<PAGE>
As filed with the Securities and Exchange Commission on November 10, 1999
Registration No. 333-85249
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
AGILENT TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
---------------
Delaware 3825 77-0518772
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
3000 Hanover Street
Palo Alto, California 94304
(650) 857-1501
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
Edward W. Barnholt
President and Chief Executive Officer
Agilent Technologies, Inc.
3000 Hanover Street
Palo Alto, California 94304
(650) 857-1501
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
Larry W. Sonsini, Esq. D. Craig Nordlund, Esq. William H. Hinman, Jr.,
Donna M. Petkanics, Esq. Marie Oh Huber, Esq. Esq.
Wilson Sonsini Goodrich Agilent Technologies, Shearman & Sterling
& Rosati Inc. 1550 El Camino Real
Professional Corporation 3000 Hanover Street Menlo Park, California
650 Page Mill Road Palo Alto, California 94025
Palo Alto, California 94304 (650) 330-2200
94304 (650) 857-1501
(650) 493-9300 ---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effectiveness until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
EXPLANATORY NOTE
This registration statement contains two separate prospectuses. The first
prospectus relates to a public offering in the United States and Canada of an
aggregate of 45,600,000 shares of common stock. The second prospectus relates
to a concurrent offering outside the United States and Canada of an aggregate
of 11,400,000 shares of common stock. The two prospectuses for inside and
outside the United States and Canada will be identical with the exception of
an alternate front cover page for the offering outside the United States and
Canada. The alternate page appears in this registration statement immediately
following the complete prospectus for the offering in the United States and
Canada.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued November 10, 1999
57,000,000 Shares
[LOGO OF AGILENT TECHNOLOGIES]
COMMON STOCK
----------
Agilent Technologies, Inc. is offering shares of its common stock. This is our
initial public offering and no public market currently exists for our shares.
We anticipate that the initial public offering price will be between $19 and
$22 per share.
----------
After the offering, Hewlett-Packard will own approximately 87.0% of our common
stock, assuming no exercise of the underwriters' over-allotment option.
Hewlett-Packard has announced that it plans to complete its divestiture of
Agilent Technologies by the middle of calendar year 2000 by distributing all of
the shares of our common stock owned by Hewlett-Packard to holders of Hewlett-
Packard's common stock. See "Arrangements Between Agilent Technologies and
Hewlett-Packard."
----------
Our common stock has been approved for listing on the New York Stock Exchange
under the trading symbol "A."
----------
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 9.
----------
PRICE $ A SHARE
----------
<TABLE>
<CAPTION>
Underwriting
Discounts and Proceeds to Agilent
Price to Public Commissions Technologies
--------------- ------------- -------------------
<S> <C> <C> <C>
Per Share..................... $ $ $
Total......................... $ $ $
</TABLE>
Agilent Technologies, Inc. has granted the U.S. underwriters the right to
purchase up to an additional 8,550,000 shares of common stock to cover over-
allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers
on , 1999.
----------
MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
J.P. MORGAN & CO.
LEHMAN BROTHERS
SG COWEN
, 1999
<PAGE>
Inside Front Cover
The following captions appear in the inside front cover:
"Agilent Technologies
Foundation. . . leadership. . . growth
Yesterday
A 60-year heritage of
innovation, contribution
and success
at Hewlett-Packard
Today
Broad market leadership,
rich technology portfolio,
global reach
Tomorrow
Focus, speed and agility,
opportunities in
communications and
life sciences"
Three photographs, each one corresponds to descriptive material for Yesterday,
Today and Tomorrow: First photograph (Yesterday) depicts two male scientists
working in a laboratory setting, circa 1950; Second photograph shows a female
laboratory technician performing analysis using Agilent Technologies test
equipment and recording her findings in a notebook, circa 1999; Third
photograph (Tomorrow) is a montage print showing a satellite antenna and a
cardiac ultrasound display.
Foldout, Page One
One banner-type photograph atop narrative material below. The photograph is
rectangular in shape and is a montage. From left to right, the montage
comprises a communications satellite and various communications components.
The following captions appear on the foldout, page one:
"Agilent Technologies
Powerful technologies, new opportunities
ENABLING
NEXT-GENERATION
COMMUNICATIONS
<TABLE>
<CAPTION>
Test and Semiconductor
Measurement Products
Our Business
<S> <C>
We help our customers design and We supply components, modules and
deploy assemblies to leaders in high-speed
new technologies with our advanced communications and computing.
test,
measurement and monitoring
solutions.
Leadership
We believe we have the leading We are a leading provider of fiber optic
position in the overall market for transceiver modules, Fibre Channel protocol
test and measurement instruments integrated circuits, infrared components
and systems. and optoelectronic components and displays.
Opportunities
Next generation communications High speed communications networks and
networks and devices wireless communications"
</TABLE>
<PAGE>
Foldout, Page Two
One banner-type photograph atop narrative material below. The photograph is
rectangular in shape and is a montage. From left to right, the montage
comprises a medical professional reviewing a patient monitoring device, a
photograph of a LabChip device and a scientist analyzing a test tube sample.
The following captions appear on the foldout, page two:
"ADVANCING THE
LIFE SCIENCES
<TABLE>
<S> <C>
Healthcare Chemical
Solutions Analysis
</TABLE>
Our Business
<TABLE>
<S> <C>
We provide clinical measurement We enable customers to identify,
and quantify, analyze and test the chemical
diagnostic solutions for the and biological properties of thousands
healthcare of substances and products.
marketplace.
Leadership
We are a leading supplier of We are a leading supplier of gas and liquid
patient chromotography and mass spectroscopy
monitoring systems, cardiovascular instruments and systems.
ultrasound imaging systems and
automatic external defibrillators.
Opportunities
Healthcare beyond the hospital, Drug development based on genetic
including origins of disease, microfluidics and other
in small clinics, doctors' offices advanced pharmaceutical technologies."
and
patients' homes.
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 4
Risk Factors........................ 9
You Should Not Rely on Forward-
looking Statements................. 20
Our Separation From Hewlett-
Packard............................ 21
Use of Proceeds..................... 23
Dividend Policy..................... 23
Capitalization...................... 24
Selected Financial Data............. 25
Unaudited Pro Forma Condensed
Financial Statements............... 26
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 29
Business............................ 50
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management.................................................................... 86
Arrangements Between Agilent Technologies and Hewlett-Packard................. 100
Principal Stockholder......................................................... 112
Description of Capital Stock.................................................. 112
Shares Eligible for Future Sale............................................... 115
Material United States Federal Tax Consequences to Non-United States Holders.. 116
Underwriters.................................................................. 119
Legal Matters................................................................. 122
Experts....................................................................... 122
Where You Can Find More Information........................................... 122
Index to Financial Statements................................................. F-1
</TABLE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock. In this prospectus, "Agilent
Technologies," "we," "us" and "our" each refers to Agilent Technologies, Inc.
and its subsidiaries, and not the underwriters or Hewlett-Packard Company, and
"Hewlett-Packard" refers to Hewlett-Packard Company and its subsidiaries.
Until , 1999 (25 days after the date of this prospectus), all dealers
that buy, sell or trade our common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This delivery requirement
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
3
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our historical consolidated financial statements and notes thereto
included elsewhere in this prospectus.
AGILENT TECHNOLOGIES, INC.
Agilent Technologies is a diversified technology company that provides
enabling solutions to high growth markets within the communications,
electronics, life sciences and healthcare industries. Our broad technology
portfolio and our experience in working with market-leading customers around
the world have allowed us to establish and continue to expand our leadership
across multiple markets.
We are a global leader in designing and manufacturing test, measurement and
monitoring instruments, systems and solutions and semiconductor products and
optical components. Agilent Technologies includes the following businesses:
. test and measurement, which had fiscal 1998 revenue of $4.1 billion,
provides test instruments, standard and customized test, measurement and
monitoring systems for the design, manufacture and support of electronic
and communication devices, and software for the design of high-frequency
electronic and communication devices;
. semiconductor products, which had fiscal 1998 revenue of $1.6 billion,
provides fiber optic communications devices and assemblies, integrated
circuits for wireless applications, integrated circuits that are
designed for specific applications (ASICs), optoelectronic devices,
which translate electrical signals from and into equivalent light-based
signals, and image sensors;
. healthcare solutions, which had fiscal 1998 revenue of $1.3 billion,
provides patient monitoring, ultrasound imaging and cardiology products
and systems; and
. chemical analysis, which had fiscal 1998 revenue of $938 million,
provides analytical instruments, systems and services for
chromatography, mass spectroscopy and bio-instrumentation.
Chromatography is the separation of mixed samples in gas or liquid form
into component compounds for the purpose of analyzing these components.
Mass spectroscopy is the measurement of masses of atoms for the purpose
of identifying and quantifying molecules and elements within a sample.
Agilent Technologies' ability to succeed is based on two fundamental
attributes. First, we have a broad and deep portfolio of technology expertise
in electronics, communications, medical and chemical measurement,
biotechnology, photonics, solid-state materials and components and measurement
systems and solutions. This expertise is driven by the research and development
efforts within our businesses and by the activities of Agilent Technologies
Laboratories, one of the world's leading industrial research and development
organizations. Each of our businesses takes advantage of the technology
advances developed by our central laboratories, often using common technology
in different applications within their specific business.
Our second core attribute is our close relationships with our customers.
These relationships provide us with comprehensive insight into the worldwide
markets in which we sell our products and services. Our businesses have
developed these relationships and insights over our 60 year history. During
this time, our businesses have worked with thousands of customers worldwide as
technologies, business needs and global economic conditions have undergone
dramatic changes.
4
<PAGE>
Our businesses share important characteristics and resources that we believe
contribute significantly to our competitive success. Our test and measurement,
healthcare solutions and chemical analysis businesses are built around our
excellence in applying measurement technologies to the development of products
that sense, analyze and display data required by the end-user. Our test and
measurement and semiconductor businesses share focus on growth opportunities in
the communications sector, while our healthcare and chemical analysis
businesses share focus on growth opportunities in healthcare and life sciences.
Our global infrastructure enables our businesses to move our products from
initial commercialization to worldwide availability rapidly and efficiently and
to provide localized service and support.
We provide the world's broadest range of test and measurement solutions to
customers in the communications, electronics and semiconductor industries. We
are also a leading supplier of:
. semiconductor and fiber optic components to the communications and
computer industries;
. modules and assemblies to the communications and electronics industries;
. patient monitoring and ultrasound imaging equipment and automatic
external defibrillators to the healthcare industry; and
. chemical measurement instruments and systems to the hydrocarbon
processing, environmental and pharmaceutical industries.
We serve customers in more than 120 countries, and we have major research
and development and manufacturing facilities around the world.
STRATEGY
To maintain and grow our market leadership, we have designed a business
strategy that takes advantage of our competitive strengths and capitalizes on
emerging trends in the communications, electronics, healthcare and life
sciences industries. The key elements of our strategy are to:
. Focus on High Growth Market Opportunities. We work closely with our
customers' research and development teams to understand emerging
markets, technologies and standards, and we invest accordingly in our
own development of enabling solutions in those areas. We will continue
to establish strategic partnerships and make tactical acquisitions to
develop advanced systems that complement our existing technologies and
products to accelerate our entry into high-growth markets.
. Continue to Innovate Technologically. We will continue to invest in and
build research and development expertise, both in the centralized
facilities of Agilent Technologies Laboratories and in the research and
development facilities of our four main businesses.
. Maximize the Benefits of our Scale and Global Presence. Our global
direct sales force gathers insights into important industry trends and
provides us an effective means of bringing new products to market
rapidly. We believe our customers value our ability to provide more
complete solutions with our global training, systems integration, and
project management programs. We will continue to focus on enhancing
overall customer satisfaction, providing effective localized service and
support to our customers around the world.
5
<PAGE>
BENEFITS OF OUR SEPARATION FROM HEWLETT-PACKARD
Agilent Technologies comprises businesses that will be separated from
Hewlett-Packard's other operations prior to this offering. We believe that we
will realize benefits from our complete separation from Hewlett-Packard,
including:
. Greater Strategic Focus. As a result of having our own board of
directors and separate management team, we expect to have a sharper
focus on the Agilent Technologies business and strategic opportunities.
. Increased Speed and Responsiveness. As a significantly smaller company,
we expect to be able to make decisions more quickly, deploy resources
more rapidly and efficiently and operate with more agility than when we
were a part of Hewlett-Packard.
. Better Incentives for Employees and Greater Accountability. We will seek
to motivate our employees and strengthen the focus of our management
through the implementation of incentive compensation programs tied to
the market performance of our common stock.
. Direct Access to Capital Markets. As an independent company, we will
have direct access to the capital markets to issue debt or equity
securities and to grow through acquisitions.
OUR RELATIONSHIP WITH HEWLETT-PACKARD
We are currently a wholly owned subsidiary of Hewlett-Packard. After the
completion of this offering, Hewlett-Packard will own approximately 87.0% of
the outstanding shares of our common stock, or approximately 85.3% if the U.S.
underwriters exercise their over-allotment option in full. Hewlett-Packard has
announced that it currently plans to complete its divestiture of Agilent
Technologies by the middle of calendar year 2000 by distributing all of the
shares of Agilent Technologies common stock owned by Hewlett-Packard to the
holders of Hewlett-Packard's common stock. However, Hewlett-Packard is not
obligated to complete the distribution, and the distribution may not occur by
the contemplated time or at all.
Hewlett-Packard will determine the timing, structure and all terms of its
distribution of our common stock in its sole discretion. Hewlett-Packard has
received a private letter ruling from the Internal Revenue Service that the
distribution of its shares of Agilent Technologies common stock to the holders
of Hewlett-Packard common stock will be tax-free to Hewlett-Packard and its
stockholders for United States federal income tax purposes. For a discussion of
the risks associated with Hewlett-Packard not completing the distribution, see
"Risk Factors--Risks Related To Our Separation From Hewlett-Packard--Our
business may suffer if Hewlett-Packard does not complete its distribution of
our common stock."
We have entered into agreements with Hewlett-Packard that provide for the
separation of our business operations from Hewlett-Packard. These agreements
are not conditioned on the distribution. They provide for, among other things,
the transfer from Hewlett-Packard to us of assets and the assumption by us of
liabilities relating to our business. For more information regarding the assets
and liabilities to be transferred to us, see our consolidated financial
statements and notes thereto that are included elsewhere in this prospectus. In
November 1999, Hewlett-Packard made a cash payment to us of $1.08 billion in
connection with the initial funding. This amount was based on our and Hewlett-
Packard's balance sheets at July 31, 1999. The final amount of our initial
funding will be adjusted, primarily based on our and Hewlett-Packard's balance
sheets at October 31, 1999. We have also entered into agreements with Hewlett-
Packard regarding the transfer and licensing to us of intellectual property
related to the business of Agilent Technologies. Substantially all of these
transfers will be completed prior to the closing of this offering.
The agreements between Hewlett-Packard and us also govern our various
interim and ongoing relationships. All of the agreements providing for our
separation from Hewlett-Packard were made in the context of a parent-subsidiary
relationship and were negotiated in the overall context of our separation from
Hewlett-Packard. The terms of these agreements may be more or less favorable to
us than if they had been negotiated with unaffiliated third parties. See "Risk
Factors--Risks Related To Our Separation From Hewlett-Packard" and
"Arrangements between Agilent Technologies and Hewlett-Packard."
6
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common stock offered:
In the United States and Canada........ 45,600,000 shares
Outside the United States and Canada... 11,400,000 shares
Total.............................. 57,000,000 shares
Common stock to be outstanding immediately
after this offering...................... 437,000,000 shares
Common stock to be held by Hewlett-Packard
immediately after this offering.......... 380,000,000 shares
Use of proceeds........................... We estimate that our net proceeds
from this offering will be
approximately $1,108,417,500 based
on an assumed initial public
offering price of $20.50 per share.
The net proceeds of this offering,
including proceeds received from
any exercise of the U.S.
underwriters' over-allotment
option, will be paid to Hewlett-
Packard as a dividend.
Proposed New York Stock Exchange
symbol................................... A
</TABLE>
This information is based on 380,000,000 shares outstanding as of October
22, 1999, all of which are owned by Hewlett-Packard. Unless we specifically
state otherwise, the information in this prospectus does not take into account
the issuance of up to 8,550,000 shares of common stock that the
U.S. underwriters have the option to purchase solely to cover over-allotments.
If the U.S. underwriters exercise their over-allotment option in full,
445,550,000 shares of common stock will be outstanding after this offering.
The number of shares of our common stock to be outstanding immediately after
this offering listed above does not take into account approximately 67,723,600
shares of our common stock reserved for issuance under our stock option plans.
This number also does not take into account any Hewlett-Packard options we may
assume or any Hewlett-Packard restricted stock we may replace with our options
or restricted stock under our employee matters agreement with Hewlett-Packard.
We expect to grant options to purchase shares of our common stock effective
as of the date of this offering with an exercise price equal to the offering
price to the public.
----------------
We were incorporated in Delaware in May 1999 as a wholly owned subsidiary of
Hewlett-Packard. Our principal executive offices are located at 3000 Hanover
Street, Palo Alto, California 94304, and our telephone number is (650) 857-
1501. We expect to move our executive offices to 395 Page Mill Road, Palo Alto,
California 94306 in the middle of calendar year 2000. Our website is
http://www.agilent.com. The information on the website is not a part of this
prospectus.
7
<PAGE>
SUMMARY FINANCIAL DATA
The following table presents summary consolidated financial data for Agilent
Technologies. The data presented in this table are derived from "Selected
Financial Data," "Unaudited Pro Forma Condensed Financial Statements" and the
historical consolidated financial statements and notes thereto that are
included elsewhere in this prospectus. You should read those sections for a
further explanation of the financial data summarized here.
The historical financial information may not be indicative of our future
performance and does not reflect what our financial position and results of
operations would have been had we operated as a separate, stand-alone entity
during the periods presented. The year ended October 31, 1998 includes the
effect of pre-tax restructuring charges that reduced our earnings from
operations by approximately $163 million.
The Pro Forma Consolidated Balance Sheet Data reflects the initial funding
of our operations by Hewlett-Packard and our pending purchase of Yokogawa
Electric Corporation's 25% interest in Hewlett-Packard Japan. The Pro Forma As
Adjusted Consolidated Balance Sheet Data also reflects the receipt and
subsequent payment to Hewlett-Packard of the net proceeds from the sale of the
shares of our common stock in this offering. The pro forma financial position
shown in this table is not indicative of what our financial position would have
been had the separation of our business from Hewlett-Packard been completed on
July 31, 1999. See Notes to Unaudited Pro Forma Condensed Financial Statements
for an explanation of the calculation of unaudited pro forma net earnings per
share.
<TABLE>
<CAPTION>
Nine Months
Ended July
Years Ended October 31, 31,
---------------------------------- -------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ ------
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of
Earnings Data:
Net revenue.................. $5,546 $6,595 $7,379 $7,785 $7,952 $5,965 $5,883
Earnings from operations..... 521 841 875 870 442 489 536
Net earnings................. 282 499 542 543 257 308 366
Unaudited pro forma net
earnings per share:
Basic....................... $ .59 $ .84
Diluted..................... $ .57 $ .82
Average shares used in
computing unaudited
pro forma net earnings per
share:
Basic....................... 437 437
Diluted..................... 451 449
</TABLE>
<TABLE>
<CAPTION>
July 31, 1999
----------------------------
Pro Forma
Actual Pro Forma As Adjusted
------ --------- -----------
(in millions)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents......................... $ -- $1,080 $1,080
Working capital................................... 1,789 2,470 2,470
Total assets...................................... 5,050 5,595 5,595
Stockholders' equity.............................. 3,220 4,268 4,268
</TABLE>
8
<PAGE>
RISK FACTORS
You should carefully consider the risks described below and the other
information in this prospectus before investing in our common stock. Our
business could be seriously harmed by any of these risks. The trading price of
our common stock could decline due to any of these risks, and you may lose all
or part of your investment.
Risks Related to Our Business
If we do not introduce new products and services in a timely manner, our
products and services will become obsolete, and our operating results will
suffer.
We sell our products in several industries that are characterized by rapid
technological changes, frequent new product and service introductions and
evolving industry standards. Without the timely introduction of new products,
services and enhancements, our products and services will likely become
technologically obsolete over time, in which case our revenue and operating
results would suffer. The success of our new product and service offerings
will depend on several factors, including our ability to:
. properly identify customer needs;
. price our products competitively;
. innovate and develop new technologies and applications;
. successfully commercialize new technologies in a timely manner;
. manufacture and deliver our products in sufficient volumes on time; and
. differentiate our offerings from our competitors' offerings.
Many of our products are used by our customers to develop, test and
manufacture their new products. We therefore must anticipate industry trends
and develop products in advance of the commercialization of our customers'
products. Development of new products generally requires a substantial
investment before we can determine the commercial viability of these
innovations. If we fail to adequately predict our customers' needs and future
activities, we may invest heavily in research and development of products and
services that do not lead to significant revenue. For example, the cellular
phone industry, which is served by our test and measurement and semiconductor
products businesses, currently has several competing communications standards.
We may suffer competitive harm if we dedicate resources to developing products
and technologies to support a standard that does not achieve broad market
acceptance. Our other businesses will encounter similar challenges. In our
healthcare business, new technologies that we develop may not be quickly
accepted because of industry-specific factors such as the need for regulatory
clearance, entrenched patterns of clinical practice, uncertainty over third-
party reimbursement and clinicians' fears of malpractice suits. We would
suffer competitive harm if we dedicate a significant amount of resources to
the development of products and technologies that do not achieve broad market
acceptance.
Economic, political and other risks associated with international sales and
operations, particularly in Korea and Japan, could adversely affect our
sales.
Since we sell our products worldwide, our business is subject to risks
associated with doing business internationally. Our net revenue originating
outside the United States, as a percentage of our total net revenue, was 54.4%
in fiscal year 1998 and 54.9% for the nine months ended July 31, 1999. We
anticipate that revenue from international operations will continue to
represent a substantial portion of our total revenue. In addition, many of our
manufacturing facilities and suppliers are located outside the United States.
Accordingly, our future results could be harmed by a variety of factors,
including:
. changes in foreign currency exchange rates;
. changes in a specific country's or region's political or economic
conditions, particularly in emerging markets;
9
<PAGE>
. trade protection measures and import or export licensing requirements;
. potentially negative consequences from changes in tax laws;
. difficulty in staffing and managing widespread operations;
. differing labor regulations;
. differing protection of intellectual property; and
. unexpected changes in regulatory requirements.
We do a substantial portion of our business in Korea and Japan, which have
been subject to increased economic instability in recent years. Our business
declined in 1998 when Korea and Japan experienced economic difficulties. The
recurrence of weakness in these economies or weakness in other international
economies could have a significant negative effect on our future operating
results.
Fluctuations in our quarterly operating results may cause our stock price
to decline.
Given the nature of the markets in which we participate, we cannot reliably
predict future revenue and profitability, and unexpected changes may cause us
to adjust our operations. A high proportion of our costs are fixed, due in
part to our significant sales, research and development and manufacturing
costs. Thus, small declines in revenue could disproportionately affect our
operating results in a quarter. For example, when our revenue declined in 1998
as a result of the financial crisis in Asia, it caused significant negative
fluctuations in our operating results. Other factors that could affect our
quarterly operating results include:
. demand for and market acceptance of our products;
. competitive pressures resulting in lower selling prices;
. adverse changes in the level of economic activity in the United States
and other major regions in which we do business;
. adverse changes in industries, such as semiconductors and electronics,
on which we are particularly dependent;
. changes in the relative portion of our revenue represented by our
various products and customers;
. unanticipated delays or problems in the introduction of new products;
. our competitors' announcements of new products, services or
technological innovations;
. increased costs of raw materials or supplies;
. changes in the timing of product orders; and
. our inability to forecast revenue in a given quarter from large system
sales.
The current technology labor market is very competitive, and our business
will suffer if we are not able to hire and retain sufficient personnel.
Our future success depends partly on the continued service of our key
research, engineering, sales, marketing, manufacturing, executive and
administrative personnel. If we fail to retain and hire a sufficient number of
these personnel, we will not be able to maintain and expand our business.
Competition for qualified personnel in the technology area is intense, and we
operate in several geographic locations where labor markets are particularly
competitive, including the Silicon Valley region of Northern California where
our headquarters and central research and development laboratories are
located. Although we believe we offer competitive salaries and benefits,
certain of our businesses have had to increase spending in order to retain
personnel. We also believe we have benefited from Hewlett-Packard's name and
reputation as an employer in the past. To the extent we do not obtain similar
popular recognition, our ability to attract and retain personnel could be
harmed. In addition, some employees of Hewlett-Packard who worked in our
businesses in the past may have chosen, or may choose, to remain with Hewlett-
Packard in other positions. Until 30 days prior to Hewlett-Packard's
distribution of our
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stock, our employees are generally eligible to apply for and move to positions
at Hewlett-Packard without losing their Hewlett-Packard tenure.
Our operating results could be harmed if the industries into which we sell
our products are in downward cycles.
Many of the industries and markets into which we sell our products are
cyclical. For example, in 1998 the operating results of our test and
measurement and semiconductor products businesses were harmed by downturns in
the semiconductor market. From time to time, the electronics industry has also
experienced significant downturns, often in connection with, or in
anticipation of, maturing product cycles and declines in general economic
conditions. In addition, the computer industry is subject to seasonal and
cyclical fluctuations in demand for its products. These industry downturns
have been characterized by diminished product demand, excess manufacturing
capacity and subsequent accelerated erosion of average selling prices. In
addition, the healthcare industry has experienced a significant increase in
cost pressures resulting from hospital consolidation and the trend by
insurance companies to reduce payments to healthcare providers. Any
significant downturn in our customers' markets or in general economic
conditions would likely result in a reduction in demand for our products and
services and could harm our business.
As a separate company from Hewlett-Packard, we may experience increased
costs resulting from decreased purchasing power which could decrease our
profitability.
Prior to our separation from Hewlett-Packard, our businesses were able to
take advantage of Hewlett-Packard's size and purchasing power in procuring
goods, services and technology, such as computer software licenses. As a
separate, stand-alone entity, we may be unable to obtain goods, services and
technology at prices and on terms as favorable as those we obtained prior to
the separation. In addition, our patent cross-license agreement with Hewlett-
Packard gives us the right to sublicense only a portion of Hewlett-Packard's
intellectual property portfolio. As a result, in negotiating patent cross-
license agreements with third parties, we may be unable to obtain agreements
on terms as favorable as we may have been able to obtain if we had access to
Hewlett-Packard's entire intellectual property portfolio.
Our semiconductor technology licensing and supply arrangements with
Hewlett-Packard limit our ability to sell to other companies and could
restrict our ability to expand our businesses.
We do not have a license under Hewlett-Packard's patents, patent
applications and invention disclosures for, with some exceptions, inkjet
products, printer products (including printer supplies, accessories and
components), document scanners and computing products. In addition, our ICBD
Technology Ownership and License Agreement, which generally covers integrated
circuit technology that is used in integrated circuits for Hewlett Packard's
printers, scanners and computers, provides that for a period of three years in
some cases and 10 years in other cases we are prohibited, with some
exceptions, from using this integrated circuit technology for the development
and sale of integrated circuits for use in inkjet products, printer products
(including printer supplies, accessories and components), document scanners
and computing products to third parties other than Hewlett-Packard.
Although we have entered into a supply agreement for the sale to
Hewlett-Packard of these kinds of integrated circuits, the supply agreement
does not require Hewlett-Packard to purchase a minimum amount of product from
us. In the event that Hewlett-Packard reduces its purchase of our integrated
circuits, we would be unable to address this reduction through sales of these
kinds of integrated circuits for these types of products to other customers.
If demand for Hewlett-Packard's printer, workstation and server products
declines, or if Hewlett-Packard chooses a different supplier, our
semiconductor products business revenue will decline significantly.
Historically, some of our businesses have sold products to Hewlett-Packard
and have engaged in product development efforts with divisions of Hewlett-
Packard. For the nine months ended July 31, 1999, Hewlett-Packard accounted
for 10% of total net revenue. In the nine months ended July 31, 1999, our
semiconductor
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products business received approximately 37% of its revenue from sales to
Hewlett-Packard's printer, workstation and server businesses. These Hewlett-
Packard businesses were not, and will not be, required to purchase products
from us. A reduction in sales to any of these Hewlett-Packard customers would
harm our business.
Our ability to compete for Hewlett-Packard's business may suffer following
our separation due to decreased access to Hewlett-Packard's research and
development strategy, technology plans, future product features and product
supply needs.
In the past, we have benefited from our access to Hewlett-Packard's
research and development strategy, technology plans, future product features
and product supply needs in competing for Hewlett-Packard's business. If our
competitors were to gain better access to Hewlett-Packard as a result of our
separation, our competitors may be able to develop products that better meet
the future needs of Hewlett-Packard, decreasing the competitiveness of our
products. In addition, we have taken advantage of collaborative relationships
with some of Hewlett-Packard's businesses. We may not continue to enjoy all of
the benefits of these collaborative relationships, particularly if our patent
cross-license is not renewed.
We face aggressive competition in all areas of our business, and if we do
not compete effectively, our business will be harmed.
We encounter aggressive competition in all areas of our business. Our
competitors are numerous, ranging from some of the world's largest
corporations, such as General Electric Company, International Business
Machines Corporation, Lucent Technologies, Inc. and Siemens AG, to many highly
specialized firms, such as Anritsu Corporation, PE Biosystems, Teradyne, Inc.
and Waters Corporation, as well as many smaller technology startups. We may
not be able to compete effectively with all of these competitors. To remain
competitive, we will need to develop new products and periodically enhance our
existing products in a timely manner. We anticipate that we may have to adjust
prices of many of our products to stay competitive, and we will have to manage
financial returns effectively. In addition, new competitors may emerge, and
entire product lines may be threatened by new technologies or market trends
which reduce the value of these product lines.
We may face significant costs in order to comply with laws and regulations
in the manufacture, processing and distribution of chemicals, and, if we
fail to comply, we could be subject to civil or criminal penalties or be
prohibited from distributing our products.
Some of our chemical analysis business' products are used in conjunction
with chemicals whose manufacture, processing and distribution are regulated by
the United States Environmental Protection Agency under the Toxic Substances
Control Act, and by regulatory bodies in other countries with laws similar to
the Toxic Substances Control Act. We must conform the manufacture, processing
and distribution of these chemicals to these laws, and adapt to regulatory
requirements in all countries as these requirements change. If we fail to
comply with these requirements in the manufacture or distribution of our
products, then we could be made to pay civil penalties, face criminal
prosecution and, in some cases, be prohibited from distributing our products
in commerce until the products or component substances are brought into
compliance.
If we fail to maintain satisfactory compliance with the Food and Drug
Administration's regulations, we may be forced to recall products and cease
their manufacture and distribution, and we could be subject to civil or
criminal penalties.
The medical device products produced by our healthcare solutions business
are subject to regulation by the United States Food and Drug Administration
(FDA) and similar international agencies. Their regulations govern a wide
variety of product activities from design and development to labeling,
manufacturing, promotion, sales and distribution. For example, we received a
warning letter from the FDA in 1996 alleging non-compliance with the FDA's
quality system regulations at one of our facilities. The FDA's quality systems
regulation includes elaborate design, testing, control, documentation and
other quality assurance requirements. We had to apply considerable resources
to address the FDA's concerns. We believe we have resolved the issues
identified in the
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FDA's letter and the FDA has concurred with our assessment, but we cannot
assure you that the FDA will not identify other areas of noncompliance. If we
fail to maintain satisfactory compliance with the FDA's quality system and
other regulations, we may have to recall products and cease their manufacture
and distribution. In addition, we could be subject to fines or criminal
prosecution.
In addition, our chemical analysis products are used in the drug design and
production processes to test compliance with the Toxic Substances Control Act,
the Federal Food, Drug and Cosmetic Act and similar regulations. Therefore, we
must continually adapt our chemical analysis products to changing regulations.
Cost containment measures in the healthcare industry and the effect of any
healthcare reform could harm our profitability.
Our healthcare customers rely on third-party payors, such as government
programs and private health insurance plans, to reimburse some or all of the
cost of the procedures in which our products are used. The continuing efforts
of government, insurance companies and other payors of healthcare costs to
contain or reduce those costs could lead our customers to reduce or eliminate
purchases of our products. Likewise, legislative proposals to reform
healthcare or reduce government programs could result in lower prices for or
rejection of our products. The cost containment measures that healthcare
providers are instituting and the effect of any healthcare reform, both in the
United States and internationally, could harm our ability to operate
profitably.
Environmental contamination from past operations could subject us to
unreimbursed costs and could harm on-site operations and the future use and
value of the properties involved.
Some of our properties are undergoing remediation by Hewlett-Packard for
known subsurface contamination. Hewlett-Packard has agreed to retain the
liability for all known subsurface contamination, perform the required
remediation and indemnify us with respect to claims arising out of that
contamination. The determination of the existence and cost of any additional
contamination caused by us could involve costly and time-consuming
negotiations and litigation. In addition, Hewlett-Packard will have access to
our properties to perform remediation. While Hewlett-Packard has agreed to
minimize interference with on-site operations at those properties, remediation
activities and subsurface contamination may require us to incur unreimbursed
costs and could harm on-site operations and the future use and value of the
properties. We cannot assure you that Hewlett-Packard will fulfill its
indemnification or remediation obligations.
We are indemnifying Hewlett-Packard for any liability associated with
contamination from past operations at all other properties to be transferred
from Hewlett-Packard to us other than those properties currently undergoing
remediation by Hewlett-Packard. While we are not aware of any material
liabilities associated with existing subsurface contamination at any of those
properties, subsurface contamination may exist, and we may be exposed to
material liability as a result of the existence of that contamination.
Environmental contamination caused by ongoing operations could subject us
to substantial liabilities in the future.
We will be responsible for any contamination to our properties arising out
of our operations following the separation. Our semiconductor and other
manufacturing processes involve the use of substances regulated under various
international, federal, state and local laws governing the environment. We may
be subject to liabilities for environmental contamination, and these
liabilities may be substantial. Although our policy is to apply strict
standards for environmental protection at our sites inside and outside the
United States, even if not subject to regulations imposed by foreign
governments, we may not be aware of all conditions that could subject us to
liability.
We are subject to laws and regulations governing government contracts, and
our failure to address these laws and regulations or comply with government
contracts could harm our business.
We have agreements relating to the sale of our products to government
entities and as a result we are subject to various statutes and regulations
that apply to companies doing business with the government. The laws
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governing government contracts differ from the laws governing private
contracts. For example, many government contracts contain pricing terms and
conditions that are not applicable to private contracts. We are also subject
to investigation for compliance with the terms of government contracts. We
have received and are complying with formal requests for information by the
government regarding our sales of products to some of the government agencies
with which we have contracted. Based on our review to date, we have not found
that there are any violations of the pertinent laws or regulations relating to
these contracts. However, these requests may result in legal proceedings
against us or liability.
We and our customers are subject to various other governmental regulations,
and we may incur significant expenses to comply with these regulations and
develop our products to be compatible with these regulations.
Several of our product lines are subject to other significant
international, federal, state and local, health and safety, packaging, product
content and labor regulations. These regulations are complex, change
frequently and have tended to become more stringent over time. We may be
required to incur significant expenses to comply with these regulations or
remedy past violations of these regulations. Any failure by us to comply with
applicable government regulations could also result in cessation of portions
or all of our operations, impositions of fines and restrictions on our ability
to carry on or expand our operations. In addition, because many of our
products are regulated or sold into regulated industries, we must comply with
additional regulations in marketing our products.
Our products and operations are also often subject to the rules of
industrial standards bodies, like the International Standards Organization, as
well as regulation of other agencies such as the United States Federal
Communications Commission. We also must comply with work safety rules. If we
fail to adequately address any of these regulations, our business will be
harmed.
Third parties may claim we are infringing their intellectual property, and
we could suffer significant litigation or licensing expenses or be
prevented from selling products.
Third parties may claim that we are infringing their intellectual property
rights, and we may be found to infringe those intellectual property rights.
While we do not believe that any of our products infringe the valid
intellectual property rights of third parties, we may be unaware of
intellectual property rights of others that may cover some of our technology,
products and services. Moreover, in connection with future intellectual
property infringement claims, we will only have the benefit of asserting
counterclaims based on Hewlett-Packard's intellectual property portfolio in
limited circumstances, and we will only be able to offer licenses to Hewlett-
Packard's intellectual property in order to resolve claims in limited
circumstances.
Any litigation regarding patents or other intellectual property could be
costly and time-consuming, and divert our management and key personnel from
our business operations. The complexity of the technology involved and the
uncertainty of intellectual property litigation increase these risks. Claims
of intellectual property infringement might also require us to enter into
costly royalty or license agreements. However, we may not be able to obtain
royalty or license agreements on terms acceptable to us, or at all. We also
may be subject to significant damages or injunctions against development and
sale of certain of our products.
We often rely on licenses of intellectual property useful for our business.
We cannot assure you that these licenses will be available in the future on
favorable terms or at all. In addition, our position with respect to the
negotiation of licenses may change after our separation from Hewlett-Packard.
Third parties may infringe our intellectual property, and we may expend
significant resources enforcing our rights or suffer competitive injury.
Our success depends in large part on our proprietary technology. We rely on
a combination of patents, copyrights, trademarks and trade secrets,
confidentiality provisions and licensing arrangements to establish and protect
our proprietary rights. If we fail to successfully enforce our intellectual
property rights, our competitive position could suffer, which could harm our
operating results.
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Our pending patent and trademark registration applications may not be
allowed or competitors may challenge the validity or scope of these patent
applications or trademark registrations. In addition, our patents may not
provide us a significant competitive advantage.
We may be required to spend significant resources to monitor and police our
intellectual property rights. We may not be able to detect infringement and
may lose competitive position in the market before we do so. In addition,
competitors may design around our technology or develop competing
technologies. Intellectual property rights may also be unavailable or limited
in some foreign countries, which could make it easier for competitors to
capture market share.
Potential year 2000 problems associated with our products, our internal
systems or the products of our suppliers and customers could harm our
business.
We are working to implement the systems and programming changes necessary
to address year 2000 internal information technology and non-information
technology readiness issues, product and service readiness issues and material
third party relationships. However, we may encounter a delay in, or increased
costs associated with, the implementation of necessary systems and programming
changes. In addition, if we fail to achieve year 2000 readiness for our
internal systems and processes, it could delay our ability to manufacture and
ship products and deliver services, disrupt our customer service and technical
support facilities and interrupt customer access to our online products and
services. Although we are dedicating substantial resources to attaining year
2000 readiness, we cannot assure you that we will be successful in our efforts
to identify and address all year 2000 issues. Even if we act in a timely
manner to complete all of our assessments; identify, develop and implement
remediation plans believed to be adequate; and develop contingency plans
believed to be adequate; some problems may not be identified or corrected in
time to prevent serious harm to us. In addition, we have relied on assurances
from third parties that they and the products they supply are year 2000
compliant. We have not independently verified these assurances in many cases,
and any failure of these third party products and services to be year 2000
compliant could harm us. Although our newly introduced products are year 2000
compliant, some of our products that are currently installed at customer sites
will require upgrades or other remediation. Some of these products are used in
critical applications in which the impact of non-performance to these
customers and other parties could be significant. There is a risk that our
customers could initiate litigation against us for damages arising from our
products that are not year 2000 compliant. Year 2000 issues could harm our
future results of operations, cash flows or financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000."
If our factories or facilities were to experience catastrophic loss due to
earthquake, our operations would be seriously harmed.
Several of our facilities could be subject to a catastrophic loss caused by
earthquake due to their location. We have significant facilities in areas with
above average seismic activity, such as our production facilities,
headquarters and Agilent Technologies Laboratories in California and our
production facilities in Washington and Japan. If any of these facilities were
to experience a catastrophic loss, it could disrupt our operations, delay
production, shipments and revenue, and result in large expenses to repair or
replace the facility. Hewlett-Packard does not carry catastrophic insurance
policies which cover potential losses caused by earthquakes. After the
distribution, we do not expect to obtain insurance to cover potential losses
resulting from earthquakes.
Risks Related to Our Separation from Hewlett-Packard
Our new name is not yet recognized as a brand in the marketplace, and as a
result our product sales could suffer.
The loss of the "Hewlett-Packard" brand name may hinder our ability to
establish new relationships. In addition, our current customers, suppliers and
partners may react negatively to the separation. In connection with
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our separation from Hewlett-Packard, we will change the brand name and most of
the trademarks and trade names under which we conduct our business. This
transition to our new name will occur rapidly in the case of some products and
over specified periods of time in the case of other products. We believe that
sales of our products have benefited from the use of the "Hewlett-Packard"
brand name. In addition, although we believe we have all necessary rights to
use the new brand name, our rights to use it may be challenged by others.
We currently use Hewlett-Packard's information systems, and we must develop
our own information systems cost-effectively.
We currently use Hewlett-Packard's systems to support our operations,
including systems to manage inventory, order processing, human resources,
shipping and accounting. We have an agreement with Hewlett-Packard for
Hewlett-Packard to continue to provide information services to us for up to
the next two years. During this time period, while we are developing our own
systems, we will be dependent on Hewlett-Packard for the provision of these
information technology services that are critical to running our business.
Many of the systems we currently use are proprietary to Hewlett-Packard and
are very complex. These systems have been modified, and are in the process of
being further modified, to enable Hewlett-Packard to separately track items
related to our business. These modifications, however, may result in
unexpected system failures or the loss or corruption of data.
We are in the process of creating our own information systems to eventually
replace Hewlett-Packard's systems. We may not be successful in implementing
these systems and transitioning data from Hewlett-Packard's systems to ours.
We are currently in the process of implementing new enterprise resource
planning software applications to manage some of our information systems. Our
chemical analysis and healthcare solutions businesses have each migrated to
new enterprise resource planning software, and each experienced disruptions
during the transition process that negatively affected their operating results
for the period in which the transition occurred.
Any failure or significant downtime in Hewlett-Packard's or our own
information systems could prevent us from taking customer orders, shipping
products or billing customers and could harm our business. In addition,
Hewlett-Packard's and our information systems require the services of
employees with extensive knowledge of these information systems and the
business environment in which we operate. In order to successfully implement
and operate our systems, we must be able to attract and retain a significant
number of current Hewlett-Packard employees to our company. If we fail to
attract and retain the highly skilled personnel required to implement,
maintain, and operate our information systems, our business could suffer.
The transitional services being provided to us by Hewlett-Packard may not
be sufficient to meet our needs, and we may pay increased costs to replace
these services after our agreements with Hewlett-Packard expire.
Hewlett-Packard has agreed to provide certain transitional services to us,
including services related to:
. information technology systems;
. buildings and facilities; and
. finance and accounting.
These services may not be provided at the same level as when we were part
of Hewlett-Packard, and we may not be able to obtain the same benefits. We
will also lease and sublease certain office and manufacturing facilities from
Hewlett-Packard. These transitional service and leasing arrangements generally
have a term of less than two years following the separation. After the
expiration of these various arrangements, we may not be able to replace the
transitional services or enter into appropriate leases in a timely manner or
on terms and conditions, including cost, as favorable as those we will receive
from Hewlett-Packard.
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These agreements were made in the context of a parent-subsidiary
relationship and were negotiated in the overall context of our separation from
Hewlett-Packard. As a result, some of these agreements may have terms and
conditions that are less specific than some agreements that are negotiated at
arms-length. The prices charged to us under these agreements may be different
from the prices that we may be required to pay third parties for similar
services or the costs of similar services if we undertake them ourselves. For
more information about these arrangements, see "Arrangements Between Agilent
Technologies and Hewlett-Packard."
Substantial sales of common stock may occur in connection with the
distribution, which could cause our stock price to decline.
Hewlett-Packard has announced that it intends to distribute the
approximately 380,000,000 shares of common stock it owns to Hewlett-Packard
stockholders by the middle of calender year 2000. Substantially all of these
shares would be eligible for immediate resale in the public market. We are
unable to predict whether significant amounts of common stock will be sold in
the open market in anticipation of, or following, this distribution. We are
also unable to predict whether a sufficient number of buyers would be in the
market at that time.
A portion of Hewlett-Packard's common stock is held by index funds tied to
the Standard & Poor's 500 Index, the Dow Jones Industrial Average or other
stock indices. If we are not in these indices at the time of Hewlett-Packard's
distribution of our common stock, these index funds will be required to sell
our stock. Similarly, other institutional stockholders are not allowed by their
charters to hold the stock of companies that do not pay dividends. Since we
currently do not intend to pay dividends, we expect that these stockholders
will sell the shares of our common stock distributed to them. Any sales of
substantial amounts of common stock in the public market, or the perception
that such sales might occur, whether as a result of this distribution or
otherwise, could harm the market price of our common stock. See "Shares
Eligible for Future Sale."
Our business may suffer if Hewlett-Packard does not complete its
distribution of our common stock.
Hewlett-Packard has announced that it intends to distribute to its
stockholders all of our common stock that it owns by the middle of calendar
year 2000, although it is not obligated to do so. This distribution may not
occur by that time or at all. We may not obtain the benefits we expect as a
result of this distribution, including greater strategic focus, increased
agility and speed, greater access to capital markets, better incentives for
employees, more accountable management and the other benefits described in "Our
Separation From Hewlett-Packard." In addition, until this distribution occurs,
the risks discussed below relating to Hewlett-Packard's control of us and the
potential business conflicts of interest between Hewlett-Packard and us will
continue to be relevant to our stockholders.
We will be controlled by Hewlett-Packard as long as it owns a majority of
our common stock, and our other stockholders will be unable to affect the
outcome of stockholder voting during such time.
After the completion of this offering, Hewlett-Packard will own
approximately 87.0% of our outstanding common stock, or approximately 85.3% if
the U.S. underwriters exercise their over-allotment option in full. As long as
Hewlett-Packard owns a majority of our outstanding common stock, Hewlett-
Packard will continue to be able to elect our entire board of directors and to
remove any director, with or without cause, without calling a special meeting.
Investors in this offering will not be able to affect the outcome of any
stockholder vote prior to the planned distribution of our stock to the Hewlett-
Packard stockholders. As a result, Hewlett-Packard will control all matters
affecting Agilent Technologies, including:
. the composition of our board of directors and, through it, any
determination with respect to our business direction and policies,
including the appointment and removal of officers;
. the allocation of business opportunities that may be suitable for us and
Hewlett-Packard;
. any determinations with respect to mergers or other business
combinations;
. our acquisition or disposition of assets;
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. our financing;
. changes to the agreements providing for our separation from Hewlett-
Packard;
. the payment of dividends on our common stock; and
. determinations with respect to our tax returns.
Hewlett-Packard is not prohibited from selling a controlling interest in us
to a third party.
Our historical financial information may not be representative of our
results as a separate company.
The historical financial information we have included in this prospectus
has been carved out from Hewlett-Packard's consolidated financial statements
and does not reflect what our financial position, results of operations and
cash flows would have been, had we been a separate, stand-alone entity during
the periods presented. Hewlett-Packard did not account for us as, and we were
not operated as, a single stand-alone entity for the periods presented.
In addition, the historical information is not necessarily indicative of what
our results of operations, financial position and cash flows will be in the
future. We have not made adjustments to reflect many significant changes that
will occur in our cost structure, funding and operations as a result of our
separation from Hewlett-Packard, including changes in our employee base,
changes in our tax structure, increased costs associated with reduced
economies of scale, increased marketing expenses related to establishing a new
brand identity and increased costs associated with being a public, stand-alone
company.
For additional information, see "Unaudited Pro Forma Condensed Financial
Statements," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our historical consolidated financial statements
and notes thereto.
We may have potential business conflicts of interest with Hewlett-Packard
with respect to our past and ongoing relationships that could harm our
business operations.
Conflicts of interest may arise between Hewlett-Packard and us in a number
of areas relating to our past and ongoing relationships, including:
. labor, tax, employee benefit, indemnification and other matters arising
from our separation from Hewlett-Packard;
. intellectual property matters;
. employee retention and recruiting;
. major business combinations involving us;
. sales or distributions by Hewlett-Packard of all or any portion of its
ownership interest in us;
. the nature, quality and pricing of transitional services Hewlett-Packard
has agreed to provide us; and
. business opportunities that may be attractive to both Hewlett-Packard
and us.
Nothing restricts Hewlett-Packard from competing with us other than some
restrictions on the use of patents licensed to Hewlett-Packard by us.
We may not be able to resolve any potential conflicts, and even if we do,
the resolution may be less favorable than if we were dealing with an
unaffiliated party. The agreements we have entered into with Hewlett-Packard
may be amended upon agreement between the parties. While we are controlled by
Hewlett-Packard, Hewlett-Packard may be able to require us to agree to
amendments to these agreements that may be less favorable to us than the
current terms of the agreement.
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Our directors and executive officers may have conflicts of interest because
of their ownership of Hewlett-Packard common stock.
Many of our directors and executive officers have a substantial amount of
their personal financial portfolios in Hewlett-Packard common stock and
options to purchase Hewlett-Packard common stock. Ownership of Hewlett-Packard
common stock by our directors and officers after our separation from Hewlett-
Packard could create, or appear to create, potential conflicts of interest
when directors and officers are faced with decisions that could have different
implications for Hewlett-Packard and us. For information regarding directors'
and officers' ownership of Hewlett-Packard common stock, see "Management--
Stock Ownership of Directors and Executive Officers."
Risks Related to the Securities Markets and Ownership of Our Common Stock
Our securities have no prior market, and we cannot assure you that our
stock price will not decline after the offering.
Before this offering, there has not been a public market for our common
stock, and an active public market for our common stock may not develop or be
sustained after this offering. The market price of our common stock could be
subject to significant fluctuations after the offering. Among the factors that
could affect our stock price are:
. quarterly variations in our operating results;
. changes in revenue or earnings estimates or publication of research
reports by analysts;
. speculation in the press or investment community;
. strategic moves by us or our competitors, such as acquisitions or
restructurings;
. actions by institutional stockholders or by Hewlett-Packard prior to its
distribution of our stock;
. general market conditions; and
. domestic and international economic factors unrelated to our
performance.
The stock markets in general, and the markets for high technology stocks in
particular, have experienced extreme volatility that has often been unrelated
to the operating performance of particular companies. These broad market
fluctuations may adversely affect the trading price of our common stock. In
particular, we cannot assure you that you will be able to resell your shares
at or above the initial public offering price, which will be determined by
negotiations between the representatives of the underwriters and us. See the
section entitled "Underwriters" for a discussion of the factors to be
considered in determining the initial public offering price.
Provisions in our charter documents and Delaware law may delay or prevent
acquisition of our company, which could decrease the value of your shares.
Our certificate of incorporation and bylaws and Delaware law contain
provisions that could make it harder for a third party to acquire us without
the consent of our board of directors, although these provisions have little
significance while we are controlled by Hewlett-Packard. These provisions
include a classified board of directors and limitations on actions by our
stockholders by written consent. In addition, our board of directors has the
right to issue preferred stock without stockholder approval, which could be
used to dilute the stock ownership of a potential hostile acquiror. Delaware
law also imposes some restrictions on mergers and other business combinations
between us and any holder of 15% or more of our outstanding common stock.
Although we believe these provisions provide for an opportunity to receive a
higher bid by requiring potential acquirors to negotiate with our board of
directors, these provisions apply even if the offer may be considered
beneficial by some stockholders.
19
<PAGE>
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS
You should not rely on forward-looking statements in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends," "may," "will," "should," "estimates,"
"predicts," "potential," "continue" and similar expressions to identify such
forward-looking statements. This prospectus also contains forward-looking
statements attributed to third parties relating to their estimates regarding
the growth of our markets. Forward-looking statements are subject to known and
unknown risks, uncertainties and other factors that may cause our actual
results, as well as those of the test and measurement, semiconductor,
healthcare, chemical analysis and related markets we serve, levels of
activity, performance, achievements and prospects to be materially different
from those expressed or implied by such forward-looking statements. These
risks, uncertainties and other factors include, among others, those identified
here in the "Risk Factors" section and elsewhere in this prospectus.
20
<PAGE>
OUR SEPARATION FROM HEWLETT-PACKARD
Our Separation from Hewlett-Packard
On March 2, 1999, Hewlett-Packard announced a plan to create a separate
company that comprises Hewlett-Packard's test and measurement, semiconductor
products, healthcare solutions and chemical analysis businesses, related
portions of Hewlett-Packard Laboratories and associated infrastructure. We
were incorporated in Delaware in May 1999 in preparation for our separation
from Hewlett-Packard, and we are currently a wholly owned subsidiary of
Hewlett-Packard. Prior to the separation, Hewlett-Packard has conducted and
will conduct our business through various divisions and subsidiaries. We
expect that the separation of our businesses from those of Hewlett-Packard,
including the transfer of related assets, liabilities and intellectual
property rights, will be substantially completed by the closing of this
offering.
