
agreed upon New Services will be included as Transition Services
provided hereunder and Buyer and Seller will document the inclusion
of such Additional Services or agreed upon New Services by an
amendment, letter agreement, or memorandum signed by duly
authorized representatives of both parties.
Section 2.05 Records.
For so long as Provider is providing any Transition Service
hereunder and for one year thereafter, Provider will keep and
maintain books and records of the Transition Services provided and
reasonable supporting documentation of all material costs incurred
in connection with providing such Transition Services, which books
and records shall be at least as comprehensive and detailed as
those Provider keeps for itself and, (i) in the case of Third
Party Pass-Thru Charges and Reimbursement Charges, sufficient to
enable Recipient to verify costs of the Transition Service and to
substantiate Provider’s invoicing of charges for Transition
Services, (ii) in the case of Direct Internal
Charges,
5
sufficient to enable Recipient to substantiate
Provider’s invoicing of charges (including time records for
services provided, where applicable) for Transition Services, and
(iii) in the case of Allocated Costs, sufficient to enable
Recipient to verify that any methodologies utilized in calculating
and allocating such Allocated Costs are consistent in all material
respects with Seller’s historical practices and to
substantiate any increased costs resulting in increased Allocated
Costs. Provider will make such books and records available to any
officer of, or other authorized person designated by, Recipient for
inspection at the principal offices of Provider, at reasonable
times and on reasonable advance written request therefor, subject
to the confidentiality provisions set forth herein. Recipient shall
bear all out-of-pocket costs and expenses in connection with such
access.
Section 2.06.
Acquisitions . The consummation of an acquisition, directly
or indirectly, after Closing, whether by stock purchase, merger,
asset acquisition or otherwise, of another existing company,
business or product line (an “Acquired Business”) by
Buyer or its Affiliates or by Seller or its Affiliates, as the case
may be, will not modify, limit, extend or expand any obligation
hereunder of Seller or Buyer, as the case may be, to provide
Transition Services during the Transition Period in respect of the
Business or the Retained Businesses, as applicable. Without
limiting the generality of the foregoing in no event shall Buyer or
Seller or their respective Affiliates be obligated to support or
otherwise provide any (i) additional services,
(ii) Transition Services, incremental or otherwise,
(iii) Additional Services or (iv) New Services, in each
case, in respect of any Acquired Business. Upon the request of the
other, Buyer and Seller agree to consider, in good faith, providing
to an Acquired Business any Transition Service that is being
provided as of the date of such request with respect to the
Business or the Retained Businesses, as applicable. In the event
that Buyer and Seller agree upon the terms and conditions on which
to provide any Transition Service to an Acquired Business, any
incremental costs associated therewith will be borne by the
Recipient of such Transition Service. For the avoidance of doubt,
the limitations set forth in this Section 2.06, shall not
apply to (and Provider shall provide) Transition Services provided
to the Business or the Retained Businesses in respect of organic
growth and development consistent with the business plan of the
Business or the Retained Businesses, as applicable, as such
business plan existed as of the Closing.
ARTICLE 3
C OMPENSATION
Section 3.01. Cost of
Transition Services.
