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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
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(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,
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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 makes a payment on Recipient’s behalf, Provider may
charge Recipient the same amount as the actual payment made by
Provider on Recipient’s behalf (a " Reimbursement
Charge ").
(c) Notwithstanding the foregoing, the manner in which some
services have been historic
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