Benefits of the Separation
We believe that we will realize certain benefits from our complete
separation from Hewlett-Packard, including the following:
. Greater Strategic Focus. We expect to have a sharper focus on the
Agilent Technologies business and strategic opportunities as a result of
our board of directors and management team focusing only on our
businesses. We will also have greater ability to modify business
processes to better fit the needs of our customers, business units and
employees.
. Increased Speed and Responsiveness. Since our company will be
significantly smaller than Hewlett-Packard, we believe we will be able
to make decisions more quickly, deploy resources more rapidly and
efficiently and operate with more agility than when we were a part of a
larger organization. In addition, we expect to enhance our
responsiveness to customers and partners.
. Better Incentives for Employees and Greater Accountability. We expect
the motivation of our employees and the focus of our management will be
strengthened by incentive compensation programs tied to the market
performance of our common stock. The separation will enable us to offer
our employees compensation directly linked to the performance of the
Agilent Technologies business, which we expect to enhance our ability to
attract and retain qualified personnel.
. Direct Access to Capital Markets. As a separate company, we will be able
to directly access the capital markets to issue debt or equity
securities, and we will be able to more readily grow through
acquisitions.
Separation and Transitional Arrangements
We and Hewlett-Packard, and, in some cases, our respective subsidiaries,
have entered into or will enter into agreements providing for the separation
of our business from Hewlett-Packard, including a master separation and
distribution agreement to which we and Hewlett-Packard are parties. These
agreements generally provide for, among other things, the transfer from
Hewlett-Packard to us of assets and the assumption by us of liabilities
relating to our business, in each case to the extent agreed to by Hewlett-
Packard and us. We have entered into agreements with Hewlett-Packard regarding
the transfer and licensing to us of intellectual property relating to our
businesses. We have also entered into agreements governing various interim and
ongoing relationships between the parties including transitional services
Hewlett-Packard will provide to us.
The agreements relating to our separation from Hewlett-Packard were made in
the context of a parent-subsidiary relationship and were negotiated in the
overall context of our separation from Hewlett-Packard. The
terms of these agreements may be more or less favorable than those we could
have negotiated with unaffiliated third parties. For more information
regarding the separation arrangements, see "Arrangements Between Agilent
Technologies and Hewlett-Packard."
21
<PAGE>
The Distribution by Hewlett-Packard of Our Common Stock
After completion of this offering, Hewlett-Packard will own approximately
87.0% of the outstanding shares of our common stock, or approximately 85.3% if
the U.S. underwriters exercise their over-allotment option in full. Hewlett-
Packard has announced that it currently plans to complete its divestiture of
our company by the middle of calendar year 2000 by distributing all of its
shares of our common stock to the holders of Hewlett-Packard's common stock.
However, Hewlett-Packard is not obligated to complete the distribution, and we
cannot assure you as to whether or when it will occur. See "Risk Factors--
Risks Related To Our Separation From Hewlett-Packard--Our business may suffer
if Hewlett-Packard does not complete its distribution of our common stock."
Hewlett-Packard has advised us that it would not complete the distribution
if its board of directors determines that the distribution is no longer in the
best interest of Hewlett-Packard and its stockholders. Hewlett-Packard has
further advised us that it currently expects that the principal factors that
it would consider in determining whether and when to complete the distribution
include:
. the relative market prices of our common stock and Hewlett-Packard's
common stock;
. the absence of any court orders or regulations prohibiting or
restricting the completion of the distribution; and
. other conditions affecting the businesses of Agilent Technologies or
Hewlett-Packard.
22
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from this offering will be approximately
$1,108,417,500, based on an assumed initial public offering price of $20.50
per share. The net proceeds of this offering, including net proceeds received
from any exercise of the U.S. underwriters' over-allotment option, will be
paid to Hewlett-Packard as a dividend. In November 1999, Hewlett-Packard made
a cash payment to us of $1.08 billion under the terms of the master separation
and distribution agreement in connection with our initial funding. The amount
of this cash payment was based on our and Hewlett-Packard's balance sheets at
July 31, 1999. The final amount of our initial funding will be adjusted,
primarily based on our and Hewlett-Packard's balance sheets at October 31,
1999. See "Arrangements between Agilent Technologies and Hewlett-Packard--
Master Separation and Distribution Agreement."
DIVIDEND POLICY
We currently intend to retain any future earnings to fund the development
and growth of our business. Therefore, other than the dividend of the net
proceeds of this offering to Hewlett-Packard, we do not anticipate paying any
cash dividends in the foreseeable future.
23
<PAGE>
CAPITALIZATION
Set forth below is our actual capitalization at July 31, 1999, our
unaudited pro forma capitalization that gives effect to the pro forma
adjustments described in "Unaudited Pro Forma Condensed Financial Statements,"
and our unaudited pro forma as adjusted capitalization that gives further
effect to the receipt and application of the net proceeds of this offering.
You should read the information set forth below together with "Selected
Financial Data," "Unaudited Pro Forma Condensed Financial Statements," our
historical consolidated financial statements and the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
July 31, 1999
-------------------------
Pro Pro Forma
Actual Forma As Adjusted
------ ------ -----------
(in millions)
<S> <C> <C> <C>
Stockholders' equity:
Preferred stock..................................... $ -- $ -- $ --
Common stock........................................ 4 4 4
Additional paid-in capital.......................... 3,216 4,264 4,264
------ ------ ------
Total stockholders' equity........................ 3,220 4,268 4,268
------ ------ ------
Total capitalization.............................. $3,220 $4,268 $4,268
====== ====== ======
</TABLE>
24
<PAGE>
SELECTED FINANCIAL DATA
The following table presents our selected historical financial data. The
information set forth below should be read in conjunction with "Unaudited Pro
Forma Condensed Financial Statements," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our historical
consolidated financial statements and notes thereto included elsewhere in this
prospectus. The consolidated statement of earnings data set forth below for
the years ended October 31, 1996, 1997 and 1998 and the nine month period
ended July 31, 1999 and the consolidated balance sheet data as of October 31,
1997 and 1998 and July 31, 1999 are derived from, and are qualified by
reference to, our audited consolidated financial statements included elsewhere
in this prospectus. The consolidated statement of earnings data for the years
ended October 31, 1994 and 1995 and the consolidated balance sheet data as of
October 31, 1994, 1995 and 1996 are derived from our unaudited consolidated
financial data that is not included in this prospectus. The consolidated
statement of earnings data for the nine month period ended July 31, 1998 are
derived from unaudited consolidated financial statements included elsewhere in
this prospectus and, in the opinion of management, include all adjustments,
consisting only of normal and recurring accruals, that are necessary for a
fair presentation of our consolidated financial position and results of
operations for these periods.
The historical financial information may not be indicative of our future
performance and does not reflect what our financial position and results of
operations would have been had we operated as a separate, stand-alone entity
during the periods presented. Statement of earnings data for the year ended
October 31, 1998 include pre-tax restructuring charges of approximately $163
million. Of this amount, cost of products and services includes $138 million,
research and development includes $7 million and selling, general and
administrative includes $18 million. See Note 8 of notes to consolidated
financial statements.
Our net revenue presented below differs from the net revenue associated
with our businesses previously reported by Hewlett-Packard primarily because
intercompany sales to Hewlett-Packard are accounted for as third-party
transactions in the financial data below, but have been eliminated in
information previously reported by Hewlett-Packard.
<TABLE>
<CAPTION>
Nine Months
Ended July
Years Ended October 31, 31,
-------------------------------------- --------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ ------
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Earnings Data:
Net revenue............. $5,546 $6,595 $7,379 $7,785 $7,952 $5,965 $5,883
Costs and expenses:
Cost of products and
services.............. 2,860 3,335 3,901 4,126 4,512 3,245 3,096
Research and
development........... 692 765 805 880 948 699 705
Selling, general and
administrative........ 1,473 1,654 1,798 1,909 2,050 1,532 1,546
------ ------ ------ ------ ------ ------ ------
Total costs and
expenses............. 5,025 5,754 6,504 6,915 7,510 5,476 5,347
------ ------ ------ ------ ------ ------ ------
Earnings from
operations............. 521 841 875 870 442 489 536
Other income (expense),
net.................... (87) (62) (21) (47) (46) (14) 27
------ ------ ------ ------ ------ ------ ------
Earnings before taxes... 434 779 854 823 396 475 563
Provision for taxes..... 152 280 312 280 139 167 197
------ ------ ------ ------ ------ ------ ------
Net earnings............ $ 282 $ 499 $ 542 $ 543 $ 257 $ 308 $ 366
====== ====== ====== ====== ====== ====== ======
Basic and diluted net
earnings per share..... $ .74 $ 1.31 $ 1.43 $ 1.43 $ .68 $ .81 $ .96
====== ====== ====== ====== ====== ====== ======
Average shares used in
computing basic and
diluted net earnings
per share.............. 380 380 380 380 380 380 380
====== ====== ====== ====== ====== ====== ======
Unaudited pro forma net
earnings per share:
Basic.................. $ .59 $ .84
====== ======
Diluted................ $ .57 $ .82
====== ======
Average shares used in
computing unaudited pro
forma net earnings per
share:
Basic.................. 437 437
====== ======
Diluted................ 451 449
====== ======
</TABLE>
<TABLE>
<CAPTION>
October 31,
---------------------------------- July 31,
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ --------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Working capital.................... $1,331 $1,388 $1,449 $1,408 $1,476 $1,789
Total assets....................... 3,925 4,454 4,720 5,006 4,987 5,050
Stockholder's equity............... 2,666 2,829 2,998 3,110 3,022 3,220
</TABLE>
25
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma condensed financial statements set forth below
consist of an unaudited pro forma condensed balance sheet as of July 31, 1999
and an unaudited pro forma condensed statement of earnings for the year ended
October 31, 1998 and the nine months ended July 31, 1999. The unaudited pro
forma condensed balance sheet has been prepared assuming that Hewlett-Packard
provided our planned initial funding and that the pending purchase of Yokogawa
Electric Corporation's 25% interest in Hewlett-Packard Japan was completed on
July 31, 1999. See Note 12 to our historical consolidated financial statements
included elsewhere in this prospectus. The "Pro Forma As Adjusted" amounts
also assume that the proceeds from the offering had been received and the
related dividend to Hewlett-Packard had been paid on July 31, 1999.
The unaudited pro forma condensed statement of earnings has been prepared
assuming that the pending purchase of Yokogawa's 25% interest and the offering
occurred on November 1, 1997. The unaudited pro forma condensed balance sheet
is not intended to represent what our financial position would actually have
been had these events occurred on July 31, 1999 or to project our financial
position for any future date. Similarly, the unaudited pro forma condensed
statement of earnings is not intended to represent what our operating results
would actually have been for the periods indicated or to project our operating
results for any future period. We do not expect that the incremental costs
related to our transitional services agreements with Hewlett-Packard will be
material to our consolidated financial statements. Other changes to our cost
structure resulting from our separation from Hewlett-Packard are not
determinable. The pro forma adjustments are based upon currently available
information and certain assumptions that management believes are reasonable.
These unaudited pro forma condensed financial statements should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
notes thereto included elsewhere in this prospectus.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
July 31, 1999
---------------------------------------------------------------------
Adjustments Adjustments
for Initial Adjustments for the Pro Forma
Actual Funding for Purchase Pro Forma Offering As Adjusted
------ ----------- ------------ --------- ----------- -----------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $ -- $1,080 (A) $ -- $1,080 $ 1,108 (C) $1,080
(1,108)(C)
Accounts receivable.... 1,297 (894)(A) -- 403 -- 403
Inventory.............. 1,597 -- -- 1,597 -- 1,597
Other current assets... 362 1 (A) -- 363 -- 363
------ ------ ---- ------ ------- ------
Total current assets... 3,256 187 -- 3,443 -- 3,443
Property, plant and
equipment, net......... 1,378 -- 56 (B) 1,434 -- 1,434
Other assets............ 416 -- 302 (B) 718 -- 718
------ ------ ---- ------ ------- ------
Total assets........... $5,050 $ 187 $358 $5,595 $ -- $5,595
====== ====== ==== ====== ======= ======
Liabilities and
stockholders' equity
Current liabilities:
Accounts payable....... $ 426 $(293)(A) $ -- $ 133 $ -- $ 133
Employee compensation
and benefits.......... 484 (171)(A) -- 313 -- 313
Deferred revenue....... 244 -- -- 244 -- 244
Other accrued
liabilities........... 313 (30)(A) -- 283 -- 283
------ ------ ---- ------ ------- ------
Total current
liabilities........... 1,467 (494) -- 973 -- 973
Other liabilities....... 363 8 (A) (17)(B) 354 -- 354
Stockholders' equity:
Preferred stock........ -- -- -- -- -- --
Common stock........... 4 -- -- 4 -- 4
Additional paid-in
capital............... 3,216 673 (A) 375 (B) 4,264 -- 4,264
------ ------ ---- ------ ------- ------
Total stockholders'
equity................ 3,220 673 375 4,268 -- 4,268
------ ------ ---- ------ ------- ------
Total liabilities and
stockholders' equity.. $5,050 $ 187 $358 $5,595 $ -- $5,595
====== ====== ==== ====== ======= ======
</TABLE>
26
<PAGE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
Nine Months Ended July 31,
Year Ended October 31, 1998 1999
------------------------------ -----------------------------
Adjustments Adjustments
for for
Actual Purchase Pro Forma Actual Purchase Pro Forma
------ ----------- --------- ------ ----------- ---------
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net revenue:
Products............... $6,794 $ -- $6,794 $4,944 $ -- $4,944
Services............... 1,158 -- 1,158 939 -- 939
------ ---- ------ ------ ---- ------
Total net revenue.... 7,952 -- 7,952 5,883 -- 5,883
------ ---- ------ ------ ---- ------
Costs and expenses:
Cost of products....... 3,807 -- 3,807 2,525 -- 2,525
Cost of services....... 705 -- 705 571 -- 571
Research and
development........... 948 -- 948 705 -- 705
Selling, general and
administrative........ 2,050 30 (D) 2,080 1,546 23 (D) 1,569
------ ---- ------ ------ ---- ------
Total costs and
expenses.............. 7,510 30 7,540 5,347 23 5,370
------ ---- ------ ------ ---- ------
Earnings from
operations............. 442 (30) 412 536 (23) 513
Other income (expense),
net.................... (46) 5 (E) (41) 27 2 (E) 29
------ ---- ------ ------ ---- ------
Earnings before taxes... 396 (25) 371 563 (21) 542
Provision for taxes..... 139 -- 139 197 -- 197
------ ---- ------ ------ ---- ------
Net earnings............ $ 257 $(25) $ 232 $ 366 $(21) $ 345
====== ==== ====== ====== ==== ======
Net earnings per share:
Basic.................. $ .68 $ .53 (F) $ .96 $ .79 (F)
====== ====== ====== ======
Diluted................ $ .68 $ .51 (F) $ .96 $ .77 (F)
====== ====== ====== ======
Average shares used in
computing net earnings
per share:
Basic.................. 380 437 (F) 380 437 (F)
====== ====== ====== ======
Diluted................ 380 451 (F) 380 449 (F)
====== ====== ====== ======
</TABLE>
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(A) Reflects our initial funding from Hewlett-Packard as if it had occurred on
July 31, 1999. In November 1999, Hewlett-Packard made a cash payment to us
of $1.08 billion based on our and Hewlett-Packard's balance sheets at July
31, 1999. In conjunction with this initial funding, Hewlett-Packard
retained some of our assets and liabilities, including most of our
accounts receivable and accounts payable, accrued payroll and related
items and taxes payable, except deferred taxes. In addition, Hewlett
Packard transferred to us some of the assets and liabilities related to
its business, including some of the accounts receivable, accounts payable
and other liabilities of Hewlett-Packard Japan. The final amount of our
initial funding from Hewlett-Packard will be adjusted, primarily based on
our and Hewlett-Packard's balance sheets as of October 31, 1999.
(B) Reflects our pending purchase of Yokogawa's 25% interest in Hewlett-
Packard Japan, which will be funded by Hewlett-Packard. For purposes of
this pro forma presentation, management has allocated $375 million of the
Hewlett-Packard Japan purchase price to our business and we have allocated
this amount as follows: minority interest--$17 million, land--$56 million
and goodwill--$302 million.
(C) Reflects the net proceeds from the offering and the subsequent payment of
the dividend to Hewlett-Packard, assuming no exercise of the U.S.
underwriters' over-allotment option.
(D) Reflects amortization of the goodwill created from the pending purchase of
Yokogawa's 25% interest in Hewlett-Packard Japan over 10 years.
(E) Reflects the elimination of Yokogawa's share of earnings in Hewlett-
Packard Japan.
(F) Pro forma basic net earnings per share is calculated based on common stock
outstanding of 437,000,000 shares upon completion of the offering, as the
proceeds of this offering will be distributed to Hewlett-Packard. Pro
forma diluted net earnings per share assumes that 50% of the outstanding
Hewlett-Packard options held by Agilent Technologies' employees are
assumed by Agilent Technologies. The actual number of Hewlett-Packard
options assumed by Agilent Technologies will not be determined until
individual employees make an election to amend their Hewlett-Packard
options in January 2000. See "Arrangements Between Agilent Technologies
and Hewlett-Packard--Employee Matters Agreement." In 1998, unaudited pro
forma diluted net earnings per share would be $.50 if 100% of the
outstanding Hewlett-Packard options are assumed and $.53 if 0% of the
outstanding Hewlett-Packard options are assumed. In the nine months ended
July 31, 1999, unaudited pro forma diluted net earnings per share would be
$.76 if 100% of the outstanding Hewlett-Packard options are assumed and
$.78 if 0% of the outstanding Hewlett-Packard options are assumed.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this
prospectus. The following discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially
from the results contemplated by these forward-looking statements due to
certain factors, including those discussed below and elsewhere in this
prospectus.
Overview
Separation from Hewlett-Packard
On March 2, 1999, Hewlett-Packard announced a plan to create a separate
company, subsequently named Agilent Technologies, that comprises Hewlett-
Packard's test and measurement, semiconductor products, healthcare solutions
and chemical analysis businesses, related portions of Hewlett-Packard
Laboratories, and associated infrastructure. After the completion of this
offering, Hewlett-Packard will own approximately 87.0% of our outstanding
common stock, assuming no exercise of the U.S. underwriters' over-allotment
option. Hewlett-Packard has also announced its intention to distribute to its
stockholders all of its remaining interest in us by the middle of calendar
year 2000. Hewlett-Packard and we have entered into various agreements related
to certain interim and ongoing relationships between the two companies. For a
description of these agreements, see "Arrangements Between Hewlett-Packard and
Agilent Technologies."
Agilent Technologies' Businesses
We were incorporated in Delaware in May 1999 as a wholly owned subsidiary
of Hewlett-Packard. Our businesses historically have been operated as internal
units of Hewlett-Packard. Hewlett-Packard has agreed to transfer to us prior
to the completion of this offering, substantially all of the assets and
liabilities relating to our businesses. We expect that the transfer of these
assets and liabilities will be substantially complete by the closing date of
this offering. In connection with our initial funding, Hewlett-Packard will
retain a portion of our assets and will transfer to us some of the assets and
liabilities related to its businesses. For a description of these retained
amounts, see "Unaudited Pro Forma Condensed Financial Statements."
We have entered into agreements with Hewlett-Packard under which Hewlett-
Packard will provide services to us during a transition period after the
separation. The agreements relate primarily to building services, information
technology services and accounting and finance services. Under these
agreements, we will reimburse Hewlett-Packard for its cost of the service plus
5%. The transition period varies depending on the agreement but is generally
less than two years. Some of the agreements, including those for building
services and information technology services, may be extended beyond the
initial transition period. If these agreements are extended, we would
reimburse Hewlett-Packard at its cost plus 10% for information technology
services and most other services and at negotiated market rates for building
services. The agreements do not necessarily reflect the costs of obtaining the
services from unrelated third parties or of our providing the applicable
services ourselves. However, we believe that purchasing these services from
Hewlett-Packard provides us with an efficient means of obtaining these
services during the transition period. In addition, we will provide some
transition services to Hewlett-Packard, for which we will be reimbursed at our
cost plus 5%.
We must also negotiate new agreements with various third parties as a
separate, stand-alone entity. There can be no assurance that the terms we will
be able to negotiate for these agreements will be as favorable as those we
enjoyed as part of Hewlett-Packard. In addition, as part of Hewlett-Packard,
we benefited from various economies of scale including shared global
administrative functions, facilities and volume purchase discounts. We expect
that our costs and expenses will increase significantly as a result of the
loss of these economies of scale, although the amount is not determinable at
this time.
29
<PAGE>
Hewlett-Packard has been and is expected to continue to be a significant
customer. In 1998, sales to Hewlett-Packard represented approximately 9% of
our total net revenue and approximately 35% of the net revenue of our
semiconductor products business. In the first nine months of 1999, sales to
Hewlett-Packard represented approximately 10% of our total net revenue and
approximately 37% of the net revenue of our semiconductor products business.
Basis of Presentation
Our fiscal year end is October 31 and our fiscal quarters end on January
31, April 30 and July 31. Unless otherwise stated, all years and dates refer
to our fiscal year and fiscal periods.
Our consolidated financial statements have been carved out from the
consolidated financial statements of Hewlett-Packard using the historical
results of operations and historical bases of the assets and liabilities of
the Hewlett-Packard businesses that our company comprises. The consolidated
financial statements also include allocations to us of certain Hewlett-Packard
corporate assets, including pension assets; liabilities, including profit
sharing, pension and non-qualified deferred compensation obligations; and
expenses, including centralized research and development, legal, accounting,
employee benefits, real estate, insurance services, information technology
services, treasury and other Hewlett-Packard corporate and infrastructure
costs. The expense allocations have been determined on bases that Hewlett-
Packard and we considered to be a reasonable reflection of the utilization of
the services provided to us or the benefit received by us. The expense
allocation methods included relative sales, headcount, square footage,
transaction processing costs, adjusted operating expenses and others.
The financial information presented in this prospectus is not indicative of
our financial position, results of operations or cash flows in the future nor
is it necessarily indicative of what our financial position, results of
operations or cash flows would have been had we been a separate, stand-alone
entity for the periods presented. The financial information presented in this
prospectus does not reflect the many significant changes that will occur in
our funding and operations as a result of our becoming a stand-alone entity,
the offering and the distribution.
1998 Restructuring
During 1998, we committed to transfer the production of eight-inch
semiconductor wafers to a third party contractor. A major factor in our
decision to transfer this production was our desire to avoid significant and
escalating future investments required to remain state-of-the-art in
semiconductor manufacturing. We also undertook employee reductions through
voluntary severance programs related to this transfer as well as consolidation
of some operations and general employee reductions in each of our four
business segments. Approximately 1,650 employees accepted the voluntary
severance incentive packages by the October 31, 1998 deadline. Of these
employees, approximately 80% were in manufacturing or other positions included
in cost of products and services. We recorded pre-tax charges of approximately
$163 million related to these restructuring actions. Of this amount, $138
million was included in cost of products, $7 million was included in research
and development expense and $18 million was included in selling, general and
administrative expense in the 1998 consolidated statement of earnings. The
restructuring costs included approximately $78 million related to employee
severance under the voluntary severance incentive plans, of which we had paid
$67 million as of July 31, 1999. The restructuring costs also included $85
million related to non-cash asset impairments primarily for equipment. Of the
equipment impairment charge, $39 million was attributable to equipment
abandoned at the time of the charge, which was written down to its net
realizable value. An additional $46 million was attributable to equipment that
remained in service for a transition period to facilitate the transfer to the
third party contractor. This equipment was written down to its estimated fair
value, including depreciation expense for the value of using the equipment
during the transition period and the estimated amount to be realized upon the
sale of the used equipment at the end of the transition period.
30
<PAGE>
Future benefits from the restructuring, which we expect to total
approximately $80 million in 1999, will be reflected primarily in cost of
products and, to a lesser extent, in operating expenses. Through July 31,
1999, we had realized benefits from the restructuring of approximately $60
million. We believe that future benefits from the restructuring will be more
than offset by additional costs that we will incur as we begin to operate as a
separate, stand-alone entity.
Cyclical Business
Many of the industries and markets into which we sell our products and
services are cyclical, causing a corresponding impact on our financial
results. Shifts in the semiconductor market, electronics industry and computer
industry, as well as rapidly shifting global economic conditions, have had
significant impacts on our business. Additionally, as a capital equipment
provider, our revenue is driven by the capital expenditure budgets and
spending patterns of our customers who often delay or accelerate purchases in
reaction to variations in their business. We expect our business to remain
cyclical when we operate as a separate, stand-alone entity. Given that a high
proportion of our costs are fixed, variability in revenue as a result of these
business cycles could disproportionately affect our quarterly and annual
results.
Economic Conditions in Asia
Beginning in the second half of 1998 and continuing into the first half of
1999, our revenue and operating results declined as a result of the downturn
in Asian economies, particularly Korea and Japan. Many of our major customers,
particularly those in the semiconductor and electronics industries, delayed or
canceled purchases of our products. This had a significant impact on us,
particularly our test and measurement business.
Impact of Foreign Currencies
We sell our products in many countries and a substantial portion of our
sales and a portion of our costs and expenses are denominated in foreign
currencies, especially in the Japanese yen and the German mark. In 1997
compared to 1996 and in 1998 compared to 1997, the U.S. dollar strengthened
significantly against the Japanese yen and the German mark. This had an
adverse affect on our net revenue growth and a favorable impact on our
operating expense growth in these periods. In the first nine months of 1999
compared to the first nine months of 1998, the U.S. dollar weakened against
these currencies, which had a favorable impact on our net revenue growth and
an adverse effect on our operating expense growth. Our currency exposures
historically have been hedged as part of Hewlett-Packard's global hedging
program, which is designed to minimize exposure to foreign currency
fluctuations. We expect to implement a similar hedging program upon our
separation from Hewlett-Packard.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments and
requires recognition of all derivatives as assets or liabilities in our
balance sheet and measurement of those instruments at fair value. The
statement is effective for fiscal years beginning after June 15, 2000. We will
adopt the standard no later than the first quarter of fiscal year 2001 and we
are in the process of determining the impact that adoption will have on our
consolidated financial statements.
31
<PAGE>
Results of Operations
Nine months ended July 31, 1998 and 1999
Our results of operations for the nine months ended July 31, 1998 and 1999
in dollars and as a percentage of total net revenue follow.
<TABLE>
<CAPTION>
Nine Months Ended July
31,
---------------------------
As a
Percentage
of Total
Dollars Net Revenue
-------------- ------------
1998 1999 1998 1999
------ ------ ----- -----
(in millions)
<S> <C> <C> <C> <C>
Net revenue:
Products....................................... $5,115 $4,944 85.8% 84.0%
Services....................................... 850 939 14.2 16.0
------ ------ ----- -----
Total net revenue................................ 5,965 5,883 100.0 100.0
------ ------ ----- -----
Costs and expenses:
Cost of products............................... 2,716 2,525 45.5 42.9
Cost of services............................... 529 571 8.9 9.7
Research and development....................... 699 705 11.7 12.0
Selling, general and administrative............ 1,532 1,546 25.7 26.3
------ ------ ----- -----
Total costs and expenses..................... 5,476 5,347 91.8 90.9
------ ------ ----- -----
Earnings from operations......................... 489 536 8.2 9.1
Other income (expense), net...................... (14) 27 (.2) .5
------ ------ ----- -----
Earnings before taxes............................ 475 563 8.0 9.6
Provision for taxes.............................. 167 197 2.8 3.4
------ ------ ----- -----
Net earnings..................................... $ 308 $ 366 5.2% 6.2%
====== ====== ===== =====
Cost of products as a percentage of products
revenue......................................... 53.1% 51.1%
Cost of services as a percentage of services
revenue......................................... 62.2 60.8
</TABLE>
Net revenue
Net revenue consists of revenue from sales of products and services net of
trade discounts and allowances and includes revenue from sales to Hewlett-
Packard. We recognize revenue from product sales at the time we ship the
product to the customer or on installation and customer acceptance, if the
acceptance criteria are substantive. Services include hardware and software
support and maintenance, operating leases, consulting and education. We
recognize revenue from services over the contractual period or as services are
rendered and accepted by the customer.
Our total net revenue decreased 1.4% in the first nine months of 1999
compared to the first nine months of 1998. Total net revenue in the third
quarter of 1999 increased 3.8% over the second quarter of 1999 and 16.9% over
the first quarter of 1999, reflecting improvement in economic conditions in
Asia and strengthening in the semiconductor industry in general.
In the first nine months of 1999, net revenue from products decreased 3.3%
while net revenue from services increased 10.5% compared to the first nine
months of 1998. Although services revenue increased while product revenue
decreased in the first nine months of 1999, we do not anticipate that this
dynamic will continue in future periods, as we expect improving economic
conditions and a strengthening semiconductor industry to result in product
revenue growth. In 1999, U.S. revenue decreased 2.1% to $2.7 billion while
international revenue decreased .8% to $3.2 billion. International revenue was
negatively affected by the ongoing weakness in economic conditions throughout
Asia, particularly in Korea and Japan, and particularly in the first quarter
of 1999. Many of our United States customers were also negatively affected by
conditions in Asia. General weakness in the semiconductor industry also
negatively affected our revenue. These effects were particularly significant
in our test and measurement business.
32
<PAGE>
Earnings from operations
Earnings from operations increased 9.6% in the first nine months of 1999
compared to the first nine months of 1998. In 1999, first quarter earnings
from operations decreased 62.0% while second quarter earnings from operations
increased 75.2% and third quarter earnings from operations increased 126.7%
compared to the same periods in 1998. The increase in earnings from operations
in the first nine months of 1999 was due to a decrease in costs of
approximately $60 million resulting from the 1998 restructuring partially
offset by lower net revenue.
Cost of products and services consists of costs of manufacturing products
and providing services. These include materials, costs of third party contract
manufacturers, salaries and related expenses for manufacturing and service
personnel, distribution costs, warranty costs, depreciation of manufacturing
equipment and overhead allocations for facilities expenses and information
technology services.
Cost of products and services as a percentage of net revenue decreased 1.8
percentage points in the first nine months of 1999 from the first nine months
of 1998. All four of our business segments recorded improvement in cost of
products and services as a percentage of net revenue with semiconductor
products accounting for the most significant improvement due primarily to cost
improvements resulting from the 1998 restructuring.
Operating expenses include research and development and selling, general
and administrative expenses. Research and development includes salaries and
related expenses of engineers and related engineering support personnel,
initial tooling, project materials, depreciation on equipment used in research
and development and an allocation of facilities expenses and information
technology services. Selling, general and administrative expenses include
salaries and related expenses for sales, account management, marketing,
administrative, finance, legal, human resources and executive personnel,
commissions, costs and expenses for marketing programs and trade shows, fees
for professional services, costs of accounting and internal control systems,
costs of patents, goodwill amortization and allocations for facilities
expenses and information technology services.
As a percentage of net revenue, operating expenses increased by .9
percentage points in the first nine months of 1999 compared to the first nine
months of 1998 as a result of lower net revenue combined with slightly higher
expenses. Research and development expenses and selling, general and
administrative expenses each increased less than 1% in the first nine months
of 1999 compared to the same period of 1998. Operating expense reductions
resulting from the 1998 restructuring enabled us to keep selling, general and
administrative expense growth at less than 1% even though we began to incur
transition costs related to our becoming a separate, stand-alone entity. These
transition costs are expected to more than offset future benefits of the 1998
restructuring and will continue over the next twelve to eighteen months,
including significant expenditures related to advertising and product
branding. In addition, we expect operating expenses, primarily infrastructure
costs, to increase as a result of our operating as a separate, stand-alone
entity, and this increase is expected to be significant in 2000.
Other income (expense), net, includes foreign currency exchange gains and
losses, gains and losses on divestitures and other non-operating gains and
losses.
Other income (expense), net, increased $41 million to income of $27 million
in the first nine months of 1999 from expense of $14 million in the first nine
months of 1998. Included in the first nine months of 1999 is a gain of $18
million related to the divestiture of our photomask operations in November
1998.
Our effective tax rate, calculated on a separate return basis, for the
first nine months of 1999 was 35.0%. The rate is based on estimates of our
earnings before taxes in the various tax jurisdictions in which we operate
throughout the world. While changes in our mix of earnings before taxes in
these tax jurisdictions can cause our effective tax rate to fluctuate, we
currently expect our effective tax rate to remain at 35% for the remainder of
1999 and in 2000.
33
<PAGE>
Test and Measurement
<TABLE>
<CAPTION>
Nine Months Ended
July 31,
------------------
1998 1999
-------- --------
(dollars in
millions)
<S> <C> <C>
Net revenue.............................................. $ 3,098 $ 2,856
Earnings from operations................................. 332 273
As a percentage of net revenue........................... 10.7% 9.6%
</TABLE>
Net revenue
Net revenue from our test and measurement business decreased 7.8% in the
first nine months of 1999 compared to the first nine months of 1998 primarily
due to the impact on our customers of the economic conditions in Asia and the
broad downturn in the semiconductor industry. Revenue from sales of products
to our customers in Asia was approximately 30% of our test and measurement
business' net revenue in both the first nine months of 1999 and the first nine
months of 1998. The net revenue decrease was partially offset by increased
sales of communications test products as a result of the rapidly growing
demand for greater bandwidth and new services.
Earnings from operations
Earnings from operations decreased 17.8% in the first nine months of 1999
from the first nine months of 1998 as a result of lower net revenue partially
offset by lower costs and expenses.
Cost of products and services as a percentage of net revenue decreased .7
percentage points in the first nine months of 1999 compared to the same period
of 1998. The decrease was due to cost savings resulting from the 1998
restructuring. This decrease was partially offset by the effect of lower
volumes of products sold, primarily wireless communication test equipment and
automated test equipment, and higher services revenue and the associated
higher cost of this revenue.
Operating expenses as a percentage of net revenue increased 2.0 percentage
points in the first nine months of 1999 compared to the first nine months of
1998 as a result of lower net revenue despite lower levels of expense.
Continued savings from cost reduction programs initiated in the second half of
1998 resulted in significant decreases in some components of both research and
development and selling, general and administrative expenses. Research and
development expenses decreased 3.9% in the first nine months of 1999 from the
first nine months of 1998. Selling, general and administrative expense
decreased 3.7% in the first nine months of 1999 compared to the same period of
1998.
Semiconductor Products
<TABLE>
<CAPTION>
Nine Months Ended
July 31,
------------------
1998 1999
-------- --------
(dollars in
millions)
<S> <C> <C>
Net revenue.............................................. $ 1,195 $ 1,230
Earnings from operations................................. 16 81
As a percentage of net revenue........................... 1.3% 6.6%
</TABLE>
Net revenue
Net revenue from our semiconductor products business increased 2.9% in the
first nine months of 1999 compared to the first nine months of 1998. This
increase was achieved despite the sale of the power amplifier business in late
1998. If net revenue in the first nine months of 1998 were adjusted to exclude
revenue of the power amplifier business, net revenue would have increased by
8.8% over the comparable prior period. Net revenue growth primarily reflects
increased shipments of fiber optic products, motion control products, high-
speed networking products and ASICs. Sales to Hewlett-Packard, consisting
primarily of ASICs and motion control products, accounted for 34.9% of net
revenue in the first nine months of 1998 and 37.4% of net revenue in the first
nine months of 1999.
34
<PAGE>
We expect projected annual net revenue from sales of precision
architecture-reduced instruction set computing (PA-RISC) microprocessors to
Hewlett-Packard to decline by approximately $50 million from 1999 to 2000 as
Hewlett-Packard purchases these products from an alternate supplier. We
currently do not expect to incur any incremental costs related to winding down
the microprocessor business. Although we expect that the loss of the revenue
associated with the microprocessor business will have a negative impact on our
net revenue growth rates in the short term, we believe this negative impact
will not have a material effect on our consolidated results of operations.
We have entered into a memorandum of understanding to expand our existing
joint venture relationship with Royal Philips Electronics, N.V. If this
transaction is completed, we expect to transfer a portion of our light-
emitting diode (LED) business into the joint venture. LEDs are used for
various lighting and display purposes. Since we will not have a majority
ownership interest in the joint venture, the revenue, costs and expenses of
the business to be transferred to the joint venture will no longer be
consolidated in our results. Instead, we will record our proportion of the
joint venture's net earnings or loss in other income (expense), net. Revenue
and results of operations of this portion of our LED business were not
material for the nine months ended July 31, 1999.
Earnings from operations
Earnings from operations from our semiconductor products business increased
406.3% in the first nine months of 1999 from the first nine months of 1998
primarily due to the cost savings resulting from the 1998 restructuring.
As a percentage of net revenue, cost of products decreased 4.4 percentage
points in the 1999 period compared to the 1998 period. A substantial portion
of this improvement was the result of the 1998 restructuring. Decreases in
cost of products also resulted from increased volumes in the ASIC business and
a more profitable product mix, specifically higher volumes of fiber optic
communications products, motion control devices and microprocessors. These
improvements were partially offset by a $51 million charge in the third
quarter of 1999 related to the writedown of a building that was under
construction for the intended purpose of housing manufacturing operations for
eight-inch semiconductor wafers. We committed to outsource eight-inch
semiconductor wafer production to a third-party contractor in October 1998.
The building shell was completed at the time construction was stopped. We
sought a semiconductor manufacturing partner to utilize the building for its
initial intended use. We exhausted these efforts without success. Accordingly,
we concluded that the highest fair value for this building is based on selling
it for use as an office or general use facility. Therefore, we have written
down the carrying value of the facility to the estimated amount to be realized
upon the sale of the building shell.
Operating expenses as a percentage of net revenue decreased .8 percentage
points in the first nine months of 1999 compared to the same period of 1998.
Research and development expenses increased 4.3% in the first nine months of
1999 from the first nine months of 1998 reflecting increased investments in
the fast growing fiber optics and high-speed networking businesses. Lower
marketing expenses largely accounted for the 4.5% decrease in selling, general
and administrative expense.
Healthcare Solutions
<TABLE>
<CAPTION>
Nine Months Ended
July 31,
------------------
1998 1999
-------- ---------
(dollars in
millions)
<S> <C> <C>
Net revenue.............................................. $ 988 $ 1,043
Earnings from operations................................. 54 86
As a percentage of net revenue......................... 5.5% 8.2%
</TABLE>
Net revenue
Net revenue from our healthcare solutions business increased 5.6% in the
first nine months of 1999 from the comparable period in 1998, primarily as a
result of strong sales in the third quarter of 1999. In the first nine
35
<PAGE>
months of 1999, growth in net revenue from cardiology products was moderated
by essentially unchanged net revenue from patient monitoring products and
supplies and a decline in net revenue from ultrasound imaging products.
Internal production constraints resulting from our transition to a new
enterprise resource planning system in November 1998 at our Andover,
Massachusetts facility contributed to the decline in revenue from the
ultrasound imaging products and the low growth rate in patient monitoring
revenue. The implementation of the new enterprise resource planning system is
now complete, and we do not anticipate further problems.
Earnings from operations
Earnings from operations from our healthcare solutions business increased
59.3% in the first nine months of 1999 compared to the first nine months of
1998 as a result of increased net revenue combined with decreased cost of
products and services, despite higher expenses.
As a percentage of net revenue, cost of products and services decreased 2.3
percentage points in the first nine months of 1999 compared to the 1998
period. The improvement was primarily due to lower overhead, lower product
installation costs and a more profitable product mix.
Operating expenses as a percentage of net revenue decreased .6 percentage
points in the first nine months of 1999 compared to the same period of 1998.
Research and development expenses increased 8.5% in the first nine months of
1999 from the first nine months of 1998 largely as a result of our efforts to
develop new automatic external defibrillator products. Selling, general and
administrative expense increased by 2.7% due to amortization of goodwill
associated with the Heartstream acquisition partially offset by lower selling
costs.
Chemical Analysis
<TABLE>
<CAPTION>
Nine Months Ended
July 31,
------------------
1998 1999
-------- --------
(dollars in
millions)
<S> <C> <C>
Net revenue.............................................. $ 684 $ 754
Earnings from operations................................. 57 99
As a percentage of net revenue......................... 8.3% 13.1%
</TABLE>
Net revenue
Net revenue from our chemical analysis business increased 10.2% in the
first nine months of 1999 over the first nine months of 1998. The net revenue
increase was generated by growth across all product lines and included a 15.8%
increase in services revenue. Demand within the pharmaceutical industry was
especially strong, leading to increased sales of our liquid chromatography
products. In addition, sales to our customers in Asia increased as economic
conditions in the region continue to improve.
Earnings from operations
Earnings from operations from our chemical analysis business increased
73.7% in the first nine months of 1999 compared to the same period of 1998
largely due to higher net revenue, partially offset by higher expenses.
Cost of products and services as a percentage of net revenue decreased 3.1
percentage points in the first nine months of 1999 compared to the first nine
months of 1998. Almost half of the improvement was due to greater efficiency
within the services business. The remainder of the improvement was driven
almost equally by higher volumes, greater manufacturing efficiencies in our
mass spectrometer and liquid chromatography product lines and lower warranty
costs as a result of improved product reliability.
Operating expenses as a percentage of net revenue decreased 1.7 percentage
points in the first nine months of 1999 compared to the same period of 1998
primarily as a result of higher net revenue. Research and
36
<PAGE>
development expense increased 14.0% in the first nine months of 1999 from the
first nine months of 1998 because of increased investment in our microfluidics
program. Microfluidics is the manipulation of minute quantities of fluids for
research purposes. Selling, general and administrative expense increased 3.1%
in the first nine months of 1999 compared to the same period of 1998. These
expenses grew at a much slower rate than net revenue due to continuing efforts
to control expenses.
Years ended October 31, 1996, 1997 and 1998
Our results of operations for the years ended October 31, 1996, 1997 and
1998 in dollars and as a percentage of total net revenue follow.
<TABLE>
<CAPTION>
Years Ended October 31,
-------------------------------------------
As a Percentage
of
Dollars Total Net Revenue
---------------------- -------------------
1996 1997 1998 1996 1997 1998
------ ------ ------ ----- ----- -----
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Net revenue:
Products........................ $6,440 $6,754 $6,794 87.3% 86.8% 85.4%
Services........................ 939 1,031 1,158 12.7 13.2 14.6
------ ------ ------ ----- ----- -----
Total net revenue.............. 7,379 7,785 7,952 100.0 100.0 100.0
------ ------ ------ ----- ----- -----
Costs and expenses:
Cost of products................ 3,327 3,455 3,807 45.1 44.4 47.9
Cost of services................ 574 671 705 7.8 8.6 8.8
Research and development........ 805 880 948 10.9 11.3 11.9
Selling, general and
administrative................. 1,798 1,909 2,050 24.3 24.5 25.8
------ ------ ------ ----- ----- -----
Total costs and expenses....... 6,504 6,915 7,510 88.1 88.8 94.4
------ ------ ------ ----- ----- -----
Earnings from operations......... 875 870 442 11.9 11.2 5.6
Other income (expense), net...... (21) (47) (46) (.4) (.6) (.6)
------ ------ ------ ----- ----- -----
Earnings before taxes............ 854 823 396 11.5 10.6 5.0
Provision for taxes.............. 312 280 139 4.2 3.6 1.8
------ ------ ------ ----- ----- -----
Net earnings..................... $ 542 $ 543 $ 257 7.3% 7.0% 3.2%
====== ====== ====== ===== ===== =====
Cost of products as a percentage
of products revenue............. 51.7% 51.2% 56.0%
Cost of services as a percentage
of services revenue............. 61.1 65.1 60.9
</TABLE>
Net revenue
Our total net revenue increased 5.5% in 1997 from 1996 and 2.1% in 1998
from 1997. The increase in 1997 from 1996 was driven primarily by our test and
measurement business, which contributed over half of our total net revenue.
The increase in 1998 from 1997 reflects improvements from our other three
businesses, substantially offset by decreased revenue in our test and
measurement business. United States revenue increased 2.1% to $3.4 billion in
1997 and increased 6.6% in 1998 to $3.6 billion. International revenue
increased 8.3% to $4.4 billion in 1997 and decreased 1.3% to $4.3 billion in
1998. Economic conditions in Asia adversely affected revenue from sales of our
products and services to customers in Japan and Korea, particularly in the
last three quarters of 1998, and also reduced revenue from other parts of the
world. Our product revenue was also affected by the global weakness in the
semiconductor industry. Product revenue increased 4.9% in 1997 from 1996 and
was essentially unchanged in 1998 from 1997. Revenue from services grew 9.8%
in 1997 from 1996 and 12.3% in 1998 from 1997 as a result of increases in our
installed base, primarily in test and measurement.
Earnings from operations
Earnings from operations was essentially unchanged in 1997 from 1996 and
decreased 49.2% in 1998 from 1997. Slightly higher net revenue in 1998 as
compared to 1997 was offset by significantly higher costs and expenses,
including the charges related to the 1998 restructuring.
37
<PAGE>
As a percentage of net revenue, cost of products and services was
essentially unchanged in 1997 from 1996 and increased 3.7 percentage points in
1998 from 1997. The increase in 1998 was a result of lower volumes and less
profitable product mix in the test and measurement business and costs
associated with the 1998 restructuring.
Operating expenses as a percentage of net revenue increased .6 percentage
points in 1997 from 1996 and 1.9 percentage points in 1998 from 1997. The
increase in 1997 and 1998 reflects higher expenses offset by higher net
revenue.
Research and development expenses increased 9.3% in 1997 compared to 1996
and 7.7% in 1998 compared to 1997. The increases in 1997 and 1998 reflect
ongoing investments in new products and new technologies, primarily in test
and measurement and semiconductor products. Selling, general and
administrative expenses grew 6.2% in 1997 and 7.4% in 1998. The 1998 increase
reflects the acquisition of Heartstream. For both years, the expense growth
reflects increased selling costs related to revenue growth and increased
marketing program costs associated with our continued introduction of new
products and the expansion of our support capabilities. The growth rate in
operating expenses, exclusive of the 1998 restructuring costs, decreased
significantly in the second half of 1998 due to our cost reduction programs
that reduced certain variable costs such as travel and discretionary marketing
programs.
In 1998, other income (expense), net, included a charge of $37 million
related to the write-down of an investment in convertible preferred stock of a
medical products company to its fair value because we concluded its impairment
was not temporary. This conclusion was based on the company's continuing poor
financial performance and recent equity transactions by the company with a
third party.
Our effective tax rate was 36.5% in 1996, 34.0% in 1997 and 35.0% in 1998.
The primary reason for the fluctuation in our tax rate is the change in the
mix of our earnings in various tax jurisdictions throughout the world.
Test and Measurement
<TABLE>
<CAPTION>
Years Ended October 31,
-------------------------
1996 1997 1998
------- ------- -------
(dollars in millions)
<S> <C> <C> <C>
Net revenue....................................... $ 3,823 $ 4,203 $ 4,100
Earnings from operations.......................... 606 674 348
As a percentage of net revenue................... 15.9% 16.0% 8.5%
</TABLE>
Net revenue
Net revenue from our test and measurement business grew 9.9% in 1997 from
1996 and declined 2.5% in 1998 from 1997. The increase in 1997 from 1996
primarily reflected significant growth in sales to global wireless
communications customers. Additional revenue growth resulted from investments
in increased capacity and capability by contract manufacturers, which resulted
in increased sales of our automated semiconductor test and automated
manufacturing test products. Sales of our communications test systems and
instruments also increased.
Results in 1998 reflected weak economic conditions in Asia, which
represented approximately 31% of test and measurement's total net revenue in
1998 compared to approximately 36% in 1997 and approximately 36% in 1996. A
slowdown in the semiconductor industry in mid-1998, which was partially caused
by the economic conditions in Asia, also reduced our revenue growth.
Competitive pressure increased because of these conditions and in some cases,
we granted higher than normal pricing discounts and allowances. These revenue
trends were partially offset by increased sales of products for development
and deployment of higher bandwidth and optical networks. In addition, services
revenue increased 18.6% in 1998 from 1997.
Earnings from operations
Earnings from operations from our test and measurement business increased
11.2% in 1997 from 1996 and decreased 48.4% in 1998 from 1997. The increase in
1997 from 1996 primarily reflects higher net revenue. The
38
<PAGE>
decrease in 1998 from 1997 reflects a combination of lower net revenue and
higher costs and expenses, including the costs of the 1998 restructuring.
Cost of products and services as a percentage of net revenue decreased .6
percentage points in 1997 from 1996. Most of this improvement was caused by
higher volumes in 1997, primarily in communications products and electronic
instruments. Cost of products and services as a percentage of net revenue
increased 3.3 percentage points from 1997 to 1998. The increase was
substantially attributable to lower volumes and less profitable product mix,
primarily in wireless communications products and automated test equipment.
Cost of products in 1998 included restructuring charges for employee severance
and higher excess inventory write-offs across all product lines, as a result
of the weak economic conditions in Asia and the timing of new product
introductions. These charges increased cost of products and services by 1.1
percentage points.
Operating expenses as a percentage of net revenue increased .4 percentage
points in 1997 from 1996 and 4.3 percentage points in 1998 from 1997. The
increase in 1997 from 1996 was due to higher expenses only partially offset by
higher net revenue. The increase in 1998 from 1997 was due to a combination of
lower net revenue and higher expenses.
Research and development expense increased 15.2% in 1997 from 1996 and
10.0% in 1998 from 1997. The expense growth in 1997 from 1996 resulted from
the accelerated development of products for the wireless communications
market. The increase in 1998 from 1997 reflects our ongoing investment in new
products. Selling, general and administrative expense increased 9.3% in 1997
from 1996 and 7.4% in 1998 from 1997. The increase in 1997 from 1996 was
driven by marketing investments in the wireless communications market, as well
as new marketing efforts focused on Internet service providers. In 1998, our
cost reduction programs slowed overall expense growth and significantly
decreased some variable operating costs. However, this was partially offset by
1998 restructuring charges for employee severance costs.
Semiconductor Products
<TABLE>
<CAPTION>
Years Ended October 31,
-------------------------
1996 1997 1998
------- ------- -------
(dollars in millions)
<S> <C> <C> <C>
Net revenue...................................... $ 1,470 $ 1,479 $ 1,574
Earnings (loss) from operations.................. 125 57 (106)
As a percentage of net revenue.................. 8.5% 3.9% (6.7)%
</TABLE>
Net revenue
Net revenue from our semiconductor products business was essentially
unchanged in 1997 from 1996 and increased 6.4% in 1998 from 1997. Our sales of
ASICs and microprocessors in 1997 were lower as compared to 1996 because
Hewlett-Packard shipped fewer workstations using these components in the first
half of 1997. This decrease was offset by strong growth in shipments of fiber
optics and high-speed networking products. The strong revenue growth in these
two areas continued into 1998. In addition, shipments in 1998 of integrated
circuits increased significantly over 1997 due to increased sales to Hewlett-
Packard. In the second half of 1998, revenue growth slowed due to customer
anticipation of the divestiture of the power amplifier business and the
decline in the wireless communications semiconductor business in Asia. Revenue
from sales to Hewlett-Packard was 32.8% of net revenue in 1996, 34.2% of net
revenue in 1997 and 34.5% of net revenue in 1998.
Earnings from operations
Earnings from operations from our semiconductor products business decreased
54.4% in 1997 from 1996 and 286.0% in 1998 from 1997. The decrease in 1997
from 1996 reflects significant growth in operating expenses while net revenue
remained essentially unchanged. The decrease in 1998 from 1997 occurred
despite growth in net revenue and was primarily a result of costs incurred for
the 1998 restructuring.
39
<PAGE>
Cost of products as a percentage of net revenue increased 2.2 percentage
points in 1997 from 1996 and 9.7 percentage points in 1998 from 1997. The
increase in 1997 from 1996 was the result of lower volumes of ASIC sales to
Hewlett-Packard as well as write-offs of obsolete semiconductor inventory
related to wireless communications devices. Costs in 1998 include $116 million
of restructuring charges. Without these charges, cost of products as a
percentage of net revenue would have increased primarily as a result of lower
ASIC volumes in the second half of 1998.
Operating expenses as a percentage of net revenue increased 2.4 percentage
points in 1997 from 1996 and 1.0 percentage point in 1998 from 1997. The
increase in 1997 from 1996 was due primarily to higher expenses. The increase
in 1998 from 1997 was due to higher expenses, including amounts related to the
1998 restructuring, partially offset by the growth in net revenue.