(a) Seller’s Current
Charge-Out Practices. Seller’s historic charge-out
practices for services such as the Transition Services include
(i) allocations of Seller’s fully-loaded costs,
determined and calculated on a basis consistent with past
practices, bearing the same relation to actual costs as
historically has been the
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case, and applicable across Seller’s
Retained Businesses and the Business, for various services to the
Business or the Retained Businesses, as applicable, at various
sites, including for international host entity services,
centralized information technology systems services and various US
human resources payroll and benefit services, estimates of which
are set forth on Schedule 1-A and 1-B (it being understood that the
estimates on Schedule 1-B are in the aggregate consistent with past
practices and bear the same relation to actual costs as
historically has been the case, and applicable across
Seller’s Retained Businesses and the Business, but the line
items set forth on Schedule 1-B have not been historically
allocated at that level of detail), respectively (the “
Allocated Costs ”); (ii) various direct
activity-based internal charges, charged on an as-requested basis
directly to the business unit (e.g., for training and
organizational effectiveness programs (“ T&OE
”)) (the “ Direct Internal Charges ”); and
(iii) third party pass through charges for services provided
by third parties and charged directly to a business unit and not
otherwise included in Allocated Costs (e.g . , metered
utilities at some locations) (the “ Third Party Pass-Thru
Charges ”) (collectively, “ Seller’s
Current Charge-Out Practices ”). In addition to
Seller’s Current Charge-Out Practices , some third
party services contemplated to be provided hereunder may have
historically been, and may currently be, charged by such third
party directly to the Business, a Purchased Subsidiary or
Seller’s Retained Businesses, as the case may be. For the
avoidance of doubt, any such direct-billed third party services
will be considered a business expense of the party receiving such
service and not a Transition Service provided hereunder.
(b) Cost of Transition
Services. With respect to any Transition Services for which
Seller’s Current Charge-Out Practice has been to charge
Allocated Costs, the cost of such Transition Services hereunder
(both those provided by Seller to the Business and the Purchased
Subsidiaries and those provided by the Business and the Purchased
Subsidiaries to Seller’s Retained Businesses) will be
Seller’s or Buyer’s Allocated Costs set forth on
Schedule 1-A and 1-B (subject to adjustment in accordance with this
Agreement) plus the applicable Adder (if any). The Allocated
Costs will be adjusted annually, in accordance with Seller’s
past practices, with respect to the Transition Services to be
provided in each immediately following calendar year during the
applicable Transition Periods ( “Allocated Cost
Adjustments” ); provided, that (i) such Allocated
Cost Adjustments shall reflect actual changes to Provider’s
fully-loaded costs, determined and calculated on a basis consistent
with historical practices, bearing the same relation to actual
costs as historically has been the case, and applicable across
Seller’s Retained Businesses or Buyer’s Business, as
applicable, (ii) Recipient will not be charged any such
Allocated Cost Adjustment resulting from enhanced capabilities or
services that are waived by Recipient, and (iii) in no event
will the aggregate Allocated Cost Adjustments, without giving
effect to any increased usage of Transition Services by Recipient
resulting in negotiated price increases as described in
Section 2.04, exceed fifteen percent (15%) in the
aggregate in any one calendar year. With respect to Transition
Services (i) requested by Recipient for which Seller’s
Current Charge-Out Practice has been
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to charge Direct Internal Charges and for which
such Direct Internal Charges are specified in the Annexes or
Schedules hereto, (ii) which are US corporate level services
that have not historically been charged to Seller’s business
units (the “ Previously Not Charged Costs ”) and
for which Direct Internal Charges are specified on the Annexes or
Schedules hereto or (iii) constituting consultation and
assistance Transition Services as specified in the Annexes and
Schedules hereto, the cost of such requested Transition Services
hereunder (both those provided by Seller to the Business and the
Purchased Subsidiaries and those provided by the Business and the
Purchased Subsidiaries to Seller’s Retained Businesses) will
be the same amounts Provider charges its divisions and business
segments or (if specified) the Direct Internal Charges set forth on
the applicable Schedule or Annex (as adjusted in accordance with
the methods and subject to the qualifications and limitations set
forth in this Section 3.01). With respect to Transition
Services for which Seller’s Current Charge-Out Practice has
been to charge Third Party Pass-Thru Charges and for which the
Annexes or Schedules hereto specify certain Third Party Pass-Thru
Charges, Provider may pass through to Recipient the same actual,
third party out of pocket expenses it passes through to its
divisions and business segments or (if specified) the amounts set
forth on such Schedule or Annex (as adjusted in accordance with the
methods and subject to the qualifications and limitations set forth
in this Section 3.01). With respect to Transition Services for
which Provider ma