Research and development expense increased 19.1% in 1997 from 1996 and
13.7% in 1998 from 1997. The increase in 1997 included increased research and
development spending on semiconductor process technologies, packaging
technologies and development tools. Research and development expense increased
in 1998 primarily as a result of our efforts to develop high-speed networking
products and advanced technology ASICs. Selling, general and administrative
expense increased 4.7% in 1997 from 1996, due primarily to higher marketing
costs. Selling, general and administrative expense increased 8.5% in 1998 from
1997, 1.5 percentage points of which reflects the restructuring charge. The
remainder of the increase was primarily related to higher sales and marketing
expenses.
We expect future research and development efforts to focus on the areas of
fiber optic and high-speed networking devices. Although we have had
significant research and development expenses related to semiconductor process
technologies in recent years, we expect to conduct future efforts through
joint venture partnering arrangements and through third-party agreements,
thereby reducing our research and development expenses in this area.
Healthcare Solutions
<TABLE>
<CAPTION>
Years Ended October 31,
-------------------------
1996 1997 1998
------- ------- -------
(dollars in millions)
<S> <C> <C> <C>
Net revenue....................................... $ 1,244 $ 1,208 $ 1,340
Earnings from operations.......................... 106 30 62
As a percentage of net revenue................... 8.5% 2.5% 4.6%
</TABLE>
Net revenue
Net revenue from our healthcare solutions business decreased 2.9% in 1997
compared to 1996 and increased 10.9% in 1998 from 1997. The decrease in 1997
from 1996 was primarily attributable to internal product transition issues in
the second half of 1997 that resulted in delays in shipments of patient
monitoring and ultrasound imaging products. The increase in 1998 from 1997 was
driven by strong sales of new patient monitoring systems and cardiology
ultrasound imaging products, which were introduced in the second half of 1997.
The net revenue growth in 1998 from 1997 was achieved despite the negative
impact from international revenue resulting from economic weakness in certain
markets in Asia as well as lower healthcare system spending in parts of
Europe.
Earnings from operations
Earnings from operations from our healthcare solutions business decreased
71.7% in 1997 from 1996 and increased 106.7% in 1998 from 1997. The decrease
in 1997 from 1996 resulted from lower net revenue combined with higher costs
and expenses. The increase in 1998 from 1997 was primarily due to higher net
revenue, partially offset by higher costs and expenses.
40
<PAGE>
Cost of products and services as a percentage of net revenue increased by
3.6 percentage points in 1997 from 1996 and decreased by .9 percentage points
in 1998 from 1997. The increase in 1997 from 1996 was driven by product
transition issues in the second half of 1997 as well as manufacturing quality
control issues in the second half of 1997. These factors resulted in delays in
shipments of ultrasound imaging and patient monitoring products, as well as a
shift in product mix to less profitable services and supplies. The decrease in
1998 from 1997 was primarily a result of higher volumes, as product transition
issues and manufacturing quality control issues encountered in 1997 were
resolved. The effect of higher volumes was partially offset by increased
spending related to the implementation of a new worldwide quality system and
the development of a new enterprise resource planning system.
Operating expenses as a percentage of net revenue increased 2.4 percentage
points in 1997 from 1996 and decreased 1.2 percentage points in 1998 from
1997. The increase in 1997 from 1996 was due to lower revenue combined with
higher expenses. The decrease in 1998 from 1997 resulted primarily from higher
revenue, partially offset by increased expenses from the inclusion of
Heartstream's operations. Without the acquisition of Heartstream, operating
expenses as a percentage of net revenue would have decreased 2.9 percentage
points in 1998 from 1997.
Research and development expense decreased 7.0% in 1997 from 1996 and 3.0%
in 1998 from 1997. The decrease in 1997 was attributable to lower initial
tooling costs than in 1996 and a headcount reduction related to the closure of
some product line operations. In 1998, research and development expense
exclusive of Heartstream decreased significantly due to the lower spending
levels required to complete customer commitments after our divestiture of the
healthcare information management business. This decrease was partially offset
by investments in the development of Heartstream's automatic external
defibrillators. Selling, general and administrative expense increased 8.1% in
1997 from 1996 and 11.1% in 1998 from 1997. The increase in 1997 from 1996 was
due primarily to higher sales and marketing costs associated with new product
introductions in patient monitoring and ultrasound imaging. Approximately half
of the increase in 1998 from 1997 was due to the acquisition of Heartstream,
which resulted in increased headcount in the sales organization and higher
goodwill amortization. The remainder was due to increased selling and
marketing expenses.
Chemical Analysis
<TABLE>
<CAPTION>
Years Ended October 31,
-------------------------
1996 1997 1998
------- ------- -------
(dollars in millions)
<S> <C> <C> <C>
Net revenue....................................... $ 842 $ 895 $ 938
Earnings from operations.......................... 38 77 75
As a percentage of net revenue................... 4.5% 8.6% 8.0%
</TABLE>
Net revenue
Net revenue from our chemical analysis business increased 6.3% in 1997 from
1996 and 4.8% in 1998 from 1997. The increases resulted from strong growth in
mass spectroscopy, liquid chromatography and consumables, such as columns and
supplies. The increase in 1998 was achieved despite decreased revenue from
products and services sold to customers in Asia as a whole and Japan in
particular as a result of the economic conditions in that region. In 1998,
pricing pressures increased as some competitors cut prices worldwide.
Earnings from operations
Earnings from operations from our chemical analysis business increased
102.6% in 1997 from 1996 and decreased 2.6% in 1998 from 1997. The increase in
1997 from 1996 resulted from higher net revenue while costs and expenses
remained relatively unchanged. The decrease in 1998 from 1997 reflects higher
operating expenses partially offset by higher revenue.
As a percentage of net revenue, cost of products and services decreased by
1.4 percentage points in 1997 from 1996 and .7 percentage points in 1998 from
1997. The improvements in 1997 and 1998 were driven by
41
<PAGE>
revenue growth and higher volumes. In addition, cost structure improvements
were achieved as we moved some production processes to contract manufacturers.
Operating expenses as a percentage of net revenue decreased 2.7 percentage
points in 1997 from 1996 and increased 1.3 percentage points in 1998 from
1997. The decrease in 1997 was due to higher net revenue and essentially
unchanged expenses. The increase in 1998 from 1997 resulted from greater
growth in expenses than in net revenue.
Research and development expense decreased 5.3% in 1997 from 1996 and
increased 9.7% in 1998 from 1997. The decrease in 1997 from 1996 resulted from
the completion in late 1996 of major development projects that were not
immediately replaced. In 1998, research and development investments increased
primarily due to joint development efforts in the bio-instrumentation and
microfluidics areas. Selling, general and administrative expense was unchanged
in 1997 from 1996 and increased 8.2% in 1998 from 1997. The increase in 1998
was primarily due to higher marketing and field selling costs.
42
<PAGE>
Quarterly Financial Results
The following tables present our operating results for each of the eleven
quarters in the period ended July 31, 1999, in dollars and as a percentage of
net revenue. The information for each of these quarters is unaudited and has
been prepared on the same basis as the audited consolidated financial
statements included elsewhere in this prospectus. In the opinion of
management, all necessary adjustments, which consist only of normal and
recurring accruals, have been included to present fairly the unaudited
quarterly results. This data should be read in conjunction with the
consolidated financial statements and the notes thereto included elsewhere in
this prospectus. These operating results are not indicative of the results of
any future period.
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------------------------
1997 1998 1999
----------------------------- ----------------------------- --------------------
Jan 31 Apr 30 Jul 31 Oct 31 Jan 31 Apr 30 Jul 31 Oct 31 Jan 31 Apr 30 Jul 31
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue:
Products............... $1,541 $1,656 $1,619 $1,938 $1,743 $1,789 $1,583 $1,679 $1,488 $1,697 $1,759
Services............... 252 251 253 275 269 289 292 308 298 313 328
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total net revenue... 1,793 1,907 1,872 2,213 2,012 2,078 1,875 1,987 1,786 2,010 2,087
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Cost of products....... 790 835 856 974 854 975 887 1,091 792 831 902
Cost of services....... 160 167 165 179 170 183 176 176 182 188 201
Research and
development........... 205 222 223 230 226 243 230 249 222 241 242
Selling, general and
administrative........ 448 469 486 506 496 540 496 518 489 510 547
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total costs and
expenses.............. 1,603 1,693 1,730 1,889 1,746 1,941 1,789 2,034 1,685 1,770 1,892
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Earnings (loss) from
operations............. 190 214 142 324 266 137 86 (47) 101 240 195
Other income (expense),
net.................... (19) (14) -- (14) (18) 5 (1) (32) 13 2 12
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Earnings (loss) before
taxes.................. 171 200 142 310 248 142 85 (79) 114 242 207
Provision (benefit) for
taxes.................. 58 68 48 106 87 49 31 (28) 40 85 72
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net earnings (loss)..... $ 113 $ 132 $ 94 $ 204 $ 161 $ 93 $ 54 $ (51) $ 74 $ 157 $ 135
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------------------------
1997 1998 1999
------------------------------ ------------------------------ ----------------------
Jan 31 Apr 30 Jul 31 Oct 31 Jan 31 Apr 30 Jul 31 Oct 31 Jan 31 Apr 30 Jul 31
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(% of total net revenue)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue:
Products............... 85.9% 86.8% 86.5% 87.6% 86.6% 86.1% 84.4% 84.5% 83.3% 84.4% 84.3%
Services............... 14.1 13.2 13.5 12.4 13.4 13.9 15.6 15.5 16.7 15.6 15.7
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total net revenue...... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Costs and expenses:
Cost of products....... 44.1 43.8 45.7 44.0 42.5 46.9 47.3 54.9 44.3 41.3 43.2
Cost of services....... 8.9 8.8 8.8 8.1 8.4 8.8 9.4 8.9 10.2 9.4 9.7
Research and
development........... 11.4 11.6 11.9 10.4 11.2 11.7 12.3 12.5 12.4 12.0 11.6
Selling, general and
administrative........ 25.0 24.6 26.0 22.9 24.7 26.0 26.4 26.1 27.4 25.4 26.2
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total costs and
expenses.............. 89.4 88.8 92.4 85.4 86.8 93.4 95.4 102.4 94.3 88.1 90.7
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Earnings (loss) from
operations............. 10.6 11.2 7.6 14.6 13.2 6.6 4.6 (2.4) 5.7 11.9 9.3
Other income (expense),
net.................... (1.1) (.7) -- (.6) (.9) .2 (.1) (1.6) .7 .1 .6
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Earnings (loss) before
taxes.................. 9.5 10.5 7.6 14.0 12.3 6.8 4.5 (4.0) 6.4 12.0 9.9
Provision (benefit) for
taxes.................. 3.2 3.6 2.6 4.8 4.3 2.3 1.6 (1.4) 2.3 4.2 3.4
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net earnings (loss)..... 6.3% 6.9% 5.0% 9.2% 8.0% 4.5% 2.9% (2.6)% 4.1% 7.8% 6.5%
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Costs of products as a
percentage of products
revenue................ 51.3% 50.4% 52.9% 50.3% 49.0% 54.5% 56.0% 65.0% 53.2% 49.0% 51.3%
Costs of services as a
percentage of services
revenue................ 63.5% 66.5% 65.2% 65.1% 63.2% 63.3% 60.3% 57.1% 61.1% 60.1% 61.3%
</TABLE>
43
<PAGE>
In the third quarter of 1997, our net earnings declined significantly
compared to the prior and subsequent quarters. During the quarter, the
healthcare solutions business received a letter from the FDA citing their
concerns regarding quality system regulations. As a result, the business
delayed shipping some of its products until the FDA's concerns were resolved,
which caused the quarter's net revenue to decrease. In addition, sales and
marketing programs in the test and measurement business related to new product
releases caused selling, general and administration expenses to increase.
Beginning in the third quarter of 1998 and through the first half of 1999,
our revenue was significantly affected by the economic conditions in Asia and
the slowdown in the semiconductor industry. Since a substantial portion of our
cost of products and services, as well as some of our operating expenses, are
relatively fixed in the short term, the sharp decline in revenue caused our
operating margins to decline. There are indications that conditions in Asia
are beginning to improve. Charges from the restructuring that occurred in the
quarter ended October 31, 1998 adversely affected operating results in that
quarter. The 1999 quarterly results reflect the benefit of the 1998
restructuring as well as other cost containment measures that we implemented
in the second half of 1998. The third quarter of 1999 includes a $51 million
charge related to the write-down of a building that was under construction for
the intended purpose of housing manufacturing operations for eight-inch
semiconductor wafers.
Our quarterly net revenue, earnings from operations and net earnings have
varied significantly in the past and we expect that they are likely to vary in
the future. In addition, upon our separation from Hewlett-Packard, we expect
to incur substantial additional costs in future periods resulting from being a
separate, stand-alone entity.
Liquidity and Capital Resources
Historically, Hewlett-Packard has managed cash on a centralized basis. Cash
receipts associated with our business have been transferred to Hewlett-Packard
on a daily basis and Hewlett-Packard has provided funds to cover our
disbursements. Accordingly, we have reported no cash or cash equivalents at
October 31, 1997 and 1998 and July 31, 1999.
In November 1999, Hewlett-Packard made an initial cash payment to us of
$1.08 billion to fund our working capital and other needs for the first few
months of our operations as a separate, stand-alone entity. Our separation
agreement with Hewlett-Packard provides that Hewlett-Packard will retain some
of our assets and liabilities and Hewlett-Packard will transfer to us some of
the assets and liabilities related to its business. We expect that our cash
balance will initially decline until we begin to collect newly generated
accounts receivable. The net proceeds of the offering, including proceeds
received from any exercise of the U.S. underwriters' over-allotment option,
will be paid to Hewlett-Packard as a dividend. See "Arrangements between
Agilent Technologies and Hewlett-Packard--Master Separation and Distribution
Agreement" and "Unaudited Pro Forma Condensed Financial Statements."
We generated cash from operations of $881 million in 1996 compared to $965
million in 1997 and $751 million in 1998. For the nine months ended July 31,
we generated cash from operations of $385 million in 1998 and $426 million in
1999. In all periods, cash from operations is primarily a result of net
earnings adjusted for non-cash charges for depreciation and amortization.
Capital expenditures for property, plant and equipment constituted
substantially all of our cash used in investing activities in 1996, 1997, 1998
and the nine months ended July 31, 1998 and 1999. The amounts expended were
partially offset by proceeds from the disposal of excess, unused or retired
assets. The high level of capital expenditures in 1996 and 1997 reflected our
investment in our semiconductor products business integrated circuit
fabrication capability, which was subsequently replaced with a joint venture
arrangement. In addition, we used small amounts of cash in each period to
acquire several small companies. We expect to continue to acquire
complementary products or businesses in the future.
On July 6, 1999, Hewlett-Packard entered into an agreement with Yokogawa to
acquire Yokogawa's 25% minority equity ownership of Hewlett-Packard Japan for
approximately $521 million. Under the terms of the agreement, Hewlett-Packard
will acquire Yokogawa's shares through a series of purchase transactions
beginning
44
<PAGE>
in January 2000. Under the terms of the master separation and distribution
agreement, we will assume these Hewlett-Packard obligations under the
agreement with Yokogawa. In the initial step, which will occur on or before
January 31, 2000, we will purchase 10.4% of Hewlett-Packard Japan's shares
from Yokogawa. In the second step, which will occur on or before April 30,
2000, we will purchase 10.4% of Hewlett-Packard Japan's shares from Yokogawa.
We will purchase the remaining 4.2% of Hewlett-Packard Japan's shares owned by
Yokogawa prior to March 31, 2003. Hewlett-Packard will provide the funding for
this transaction.
An independent valuation has been performed, which we used to determine the
portion of the transaction's purchase price attributable to our business and
the remaining Hewlett-Packard business and to allocate the purchase price to
identifiable assets and liabilities. Of the total purchase price, $375 million
is attributable to us, with the remainder attributable to Hewlett-Packard's
remaining business. We expect that $302 million of the purchase price will be
recorded as goodwill, which will be amortized over 10 years.
Our commitments consist primarily of future minimum lease payments under
noncancelable lease agreements, our obligations under the transaction with
Yokogawa described above and cash capital contributions required under the
terms of a joint venture agreement. In addition, we have entered into
agreements with Hewlett-Packard under which Hewlett-Packard will provide
services to us during a transition period after the separation.
Our liquidity is affected by many factors, some of which are based on the
normal ongoing operations of our businesses and some of which arise from
uncertainties related to global economies. We believe that the initial cash
funding we received from Hewlett-Packard, together with cash generated from
operations, and our unused lines of credit amounting to $500 million, will be
sufficient to satisfy our working capital, capital expenditure and research
and development requirements for the foreseeable future. However, we may
require or choose to obtain additional debt or equity financing in the future.
We cannot assure you that additional financing, if needed, will be available
on favorable terms.
Factors That May Affect Future Results
Since we sell our products worldwide, our business is subject to risks
associated with doing business internationally. We do a substantial portion of
our business in Korea and Japan, which have been subject to increased economic
instability in recent years. We experienced a decline in our business in 1998
when Korea and Japan experienced economic difficulties. The recurrence of
weakness in these economies or weakness in other international economies could
have a significant negative effect on our future operating results. For a
detailed discussion of these risks, see "Risk Factors--Risks Related To Our
Business--Economic, political and other risks associated with international
sales and operations, particularly in Korea or Japan, could adversely affect
our sales."
Given the nature of the markets in which we participate, we cannot reliably
predict future revenue and profitability, and unexpected changes may cause us
to adjust our operations. Small declines in revenue could disproportionately
affect our operating results in a quarter. Factors that could effect quarterly
operating results include the demand for and market acceptance of our products
and competitive pressures resulting in lower selling prices. For a detailed
discussion of these risks, see "Risk Factors--Risks Related To Our Business--
Fluctuations in our quarterly operating results may cause our stock price to
decline."
Many of the industries and markets into which we sell our products are
cyclical. Any significant downturn in our customers' markets or in general
economic conditions would likely result in a reduction in demand for our
products and services and could harm our business. For a detailed discussion
of these risks, see "Risk Factors--Risks Related To Our Business--Our
operating results could be harmed if the industries into which we sell our
products are in downward cycles."
Year 2000
The year 2000 problem arises from the use of a two-digit field to identify
years in computer programs, e.g., 85=1985, and the assumption of a single
century, the 1900s. Any program so created may read, or attempt to read, "00"
as the year 1900. There are two other related issues that could also lead to
incorrect calculations or
45
<PAGE>
failure: some systems' programming assigns special meaning to certain dates
and the year 2000 is a leap year. Accordingly, some computer hardware and
software, including programs embedded within machinery and parts, will need to
be modified prior to the year 2000 to remain functional. Our year 2000
initiatives are focusing primarily on four areas of potential impact: internal
information technology (IT) systems; internal non-IT systems and processes,
including services and embedded chips (controllers); our products and
services; and the readiness of significant third parties with whom we have
material business relationships. In 1997, Hewlett-Packard established a Year
2000 Program Office to coordinate these programs for all of its businesses,
including Agilent Technologies, across the enterprise and to provide a single
point of contact for information about year 2000 programs. The year 2000
efforts in these areas are led by the year 2000 general manager who reports
directly to Hewlett-Packard's senior management, including Agilent
Technologies' chief executive officer.
The costs associated with our IT internal readiness actions are a
combination of incremental external spending and use of existing internal
resources. We estimate that over the life of our IT internal readiness effort,
we will have spent a total of approximately $90 million over a multi-year
period. We expect to implement successfully the systems and programming
changes necessary to address year 2000 internal IT and non-IT readiness issues
and material third party relationships. Based on current estimates, we do not
believe that the costs associated with these actions will have a material
effect on our results of operations, cash flows or financial condition.
However, the costs of these actions may vary from quarter to quarter. There
can be no assurance, however, that there will not be a delay in, or increased
costs associated with the implementation of these changes. In addition,
failure to achieve year 2000 readiness for our internal systems and processes
could delay our ability to manufacture and ship products and deliver services,
disrupt our customer service and technical support facilities and interrupt
customer access to our online products and services. Our inability to perform
these functions could have an adverse effect on our future results of
operations, cash flows or financial condition.
Internal IT Systems
Hewlett-Packard has established a dedicated Year 2000 IT Internal Readiness
Program Organization to oversee the worldwide year 2000 internal IT
application and infrastructure readiness activities, for all its businesses,
including Agilent Technologies. The Internal Readiness IT Program Organization
provides monthly progress reports to Hewlett-Packard's senior management,
including Agilent Technologies' chief executive officer. The Internal
Readiness IT Program Organization is charged with raising awareness throughout
Hewlett-Packard and Agilent Technologies, developing tools and methodologies
for addressing the year 2000 issue, monitoring the development and
implementation of business and infrastructure plans to bring non-compliant
applications into compliance on a timely basis and identifying and assisting
in resolving high-risk issues.
We, in conjunction with the Hewlett-Packard program, are approaching our
year 2000 IT internal readiness program in four phases: (1) assessment, (2)
planning, (3) preparation and (4) implementation. The assessment phase
involves taking an inventory of our internal IT applications to prioritize
risk, identifying failure dates, defining a solution strategy, estimating
repair costs and communicating across and within business units regarding the
magnitude of the problem and the need to address year 2000 issues. The
planning phase consists of identifying the tasks necessary to ensure
readiness, scheduling remediation plans for applications and infrastructure
and determining resource requirements and allocations. The third phase,
preparation, involves readying the development and testing environments and
piloting the remediation process. Implementation, the last phase, consists of
executing the plans to fix, test and implement critical applications and
associated infrastructure, and putting in place contingency plans for
processes that have a high impact on our businesses.
We set July 31, 1999 as the target date by which our critical IT
applications would be year 2000 compliant. The assessment, planning and
preparation phases have been completed. As of August 31, 1999, the
implementation phase is substantially complete. For a few remaining
applications, the work is pending a third-party patch or upgrade to complete
year 2000 readiness. In each of these cases, target completion dates are in
the near future and there are backup plans to ensure year 2000 readiness.
46
<PAGE>
Internal Non-IT Systems and Processes
Non-IT systems include, but are not limited to, those systems that are not
commonly thought of as IT systems, such as telephone/PBX systems; fax
machines; facilities systems regulating alarms, building access and
sprinklers; manufacturing, assembly and distribution equipment; and other
miscellaneous systems and processes. Year 2000 readiness for these internal
non-IT systems is the responsibility of our worldwide operating units and
their respective functions and operations, e.g., facilities, research and
development, manufacturing, distribution, logistics, sales and customer
support.
The year 2000 Program Office has developed a comprehensive process to
ensure all operations and global business units use a structured and
standardized methodology to organize, plan and implement their year 2000
readiness.
Hewlett-Packard has also established a Year 2000 Council to coordinate its
overall internal readiness and its business continuity planning efforts,
including those of Agilent Technologies. The Council is composed of
representatives from the major business units within Hewlett-Packard and
Agilent Technologies and the critical corporate and infrastructure functions
that support them. The Council is chaired by the year 2000 general manager and
has initiated a comprehensive program to ensure timely and consistent business
continuity planning by all of Hewlett-Packard's and Agilent Technologies'
business units. As of July 31, 1999, substantially all year 2000 testing,
internal mitigation and remediation activities, and business contingency plans
have been finalized. From July 31, 1999, until November 30, 1999, all year
2000 internal readiness solutions, contingency plans, crisis management and
recovery mechanisms will be further stress-tested to ensure full preparation.
Product and Customer Readiness
Our newly introduced products are year 2000 compliant. However, some
hardware and software products currently installed at customer sites will
require upgrade or other remediation. Some of these products are used in
critical applications in which the impact of non-performance to these
customers and other parties could be significant. While we believe our
customers are responsible for the year 2000 readiness of their IT and business
environments, we are taking significant steps to enable customers to achieve
their readiness goals, thereby preserving our customers' satisfaction and our
brand reputation. In 1997, Hewlett-Packard established a dedicated Year 2000
Product Compliance Program Office to coordinate worldwide year 2000 product
compliance activities for all its businesses, including Agilent Technologies.
The Product Compliance Program Office is charged with developing and
overseeing implementation of plans to identify all standard products delivered
since January 1, 1995; to test those products for compliance; to identify an
appropriate path to compliance for non-compliant standard products; and to
communicate the status and necessary customer action for non-compliant
standard products.
Hewlett-Packard has an Internet website dedicated to communicating year
2000 issues to a broad customer base. Most of our key business groups have
complementary Internet websites dedicated to similar communication to their
specific customers. These websites include product compliance search pages
that allow customers to look up the status of our products they have
installed. We are taking additional steps to identify affected customers,
raise customer awareness related to non-compliance of some products and help
customers to assess their risks. We are in the process of implementing plans
to accommodate increased levels of customer assistance in the first half of
2000 and currently anticipate that a significant portion of the costs related
to these actions will occur in the fourth quarter of 1999 and the first half
of 2000.
All of these efforts are coordinated by representatives from all of
Hewlett-Packard's and Agilent Technologies' product and service business
units, who work in conjunction with the Product Compliance Program Office to
develop and implement Hewlett-Packard's and Agilent Technologies' year 2000
policies for products and services. The year 2000 general manager chairs this
group of representatives.
The costs of the readiness program for products are primarily costs of
existing internal resources largely absorbed within existing engineering
spending levels. These costs were incurred primarily in 1998 and earlier
47
<PAGE>
years and were not broken out from other product engineering costs. Historical
year 2000 customer satisfaction costs were not material. Future product
readiness costs, including those for customer satisfaction, are not
anticipated to be material. We are aware of the potential for legal claims
against us and other companies for damages arising from products that are not
year 2000 compliant. We believe that reasonable communication and customer
satisfaction steps are under way so that any claims would not result in
material liability for us.
It is unknown how year 2000 issues may affect customer spending patterns.
As customers focus their attention and capital budgets in the near term on
preparing their own businesses for the year 2000, they may either delay or
accelerate purchases of new applications, services and systems from us. Many
of our products run custom software or connect to other systems or peripheral
products that may be adversely affected by operating system or hardware
upgrades. Although it is possible that these factors may increase or change
the timing of demand for certain of our products and services, the increase
may be offset by the softening in demand for other offerings. As a result,
these events may affect our future revenue and revenue patterns.
Material Third-Party Relationships
We have developed a year 2000 process for dealing with our key suppliers,
contract manufacturers, distributors, vendors and partners. The process
generally involves the following steps: (1) initial supplier survey; (2) risk
assessment and contingency planning; (3) follow-up supplier reviews and
escalation, if necessary; and where relevant, (4) testing. To date, we have
received formal responses from substantially all of our critical suppliers.
Most of them have responded that they expect to address all their significant
year 2000 issues on a timely basis. We regularly review and monitor the
suppliers' year 2000 readiness plans and performance. Based on our risk
assessment, selective on-site reviews have been performed. Risk analysis has
been completed with our base of suppliers and contingency plans are now being
developed and tested. All critical surveys and testing efforts were completed
by June 1, 1999. In some cases, to meet year 2000 readiness, we have replaced
suppliers or eliminated suppliers from consideration for new business. Where
efforts to work with critical suppliers have not been successful, contingency
planning generally emphasizes the identification of substitute and second-
source suppliers, or in certain situations includes a planned increase in the
level of inventory held (e.g., in the case of sole sources). We have also
contracted with multiple transportation companies to provide product delivery
alternatives. We have also completed substantially all Electronic Data
Interchange (EDI) migration and testing with our supply base. EDI is a set of
standard protocols for the electronic interchange of business data.
We are working to identify and analyze the most reasonably likely worst-
case scenarios for third-party relationships affected by year 2000. These
scenarios could include possible infrastructure collapse, the failure of power
and water supplies, major transportation disruptions, unforeseen product
shortages due to hoarding of products and sub-assemblies and failures of
communications and financial systems. Any one of these scenarios could have a
major and material effect on our ability to build our products and deliver
services to our customers. While we have contingency plans in place to address
most issues under our control, an infrastructure problem outside of our
control or some combination of several of these problems could result in a
delay in product shipments depending on the nature and severity of the
problems. We would expect that most utilities and service providers would be
able to restore service within days although more pervasive system problems
involving multiple providers could last two to four weeks or more depending on
the complexity of the systems and the effectiveness of their contingency
plans.
Although we are dedicating substantial resources towards attaining year
2000 readiness, we cannot assure you that we can identify and address
successfully all year 2000 issues. Even if we act in a timely manner to
complete all of our assessments; identify, develop and implement remediation
plans believed to be adequate; and develop contingency plans believed to be
adequate, some problems may not be identified or corrected in time to prevent
material adverse consequences to us.
The discussion above regarding estimated completion dates, costs, risks and
other forward-looking statements regarding year 2000 is based on our best
estimates given information that is currently available and is
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subject to change. As we continue to progress with our year 2000 initiatives,
we may discover that actual results will differ materially from these
estimates.
Adoption of the Euro
Hewlett-Packard has established a dedicated task force to address the
issues raised for all of its businesses, including Agilent Technologies, by
the introduction of a European single currency, the Euro. The Euro's initial
implementation was effective as of January 1, 1999 and the transition period
will continue through January 1, 2002. Beginning January 1, 1999, product
prices in local currencies are being converted to Euros as required. At an
appropriate point during the transition period, product prices in
participating countries will be established and stored in Euros, and converted
to local denominations. We implemented system changes to give multi-currency
capability to the few internal applications that did not yet have this
capability, or to ensure that external partners' systems processing Euro
conversions are compliant with the European council regulations.
We do not presently expect that introduction and use of the Euro will
materially affect Hewlett-Packard's foreign exchange and hedging activities or
our use of derivative instruments. We do not expect that the introduction of
the Euro will result in any material increase in our costs and all costs
associated with the introduction of the Euro will be expensed to operations as
incurred. While we will continue to evaluate the impact of the Euro
introduction over time, based on currently available information, we do not
believe that the introduction of the Euro currency will have a material
adverse impact on our consolidated financial condition, cash flows or results
of operations.
Market Risk
We are exposed to foreign currency exchange rate risk inherent in our sales
commitments, anticipated sales, and assets and liabilities denominated in
currencies other than the United States dollar. Historically, our exposure to
exchange rate risk has been managed on an enterprise-wide basis as part of
Hewlett-Packard's risk management strategy. This strategy has utilized
derivative financial instruments, including forwards, swaps and purchased
options, to hedge certain foreign currency exposures, with the intent of
offsetting gains and losses that occur on the underlying exposures with gains
and losses on the derivative contracts hedging them. We are currently
evaluating our exchange rate risk management strategy. We do not currently and
do not intend in the future to utilize derivative financial instruments for
trading purposes.
Hewlett-Packard has performed a sensitivity analysis assuming a
hypothetical 10% adverse movement in foreign exchange rates to the hedging
contracts and the underlying exposures described above. As of October 31, 1997
and 1998 and July 31, 1999, the analysis indicated that these hypothetical
market movements would not have a material effect on Hewlett-Packard's
consolidated financial position, results of operations or cash flows. Because
the exposure to exchange rate risk has been managed on an enterprise-wide
basis, it is not practicable to perform a similar analysis on only our
exposures. However, it is unlikely that the results of such an analysis on our
exposures would indicate a material impact on our consolidated financial
position, results of operations or cash flows.
All debt will be retained by Hewlett-Packard. Therefore, no debt has been
directly attributed to us. Accordingly, we have not been exposed to interest
rate risk.
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BUSINESS
Agilent Technologies is a global diversified technology company that
provides enabling solutions to high growth markets within the communications,
electronics, healthcare and life sciences industries. Our broad technology
portfolio and our experience in working with market-leading customers in more
than 120 countries have allowed us to establish and advance our leadership
across multiple markets.
Agilent Technologies includes the following four primary businesses:
. test and measurement, which provides standard and customized test,
measurement and monitoring instruments and systems as well as software
for the design, manufacture and support of high frequency electronics
and communications devices;
. semiconductor products, which provides fiber optic communications
devices and assemblies, integrated circuits for wireless applications,
application-specific integrated circuits, optoelectronic devices and
image sensors;
. healthcare solutions, which provides patient monitoring, ultrasound
imaging and cardiology products and systems; and
. chemical analysis, which provides analytical instruments, systems and
services for chromatography, spectroscopy and bio-instrumentation.
Our test and measurement and semiconductor businesses share focus on growth
opportunities in the communications sector, while our healthcare and chemical
analysis businesses share focus on growth opportunities in healthcare and life
sciences. All of our businesses are supported by the technical expertise of
Agilent Technologies Laboratories, one of the world's foremost industrial
research and development organizations. Agilent Technologies Laboratories is
thoroughly integrated with our businesses in design, development and
manufacturing engineering, and substantially all of its development engineers
are aligned with the research and development teams in our individual
businesses.
Over our 60-year history, our businesses have developed close relationships
with market-leading customers, working with thousands of customers around the
world as technologies, business needs and global economic conditions have
undergone dramatic changes. These close relationships have provided us
invaluable strategic market insights and have been central to our success.
We have established leadership positions across multiple markets and are a
leading supplier of:
. test and measurement instruments and systems;
. application-specific semiconductor devices and fiber optic components
and assemblies;
. patient monitoring and ultrasound imaging equipment and automatic
external defibrillators; and
. chemical measurement instruments and systems.
We sell our products primarily through our direct sales force, but we also
utilize distributors, resellers, telesales and electronic commerce. Of our
total net revenue of $8.0 billion in the fiscal year ended October 31, 1998,
we generated 45.6% in the United States and 54.4% internationally. As of July
31, 1999, we employed approximately 42,000 people worldwide. We have major
research and development and manufacturing sites in California, Colorado,
Delaware, Massachusetts, and Washington in the United States and in China,
Germany, Japan, Korea, Malaysia, Singapore and the United Kingdom.
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Our net revenue by business segment for each of the years ending October
31, 1996, 1997 and 1998 and for the nine months ended July 31, 1998 and 1999
was:
<TABLE>
<CAPTION>
Nine Months
Years Ended October Ended
31, July 31,
-------------------- -------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
(in millions)
<S> <C> <C> <C> <C> <C>
Test and measurement......................... $3,823 $4,203 $4,100 $3,098 $2,856
Semiconductor products....................... 1,470 1,479 1,574 1,195 1,230
Healthcare solutions......................... 1,244 1,208 1,340 988 1,043
Chemical analysis............................ 842 895 938 684 754
------ ------ ------ ------ ------
Total net revenue.......................... $7,379 $7,785 $7,952 $5,965 $5,883
====== ====== ====== ====== ======
</TABLE>
In the nine months ended July 31, 1999, Hewlett-Packard accounted for 10%
of our total net revenue.
Industry Overview
Many of the markets we serve are undergoing rapid change and experiencing
significant growth. We believe that these trends will provide us with major
growth opportunities.
Communications Industry
The communications industry is undergoing fundamental change and growth
resulting principally from explosive demand for Internet access and data
transmission services. Traditional voice telecommunications have been carried
as an electrical signal over copper wire. Since this technology was designed
for low-capacity voice transmission, it is unable to meet the high-volume
transmission requirements of Internet access and other forms of high-speed,
digital data communications. Increased bandwidth is critically important to
the transmission of high-volume data and is the driving force behind the
deployment of the high-speed, high-capacity, digital network infrastructure.
Fiber optic networks are increasingly replacing copper-based technologies
in local area and wide area networks. Fiber optics enable digital information,
such as coded data, voice or video, to be transmitted as pulses of light. The
light being transmitted along each fiber-optic cable can be divided up into
multiple frequencies, and each frequency can be used as a separate
transmission path. Thus each fiber optic cable can simultaneously carry
multiple transmissions. Other new communications technologies, such as Gigabit
Ethernet, Digital Subscriber Line and Asynchronous Transfer Mode, are being
deployed to expand the capabilities of existing networks or build new
broadband data networks. Cable service providers are in the early stages of
introducing broadband interactive data services and Internet access to their
customers by redesigning their networks and deploying cable modem
technologies.
The usage levels of wireless communications around the world are increasing
dramatically, as penetration increases in developed countries, and lesser-
developed countries deploy wireless networks as a means to quickly address the
surging demand for communications. As an alternative to wireline access, some
carriers and service providers are utilizing wireless technologies to provide
voice, data and Internet services to their customers. While broadband wireless
data services are still in the early stages, the development and deployment of
next generation cellular technologies and services is likely to lead to their
rapid growth.
We believe that these emerging trends in the communications industry
provide us with a number of significant business opportunities. The widespread
deployment of fiber optic networks generates increasing demand for high-speed
optoelectronic components to connect the electronic systems controlling the
network to the transmission fiber. The manufacture, physical installation and
maintenance of network switches, routers and other high-speed devices rely on
increasingly sophisticated testing, calibration and measurement instruments
and systems. Additionally, these systems typically require physical layer
integrated circuits to prepare data for transmission across high-speed
networks, such as Gigabit Ethernet, Digital Subscriber Line, Asynchronous
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Transfer Mode and next-generation cable networks. Service providers face
increased competition as a result of these emerging technologies and
deregulation of the industry. Traditional communications service providers and
emerging Internet service providers, competing aggressively for subscribers,
require advanced test and monitoring solutions to optimize quality of service
to their customers. Similarly, the manufacturers of cellular handsets, base
stations and other wireless network equipment require advanced design software
and test and measurement instruments and systems to develop, manufacture and
deploy advanced wireless communications products and capture the high growth
market opportunity.
Semiconductor and Electronics Industries
The semiconductor and electronics industries are still largely driven by
rapid technological advancement, a phenomenon commonly known as Moore's Law,
which states that the functionality and performance of a digital integrated
circuit doubles roughly every 18-24 months. Decreased size and greater density
of the individual electronic components on the integrated circuit drive
improvements in the performance and functionality of the device and decrease
price to the end user. This continuous cycle of increased performance at lower
cost drives the pervasiveness of semiconductor devices in multiple
applications, from communications networks to consumer products. At the same
time, the cycle places increasing demands on companies that develop and use
electronic components, products and systems to keep up with the fast pace of
technological advances.
The effect of Moore's Law creates major business opportunities for us. Each
new integrated circuit design presents new challenges for test and measurement
systems: smaller, more densely-packed elements; faster operating speeds; and
greater complexity. Semiconductor devices and electronic components and
assemblies comprise an increasing proportion of the overall value of end-
products, increasing the importance of testing within the electronic component
and systems design and manufacturing process. The increasing pervasiveness of
semiconductor devices creates strong growth opportunities for many of our
products, including our electronic and optical components, our high frequency
and digital design solutions, as well as our automated test equipment used in
high volume manufacturing settings.
Pharmaceutical, Bioscience and Healthcare Industries
The time and expense required to discover and develop new drugs demand that
pharmaceutical companies continually find ways to improve the efficiency of
the drug-discovery process, often relying on analytical instruments to improve
productivity while remaining compliant with laws and regulations. At the same
time, the healthcare industry is seeking ways to reduce costs and improve the
quality of health care. We believe this trend will require healthcare
solutions that can be deployed in non-hospital settings, such as in smaller
clinics and in patients' homes. Healthcare research and development
institutions are also focusing increased resources on disease diagnosis and
prevention. Greater understanding of the genetic basis of disease is
considered critical to learning how to prevent, diagnose and manage diseases
and requires advanced instrumentation for DNA and related analysis.
Strategy
Focus on High Growth Market Opportunities
Our strategy is to use our strengths as a diversified technology company to
enter new markets through internal development, strategic partnerships and
acquisitions. To achieve this objective, we work closely with our customers'
research and development teams to understand emerging markets, technologies
and standards and we invest accordingly in our own development of enabling
solutions in those areas. We intend to use strategic partnerships and make
tactical acquisitions to develop advanced systems that complement our existing
technologies and products to accelerate our entry into strategic, high-growth
markets.
Within the communications markets, we are focused on providing test,
measurement and monitoring technologies and solutions for the development and
deployment of next-generation fiber optic, broadband,
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Internet and cellular networks, as well as leading edge fiber optic and
semiconductor components. We work closely with cellular component and device
manufacturers at the research and development stage to understand emerging
industry standards. We have also continued to invest in our market-leading
high-frequency design solutions. We were able to take advantage of our product
diversity by applying the technologies we developed for the defense industries
in the 1980s to the higher growth communications industry when growth of the
defense market slowed. In life sciences, we have focused our efforts on the
high-growth segments of the pharmaceutical industry. In healthcare, we
recently made an acquisition that accelerated our entry and gave us leading
market share in the fast-growing automatic external defibrillator market.
Continue to Innovate Technologically
Agilent Technologies and Agilent Technologies Laboratories have a long
legacy of technological innovation and product generation as part of Hewlett-
Packard. We will continue to invest in and build research and development
expertise, focusing our centralized laboratories on fundamental technology and
process developments and utilizing innovations from our businesses to develop
products to address high growth market segments. Our scientists have provided
significant contributions and technological advances across multiple markets
and industries. Our reputation for technological innovation allows us to work
closely with both established and emerging leaders in the communications,
electronics, life sciences and healthcare industries, and to provide advanced
solutions to meet emerging market requirements. The experience and knowledge
of our engineers, combined with our close customer relationships, enable us to
anticipate customer needs for next-generation products and solutions. In
healthcare, we market our equipment and establish strong relationships with
influential medical research and development centers around the world, to gain
valuable insights into new discoveries and strategic initiatives in the
healthcare and life sciences industries. Similarly, in semiconductor test, we
have worked closely with Rambus to develop a high-speed test solution for
advanced memory chips, which has been used in selected niche products such as
video games, but is now being developed as main memory for high-performance
personal computers.
Maximize the Benefits of our Scale and Global Presence
We believe our scale and global presence provide us with a competitive
advantage across multiple industries. In many of our targeted markets and in
many of the countries in which we operate, we believe we are the largest
industry participant and possess greater resources for research and
development and service and support than any competitor. Our global direct
sales force gathers valuable insights into emerging industry trends around the
world and provides us an effective means of bringing new products to market
rapidly. In addition, we believe our customers value our global ability to
provide more complete solutions with our training, systems integration, and
project management programs. Our regional support centers enable us to provide
localized service and support, and our telesales and electronic commerce
systems allow remote customers to order products, obtain product information
and utilize remote support services. We intend to continually enhance overall
customer satisfaction by remaining focused on providing effective service and
support.
AGILENT TECHNOLOGIES LABORATORIES
We are supported by the technological expertise of Agilent Technologies
Laboratories, one of the world's foremost industrial research and development
organizations. Agilent Technologies Laboratories consists of those operations
of Hewlett-Packard Laboratories that historically conducted basic research in
our focus areas. Agilent Technologies Laboratories works with our businesses
in design, development and manufacturing engineering, and substantially all of
its development staff are aligned with the research and development staff in
our specific businesses.
Agilent Technologies Laboratories conducts applied research in electronics,
medical and analytical measurements, biotechnology, photonics, solid-state
materials and components, and measurement systems and solutions. The
scientists in Agilent Technologies Laboratories have made significant
contributions and advances
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in many of these areas, including LEDs, gallium-arsenide integrated circuits,
lightwave and LAN-based instruments, mass spectrometry, ultra-violet and
visible spectrophotometry, cardiac ultrasound imaging, electrocardiogram
algorithms and the wireless mouse.
Agilent Technologies Laboratories is located primarily in Palo Alto,
California and employs approximately 500 people. Approximately half of the 300
technical professionals in Agilent Technologies Laboratories have doctoral
degrees and over 75% have some form of advanced degree. In recent years, an
average of 80 patents are issued to Agilent Technologies Laboratories
annually.
TEST AND MEASUREMENT
Our test and measurement business is a leader in providing test and
measurement solutions to companies in the communications, electronics,
semiconductor and related industries. We provide standard and customized
solutions that are used in the design, development, manufacture, installation,
deployment and operation of electronic equipment and systems. These solutions
are used by our customers to improve time-to-market, lower cost of
manufacturing and improve the quality of their products. These solutions
include test and measurement instruments and systems, automated test
equipment, communications network monitoring and management tools and software
design tools and associated services. Our solutions are employed by a wide
range of customers, including:
. communications and network equipment manufacturers, including providers
of fiber optic, wireless and wireline components, products and systems;
. providers of communications services, including telecommunications,
Internet and cellular service providers;
. designers and manufacturers of semiconductor products, including
microprocessors, memory devices, ASICs, radio frequency and microwave
integrated circuits and other types of integrated circuits; and
. designers and manufacturers of electronic equipment, including printed
circuit board assemblies and electronic equipment, such as cellular
handsets, personal computers and avionics equipment.
We believe that we are the leader in the overall test and measurement
market, with leadership positions in:
. network and spectrum analyzers;
. communications test equipment;
. wireless test equipment;
. in-circuit test and x-ray inspection systems for printed circuit board
assemblies;
. lightwave test equipment;
. logic analyzers and logic-signal sources; and
. high-frequency computer-aided engineering and simulation software.
Our test and measurement business employed approximately 18,300 people as
of July 31, 1999. We serve customers in more than 110 countries and sell our
products primarily through our direct sales force, as well as through
resellers, distributors, telesales and electronic commerce. Our products are
complemented by service and support offerings such as consulting, training,
local solutions integration, and instrument calibration and repair. We have
manufacturing and research and development facilities in Australia, Canada,
China, Germany, Japan, Korea, Malaysia, Singapore, the United Kingdom and the
United States. Our test and measurement business generated $4.1 billion in
revenue in fiscal year 1998 and $2.9 billion in revenue in the first nine
months of fiscal year 1999.
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Markets
The market for our test and measurement products comprises three major
customer groups:
. communications network equipment manufacturers and service providers;
. electronic component and equipment manufacturers; and
. semiconductor manufacturers and purchasers of semiconductors.
Communications Network Equipment Manufacturers and Service Providers
Network equipment manufacturers provide products to facilitate the
transmission of voice and data traffic. This transmission may be in various
forms, such as electronic signals over copper wire, optical signals over fiber
cables, and radio frequency or microwave signals. The customers of the network
equipment manufacturers are the communications service providers that deploy
and operate the networks. The communication service providers are facing
increasing competitive pressures as a result of deregulation in the
telecommunications industry and the rapid advances in transmission technology,
including communications switching and routing. Communications service
providers must provide high-quality, highly reliable service to remain
competitive, maintain customer loyalty and meet the rapidly growing demand for
data transmission and related services. As a result, these service providers
require network equipment that enables their networks to operate at
increasingly faster speeds while providing rapidly expanding capacity and
superior reliability. To meet these demands, network component and equipment
manufacturers require test and measurement instruments, systems and solutions
for the development, production, installation and operation of each new
network technology. These solutions include:
. test instruments and systems for developing and manufacturing
communications modules, assemblies and products; and
. test instruments and systems to support the installation and deployment
of network equipment and to validate the operational performance of the
equipment in the network.
Communications and Internet service providers also require a range of
sophisticated test instruments and systems to evaluate network performance and
to identify any sources of communications failure. Additionally, these
customers require advanced software and systems to monitor and manage the
network infrastructure on a continuous, proactive basis to achieve either
regulated or customer-specified service levels. Real-time monitoring of the
network infrastructure also enables the implementation of additional services,
such as fraud detection, which customers increasingly require of service
providers. Many corporations manage their own internal voice and data
communications networks. As enterprises increasingly rely on these networks
for critical applications, they also require advanced test and monitoring
equipment, systems and software to optimize network performance.
The market for cellular telephony has increased dramatically in recent
years, as the levels of wireless penetration in developed countries have grown
rapidly. Many lesser-developed countries have decided to build wireless
communications infrastructure to meet their nations' needs for telephony,
rather than invest in expensive wire-based infrastructure. To develop cellular
telephone equipment, manufacturers require electronic design software and test
instruments and systems for the development of high-frequency communications
circuits, devices and systems. Cellular equipment manufacturers also require
advanced, high-frequency test instruments and systems to develop, manufacture
and deploy cellular base stations for these wireless networks. In addition,
the rapid growth of the cellular handset market has created a new market
segment for automated test equipment to test cellular handsets on the factory
floor. Further, as new standards evolve in the wireless industry, new test and
measurement equipment and systems have to be developed to enable testing of
the new standards in the research and development and later in the
manufacturing and deployment phases.
We believe that in the last several years, producers of networking
communications equipment have increased their use of contract manufacturers to
reduce cost, retain business flexibility and access high end or
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high volume manufacturing capabilities. Contract manufacturers require test
solutions that are particularly well-suited for faster production and flexible
for use in different applications. Recently, cellular phone producers have
also begun to increasingly use contract manufacturers, including for
functional test. This requires specialized test products and services to
address the particular needs of these high-frequency products.
Electronic Equipment Manufacturers
The electronics industry designs, develops, manufactures and distributes a
wide range of products, including products produced in high volumes, such as
computers, computer peripherals and consumer electronics. In addition,
electronic components and printed circuit assemblies are incorporated into
other products, such as aircraft, satellites and automobiles. These components
and printed circuit assemblies may be designed, developed and manufactured by
electronic components companies, by original equipment manufacturers or by
third-party contract manufacturers. For the development and timely
commercialization of new technologies, original equipment manufacturers
require state-of-the-art test instruments, systems and software design tools
in order to design the products for efficient and cost-effective manufacturing
and validate product performance in a variety of configurations and
environments. We believe that these demands have resulted in an increasing
trend toward the use of contract manufacturers by electronics equipment
manufacturers.
Designers and developers of electronic devices and products require state-
of-the-art digital design tools and instruments in order to build electronic
circuits, components and products, to validate their performance and
functionality and to improve the efficiency of the overall design and
development process.
High volume manufacturers of electronics products, such as printed circuit
board assemblies, require sophisticated automated test equipment to operate
and perform highly accurate tests at speeds and volumes matching those of the
production line. This equipment includes in-circuit testing systems, automated
x-ray inspection systems and automated optical inspection systems, all of
which examine the printed circuit assemblies for manufacturing defects.
Manufacturers are also beginning to demand automated functional test systems,
which test an electronic device as if it were in its final environment.
Functional test equipment must have a wide range of capabilities in order to
simulate the functions of a wide variety of electronic devices such as
personal computers, personal computer peripherals or automotive electronics.
Electronics manufacturing also requires standardized test instruments,
system components and complete solutions. These offerings are used for testing
electronic devices in a broad range of applications, such as radar systems,
electronics used in the operation of household appliances and industrial
automation. Aerospace and defense are important markets for standardized
electronic equipment because of the high electronic content of advanced
defense systems and defense-related communications and surveillance equipment.
We believe that following recent reductions in defense spending, defense
purchasers are shifting from specialized test equipment to off-the-shelf test
products and systems.
Semiconductor Manufacturers
Semiconductor test systems are used by semiconductor designers,
semiconductor manufacturers and electronic component manufacturers in the
design, manufacture and testing of a wide variety of semiconductor products,
including logic, memory, mixed analog and digital signal, and system-on-a-chip
integrated circuits. Semiconductor test systems are sold to semiconductor
manufacturers and assembly and test subcontractors to the semiconductor
industry. Semiconductor manufacturers use our semiconductor test systems to
measure product performance, to confirm functionality, to improve product and
production process quality, to shorten time to market, to enhance
manufacturability, to reduce labor costs and to increase production yields.
According to VLSI Research, the market for automatic test equipment for
semiconductor manufacturing was approximately $3.3 billion in 1998 and is
expected to grow at a compound annual rate of approximately 20% over the next
five years. Demand for this test equipment is driven primarily by the
increased volume of
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semiconductor devices produced. The use of semiconductors has proliferated
across many industries, including communications, computing, and consumer
electronics, driving up the overall production volume of semiconductor
devices. Advances in semiconductor technology are also increasing demand for
semiconductor test equipment. The development of increasingly faster and more
complex semiconductor devices stimulates demand for testers capable of
evaluating these high-speed devices. In addition, the continuing integration
of functions, such as microprocessor, logic and memory, on a single integrated
circuit has created a new category of device called system-on-a-chip. These
devices require a new category of sophisticated and flexible automatic test
equipment.
Strategy
Our test and measurement business pursues the following strategies to
maintain and extend our global leadership position and to be the preferred
supplier of enabling solutions for our customers:
Address the Needs of High Growth Markets
Our test and measurement business is focused on addressing the needs of the
communications and electronics industries. We believe these markets will
provide significant growth opportunities as end-users' demands are driven by
the rapid adoption of new technologies providing increased performance at
lower cost. In communications markets, we address the needs of both network
component and equipment manufacturers and network service providers, including
fiber optic, Internet Protocol-based and cellular networks. As demand for
greater communications capacity increases, network manufacturers must develop
higher speed and higher capacity equipment. Similarly, network service
providers must be able to expand and operate existing networks, as well as
create and operate new networks, at high service levels. In the electronics
industry, designers must develop next generation electronic devices and
equipment rapidly and in a cost-effective manner. To keep pace with the speed
of innovation in this market, manufacturers need to bring product to market
faster and achieve high quality at high volume production levels. We have
targeted our test and measurement business products and services to enable our
customers in these high growth markets to achieve these goals.
Utilize Our Investments in New Technology Across Multiple Customer
Applications
We design our products to be used in many phases of our customers'
business--from design and development through installation and deployment. We
invest heavily in the development of new test and measurement instruments,
systems and design tools to meet the requirements of our most innovative
customers. Our work with these customers in developing tools and test
instruments targeted for the research and development labs provides us with
valuable insight into emerging technologies and standards. Once we have
developed a testing solution for what we anticipate will become a sizable
market, we invest in further product development to market the solution to a
broader customer base. Our initial solutions often combine several general
purpose instruments with customized software applications. This approach
enables us to move our solutions more easily from our customers' research and
development laboratories to their manufacturing lines, allowing us to meet
their manufacturing test needs in a timely manner. By working closely with our
customers to understand the final application of their products, we are able
to modify the software and hardware design of our solutions for use in the
installation and deployment phase of their products. We believe that this
strategy allows us to utilize fully our investments in these new technologies.
Maintain Strong Customer Relationships to Anticipate Important Industry
Trends
A central component of our strategy is to work closely with our customers
in their product design stage to understand emerging technologies and
applications and develop advanced test and measurement instruments, systems
and solutions. We gather information from our customers so that we may design
and create new instruments to test emerging technologies as they develop them.
For example, as communications networks have been overwhelmed by demand for
increased speed and capacity, we have focused our product development on the
technologies to enable next-generation, high-speed networks. We provide
advanced fiber optic network test
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instruments and solutions to service providers to maximize the performance and
minimize the total cost of ownership of high-speed fiber optic networks. In
the cellular communications industry, we are working closely with industry
leaders such as Telefonaktiebolaget LM Ericsson, Motorola, Inc. and Nokia Oy
to develop testing solutions to support next-generation high-capacity wireless
cellular standards. We have also worked closely with Rambus in developing
advanced test solutions for high-speed memory devices.
Expand Our Services and Consulting Business Globally
We believe that the rapid pace of technology innovation and our customers'
focus on more efficient uses of their resources have created an opportunity
for us to differentiate ourselves from our competitors with our global support
and service capabilities. We provide basic support services, such as repair
and calibration; systems integration services; training and customer
education; and advanced business services, such as design services and
consulting. For some of our more complex products, such as our automated test
equipment, we provide proactive maintenance and support to ensure maximum
reliability and continuous operation. In addition, we believe we provide
customers with more flexibility and lower the total cost of ownership with our
asset management, financing and pay-per-use programs.
Products
Our test and measurement business designs, develops and manufactures test
and design products that range from single-unit electronic measurement devices
priced under $1,000 to large scale integrated test solutions priced at $1
million and higher.
Communications Equipment Test Solutions
We provide test solutions for fiber optic, broadband wire-based, radio
frequency and microwave communications networks and products.
Fiber Optics. We make products that enable the development, production,
installation, verification and maintenance of fiber optic networks. Our
products include optical signal and spectrum analysis instruments used by the
industry's leading equipment manufacturers to develop and manufacture reliable
optical components. We also make products that test dense wavelength division
multiplexing systems, a new technology that is used to increase the
transmission capacity of optical fibers. Our products also include network
analyzers and high-speed bit-error rate testers that measure key transmission
properties of high-speed optical and electrical signals. These products are
used by network component and equipment manufacturers as well as service
providers to test the proper functioning of fiber optic components and
networks.
Broadband and Data Networks. Our network test equipment is used by service
providers to install and maintain connections to the Internet, high-speed data
networks, telephone systems and cable television lines. This equipment is also
used by network equipment manufacturers to develop and manufacture high- speed
network equipment. We market test solutions for high-speed network equipment
based on broadband data transmission technologies such as Digital Subscriber
Line, Asynchronous Transfer Mode and Integrated Services Digital Network. Our
suite of solutions for network equipment based on the Internet Protocol tests
quality and service performance of voice and data traffic transmitted over
Internet Protocol-based networks. Enterprise network managers, network
equipment designers and third-party field network maintenance service
providers rely on our Internet Advisor product line for comprehensive
diagnostic and problem solving solutions for troubleshooting high-speed local
area networks, wide area networks and asynchronous transfer mode networks. Our
cable television test equipment is designed to ensure maximum radio frequency
and video performance and troubleshooting of components in the cable
infrastructure and the connection to the cable subscriber.
Wireless Communications and Microwave. In wireless communications, we
market our test solutions to manufacturers of cellular handsets and wireless
telephone infrastructure. Our radio frequency and microwave test
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instruments assist in the design and production of cellular handsets and base
stations, as well as satellite and aerospace defense systems. Examples of our
radio frequency and microwave products include network analyzers, spectrum
analyzers and signal sources. These products generate and measure electronic
communications signals. We have combined several of our instruments into
integrated test solutions, such as our single-box testers for cellular
handsets that determine the ability of a handset to send and receive signals
accurately as well as successfully switch between cellular base stations while
traveling. Another example is our integrated solution for testing
communication satellite electronics.
Communications Service Test and Monitoring Solutions
Our acceSS7 product is designed to allow major communications service
providers that use the communications network protocol Signaling System 7
(SS7) to monitor and analyze their signaling network traffic for network
performance and management, fraud management and billing of interconnecting
service providers. Similarly, our AccessFiber products and solutions perform
fault detection and monitor fiber optic communications networks. Our acceSS7
and AccessFiber products are typically sold as a combination of hardware,
software and services. Our Firehunter network management software solution
provides performance monitoring, analysis and reporting capabilities for
Internet service providers. Firehunter allows Internet service providers to
monitor and analyze network occurrences and helps improve the availability and
responsiveness of the network, while reducing the time required to isolate
problems. It gives Internet service providers the capability to monitor and
measure important service level parameters and thus to offer and meet customer
service level agreements. Our NetMetrix local area network probes and software
provide local area network management solutions for the enterprise.
We also market benchtop and handheld measurement devices such as lightwave
multimeters, power meters and optical sources. We also market portable test
instruments for installation and field service testing and monitoring for many
types of communications networks. For example, our portable bit error rate
test instruments are used by service providers for transmission performance
analysis during installation and for ongoing maintenance.
Electronics Design and Manufacturing Solutions
General Purpose Instruments. General purpose instruments are used by a wide
variety of customers across all electronics-related industries. They are used
principally by engineers in research and development laboratories,
manufacturing, calibration and service for measuring voltage, current,
frequency, signal pulse width and other standard electronics measurements.
These products are often the core of an electrical engineer's benchtop
equipment. Examples of general purpose instruments include:
. digitizing oscilloscopes;
. voltmeters and multimeters;
. frequency counters;
. bench and system power supplies; and
. function generators and waveform synthesizers.
Our general purpose instruments have been the basic building blocks for
many of our more advanced products and solutions.
Modular Instruments and Test Software. Our modular instruments and test
software, including instruments incorporating the VXI bus, a standard
interface for building test systems using modular components, and modular
measurement system software is used to dynamically configure and reconfigure
test systems for designers and manufacturers of electronic devices.
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Data Acquisition Devices. Our data acquisition and control products measure
physical phenomena, acquire data from sensors and perform digital-to-analog
conversion, signal processing and control functions. Data acquisition and
control products include digital-to-analog converters that are attached to
sensors to measure a wide range of physical data such as temperature, airplane
wing strain and vibrations in cars, jet engines and power generation
equipment.
Digital Design Products. Our digital design and test products are used
primarily by research and development engineers to design, test and remove
design defects from digital electronic systems, including microprocessors,
computers and computer peripherals. These systems range from simple digital
control circuits to complex, high-speed servers incorporating the latest
microprocessor technology. Our digital design products include logic
analyzers, logic-signal sources and data generators.
Automated In-Circuit Testing. We believe that we offer the leading family
of in-circuit test products, which test printed circuit board assemblies to
find defects caused by the manufacturing process. In-circuit testers use a
probe fixture which makes electrical contact with the circuit board and
provides electrical measurements. These products are used with a suite of
proprietary tools for testing printed circuit assemblies where probing may be
able to access as little as 50% of the contacts due to very densely packed or
very small components. These tools enable our current systems to test up to
twice as fast as previous in-circuit test systems.
Automated X-ray Inspection. Our leading x-ray inspection products provide a
three-dimensional scan of printed circuit board assemblies to identify and
isolate quality defects caused by the manufacturing process. Using patented
techniques, our products can look through a device to identify structural
defects in soldering that are not identified by visual inspection and that may
not be detected with in-circuit testing. This technique also eliminates the
need for expensive physical probe fixtures.
Automated Optical Inspection. Our automated optical inspection line of
products enables automated visual inspection of printed circuit assemblies.
These systems are able to locate, with a high degree of repeatability and
reliability, misplaced and misaligned parts, gross solder defects and other
process faults without the need for a human inspector.
Intelligent Test. In products that demand the highest reliability, like
those used in networking and communications, customers will often require that
their printed circuit assemblies be tested using a combination of automated
test processes. Our AwareTest Software enables customers to design test
processes that avoid unnecessary test duplication. For example, an in-circuit
test device will receive information about the faults that have already been
detected by an x-ray inspection system and not repeat the test of that
circuit. AwareTest allows customers to obtain maximum test coverage while
decreasing total test time and cost.
Semiconductor Automated Test Equipment
Our automated test equipment supports the development and manufacture of
semiconductor devices. We produce semiconductor test equipment to perform
electrical and functional testing of the operation of memory, logic, mixed
signal, systems-on-a chip, and radio frequency integrated circuits. Our
parametric test instruments and systems are used to examine semiconductor
wafers during the semiconductor manufacturing process. Our semiconductor
parametric test systems combine hardware technology with system software. The
software can be customized to meet specific application needs to allow faster
verification of the accuracy of the manufacturing process of a silicon wafer
and wafer quality through its first electrical test. Our product development
efforts are targeted at leading edge technologies, such as systems-on-a-chip
and high-speed memory products.
Our semiconductor test products test a variety of different circuit types.
These devices are usually tested after final assembly, but the testing of some
devices is most effective immediately after the production of the silicon
wafer, when the wafers are sorted. We believe we are the industry leader in
wafer-sort test solutions for
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flash memory devices, which retain data even when the power is turned off and
that are critical for use in digital cameras, cellular phones, personal
digital assistants and storage of portable digital audio files. Our flash
memory test products can test as many as 16 devices in parallel, greatly
improving test throughput for our customers.
In the final test area, we are exploiting our successful logic and mixed
signal semiconductor test offerings into two market areas. Based on our high
performance logic technology, we have recently developed and begun shipping an
accurate, high-speed test system, initially focused on Direct Rambus dynamic
random access memory chip testing. The Rambus architecture addresses
performance limitations in other random access memory chips by moving data
quickly in and out of memory. Rambus-designed memory has been used in products
such as video games for several years. Our Rambus memory testers will
initially test 16 devices in parallel. In the year 2000, we expect to offer
the ability to test 32 devices in parallel, which we believe will result in an
extremely competitive cost of test.
Our test equipment for the system-on-a-chip market is based on our newest
generation logic and mixed signal product platform. This platform is designed
to span the wide range of price, performance and functionality that the
system-on-a-chip market will require. Also, we produce a radio frequency
integrated circuit test system that we believe has established a leadership
position in the wireless device market.
High-Frequency Electronic Design Tools
Our high-frequency electronic design automation software tools are used by
radio frequency integrated circuit design engineers to model, simulate and
analyze communications product designs at the circuit and system levels. Our
technology is the first in the industry to allow the simulation of complete
communication product design in a single environment. According to Dataquest,
we are the leader in the market for high-frequency computer aided engineering
software.
Customers
We market our test and measurement solutions to customers across a broad
array of industries. Several of our customers purchase products across several
of our major product lines for their different business units.
A representative list of the customers of our test and measurement business
follows:
Alcatel Alsthom Intel Corporation Qualcomm, Inc.
AT&T LG Group Samsung Electronics
Bell Canada Enterprises, Co., Ltd.
Inc. (Nortel Networks
Corporation)
Lockheed Martin
Corporation Siemens
Lucent Solectron Corporation
The Boeing Company Matsushita Electric Sprint
Ericsson Industrial Co., Ltd. THOMSON Multimedia,
Fujitsu Limited Mitsubishi Electronics S.A.
General Electric America, Inc. Toshiba Corporation
General Motors Motorola Tyco International
Corporation NEC Corporation Ltd.
Hitachi, Ltd. Nippon Telephone & United States Air
IBM Telegraph Corporation Force
Nokia U S WEST, Inc.
Sales, Marketing and Support
We have a focused sales strategy to strengthen customer satisfaction. Our
worldwide sales and support teams are key elements of this strategy. Our
direct sales force is focused on identifying customer needs and recommending
solutions involving the effective use and deployment of our equipment and
systems. Some members of our direct sales force focus on global accounts,
providing uniform services on a worldwide basis. Others focus on our more
complex products such as our communications monitoring systems and our
automated test equipment, where customers require intensive strategic
consultation. Our sales force also specifically targets
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the contract manufacturer market by collaborating with original equipment
manufacturers to specify that our test equipment be used by contract
manufacturers, as well as marketing to contract manufacturers directly.
Our direct sales force consists of field engineers and systems engineers
who often hold advanced degrees and who have in-depth knowledge of the
customers' business and technology needs. Some of our field engineers are
account managers for our large accounts, and enhance our understanding of the
future needs of these customers. Our systems engineers provide a combination
of consulting, systems integration and application and software engineering
services, and are instrumental in all stages of the sale, implementation and
support of our complex systems and solutions. We have more than 3,000 sales,
service and support engineers located throughout the world. In support of our
selling efforts, we have regional sales and customer support centers in Hong
Kong, the Netherlands and the United States. We believe that the scale and
global presence of our direct sales force are an important competitive
advantage. We also use value-added resellers to address specific market
segments.
We sell our less complex products through a combination of our direct sales
force, distributors, mail order, telephone and electronic commerce, utilizing
our extensive catalogs. In many cases, initial sales of our products may be
made by our direct sales force, with follow-up sales of the products through
one of our alternative sales channels.
We have a support organization dedicated to delivering a full range of
services to our customers, including:
. instrument repair and calibration;
. proactive support to ensure continuous productivity of our semiconductor
and electronics manufacturing test equipment;
. application and process consulting;
. solution development and product integration;
. customer education;
. system integration; and
. software support.
We offer these services worldwide through an integrated team of support
engineers. We also provide support services over the Internet and through call
centers.
Manufacturing
We concentrate our test and measurement manufacturing efforts primarily on
final assembly and test of our products. To maximize our productivity and our
ability to respond to market conditions, we use contract manufacturers for the
production of printed circuit boards, sheetmetal fabrication, metal die
casting, plastic molding and standard electronic components. We also
manufacture proprietary devices and assemblies, such as x-ray tubes and high-
frequency integrated circuits and devices, in our own foundries for
competitive advantage.
We have approximately 2.5 million square feet of manufacturing space
worldwide dedicated to our test and measurement business.
Competition
The market for test and measurement equipment is highly competitive, and we
expect this competition to increase. We believe that the principal factors of
competition are:
. speed, accuracy and cost of test;
. breadth of product offerings;
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. scalability and flexibility of products;
. ease of product use;
. ability to upgrade product platform;
. time to market of new technologies;
. adherence to industry standards;
. ability to support emerging industry protocols; and
. ability to provide localized service and support on a worldwide basis.
We believe we compete favorably with respect to each of these factors and
have gained significant market share in many of our targeted markets as a
result. We believe our success has been driven by technology leadership, our
ability to generate customer loyalty and our track record at anticipating
market trends.
Our test and measurement business competes with a number of significant
competitors in all our major product categories and across our targeted
industries. In communications test, our primary competitors are Anritsu, IFR
Systems, Inc./Marconi Communications Ltd., Network Associates, Inc., Rhode &
Schwartz, Tektronix, Inc. and Wandel & Goltermann Technologies, Inc./Wavetek
Corporation, as well as INET Technologies, Inc. and Micromuse Inc. in the
communications network monitoring market. In the semiconductor test market, we
compete primarily against Advantest Corporation, Schlumberger Limited and
Teradyne. In the printed circuit board test market, a segment of the
electronics manufacturing market, we compete against GenRad, Inc. and
Teradyne. In the general purpose electronic test market, we compete against
companies such as Fluke Corporation (a subsidiary of Danaher Corporation),
Keithley Instruments, Inc., LeCroy Corporation, National Instruments
Corporation and Tektronix. Some of our competitors may have a strategic
advantage based on geographic location that could make it difficult for us to
compete in those markets. In addition to our larger competitors, we also face
competition from start-up companies with newer technologies or products based
on next-generation industry protocols, particularly in communications test.
Any of these start-up or other emerging competitors, as well as our existing
competitors, may develop technologies that more effectively address our
targeted markets at a lower cost. In addition, these small competitors may
enter into strategic alliances or business combinations that increase their
ability to innovate and address our markets.
SEMICONDUCTOR PRODUCTS
Our semiconductor products business is a leading supplier of semiconductor
components, modules and assemblies for high performance communications
infrastructure, computing devices and mobile information appliances. We
design, develop and manufacture:
. fiber-optic communication devices, components and assemblies;
. integrated circuits for high-speed local area networks;
. integrated circuits and board-level solutions for storage area networks;
. discrete devices and integrated circuits for microwave and radio
frequency mobile wireless devices and infrastructure;
. infrared components used for short-range communication between portable
and stationary devices;
. ASICs for workstations, servers and laser and inkjet printers;
. LEDs for electronic image and information display; and
. semiconductors for image capture and display.
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We believe we are the leading provider of:
. fiber optic communications transceiver (transmitter/receiver) modules
used for high speed data transmission;
. integrated circuits for storage area networks based on the Fibre Channel
protocol, a protocol for communications among storage area networks;
. infrared components;
. optoelectronic components and displays; and
. ASICs to Hewlett-Packard for its workstations, servers and printers.
In total, we produce more than 9,000 products for high-speed networking,
mobile communications and computing devices worldwide. As of July 31, 1999,
our semiconductor products business had approximately 10,900 employees
worldwide. We have eleven major design centers and eight manufacturing sites
around the world. Our semiconductor products business generated revenue of
$1.6 billion in fiscal year 1998 and $1.2 billion in the first nine months of
fiscal year 1999.
Markets
Our semiconductor products business serves two primary markets:
communications and computing.
Communications
High-Speed Networking. The advent of the Internet as a communications
medium has dramatically increased business and consumer demand for high-speed,
reliable access to data and, as a result, has placed considerable stress on
existing communications networks. In data communications, speed is measured in
the number of bits of data per second that can be transmitted across the
network.
As the volume of data transferred over networks grows, users are becoming
increasingly frustrated with the low performance of the existing
communications infrastructure, which was originally designed for lower speed
analog transmission rather than high-speed digital transmission. This
infrastructure consists primarily of copper wiring, which was originally
intended for analog voice transmission. Copper wiring is highly susceptible to
noise and interference, making accurate transmission of data at high speeds
difficult.
Fiber optic cables, which carry information in the form of pulses of light
produced by light-emitting diodes or lasers, can carry very large amounts of
data in a small space and are immune to electrical and magnetic interference.
Because fiber optic cables are not susceptible to interference, they can
minimize error in data transmission and prevent the crossing of telephone
conversations between lines. Fiber optic cables can also provide enhanced
security compared to copper wiring, since intercepting communications on a
fiber optic line without detection is difficult. Because of these benefits,
telecommunications service providers have historically used fiber-optic cables
for their ultra-long-distance, typically undersea, communications
infrastructure. For a number of years, fiber-optic cables have also been the
method of choice for long-distance, high-volume voice and data, and have more
recently been increasingly used in local area networks, in place of
traditional copper wires, for higher-speed and more reliable data
communication.
We are a major supplier of fiber optic transceivers, which convert digital
data into light signals for transmission, and convert light signals back into
digital form on the receiving end of the communication. We market fiber optic
transceivers for both short-range, local area network applications and long-
range, wide area network applications to major telecommunications and data
networking equipment vendors such as Alcatel, Cisco Systems, Inc., Lucent and
Nortel. In addition, we supply high reliability solid-state lasers to major
telecommunications companies for high-reliability, ultra-long-distance
applications. We are also a major supplier of physical layer integrated
circuits for high-speed networking applications, which prepare data for
transmission across fiber networks.
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Storage Area Networking. As the volume of data that is being transmitted,
processed and stored in networked environments has increased, the market for
storage area network equipment, which connects computers and storage devices,
has grown dramatically. The increase in data transmission speeds across
networks has created a demand for high-speed and high-performance storage-to-
server and server-to-server connectivity. The Fibre Channel interconnect
protocol, a standard for the transfer of information between computers and
storage devices defined by the American National Standards Institute, was
developed to meet this growing demand. Fibre Channel supports the transfer of
large amounts of data within storage area networks at speeds of one gigabit
per second and greater and provides high transmission reliability. We supply a
broad range of integrated circuits, fiber optic components and systems to
manufacturers of storage area network systems utilizing the Fibre Channel
protocol, such as Data General Corporation, EMC Corporation, Hitachi and NEC.
Wireless Communications. Worldwide subscriber growth for wireless
communications has been increasing rapidly in recent years. The Strategis
Group anticipates that the worldwide market for cellular services will
increase to approximately 650 million subscribers by 2002 from approximately
300 million subscribers in 1998. We supply a wide range of radio frequency and
microwave integrated circuits and devices to mobile telephone manufacturers
and vendors of equipment for the mobile telephone infrastructure to meet this
increasing demand. We supply infrared and radio frequency devices and modules
for short-range, point-to-point wireless communications to manufacturers of
computers, printers and consumer electronics products, such as mobile
telephones, digital cameras, personal digital assistants and pagers.
Computing
We are the largest supplier to Hewlett-Packard of ASICs for printers,
workstations and servers. ASICs are semiconductors that are designed for a
unique, customer-specified application and typically replace a number of
discrete components resulting in improved performance, lower cost and high
reliability.
Strategy
To service the needs of our customers in the communications and computer
industries, the semiconductor products business pursues the following
strategies:
Apply our Broad Technology Base to Capture Demand for Higher-speed and
Mobile Data Transmission
We have established leadership positions in the design and development of
semiconductors used in fiber optic communications and infrared technology.
Building on this leadership and our broad technology base, we continue to
invest in designing and marketing semiconductor products to address the
growing demand for higher-speed, higher-capacity connections and mobile
communications. In particular, we are focused on developing devices that
enable data transmission speeds of one gigabit per second or greater to
address the increasing demand for high speed networking. We currently produce
integrated circuits for the most prevalent mobile communications standards,
and we believe we are well positioned to benefit from the increased demand for
these products.
Continue to be Hewlett-Packard's leading supplier of ASICs
Key elements of our remaining a leading supplier of ASICs to Hewlett-
Packard for use in its printers, workstations and servers have been:
. our development, external sourcing and application of intellectual
property;
. our ability to meet competitive pricing and performance requirements;
and
. our dedicated sales force and co-location of design personnel with major
Hewlett-Packard businesses.
To maintain this position, we will continue to pursue our intellectual
property strategy through both internal development and acquisitions, and
apply this intellectual property strategically to our products. In addition,
to
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remain competitive, we are focused on reducing the costs and improving the
performance of the ASICs we provide to Hewlett-Packard by pursuing higher
levels of device integration and employing advanced process technology. We
also intend to increase sales of ASICs to purchasers other than Hewlett-
Packard, in areas other than workstations, servers and printers, particularly
in the networking area.
Take Advantage of Technology Partnerships
To maintain technology leadership in a cost-effective manner, we have
formed several strategic technology partnerships. We intend to continue to
enter into strategic technology partnerships to gain access to intellectual
property and advanced semiconductor manufacturing process technology. For
example, through our joint venture with Chartered Semiconductor Manufacturing,
Ltd. and the joint venture's technology sharing arrangements with Motorola, we
obtain access to advanced semiconductor process technology and volume
production capacity while reducing capital outlays and design process costs.
Our alliance with Displaytech, Ltd. provides us with access to its expertise
in liquid crystal materials development, microdisplay design and display
systems integration for use in our near-eye microdisplay products.
Products
Our major product areas include:
Fiber Optics
Our fiber optic transceiver products address all segments of the market for
high-speed optical communications, including local area networking, wide area
networking, long-distance networks and custom-built, proprietary network
solutions. We market optical transceivers, transmitters and receivers for
high-speed local area network applications from 10 megabits per second to one
gigabit per second and higher, and wide area network applications at up to 2.5
gigabits per second. We also produce solid-state lasers, which are used for
high-reliability undersea transmission by major communications companies, such
as intercontinental communications.
High-Speed Network Input-Output Circuits
We market integrated circuits and solutions for high-speed input-output
devices, focusing on the high-speed networking and storage area networking
markets. We produce physical layer integrated circuits for high speed network
switches and routers, devices that direct network traffic. We are also the
industry leader in Fibre Channel protocol-based integrated circuits for
storage area networks. We also produce subsystems for storage area networks.
Radio Frequency and Microwave Communications Devices
We produce a broad family of radio frequency and microwave communications
products, primarily integrated circuits for wireless communications products
and infrastructure. Our products include integrated circuits, individual
transistors and diodes and amplifiers used in higher speed and higher
frequency applications. These products are focused on applications in a broad
variety of wireless communications standards, including Cellular and Personal
Communications Systems based on Code Division Multiple Access and Global
Systems for Mobile Communications. We offer products for both cellular base
stations and handsets.
Infrared Emitters, Detectors and Transceiver Modules
We produce a full line of infrared products that enable short range, point-
to-point wireless communication between portable and stationary devices.
Examples of these portable devices include notebook personal computers,
cellular phones, personal digital assistants and digital cameras. Our infrared
products utilize our strength in high-speed communication design and our
expertise in optics and are used in a substantial portion of the notebook
computers and laser printers produced today.
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ASICs
Through a competitive process, we have been the primary supplier to
Hewlett-Packard of ASICs for Hewlett-Packard's printers. In addition, we
provide graphics chips, core electronics chipsets that surround central
processing units and microprocessors for Hewlett-Packard's workstations and
servers. However, we expect shipments of microprocessors to Hewlett-Packard to
be substantially reduced before the end of 2000. The terms of our license
limit our use of Hewlett-Packard's intellectual property for the sale of
integrated circuits in printing devices, printer supplies, components and
accessories, document scanners and some computing devices for a period of
three years in some cases and 10 years in other cases.
Optical Image Sensors, Optical Position Sensors and Reflective Microdisplay
Components
We have recently begun applying our capabilities in optoelectronics and
integrated circuit design to image and position sensors and microdisplays. Our
sensor products include color and monochrome still and video camera image
capture solutions and intelligent optical sensors. Our focus in this area is
to enable pervasive imaging through low-cost digital image sensors for use on
a stand-alone basis or embedded within personal computers, laptops,
peripherals, cellular telephones and affordable digital cameras.
We also produce optical position motion control products used primarily for
motion control in printers and small motors that require precise control.
These optical position sensors are used to locate the printing device in an
inkjet printer. In addition, our optical image sensors are being used as the
sensing system in a new generation of computer mice.
Our microdisplay products deliver high quality, low power, low cost images
on a single silicon chip with television or computer monitor image capability.
These image subsystems can be used as display panels on electronic devices
such as portable telephones and, when coupled with optics, can be used for
viewfinders in cameras and camcorders. Through an alliance with Displaytech,
we are jointly developing advanced microdisplay components and subsystems for
sale to original equipment manufacturers.
LEDs and Optocouplers
We manufacture and sell a broad range of LEDs, alphanumeric displays and
optocouplers. LEDs are semiconductor devices that emit light when an
electrical signal is applied. LEDs and alphanumeric displays are primarily
used as status indicators, back-lighting for panels or switches and
information in consumer, home office and industrial applications. Typical
applications include status indicators on computers, fax and other office
equipment, display panels and indicators for audio and video equipment, and as
indicators and displays on industrial grade electronic equipment. Optocoupler
products are devices that provide both electrical insulation, for protection,
and signal isolation, to prevent distortion of data, between differing
electrical environments. Typical applications for these products include
industrial automation, electrical motor control and data communications
interface isolation.
Lighting Joint Venture
We recently announced a memorandum of understanding with Philips to extend
our existing joint venture relating to the design and production of LEDs. The
joint venture will be expanded to take advantage of our technology and
manufacturing strength in high-brightness color LEDs, and Philips' strength in
developing, manufacturing and selling innovative lighting products and
systems. Under the terms of the new agreement, the global joint venture will
develop, manufacture and sell LEDs, modules, products and systems for a broad
spectrum of lighting applications, including automotive lighting, high-
brightness traffic signals, contour lighting and signs, outdoor illumination,
and white LEDs for both indoor and outdoor applications. We will equally own
the joint venture with Philips, which we currently anticipate will involve
1,000 employees located in California, Malaysia and the Netherlands. We are
negotiating a definitive agreement with Philips based on the memorandum of
understanding, and we therefore cannot guarantee that our relationship with
Philips will be extended on these terms or at all.
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Competition
The markets for our semiconductor products are intensely competitive, and
we expect competition to increase. Our ability to compete effectively depends
upon a number of factors, including:
. product reliability and performance in operation;
. price;
. power consumption;
. compliance with standards;
. product size and integration; and
. time to market.
We believe that we compete favorably on the basis of these factors. In the
fiber-optic products market, our principal competitors are Tyco, Lucent and
Siemens. In the market for high-speed network components, our principal
competitors are Emulex Corporation, LSI Logic Corporation, QLogic Corporation
and Vitesse Semiconductor Corporation. Our principal competitors in wireless
communications are Motorola, NEC and Siemens. In the market for infrared
products, our principal competitors are Vishay Intertechnology, Inc. and IBM.
We compete with companies including LSI, IBM, Mitsubishi, Motorola and NEC in
the production of integrated circuits. Principal competitors in our LED
businesses include Lite-on, Inc., Stanley Electronic Co., Ltd., Siemens and
Toshiba.
Customers
We sell to a broad array of customers in the communications and computing
industries. We sell to original equipment manufacturers directly, as well as
contract manufacturers including Celestica, Inc., Jabil Circuit, Inc., SCI
Systems, Inc. and Solectron. Our top customers by product line, including
customers purchasing through contract manufacturers and distributors, include
the following:
<TABLE>
<CAPTION>
High-Speed
Fiber Optics Networking Components Wireless
--------------------------------- --------------------------- --------
<S> <C> <C>
Alcatel Cisco Alcatel
Allied Telesyn International Corp Compaq Computer Corporation Ericsson
Cabletron Systems, Inc. Data General LG Group
Cisco EMC Lucent
FORE Systems, Inc. Hewlett-Packard Motorola
IBM Hitachi Nokia
Lucent IBM Nortel
Motorola Interphase Corporation Qualcomm
Nortel NEC Samsung
Tellabs, Inc. 3Com Siemens
3Com Corporation
Tyco
</TABLE>
In addition, through sales of ASICs, storage area networking components,
motion-control products and microprocessors, Hewlett-Packard accounted for
approximately 37% of our semiconductor products revenue in the nine months
ended July 31, 1999, and approximately 34% in fiscal years 1997 and 1998. We
have begun marketing our imaging products to companies such as Microsoft
Corporation and Logitech International S.A.
Sales, Marketing and Support
Our sales organization consists of 375 professionals. Our sales
organization is divided into four groups, with responsibilities for large,
global accounts and three regional areas: the Americas, Europe and Asia
Pacific. We also have a direct sales team that has several years of experience
in servicing our customer relationship with Hewlett-Packard. Our sales force
has specialized product and service knowledge that enables it to sell specific
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offerings at key levels throughout a customer's organization. In addition to
our direct sales force, we generate approximately 25% of our revenue through
our relationships with key electronic distributors, such as Arrow Electronics,
Inc. and Avnet, Inc. on a worldwide basis, EBV Electronik GmbH/Wyle
Electronics in Europe and North America, Future Electronics, Inc. in Europe
and North America, and Ryoyo Electro Singapore PTE, Ltd. and Tokyo Electric
Power Company in Japan. We have also recently focused a sales effort to major
contract manufacturers such as Celestica, Jabil, SCI and Solectron. Our total
sales effort reaches 45 countries through 200 distribution locations.
In support of our selling effort, we also have regional sales and customer
support centers in Germany, Hong Kong, Japan, Singapore, the United Kingdom
and the United States. These regional centers are responsible for sales
support, product presentations, developing new services and business
opportunities, and meeting the demands of our customers for localized
aftermarket support. We also provide a broad range of products and
applications-related information to customers and channel partners via the
Internet.
Manufacturing
Our semiconductor products business has a total of eight manufacturing
sites located in California, Colorado in the United States, Malaysia,
Singapore and the United Kingdom. The sites together have usable manufacturing
space of over 897,000 square feet and, as of July 31, 1999 approximately 7,900
employees devoted strictly to manufacturing. The majority of our silicon and
gallium arsenide wafer fabrication is done in the United States and Singapore,
while our assembly and test operations are in Malaysia, Singapore and the
United Kingdom. In addition to these facilities, we utilize a network of
contract manufacturers throughout Asia for semiconductor fabrication and test.
Our manufacturing strategy has been to outsource more mature technologies
while using our in-house manufacturing fabrication, assembly and test
capabilities to develop new, leading edge-products. In addition, through our
relationship with Chartered Semiconductor Manufacturing and with Chartered
Silicon Partners, we have access to an assured source of silicon wafers for
our integrated circuit designs at favorable prices. Chartered Semiconductor
Manufacturing provides us with access to Motorola's fabrication process
developments through licensing arrangements with Motorola.
Our production facilities have developed several quality-management
processes designed to increase productivity. We have developed proprietary
automated test systems, particularly in optical, light-emitting diode and
microwave.
HEALTHCARE SOLUTIONS
Our healthcare solutions business is a worldwide leader in electro-medical
clinical measurement and diagnostic solutions. Our products and systems enable
medical professionals to gather and analyze information in hospital intensive
care units and emergency rooms, outpatient clinics, doctors' offices,
patients' homes and other settings. Our products and services include patient
monitoring systems, imaging systems, external defibrillators, cardiology
products and related professional services and support, each aimed at helping
our customers improve the quality of patient care while decreasing their
costs. We hold leading market share with our patient monitoring and associated
clinical information-management systems for critical care and cardiovascular
ultrasound imaging systems.
We market our products to professionals and institutions in more than 100
countries. We have sales offices in 33 countries and manufacturing sites in
Massachusetts and Washington in the United States, China and Germany. As of
July 31, 1999, the healthcare solutions business had approximately 5,000
employees worldwide. Our healthcare solutions business generated revenue of
$1.3 billion in fiscal year 1998 and $1.0 billion in the first nine months of
fiscal year 1999.
Markets
The principal markets in which we participate are patient monitoring,
ultrasound imaging and external defibrillator and cardiology products.
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Patient Monitoring
Patient monitoring systems continuously assess a patient's vital signs,
such as heart rate, blood pressure and respiration rates, to enable very rapid
decision making in emergency and critical care environments. Our patient
monitoring systems are used in three major market segments: critical care,
anesthesia care and neonatal care. According to Frost & Sullivan, the
worldwide market for multi-functional patient monitoring equipment totaled
$5.3 billion in 1997, growing at a compound annual rate of 8.7% from 1994 to
1997. This market is forecasted to grow at a compound annual rate of 11.5%
from 1998 to 2003.
Patient monitoring equipment and services are also used in non-critical
care environments. As providers seek to reduce costs, patient care is often
being delivered in non-critical care environments. Many patients who
previously would have remained in the intensive-care unit are being moved to
non-critical care areas, where portable monitors and remote measurement
systems are used. These non-critical care areas, which include non-intensive-
care areas of hospitals, outpatient care facilities and patients' homes, are
expected to provide significant growth opportunities for patient monitoring
markets in the future. Frost & Sullivan expects the market for lower cost and
portable monitoring equipment to grow from $675 million in 1998 to $1.3
billion by the year 2004, a 11.3% compound annual growth rate.
Ultrasound Imaging
Ultrasound imaging systems enable medical professionals to view multiple
parts of the human anatomy with high-resolution images that are produced non-
invasively from sound waves. The ultrasound imaging equipment market includes
cardiovascular, radiology, obstetrical and general imaging equipment. Frost &
Sullivan estimates that the worldwide market for ultrasound imaging equipment
was $2.5 billion in 1998 and grew at a compound annual rate of 5.1% from 1996
to 1998. Frost & Sullivan forecasts the overall market to grow at a compound
annual rate of 6.7% over the next five years. Within ultrasound imaging, our
principal targeted market is cardiology ultrasound imaging. Frost & Sullivan
estimates that the global market for cardiology ultrasound imaging equipment
was approximately $768 million in 1998 and grew at a compound annual rate of
5.5% from 1996 to 1998. In line with the overall ultrasound market, Frost &
Sullivan forecasts the cardiovascular imaging segment to grow at an annual
rate of approximately 6.8% over the next five years.
Cardiology Products
Our cardiology products business includes external defibrillators,
electrocardiographs and related information systems. External defibrillators
are devices that deliver an electrical shock designed to restart the heart of
victims of sudden cardiac arrest. Theta Corporation estimates the worldwide
external defibrillator market was approximately $425 million for 1998 and
forecasts a compound annual growth of 8% for the years 1998 through 2000. The
fastest-growing segment of the defibrillator market is the out-of-hospital
segment, which is expected to grow, on average, more than 35% annually for the
next three years, according to Frost & Sullivan. Each year in the United
States, sudden cardiac arrest strikes approximately 350,000 people, of whom
less than 5% survive, largely because defibrillators do not reach victims in
time. In 1997, the American Heart Association called for the broad deployment
of automatic external defibrillators in public places where large groups of
people gather and estimated that broader public access to defibrillators could
save an additional 20,000 lives each year in the United States.
We also sell electrocardiography equipment, which measures and displays
information about the electrical activity of the heart. Frost & Sullivan
estimates that the total worldwide electrocardiography equipment market was
approximately $200 million in 1998 and grew at a compound annual growth rate
of approximately 2.3% from 1991 to 1998. This market is expected to grow at an
annual rate of 3.0% over the next three years.
Strategy
Our healthcare solutions business focuses on creating and delivering new
products and services for the healthcare market, establishing and maintaining
a strong reputation with our customers and developing effective strategic
partnerships by pursuing the following strategies:
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Bring New Technologies and Applications to Targeted Markets
We have established leadership positions in the patient monitoring,
ultrasound and cardiology markets. We believe we can expand our market
opportunity by moving into new areas of these markets, increasing the market
penetration of our existing products and services and delivering new products
that offer higher performance at lower prices. In particular, we aim to bring
new technologies to the patient monitoring and imaging markets and expand our
coverage in developed countries by delivering cost-effective diagnostic and
therapeutic tools. We are also focused on developing new, low-cost
applications of our existing products to expand our presence in smaller
hospitals and less-developed countries.
Target Medical Care Beyond the Hospital
We believe that an increasing proportion of healthcare is being delivered
outside of the hospital in clinics, surgical centers and doctors' offices, as
well as in the workplace and homes. According to data from the National Center
for Health Statistics, the average length of stay at hospitals has declined
17.6% from 1990 to 1996. By contrast, outpatient visits increased 37% between
1990 and 1996. This growth in outpatient services has increased demand for
products that can enable nurses, other clinicians and nonmedical professionals
to provide care outside of the hospital. In 1998, we acquired Heartstream, a
market leader in automatic external defibrillators which enable nonmedical
professionals to deliver defibrillation in settings outside the hospital.
Through internal development efforts, we are also delivering cost-effective
diagnostic and therapeutic tools, which can decrease the cost of diagnosing
and monitoring patients. These tools are targeted at smaller hospitals, mobile
clinics and private offices.
Increase Presence in Emerging Systems Worldwide
We believe an opportunity exists in emerging countries with underdeveloped
healthcare systems and infrastructure. We believe the large and growing
populations of these countries will fuel demand for cost-efficient medical
products and services. In order to capitalize on this opportunity, we plan to
expand our global presence by continuing to invest in the development of low-
cost, reliable, high-utility, diagnostic, monitoring and therapy instruments
designed to be easily supported in rural areas. We also work with
international financial organizations, such as the World Bank, to arrange
secured financing services for our customers in these regions.
Take Advantage of the Rapid Adoption of Information Technology, the
Internet and Industry Standards
The rapid growth of the Internet is fueling the adoption of Internet-based
healthcare services, medical care by telephone and online self-care. According
to Cyber Dialogue, by the year 2000 an estimated 30 million Americans will use
the Internet to learn about options for treatment, self-care and prevention.
To take advantage of this accelerating trend, we are working with medical
professionals to deploy Internet-based communication systems that link medical
professionals and patients. For example, our CodeRunner Web product allows
healthcare professionals to review a summary of cardiac resuscitation efforts
to ensure that approved procedures were followed in an emergency situation.
Increasingly, our customers are demanding clinical diagnostic information
systems based on open standards for easier and more cost-effective access to
medical data. To proactively participate in the definition of new industry
standards and ensure compliance of our products and technologies, we are
currently leading several industry-wide efforts to create and promulgate
standards for communication and interoperability among disparate healthcare
systems.
Develop Point-of-Care Technologies
Point-of-care diagnostic products consist of blood-and-tissue analysis
systems that provide immediate or continuous diagnostic results at the
patient's bedside. These systems include portable, microprocessor-based
analyzers that employ single-use, disposable cartridges to perform
simultaneously several of the most frequently ordered blood tests in a simple
90-second procedure. These biochemistry-based devices provide accurate and
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reliable blood test results more quickly, cost-effectively and simply than
most advanced clinical laboratory equipment. We believe market acceptance of
point-of-care diagnostics is increasing. In 1995, we entered into an agreement
with i-STAT Corporation to enter the point-of-care testing marketplace with
critical blood parameters. In 1999, we entered into a worldwide agreement with
Diametrics Medical Incorporated in order to provide both continuous and
intermittent blood monitoring capabilities. These companies' biochemical
sensors, when integrated into our monitoring platforms, enable time-sensitive
measurements to be made quickly and accurately at a patient's bedside for
faster diagnosis and therapeutic intervention. We intend to continue to
enhance our patient monitoring capabilities by developing alliances with other
companies.
Focus on the Management and Treatment of Chronic Illnesses
Our products and solutions primarily address the need for the diagnosis and
treatment of non-critical illnesses in a clinical setting. We believe
healthcare expenditures are shifting from acute care in the hospital to
ongoing care or treatment of long-standing conditions, as a result of the
dramatic growth in the elderly population and advances in life-extending
medical therapies and technologies. Therefore, we have recently begun to
pursue opportunities focused on the ongoing management and treatment of
chronic illnesses. We plan to introduce our first product to address the
chronic care market, our remote measurement solution, in late 1999. It is our
intention that this solution will assist clinicians in successfully managing
congestive heart failure patients at home. Studies show that this type of
disease management program increases patient comfort while avoiding costly
hospital emergency visits.
Products
Our products and services include patient monitoring, imaging systems,
cardiology products and related professional services.
Patient Monitoring
According to a 1998 study by Frost & Sullivan, we maintain a leadership
position in the market for patient monitoring and related information
management systems. Our products range from critical-care bedside monitors,
fetal monitoring and remote-measurement systems to central station monitors,
associated clinical decision support systems and critical-care information-
management systems. Our clinical decision support and critical-care
information-management systems are scalable based on department protocols,
severity of patient condition and workflow requirements. Our solutions range
from basic surveillance and centralized alarms to very large system
configurations that provide comprehensive patient information-management
support.
We have supplied over 170,000 units worldwide of our modular Viridia
Component Monitoring System family of patient monitors. The Viridia CMS
monitors support more than 20 different kinds of clinical measurements in
critical care, anesthesia and perinatal care. Our Viridia Information Center
is one of the industry's most advanced real-time, patient data analysis and
surveillance solutions offering data at a central station. It enables
clinicians to provide more effective care through the analysis, integration
and management of patient information. The Viridia Information Center
integrates the data management and review capabilities of a clinical
workstation with the features of a central monitor for increased productivity
and improved quality of care. Our CareVue clinical information system,
deployed at the point of care, captures, stores and makes available data that
can be configured for comprehensive reports. CareVue enables multiple
caregivers to analyze patient data in order to improve outcomes, analyze care
protocols and perform research and continuous quality improvements.
We have established a number of strategic relationships to provide us with
certain clinical applications to be used with our existing products and
products under development, including our agreements with Diametrics Medical
and i-STAT Corporation in point-of-care blood chemistry. Continuous and
intermittent monitoring sensors provided by these partners, when integrated
into our monitoring platforms, enable these time-sensitive measurements to be
made quickly and accurately at a patient's bedside for faster diagnosis and
therapeutic intervention.
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Ultrasound Imaging
We have a broad range of ultrasound imaging products, which are used by
doctors and technicians in cardiology, radiology, obstetrics, vascular,
emergency and operating departments to diagnose non-invasively a range of
diseases and abnormalities throughout the body. Our U.S. cardiac-ultrasound
business was ranked number one in the industry for overall quality of service
and support by International Marketing Ventures in 1998 for the fourth year in
a row. We offer three major ultrasound platforms: SONOS 5500, SONOS 4500 and
ImagePoint Hx. SONOS 5500 is a premium performance cardiovascular ultrasound
system used for both research and clinical applications, while SONOS 4500 is a
high-performance cardiovascular ultrasound system used primarily in the
clinical environment. ImagePoint Hx is a multispecialty product used in a
broad range of ultrasound applications to address the broad needs of
physicians working in smaller hospitals, mobile clinics and offices.
Our technology differentiates our ultrasound products from products of
competitors. A key component of ultrasound products is the transducer, a
complex electro-mechanical device that transmits sound waves into the body and
converts the returning echoes into electrical signals, providing for the
display of high quality images of human anatomy. We believe our proprietary
transducers provide the widest bandwidth, or range of soundwave frequencies,
in the industry, enabling the ultrasound system to optimize image detail and
penetration without making the operator switch transducers. Another key
technology in ultrasound products, signal processing, takes the electrical
signals from the transducers and converts them into a high quality image. An
example is our proprietary Acoustic Quantification, which automatically
measures critical characteristics of the beating heart, eliminating time-
consuming manual measurements. Our expertise in signal processing has also led
to the development of proprietary ASICs, which have enabled us to provide
ultrasound imaging equipment with enhanced performance for the same or lower
cost.
To address the information-management needs of our ultrasound customers, we
have developed EnConcert, which consists of a series of software applications
running on personal computer hardware. EnConcert allows clinicians to review,
measure, manage and archive images, reports and patient data related to their
ultrasound exams. These tools improve doctors' efficiency and allow them to
communicate exam results more rapidly to their colleagues.
Cardiology Products
We develop and manufacture external defibrillators, electrocardiographs and
electrocardiogram information management systems. An external defibrillator is
a device that delivers an electrical charge that can restart a person's heart
in sudden cardiac arrest or restore a heart's correct rhythm in cases of
irregular heartbeat. An electrocardiograph is a diagnostic tool that measures
and displays the characteristics of the heart's electrical activity. An
electrocardiogram management system allows for the digital storage, review and
retrieval of electrocardiograms.
We produce both manual and automatic external defibrillators. Manual
defibrillators are used by highly trained medical personnel, primarily in
hospitals and paramedic units. We believe our CodeMaster manual defibrillator
product line is one of the most extensive in the industry. Our products are
designed for both hospital and out-of-hospital use and are recognized as
having the fastest charge time in the industry. In addition to their
reliability and ease of use, our defibrillation products record the patient
data monitored, and action taken by the caregiver, for review by an emergency
medical director or other responsible parties, to enable monitoring of
caregiver performance and product effectiveness. We also have the industry's
first pre-hospital product with predictive software that provides information
used to accelerate assessment and triage of patients with chest pains so that
appropriate therapy can begin promptly.
Automatic external defibrillators are portable defibrillators that are used
by nonmedical professionals to deliver on-site defibrillation following a
cardiac event. Given the relatively low cost and ease of use, these systems
are well suited for deployment in places where people congregate. Purchasers
of our ForeRunner automatic external defibrillators include American Airlines,
Inc., Delta Air Lines, Inc., United Air Lines, Inc.,
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Chicago O'Hare International Airport, Hilton Gaming Corporation and Sundance
Ski Resort. The ForeRunner's competitive advantage is based upon its unique,
proprietary, low-energy biphasic waveform. A biphasic waveform is a form of
energy where the electrical current is reversed midway through the pulse. We
believe this technology enables the ForeRunner to be lighter, less costly,
safer, more reliable and the smallest external defibrillator in the market.
Our electrocardiographs monitor the characteristics of the heart's
electrical activity to enable cardiology professionals to provide accurate
diagnoses and deliver care for cardiac patients. Our electrocardiogram
information management systems allow cardiologists in institutions where large
numbers of electrocardiograms are taken each day to automate the flow of
information efficiently and generate accurate diagnostic reports for referring
physicians. This system is based on industry standard computing platforms and
also provides for remote connectivity and information access using standard
Internet software.
We have also established strategic alliances for our cardiology products
business. For example, we have an agreement with Dr. Harry P. Selker, Chief of
the Division of Clinical Research at the New England Medical Center, to jointly
develop predictive instruments to help accelerate the assessment and triage of
patients who may be having a cardiac event. Dr. Selker provides us with
clinical and technical input and product evaluation by clinical trial, while we
provide software and hardware engineering and development. We also have an
agreement with Zymed, Inc. in electrocardiograms. Zymed's "EASI 12-lead"
technology, when integrated into our monitoring platforms, provides the ability
to more quickly and easily acquire, process and transmit a derived 12-lead
electrocardiogram using five electrodes instead of the customary 10 used today
in the critical care setting.
Customers
We provide products and services to a broad range of customers in the
industry. Within the last 12 months, 91% of the largest 2,000 hospitals in the
United States purchased our equipment and/or services. Outpatient clinics,
doctors' offices and public facilities, travel companies and entertainment
providers are also a growing part of our customer base.
A representative list of customers of our healthcare solutions business
follows:
Adventist Health Kaiser Foundation Scripps Memorial
System--Sunbelt Hospitals Health System
Advocate Health Care Lahey Hitchcock Sisters of
Baptist Health System Clinic Providence (WA)
of South Florida Mayo Foundation St. John's Health
Boston Medical Center Memorial Healthcare System
Catholic Healthcare Systems St. Joseph Health
West Nebraska Methodist System (CA)
Columbia/HCA Healthcare Health System Stanford Healthcare
Corporation The Methodist Services
Intermountain Health Hospitals, Inc. Sutter Health
Care Mount Sinai Health California
International Military System Healthcare Systems
Medical Center, Cairo, New York Health Tenet Healthcare
Egypt Hospital Corporation
Promedica Health Tri-State Health
System Initiative
Quorum Health United States
Group, Inc. Government
Sales, Marketing and Support
Our products and services are sold through both direct and indirect
channels. We have sales offices in 33 countries and more than 2,400 direct
sales and service personnel. Our sales strategy is to sell to and service our
largest accounts (hospital and corporate business) directly while employing
third-party distributors and manufacturer's representatives for smaller or more
geographically dispersed countries. Electronic commerce is also an integral and
growing element of our sales and distribution strategy. Today, customers can
access product and service information for all our products, and they can
purchase medical supplies and replacement parts on our website.
In select instances we have also established distribution alliances with
complementary medical equipment manufacturers in order to leverage market
strength or bring a broader array of solutions to our customers.
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Specifically, Quinton Instruments Company is the United States distributor for
our electrocardiographs and electrocardiogram information-management systems.
We have an agreement with Laerdal Medical Corporation in the area of worldwide
distribution and complementary training products in the emergency medical
services segment. Laerdal sells our CodeMaster and ForeRunner defibrillators
in the pre-hospital market for paramedics and other specifically-trained
emergency medical teams.
We believe that medical equipment sales are heavily influenced by personal
references among clinicians with large medical research facilities serving as
key installations. For this reason, we have sold equipment into what we
believe to be some of the most influential facilities worldwide, including
Allgemeines Krankenhaus (Vienna), Cedars Sinai Medical Center, Cleveland
Clinic Foundation, Duke University Medical Center, Johns Hopkins Hospital,
Mayo Foundation, Royal Brisbane Hospital, Stanford University Hospital and
Tokyo General Hospital.
To support our sales efforts we have marketing centers in Hong Kong and
Japan covering Asia; in Germany covering Europe; and in Massachusetts covering
North and Latin America. These centers are responsible for outbound marketing
programs, tradeshows, telesales, call-center operations and distribution
support.
Our professional services offerings include multivendor systems
integration, training and consulting to hospitals, outpatient facilities and
doctors' offices. Our professional services enhance our clients' ability to
access and utilize their data, enabling enhanced clinical decision support and
improved workflow for lower healthcare costs and improved delivery of patient
care. We combine our knowledge of clinical processes and technology with
complementary applications and tools from partners to create information
management solutions required by our customers. For example, our Report Review
software product integrates a patient's clinical reports from multiple
information sources to provide one access point for care planning and
treatment.
Our technical specialists and clinical application specialists provide
installation, repair and training services to preserve and maximize customer
investments in our solutions. In addition, geographic response centers and
remote on-line support supplement on-site services. Finally, we provide
consulting, project management and technical implementation services to meet
customer needs for networking and integrating our solutions.
Manufacturing
The healthcare solutions business has four manufacturing locations:
Massachusetts and Washington in the United States, China and Germany. We
selectively use suppliers to provide manufacturing capabilities outside our
core competencies, such as the manufacture of printed circuit assemblies by
Celestica. We typically complete the final assembly and test of our medical
products and systems internally.
Competition
The markets we address are highly competitive. Our competitors are diverse
and offer a variety of solutions directed at various segments of our medical
products and services markets. Our ability to compete effectively depends upon
a number of factors, including our ability to:
. provide a complete set of high quality products for our customers;
. offer competitive prices;
. provide financing services;
. provide support and training; and
. innovate technologically.
Our competitors with broad product portfolios include GE Marquette Medical
Systems and Siemens Medical Systems, Inc. We also compete with other vendors
in specific markets. Our major competitors in patient
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monitoring include GE Marquette Medical, Siemens Medical, Spacelabs Medical,
Inc. and the Datex-Ohmeda division of Instrumentarium Corporation. In the
imaging systems business, we compete with Acuson Corporation, Toshiba Medical
Systems, Inc., GE Marquette Medical, Siemens Medical and the ATL Ultrasound,
Inc. division of Philips Medical Systems International. Our competition in the
external defibrillator market comes primarily from Physio Control Corporation
(a subsidiary of Medtronic Inc.) and Zoll Medical Corporation.
Government Regulation
The products developed and marketed by our healthcare solutions business
are subject to extensive regulation by the FDA and other regulatory bodies.
FDA regulations govern, among other things, the following product activities:
. design and development;
. testing, including animal and human studies;
. labeling;
. premarket clearance or approval;
. manufacturing;
. storage;
. advertising and promotion; and
. sales and distribution.
In the United States, medical devices are classified on the basis of
controls deemed necessary to ensure their safety and effectiveness. Class I
devices are subject to general controls, such as labeling, premarket
notification, and adherence to the FDA's Quality System Regulations, which
incorporate current good manufacturing practices that are applicable to
medical devices. Class II devices are subject to general and special controls.
Special controls include performance standards, postmarket surveillance,
patient registries and FDA guidelines. Most class III devices are controlled
through the premarket approval process to ensure their safety and
effectiveness.
Prior to commercialization, premarket notification clearance generally must
be obtained for class I and II devices as well as class III devices for which
the FDA has not called for premarket approval. For most class III devices, a
premarket approval application is required and must be supported by valid
scientific evidence to demonstrate their safety and effectiveness. The
notification or application typically includes:
. results of bench and laboratory tests;
. when appropriate, results of animal tests and clinical studies;
. a detailed description of the methods, facilities and controls used to
manufacture the device; and
. proposed labeling and advertising literature.
Most medical devices marketed by the healthcare solutions business are
class II or "Pre-Amendment" class III devices, which currently require only
premarket clearance. The healthcare solutions business does not market any
class III device requiring premarket approval in the United States, but it may
do so in the future or the FDA may require by regulation that premarket
approval applications be submitted for our existing "Pre-Amendment" class III
devices.
Once clearance or approval is obtained, FDA oversight continues. We are
required to demonstrate and maintain compliance with the Quality System
Regulations for all our products. The FDA enforces the Quality System
Regulations through periodic inspections of our manufacturing operations and
those of our contract manufacturers. The Quality System Regulations relate to
product testing and quality assurance, as well as to the maintenance of
records and documentation. We are required to provide information to the FDA
on deaths or
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serious injuries alleged to have been associated with the use of our medical
devices, as well as on product malfunctions that could contribute to death or
serious injury. The FDA also restricts the promotion of products for
unapproved or off-label uses.
If the FDA believes we are not in compliance with the Federal Food, Drug
and Cosmetic Act or its regulations it can:
. detain or seize our products;
. order or request a recall;
. seek an injunction against future violations;
. assess civil penalties against us; and
. initiate criminal proceedings against us.
Compliance with other regulatory requirements is necessary to market our
medical devices outside the United States. These regulations vary from country
to country.
CHEMICAL ANALYSIS
Our chemical analysis business is a leading provider of analytical
instrument systems that enable customers to identify, quantify, analyze and
test the atomic, molecular, physical and biological properties of substances
and products. Our chemical analysis products and services are used by
scientists, engineers and technicians working in research and development,
quality assurance, quality control and manufacturing.
Our four main product lines are chromatography, spectroscopy, bio-
instrumentation and related consumables. We also provide service and customer
support for our products. Chromatographs separate a mixed sample in gas or
liquid form into its component compounds so that these components can be
analyzed individually. Mass spectrometers identify and quantify molecules and
elements within a sample by measuring the mass of atoms. Bio-instrumentation
is used in the analysis of complex compounds, such as DNA.
Our chemical analysis business offers a wide range of products and services
that are sold primarily into the hydrocarbon-processing, environmental,
pharmaceutical and bioscience markets. We are a leading provider of
chromatography and mass spectrometry systems used by research and development
and quality assurance laboratories for the measurement and analysis of
chemical compounds. We believe that we are also a leader in the sale of
benchtop inductively coupled plasma mass spectrometers (ICP-MS), which are
generally acknowledged as the most powerful tools for the detection of minute
quantities of metals.
Some of the uses of our instrument systems are:
. determining octane levels in gasoline;
. analyzing pesticide levels in drinking water;
. ascertaining the quality of compounds in the manufacture of
pharmaceuticals;
. identifying impurities in the manufacture of semiconductors; and
. analyzing DNA for various life science applications.
We employed approximately 3,700 people as of July 31, 1999 in our chemical
analysis business. We have manufacturing and product development centers in
China, Germany, Japan and the United States and marketing centers in Germany,
the United States, and Singapore. Our chemical analysis business generated
revenue of $938 million in fiscal year 1998 and $754 million in the first nine
months of fiscal year 1999.
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Markets
Strategic Directions International estimates that in 1998, worldwide
revenue in the analytical instrumentation market totaled approximately $15.9
billion. According to Strategic Directions International, growth of the
overall analytical instrumentation market between 1998 to 2001 is expected to
be approximately 8% annually. The primary markets served by our chemical
analysis business are the hydrocarbon processing, environmental,
pharmaceutical and biopharmaceutical industries. We estimate that our market
represents approximately 30% of the total available analytical instrumentation
market that we serve.
Hydrocarbon Processing
The hydrocarbon processing industry encompasses the natural gas, petroleum
refining, petrochemical and chemical markets. This industry spends
approximately $2.2 billion annually on analytical instrumentation. We sell
primarily gas chromatographs and gas chromatography-mass spectrometry products
and systems into these markets. Petroleum refiners use our measurement
solutions to analyze crude oil composition and perform other raw material
analysis, verify and improve refining processes, and ensure the overall
quality of gasoline, fuels, lubricants and other products. Our gas
chromatographs are used to monitor consistent quality in the natural gas
delivered to consumers and industry. Petrochemical and chemical producers use
our products to measure and control the quality of their finished products and
to verify the environmental safety of their operations. We expect growth in
these markets to be driven by: (A) migration of measurement and analysis
activities out of the centralized labs and closer to the process, (B)
standardization of measurement processes across companies' worldwide
operations, and (C) technologies that improve analysts' productivity.
Environmental
We develop and market analytical instrumentation for the environmental
market for applications such as laboratory and field analysis and
characterization of chemical pollutants in air, water, soils, solid waste,
agriculture and food products. Environmental industry customers include all
levels of government, the industrial and manufacturing sectors, engineering
and consulting companies, commercial testing laboratories, colleges and
universities. We expect growth in this market to be driven by: (A) government
legislation, enforcement, site assessment and monitoring, (B) multi-national
trade agreements, (C) concerns about public health and food safety and (D)
technologies that identify new environmental risks. We believe these factors
will lead to more demand for environmental instrumentation in the Asia-
Pacific, Latin America and Eastern Europe regions, as these regions implement
new and stricter environmental regulations.
Pharmaceutical and Biopharmaceutical
Our analytical-instrument solutions are used by pharmaceutical and
biopharmaceutical companies in every phase of the drug development process.
This includes research into the basic causes of disease, identification and
development of new drugs, obtaining regulatory approval, manufacturing and
distribution. Strategic Directions International estimates that these
companies will spend approximately $3.8 billion on analytical instrumentation
in 2002.
Drug discovery is extremely costly and involves high risk. The
Pharmaceutical Research Manufacturers' Association indicates that it costs an
average of $500 million to discover and develop a new drug. Therefore,
investment in productivity-enhancing technology, such as analytical instrument
solutions, is critical to reducing the time and cost it takes to bring new
drugs to the consumer.
Strategy
In order to maintain our leading position in the analytical instrumentation
market, our strategy is as follows:
Target high-growth opportunities in the pharmaceutical and
biopharmaceutical markets
We believe the pharmaceutical and biopharmaceutical markets represent a
high-growth opportunity for us, as participants in these markets continue to
invest significant resources in research and development. Companies in
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this industry are constantly in search of ways to discover and develop new
drugs faster and at lower cost. We continue to invest in developing new
instruments and technologies to address these requirements. For example,
through our strategic relationship with Caliper Technologies Corporation, we
have developed instrumentation that enables chemical analysis procedures to be
performed on the surface of the Caliper LabChip device. We have recently begun
marketing the LabChip device, which uses a technology called microfluidics to
manipulate minute quantities of various fluids. The LabChip device is designed
to enable researchers to conduct analysis at a fraction of the time and cost
it would take using conventional techniques.
Pharmaceutical and biopharmaceutical companies are also investing in bio-
instrumentation that increases understanding of the genetic cause of diseases
in order to speed the development and increase the efficacy of new drugs. We
will continue to focus resources on the development of technologies to address
this market segment. For example, working with Affymetrix, Inc., we have
developed an instrument that scans a large number of DNA molecules synthesized
on the surface of an Affymetrix GeneChip, enabling identification of important
genetic information.
Focus on growth opportunities in current markets
We will continue to focus resources on growth opportunities in markets we
currently address. We believe that emerging markets, particularly in the Asia
Pacific, Latin America and Eastern Europe regions, represent a growth
opportunity for analytical instrumentation, as investments in basic
industries, infrastructure and environmental protection increase over the
coming years. To address these emerging markets, we are broadening our
worldwide distribution capabilities and developing less complex
instrumentation with lower prices. Additionally, in order to differentiate our
product offerings and increase our market share in developed markets, we
intend to continue to grow our portfolio of services and consumable products,
enabling us to offer our customers more complete solutions. Finally, we
continue to develop gas chromatography and mass spectroscopy products that are
smaller and more portable to meet increasing demand for use of these
instruments outside of centralized laboratories.
Bring new products and technologies to market faster
We seek to bring new products and technologies to market both through
internal development and the strategic acquisition of technologies from third
parties. Internal development of new technology is accomplished through a
combination of discoveries at Agilent Technologies Laboratories and research
and development efforts within our chemical analysis business. Agilent
Technologies Laboratories is primarily focused on basic long-term research,
while our chemical analysis business emphasizes research and development of
technology for more immediate commercialization. We also focus considerable
effort on developing solutions that meet the current and anticipated needs of
customers. For example, we are expanding our programs to offer customers early
access to products under development to ensure that these products are meeting
customer needs. In addition, our development of modular hardware and software
platforms allows us to bring new generations of products to market faster.
In addition to our internal efforts, we consider acquisitions to complement
our current products, solutions and technologies and to accelerate our entry
into strategic markets.
Leverage strategic relationships and alliances
We intend to build strategic relationships to enable us to develop products
and services that complement existing technologies and products in our target
markets. For example, through our relationship with Caliper Technologies
Corp., we are conducting joint research and development in microfluidics. This
has resulted in the commercialization of the LabChip technology, which is
designed to increase the speed and accuracy of traditional analytical methods.
In addition, through our strategic alliances, we develop instruments that
work with our partners' products, enabling us to offer our customers a broader
range of products and solutions. These alliances also help our customers to
reduce the time and resources needed to integrate disparate products from
separate vendors.
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Products
A key factor in our target markets is the need for new products that
increase productivity of the end customer. Our chemical analysis products,
systems and services enable our customers to analyze water, air and soil for
monitoring and remediation; to understand the properties of natural and man-
made gases, liquids and chemically-based products; and to advance knowledge of
the genetic basis of disease and enable the development, testing and use of
new drugs. Our four main product lines, chromatography, spectroscopy, bio-
instrumentation and related consumables, are described below.
Gas Chromatography
Gas chromatographs are used to separate molecules of a gaseous mixture to
determine the quantity and identity of the molecules present. A gas
chromatograph can analyze gas samples as well as solids and liquids that can
be converted to a gaseous state. Most gas chromatographs have the approximate
size and appearance of a large microwave oven.
We are the worldwide market leader in the $1 billion gas chromatograph
industry, according to Strategic Directions International. Our gas
chromatography systems are used in many industries, including pharmaceutical,
hydrocarbon processing, environmental, foods and flavors, forensics and
consumer products. Our instruments are used in laboratories involved in
research and development, quality assurance, quality control and routine
testing. We also produce portable chromatography systems used in the field for
performing on-site, real-time measurements. Our products are used to test the
quality and safety of food, air and water; to develop cleaner-burning fuels
and more effective pharmaceuticals; and to test for alcohol in blood, drugs in
urine or explosive residues in crime scene evidence.
Liquid Chromatography
Liquid chromatographs are used to separate molecules of a liquid mixture to
determine the quantity and identity of the molecules present. These
instruments are modular in construction and can be configured to form
instruments that perform specific analyses. Each module is about the size of a
home videocassette recorder.
According to Strategic Directions International, the high-performance
liquid chromatography market is larger than any other analytical instrument
market, exceeding $1.8 billion in 1998 with an estimated annual growth rate of
8% over the next five years. High-performance liquid chromatographs are an
essential tool in the pharmaceutical industry for basic research, drug
development and clinical trials of new drugs. Other industry groups that
utilize high-performance liquid chromatographs include chemical development
and manufacturing, industry and government testing laboratories for safety,
quality and nutritional content of foods and beverages, athlete monitoring for
illegal drug use and environmental monitoring.
Mass Spectroscopy
Mass spectroscopy systems break molecules into their component parts and
analyze these parts. Our mass spectrometers range in size from that of a small
microwave oven to that of a medium-sized refrigerator.
We are a leader in the worldwide mass spectroscopy market, which Strategic
Directions International estimates to have been about $518 million in 1998.
Mass spectroscopy systems are typically used in combination with gas or liquid
chromatographs in the pharmaceutical, semiconductor and environmental
industries. The combined instruments are used to study and refine the chemical
structure of new drugs, to determine the presence of impurities in
semiconductors as they are manufactured, or to research the presence of heavy
metals and other unwanted substances in soil and water.
Bio-Instrumentation
We have developed relationships with Affymetrix and Caliper Technologies to
address opportunities in the pharmaceutical and biopharmaceutical industries.
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Our GeneArray system allows a researcher to use GeneChip arrays designed by
Affymetrix to analyze many different samples more quickly than other DNA
analysis techniques. The procedure consists of extracting DNA from the sample
to be analyzed, tagging it with a fluorescent molecule and fragmenting it into
relatively small pieces. This fluorescent DNA sample is then placed on
Affymetrix's GeneChip array. During this process, the DNA on the chip binds to
complementary DNA in the sample. Our GeneArray system then scans the GeneChip
array with a laser and the results are analyzed by our software. For example,
these results are useful in identifying defects in genes that cause disease.
The GeneChip array and GeneArray Scanner enable high-speed detection and
characterization of large amounts of genetic information.
In addition to our gene analysis system, we are also developing faster ways
to conduct chemical analysis for the pharmaceutical and biopharmaceutical
industries. The new instrument systems that we have developed through our
relationship with Caliper Technologies integrate a large number of chemical-
analysis procedures onto a single chip. We develop and distribute
instrumentation that extracts and analyzes data from the microchip developed
by Caliper Technologies, using advanced microfluidics technology. Using
miniature, integrated chemical-processing systems etched into glass, silicon,
quartz or plastic, the microchip allows the steps customarily performed in
conventional instruments to be done using minute quantities of costly liquids
in a fraction of the usual time. We believe these new systems will speed up
chemical analysis significantly while reducing costs.
Consumables
We also offer consumable products, including chromatograph columns,
analytical reagents and other accessories and supplies used by our customers
during the analytical experimentation process. Columns are metal or glass
tubes containing various substances that are inserted into chromatographs to
assist in the process of separating compounds into their constituent parts.
Reagents are chemicals used to perform analysis on the resulting constituent
parts. Other accessories and supplies we provide range from rubber rings to
syringes to safety glasses.
Our offerings include both generic consumables, where we seek to
distinguish our products on price, selection and customer loyalty, and
proprietary consumables developed by us, where we offer exclusive technology,
performance and functionality.
Customers
We sell our products and services to a broad array of customers in each of
the markets we serve. Our top customers by market segment are the following:
<TABLE>
<CAPTION>
Hydrocarbon Processing Environmental Pharmaceutical
------------------------ ------------------------ ------------------------
<S> <C> <C>
Bayer AG Government of Korea AstraZeneca PLC
Boehringer Ingelheim State of California Glaxo Wellcome PLC
International GmbH State of Georgia Johnson & Johnson
E. I. du Pont de Nemours State of Texas Merck & Co., Inc.
and Company United States Army Novartis AG
Elf Group U.S. Federal Government Pfizer, Inc.
Exxon Corporation Pharmacia & Upjohn, Inc.
Hoechst AG Roche Holdings, Inc.
Monsanto Company SmithKline Beecham
Rhone-Poulenc S.A. Clinical Laboratories,
Royal Dutch Shell Inc.
</TABLE>
Sales, Marketing and Support
Our sales and support delivery channels are aligned by our key markets to
maximize market coverage and to optimize selling and support delivery
efficiency. We market our products to our customers through our direct sales
force, value-added resellers, manufacturers' representatives and distributors.
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We use our direct sales force to market our products to all our
pharmaceutical and biopharmaceutical accounts, large and medium size
hydrocarbon processing customers and all environmental accounts. We supplement
our direct sales force with sales agents to provide broader geographic
coverage and to cover smaller accounts. We also have an active value-added
reseller program to augment our ability to provide more complete solutions to
our customers. We sell our consumable products through distributors, telesales
and electronic commerce.
We offer a wide range of startup, operational, educational and compliance
support services for our chemical analysis measurement and data handling
systems. We deliver our support services to customers in a variety of ways,
including on-site assistance, return to us for repair or exchange, telephone
support and self diagnostic services provided over the Internet. Our support
services limit the amount of time an instrument is out of service, provide
increased system productivity, extend the instrument life and offer fast
problem resolution. We also offer special industry-focused service bundles
that are designed to meet the specific needs of hydrocarbon processing,
environmental, pharmaceutical and biopharmaceutical customers to keep
instruments fully operational and compliant with the respective industry
requirements.
Competition
The markets for analytical instruments in which we compete are
characterized by evolving industry standards and intense competition. Our
principal competitors include EG&G, Inc., PE Biosystems, Shimadzu Corporation,
Thermo Instrument Systems, Inc. and Waters.
Our ability to compete effectively depends upon a number of factors
including our ability to:
. produce high-quality and reliable products;
. introduce new technologies and products in a timely manner;
. provide favorable overall cost of ownership; and
. provide product and service solutions that complement and support our
main product lines.
We believe our analytical instrument solutions compete favorably with
respect to each of the above listed factors.
Manufacturing
Our manufacturing strategy supports our diverse product range and customer-
centric focus. We assemble highly configurable products to individual customer
orders and make standard products to stock. We employ advanced manufacturing
techniques and supply chain management systems to reduce costs and
manufacturing cycle times. We selectively use partners to provide
manufacturing capabilities outside our core competencies, such as the
manufacture of printed circuit assemblies and the delivery of shipment
logistics. We have manufacturing facilities in California and Delaware in the
United States, China, Germany and Japan.
Government Regulation
The chemical analysis product and related consumables marketed by our
chemical analysis business are subject to regulation in the United States by
the Environmental Protection Agency under the Toxic Substances Control Act,
and by government agencies in other countries under similar laws. The Toxic
Substances Control Act regulations govern, among other things, the testing,
manufacture, processing and distribution of chemicals, the testing of
regulated chemicals for their effects on human health and safety and import
and export of chemicals. The act prohibits persons from manufacturing any
chemical in the United States that has not been reviewed by Environmental
Protection Agency for its effect on health and safety, and placed on an
Environmental Protection Agency inventory of chemical substances. If we fail
to comply with the notification, record-keeping and other requirements in the
manufacture or distribution of our products, then the Environmental Protection
Agency can obtain an order from a court that would prohibit the further
distribution or marketing of a product that contains a chemical that is out of
compliance or can impose fines and penalties.
----------------
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Research and Development
The process of developing new high-technology products and solutions is
inherently complex and uncertain. It requires, among other things, innovation
and accurate anticipation of customers' changing needs and emerging
technological trends. Without the introduction of new products, services and
enhancements, our products and services are likely to become technologically
obsolete over time, in which case revenue would be materially and adversely
affected. There can be no assurance that such new products and services, if
and when introduced, will achieve market acceptance. After the products and
services are developed, we must quickly manufacture and deliver such products
and services in sufficient volumes at acceptable costs to meet demand.
Research and development expenditures were $805 million in fiscal year
1996, $880 million in fiscal year 1997, $948 million in fiscal year 1998 and
$705 million for the nine months ended July 31, 1999. We anticipate that we
will continue to have significant research and development expenditures in
order to maintain our competitive position with a continuing flow of
innovative, high-quality products and services.
Intellectual Property
Our general policy has been to seek patent and other intellectual property
protection for those inventions and improvements likely to be incorporated
into our products and services or to give us a competitive advantage. While we
believe that our patents and applications have value, in general no single
patent is in itself essential. In addition, we cannot assure you that any of
our proprietary rights will not be challenged, invalidated or circumvented, or
that our rights will provide significant competitive advantages.
International Operations
Our net revenue originating outside the United States, as a percentage of
our total net revenue, was approximately 54.9% in fiscal year 1996, 56.3% in
fiscal year 1997, 54.4% in fiscal year 1998 and 54.9% for the nine months
ended July 31, 1999, the majority of which was from customers other than
foreign governments. Approximately 20% of our international revenue in the
last three years was derived from Japan.
Most of our sales in international markets are made by foreign sales
subsidiaries. In countries with low sales volumes, sales are made through
various representatives and distributors. However, we make certain sales in
international markets directly from the United States.
Our international business is subject to risks customarily encountered in
foreign operations, including changes in a specific country's or region's
political or economic conditions, trade protection measures, import or export
licensing requirements, the overlap of different tax structures, unexpected
changes in regulatory requirements and natural disasters. We are also exposed
to foreign currency exchange rate risk inherent in our sales commitments,
anticipated sales and assets and liabilities denominated in currencies other
than the United States dollar and may also become subject to interest rate
risk inherent in any debt, investment and finance receivable portfolios we
incur.
We believe that our international diversification provides stability to our
worldwide operations and reduces the impact on us of adverse economic changes
in any single country.
Properties
Our principal executive offices are located in Palo Alto, California. We
plan to move our headquarters to another location in Palo Alto, California in
May 2000. We operate Agilent Technologies Laboratories in Palo Alto,
California, and 35 manufacturing sites, including ten primary sites. Of the
primary sites, five are located in the United States, and an additional five
sites are located in Germany, Japan, Malaysia, Scotland and Singapore.
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Materials
Our manufacturing operations employ a wide variety of semiconductors,
electromechanical components and assemblies, and raw materials such as plastic
resins and sheet metal. We believe that the materials and supplies necessary
for our manufacturing operations are presently available in the quantities
required. We purchase materials, supplies and product subassemblies from a
substantial number of vendors. For many of our products, we have existing
alternate sources of supply, or such sources are readily available. In certain
instances, however, we enter into non-cancelable purchase commitments with, or
make advance payments to, certain suppliers to ensure supply. Portions of our
manufacturing operations are dependent on the ability of suppliers to deliver
quality components, subassemblies and completed products in time to meet
critical manufacturing and distribution schedules. The failure of suppliers to
deliver these components, subassemblies and products in a timely manner may
adversely affect our operating results until alternate sources could be
developed. In addition, we periodically experience constrained supply of
certain component parts in some product lines as a result of strong demand in
the industry for those parts. Such constraints, if persistent, may adversely
affect our operating results. However, we believe that alternate suppliers or
design solutions could be arranged within a reasonable time so that material
long-term adverse impacts would be minimized.
Environmental
Our research and development and manufacturing operations involve the use
of hazardous substances and are regulated under international, federal, state
and local laws governing health and safety and the environment. We apply
strict standards for protection of the environment and worker health and
safety to sites inside and outside the United States, even if not subject to
regulation imposed by foreign governments. We believe that our properties and
operations at our facilities comply in all material respects with applicable
environmental laws; however, the risk of environmental liabilities cannot be
completely eliminated and there can be no assurance that the application of
environmental and health and safety laws to our company may not require our
company to incur substantial expenditures. We are also regulated under a
number of international, federal, state and local laws regarding recycling,
product packaging and product content requirements. These laws are gradually
becoming more stringent and may in the future cause us to incur substantial
expenditures.
Some of our operations are located on properties that are known to have
subsurface contamination that is undergoing remediation by Hewlett-Packard.
Hewlett-Packard has agreed to retain the liability for the contamination,
perform the required remediation and indemnify us with respect to claims
arising out of the contamination. While we expect that Hewlett-Packard will
meet its remediation and indemnification obligations in this regard, there can
be no guarantee that it will do so. Under our agreement with Hewlett-Packard,
Hewlett-Packard will have access to these properties to perform the
remediation. Hewlett-Packard has agreed to minimize interference with on-site
operations at those properties during the course of the remediation, but there
can be no guarantee that our operations will not be interrupted or that we
will not be required to incur unexpected expenses associated with the
remediation.
In addition, some of these properties are undergoing remediation by
Hewlett-Packard under an order of an agency of the state in which the property
is located. Although Hewlett-Packard has agreed to indemnify us with respect
to that subsurface contamination, it is possible that one or more of the
governmental agencies will require us to be named on any of these orders. The
naming of our company will not affect Hewlett-Packard's obligation to
indemnify us with regard to these matters.
We are liable and are indemnifying Hewlett-Packard for any contamination
found at all facilities being transferred to us excluding the properties
undergoing remediation. In addition, we are indemnifying Hewlett-Packard for
any liability associated with past non-compliance with environmental laws
regulating ongoing operations at all properties to be transferred by Hewlett-
Packard to us, as well as at sold or discontinued businesses that related to
our businesses. While we are not aware of any material liabilities associated
with such indemnified matters, there is no guarantee that such contamination
or regulatory non-compliance does not exist, and will not expose us to
material liability in the future.
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We are being indemnified by Hewlett-Packard with respect to all
environmental liabilities for which Hewlett-Packard accrued a reserve and we
are not aware of any material and probable environmental liabilities being
assumed by us which are not subject to the indemnity.
Legal Proceedings
The Environmental Protection Agency initiated a civil penalty proceeding
against Hewlett-Packard in 1998 that alleged four violations of the Toxic
Substances Control Act, two of which were directed at operations of our
chemical analysis business. Under this proceeding, the Environmental
Protection Agency is seeking a total of $112,750 in civil penalties. As a
result of this enforcement action, Hewlett-Packard offered in 1999 to conduct
a post-enforcement audit of some of its operations for compliance with the
Toxic Substances Control Act. The audit will include some facilities operated
by our chemical analysis business. If violations of the law are discovered in
the audit, we would pay civil penalties for those violations in stipulated
amounts.
We are involved in lawsuits, claims, investigations and proceedings,
including patent, commercial and environmental matters, which arise in the
ordinary course of business. There are no matters pending that we expect to be
material in relation to our business, consolidated financial condition,
results of operations or cash flows.
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MANAGEMENT
Directors and Executive Officers
Set forth below is information concerning our directors and executive
officers and their ages as of September 30, 1999.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Edward W. Barnholt...... 56 President, Chief Executive Officer and Director
Gerald Grinstein........ 67 Chairman of the Board of Directors
Thomas E. Everhart...... 67 Director
Walter B. Hewlett....... 55 Director
David M. Lawrence, 59 Director
M.D. ..................
Randall L. Tobias....... 57 Director
Byron Anderson.......... 56 Senior Vice President, Electronic Products and Solutions
William R. Hahn......... 48 Senior Vice President, Strategic Programs
Jean M. Halloran........ 46 Senior Vice President, Human Resources
Richard D. Kniss........ 59 Senior Vice President, Chemical Analysis
D. Craig Nordlund....... 50 Senior Vice President, General Counsel and Secretary
Stephen H. Rusckowski... 42 Senior Vice President, Healthcare Solutions
Thomas A. Saponas....... 50 Senior Vice President and Chief Technology Officer
John E. Scruggs......... 58 Senior Vice President, Automated Test
William P. Sullivan..... 49 Senior Vice President, Semiconductor Products
Robert R. Walker........ 49 Senior Vice President and Chief Financial Officer
Thomas White............ 42 Senior Vice President, Communications Solutions
Dorothy D. Hayes........ 48 Vice President and Controller
</TABLE>
Edward W. Barnholt has served as our President and Chief Executive Officer
and as a director since May 1999. Before being named our Chief Executive
Officer, Mr. Barnholt served as General Manager of Hewlett-Packard's
Measurement Organization from 1998 to 1999, which included Hewlett-Packard's
Electronic Instruments Group, the Microwave and Communications Group, the
Communications Test Solutions Group, the Automated Test Group, the Chemical
Analysis Group, the Components Group and the Medical Products Group. From 1990
to 1998, he served as General Manager of Hewlett-Packard's Test and
Measurement Organization. He was elected a Senior Vice President of Hewlett-
Packard in 1993 and an Executive Vice President in 1996. He is a director of
KLA-Tencor Corporation.
Gerald Grinstein has served as Chairman of our board of directors since
August 1999. From 1985 to 1995, he held a number of positions at Burlington
Northern, Inc. He was named its Chairman and Chief Executive Officer in July
1991 and retired from his position as chairman of Burlington Northern Santa Fe
Corporation (the successor to Burlington Northern, Inc.) in September 1995.
Mr. Grinstein has served as Chairman of the Board of Delta Air Lines, Inc.
since August 1997 and has served as a principal of Madrona Investment Group,
L.L.C., a Seattle based investment company, since October 1996. He is a
director of Browning-Ferris Industries, Inc., PACCAR Inc., Vans, Inc., the
Pittston Company and Imperial Sugar Corporation.
Thomas E. Everhart has served as a director since July 1999. From February
to July 1998, Dr. Everhart acted as the Pro-Vice Chancellor of the University
of Cambridge. Since October 1998, he has served as a trustee of the California
Institute of Technology. Prior to assuming that position, Dr. Everhart served
as President of the California Institute of Technology from September 1987
until his retirement in October 1997, when he became President Emeritus. Since
December 1997, Dr. Everhart has acted as the Senior Scientific Advisor to the
W. M. Keck Foundation. He is a director of General Motors Corporation,
Raytheon Company, Hughes Electronics Corporation, Reveo, Inc. and Saint-Gobain
Company. He is also a director of the Corporation for National Research
Initiatives, the Electric Power Research Institute and a member of the Board
of Trustees of the California Institute of Technology and of the Board of
Overseers of Harvard University. He has served as a director of Hewlett-
Packard since June 1991.
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Walter B. Hewlett has served as a director since July 1999. Mr. Hewlett is
an independent software developer involved with computer applications in the
humanities. In 1997, Mr. Hewlett was elected to the Board of Overseers of
Harvard University. In 1994, Mr. Hewlett participated in the formation of
Vermont Telephone Company of Springfield, Vermont and currently serves as its
Chairman. Mr. Hewlett founded the Center for Computer Assisted Research in the
Humanities in 1994, for which he serves as a director. Mr. Hewlett has been a
trustee of The William and Flora Hewlett Foundation since its founding in 1966
and currently serves as its Chairman. Mr. Hewlett has served as a director of
Hewlett-Packard since 1987. He is the son of Hewlett-Packard co-founder
William R. Hewlett.
David M. Lawrence, M.D. has served as a director since July 1999.
Dr. Lawrence has served as Chairman of the Board since 1992 and Chief
Executive Officer since 1991 of Kaiser Foundation Health Plan, Inc. and Kaiser
Foundation Hospitals. He held a number of management positions with those
organizations prior to assuming his current positions, including Vice Chairman
of the Board and Chief Operating Officer. Dr. Lawrence is a director of
Pacific Gas and Electric Company and Raffles Medical Group, Inc. He has served
as a director of Hewlett-Packard since May 1995.
Randall L. Tobias has served as a director since October 1999. Prior to
assuming this position, from 1993 to 1998, Mr. Tobias served as Chairman of
the Board of Directors and Chief Executive Officer of Eli Lilly and Company
and has served as its Chairman Emeritus since January 1999. Prior to joining
Eli Lilly, Mr. Tobias served as Vice Chairman of the Board of AT&T from 1986
to 1993 and as Chairman and Chief Executive Officer of AT&T International (an
AT&T subsidiary) from 1991 to 1993. Mr. Tobias is a director of Kimberly-Clark
Corporation, Knight-Ridder, Inc. and Phillips Petroleum Company.
Byron Anderson has served as our Senior Vice President, Electronic Products
and Solutions since August 1999. Prior to assuming that position, Mr. Anderson
served as a vice president of Hewlett-Packard since November 1995 and General
Manager of the Microwave and Communications Group since September 1997. In
January 1991, Mr. Anderson was named General Manager of Hewlett-Packard's
Communications Test Business Unit, which became the Test Solutions Group in
1994.
William R. Hahn has served as our Senior Vice President, Strategic Programs
since August 1999. Since October 1997, Mr. Hahn served as the Sector
Controller of Hewlett-Packard's Measurement Organization. From September 1995
to October 1997, he served as Operations Manager for Hewlett-Packard's
interactive broadband program. From May 1993 to September 1995, Mr. Hahn
served as Vice President of Finance and Manufacturing and Chief Financial
Officer at Aspect Communications.
Jean M. Halloran has served as our Senior Vice President, Human Resources
since August 1999. Since 1997, Ms. Halloran served as Director of Corporate
Education and Development for Hewlett-Packard. Prior to assuming this
position, from 1993 to 1997, Ms. Halloran acted as personnel manager for
Hewlett-Packard's Measurement Systems Organization. From 1990 to 1993, she
acted as group personnel manager for Hewlett-Packard's Medical Products Group.
Ms. Halloran joined Hewlett-Packard in 1980 in the Medical Products Group,
where she held a variety of positions in human resources, manufacturing and
strategic planning.
Richard D. Kniss has served as our Senior Vice President, Chemical Analysis
Group since August 1999. Prior to assuming that position, since May 1995, Mr.
Kniss was General Manager of Hewlett-Packard's Chemical Analysis Group and was
named a vice president of Hewlett-Packard in June 1997. He served as general
manager of the Optical Communication Division from 1984 to 1995.
D. Craig Nordlund was named our Senior Vice President, General Counsel and
Secretary in May 1999. Mr. Nordlund has served as Associate General Counsel
and Secretary of Hewlett-Packard since 1987. He has served as an officer or
director for a variety of Hewlett-Packard's subsidiaries and affiliates. He
currently serves as Chairman of the National American Society of Corporate
Secretaries organization.
Stephen H. Rusckowski has served as our Senior Vice President, Healthcare
Solutions since October 1999. Prior to assuming that position, Mr. Rusckowski
held a number of positions at Hewlett-Packard. He served as
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General Manager of the Cardiology Products Division from 1997 to 1999, General
Manager of the Healthcare Information Management Division from 1996 to 1997
and General Manager of the Clinical Information Systems Division from 1994-
1995. Mr. Rusckowski joined Hewlett-Packard in 1984.
Thomas A. Saponas has served as our Senior Vice President and Chief
Technology Officer since August 1999. Prior to being named Chief Technology
Officer, from June 1998 to April 1999, Mr. Saponas was Vice President and
General Manager of Hewlett-Packard's Electronic Instruments Group. Mr. Saponas
has held a number of positions since the time he joined Hewlett-Packard. Mr.
Saponas served as General Manager of the Lake Stevens Division from August
1997 to June 1998 and General Manager of the Colorado Springs Division from
August 1989 to August 1997. In 1986 he was a White House Fellow in Washington.
D.C.
John E. Scruggs has served as our Senior Vice President, Automated Test
since August 1999. Prior to assuming that position, since January 1992,
Mr. Scruggs was General Manager of the Automated Test Group of Hewlett-Packard
within the Test and Measurement Organization. He was elected a vice president
of Hewlett-Packard in November 1996.
William P. Sullivan has served as our Senior Vice President, Semiconductor
Products since August 1999. Prior to assuming that position, since February
1998, he served as Vice President and General Manager of Hewlett-Packard's
Components Group. In 1997, Mr. Sullivan became General Manager of the
Communication Semiconductor Solutions Division. From 1995 to 1997, he was
General Manager of the Optical Communication Division. From April 1991 to
February 1995, Mr. Sullivan served as research and development manager for the
Optical Communication Division.
Robert R. Walker has served as our Senior Vice President and Chief
Financial Officer since May 1999. During 1997 and 1998 Mr. Walker served as
Vice President and General Manager of Hewlett-Packard's Professional Services
Business Unit. From 1993 to 1997 he led Hewlett-Packard's information systems
function. He became Chief Information Officer in 1995 and served in that
position until 1997. Mr. Walker was named a vice president of Hewlett-Packard
in 1995. From 1975 to 1993 Mr. Walker held a variety of financial positions in
Hewlett-Packard.
Thomas White has served as our Senior Vice President, Communications
Solutions since August 1999. From 1997 to August 1999, Mr. White served as
Vice President and General Manager of the Communications Solutions Group of
Hewlett-Packard. From 1996 to 1997, he served as General Manager of the
Computer Peripherals Bristol Division and, in 1994, he served as General
Manager for the Telecommunications Systems Division, South Queensferry,
Scotland.
Dorothy D. Hayes has served as our Vice President and Controller since
August 1999. Prior to assuming that position, since October 1989, Ms. Hayes
held a number of positions at Hewlett-Packard. She served as Transition
General Manager from March to July 1999, Director of Internal Audit from July
1997 to June 1999, Measurement Systems Organization Controller from February
1994 to July 1997, Components Group Controller from September 1993 to February
1996 and Corporate Financial Reporting Manager from October 1989 to September
1993.
Board Structure and Compensation
Our board of directors is divided into three classes serving staggered
three-year terms. Mr. Barnholt's and Mr. Grinstein's initial terms will expire
in 2000. Mr. Hewlett's and Mr. Tobias' initial terms will expire in 2001. Dr.
Everhart's and Dr. Lawrence's initial terms will expire in 2002. Prior to
Hewlett-Packard's distribution of our shares to its stockholders, our
nominating committee expects to identify a number of additional candidates not
affiliated with Agilent Technologies or Hewlett-Packard for election to our
board of directors.
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<PAGE>
Our board of directors has six directors and the following four committees:
(1) audit, (2) compensation, (3) nominating, and (4) executive. The membership
and the function of each committee are described below.
<TABLE>
<CAPTION>
Audit Compensation Nominating Executive
----- ------------ ---------- ---------
<S> <C> <C> <C>
Thomas E.
Everhart Thomas E. Everhart Edward W. Barnholt Edward W. Barnholt
Walter B.
Hewlett Gerald Grinstein Thomas E. Everhart Gerald Grinstein
David M.
Lawrence,
M.D. David M. Lawrence, M.D. Gerald Grinstein
Walter B. Hewlett
David M. Lawrence, M.D.*
</TABLE>
- --------
* Committee Chair
Audit Committee
Our audit committee reviews our auditing, accounting, financial reporting
and internal control functions and makes recommendations to the board of
directors for the selection of independent accountants. In addition, the
committee monitors the quality of our accounting principles and financial
reporting, our compliance with foreign trade regulations as well as the
independence of and the non-audit services provided by our independent
accountants. In discharging its duties, the audit committee:
. reviews and approves the scope of the annual audit and the independent
accountant's fees;
. meets independently with our internal auditing staff, our independent
accountants and our senior management; and
. reviews the general scope of our accounting, financial reporting, annual
audit and internal audit program, matters relating to internal control
systems as well as the results of the annual audit.
Compensation Committee
Our compensation committee determines, approves and reports to the board on
all elements of compensation for our elected officers including targeted total
cash compensation and long-term equity based incentives.
Nominating Committee
Our nominating committee proposes a slate of directors for appointment by
our stockholders at each annual meeting and candidates to fill any vacancies
on the board of directors. It is also responsible for approving management
succession plans and addressing board of directors organizational and
governance issues.
Executive Committee
Our executive committee meets or takes written action when the board is not
otherwise meeting and has the level of authority delegated to it from time to
time by the board of directors, except that it cannot amend our bylaws,
recommend any action that requires the approval of the stockholders or to take
any other action not permitted under Delaware law to be delegated to a
committee.
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<PAGE>
Stock Ownership of Directors and Executive Officers
All of our common stock is currently owned by Hewlett-Packard, and thus
none of our officers, directors or director nominees own any of our common
stock. To the extent our directors and officers own shares of Hewlett-Packard
common stock at the time of the distribution, they will participate in the
distribution on the same terms as other holders of Hewlett-Packard common
stock.
The following table sets forth the number of shares of Hewlett-Packard
common stock beneficially owned on September 30, 1999 by each director, each
of the executive officers named in the Summary Compensation Table in the "--
Executive Compensation" section below, and all of our directors, director
nominees and executive officers as a group. Except as otherwise noted, the
individual director or executive officer or their family members had sole
voting and investment power with respect to such securities. The total number
of shares of Hewlett-Packard common stock outstanding as of September 30, 1999
was 1,013,663,657.
<TABLE>
<CAPTION>
Shares of
Hewlett-Packard
Beneficially Owned
--------------------
Name of Beneficial Owner Number Percentage
- ------------------------ --------- ----------
<S> <C> <C>
Edward W. Barnholt(1)...................................... 381,646 *
Gerald Grinstein(2)........................................ 4,500 *
Thomas E. Everhart(3)...................................... 10,780 *
Walter B. Hewlett(4)....................................... 171,134 *
David M. Lawrence, M.D.(5)................................. 6,012 *
Randall L. Tobias(6)....................................... 1,000 *
Byron Anderson(7).......................................... 76,883 *
Richard D. Kniss(8)........................................ 47,896 *
John E. Scruggs(9)......................................... 58,733 *
Robert R. Walker(10)....................................... 75,802 *
All directors and executive officers as a group............ 1,062,350 *
</TABLE>
- --------
*Represents holdings of less than one percent.
(1) Includes 226,000 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1999 and 4,872 of the shares are held by
Mr. Barnholt as a custodian for his children.
(2) These shares are beneficially owned by Mr. Grinstein and his spouse.
(3) Includes 6,956 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1999.
(4) Includes 3,224 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1999. Also includes 14,580 shares held by
Mr. Hewlett as a custodian for his children, 1,100 shares held by
Mr. Hewlett for the benefit of his son, 250 shares held by Mr. Hewlett
for the benefit of his daughter and 1,280 shares held by Mr. Hewlett for
the benefit of his spouse. Excludes 60,042,696 shares held by the William
R. Hewlett Revocable Trust, of which Mr. Hewlett is a co-trustee, and
2,143,500 shares held by the William and Flora Hewlett Foundation, of
which Mr. Hewlett is a director. Mr. Hewlett shares voting and investment
power over the shares held by the William R. Hewlett Revocable Trust and
the William and Flora Hewlett Foundation. Mr. Hewlett disclaims any
beneficial interest in the excluded shares because he has no economic
interest in any of these shares.
(5) Includes 4,560 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1999.
(6) Excludes 1,000 shares held by the Mariane W. Tobias Revocable Trust, a
trust in the name of Mr. Tobias' spouse, 400 shares held by the JK
Foundation, a family foundation of which Mr. Tobias' spouse is chairman
and director, 400 shares held by the Trust for the Benefit of James R.
Ullyot, a trust in which Mr. Tobias' spouse has voting and investment
power, and 350 shares held by the Mariane W. Tobias Individual Retirement
Account. Mr. Tobias disclaims any beneficial interest in the excluded
shares because he has no voting or investment power in any of these
shares.
(7) Includes 27,000 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1999.
(8) Includes 24,200 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1999. Includes 570 shares held for the
benefit of his daughters.
(9) Includes 31,000 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1999.
(10) Includes 37,265 shares issuable upon the exercise of options exercisable
within 60 days of September 30, 1999.
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<PAGE>
Executive Compensation
The following table sets forth certain compensation information for the
chief executive officer and the four other executive officers of Agilent
Technologies who, based on salary and bonus compensation from Hewlett-Packard
and its subsidiaries, were the most highly compensated for the year ended
October 31, 1998. All information set forth in this table reflects
compensation earned by these individuals for services with Hewlett-Packard and
its subsidiaries for the year ended October 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
---------------------
Annual Compensation Awards Payouts
------------------------------- ----------- ---------
Restricted Long Term
Stock Securities Incentive All Other
Name and Principal Bonus Award(s) Underlying Payouts Compensation
Position Salary ($) ($)(1)(4) ($)(2) Options (#) ($)(3)(4) ($)(5)
- ------------------ ---------- --------- ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Edward W. Barnholt...... $759,488 $115,754 $967,581 60,000 $(531,000) $6,499
President and Chief
Executive
Officer
Byron Anderson.......... 452,344 24,964 204,498 15,000 0 6,499
Senior Vice President,
Electronic
Products and Solutions
Richard D. Kniss........ 391,063 21,629 77,924 8,000 0 6,499
Senior Vice President,
Chemical
Analysis
John E. Scruggs......... 413,094 22,780 201,849 15,000 0 5,966
Senior Vice President,
Automated Test
Robert R. Walker........ 408,438 22,516 264,562 12,000 0 6,499
Senior Vice President
and Chief
Financial Officer
</TABLE>
FOOTNOTES TO SUMMARY COMPENSATION TABLE
(1) The amounts shown in this column reflect payments under Hewlett-Packard's
1998 Variable Pay Plan established November 1, 1998 and Hewlett-Packard's
Cash Profit-Sharing Plan. Hewlett-Packard's 1998 Variable Pay Plan is
available to designated key employees of Hewlett-Packard. The Cash Profit-
Sharing Plan is available to all employees of Hewlett-Packard.
Under the cash profit-sharing plan, a portion of Hewlett-Packard's earnings
generated during each half of Hewlett-Packard's fiscal year is paid to
employees. The amount paid is based upon the performance of Hewlett-Packard
as measured by return on assets and revenue growth.
Hewlett-Packard's 1998 Variable Pay Plan permits Hewlett-Packard to
designate a portion of the annual cash compensation planned for certain key
employees as variable pay. Under Hewlett-Packard's 1998 Variable Pay Plan,
the percentage of the targeted variable amount to be paid is dependent upon
the degree to which performance metrics defined on an annual basis are met.
In November 1998, the Compensation Committee of the Board of Directors of
Hewlett-Packard established the performance metrics for fiscal 1998, which
metrics were based on the performance of Hewlett-Packard's common stock
relative to the S&P High Technology Composite Index. In November 1998, the
Compensation Committee determined that 80% of the targeted variable
compensation for Mr. Barnholt in the amount of $86,000 had been earned. The
amounts attributable to the Variable Pay Plan for fiscal 1998 are disclosed
in the table above as "Bonus."
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<PAGE>
(2) The amounts disclosed in this column reflect, for fiscal 1998, the dollar
values of Hewlett-Packard's common stock which Hewlett-Packard contributed
under its Stock Purchase Plan, as a match for every two shares purchased
by the named executive officer and for Mr. Barnholt performance-based
restricted shares of Hewlett-Packard's common stock which Hewlett-Packard
granted.
The Stock Purchase Plan is a broad-based plan which is available to all
employees of Hewlett-Packard. The matching shares vest two years after the
date of Hewlett-Packard's contributions, which occur on a rolling fiscal
quarter basis, and are subject to forfeiture during the two-year period in
the event of termination or certain other events. The named executive
officers receive non-preferential dividends on these restricted shares. In
fiscal 1998, Hewlett-Packard, under its Stock Purchase Plan, granted 664
shares of restricted stock
to Mr. Barnholt worth $41,331; 308 shares of restricted stock to Mr.
Anderson worth $19,248; 295 shares of restricted stock to Mr. Kniss worth
$16,174; 263 shares of restricted stock to Mr. Scruggs worth $16,599; and
258 shares of restricted stock to Mr. Walker worth $17,562.
In fiscal 1998, Hewlett-Packard granted 15,000 shares of performance-based
restricted stock to Mr. Barnholt valued at $926,250 based upon the grant
date closing price of $61.75 per share. The performance-based restricted
stock will vest only to the extent that Hewlett-Packard achieves stated
performance goals with respect to earnings per share and return on assets
over a three-year period ending October 31, 2000 for the performance-based
restricted stock granted in fiscal 1998. Because the stated performance
goals for the three year period ended October 31, 1998 were not met, 75% of
the performance-based restricted stock granted in fiscal 1996 was forfeited
as further described in footnote 3 below.
At October 31, 1998 each of the named executive officers held the following
number of shares of restricted stock with a value based on the October 30,
1998 closing price of $60.25 per share: Mr. Barnholt held 51,000 shares of
restricted stock valued at $3,072,750, Mr. Anderson held 35,800 shares of
restricted stock valued at $2,156,950, Mr. Kniss held 22,000 shares of
restricted stock valued at $1,325,500, Mr. Scruggs held 28,300 shares of
restricted stock valued at $1,705,075 and Mr. Walker held 34,000 shares of
restricted stock valued at $2,048,500.
(3) In November 1998, the Compensation Committee reviewed the results for the
three year performance period ended October 31, 1998 to determine to what
extent the performance objectives associated with performance-based
restricted stock granted in fiscal 1996 had been met. The Compensation
Committee determined that under the terms of each grant Mr. Barnholt was
required to forfeit 75% of the performance-based restricted stock granted
in 1996. The amount forfeited is reflected in the table above as a
negative LTIP pay-out in fiscal 1998 based upon the original grant date
closing price of $44.25 per share.
(4) As noted above, Hewlett-Packard provides performance-based compensation
under its 1998 Variable Pay Plan, its cash profit-sharing plan and
pursuant to the agreement under which the Compensation Committee granted
shares of restricted stock in fiscal 1998. The subsequent payment or
forfeiture described above as "Bonus" or "LTIP Payout" is reflected as
compensation in the fiscal year for which the relevant performance period
is completed.
(5) The amounts disclosed in this column include payment by Hewlett-Packard of
$99 in fiscal 1998 for term life insurance on behalf of each of the named
executive officers and Hewlett-Packard's contributions under its Tax
Saving Capital Accumulation Plan, a tax-qualified defined contribution
401(k) plan, in fiscal 1998 of $6,400 on behalf of Mr. Barnholt $6,400 on
behalf of Mr. Anderson, $6,400 on behalf of Mr. Kniss, $5,867 on behalf of
Mr. Scruggs and $6,400 on behalf of Mr. Walker.
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<PAGE>
Grants of Stock Options
The following table shows all grants of options to acquire shares of
Hewlett-Packard common stock granted to the executive officers named in the
Summary Compensation Table in the "--Executive Compensation" section in the
year ended October 31, 1998.
<TABLE>
<CAPTION>
% of Total
Number of Options Granted
Securities to
Underlying Hewlett-Packard Exercise or Grant Date
Options Employees in Base Price Present Value
Name Granted (#)(1) Fiscal Year(2) ($/Sh.)(3) Expiration Date ($)(4)
- ---- -------------- --------------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Edward W. Barnholt...... 60,000 .6% $61.75 Nov. 2007 $1,315,200
Byron Anderson.......... 15,000 .1% 61.75 Nov. 2007 328,800
Richard D. Kniss........ 8,000 .1% 61.75 Nov. 2007 175,360
John E. Scruggs......... 15,000 .1% 61.75 Nov. 2007 328,800
Robert R. Walker........ 12,000 .1% 61.75 Nov. 2007 263,040
</TABLE>
- --------
(1) The options granted in fiscal 1998 are exercisable 25% after the first
year, 50% after the second year, 75% after the third year, and 100% after
the fourth year.
(2) Hewlett-Packard granted options representing 10,648,000 shares to
employees in fiscal 1998.
(3) The exercise price may be paid by delivery of already-owned shares and tax
withholding obligations related to exercise may be paid by offset of the
underlying shares, subject to certain conditions.
(4) Hewlett-Packard used a modified Black-Scholes model of option valuation to
determine grant date present value. Hewlett-Packard does not advocate or
necessarily agree that the Black-Scholes model can properly determine the
value of an option. Calculations for the named officers are based on a
seven-year option term, which reflects Hewlett-Packard's experience that
its options, on average, are exercised within seven years of grant. Other
assumptions used for the valuations are: an annual interest rate of 5.39%;
annual dividend yield of 1.0%; and volatility of 30%. The resulting values
are reduced by 9% to reflect Hewlett-Packard's experience with
forfeitures.
Exercises of Stock Options
The following table shows aggregate exercises of options to purchase
Hewlett-Packard common stock in the year ended October 31, 1998 by the
executive officers named in the Summary Compensation Table in the "--Executive
Compensation" section above.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options at Fiscal The- Money Options at
Shares Value Year-End (#) Fiscal Year-End ($) (1)
Acquired on Realized ------------------------- -------------------------
Name Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward W. Barnholt...... 20,000 $1,035,600 218,288 110,000 $9,113,541 $824,450
Byron Anderson.......... 0 0 42,400 26,000 1,907,603 107,865
Richard Kniss........... 27,200 1,298,160 6,600 18,600 83,544 113,184
John E. Scruggs......... 0 0 20,950 30,550 702,652 231,142
Robert R. Walker........ 5,000 249,750 46,600 25,000 2,085,330 126,450
</TABLE>
- --------
(1) The value of unexercised options is based upon the difference between the
exercise price and the average of the high and low market prices on
October 30, 1998 of $59.91.
Treatment of Hewlett-Packard Options
Under the existing terms of Hewlett-Packard's stock option plans, the
separation will result in accelerated vesting of the unvested portion of
substantially all Hewlett-Packard options held by our employees on the
distribution date. All Hewlett-Packard options held by our employees on the
distribution date that are not
93
<PAGE>
exercised will expire three months following the distribution date.
Alternatively, in most countries our employees may elect in January 2000 to
amend their Hewlett-Packard options to waive the vesting acceleration. We will
assume the vested and unvested portions of these amended options, as well as
selected options held by our non-employee directors, which will convert at the
distribution into options to purchase our common stock. The number of shares
and the exercise price of Hewlett-Packard options that convert into Agilent
Technologies options will be adjusted using a conversion formula. The
conversion formula will be based on the opening per share price of our common
stock on the first trading day after the distribution relative to the closing
per share price of Hewlett-Packard common stock on the last trading day before
the distribution. The resulting Agilent Technologies options will maintain the
original vesting provisions and option periods. We do not currently know how
many Agilent Technologies options we will issue upon the assumption of
Hewlett-Packard options because, among other things, we are not able to
predict how many of our employees will elect to convert their Hewlett-Packard
options and the conversion formula variables will not be known until the
distribution date. As of July 31, 1999, Agilent Technologies employees held
options to purchase approximately 15,000,000 shares of Hewlett-Packard common
stock with a weighted average exercise price of approximately $44. We expect
the number of these Hewlett-Packard options converted to Agilent Technologies
options will be less than 15,000,000 because it is likely some of our
employees will decide to retain their Hewlett-Packard options, and some of our
employees will either exercise or forfeit their Hewlett-Packard options prior
to the distribution date.
Treatment of Hewlett-Packard Restricted Stock
Under the Hewlett-Packard 1985 Incentive Compensation Plan and the 1990 and
1995 Incentive Stock Plans, certain key employees of Hewlett-Packard were
granted restricted stock awards. The majority of the shares of restricted
stock outstanding at October 31, 1998 are subject to forfeiture if employment
terminates prior to three years from the date of grant. Restricted shares held
by our employees are expected to be forfeited on or before the distribution.
Our employees who forfeit Hewlett-Packard restricted shares may elect to
receive either replacement options to purchase our common stock granted on the
effective date of this offering at an exercise price equal to the initial
public offering price or replacement Agilent Technologies restricted shares
granted on or before the distribution, in either case with the same vesting as
before. We intend to provide replacement options and replacement Agilent
Technologies restricted shares with a value that is comparable to the value of
the forfeited Hewlett-Packard restricted shares. Substantially all of our
employees have made their election.
Treatment of Unvested Stock Purchase Plan Shares
Under the Hewlett-Packard Stock Purchase Plan, employees who purchase
shares under the plan receive, as a matching contribution from Hewlett-
Packard, one share of Hewlett-Packard common stock for every two shares
purchased. The matching shares vest two years after the date on which Hewlett-
Packard makes a contribution and are subject to forfeiture during that two-
year period in the event of termination of employment, sale of the employee-
purchased shares or certain other events. On the distribution date, our
employees with unvested matching shares will forfeit the unvested shares
together with shares of Agilent Technologies issued with respect to such
unvested shares in connection with the distribution. We intend to provide
replacement Agilent Technologies unvested shares with a value that is
comparable to the value of the forfeited Hewlett-Packard unvested matching
shares (and associated Agilent Technologies shares issued in connection with
the distribution). The replacement shares will maintain the original vesting
term based on the employee's continued employment with Agilent Technologies.
Incentive Plans
1999 Stock Plan
We have adopted the 1999 Stock Plan to provide grants of incentive stock
options to our employees, including officers and employee directors, and
grants of nonstatutory stock options, stock appreciation rights, stock awards
and cash awards to our employees, directors and consultants. A total of
66,832,500 shares of common stock are reserved for issuance under the stock
plan.
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<PAGE>
Administration of the 1999 Stock Plan
The administrator, which is either the board of directors or a committee of
the board of directors, will administer the stock plan. In the case of awards
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code, the committee will consist of two or more "outside
directors" within the meaning of Section 162(m) of the Code. The administrator
has the power to determine the terms of the options, stock awards, stock
appreciation rights and cash awards granted, including the exercise price, the
number of shares subject to each option, stock appreciation right or stock
award, the exercisability of the options and stock appreciation rights and the
form of consideration payable upon exercise of the options.
Options
The exercise price of nonstatutory stock options granted under the stock
plan is determined by the administrator, but the per share exercise price will
be no less than 75% of the fair market value of our common stock on the date
of grant. With respect to nonstatutory stock options intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Internal Revenue Code and incentive stock options, the exercise price will be
at least equal to the fair market value of our common stock on the date of
grant. The term of options granted under the stock plan generally is
determined by the administrator, however, the term of incentive stock options
may not exceed 10 years.
Unless otherwise provided in the employee's option agreement, options
granted under the stock plan terminate immediately upon the termination of the
optionee's status as an employee of Agilent Technologies, within three years
after an employee's termination by disability or retirement (three months in
the case of incentive stock options), within one year after the employee's
termination by death, or within three months after termination as a result of
participation in a voluntary severance program but in any event, no later than
the expiration of the option's term. If an optionee's status as an employee
ends due to death, disability, retirement or through certain voluntary
severance programs, the participant's option will fully vest and the
participant will have the right to exercise the option within the time limits
described above.
During any fiscal year each participant may be granted options to purchase
a maximum of 1,000,000 shares of our common stock. However, in connection with
initial service, a participant may be granted options to purchase up to an
additional 1,000,000 shares.
Stock Appreciation Rights
Stock appreciation rights may be granted under the stock plan to
participants. The administrator determines the terms and conditions of each
stock appreciation right. The number of shares covered by each stock
appreciation right will be determined by the administrator, but during any
fiscal year of the Company, no participant may be granted stock appreciation
rights for more than 1,000,000 shares. However, in connection with initial
service, a participant may be granted stock appreciation rights for up to an
additional 1,000,000 shares. Upon exercise of a stock appreciation right, the
participant will receive a cash payment determined by multiplying (1) the
difference between the fair market value of a share of our common stock on the
date of exercise and the exercise price, times (2) the number of shares with
respect to which the stock appreciation right is exercised. The stock
appreciation right generally will terminate at the same time and pursuant to
the same terms as options granted under the stock plan.
Stock Awards
The administrator determines the terms and conditions, including vesting,
of stock awards granted under the stock plan. Unless the administrator
determines otherwise, stock awards shall be forfeited upon the voluntary or
involuntary termination of the participant's employment with us for any
reason, although full or partial vesting may occur in the event of termination
by reason of death, disability or retirement, or in connection with a
voluntary severance program.
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<PAGE>
Cash Awards
Cash awards may be granted alone, in addition to, or in tandem with other
awards granted under the stock plan. The terms of a cash award will be
determined by the administrator.
Non-Transferability of Awards
Unless the administrator provides otherwise, awards granted under the stock
plan are generally not transferable by the participant, and awards are
exercisable during the lifetime of the participant only by such participant.
Adjustments upon Merger or Change in Control
The stock plan provides that in the event we are merged into or acquired by
another entity, we may provide for the assumption or substitution of, or
adjustment to, awards under the stock plan. In addition, we may accelerate the
vesting of options and stock appreciation rights and terminate any
restrictions on cash awards or stock awards, and we may provide for the
cancellation of awards under the stock plan with a cash payment to the
participant.
Amendment and Termination of the 1999 Stock Plan
Unless terminated sooner, the stock plan will terminate automatically 10
years from the date of its adoption by the board of directors. In addition,
the board has the authority to amend, suspend or terminate the stock plan, so
long as no such action impairs any award previously granted under the stock
plan unless agreed to in writing by the participant.
Employee Stock Purchase Plan
We have adopted the Employee Stock Purchase Plan to encourage employee
stock ownership.
Administration of the Employee Stock Purchase Plan
Our officers or other selected employees of us will administer the employee
stock purchase plan and determine employee eligibility to participate in the
employee stock purchase plan.
Eligibility to Participate
Regular full-time or regular part-time employees who regularly work at
least 20 hours per week are eligible to participate in the employee stock
purchase plan on their hire date and may enroll before their first day of work
or at the beginning of any fiscal quarter. The employee stock purchase plan
permits participants to purchase our common stock through payroll deductions
of up to 10% of the participant's pay. Pay means base earnings but excludes:
. bonuses;
. pay for overtime work; and
. other extra compensation.
An employee may participate in both the 401(k) plan and the stock purchase
plan. A participant may always contribute up to 5% of pay to the employee
stock purchase plan, even if the participant contributes the maximum
percentage permitted under the 401(k) plan. If a participant contributes more
than 5% of pay to the employee stock purchase plan, the participant's combined
401(k) plan and employee stock purchase plan contributions cannot exceed 10%
of eligible pay.
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Purchases
Participant contributions are used to purchase shares of our common stock
on the last business day of each fiscal quarter. Our fiscal quarters end in
January, April, July, and October. The price of stock purchased under the
employee stock purchase plan will be the lowest of the following:
. the average of the daily closing prices of the stock on the New York
Stock Exchange for the full quarter;
. the average of the daily closing prices of the stock on the New York
Stock Exchange for the last five trading days of the quarter; or
. the closing price of the stock on the last trading day of the quarter.
All prices will be based on prices as reported in The Wall Street Journal
or another source as we determine. For every two shares purchased through
employee contributions, we will contribute one share.
Restrictions
A participant cannot sell or transfer shares purchased with contributions
from us for the two-year period after purchase unless the participant leaves
us due to retirement, permanent and total disability or death. If a
participant leaves us within two years of purchase for any reason other than
retirement, permanent and total disability or death, the participant will
forfeit all our contributions. If a participant sells or transfers shares
purchased through employee contributions in a quarter prior to the lapse of
the two-year period, the participant will forfeit our contributions for that
quarter.
Replacement Shares
On the distribution date, our employees with unvested Hewlett-Packard
matching shares under the Hewlett-Packard Stock Purchase Plan will forfeit the
unvested shares, together with shares of Agilent Technologies common stock
issued with respect to the unvested shares in connection with the
distribution. We intend to provide replacement Agilent Technologies unvested
shares out of the Employee Stock Purchase Plan with a value comparable to the
value of the forfeited Hewlett-Packard unvested matching shares (and
associated Agilent Technologies shares issued in connection with the
distribution). The replacement shares will maintain the original vesting term
based on the employee's continued employment with Agilent Technologies.
End of Participation
Participation in the employee stock purchase plan will end when an employee
voluntarily elects to withdraw from the employee stock purchase plan or is no
longer eligible to participate. If an employee's participation in the employee
stock purchase plan ends, we will promptly distribute all accrued employee
contributions without interest and the employee will not be able to
participate in the employee stock purchase plan until the next quarter.
Transferability of Rights
A participant may not transfer rights granted under the employee stock
purchase plan other than by will or the laws of descent and distribution.
Amendment and Termination of the Employee Stock Purchase Plan
Our board of directors has the authority to amend or terminate the employee
stock purchase plan at any time.
1999 Non-Employee Director Stock Plan
We have adopted the 1999 Non-Employee Director Stock Plan to help attract
and retain non-employee directors. A total of 891,100 shares of our common
stock have been reserved for issuance under the non-employee director stock
plan.
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Administration
Our board of directors or a committee of the board of directors will
administer the non-employee director stock plan.
Stock Options
The non-employee director stock plan will permit stock option grants. Each
non-employee director shall receive a minimum of 75% of the value of his or
her annual retainer in the form of a stock option grant and the balance in a
cash payment.
We will issue the non-employee director an option grant on the date of the
offering and for subsequent plan years on or about March 1 of each year based
on the non-employee director's election. If the non-employee director fails to
make a timely election, a non-employee director will receive an option grant
that has a value equal to 75% of the value of his or her annual retainer. We
will use a modified Black-Scholes option valuation model to determine the
number of shares necessary so that the value of each stock option equals that
portion of the annual retainer that a non-employee director receives in the
form of a stock option.
Each stock option will vest 12 months after the grant date. The exercise
price of each stock option will equal the fair market value of our common
stock on the date of grant.
Transferability of Options
Unless the administrator provides otherwise, a non-employee director may
not transfer stock a option granted under the non-employee director stock plan
other than by will or by the laws of descent and distribution.
Cash Payments
All cash payments will be paid in equal quarterly installments beginning in
March of each year.
Special Compensation
Common stock or stock options may be granted to non-employee directors at
the administrator's discretion. The administrator determines the terms and
conditions of each grant.
Adjustments upon Merger or Asset Sale
At the time of any merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, or other change in the corporate structure or
capitalization affecting our common stock, our board of directors or the
committee will make appropriate adjustments to the number and kind of shares
to be issued under the non-employee director stock plan and the price of any
stock option.
Amendment and Termination of the 1999 Non-Employee Director Stock Plan
The non-employee director stock plan will terminate 10 years from its
adoption, unless our board of directors or the committee terminates the non-
employee director stock plan earlier. No stock options will be granted after
the non-employee director stock plan terminates. Our board of directors has
the authority to amend, modify, suspend or terminate the non-employee director
stock plan at any time.
1999 Variable Pay Plan
We intend to adopt a 1999 variable pay plan that will be designed to link
annual cash compensation for designated employees to business performance.
Under the variable pay plan, the plan participant's bonus compensation will
only be paid if certain pre-determined business performance goals are
achieved.
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The variable pay plan will be administered in six-month performance periods
which coincide with each half of our fiscal year. Awards will be distributed
after each performance period if the pre-determined business performance goals
are achieved.
Pension Plans
The following table shows the estimated annual benefits payable upon
retirement to Hewlett-Packard eligible employees in the United States under
Hewlett-Packard's Deferred Profit-Sharing Plan or the Deferred Plan, Hewlett-
Packard's Retirement Plan, or the Retirement Plan, and Hewlett-Packard's
Excess Benefit Retirement Plan or the Excess Benefit Plan. To calculate the
number of years of an eligible employee's service, the pension plans will
bridge each eligible employee's service with Hewlett-Packard to that eligible
employee's service with Agilent Technologies.
ESTIMATED ANNUAL RETIREMENT BENEFITS(1)(2)
<TABLE>
<CAPTION>
Highest 20 Years 25 Years
Five-Year Average 15 Years of of 30 Years
Compensation of Service Service Service of Service
- ----------------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C>
$ 400,000 $ 87,207 $116,276 $145,345 $ 174,414
600,000 132,207 176,276 220,345 264,414
800,000 177,207 236,276 295,345 354,414
1,000,000 222,207 296,276 370,345 444,414
1,200,000 267,207 356,276 445,345 534,414
1,400,000 312,207 416,276 520,345 624,414
1,600,000 357,207 476,276 595,345 714,414
1,800,000 402,207 536,276 670,345 804,414
2,000,000 447,207 596,276 745,345 894,414
2,200,000 492,207 656,276 820,345 984,414
2,400,000 537,207 716,276 895,345 1,074,414
</TABLE>
- --------
(1) Amounts exceeding $130,000 would be paid pursuant to the Excess Benefit
Plan.
(2) No more than $160,000 (as adjusted from time to time by the IRS) of
eligible compensation may be taken into account in calculating benefits
payable under the Retirement Plan.
The compensation covered by the pension plans whose benefits are summarized
in the table above equals base pay. The covered compensation for each of the
executive officers named in the Summary Compensation Table is the highest
five-year average of the amounts shown in the "Salary" column of that table.
The compensation covered by the pension plans for any Hewlett-Packard officer
who participates in Hewlett-Packard's 1999 Variable Pay Plan shall be the
"total targeted cash compensation" as defined under each of such variable pay
plans.
Agilent Technologies employees will receive credit under Agilent
Technologies' new defined benefit plans for their years of service with
Hewlett-Packard. Officers named in the Summary Compensation Table have been
credited with the following years of service: Mr. Barnholt, 30 years, Mr.
Anderson, 28 years, Mr. Kniss, 30 years, Mr. Scruggs, 25 years and Mr. Walker,
23 years. Retirement benefits shown are payable at age 65 in the form of a
qualified joint and survivor annuity or single life annuity, as applicable to
the employee and reflect the maximum offset allowance currently in effect
under Section 401(1) of the Internal Revenue Code of 1986, as amended, to
compute the offset for such benefits under the pension plans. For purposes of
calculating the benefit, an employee cannot be credited with more than 30
years of service.
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ARRANGEMENTS BETWEEN AGILENT TECHNOLOGIES AND HEWLETT-PACKARD
We have provided below a summary description of the master separation and
distribution agreement, effective as of August 12, 1999, or the separation
agreement, and the key related agreements. This description, which summarizes
the material terms of such agreements, is not complete. You should read the
full text of these agreements, which have been filed with the Securities and
Exchange Commission as exhibits to the registration statement of which this
prospectus is a part.
Master Separation and Distribution Agreement
The master separation and distribution agreement contains the key
provisions relating to the separation, this offering and the distribution.
The Separation. The separation is scheduled to occur on or around November
1, 1999. On or before the separation date, Hewlett-Packard and we will sign
the general assignment and assumption agreement which provides for the
transfer to us of assets and liabilities from Hewlett-Packard, effective on
the separation date. Hewlett-Packard will also transfer to us ownership of
specified subsidiaries. Hewlett-Packard will deliver additional agreements
governing various interim and ongoing relationships between Hewlett-Packard
and us following the separation date. The ancillary agreements include:
. a general assignment and assumption agreement;
. master technology, patent, and trademark ownership agreements;
. an employee matters agreement;
. a tax sharing agreement;
. a master information technology service level agreement;
. a real estate matters agreement;
. an environmental matters agreement;
. a master confidential disclosure agreement; and
. an indemnification and insurance matters agreement.
To the extent that the terms of any of these ancillary agreements conflict
with the separation agreement, the terms of these agreements govern. These
agreements are described more fully below.
Cash to be Transferred to Agilent Technologies. Hewlett-Packard has agreed
to provide us sufficient cash to satisfy the following obligations or
requirements (as adjusted with mutual agreement):
. the obligations of Hewlett-Packard, which will be assumed by Agilent
Technologies, and the obligations of our Japanese subsidiary under
Hewlett-Packard's agreement with Yokogawa to buy out Yokogawa's interest
in this subsidiary;
. taxes specified in the tax sharing agreement incurred in connection with
Hewlett-Packard's restructuring of its operations in Japan;
. working capital and acquisition requirements of $250 million; and
. an amount, as of October 31, 1999, equal to:
(A) the difference between specified assets and liabilities related to
our business that will be retained by Hewlett-Packard, plus or minus
(B) specified assets, net of specified liabilities, retained by our
Japanese subsidiary related to Hewlett-Packard's business.
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Hewlett-Packard and its subsidiaries will make interim cash payments to us
on or around the separation. On December 15, 1999, Hewlett-Packard and we will
recalculate these cash payments based on our October 31, 1999 balance sheet,
and Hewlett-Packard and its subsidiaries will pay, or we will repay, any
difference. Additional cash will be held by some of our subsidiaries on the
separation date.
The Initial Public Offering. Under the terms of the separation agreement we
are offering approximately 13.0% of our outstanding common stock in this
offering, or about 14.7% if the underwriters exercise their over-allotment
option in full. We estimate that the net proceeds from this offering will be
about $1,108,417,500, based on an assumed initial public offering price of
$20.50 per share. All of the proceeds of this offering (including any proceeds
from the sale of shares pursuant to the exercise of the U.S. underwriters'
over-allotment option), less underwriters' discounts and commissions, will be
paid to Hewlett-Packard as a dividend to be declared prior to the offering. We
are obligated to use our reasonable best efforts to satisfy the following
conditions to the consummation of this offering (any of which may be waived by
Hewlett-Packard):
. the registration statement containing this prospectus must be effective;
. U.S. securities laws must be satisfied;
. our common stock must be listed on the New York Stock Exchange or the
Nasdaq Stock Market;
. all our obligations under the underwriting agreement must be met or
waived by the underwriters;
. Hewlett-Packard must own at least 80.1% of our stock and must be
satisfied that the distribution will be tax free to its U.S.
stockholders;
. no legal restraints must exist preventing the separation or this
offering;
. the separation must have occurred; and
. the separation agreement must not have been terminated.
The Distribution. By the middle of calendar year 2000, Hewlett-Packard
intends to distribute the remaining shares of our common stock Hewlett-Packard
holds to Hewlett-Packard stockholders on a pro rata basis. We will prepare an
information statement with Hewlett-Packard and send it to Hewlett-Packard
stockholders before the distribution becomes effective. The information
statement will inform the stockholders of the distribution and its specifics.
Hewlett-Packard may, in its sole discretion, change the distribution date.
Hewlett-Packard intends to consummate the distribution only if the following
conditions are met (any of which may be waived by Hewlett-Packard):
. the Internal Revenue Service must issue a favorable tax ruling on the
tax-free status of the transaction and the transaction qualifies as a
tax-free reorganization under Sections 368(a)(1)(D) and 355 of the
Internal Revenue Code of 1986;
. all required government approvals must be in effect;
. no legal restraints must exist preventing this distribution; and
. nothing must have happened in the intervening time between the initial
public offering and the distribution that makes the distribution harmful
to Hewlett-Packard or its stockholders.
Covenants Between Hewlett-Packard and Agilent Technologies. In addition to
signing documents that transfer control and ownership of various assets and
liabilities of Hewlett-Packard relating to our business, we have agreed with
Hewlett-Packard to enter into additional service level agreements, exchange
information, engage in certain auditing practices and resolve disputes in
particular ways.
Additional Service Level Agreements. Hewlett-Packard and we will enter into
interim service level agreements covering the provision of various interim
services, including financial, accounting, building services, legal and other
services by Hewlett-Packard to us or, in certain circumstances, vice versa.
These services will generally be provided for a fee equal to the actual direct
and indirect costs of providing the services plus 5%.
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The interim service level agreements will generally have a term of two years
or less from the date of separation. However, some interim service level
agreements, including those for building services and information technology
services, may be extended beyond the initial two-year period. If these
agreements are extended, their terms will change so that the lessor will
receive fair market rental value for the rental component of the building
services and the costs plus 10% for information technology and other services
and non-rental components of building services.
Information Exchange. Both Hewlett-Packard and we have agreed to share
information with each other, at no cost to the requesting party, for the
following purposes, unless the sharing would be commercially detrimental:
. Each party has agreed to maintain adequate internal accounting to allow
the other party to satisfy its own reporting obligations and prepare its
own financial statements.
. Each party will retain records that may be beneficial to the other party
for a specified period of time. If the records are going to be
destroyed, the destroying party will give the other party an opportunity
to retrieve all relevant information from the records.
. Each party will do its best to provide the other party with personnel,
directors, officers or agents who may be used as witnesses in legal
proceedings.
Auditing Practices. So long as Hewlett-Packard is required to consolidate
our results of operations and financial position, we have agreed to:
. not change independent accounting firms without Hewlett-Packard's
consent;
. use reasonable commercial efforts to cause our auditors to date their
opinion on our audited annual financial statements on the same date as
Hewlett-Packard's auditors' date their opinion on Hewlett-Packard's
financial statements;
. provide Hewlett-Packard all relevant information to enable Hewlett-
Packard to prepare their financial statements (and Hewlett-Packard has
agreed to provide us all relevant information to enable us to prepare
our financial statements);
. grant each other's internal auditors access to our records; and
. notify each other of any change in our accounting principles.
Dispute Resolution. If problems arise between us and Hewlett-Packard, we
have agreed to the following procedures:
. The parties will make a good faith effort to first resolve the dispute
through negotiation.
. If negotiations fail, the parties agree to attempt to resolve the
dispute through non-binding mediation.
. If mediation fails, the parties can resort to litigation. In addition,
nothing prevents either party acting in good faith from initiating
litigation at any time if failure to do so would substantially
disadvantage the party.
No Representations and Warranties. Neither party is making any promises to
the other regarding:
. the value of any asset that Hewlett-Packard is transferring;
. whether there is a lien or encumbrance on the asset Hewlett-Packard is
transferring; or
. the legal sufficiency of any conveyance of title to any asset Hewlett-
Packard is transferring.
No Solicitation. Both parties have agreed not to directly recruit employees
of the other party for two years after the distribution date if the recruiting
would be damaging to the other party. However, general advertising and
employee-initiated solicitations are permissible.
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Expenses. Hewlett-Packard will pay all of our costs and expenses related to
this offering and the distribution and a portion of our costs and expenses
related to the separation.
Termination of the Agreement. Hewlett-Packard in its sole discretion can
terminate the separation agreement and all ancillary agreements and abandon
the distribution at any time prior to the closing of this offering. Both
Hewlett-Packard and Agilent Technologies must agree to terminate the
separation agreement and all ancillary agreements at any time between the
closing of this offering and the distribution.
General Assignment and Assumption Agreement
The general assignment and assumption agreement identifies the assets
Hewlett-Packard will transfer to us and the liabilities we will assume from
Hewlett-Packard in the separation. The agreement also describes when and how
these transfers and assumptions will occur.
Asset Transfer. Effective on the separation date, Hewlett-Packard will
transfer the following assets to us, except as provided in an ancillary
agreement or other agreement:
. all assets reflected on our balance sheet as of July 31, 1999, minus any
assets disposed of after July 31, 1999;
. all written off, expensed or fully depreciated assets that would have
appeared on our balance sheet as of July 31, 1999 if we had not written
off, expensed or fully depreciated them;
. all assets that Hewlett-Packard acquired after July 31, 1999 that would
have appeared in our financial statements as of the separation date if
we prepared such financial statements using the same principles we used
in preparing our balance sheet dated July 31, 1999;
. all assets that our business primarily uses as of the separation date
but are not reflected in our balance sheet as of July 31, 1999 due to
mistake or omission;
. all contingent gains related primarily to our business;
. all supply, vendor, capital, equipment lease or other contracts that
relate primarily to our business, including contracts representing
obligations reflected on our balance sheet as of July 31, 1999;
. all outstanding stock, investments or similar interests of specified
Hewlett-Packard subsidiaries;
. all computers, desks, equipment and other assets used primarily by
employees of Hewlett-Packard who will become our employees due to the
separation;
. specified rights under existing insurance policies; and
. other specified assets.
Excluded Assets. The general assignment and assumption agreement also
provides that Hewlett-Packard will not transfer certain assets to us,
including most accounts receivable.
Assumption of Liabilities. Effective on the separation date, we will assume
the following liabilities from Hewlett-Packard, except as provided in an
ancillary agreement or other agreement:
. all liabilities reflected as liabilities on our balance sheet as of July
31, 1999, minus any liabilities that were discharged after such date of
the balance sheet;
. all liabilities of Hewlett-Packard that arise after July 31, 1999, that
would have appeared in our financial statements as of the separation
date if we prepared such financial statements using the same principles
we used in preparing our balance sheet of Agilent Technologies as of
July 31, 1999;
. all liabilities that are primarily related to or primarily arise out of
our business at the separation date but are not reflected in our balance
sheet as of July 31, 1999 due to mistake or omission;
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. all contingent liabilities primarily related to our business;
. all liabilities (other than taxes) primarily resulting from the
operation of our business, or resulting from any asset that Hewlett-
Packard transferred to us;
. all liabilities arising out of specified terminated, divested or
discontinued businesses and operations; and
. other specified liabilities.
Excluded Liabilities. The general assignment and assumption agreement
provides that we will not assume specified liabilities, including:
. most accounts payable;
. any liabilities that would otherwise be allocated to us but which are
covered by Hewlett-Packard's insurance policies, unless we are a named
insured under such policies; and
. specified third party environmental actions.
The Non-United States Plan. The transfer of international assets and
assumption of international liabilities will be accomplished through
agreements entered into between international subsidiaries. According to the
general assignment and assumption agreement, Hewlett-Packard will transfer its
ownership of all outstanding capital stock of the holding company that owns
all of the subsidiaries holding the international assets and liabilities
related to our business. The agreement acknowledges that circumstances in
jurisdictions outside of the United States may require the timing of the
international separation to be delayed past the separation date.
Delayed Transfers. If it is not practicable to transfer specified assets
and liabilities on the separation date, the agreement provides that these
assets and liabilities will be transferred after the separation date.
Terms of Other Ancillary Agreements Govern. To the extent that another
ancillary agreement expressly provides for the transfer of an asset or an
assumption of a liability, the terms of such other ancillary agreement will
determine the manner of the transfer and assumption.
Obtaining Approvals and Consents. The parties agree to use all reasonable
efforts to obtain any required consents, substitutions or amendments required
to novate or assign all rights and obligations under any contracts that will
be transferred in the separation.
Nonrecurring Costs and Expenses. Any nonrecurring costs and expenses that
are not allocated in the separation agreement or any other ancillary agreement
shall be the responsibility of the party that incurs the costs and expenses.
Indemnification and Insurance Matters Agreement
General Release of Pre-Separation Claims. Effective as of the separation
date, we will release Hewlett-Packard and its affiliates, agents, successors
and assigns, and Hewlett-Packard will release us, and our affiliates, agents,
successors and assigns, from any liabilities arising from events occurring on
or before the separation date, including events occurring in connection with
the activities to implement the separation, the initial public offering and
the distribution. This provision will not impair a party from enforcing the
separation agreement, any ancillary agreement or any arrangement specified in
any of these agreements.
Indemnification. The indemnification and insurance matters agreement also
contains provisions governing indemnification. In general, we have agreed to
indemnify Hewlett-Packard and its affiliates, agents, successors and assigns
from all liabilities arising from:
. our business, any of our liabilities or any of our contracts; and
. any breach by us of the separation agreement or any ancillary agreement.
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Hewlett-Packard has agreed to indemnify us and our affiliates, agents,
successors and assigns from all liabilities arising from:
. Hewlett-Packard's business other than the businesses transferred to us
pursuant to the separation; and
. any breach by Hewlett-Packard of the separation agreement or any
ancillary agreement.
The indemnifying party will make all indemnification payments net of
insurance proceeds that the indemnified party receives. The agreement also
contains provisions governing notice and indemnification procedures.
Liability Arising From This Prospectus. We and Hewlett-Packard have agreed
to share any liability arising from any untrue statement of a material fact or
any omission of a material fact in this prospectus. Hewlett-Packard will bear
82% of any such liability, and we will bear 18% of any such liability.
Agilent Technologies Contingent Liabilities in Excess of $50 Million. To
the extent we incur any contingent liability or group of related contingent
liabilities with a value of more than $50 million, after deducting related
insurance proceeds and amounts recovered from third parties, Hewlett-Packard
has agreed to share the liability relating to this excess portion. Hewlett-
Packard will bear 82% of any such liability, and we will bear 18% of any such
liability. This provision only applies to Agilent Technologies contingent
liabilities arising from written demands made or suits or similar proceedings
filed within four years following the separation date that seek or demand
monetary damages, services or non-monetary relief. An Agilent Technologies
contingent liability is a liability that primarily relates to our business
that arises out of events, acts or omission occurring prior to the separation
date, where the existence or scope of the obligation of Hewlett-Packard or
Agilent Technologies as of the separation date with respect to such liability
was not acknowledged, fixed or determined in any material respect. We may not
assign our rights under this provision, and this provision terminates upon a
change of control of Agilent Technologies (other than as a result of the
distribution).
Insurance Matters. The agreement also contains provisions governing our
insurance coverage from the separation date until the distribution date. In
general, we agree to reimburse Hewlett-Packard for premium expenses related to
insurance coverage during this period. Prior to the distribution, Hewlett-
Packard will maintain insurance policies on our behalf that are generally
comparable to those maintained at Hewlett-Packard.
Environmental Matters. Under the general assignment and assumption
agreement, we have generally assumed environmental liabilities associated with
the historic operations of the businesses transferred to us. This would
include, for example, liabilities associated with non-compliance with
environmental laws prior to separation. However, under the indemnification and
insurance matters agreement and general assignment and assumption agreement,
there are exceptions to our assumption of liabilities for environmental
contamination associated with the historic operations of those businesses.
They include the following:
. Hewlett-Packard will generally retain and indemnify us for all
liabilities for environmental contamination, whether or not arising out
of the businesses transferred to us, on any property (including third
party disposal sites) other than the properties that are to be
transferred to us upon separation.
. Hewlett-Packard will also retain and indemnify us for liabilities
associated with any contamination existing prior to the separation date
on those properties to be transferred to us which are currently
undergoing investigation and remediation by Hewlett-Packard and for
which Hewlett-Packard has accrued a reserve.
We will indemnify Hewlett-Packard for liabilities associated with
environmental contamination at those sites that are to be transferred to us
(other than specifically listed properties which are undergoing investigation
and remediation by Hewlett-Packard) regardless of whether the contamination
was caused by historic operations of the business transferred to us or a
business retained by Hewlett-Packard. We will have limited access to Hewlett-
Packard's historic insurance policies for coverage of liabilities associated
with pre-separation contamination assumed by us. Each party will be
responsible for all liabilities associated with any environmental
contamination caused by that party post-separation.
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Certain Losses and liabilities Not Covered by Hewlett-Packard's Insurance
Policies. Hewlett-Packard has agreed to reimburse us for any losses or
liabilities aggregating in excess of $20 million, exclusive of amounts covered
by insurance policies, that we incur between the separation date and the
distribution date of the following nature:
. specified categories of losses resulting from an earthquake;
. property losses of a type that is covered by Hewlett-Packard's insurance
policies or that is covered by standard form insurance policies; or
. events, acts or omissions occur that give rise to one or more third
party claims that result in a liability to Agilent Technologies of a
type that is covered by Hewlett-Packard's insurance policies or that is
covered by standard form insurance policies, but only to the extent that
suits or similar proceedings are filed or written demands are made in
connection with such claims within four years following the distribution
date that seek or demand monetary damages, services or non-monetary
relief.
. releases occur that give rise to one or more environmental actions that
result in a liability to Agilent Technologies, but only to the extent
that suits or similar proceedings are filed, orders or decrees are
issued, written notice that the environmental action will be commenced
is received by us or Hewlett-Packard, or written demands are made in
connection with the environmental action within four years following the
distribution date that seek or demand monetary damages, services or non-
monetary relief.
Assignment. The indemnification and insurance matters agreement is not
assignable by either party without prior written consent.
Master Patent Ownership and License Agreement
The master patent ownership and license agreement, or the master patent
agreement, allocates rights relating to patents, patent applications and
invention disclosures. Under the master patent agreement, Hewlett-Packard will
assign to us ownership of listed patents, patent applications and invention
disclosures and joint ownership of a small number of listed patents and patent
applications. Hewlett-Packard will not restrict our right to practice the
assigned patents, and neither party will restrict the other's right to
practice the joint patents except for a small number of joint patents that
will be subject to field-of-use limitations.
In addition, each party will grant the other a non-exclusive, royalty-free
patent cross-license to make, have made, use, lease, sell, offer for sale, and
import any and all products and services of the businesses in which the
licensed company and its subsidiaries, including specified affiliated
companies are, as of or after the separation date, engaged, except in specific
excluded fields-of-use. The fields that are excluded from the license granted
by us to Hewlett-Packard are, with some exceptions, products for the
measurement or analysis of biological, genetic or chemical materials and
health care products. The fields that are excluded from the license granted by
Hewlett-Packard to us are, with some exceptions, inkjet products, printer
products (including printer supplies, accessories and components), document
scanners and computing products. The cross-licenses between Hewlett-Packard
and us will cover all of each company's patents issued on patent applications
with first effective filing dates before the separation date or within five
years after, and will include rights to sublicense to subsidiaries and
specified affiliated companies as well as certain rights to sublicense a small
number of patents to third parties. The licenses continue for the life of the
patent.
The master patent agreement also will provide that Hewlett-Packard and we
will assist each other in specified ways for a period of five years after the
separation date in the event either party is subject to patent litigation.
Under the master patent agreement, Hewlett-Packard and we will have the
right to require, subject to some restrictions, that the other party license
its patents, subject to the same field-of-use restrictions, to (A) a
subsidiary or one of the specified affiliated companies valued at $10 million
or more that has been spun-off or sold and (B) a third party that acquires a
business from it valued at $10 million or more. These licenses will be limited
to the products, services and processes that are in the subsidiary, affiliated
company or business at the time of transfer
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and minor extensions to those products, services and processes and will be
limited to patents issued on patent applications with first effective filing
dates on or before the effective date of the spin-off or acquisition. As a
condition of these licenses, the transferee of the subsidiary, affiliated
company or business must grant a patent license back to the non-transferring
party.
In the event of an acquisition of all or substantially all of the assets of
either party, the party whose assets are acquired may assign the master patent
agreement to the person who acquires the assets. In that event, the license
granted to the acquired party will be limited to the products, services and
processes of the acquired party as of the date of the acquisition and minor
extensions to those products, services and processes. The license granted to
the acquired party will not include patents issued on patent applications with
first effective filing dates after the date of acquisition.
Master Technology Ownership and License Agreement
The master technology ownership and license agreement, or the master
technology agreement, allocates rights in technology other than the integrated
circuit technology covered by the ICBD technology ownership and license
agreement (discussed below) and other than patents, patent applications and
invention disclosures. In the master technology agreement, Hewlett-Packard
will assign to us technology related to our products and developments.
Hewlett-Packard will not restrict our right to use the assigned technology. In
addition, each party will license its technology to the other party for
unrestricted use (except for commercially released software, which is subject
to narrower rights), to the extent that its technology has been disclosed to
or is in the possession of the other party as of the separation date, with the
right to sublicense to subsidiaries and specified affiliated companies. The
licenses are perpetual.
Under the master technology agreement, subject to some restrictions, each
party may also sublicense the technology that it licenses from the other party
to (A) a subsidiary or one of the specified affiliated companies valued at $10
million or more that has been spun-off or sold and (B) a third party that
acquires a business from it valued at $10 million or more.
The master technology agreement will not obligate either party to provide
to the other party improvements that it makes, whether to its own technology
or to the other party's technology licensed to it under the agreement.
In the event of an acquisition of all or substantially all of the assets of
either party, the party whose assets are acquired may assign the master
technology agreement to the person who acquires the assets.
ICBD Technology Ownership and License Agreement
The ICBD technology ownership and license agreement, or the ICBD technology
agreement, assigns to us listed technology relating to the design, development
and manufacture of integrated circuits that is used by the Integrated Circuits
Business Division (ICBD), or integrated circuit technology, (other than
patents, patent applications and invention disclosures). The ICBD technology
agreement also provides that Hewlett-Packard will retain ownership of other
integrated circuit technology. In the ICBD technology agreement, Hewlett-
Packard will assign to us joint ownership of other listed integrated circuit
technology and both parties will have unrestricted rights to use the jointly
owned integrated circuit technology. The integrated circuit technology that is
covered by the ICBD technology agreement encompasses the majority of the
integrated circuit technology within Hewlett-Packard. The covered integrated
circuit technology generally includes the integrated circuit technology that
was developed jointly with or for the benefit of the imaging and computing
businesses of Hewlett-Packard.
In addition, under the ICBD technology agreement, each party will license
the listed integrated circuit technology to the other party, with the right to
sublicense to subsidiaries and specified affiliated companies. The licenses
are perpetual. We will be restricted from using both the integrated circuit
technology that Hewlett-Packard will assign to us and that Hewlett-Packard
will license to us within the fields of, with some exceptions, inkjet
products, printer products (including printer supplies, accessories and
components), document scanners and computing products, other than to supply
Hewlett-Packard. This restriction expires ten years after the separation
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date for certain printing, scanning and computing technology considered
fundamental or of long term value and three years after the separation date
for the rest of the technology.
Under the ICBD technology agreement, subject to some restrictions, each
party may sublicense the integrated circuit technology that it licenses from
the other party to (A) a subsidiary or one of the specified affiliated
companies valued at $10 million or more that has been spun-off or sold and (B)
a third party that acquires a business from it valued at $10 million or more.
The ICBD technology agreement will not obligate either party to provide to
the other party improvements that it makes, whether to its own technology or
to the other party's technology licensed to it under the agreement. Each
party, upon request, will notify the other party of improvements that it may
have made in a particular defined technical area and will negotiate in good
faith disclosing and licensing those improvements to the other party.
In the event of an acquisition of all or substantially all of the assets of
either party, the party whose assets are acquired may assign the ICBD
technology agreement to the person who acquires the assets.
Master Trademark Ownership and License Agreement
The master trademark ownership and license agreement, or the master
trademark agreement, will allocate rights relating to trademarks, service
marks and trade names. Under the master trademark agreement, Hewlett-Packard
will assign to us its rights in listed trademarks, service marks and trade
names that it uses in connection with the businesses transferred to us. In
addition, Hewlett-Packard will grant us a perpetual license to mark our
products shipping as of the distribution date with, and advertise and promote
these products using, listed Hewlett-Packard trademarks and service marks.
After five years, our use will be subject to royalty payments. We may
sublicense these rights to subsidiaries and specified affiliated companies,
and we and our subsidiaries and the specified affiliated companies may allow
authorized dealers to use the trademarks and service marks in the
advertisement and promotion of these products.
During the first three years from the separation date, Hewlett-Packard will
agree not to license the trademarks and service marks it licenses to us to
third parties for use in connection with products or services that compete
with our products shipping as of the distribution date (other than in
connection with co-branding activities and other than any licenses that may
have previously been granted).
Hewlett-Packard may terminate the license under the master trademark
agreement only with regard to products that fail to meet required quality
standards, subject to a notice and cure period.
In the event of an acquisition of all or substantially all of the assets of
either party, the party whose assets are acquired may assign the master
trademark agreement to the person who acquires the assets.
Master Confidential Disclosure Agreement
The master confidential disclosure agreement provides that both parties
agree not to disclose confidential information of the other party except in
specific circumstances. Hewlett-Packard and we also agree not to use this
information in violation of any use restrictions in one of the other written
agreements between us.
Master IT Service Level Agreement
The master IT service level agreement governs the provision of information
technology services by Hewlett-Packard and us to each other, on an interim
basis, until November 1, 2001, unless extended for specific services or
otherwise indicated in the agreement. The services include data processing and
telecommunications services, such as voice telecommunications and data
transmission, and information technology support services, for functions
including accounting, financial management, tax, payroll, stockholder and
public relations, legal,
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human resources administration, procurement, real estate management and other
administrative functions. Specified charges for such services are generally
intended to allow the providing company to recover the direct and indirect
costs of providing the services, plus 5% until November 1, 2001 and such costs
plus 10% thereafter. The master IT service level agreement also will cover the
provision of certain additional information technology services identified
from time to time after the separation date that were inadvertently or
unintentionally omitted from the specified services, or that are essential to
effectuate an orderly transition under the separation agreement, so long as
the provision of such services would not significantly disrupt the providing
company's operations or significantly increase the scope of the agreement.
In addition, the master IT service level agreement will provide for the
replication of some computer systems, including hardware, software, data
storage or maintenance and support components. Generally, the party needing
the replicated system will bear the costs and expenses of replication.
Generally, the party purchasing new hardware or licensing new software will
bear the costs and expenses of purchasing the new hardware or obtaining the
new software licenses.
Employee Matters Agreement
We will enter into an employee matters agreement with Hewlett-Packard to
allocate assets, liabilities, and responsibilities relating to current and
former United States employees of Agilent Technologies and their participation
in the benefit plans, including stock plans, that Hewlett-Packard currently
sponsors and maintains.
In general, separate agreements will address similar issues relating to
foreign employment and benefit matters.
All eligible United States Agilent Technologies employees will continue to
participate in the Hewlett-Packard benefit plans on comparable terms and
conditions to those for Hewlett-Packard employees until we establish
comparable benefit plans for our current and former employees. We intend to
establish these plans no later than the time of the distribution.
Around November 1, 1999, all United States Agilent Technologies employees
will be transferred to Agilent Technologies' United States payroll. At that
time, we will adopt specified plans associated with our United States payroll
system, such as the Agilent Technologies stock plans, the Agilent Technologies
executive deferred compensation plan and the Agilent Technologies leave of
absence programs. After that time, we will adopt benefit plans that reflect
our more permanent separation from Hewlett-Packard, such as the Agilent
Technologies health and welfare plans, the Agilent Technologies pension plans,
the Agilent Technologies Excess Benefit Plan and the Agilent Technologies
fringe benefit plans. Each Agilent Technologies benefit plan will be
comparable to the corresponding Hewlett-Packard benefit plan.
Once we establish our own corresponding benefit plan, we may modify or
terminate that plan in accordance with the terms of that plan and our
policies. No Agilent Technologies benefit plan will provide benefits that
overlap benefits under the corresponding Hewlett-Packard benefit plan at the
time of the distribution. Each Agilent Technologies benefit plan will provide
that all service, compensation and other benefit determinations that, as of
the distribution, were recognized under the corresponding Hewlett-Packard
benefit plan will be taken into account under that Agilent Technologies
benefit plan.
Each Agilent Technologies benefit plan will assume any liabilities under
the corresponding Hewlett-Packard benefit plan for Agilent Technologies
employees. Assets relating to the employee liabilities will also be
transferred to Agilent Technologies or the related Agilent Technologies plans
and trusts from trusts and other funding vehicles associated with Hewlett-
Packard's benefit plans.
Options and Stock Appreciation Rights. Under the existing terms of the
Hewlett-Packard stock option plans, the separation will result in accelerated
vesting of substantially all of the unvested portion of Hewlett-Packard
options held by our employees on the distribution date. All Hewlett-Packard
options held by our employees on the distribution date that are not exercised
will expire three months after the distribution date. Alternatively, in most
countries our employees may elect in January 2000 to amend their Hewlett-
Packard options to waive the vesting
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acceleration. We will assume the amended options, as well as certain options
held by our non-employee directors, which will convert at the distribution
into options to purchase our common stock. The number of shares and the
exercise price of Hewlett-Packard options that convert into Agilent
Technologies options will be adjusted using a conversion formula. The
conversion formula will be based on the opening per-share price of our common
stock on the first trading day after the distribution relative to the closing
per-share price of Hewlett-Packard common stock on the last trading day before
the distribution. The resulting Agilent Technologies options will maintain the
original vesting provisions and option period. At the distribution, Agilent
Technologies will assume each Hewlett-Packard stock appreciation right held by
Agilent Technologies employees.
Restricted Stock. On or before the distribution, Hewlett-Packard restricted
stock granted under incentive stock plans and held by Agilent Technologies
employees is expected to be forfeited. Each Agilent Technologies employee who
forfeits Hewlett-Packard restricted stock has elected to receive as
replacement either Agilent Technologies options or Agilent Technologies
restricted shares.
Stock Purchase Plan. We anticipate that Agilent Technologies employees will
continue to participate in the Hewlett-Packard stock purchase plan through
January 31, 2000. Beginning February 1, 2000, we will sponsor a stock purchase
plan for the benefit of Agilent Technologies employees that is comparable to
the Hewlett-Packard stock purchase plan. The Agilent Technologies stock
purchase plan will provide for the replacement of unvested Hewlett-Packard
shares and Agilent Technologies shares that are forfeited by our employees at
the distribution date.
Tax Sharing Agreement
Hewlett-Packard and we have entered into a tax sharing agreement providing
for each of the party's obligations concerning various tax liabilities. The
tax sharing agreement provides that Hewlett-Packard generally will pay, and
indemnify us if necessary, with respect to all federal, state, local and
foreign taxes relating to our business for any taxable period ending prior to
this offering. In addition, the tax sharing agreement provides that Hewlett-
Packard and we will make payments between us so that, with respect to tax
returns for any taxable period in which we or any of our subsidiaries are
included in Hewlett-Packard's consolidated group for U.S. federal income tax
purposes, or in any consolidated, combined or unitary group which includes
Hewlett-Packard or any of its subsidiaries for state, local or foreign income
tax purposes the amount of taxes to be paid by us will be determined, subject
to specified adjustments, as if we and each of our subsidiaries filed our own
consolidated, combined or unitary tax return. Each member of a consolidated
group for U.S. federal income tax purposes is jointly and severally liable for
the federal income tax liability of each other member of the consolidated
group. Accordingly, although the tax sharing agreement allocates tax
liabilities between Hewlett-Packard and us, for any period in which we were
included in Hewlett-Packard's consolidated group we could be liable in the
event that any federal tax liability was incurred, but not discharged, by any
other member of the group.
The tax sharing agreement allocates responsibility for various taxes
arising from restructurings related to the spinoff between Hewlett-Packard and
Agilent Technologies. In addition, Agilent Technologies will bear 18% of
unanticipated taxes related to the spinoff where neither party is at fault.
In addition, the tax sharing agreement provides that we shall indemnify
Hewlett-Packard for any taxes arising out of the failure of the spin-off or
some of the transactions related to it to qualify as tax free as a result of
actions taken, or the failure to take required actions, by us or any of our
subsidiaries. Specifically, we are required under the tax sharing agreement to
comply with the representations made to the Internal Revenue Service in
connection with the private letter ruling that has been issued to Hewlett-
Packard by the Internal Revenue Service regarding the tax-free nature of the
spin-off of our stock by Hewlett-Packard to Hewlett-Packard's stockholders.
The tax sharing agreement further provides for cooperation with respect to
tax matters, the exchange of information and the retention of records which
may affect the income tax liability of either party.
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Real Estate Matters Agreement
The real estate matters agreement addresses real estate matters relating to
the Hewlett-Packard leased and owned properties that Hewlett-Packard will
transfer to or share with us. The agreement describes the manner in which
Hewlett-Packard will transfer to or share with us various leased and owned
properties, including the following types of transactions:
. conveyances to us of specified properties that Hewlett-Packard owns;
. leases back to Hewlett-Packard of specified owned properties that
Hewlett-Packard will convey to us;
. leases to us of portions of specified properties that Hewlett-Packard
owns;
. assignments to us of Hewlett-Packard's leases for specified leased
properties;
. subleases back to Hewlett-Packard of specified leased properties to be
assigned to us; and
. subleases to us of portions of specified leased properties.
The real estate matters agreement includes a description of each material
property to be transferred to or shared with us for each type of transaction.
The standard forms of the proposed transfer documents (e.g., lease and
sublease) are contained in schedules.
The real estate matters agreement also requires both parties to use
reasonable efforts to obtain any landlord consents required for the proposed
transfers of leased sites, including Hewlett-Packard paying commercially
reasonable consent fees and negotiating other commercially reasonable
amendments to the leases, if required by the landlords, and us agreeing to
provide the security required under the applicable leases.
The real estate matters agreement further provides that we will be required
to accept the transfer of all sites allocated to us, even if a site has been
damaged by a casualty before the separation date. Transfers with respect to
leased sites where the underlying lease is terminated due to casualty or
action by the landlord prior to the separation date will not be made, and
neither party will have any liability related thereto.
The real estate matters agreement also gives the parties the right to
change the allocation and terms of specified sites by mutual agreement based
on changes in the requirements of the parties.
The real estate matters agreement provides that all reasonable costs
required to effect the transfers (including landlord consent fees, landlord
attorneys' fees, title insurance fees and transfer taxes) will be paid by
Hewlett-Packard.
Environmental Matters Agreement
Hewlett-Packard has agreed to retain and indemnify us for liabilities
associated with properties transferred to us which are undergoing
environmental investigation and remediation and for which Hewlett-Packard has
accrued a reserve. The purpose of the environmental matters agreement is to
address, in a general way, Hewlett-Packard's rights and obligations with
respect to remediation of contamination at those properties. The agreement
also sets forth our rights and obligations with respect to that remediation.
Among other things, we are required to cooperate with Hewlett-Packard in
providing access to and use of the property for the performance of the
remedial activities by Hewlett-Packard and make reasonable efforts to avoid
interference with the remedial activities. Hewlett-Packard agrees to minimize,
to the extent feasible, the impact of remedial activities on the use and
operation on or at the relevant properties.
Hewlett-Packard and Agilent Technologies will designate liaisons for each
property who will work together and attend regular meetings with respect to
the remedial activities.
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PRINCIPAL STOCKHOLDER
Prior to this offering, all of the outstanding shares of our common stock
will be owned by Hewlett-Packard. After this offering, Hewlett-Packard will
own about 87.0%, or about 85.3% if the U.S. underwriters exercise their over-
allotment option in full, of our outstanding common stock. Except for Hewlett-
Packard, we are not aware of any person or group that will beneficially own
more than 5% of the outstanding shares of our common stock following this
offering.
DESCRIPTION OF CAPITAL STOCK
General
Upon the completion of this offering, we will be authorized to issue
2,000,000,000 shares of common stock, $.01 par value, and 125,000,000 shares
of undesignated preferred stock, $.01 par value. The following description of
our capital stock is subject to and qualified in its entirety by our
certificate of incorporation and bylaws, which are included as exhibits to the
registration statement of which this prospectus forms a part, and by the
provisions of applicable Delaware law.
Common Stock
Prior to this offering, there were 380,000,000 shares of common stock
outstanding, all of which were held of record by Hewlett-Packard.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the board of directors out of funds legally available for
that purpose. See "Dividend Policy." In the event of our liquidation,
dissolution or winding up, the holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of preferred stock, if any, then outstanding. The holders
of common stock have no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
common stock.
Preferred Stock
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may
be greater than the rights of the common stock. It is not possible to state
the actual effect of the issuance of any shares of preferred stock upon the
rights of holders of the common stock until the board of directors determines
the specific rights of the holders of such preferred stock. However, the
effects might include, among other things:
. restricting dividends on the common stock;
. diluting the voting power of the common stock;
. impairing the liquidation rights of the common stock; or
. delaying or preventing a change in control of us without further action
by the stockholders.
At the closing, no shares of preferred stock will be outstanding, and we
have no present plans to issue any shares of preferred stock.
Anti-Takeover Effects of Our Certificate and Bylaws and Delaware Law
Some provisions of Delaware law and our certificate of incorporation and
bylaws could make the following more difficult:
. acquisition of us by means of a tender offer;
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. acquisition of us by means of a proxy contest or otherwise; or
. removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage coercive
takeover practices and inadequate takeover bids. These provisions are also
designed to encourage persons seeking to acquire control of us to first
negotiate with our board. We believe that the benefits of increased protection
give us the potential ability to negotiate with the proponent of an unfriendly
or unsolicited proposal to acquire or restructure us and outweigh the
disadvantages of discouraging such proposals because negotiation of such
proposals could result in an improvement of their terms.
Election and Removal of Directors. Our board of directors is divided into
three classes. The directors in each class will serve for a three-year term,
one class being elected each year by our stockholders. See "Management--
Directors and Executive Officers." This system of electing and removing
directors may discourage a third party from making a tender offer or otherwise
attempting to obtain control of us because it generally makes it more
difficult for stockholders to replace a majority of the directors.
Stockholder Meetings. Under our bylaws, only the board of directors, the
chairman of the board, and until Hewlett-Packard owns less than 50% of our
common stock, Hewlett-Packard, may call special meetings of stockholders.
Requirements for Advance Notification of Stockholder Nominations and
Proposals. Our bylaws establish advance notice procedures with respect to
stockholder proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of the board of
directors or a committee of the board of directors.
Delaware Anti-Takeover Law. We are subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
following the date the person became an interested stockholder, unless the
"business combination" or the transaction in which the person became an
interested stockholder is approved in a prescribed manner. Generally, a
"business combination" includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested stockholder.
Generally, an "interested stockholder" is a person who, together with
affiliates and associates, owns or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock. The existence of this provision may have an anti-
takeover effect with respect to transactions not approved in advance by the
board of directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by
stockholders.
Elimination of Stockholder Action By Written Consent. Our certificate of
incorporation eliminates the right of stockholders other than Hewlett-Packard
to act by written consent without a meeting. Hewlett-Packard will lose this
right once it owns less than 50% of our common stock.
Elimination of Cumulative Voting. Our certificate of incorporation and
bylaws do not provide for cumulative voting in the election of directors.
Undesignated Preferred Stock. The authorization of undesignated preferred
stock makes it possible for the board of directors to issue preferred stock
with voting or other rights or preferences that could impede the success of
any attempt to change control of us. These and other provisions may have the
effect of deferring hostile takeovers or delaying changes in control or
management of us.
Amendment of Charter Provisions. The amendment of any of the above
provisions would require approval by holders of at least 80% of the
outstanding common stock.
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Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Harris Trust and
Savings Bank.
New York Stock Exchange Listing
Our common stock has been approved for listing on the New York Stock
Exchange under the symbol "A."
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SHARES ELIGIBLE FOR FUTURE SALE
All of the 57,000,000 shares of our common stock sold in this offering
(65,550,000 shares if the U.S. underwriters exercise their over-allotment
option in full) will be freely tradeable without restriction under the
Securities Act, except for any shares which be may acquired by an affiliate of
Agilent Technologies, as that term is defined in Rule 144 under the Securities
Act. Persons who may be deemed to be affiliates generally include individuals
or entities that control, are controlled by, or are under common control with,
Agilent Technologies and may include directors and officers of Agilent
Technologies as well as significant stockholders of Agilent Technologies, if
any.
Hewlett-Packard has announced that, subject to specified conditions, it
intends to distribute to its stockholders by the middle of calendar year 2000
all of the 380,000,000 shares of our common stock owned by Hewlett-Packard by
means of the distribution. Shares of our common stock distributed to Hewlett-
Packard shareholders in the distribution generally will be freely
transferable, except for shares of common stock received by persons who may be
deemed to be affiliates. Persons who are affiliates will be permitted to sell
the shares of common stock that are issued in this offering or that they
receive in the distribution only through registration under the Securities
Act, or under an exemption from registration, such as the one provided by Rule
144.
The shares of our common stock held by Hewlett-Packard before distribution
are deemed "restricted securities" as defined in Rule 144, and may not be sold
other than through registration under the Securities Act or under an exemption
from registration, such as the one provided by Rule 144. Hewlett-Packard, our
directors and officers and we have agreed not to offer or sell any shares of
our common stock, subject to exceptions (including the distribution), for a
period of 180 days after the date of this prospectus, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters. See "Underwriters."
We will grant shares of our common stock and non-stock awards pursuant to
our stock plans subject to restrictions. We have reserved 67,723,600 shares of
our common stock for issuance under our stock option plans. In addition, under
our employee matters agreement with Hewlett-Packard, we will assume options to
purchase shares of Hewlett-Packard common stock held by our employees and we
will replace restricted shares of Hewlett-Packard common stock held by our
employees with options to purchase our shares or with restricted shares of our
common stock. The number of options we will assume, and the number of
replacement options or shares of restricted stock we will issue, will be
determined based on elections to be made by each affected employee. See
"Management--Incentive Plans--1999 Stock Plan." We currently expect to file a
registration statement under the Securities Act to register shares reserved
for issuance under our stock plans. Shares issued pursuant to awards after the
effective date of such registration statement (other than shares issued to
affiliates) generally will be freely tradable without further registration
under the Securities Act. Any vested and exercisable options of Hewlett-
Packard will also be freely tradeable without registration under the
Securities Act after the effective date of such registration statement. See
"Management--Treatment of Hewlett-Packard Options."
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MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
General
The following is a general discussion of the material United States federal
income and estate tax consequences of the ownership and disposition of common
stock that may be relevant to you if you are a non-United States Holder. In
general, a "non-United States Holder" is any person or entity that is, for
United States federal income tax purposes, a foreign corporation, a
nonresident alien individual, a foreign partnership or a foreign estate or
trust. This discussion is based on current law, which is subject to change,
possibly with retroactive effect, or different interpretations. This
discussion is limited to non-United States Holders who hold shares of common
stock as capital assets. Moreover, this discussion is for general information
only and does not address all of the tax consequences that may be relevant to
you in light of your personal circumstances, nor does it discuss special tax
provisions which may apply to you if you relinquished United States
citizenship or residence.
If you are an individual, you may, in many cases, be deemed to be a
resident alien, as opposed to a nonresident alien, by virtue of being present
in the United States for at least 31 days in the calendar year and for an
aggregate of at least 183 days during a three-year period ending in the
current calendar year (counting for such purposes all of the days present in
the current year, one-third of the days present in the immediately preceding
year, and one-sixth of the days present in the second preceding year).
Resident aliens are subject to United States federal income tax as if they
were United States citizens.
EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT A TAX
ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF
PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY UNITED STATES STATE,
MUNICIPALITY OR OTHER TAXING JURISDICTION.
Dividends
If dividends are paid, as a non-United States Holder, you will be subject
to withholding of United States federal income tax at a 30% rate or a lower
rate as may be specified by an applicable income tax treaty. To claim the
benefit of a lower rate under an income tax treaty, you must properly file
with the payor an IRS Form 1001, or successor form, claiming an exemption from
or reduction in withholding under the applicable tax treaty.
If dividends are considered effectively connected with the conduct of a
trade or business by you within the United States and, where a tax treaty
applies, are attributable to a United States permanent establishment of yours,
those dividends will not be subject to withholding tax, but instead will be
subject to United States federal income tax on a net basis at applicable
graduated individual or corporate rates, provided an IRS Form 4224, or
successor form, is filed with the payor. If you are a foreign corporation, any
effectively connected dividends may, under certain circumstances, be subject
to an additional "branch profits tax" at a rate of 30% or a lower rate as may
be specified by an applicable income tax treaty.
Unless the payor has knowledge to the contrary, dividends paid prior to
January 1, 2001 to an address outside the United States are presumed to be
paid to a resident of such country for purposes of the withholding discussed
above and for purposes of determining the applicability of a tax treaty rate.
However, recently finalized Treasury Regulations pertaining to United States
federal withholding tax provide that you must comply with certification
procedures, or, in the case of payments made outside the United States with
respect to an offshore account, certain documentary evidence procedures,
directly or under certain circumstances through an
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<PAGE>
intermediary, to obtain the benefits of a reduced rate under an income tax
treaty with respect to dividends paid after December 31, 2000. In addition,
these regulations will require you, if you provide an IRS Form 4224 or
successor form, as discussed above, to also provide your identification
number.
If you are eligible for a reduced rate of United States withholding tax
pursuant to an income tax treaty, you may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the IRS.
Gain on Disposition of Common Stock
As a non-United States Holder, you generally will not be subject to United
States federal income tax on any gain recognized on the sale or other
disposition of common stock unless:
(1) the gain is considered effectively connected with the conduct of a
trade or business by you within the United States and, where a tax
treaty applies, is attributable to a United States permanent
establishment of yours (and, in which case, if you are a foreign
corporation, you may be subject to an additional branch profits tax
equal to 30% or a lower rate as may be specified by an applicable
income tax treaty).
(2) you are an individual who holds the common stock as a capital asset and
are present in the United States for 183 or more days in the taxable
year of the sale or other disposition and other conditions are met; or
(3) we are or have been a "United States real property holding
corporation", or a USRPHC, for United States federal income tax
purposes. We believe that we are not currently, and are likely not to
become, a USRPHC. If we were to become a USRPHC, then gain on the sale
or other disposition of common stock by you generally would not be
subject to United States federal income tax provided:
. the common stock was "regularly traded" on an established securities
market; and
. you do not actually or constructively own more than 5% of the common
stock during the shorter of the five-year period preceding the
disposition or your holding period.
Federal Estate Tax
If you are an individual, common stock held at the time of your death will
be included in your gross estate for United States federal estate tax
purposes, and may be subject to United States federal estate tax, unless an
applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding Tax
We must report annually to the IRS and to each of you the amount of
dividends paid to you and the tax withheld with respect to those dividends,
regardless of whether withholding was required. Copies of the information
returns reporting those dividends and withholding may also be made available
to the tax authorities in the country in which you reside under the provisions
of an applicable income tax treaty or other applicable agreements.
Backup withholding is generally imposed at the rate of 31% on certain
payments to persons that fail to furnish the necessary identifying information
to the payer. Backup withholding generally will not apply to dividends paid
prior to January 1, 2001 to a Non-United States Holder at an address outside
the United States, unless the payor has knowledge that the payee is a United
States person. In the case of dividends paid after December 31, 2000, the
recently finalized Treasury Regulations provide that you generally will be
subject to withholding tax at a 31% rate unless you certify your non-United
States status.
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<PAGE>
The payment of proceeds of a sale of common stock effected by or through a
United States office of a broker is subject to both backup withholding and
information reporting unless you provide the payor with your name and address
and you certify your non-United States status or you otherwise establish an
exemption. In general, backup withholding and information reporting will not
apply to the payment of the proceeds of a sale of common stock by or through a
foreign office of a broker. If, however, such broker is, for United States
federal income tax purposes, a United States person, a controlled foreign
corporation, or a foreign person that derives 50% or more of its gross income
for certain periods from the conduct of a trade or business in the United
States, or, in addition, for periods after December 31, 2000, a foreign
partnership that at any time during its tax year either is engaged in the
conduct of a trade or business in the United States or has as partners one or
more United States persons that, in the aggregate, hold more than 50% of the
income or capital interest in the partnership, such payments will be subject
to information reporting, but not backup withholding, unless such broker has
documentary evidence in its records that you are a non-United States Holder
and certain other conditions are met or you otherwise establish an exemption.
Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against your United States federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.
118
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date hereof the U.S. underwriters named below, for whom
Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co., Credit Suisse First
Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith, Incorporated,
Salomon Smith Barney Inc., Bear, Stearns & Co. Inc., J.P. Morgan & Co. Inc.,
Lehman Brothers Inc. and SG Cowen Securities Corporation are acting as U.S.
representatives, and the international underwriters named below for whom
Morgan Stanley & Co. International Limited, Goldman Sachs International,
Credit Suisse First Boston Limited, Merrill Lynch International, Salomon Smith
Barney Inc., Bear, Stearns International Limited, J.P. Morgan Securities Ltd.,
Lehman Brothers International (Europe) and Societe Generale are acting as
international representatives, have severally agreed to purchase, and Agilent
Technologies has agreed to sell to them, severally, the number of shares of
our common stock indicated below:
<TABLE>
<CAPTION>
Name Number of Shares
- ---- ----------------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated............................
Goldman, Sachs & Co..........................................
Credit Suisse First Boston Corporation.......................
Merrill Lynch, Pierce, Fenner & Smith,
Incorporated.........................................
Salomon Smith Barney Inc. ...................................
Bear, Stearns & Co. Inc......................................
J.P. Morgan Securities Inc. .................................
Lehman Brothers Inc. ........................................
SG Cowen Securities Corporation..............................
Subtotal................................................... 45,600,000
----------
International Underwriters:
Morgan Stanley & Co. International Limited...................
Goldman Sachs International..................................
Credit Suisse First Boston Limited...........................
Merrill Lynch International .................................
Salomon Smith Barney Inc. ...................................
Bear, Stearns International Limited..........................
J.P. Morgan Securities Ltd...................................
Lehman Brothers International (Europe).......................
Societe Generale.............................................
Subtotal................................................... 11,400,000
----------
Total.................................................... 57,000,000
==========
</TABLE>
The U.S. underwriters and the international underwriters, and the U.S.
representatives and the international representatives, are collectively
referred to as the "underwriters" and the "representatives," respectively. The
119
<PAGE>
underwriters are offering the shares of common stock subject to their
acceptance of the shares from Agilent Technologies and subject to prior sale.
The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of our common stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The underwriters are obligated to
take and pay for all of the shares of our common stock offered hereby, if any
such shares are taken, other than those covered by the U.S. underwriters'
over-allotment option described below.
In the agreement between the U.S. and international underwriters, sales may
be made between the U.S. underwriters and international underwriters of any
number of shares as may be mutually agreed. The per share price of any shares
sold by the underwriters shall be the public offering price set forth on the
cover page of this prospectus, in United States dollars, less an amount not
greater than the per share amount of the concession to dealers described
below.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the
cover page of this prospectus and part to certain dealers at a price that
represents a concession not in excess of $ a share under the public
offering price. Any underwriter may allow, and such dealers may reallow, a
concession not in excess of $ a share to other underwriters or to certain
dealers. After the initial offering of the shares of common stock, the
offering price and other selling terms may from time to time be varied by the
representatives.
Agilent Technologies has granted to the U.S. underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase up to an
aggregate of 8,550,000 additional shares of common stock at the public
offering price set forth on the cover page of this prospectus, less
underwriting discounts and commissions. The U.S. underwriters may exercise
this option solely for the purpose of covering over-allotments, if any, made
in connection with this offering of the shares of common stock offered by this
prospectus. To the extent the option is exercised, each U.S. underwriter will
become obligated, subject to certain conditions, to purchase about the same
percentage of the additional shares of common stock as the number listed next
to the U.S. underwriter's name in the preceding table bears to the total
number of shares of common stock set forth next to the names of all U.S.
underwriters in the preceding table. If the U.S. underwriters' option is
exercised in full, the total price to the public would be $ , the total
underwriters' discounts and commissions would be $ and total proceeds to
Agilent Technologies would be $ .
The underwriters have informed Agilent Technologies that each principal
underwriter in this offering may, subject to the approval of Morgan Stanley &
Co. Incorporated, sell to discretionary accounts over which such principal
underwriter exercises discretionary authority. The underwriters have further
informed Agilent Technologies that they estimate that such sales will not
exceed in the aggregate five percent of the total number of shares of common
stock offered by them.
Agilent Technologies' common stock has been approved for listing on the New
York Stock Exchange under the symbol "A."
Each of Agilent Technologies, Hewlett-Packard and the directors and
executive officers of Agilent Technologies has agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters, it will not, during the period ending 180 days after the date of
this prospectus:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
. enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock;
whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise.
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The restrictions described in the previous paragraph do not apply to:
. the sale of the shares to the underwriters;
. the issuance by Agilent Technologies of shares of common stock upon the
exercise of an option or a warrant or the conversion of a security
outstanding on the date of this prospectus of which the underwriters
have been advised in writing;
. the granting of stock options and/or restricted stock units pursuant to
existing Agilent Technologies employee benefit plans, provided that such
options do not become exercisable and such units do not vest during such
180-day period;
. transactions by any person other than Agilent Technologies relating to
shares of common stock or other securities acquired in open market or
other transactions after the completion of this offering;
. transactions in shares of Hewlett-Packard common stock;
. the issuance by Agilent Technologies of shares of common stock in
connection with any acquisition of or merger with another company or the
acquisition of assets, provided that each recipient of common stock
agrees that these shares shall remain subject to the lock-up
restrictions for the remainder of the period for which Agilent
Technologies is bound;
. the distribution; or
. the substitution of Hewlett-Packard Awards with replacement awards under
Agilent Technologies' incentive plans and other transactions under
Agilent Technologies' incentive plans.
In order to facilitate this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot in connection with
this offering, creating a short position in the common stock for their own
account. In addition, to cover any over-allotments or to stabilize the price
of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may
reclaim selling concessions allowed to an underwriter or a dealer for
distributing the common stock in this offering, if the syndicate repurchases
previously distributed common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above
independent market levels. The underwriters are not required to engage in
these activities, and may end any of these activities at any time.
From time to time, certain of the underwriters have provided, and may
continue to provide, investment banking services to each of Agilent
Technologies and Hewlett-Packard.
Hewlett-Packard has generally agreed to pay the costs and expenses relating
to this offering. The underwriters have agreed to reimburse Hewlett-Packard
for certain of its expenses incurred in connection with this offering.
Agilent Technologies and the underwriters have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act.
Pricing of this Offering
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiations
between Agilent Technologies and the U.S. representatives. Among the factors
to be considered in determining the initial public offering price will be the
future prospects of Agilent Technologies and its industry in general, sales,
earnings and certain other financial and operating information of Agilent
Technologies in recent periods, and the price-earnings ratios, price-sales
ratios, market prices of securities and certain financial and operating
information of companies engaged in activities similar to those of Agilent
Technologies. The estimated initial public offering price range set forth on
the cover page of this preliminary prospectus is subject to change as a result
of market conditions and other factors.
121
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby and certain other legal
matters will be passed upon for us by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. As of August 31, 1999,
attorneys of Wilson Sonsini Goodrich & Rosati who participated in matters
relating to this offering beneficially held approximately 3,388 shares of
Hewlett-Packard common stock. The value of such shares as of September 30,
1999, according to the closing price reported on the New York Stock Exchange
on September 30, 1999, was $307,461. Certain legal matters will be passed upon
for the underwriters by Shearman & Sterling, Menlo Park, California.
EXPERTS
The consolidated financial statements as of October 31, 1997 and 1998 and
for each of the three years in the period ended October 31, 1998 and as of
July 31, 1999 and for the nine month period then ended included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a registration statement on Form S-1 under the Securities Act with
respect to the common stock offered hereby. This prospectus does not contain
all of the information set forth in the registration statement and the
exhibits and schedules thereto. Certain items are omitted in accordance with
the rules and regulations of the SEC. For further information with respect to
Agilent Technologies and its common stock, reference is made to the
registration statement and the exhibits and any schedules filed therewith.
Statements contained in this prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance,
if such contract or document is filed as an exhibit, reference is made to the
copy of such contract or other documents filed as an exhibit to the
registration statement, each statement being qualified in all respects by such
reference. A copy of the registration statement, including the exhibits and
schedules thereto, may be read and copied at the SEC's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the
operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. In addition, the SEC maintains an Internet site at
http://www.sec.gov, from which interested persons can electronically access
the registration statement, including the exhibits and any schedules thereto.
As a result of this offering, we will become subject to the full
informational requirements of the Securities Exchange Act of 1934, as amended.
We will fulfill our obligations with respect to such requirements by filing
periodic reports and other information with the SEC. We intend to furnish our
stockholders with annual reports containing consolidated financial statements
certified by an independent public accounting firm. We also maintain an
Internet site at http://www.agilent.com. Our website and the information
contained therein or connected thereto shall not be deemed to be incorporated
into this prospectus or the registration statement of which it forms a part.
122
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheet................................................. F-3
Consolidated Statement of Earnings......................................... F-4
Consolidated Statement of Stockholder's Equity............................. F-5
Consolidated Statement of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of Agilent Technologies, Inc.:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of earnings, stockholder's equity and cash flows
present fairly, in all material respects, the financial position of Agilent
Technologies, Inc. and its subsidiaries at October 31, 1997 and 1998 and July
31, 1999, and the results of their operations and their cash flows for each of
the three years in the period ended October 31, 1998 and for the nine months
ended July 31, 1999 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
November 9, 1999
F-2
<PAGE>
AGILENT TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
(in millions, except share amounts)
<TABLE>
<CAPTION>
October 31,
-------------
July
31,
1997 1998 1999
------ ------ ------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................ $ -- $ -- $ --
Accounts receivable...................................... 1,234 1,215 1,297
Inventory................................................ 1,432 1,485 1,597
Other current assets..................................... 265 375 362
------ ------ ------
Total current assets.................................... 2,931 3,075 3,256
Property, plant and equipment, net........................ 1,623 1,481 1,378
Other assets.............................................. 452 431 416
------ ------ ------
Total assets.............................................. $5,006 $4,987 $5,050
====== ====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable......................................... $ 495 $ 435 $ 426
Employee compensation and benefits....................... 604 574 484
Deferred revenue......................................... 157 205 244
Other accrued liabilities................................ 267 385 313
------ ------ ------
Total current liabilities............................... 1,523 1,599 1,467
Other liabilities......................................... 373 366 363
Commitments and contingencies
Stockholder's equity:
Preferred stock; $.01 par value; 125,000,000 shares
authorized, none issued and outstanding................ -- -- --
Common stock; $.01 par value; 2,000,000,000 shares
authorized, 380,000,000 shares issued and outstanding.. -- -- 4
Additional paid-in capital.............................. -- -- 3,216
Stockholder's net investment............................ 3,110 3,022 --
------ ------ ------
Total stockholder's equity.............................. 3,110 3,022 3,220
------ ------ ------
Total liabilities and stockholder's equity................ $5,006 $4,987 $5,050
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AGILENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
October 31, July 31,
---------------------- ------------------
1996 1997 1998 1998 1999
------ ------ ------ ----------- ------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net revenue:
Products.......................... $5,756 $6,114 $6,098 $4,583 $4,354
Products to Hewlett-Packard....... 684 640 696 532 590
Services.......................... 939 1,031 1,158 850 939
------ ------ ------ ------ ------
Total net revenue................ 7,379 7,785 7,952 5,965 5,883
------ ------ ------ ------ ------
Costs and expenses:
Cost of products.................. 3,327 3,455 3,807 2,716 2,525
Cost of services.................. 574 671 705 529 571
Research and development.......... 805 880 948 699 705
Selling, general and
administrative................... 1,798 1,909 2,050 1,532 1,546
------ ------ ------ ------ ------
Total costs and expenses......... 6,504 6,915 7,510 5,476 5,347
------ ------ ------ ------ ------
Earnings from operations........... 875 870 442 489 536
Other income (expense), net........ (21) (47) (46) (14) 27
------ ------ ------ ------ ------
Earnings before taxes.............. 854 823 396 475 563
Provision for taxes................ 312 280 139 167 197
------ ------ ------ ------ ------
Net earnings....................... $ 542 $ 543 $ 257 $ 308 $ 366
====== ====== ====== ====== ======
Basic and diluted net earnings per
share............................. $ 1.43 $ 1.43 $ .68 $ .81 $ .96
====== ====== ====== ====== ======
Average shares used in computing
basic and diluted net earnings per
share............................. 380 380 380 380 380
====== ====== ====== ====== ======
Unaudited pro forma net earnings
per share:
Basic............................ $ .59 $ .84
====== ======
Diluted.......................... $ .57 $ .82
====== ======
Average shares used in computing
unaudited pro forma net earnings
per share:
Basic............................ 437 437
====== ======
Diluted.......................... 451 449
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AGILENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(in millions)
<TABLE>
<CAPTION>
Stock-
Additional holder's Total Stock-
Common Paid-In Net holder's
Stock Capital Investment Equity
------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
Balance, October 31, 1995............ $-- $ -- $ 2,829 $2,829
Net earnings......................... -- -- 542 542
Net cash transfers to Hewlett-Packard
Company............................. -- -- (373) (373)
--- ------ ------- ------
Balance, October 31, 1996............ -- -- 2,998 2,998
Net earnings......................... -- -- 543 543
Transfer of net assets from Hewlett-
Packard Company related to an
immaterial acquisition.............. -- -- 19 19
Net cash transfers to Hewlett-Packard
Company............................. -- -- (450) (450)
--- ------ ------- ------
Balance, October 31, 1997............ -- -- 3,110 3,110
Net earnings......................... -- -- 257 257
Transfer of net assets from Hewlett-
Packard Company related to the
Heartstream acquisition............. -- -- 134 134
Net cash transfers to Hewlett-Packard
Company............................. -- -- (479) (479)
--- ------ ------- ------
Balance, October 31, 1998............ -- -- 3,022 3,022
Net earnings ........................ -- -- 366 366
Net cash transfers to Hewlett-Packard
Company ............................ -- -- (168) (168)
Transfer to common stock and
additional paid-in capital.......... 4 3,216 (3,220) --
--- ------ ------- ------
Balance, July 31, 1999............... $ 4 $3,216 $ -- $3,220
=== ====== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AGILENT TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
October 31, July 31,
------------------- -----------------
1996 1997 1998 1998 1999
----- ----- ----- ----------- -----
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings.......................... $ 542 $ 543 $ 257 $ 308 $ 366
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization....... 401 409 477 332 365
Deferred taxes on earnings.......... (1) (26) (140) (105) 49
Non-cash restructuring and asset
impairment charges................. -- -- 85 17 51
Write-down of investments........... -- -- 37 -- --
Changes in assets and liabilities:
Accounts receivable................ 67 (20) 18 141 (84)
Inventory.......................... (181) (57) (67) (178) (113)
Accounts payable................... (11) 72 (60) (114) (9)
Other current assets and
liabilities....................... 84 57 130 16 (147)
Other, net......................... (20) (13) 14 (32) (52)
----- ----- ----- ----- -----
Net cash provided by operating
activities............................ 881 965 751 385 426
----- ----- ----- ----- -----
Cash flows from investing activities:
Investment in property, plant and
equipment............................ (559) (582) (410) (320) (336)
Disposition of property, plant and
equipment............................ 64 81 78 56 71
Acquisitions, net of cash acquired.... (6) (9) (2) 14 (28)
Cash proceeds of divestitures......... -- -- 57 -- 39
Other, net............................ (7) (5) 5 2 (4)
----- ----- ----- ----- -----
Net cash used in investing activities.. (508) (515) (272) (248) (258)
----- ----- ----- ----- -----
Net cash transfers to Hewlett-Packard
Company............................... (373) (450) (479) (137) (168)
----- ----- ----- ----- -----
Change in cash and cash equivalents.... -- -- -- -- --
Cash and cash equivalents at beginning
of period............................. -- -- -- -- --
----- ----- ----- ----- -----
Cash and cash equivalent at end of
period................................ $ -- $ -- $ -- $ -- $ --
===== ===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Overview and Basis of Presentation
On March 2, 1999, Hewlett-Packard Company (HP) announced a plan to create a
separate company, subsequently named Agilent Technologies, Inc. (Agilent
Technologies), comprised of HP's test and measurement, semiconductor products,
healthcare solutions and chemical analysis businesses, related portions of
Hewlett-Packard Laboratories and associated infrastructure. After completion
of Agilent Technologies' initial public offering, HP will own at least 80.1%
of Agilent Technologies' outstanding common stock. HP also announced its
intention to distribute all of the shares of Agilent Technologies' common
stock that HP owns to HP's stockholders by the middle of calendar year 2000
(the distribution date).
Agilent Technologies was incorporated in Delaware in May 1999 as a wholly
owned subsidiary of HP. In July 1999, Agilent Technologies authorized
125,000,000 shares of $.01 par value preferred stock and 2,000,000,000 shares
of $.01 par value common stock, and issued 10,000,000 shares of common stock
to HP. There are no shares of preferred stock issued and outstanding.
Effective October 21, 1999, Agilent Technologies' Board of Directors
declared a 38-for-one stock split in the form of a stock dividend. As a result
of the stock split, common stock issued and outstanding increased to
380,000,000 shares. Shares outstanding and net earnings per share amounts have
been adjusted for all periods.
HP and Agilent Technologies have entered into a Master Separation and
Distribution Agreement (the separation agreement) under which HP will make an
initial cash payment to Agilent Technologies on or about November 1, 1999 (the
separation date), to fund working capital and other needs for the first few
months of operation as a separate, stand-alone entity. Additionally, HP will
transfer to Agilent Technologies, on or about the separation date,
substantially all of the assets and liabilities associated with Agilent
Technologies' businesses, except that HP will retain some of Agilent
Technologies' assets and liabilities and will transfer to Agilent Technologies
some of its assets and liabilities.
The consolidated financial statements include the assets, liabilities,
operating results and cash flows of Agilent Technologies and have been
prepared using HP's historical bases in the assets and liabilities and the
historical results of operations of Agilent Technologies. Changes in
stockholder's equity represent HP's transfer of its net investment in Agilent
Technologies, after giving effect to the net earnings of Agilent Technologies
plus net cash transfers to HP and other transfers from HP. Agilent
Technologies will begin accumulating retained earnings on November 1, 1999.
The consolidated financial statements include allocations of certain HP
corporate expenses, including centralized research and development, legal,
accounting, employee benefits, real estate, insurance services, information
technology services, treasury and other HP corporate and infrastructure costs.
The expense allocations have been determined on bases that HP and Agilent
Technologies considered to be a reasonable reflection of the utilization of
services provided or the benefit received by Agilent Technologies. However,
the financial information included herein may not reflect the consolidated
financial position, operating results, changes in stockholder's equity and
cash flows of Agilent Technologies in the future or what they would have been
had Agilent Technologies been a separate, stand-alone entity during the
periods presented.
2. Summary of Significant Accounting Policies
Principles of consolidation. The consolidated financial statements include
the accounts of Agilent Technologies and its wholly- and majority-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
Use of estimates. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in Agilent
Technologies' consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
F-7
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Interim financial information. The financial information for the nine
months ended July 31, 1998 is unaudited but includes all adjustments,
consisting only of normal and recurring accruals, that management considers
necessary for a fair presentation of its consolidated financial position,
operating results and cash flows. Results for the nine months ended July 31,
1999 are not necessarily indicative of results to be expected for the full
fiscal year 1999 or for any future period.
Revenue recognition. Revenue from product sales, net of trade discounts and
allowances, is recognized at the time the product is shipped or upon
installation and customer acceptance, if the acceptance criteria are
substantive. Provisions are established for estimated costs that may be
incurred for product warranties and post-sales support. Revenue from services,
including operating leases, is recognized over the contractual period or as
services are rendered and accepted by the customer.
Advertising. Advertising costs are expensed as incurred and amounted to $87
million in 1996, $98 million in 1997, $94 million in 1998 and $70 million for
the nine months ended July 31, 1999.
Taxes on earnings. Agilent Technologies' operating results historically
have been included in HP's consolidated U.S. and state income tax returns and
in tax returns of certain HP foreign subsidiaries. The provision for income
taxes in Agilent Technologies' consolidated financial statements has been
determined on a separate-return basis. Deferred tax assets and liabilities are
recognized for the expected tax consequences of temporary differences between
the tax bases of assets and liabilities and their reported amounts.
Net earnings per share. In July 1999, Agilent Technologies issued
10,000,000 shares of common stock, all of which is owned by HP. As discussed
in Note 1, "Overview and Basis of Presentation," Agilent Technologies effected
a stock split resulting in 380,000,000 common shares outstanding. Basic and
diluted net earnings per share have been computed by dividing the net earnings
for each period presented by the 380,000,000 common shares.
Unaudited pro forma net earnings per share. Unaudited pro forma basic net
earnings per share has been computed by dividing net earnings for each period
by the sum of the 380,000,000 common shares outstanding plus the estimated
57,000,000 shares to be issued in this offering, as the proceeds of the
offering will be distributed to HP. Unaudited pro forma diluted net earnings
per share has been computed by dividing the net earnings for each period by
the sum of the 380,000,000 common shares plus the estimated 57,000,000 shares
to be issued in this offering plus the estimated effect of dilutive stock
options and other employee stock plans, which totaled 14,000,000 shares in
1998 and 11,600,000 shares in the nine months ended July 31, 1999. The effect
of dilutive stock options was computed using the treasury stock method and
assumes an initial public offering price of $20.50 per share.
It is currently unknown how many HP options held by Agilent Technologies
employees will be assumed by Agilent Technologies. The estimated effect of
dilutive stock options assumes that 50% of the outstanding HP options held by
Agilent Technologies employees are assumed by Agilent Technologies. The actual
number of HP options assumed by Agilent Technologies will not be determined
until individual employees make an election to amend their HP options in
January 2000. See Note 9, "Employee Stock Plans," for a description of the
election to be made by employees. In 1998, unaudited pro forma diluted net
earnings per share would be $.56 if 100% of the outstanding HP options were
assumed and $.58 if 0% of the outstanding HP options were assumed. In the nine
months ended July 31, 1999, unaudited pro forma diluted net earnings per share
would be $.80 if 100% of the outstanding HP options were assumed and $.83 if
0% of the outstanding HP options were assumed.
Cash and cash equivalents. Historically, HP has managed cash and cash
equivalents on a centralized basis. Cash receipts associated with Agilent
Technologies' business have been transferred to HP on a daily basis and HP has
funded Agilent Technologies' disbursements.
Inventory. Inventory is valued at standard cost that approximates actual
cost computed on a first-in, first-out basis, not in excess of market value.
F-8
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property, plant and equipment. Property, plant and equipment are stated at
cost. Additions, improvements and major renewals are capitalized. Maintenance,
repairs and minor renewals are expensed as incurred. Depreciation is provided
using accelerated methods, principally over 15 to 40 years for buildings and
improvements and 3 to 10 years for machinery and equipment, including
equipment leased to customers under operating leases. Depreciation of
leasehold improvements is provided using the straight-line method over the
life of the lease or the asset, whichever is shorter.
Impairment of long-lived assets. Agilent Technologies continually monitors
events and changes in circumstances that could indicate carrying amounts of
long-lived assets, including intangible assets, may not be recoverable. When
such events or changes in circumstances are present, Agilent Technologies
assesses the recoverability of long-lived assets by determining whether the
carrying value of such assets will be recovered through undiscounted expected
future cash flows. If the total of the future cash flows is less than the
carrying amount of those assets, Agilent Technologies recognizes an impairment
loss based on the excess of the carrying amount over the fair value of the
assets.
Foreign currency translation. Agilent Technologies uses the U.S. dollar as
its functional currency. Foreign currency assets and liabilities are
remeasured into U.S. dollars at end-of-period exchange rates except for
inventory, property, plant and equipment, other assets and deferred revenue,
which are remeasured at historical exchange rates.
Revenue and expenses are remeasured at average exchange rates in effect
during each period, except for those expenses related to balance sheet amounts
that are remeasured at historical exchange rates. Gains or losses from foreign
currency remeasurement are included in net earnings. Because Agilent
Technologies' consolidated balance sheet includes no cash or cash equivalents,
foreign currency exchange rate fluctuations have had no material effect on
Agilent Technologies' cash flows.
Comprehensive earnings. Agilent Technologies has no material components of
other comprehensive earnings and, accordingly, comprehensive earnings are the
same as net earnings for all periods presented.
Recent pronouncements. In June 1998, the Financial Accounting Standards
Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments and requires recognition of all
derivatives as assets or liabilities in the statement of financial position
and measurement of those instruments at fair value. The statement is effective
for fiscal years beginning after June 15, 2000. Agilent Technologies will
adopt the standard no later than the first quarter of fiscal year 2001 and is
in the process of determining the impact that adoption will have on its
consolidated financial statements.
3. Acquisitions and Divestitures
In March 1998, Agilent Technologies acquired all of the outstanding stock
of Heartstream, Inc. for approximately 2.1 million shares of HP stock with a
fair market value of approximately $134 million. Heartstream develops and
markets automatic external defibrillators. During 1996, 1997, 1998 and the
nine months ended July 31, 1999, Agilent Technologies acquired several
additional companies that were not significant to its consolidated financial
position, results of operations or cash flows. All of these acquisitions were
accounted for under the purchase method. Under the purchase method, the
results of operations of the acquired companies were included prospectively
from the date of acquisition and the acquisition cost was allocated to the
acquired tangible and identifiable intangible assets and liabilities based on
fair values at the date of acquisition. Residual amounts were recorded as
goodwill. In-process research and development write-offs have not been
significant. Goodwill is amortized on a straight-line basis over its estimated
economic life, generally three to five
F-9
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
years. The net book value of goodwill associated with acquisitions was $56
million at October 31, 1997, $126 million at October 31, 1998 and $123 million
at July 31, 1999.
In 1998 and the nine months ended July 31, 1999, Agilent Technologies sold
assets related to portions of its business to third parties. Gross proceeds
from these divestitures were $57 million in 1998 and $39 million in the nine
months ended July 31, 1999. Gains from the divestitures are included in other
income (expense), net, in the consolidated statement of earnings and totaled
$21 million in 1998 and $18 million in the nine months ended July 31, 1999.
Unaudited pro forma statement of earnings information has not been
presented because the effects of these acquisitions and divestitures were not
material on either an individual or aggregated basis.
4. Financial Instruments
Off-balance-sheet foreign exchange risk. HP enters into foreign exchange
contracts, primarily forwards and purchased options, to hedge against
exposures to changes in foreign currency exchange rates. At July 31, 1999, HP
had entered into foreign exchange contracts in approximately 35 foreign
currencies. These contracts are designated at inception to the related foreign
currency exposures being hedged, which include committed and anticipated sales
by subsidiaries and assets and liabilities that are denominated in currencies
other than the U.S. dollar. To achieve hedge accounting, contracts must reduce
the foreign currency exchange rate risk otherwise inherent in the amount and
duration of the hedged exposures and comply with established HP risk
management policies. Hedging contracts generally mature within six months.
When hedging sales-related exposure, HP sets foreign exchange contract
expirations so as to occur in the same month the hedged shipments occur,
allowing realized gains and losses on the contracts to be recognized in net
revenue in the same periods in which the related revenue is recognized. When
hedging balance sheet exposure, HP recognizes realized gains and losses on
foreign exchange contracts in other income (expense), net, in the same period
as the realized gains and losses on remeasurement of the foreign currency
denominated assets and liabilities occur.
Agilent Technologies' exposures to foreign currency exchange rate
fluctuations have been netted with those of other HP businesses and hedged as
described above on a combined basis. As of October 31, 1997 and 1998 and July
31, 1999, there were no specific contracts for Agilent Technologies' foreign
exchange exposures. A portion of the gains and losses related to foreign
exchange contracts has been allocated to Agilent Technologies based on the
proportion of its foreign currency exposures to HP's total foreign currency
exposures. The gains and losses, which have not been material, are included in
cash flows from operating activities in the consolidated statement of cash
flows.
Concentrations of credit risk. Agilent Technologies sells the majority of
its products through its direct sales force. No single customer accounted for
10% or more of accounts receivable at October 31, 1997 and 1998 and July 31,
1999. Credit risk with respect to accounts receivable is generally diversified
due to the large number of entities comprising Agilent Technologies' customer
base and their dispersion across many different industries and geographies.
Agilent Technologies performs ongoing credit evaluations of its customers'
financial condition, and requires collateral, such as letters of credit and
bank guarantees, in certain circumstances.
Fair value of financial instruments. The carrying values of Agilent
Technologies' financial instruments, including accounts receivable, accounts
payable and other accrued liabilities, approximate their fair values due to
their short maturities. The estimated fair values may not be representative of
actual values of the financial instruments that could have been realized as of
the period end or that will be realized in the future.
F-10
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Inventory
<TABLE>
<CAPTION>
October 31, July
------------- 31,
1997 1998 1999
------ ------ ------
(in millions)
<S> <C> <C> <C>
Finished goods......................................... $ 477 $ 617 $ 745
Purchased parts and fabricated assemblies.............. 955 868 852
------ ------ ------
$1,432 $1,485 $1,597
====== ====== ======
</TABLE>
6. Property, Plant and Equipment
<TABLE>
<CAPTION>
October 31, July
---------------- 31,
1997 1998 1999
------- ------- -------
(in millions)
<S> <C> <C> <C>
Land.............................................. $ 96 $ 93 $ 95
Buildings and leasehold improvements.............. 1,410 1,442 1,522
Machinery and equipment........................... 1,950 1,997 2,031
------- ------- -------
3,456 3,532 3,648
Accumulated depreciation.......................... (1,833) (2,051) (2,270)
------- ------- -------
$ 1,623 $ 1,481 $ 1,378
======= ======= =======
</TABLE>
Agilent Technologies leases certain of its products to customers under
operating leases. Equipment on operating leases was $173 million at October
31, 1997, $193 million at October 31, 1998 and $215 million at July 31, 1999
and is included in machinery and equipment. Accumulated depreciation on
equipment on operating leases was $58 million at October 31, 1997, $68 million
at October 31, 1998 and $79 million at July 31, 1999. At July 31, 1999,
minimum future rentals on noncancelable operating leases with original terms
of one year or longer are $33 million for the remainder of 1999, $90 million
in 2000, $35 million in 2001, $11 million in 2002, $4 million in 2003 and $2
million thereafter.
7. Taxes on Earnings
The provision for income taxes is comprised of:
<TABLE>
<CAPTION>
Years Ended Nine Months
October 31, Ended
----------------- July 31,
1996 1997 1998 1999
---- ---- ----- -----------
(in millions)
<S> <C> <C> <C> <C>
U.S. federal taxes:
Current..................................... $181 $236 $ 213 $ 6
Deferred.................................... (17) (42) (133) 57
Non-U.S. taxes:
Current..................................... 128 65 63 134
Deferred.................................... 11 17 (8) (6)
State taxes................................... 9 4 4 6
---- ---- ----- ----
$312 $280 $ 139 $197
==== ==== ===== ====
</TABLE>
F-11
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The significant components of deferred tax assets, which required no
valuation allowance, and deferred tax liabilities included on the balance
sheet are:
<TABLE>
<CAPTION>
October 31,
-----------------------------------------
1997 1998 July 31, 1999
-------------------- -------------------- --------------------
Deferred Deferred Deferred Deferred Deferred Deferred
Tax Tax Tax Tax Tax Tax
Assets Liabilities Assets Liabilities Assets Liabilities
-------- ----------- -------- ----------- -------- -----------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Inventory............... $ 89 $ 4 $ 96 $ 3 $126 $--
Property, plant and
equipment.............. 22 18 13 15 52 7
Warranty................ 18 -- 29 -- 22 --
Retiree medical
benefits............... 90 -- 89 -- 91 --
Other retirement
benefits............... -- 42 -- 40 -- 40
Employee benefits, other
than retirement........ 92 4 126 16 124 23
Intracompany sales...... -- -- 77 -- 4 --
Unremitted earnings of
foreign subsidiaries... -- 68 -- 89 -- 107
Other................... 76 78 65 19 62 40
---- ---- ---- ---- ---- ----
$387 $214 $495 $182 $481 $217
==== ==== ==== ==== ==== ====
</TABLE>
The current portion of the deferred tax asset is $134 million at October
31, 1997, $260 million at October 31, 1998 and $207 million at July 31, 1999
and is included in other current assets.
The differences between the U.S. federal statutory income tax rate and
Agilent Technologies' effective tax rate are:
<TABLE>
<CAPTION>
Years Ended
October 31, Nine Months
---------------- Ended July 31,
1996 1997 1998 1999
---- ---- ---- --------------
<S> <C> <C> <C> <C>
U.S. federal statutory income tax rate.... 35.0% 35.0% 35.0% 35.0%
State income taxes, net of federal tax
benefit.................................. 1.0 0.5 0.9 1.0
Lower rates in other jurisdictions, net... (1.4) (2.2) (1.4) (1.0)
Other, net................................ 1.9 0.7 0.5 --
---- ---- ---- ----
36.5% 34.0% 35.0% 35.0%
==== ==== ==== ====
</TABLE>
The domestic and foreign components of earnings before taxes are:
<TABLE>
<CAPTION>
Years Ended
October 31, Nine Months
-------------- Ended July 31,
1996 1997 1998 1999
---- ---- ---- --------------
(in millions)
<S> <C> <C> <C> <C>
U.S. operations................................ $443 $543 $224 $179
Non-U.S operations............................. 411 280 172 384
---- ---- ---- ----
$854 $823 $396 $563
==== ==== ==== ====
</TABLE>
As a result of certain employment and capital investment actions undertaken
by Agilent Technologies, income from manufacturing activities in certain
countries is subject to reduced tax rates, and in some cases is
F-12
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
wholly exempt from taxes, for years through 2007. The income tax benefits
attributable to the tax status of these subsidiaries are estimated to be $21
million in 1996, $23 million in 1997, $21 million in 1998 and $18 million for
the nine months ended July 31, 1999.
Agilent Technologies has not provided for U.S. federal income and foreign
withholding taxes on $597 million of non-U.S. subsidiaries' undistributed
earnings as of July 31, 1999 because these earnings are intended to be
reinvested indefinitely. Where excess cash has accumulated in Agilent
Technologies' non-U.S. subsidiaries and it is advantageous for tax or foreign
exchange reasons, subsidiary earnings are remitted.
See Note 11, "Transactions with Hewlett-Packard," for a description of the
Tax Sharing Agreement between Agilent Technologies and HP.
8. Restructuring, Asset Impairment and Other Charges
During 1998, management committed to transfer the production of eight-inch
semiconductor wafers to a third-party contractor. Management also undertook
employee reductions through voluntary severance programs related to this
transfer, as well as consolidation of some operations and general employee
reductions in each of the four business segments. Approximately 1,650
employees accepted the voluntary severance incentive packages by the October
31, 1998 deadline. Of these employees, approximately 80% were in manufacturing
or other positions included in cost of products and services. Agilent
Technologies recorded pre-tax charges of approximately $163 million related to
these restructuring actions. Of this amount, $138 million was included in cost
of products, $7 million was included in research and development expense and
$18 million was included in selling, general and administrative expense in the
1998 consolidated statement of earnings. The restructuring costs included
approximately $78 million related to employee severance under the voluntary
severance incentive plans, of which $67 million had been paid as of July 31,
1999. The restructuring costs also included $85 million related to non-cash
asset impairments primarily for equipment. Of the equipment impairment charge,
$39 million was attributable to equipment abandoned at the time of the charge
and written down to its net realizable value. An additional $46 million was
attributable to equipment that remained in service for a transition period to
facilitate the transfer to the third party contractor. This equipment was
written down to its estimated fair value, including depreciation expense for
the value of using the equipment during the transition period and the
estimated amount to be realized upon the sale of the used equipment at the end
of the transition period.
In the nine months ended July 31, 1999, Agilent Technologies recognized an
impairment loss of $51 million related to a building that was under
construction for the intended purpose of housing manufacturing operations for
eight-inch semiconductor wafers. The building shell was completed at the time
construction was stopped. Management sought a semiconductor manufacturing
partner to utilize the building for its initial intended use. Agilent
Technologies exhausted these efforts without success. Accordingly, management
concluded that the highest fair value for this building is based on selling it
for use as an office or general use facility. Agilent Technologies has written
down the carrying value of the facility to the estimated amount to be realized
upon the sale of the building shell.
In 1998, other income (expense), net, included a charge of $37 million
related to the write-down of an investment in convertible preferred stock of a
medical products company to its fair value because Agilent Technologies
concluded its impairment was not temporary.
9. Employee Stock Plans
Employee Stock Purchase Plan. Eligible Agilent Technologies employees have
generally been able to contribute up to 10 percent of their base compensation
to the quarterly purchase of shares of HP's common stock
F-13
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
under the HP Stock Purchase Plan. Under this plan, employee contributions to
purchase shares are partially matched with shares contributed by HP. These
matching shares generally vest over two years. Compensation expense, measured
using the fair market value of HP shares on the date of purchase by HP, is
recognized over the two-year vesting period. The allocated portion of
compensation expense attributable to Agilent Technologies employees was $24
million in 1996, $32 million in 1997, $33 million in 1998 and $32 million for
the nine months ended July 31, 1999. On the distribution date, all unvested
shares of HP stock held by Agilent Technologies employees under the HP Stock
Purchase Plan, together with any shares of Agilent Technologies common stock
issued with respect to the HP shares in connection with the distribution, will
be forfeited. Agilent Technologies intends to provide replacement Agilent
Technologies unvested shares with a value comparable to the value of the
forfeited HP unvested matching shares and associated Agilent Technologies
shares issued in connection with the distribution. The replacement shares will
maintain the original vesting terms based on the employee's continued
employment with Agilent Technologies. Agilent Technologies has adopted an
Employee Stock Purchase Plan, with terms substantially similar to the HP Stock
Purchase Plan. This plan will be effective in February 2000.
Incentive compensation plans. Eligible Agilent Technologies employees
participate in HP's four principal stock option plans, which were adopted in
1979, 1985, 1990 and 1995. Options are generally granted as non-qualified
options although all plans permit the granting of options that qualify as
"Incentive Stock Options" under the Internal Revenue Code. The exercise price
of a stock option is generally equal to the fair market value of HP's common
stock on the date the option is granted and its term is generally ten years.
Under the 1990 and 1995 Incentive Stock Plans, HP's Compensation Committee, in
certain cases, may choose to establish a discounted exercise price at no less
than 75 percent of fair market value on the grant date. The allocated portion
of stock compensation expense related to Agilent Technologies employees'
discounted options was not material in 1996, 1997, 1998 and the nine months
ended July 31, 1999. Options, other than discounted options, generally vest at
a rate of 25 percent per year over a period of four years from the date of
grant. Discounted options generally vest fully on the third or fifth
anniversary of the date of grant.
Under the existing terms of the stock option plans, substantially all HP
options held by Agilent Technologies employees on the distribution date will
be fully vested, and if not exercised, will expire in three months.
Alternatively, Agilent Technologies employees may elect to amend their HP
options to waive the vesting acceleration and have the resulting options
assumed by Agilent Technologies. This election will be made in January 2000.
The conversion of HP options into Agilent Technologies options will be done in
such a manner that (1) the aggregate intrinsic value of the options
immediately before and after the exchange are the same, (2) the ratio of the
exercise price per option to the market value per option is not reduced, and
(3) the vesting provisions and option period of the replacement Agilent
Technologies options are the same as the original vesting terms and option
period of the HP options. It is currently unknown how many HP options held by
Agilent Technologies employees will be converted into Agilent Technologies
options. Agilent Technologies 1999 stock plans have 67,723,600 shares
available for option grants and there are no options outstanding. These 1999
plans have terms similar to the comparable HP incentive compensation plans.
Under the HP 1985 Incentive Compensation Plan and the 1990 and 1995
Incentive Stock Plans, certain key employees may be granted cash or restricted
stock awards. The majority of the shares of restricted stock outstanding at
July 31, 1999 are subject to forfeiture if employment terminates prior to
three years from the date of grant. During the restricted period, ownership of
the shares cannot be transferred. Restricted stock has the same cash dividend
and voting rights as other common stock and is considered to be currently
issued and outstanding. The cost of the awards, determined to be the fair
market value of the shares at the date of grant, is expensed ratably over the
period the restrictions lapse. This expense was not material in 1996, 1997,
1998 and the nine months ended July 31, 1999. Restricted shares held by
Agilent Technologies employees will be forfeited on or before the distribution
date. Agilent Technologies employees who forfeit HP restricted shares may
elect to
F-14
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
receive either replacement options to purchase Agilent Technologies stock
granted on the effective date of the initial public offering at an exercise
price equal to the initial public offering price or replacement Agilent
Technologies restricted shares granted on or before the distribution date, in
either case with the same vesting as before. Substantially all Agilent
Technologies employees have made their election.
Pro forma information. Agilent Technologies applies the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," in accounting for stock options granted to
Agilent Technologies employees. Accordingly, compensation expense is
recognized only when options are granted with a discounted exercise price. Any
compensation expense is recognized ratably over the associated service period,
which is generally the option vesting term.
Pro forma net earnings and earning per share information, as required by
SFAS No. 123, "Accounting for Stock-Based Compensation," has been determined
as if HP had accounted for employee stock options granted to Agilent
Technologies employees under SFAS No. 123's fair value method. The fair value
of these options was estimated at grant date using a Black-Scholes option
pricing model with the following weighted-average assumptions: risk-free
interest rates of 6.29 percent in 1996, 6.21 percent in 1997, 5.38 percent in
1998 and 5.33 percent in the nine months ended July 31, 1999; dividend yield
of 1.0 percent in 1996, 1997 and 1998 and 0.5 percent in the nine months ended
July 31, 1999; expected option life of 6 years for 1996 and 1997 and 7 years
for 1998 and the nine months ended July 31, 1999; and volatility of 30 percent
in all periods.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the four-year average vesting period of
the options. The pro forma effect of recognizing compensation expense in
accordance with SFAS No. 123 would have been to reduce Agilent Technologies'
reported net earnings by $5 million in 1996, $11 million in 1997, $20 million
in 1998 and $32 million in the nine months ended July 31, 1999. Had
compensation expense been recorded by Agilent Technologies in accordance with
SFAS No. 123, the effect would be to reduce unaudited pro forma diluted net
earnings per share to $.52 in 1998 and $.74 in the nine months ended July 31,
1999. These pro forma amounts include amortized fair values attributable to
options granted after October 31, 1995 only, and therefore are not
representative of future pro forma amounts.
10. Retirement Plans and Retiree Medical Benefits
At the date of distribution by HP of its investment in Agilent Technologies
to the stockholders of HP, Agilent Technologies will assume responsibility for
pension, deferred profit sharing and other post-employment benefits for
current and former employees whose last work assignment prior to the
distribution was with Agilent Technologies. These current and former employees
are collectively referred to as "Agilent Technologies Employees." Until the
distribution date, the expense for these programs associated with Agilent
Technologies Employees will be allocated to Agilent Technologies.
Pension and deferred profit-sharing plans. Substantially all Agilent
Technologies Employees are covered under various HP retirement plans.
Worldwide retirement costs were $100 million in 1996, $115 million in 1997,
$123 million in 1998 and $112 million in the nine months ended July 31, 1999.
U.S. employees who meet eligibility criteria are provided benefits under
HP's Retirement Plan. Defined benefits are generally based on an employee's
average pay and length of service. For eligible service through October 31,
1993, the benefit payable under the defined benefit plan is reduced by any
amounts due to the eligible employee under HP's fixed and frozen deferred
profit-sharing plan (DPSP), which has been closed to new participants.
F-15
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The combined status of the Retirement Plan and DPSP for U.S. employees
allocated to Agilent Technologies follows.
<TABLE>
<CAPTION>
October 31,
------------- July 31,
1997 1998 1999
------ ------ --------
(in millions)
<S> <C> <C> <C>
Fair value of plan assets............................. $1,215 $1,356 $1,457
Retirement benefit obligation......................... $1,231 $1,423 $1,528
</TABLE>
Eligible employees outside the U.S. generally receive retirement benefits
under various retirement plans based upon factors such as years of service and
compensation levels. Eligibility is generally determined in accordance with
local statutory requirements.
Retiree medical plan. In addition to receiving pension benefits, Agilent
Technologies Employees may participate in HP's medical plan which provides
medical benefits to U.S. retired employees. Substantially all of Agilent
Technologies' current U.S. employees could become eligible for these benefits,
and the existing benefit obligation relates primarily to those employees. Once
participating in the plan, retirees may choose from managed-care and indemnity
options, with their contributions dependent on options chosen and length of
service.
401(k) Plan. Agilent Technologies' U.S. eligible employees may participate
in HP's 401(k) plan, the Tax Savings Capital Accumulation Plan (TAXCAP), which
was established as a supplemental retirement program. Beginning February 1,
1998, enrollment in the TAXCAP became automatic for employees who met
eligibility requirements unless they declined participation. Under the TAXCAP
program, HP matches contributions by employees up to a maximum of 4 percent of
an eligible employee's annual compensation. The maximum combined contribution
to the Employee Stock Purchase Plan and TAXCAP is 25 percent of an employee's
annual eligible compensation subject to certain regulatory and plan
limitations. Agilent Technologies' expense related to TAXCAP was $36 million
in 1996, $40 million in 1997, $47 million in 1998 and $38 million in the nine
months ended July 31, 1999.
Upon the distribution, Agilent Technologies will establish separate defined
benefit pension, deferred profit-sharing, retiree medical and 401(k) plans for
its current and former employees. An allocable share of the defined benefit
plan assets will be transferred from the HP pension trust in each country to a
newly established Agilent Technologies pension trust. In addition, an
allocable share of the U.S. retiree medical plan trust will be transferred to
a newly established Agilent Technologies retiree medical plan trust. Subject
to local law, it is anticipated that the share of assets allocated to Agilent
Technologies will be in the same proportion as the projected benefit
obligation of Agilent Technologies Employees to the total projected benefit
obligation of HP. The deferred profit sharing plan assets attributable to
Agilent Technologies will also be transferred to Agilent Technologies.
Included in the consolidated balance sheet as of October 31, 1997 and 1998 and
July 31, 1999 are estimates of the assets and pension obligations to be
transferred to Agilent Technologies. Actual amounts to be transferred will be
measured at the distribution, using the same methodology, and will likely be
different from these estimates.
F-16
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The tables below set forth the estimated net periodic cost and funded
status of the HP pension and retiree medical plans allocable to Agilent
Technologies based on the allocation methodology described above, as well as
the actuarial assumptions on which those amounts are based.
Net periodic cost. For the years ended October 31, 1996, 1997 and 1998 and
the nine months ended July 31, 1999, net pension and retiree medical costs
allocated to Agilent Technologies are comprised of:
<TABLE>
<CAPTION>
Pensions
---------------------------------------------- U.S. Retiree
U.S. Plan Non-U.S. Plans Medical Plan
---------------------- ---------------------- ----------------------
1996 1997 1998 1999 1996 1997 1998 1999 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service cost--benefits
earned during the
period................. $ 50 $ 58 $ 69 $ 54 $ 30 $ 36 $ 40 $ 39 $ 8 $ 9 $ 10 $ 8
Interest cost on benefit
obligation............. 10 15 20 19 28 30 33 29 12 13 13 10
Expected return on plan
assets................. (12) (17) (25) (23) (30) (35) (41) (42) (10) (13) (15) (12)
Amortization and
deferrals:
Actuarial (gains)
losses................ -- -- -- 2 (2) (5) (11) (3) (2) (3) (4) (8)
Transition obligation
(asset)............... (3) (3) (3) (2) -- -- -- -- -- -- -- --
Prior service cost..... 2 2 2 1 1 2 1 -- (4) (4) (4) (3)
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net plan costs.......... $ 47 $ 55 $ 63 $ 51 $ 27 $ 28 $ 22 $ 23 $ 4 $ 2 $ -- $ (5)
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
F-17
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Funded status. As of October 31, 1997 and 1998 and July 31, 1999, the
estimated funded status of the defined benefit and retiree medical plans
allocated to Agilent Technologies is:
<TABLE>
<CAPTION>
Non-U.S.
U.S. Defined Defined U.S. Retiree
Benefit Plan Benefit Plans Medical Plan
---------------- ---------------- -------------------
1997 1998 1999 1997 1998 1999 1997 1998 1999
---- ---- ---- ---- ---- ---- ----- ----- -----
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Change in fair value of
plan assets:
Fair value--beginning
of period............. $180 $269 $343 $483 $578 $705 $137 $168 $189
Actual return on plan
assets................ 38 33 23 121 89 42 31 21 12
Employer
contributions......... 57 50 60 22 22 48 3 3 1
Participants'
contributions......... -- -- -- 8 8 5 3 3 3
Change in population
estimate.............. -- -- (33) -- -- -- -- -- --
Benefits paid.......... (6) (9) (15) (12) (11) (7) (6) (6) (5)
Currency impact........ -- -- -- (44) 19 (47) -- -- --
---- ---- ---- ---- ---- ---- ----- ----- -----
Fair value--end of
period................ 269 343 378 578 705 746 168 189 200
---- ---- ---- ---- ---- ---- ----- ----- -----
Change in benefit
obligation:
Benefit obligation--
beginning of period... 200 292 420 489 545 750 161 179 204
Service cost........... 58 69 54 36 40 39 9 10 8
Interest cost.......... 15 20 19 30 33 29 13 13 10
Participants'
contributions......... -- -- -- 8 8 5 3 3 3
Change in population
estimate.............. -- -- (28) -- -- -- -- -- --
Actuarial (gain) loss.. 25 48 -- (56) 98 -- (1) 5 --
Benefits paid.......... (6) (9) (15) (12) (11) (7) (6) (6) (5)
Currency impact........ -- -- -- 50 37 (43) -- -- --
---- ---- ---- ---- ---- ---- ----- ----- -----
Benefit obligation--end
of period............. 292 420 450 545 750 773 179 204 220
---- ---- ---- ---- ---- ---- ----- ----- -----
Plan assets in excess of
(less than) benefit
obligation............. (23) (77) (72) 33 (45) (27) (11) (15) (20)
Unrecognized net
experience (gain)
loss................... (9) 28 32 (29) 50 49 (101) (96) (88)
Unrecognized prior
service cost (benefit)
related to plan
changes................ 16 14 13 14 13 11 (57) (54) (51)
Unrecognized net
transition asset*...... (9) (5) (3) (1) (1) (1) -- -- --
---- ---- ---- ---- ---- ---- ----- ----- -----
Net prepaid (accrued)
costs.................. $(25) $(40) $(30) $ 17 $ 17 $ 32 $(169) $(165) $(159)
==== ==== ==== ==== ==== ==== ===== ===== =====
</TABLE>
- --------
*Amortized over 15 years for the U.S. plan and over periods ranging from 12 to
20 years for the foreign plans.
Plan assets consist primarily of listed stocks and bonds. These costs are
generally funded to the extent they are tax-deductible.
Non-U.S. defined benefit plans whose benefit obligations are in excess of
the fair value of the plan assets are:
<TABLE>
<CAPTION>
October 31,
------------ July 31,
1997 1998 1999
----- ----- --------
(in millions)
<S> <C> <C> <C>
Aggregate benefit obligation........................ $(135) $(423) $(458)
Aggregate fair value of plan assets................. $ 99 $ 327 $ 387
</TABLE>
The non-current portion of the liability for retirement plans and the
retiree medical plan is included in other liabilities and totaled $208 million
at October 31, 1997, $206 million at October 31, 1998 and $190 million at July
31, 1999.
F-18
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Assumptions. The assumptions used to measure the benefit obligations and to
compute the expected long-term return on assets for Agilent Technologies'
defined benefit and retiree medical plans are:
<TABLE>
<CAPTION>
Years Ended Nine Months
October 31, Ended
--------------------------- July 31,
1996 1997 1998 1999
-------- ------- -------- -----------
<S> <C> <C> <C> <C>
U.S. defined benefit plan:
Discount rate....................... 7.5% 7.0% 6.5% 6.5%
Average increase in compensation
levels............................. 5.5% 5.5% 5.0% 5.0%
Expected long-term return on
assets............................. 9.0% 9.0% 9.0% 9.0%
Non-U.S. defined benefit plans:
Discount rate....................... 4.0-8.5% 3.5-8.0% 3.0-6.5% 3.0-6.5%
Average increase in compensation
levels............................. 3.5-6.5% 3.5-5.5% 3.75-5.0% 3.75-5.0%
Expected long-term return on
assets............................. 5.8-10.0% 6.0-9.0% 6.5-8.5% 6.5-8.5%
U.S. retiree medical plan:
Discount rate....................... 7.5% 7.0% 6.5% 6.5%
Expected long-term return on
assets............................. 9.0% 9.0% 9.0% 9.0%
Current medical cost trend rate..... 10.0% 9.6% 8.65% 8.2%
Ultimate medical cost trend rate.... 6.0% 6.0% 5.5% 5.5%
Medical cost trend rate decreases to
ultimate rate in year.............. 2007 2007 2007 2007
</TABLE>
Assumed health care trend rates could have a significant effect on the
amounts reported for the U.S. retiree medical plan. A one-percentage point
change in the assumed health care cost trend rates for the nine months ended
July 31, 1999 would have the following effects:
<TABLE>
<CAPTION>
1 Percentage 1 Percentage
Point Increase Point Decrease
-------------- --------------
(in millions)
<S> <C> <C>
Effect on total service and interest cost
components..................................... $ 5 $ (4)
Effect on U.S. retiree medical benefit
obligations.................................... 44 (33)
</TABLE>
11. Transactions with Hewlett-Packard
Agilent Technologies' revenue from sales of products to HP was $684 million
in 1996, $640 million in 1997, $696 million in 1998, $532 million (unaudited)
for the nine months ended July 31, 1998 and $590 million for the nine months
ended July 31, 1999.
Agilent Technologies has purchased products from HP, at a price that
management believes approximates the price an unrelated third party would pay,
for inclusion in its products sold to third parties. These purchases from HP
totaled $91 million in 1996, $99 million in 1997, $86 million in 1998, $64
million (unaudited) for the nine months ended July 31, 1998 and $45 million
for the nine months ended July 31, 1999. Agilent Technologies also purchases
products from HP at cost for internal use. Purchases at cost were $59 million
in 1996, $63 million in 1997, $65 million in 1998, $48 million (unaudited) for
the nine months ended July 31, 1998 and $63 million for the nine months ended
July 31, 1999.
Agilent Technologies' costs and expenses include allocations from HP for
centralized research and development, legal, accounting, employee benefits,
real estate, insurance services, information technology services, treasury and
other HP corporate and infrastructure costs. These allocations have been
determined on bases that HP and Agilent Technologies considered to be a
reasonable reflection of the utilization of services
F-19
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
provided or the benefit received by Agilent Technologies. The allocation
methods include relative sales, headcount, square footage, transaction
processing costs, adjusted operating expenses and others. Allocated costs
included in the accompanying consolidated statement of earnings follow.
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended October 31, July 31,
----------------------- ---------------------
1996 1997 1998 1998 1999
------- ------- ------- ------------ --------
(unaudited)
(in millions)
<S> <C> <C> <C> <C> <C>
Costs of products and
services.................... $ 139 $ 152 $ 197 $ 155 $ 147
Research and development..... 128 140 143 109 108
Selling, general and
administrative.............. 391 430 440 336 324
</TABLE>
For purposes of governing certain of the ongoing relationships between
Agilent Technologies and HP at and after the separation and to provide for an
orderly transition, Agilent Technologies and HP have entered or will enter
into various agreements. A brief description of each of the agreements
follows.
Master Separation and Distribution Agreement. The separation agreement
contains the key provisions relating to the separation, Agilent Technologies'
initial funding, initial public offering and the distribution. The agreement
lists the documents and items that the parties must deliver in order to
accomplish the transfer of assets and liabilities from HP to Agilent
Technologies, effective on the separation date. The agreement also contains
conditions that must occur prior to the initial public offering and the
distribution. The parties also entered into ongoing covenants that survive the
transactions, including covenants to establish interim service level
agreements, exchange information, notify each other of changes in their
accounting principles and resolve disputes in particular ways.
General Assignment and Assumption Agreement. The General Assignment and
Assumption Agreement identifies the assets that HP will transfer to Agilent
Technologies and the liabilities that Agilent Technologies will assume from HP
in the separation. In general, the assets that will be transferred and the
liabilities that will be assumed are those that appear on the consolidated
balance sheet, after adjustment for certain assets and liabilities that will
be retained by HP and for activity that occurs between the balance sheet date
and the separation date.
HP will retain most of Agilent Technologies' accounts receivable and
accounts payable, accrued payroll and related items and tax-related amounts,
except deferred taxes. In addition, HP will transfer to Agilent Technologies
some of the assets and liabilities related to HP's business including its
liability related to the purchase of Yokogawa Electric Corporation's
(Yokogawa) 25% interest in Hewlett-Packard Japan (see Note 12, "Commitments")
and some of the accounts receivable, accounts payable and other liabilities of
Hewlett-Packard Japan.
Indemnification and Insurance Matters Agreement. Effective as of the
separation date, Agilent Technologies and HP will each release the other from
any liabilities arising from events occurring on or before the separation
date. The agreement also contains provisions governing indemnification. In
general, Agilent Technologies and HP will each indemnify the other from all
liabilities arising from its business, any of its liabilities, any of its
contracts or a breach of the separation agreement. In addition, HP and Agilent
Technologies will each indemnify the other against liability for specified
environmental matters. Agilent Technologies will reimburse HP for the cost of
any insurance coverage from the separation date to the distribution date.
Employee Matters Agreement. The Employee Matters Agreement outlines how HP
and Agilent Technologies plan to allocate responsibility for, and liability
related to the employment of those employees of HP who will become Agilent
Technologies employees. The agreement also contains provisions describing
F-20
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Agilent Technologies' benefit and equity plans. On or before the distribution
date, Agilent Technologies expects to establish employee benefit plans
comparable to those of HP for its active, inactive and former employees.
However, in certain cases, certain of its employees will continue to
participate in the HP benefit plans. The transfer to Agilent Technologies of
employees at certain of HP's international operations, and of certain pension
and employee benefit plans, may not take place until Agilent Technologies
receives consents or approvals or has satisfied other applicable requirements.
Tax Sharing Agreement. The tax sharing agreement provides for HP's and
Agilent Technologies' obligations concerning various tax liabilities. The tax
sharing agreement provides that HP generally will pay, and indemnify Agilent
Technologies if necessary, with respect to all federal, state, local and
foreign taxes relating to Agilent Technologies' business for any taxable
period ending prior to this offering. In addition, the tax sharing agreement
provides that HP and Agilent Technologies will make payments between them such
that the amount of taxes to be paid by HP and Agilent Technologies will be
determined, subject to specified adjustments, as if HP and Agilent
Technologies and each of their subsidiaries included in HP's consolidated tax
returns had filed their own consolidated, combined or unitary tax return.
The tax sharing agreement allocates responsibility for various taxes
arising from restructurings related to the spinoff between HP and Agilent
Technologies. In addition, Agilent Technologies will bear 18% of unanticipated
taxes related to the distribution where neither party is at fault.
In addition, the tax sharing agreement provides that Agilent Technologies
will indemnify HP for any taxes arising out of the failure of the distribution
or certain of the transactions related to it to qualify as tax free as a
result of actions taken, or the failure to take required actions, by Agilent
Technologies. Specifically, Agilent Technologies is required under the tax
sharing agreement to comply with the representations made to the Internal
Revenue Service, or the IRS, in connection with the private letter ruling that
has been issued to HP from the IRS regarding the tax-free nature of the
distribution of Agilent Technologies' stock by HP to HP's stockholders.
The tax sharing agreement further provides for cooperation with respect to
certain tax matters, the exchange of information and the retention of records
which may affect the income tax liability of either party.
Real Estate Matters Agreement. The Real Estate Matters Agreement addresses
real estate matters relating to the HP leased and owned properties that HP
will transfer to or share with Agilent Technologies. The agreement describes
the manner in which HP will transfer to or share with Agilent Technologies
various leased and owned properties. The Real Estate Matters Agreement
provides that Agilent Technologies will be required to accept the transfer of
all sites allocated to Agilent Technologies, even if a site has been damaged
by a casualty before the separation date. The Real Estate Matters Agreement
also provides that all costs required to effect the transfers, including
landlord consent fees, landlord attorneys' fees, title insurance fees and
transfer taxes, will be paid by HP.
Master IT Service Level Agreement. The Master IT Service Level Agreement
governs the provision of information technology services by HP and Agilent
Technologies to each other, on an interim basis, until November 1, 2001,
unless extended for specific services or otherwise indicated in the agreement.
The services include data processing and telecommunications services, such as
voice telecommunications and data transmission, and corporate support
services, including accounting, financial management, tax, payroll,
stockholder and public relations, legal, human resources administration,
procurement, real estate management and other administrative functions.
Specified charges for such services are generally intended to allow the
providing company to recover the direct and indirect costs of providing the
services, plus 5% until November 1, 2001 and such costs plus 10% thereafter.
The Master IT Service Level Agreement also will cover the provision
F-21
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
of certain additional information technology services identified from time to
time after the separation date that were inadvertently or unintentionally
omitted from the specified services, or that are essential to effectuate an
orderly transition under the separation agreement, so long as the provision of
such services would not significantly disrupt the providing company's
operations or significantly increase the scope of the agreement.
In addition, the Master IT Service Level Agreement will provide for the
replication of some computer systems, including hardware, software, data
storage or maintenance and support components. Generally, the party needing
the replicated system will bear the costs and expenses of replication.
Generally, the party purchasing new hardware or licensing new software will
bear the costs and expenses of purchasing the new hardware or obtaining the
new software licenses.
Intellectual Property Agreements. The Master Technology Ownership and
License Agreement, the Master Patent Ownership and License Agreement, the
Master Trademark Ownership and License Agreement and the ICBD Technology
Ownership and License Agreement together are referred to as the Intellectual
Property Agreements. Under the Intellectual Property Agreements, HP will
transfer to Agilent Technologies its rights in specified patents, specified
trademarks and other intellectual property related to Agilent Technologies'
current business and research and development efforts. HP and Agilent
Technologies will each be licensed under the other's patents issued on patent
applications with effective filing dates before November 1, 2004, subject to
field restrictions. HP and Agilent Technologies will also be licensed to use
technology that has been disclosed to such licensed company or that is in the
licensed company's possession as of the separation date, with certain
limitations. The agreements include certain rights to sublicense for both
parties. Agilent Technologies will be licensed to use some Hewlett-Packard
trademarks, and this license is royalty-bearing after five years.
Environmental Matters Agreement. HP has agreed to retain and indemnify
Agilent Technologies for liabilities associated with properties transferred to
Agilent Technologies which are undergoing environmental investigation and
remediation and for which HP has accrued a reserve. The purpose of the
Environmental Matters Agreement is to address, in a general way, HP's and
Agilent Technologies' rights and obligations with respect to that
investigation and remediation.
12. Lines of Credit
On November 8, 1999, Agilent Technologies executed two revolving credit
agreements totaling $500 million, with $250 million expiring in one year and
$250 million expiring in five years. Interest is based on the Citicorp base
rate, a margin over LIBOR, or a fixed rate based on competitive bids. Under
the agreements, Agilent Technologies must not exceed a defined debt to
earnings ratio.
13. Commitments
Operating leases. Agilent Technologies leases certain real and personal
property from unrelated third parties under noncancelable operating leases.
Future minimum lease payments under these leases at July 31, 1999 were $9
million for the remainder of 1999, $31 million for 2000, $22 million for 2001,
$15 million for 2002, $7 million for 2003 and $74 million thereafter. Certain
leases require Agilent Technologies to pay property taxes, insurance and
routine maintenance, and include escalation clauses. Rent expense was $87
million in 1996, $92 million in 1997, $111 million in 1998 and $83 million in
the nine months ended July 31, 1999.
Transition service agreements. Beginning in November 1999, Agilent
Technologies will obtain various services from HP. See Note 11, "Transactions
with Hewlett-Packard."
F-22
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hewlett-Packard Japan. On July 6, 1999, HP entered into an agreement with
Yokogawa to acquire Yokogawa's 25% equity interest in Hewlett-Packard Japan
(HPJ) for approximately $521 million. Under the terms of the agreement, HP
will acquire Yokogawa's shares through a series of purchase transactions
beginning in January 2000. Under the terms of the separation agreement,
Agilent Technologies will assume HP's obligations under the terms of the
agreement. In the initial step, which will occur on or before January 31,
2000, Agilent Technologies will purchase approximately 10.4% of HPJ shares
from Yokogawa. In the second step, which will occur on or before April 30,
2000, Agilent Technologies will purchase approximately 10.4% of HPJ shares
from Yokogawa. Agilent Technologies will purchase the remaining 4.2% of HPJ
shares owned by Yokagawa prior to March 31, 2003. HP will provide the funding
for these transactions.
An independent valuation has been performed to determine the portion of the
purchase price attributable to Agilent Technologies' business and the
remaining HP business and to allocate the purchase price to identifiable
assets and liabilities. Of the total purchase price, $375 million is
attributable to Agilent Technologies' business, of which approximately $302
million will be recorded as goodwill and amortized over 10 years.
Joint venture funding. Under the terms of the agreement with one of its
joint venture partners, Agilent Technologies is required to make cash capital
contributions of $98 million to the joint venture at various times through the
first quarter of fiscal 2001. These amounts are expected to total $4 million
for the remainder of 1999, $82 million in 2000 and $12 million in 2001.
14. Contingencies
Agilent Technologies is involved in lawsuits, claims, investigations and
proceedings, including patent, commercial and environmental matters, which
arise in the ordinary course of business. There are no such matters pending
that Agilent Technologies expects to be material in relation to its business,
consolidated financial condition, results of operations or cash flows. See
Note 11, "Transactions with Hewlett-Packard," for a discussion of Agilent
Technologies' indemnification agreement with HP.
15. Segment Information
Description of segments. Agilent Technologies is a diversified technology
company that provides enabling solutions to high growth markets within the
communications, electronics, life sciences and healthcare industries. Agilent
Technologies designs and manufactures test, measurement and monitoring
instruments, systems and solutions and semiconductors and optical components.
Agilent Technologies' organizes its business operations into four major
groups--test and measurement, semiconductor products, healthcare solutions and
chemical analysis, each of which comprises a reportable segment. The segments
were determined based primarily on how management views and evaluates Agilent
Technologies' operations. Other factors, including customer base, homogeneity
of products, technology and delivery channels, were also considered in
determining Agilent Technologies' reportable segments. Agilent Technologies
measures segment performance based on earnings from operations.
Agilent Technologies includes the following businesses:
. test and measurement, which provides standard and customized test,
measurement and monitoring instruments and systems as well as software
for the design, manufacture and support of high-frequency electronics
and communications devices. The test and measurement business includes
operating segments that have been aggregated based on the similarity of
the nature of their products and services, their production processes,
their class of customers, their distribution methods and their economic
characteristics;
F-23
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
. semiconductor products, which provides fiber optic communications
devices and assemblies, wireless integrated circuits, application-
specific integrated circuits, optoelectronics and image sensors;
. healthcare solutions, which provides patient monitoring, ultrasound
imaging and cardiology products and systems; and
. chemical analysis, which provides analytical instruments, systems and
services for chromatography, spectroscopy and bio-instrumentation.
Segment revenue and profit. The accounting policies used to derive
reportable segment results are generally the same as those described in Note
2, "Summary of Significant Accounting Policies." Internal revenue and earnings
from operations include transactions between segments that are intended to
reflect an arm's length transfer at the best price available for comparable
external customers.
A significant portion of the segments' expenses arise from shared services
and infrastructure that HP has historically provided to the segments in order
to realize economies of scale and to efficiently use resources. These expenses
include costs of centralized research and development, legal, accounting,
employee benefits, real estate, insurance services, information technology
services, treasury and other HP corporate and infrastructure costs. These
allocations have been determined on bases that HP and Agilent Technologies
considered to be a reasonable reflection of the utilization of services
provided to or benefits received by the segments. A different result could be
arrived at for any segment if costs were specifically identified to each
segment.
The following tables reflect the results of Agilent Technologies'
reportable segments under Agilent Technologies management system. These
results are not necessarily a depiction that is in conformity with generally
accepted accounting principles. The performance of each segment is measured
based on several metrics, including earnings from operations. These results
are used, in part, by management, in evaluating the performance of, and in
allocating resources to, each of the segments.
F-24
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Test and Semiconductor Healthcare Chemical Total
Measurement Products Solutions Analysis Segments
----------- ------------- ---------- -------- --------
(in millions)
<S> <C> <C> <C> <C> <C>
Year ended October 31,
1996:
External revenue........ $3,823 $1,470 $1,244 $842 $7,379
Internal revenue........ -- 30 -- -- 30
------ ------ ------ ---- ------
Total net revenue....... $3,823 $1,500 $1,244 $842 $7,409
====== ====== ====== ==== ======
Depreciation and amorti-
zation expense......... $ 110 $ 181 $ 21 $ 13 $ 325
====== ====== ====== ==== ======
Earnings from opera-
tions.................. $ 606 $ 125 $ 106 $ 38 $ 875
====== ====== ====== ==== ======
Year ended October 31,
1997:
External revenue........ $4,203 $1,479 $1,208 $895 $7,785
Internal revenue........ -- 27 -- 1 28
------ ------ ------ ---- ------
Total net revenue....... $4,203 $1,506 $1,208 $896 $7,813
====== ====== ====== ==== ======
Depreciation and amorti-
zation expense......... $ 107 $ 177 $ 16 $ 13 $ 313
====== ====== ====== ==== ======
Earnings from opera-
tions.................. $ 674 $ 57 $ 30 $ 77 $ 838
====== ====== ====== ==== ======
Year ended October 31,
1998:
External revenue........ $4,100 $1,574 $1,340 $938 $7,952
Internal revenue........ -- 39 -- -- 39
------ ------ ------ ---- ------
Total net revenue....... $4,100 $1,613 $1,340 $938 $7,991
====== ====== ====== ==== ======
Depreciation and amorti-
zation expense......... $ 133 $ 205 $ 28 $ 15 $ 381
====== ====== ====== ==== ======
Earnings (loss) from op-
erations............... $ 348 $ (106) $ 62 $ 75 $ 379
====== ====== ====== ==== ======
Nine months ended July
31, 1998 (unaudited):
External revenue........ $3,098 $1,195 $ 988 $684 $5,965
Internal revenue........ 1 29 -- -- 30
------ ------ ------ ---- ------
Total net revenue....... $3,099 $1,224 $ 988 $684 $5,995
====== ====== ====== ==== ======
Depreciation and amorti-
zation expense......... $ 95 $ 137 $ 19 $ 11 $ 262
====== ====== ====== ==== ======
Earnings from opera-
tions.................. $ 332 $ 16 $ 54 $ 57 $ 459
====== ====== ====== ==== ======
Nine months ended July
31, 1999:
External revenue........ $2,856 $1,230 $1,043 $754 $5,883
Internal revenue........ 4 26 1 -- 31
------ ------ ------ ---- ------
Total net revenue....... $2,860 $1,256 $1,044 $754 $5,914
====== ====== ====== ==== ======
Depreciation and amorti-
zation expense......... $ 123 $ 119 $ 27 $ 13 $ 282
====== ====== ====== ==== ======
Earnings from opera-
tions.................. $ 273 $ 81 $ 86 $ 99 $ 539
====== ====== ====== ==== ======
</TABLE>
F-25
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Reconciliations to Agilent Technologies, as reported.
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended October 31, July 30,
------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- ------
(unaudited)
(in millions)
<S> <C> <C> <C> <C> <C>
Net revenue:
Total reportable
segments................. $ 7,409 $ 7,813 $ 7,991 $5,995 $5,914
Elimination of internal
revenue.................. (30) (28) (39) (30) (31)
------- ------- ------- ------ ------
Total net revenue, as
reported............... $ 7,379 $ 7,785 $ 7,952 $5,965 $5,883
======= ======= ======= ====== ======
Earnings before taxes:
Total reportable segments'
earnings from
operations............... $ 875 $ 838 $ 379 $ 459 $ 539
Corporate and
unallocated.............. -- 32 63 30 (3)
Other income (expense),
net...................... (21) (47) (46) (14) 27
------- ------- ------- ------ ------
Total earnings before
taxes, as reported..... $ 854 $ 823 $ 396 $ 475 $ 563
======= ======= ======= ====== ======
Depreciation and
amortization expense:
Total reportable
segments................. $ 325 $ 313 $ 381 $ 262 $ 282
Corporate and
unallocated.............. 76 96 96 70 83
------- ------- ------- ------ ------
Total depreciation and
amortization expense,
as reported............ $ 401 $ 409 $ 477 $ 332 $ 365
======= ======= ======= ====== ======
</TABLE>
Corporate and unallocated earnings before taxes primarily relates to
employee related benefit programs. The expenses for these programs are
recorded by the segments at a pre-determined rate and are adjusted at the
corporate level to reflect the actual rate. This adjustment is not allocated
to the segments. Corporate and unallocated also includes certain unallocated
depreciation and goodwill amortization.
Major customers. For the nine months ended July 31,1999, Hewlett-Packard
accounted for 10% of Agilent Technologies' total net revenue. See Note 11,
"Transactions with Hewlett-Packard." No other customer represented 10% or more
of Agilent Technologies' total net revenue in any period presented.
Segment assets and other items. Segment assets directly managed by the
segment primarily consist of accounts receivable, inventory, property, plant
and equipment and certain other current and non-current assets. In some cases,
several segments may occupy the same location and therefore will share a
common building and certain machinery and equipment. In these cases, there
will not be a precise correlation between a segment's earnings from operations
and the segment's assets. Capital expenditures for each segment also reflect
the asset assignment by segment.
Corporate-held assets not allocated to the segments include property, plant
and equipment assigned to corporate functions, equity investments managed at
the corporate level, deferred tax assets and other current and non-current
assets managed at the corporate level.
The investment in equity method investees totals disclosed for each segment
represent equity investments directly managed by the segment.
F-26
<PAGE>
AGILENT TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Test and Semiconductor Healthcare Chemical Total
Measurement Products Solutions Analysis Segments
----------- ------------- ---------- -------- --------
(in millions)
<S> <C> <C> <C> <C> <C>
As of October 31, 1996:
Assets.................. $2,214 $1,173 $763 $455 $4,605
Capital expenditures,
year-to-date........... 146 326 17 13 502
Investment in equity-
method investees....... 15 -- -- -- 15
As of October 31, 1997:
Assets.................. $2,305 $1,273 $793 $469 $4,840
Capital expenditures,
year-to-date........... 147 316 13 17 493
Investment in equity-
method investees....... 14 4 -- -- 18
As of October 31, 1998:
Assets.................. $2,188 $1,134 $847 $517 $4,686
Capital expenditures,
year-to-date........... 155 162 22 8 347
Investment in equity-
method investees....... 11 19 -- -- 30
As of July 31, 1999:
Assets.................. $2,352 $ 924 $937 $512 $4,725
Capital expenditures,
year-to-date........... 135 68 11 5 219
Investment in equity-
method investees....... 13 19 -- -- 32
</TABLE>
Reconciliations to Agilent Technologies, as reported.
<TABLE>
<CAPTION>
October 31,
-------------------- July 31,
1996 1997 1998 1999
------ ------ ------ --------
(in millions)
<S> <C> <C> <C> <C>
Assets:
Total reportable segments........................ $4,605 $4,840 $4,686 $4,725
Unallocated corporate assets..................... 115 166 301 325
------ ------ ------ ------
Total assets, as reported........................ $4,720 $5,006 $4,987 $5,050
====== ====== ====== ======
</TABLE>
Geographic information.
<TABLE>
<CAPTION>
United Rest of the
States Japan World Total
------ ----- ----------- ------
(in millions)
<S> <C> <C> <C> <C>
Revenue (based on location of customer):
Year ended October 31, 1996.................... $3,328 $918 $3,133 $7,379
Year ended October 31, 1997.................... 3,399 972 3,414 7,785
Year ended October 31, 1998.................... 3,623 880 3,449 7,952
Nine months ended July 31, 1998 (unaudited).... 2,709 662 2,594 5,965
Nine months ended July 31, 1999................ 2,652 597 2,634 5,883
Long-lived assets (all non-current assets):
October 31, 1996............................... $1,127 $267 $ 491 $1,885
October 31, 1997............................... 1,223 261 591 2,075
October 31, 1998............................... 1,180 242 490 1,912
July 31, 1999.................................. 1,152 254 388 1,794
</TABLE>
F-27
<PAGE>
[LOGO OF AGILENT TECHNOLOGIES]
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued November 10, 1999
57,000,000 Shares
[LOGO OF AGILENT TECHNOLOGIES]
COMMON STOCK
----------
Agilent Technologies, Inc. is offering shares of its common stock. This is our
initial public offering and no public market currently exists for our shares.
We anticipate that the initial public offering price will be between $19 and
$22 per share.
----------
After the offering, Hewlett-Packard will own approximately 87.0% of our common
stock, assuming no exercise of the underwriters' over-allotment option.
Hewlett-Packard has announced that it plans to complete its divestiture of
Agilent Technologies by the middle of calendar year 2000 by distributing all of
the shares of our common stock owned by Hewlett-Packard to holders of Hewlett-
Packard's common stock. See "Arrangements Between Agilent Technologies and
Hewlett-Packard."
----------
Our common stock has been approved for listing on the New York Stock Exchange
under the trading symbol "A."
----------
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 9.
----------
PRICE $ A SHARE
----------
<TABLE>
<CAPTION>
Underwriting
Discounts and Proceeds to Agilent
Price to Public Commissions Technologies
--------------- ------------- -------------------
<S> <C> <C> <C>
Per Share..................... $ $ $
Total......................... $ $ $
</TABLE>
Agilent Technologies has granted the U.S. underwriters the right to purchase up
to an additional 8,550,000 shares of common stock to cover over-allotments.
The United States Securities and Exchange Commission and state securities
regulators have not approved or disapproved these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers
on , 1999.
----------
MORGAN STANLEY DEAN WITTER GOLDMAN SACHS INTERNATIONAL
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH INTERNATIONAL
SALOMON SMITH BARNEY
BEAR, STEARNS INTERNATIONAL LIMITED
J.P. MORGAN SECURITIES LTD.
LEHMAN BROTHERS
SG COWEN
, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale
and distribution of the securities being registered. All amounts are estimated
except the Securities and Exchange Commission registration fee, the NASD
filing fee and the New York Stock Exchange registration fee. Hewlett-Packard
has generally agreed to pay these costs and expenses.
<TABLE>
<CAPTION>
Item Amount
---- ----------
<S> <C>
Securities and Exchange Commission registration fee............ $ 400,904
NASD filing fee................................................ 30,500
NYSE original listing fee...................................... 504,600
Blue Sky qualification fees and expenses....................... 5,000
Legal fees and expenses........................................ 2,500,000
Accounting fees and expenses................................... 3,000,000
Transfer agent and registrar fees.............................. 25,000
Printing and engraving expenses................................ 500,000
Miscellaneous expenses......................................... 533,996
----------
Total........................................................ $7,500,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Agilent Technologies is incorporated under the laws of the State of
Delaware. Section 145 ("Section 145") of the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended (the
"General Corporation Law"), inter alia, provides that a Delaware corporation
may indemnify any persons who were, are or are threatened to be made, parties
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of such corporation), by reason of the fact that such person is
or was an officer, director, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against him and incurred by him
in any such capacity, arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.
Agilent Technologies' Certificate of Incorporation and Bylaws provide for
the indemnification of officers and directors to the fullest extent permitted
by the General Corporation Law.
All of Agilent Technologies' directors and officers will be covered by
insurance policies maintained by Agilent Technologies against certain
liabilities for actions taken in their capacities as such, including
liabilities under the Securities Act of 1933, as amended. In addition, the
Company has entered into indemnity agreements with its directors and executive
officers (a form of which is filed as Exhibit 10.9 to this Registration
Statement) that obligate the Company to indemnify such directors and executive
officers to the fullest extent permitted by the General Corporation Law.
Item 15. Recent Sales of Unregistered Securities
In connection with its incorporation and organization, on July 30, 1999,
Agilent Technologies issued 10,000,000 shares of common stock to Hewlett-
Packard for an aggregate of $10,000,000. Agilent Technologies
II-1
<PAGE>
believes that this issuance was exempt from registration under Section 4(2) of
the Securities Act as a transaction not involving any public offering. On
October 21, 1999, the board of directors of Agilent Technologies declared and
paid a stock dividend of 37 shares for each one share outstanding as of
October 1, 1999 thereby increasing Hewlett-Packard's ownership to 380,000,000
shares.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Master Separation and Distribution Agreement between Hewlett-Packard
and the registrant effective as of August 12, 1999.
2.2 Form of General Assignment and Assumption Agreement between Hewlett-
Packard and the registrant.
2.3 Form of Master Technology Ownership and License Agreement between
Hewlett-Packard and the registrant.
2.4 Form of Master Patent Ownership and License Agreement between Hewlett-
Packard and the registrant.
2.5 Form of Master Trademark Ownership and License Agreement between
Hewlett-Packard and the registrant.
2.6 Form of ICBD Technology Ownership and License Agreement between
Hewlett-Packard and the registrant.
2.7 Form of Employee Matters Agreement between Hewlett-Packard and the
registrant.
2.8 Tax Sharing Agreement between Hewlett-Packard and the registrant.
2.9 Form of Master IT Service Level Agreement between Hewlett-Packard and
the registrant.
2.10 Form of Real Estate Matters Agreement between Hewlett-Packard and the
registrant.
2.11 Form of Environmental Matters Agreement between Hewlett-Packard and
the registrant.
2.12 Form of Master Confidential Disclosure Agreement between Hewlett-
Packard and the registrant.
2.13 Form of Indemnification and Insurance Matters Agreement between
Hewlett-Packard and the registrant.
2.14 Non U.S. Plan.
2.15 Five Year Credit Agreement Dated as of November 5, 1999.
2.16 364-Day Credit Arrangement Dated as of November 5, 1999.
3.1* Amended and Restated Certificate of Incorporation.
3.2* Bylaws.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1* 1999 Employee Stock Purchase Plan.
10.2* 1999 Stock Plan.
10.3* 1999 Non-Employee Director Stock Plan.
10.4* Yokogawa Electric Corporation and Hewlett-Packard Company Agreement
for the Redemption and Sale of Shares and Termination of Joint Venture
Relationship.
10.5* Form of Indemnification Agreement entered into by the registrant with
each of its directors and executive officers.
21.1* Subsidiaries of Agilent Technologies.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1).
24.1* Power of Attorney.
24.2* Power of Attorney of Randall L. Tobias.
27.1* Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
II-2
<PAGE>
(b) Financial Statement Schedules.
Schedules have been omitted because the information required to be set
forth therein is not applicable or is immaterial.
Item 17. Undertakings
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as the indemnification for liabilities arising under the Securities
Act of 1933 may be permitted as to directors, officers and controlling persons
of the Registrant pursuant to the provisions described in Item 14, or
otherwise, the Registrant has been advised that in the opinion of the SEC,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payments by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) for purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective; and
(2) for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and this offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant
has duly caused this Amendment to the registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Palo
Alto, State of California on November 10, 1999.
*
_____________________________________
Edward W. Barnholt
President, Chief Executive Officer
and
Director
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the registration statement has been signed by the following persons on
November 10, 1999 in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C> <C>
* President, Chief Executive Officer and Director
______________________________________ (Principal Executive Officer)
Edward W. Barnholt
* Chairman of the Board of Directors
______________________________________
Gerald Grinstein
* Senior Vice President and Chief Financial
______________________________________ Officer
Robert R. Walker (Principal Financial Officer)
* Vice President, Controller and
______________________________________ Chief Accounting Officer
Dorothy D. Hayes (Principal Accounting Officer)
* Director
______________________________________
Thomas E. Everhart
* Director
______________________________________
Walter B. Hewlett
* Director
______________________________________
David M. Lawrence, M.D.
* Director
______________________________________
Randall L. Tobias
/s/ D. CRAIG NORDLUND
*By: _________________________________
D. Craig Nordlund
Attorney-in-fact
</TABLE>
II-4
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Master Separation and Distribution Agreement between Hewlett-Packard
and the registrant effective as of August 12, 1999.
2.2 Form of General Assignment and Assumption Agreement between Hewlett-
Packard and the registrant.
2.3 Form of Master Technology Ownership and License Agreement between
Hewlett-Packard and the registrant.
2.4 Form of Master Patent Ownership and License Agreement between Hewlett-
Packard and the registrant.
2.5 Form of Master Trademark Ownership and License Agreement between
Hewlett-Packard and the registrant.
2.6 Form of ICBD Technology Ownership and License Agreement between
Hewlett-Packard and the registrant.
2.7 Form of Employee Matters Agreement between Hewlett-Packard and the
registrant.
2.8 Tax Sharing Agreement between Hewlett-Packard and the registrant.
2.9 Form of Master IT Service Level Agreement between Hewlett-Packard and
the registrant.
2.10 Form of Real Estate Matters Agreement between Hewlett-Packard and the
registrant.
2.11 Form of Environmental Matters Agreement between Hewlett-Packard and
the registrant.
2.12 Form of Master Confidential Disclosure Agreement between Hewlett-
Packard and the registrant.
2.13 Form of Indemnification and Insurance Matters Agreement between
Hewlett-Packard and the registrant.
2.14 Non U.S. Plan.
2.15 Five Year Credit Agreement Dated as of November 5, 1999.
2.16 364-Day Credit Arrangement Dated as of November 5, 1999.
3.1* Amended and Restated Certificate of Incorporation.
3.2* Bylaws.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1* 1999 Employee Stock Purchase Plan.
10.2* 1999 Stock Plan.
10.3* 1999 Non-Employee Director Stock Plan.
10.4* Yokogawa Electric Corporation and Hewlett-Packard Company Agreement
for the Redemption and Sale of Shares and Termination of Joint Venture
Relationship.
10.5* Form of Indemnification Agreement entered into by the registrant with
each of its directors and executive officers.
21.1* Subsidiaries of Agilent Technologies.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1).
24.1* Power of Attorney.
24.2* Power of Attorney of Randall L. Tobias.
27.1* Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
<PAGE>
Exhibit 2.1
Master Separation and Distribution Agreement
Between
Hewlett-Packard Company
and
Agilent Technologies, Inc.
Effective As Of
August 12, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I SEPARATION...................................................................................... 2
Section 1.1 Separation Date................................................................ 2
Section 1.2 Closing of Transactions........................................................ 2
Section 1.3 Exchange of Secretary's Certificates........................................... 2
ARTICLE II DOCUMENTS AND ITEMS TO BE DELIVERED ON THE SEPARATION DATE..................................... 2
Section 2.1 Documents to Be Delivered By HP................................................ 2
Section 2.2 Cash to be Transferred by HP................................................... 3
Section 2.3 Documents to Be Delivered by Agilent........................................... 4
ARTICLE III THE IPO AND ACTIONS PENDING THE IPO........................................................... 5
Section 3.1 Transactions Prior to the IPO.................................................. 5
Section 3.2 Proceeds of the IPO............................................................ 5
Section 3.3 Cooperation.................................................................... 5
Section 3.4 Conditions Precedent to Consummation of the IPO................................ 6
ARTICLE IV THE DISTRIBUTION............................................................................... 7
Section 4.1 The Distribution............................................................... 7
Section 4.2 Actions Prior To The Distribution.............................................. 7
Section 4.3 Sole Discretion of HP.......................................................... 8
Section 4.4 Conditions To Distribution..................................................... 8
Section 4.5 Fractional Shares.............................................................. 9
ARTICLE V COVENANTS AND OTHER MATTERS..................................................................... 9
Section 5.1 Other Agreements............................................................... 9
Section 5.2 Further Instruments............................................................ 9
Section 5.3 Additional Service Level Agreements............................................ 10
Section 5.4 Agreement For Exchange of Information.......................................... 10
Section 5.5 Auditors and Audits; Annual and Quarterly Statements and Accounting............ 12
Section 5.6 Consistency with Past Practices................................................ 13
Section 5.7 Payment of Expenses............................................................ 13
Section 5.8 Foreign Subsidiaries........................................................... 14
Section 5.9 Dispute Resolution............................................................. 14
Section 5.10 Governmental Approvals......................................................... 15
Section 5.11 No Representation or Warranty.................................................. 15
Section 5.12 Non-Solicitation of Employees.................................................. 15
Section 5.13 Employee Agreements............................................................ 16
Section 5.14 Cooperation in Obtaining New Agreements........................................ 17
Section 5.15 Property Damage to Agilent Assets Prior to the Separation Date................. 17
Section 5.16 Newly Discovered Environmental Conditions at Agilent Schedule 1
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Facilities..................................................................... 18
ARTICLE VI MISCELLANEOUS.................................................................................. 18
Section 6.1 Limitation of Liability........................................................ 18
Section 6.2 Entire Agreement............................................................... 18
Section 6.3 Governing Law.................................................................. 18
Section 6.4 Termination.................................................................... 18
Section 6.5 Notices........................................................................ 19
Section 6.6 Counterparts................................................................... 19
Section 6.7 Binding Effect; Assignment..................................................... 19
Section 6.8 Severability................................................................... 19
Section 6.9 Failure or Indulgence Not Waiver; Remedies Cumulative.......................... 19
Section 6.10 Amendment...................................................................... 19
Section 6.11 Authority...................................................................... 20
Section 6.12 Interpretation................................................................. 20
Section 6.13 Conflicting Agreements......................................................... 20
ARTICLE VII DEFINITIONS................................................................................... 20
Section 7.1 Affiliated Company............................................................. 20
Section 7.2 Agilent Assets................................................................. 20
Section 7.3 Agilent Business............................................................... 20
Section 7.4 Agilent Group.................................................................. 20
Section 7.5 Agilent Pro Forma Balance Sheet................................................ 21
Section 7.6 Agilent's Auditors............................................................. 21
Section 7.7 Ancillary Agreements........................................................... 21
Section 7.8 Assignment Agreement........................................................... 21
Section 7.9 Business Day................................................................... 21
Section 7.10 Code........................................................................... 21
Section 7.11 Commission..................................................................... 21
Section 7.12 Disputes....................................................................... 21
Section 7.13 Distribution................................................................... 21
Section 7.14 Distribution Agent............................................................. 21
Section 7.15 Distribution Date.............................................................. 21
Section 7.16 Employee Agreement............................................................. 21
Section 7.17 Exchange Act................................................................... 21
Section 7.18 Governmental Approvals......................................................... 21
Section 7.19 Governmental Authority......................................................... 22
Section 7.20 HP Business.................................................................... 22
Section 7.21 HP Group....................................................................... 22
Section 7.22 HP's Auditors.................................................................. 22
Section 7.23 Information.................................................................... 22
Section 7.24 IPO............................................................................ 22
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.25 IPO Closing Date............................................................... 22
Section 7.26 IPO Net Proceeds............................................................... 22
Section 7.27 IPO Over-allotment Option...................................................... 22
Section 7.28 IPO Registration Statement..................................................... 22
Section 7.29 Nasdaq......................................................................... 22
Section 7.30 Non-US Plan.................................................................... 22
Section 7.31 NYSE........................................................................... 22
Section 7.32 Person......................................................................... 23
Section 7.33 Prime Rate..................................................................... 23
Section 7.34 Record Date.................................................................... 23
Section 7.35 Retained Payables.............................................................. 23
Section 7.36 Retained Receivables........................................................... 23
Section 7.37 Separation..................................................................... 23
Section 7.38 Separation Date................................................................ 23
Section 7.39 Subsidiary..................................................................... 23
Section 7.40 Underwriters................................................................... 23
Section 7.41 Underwriting Agreement......................................................... 23
Section 7.42 WSGR........................................................................... 24
</TABLE>
-iii-
<PAGE>
EXHIBITS
Exhibit A Certificate of Secretary of HP
Exhibit B Certificate of Secretary of Agilent
Exhibit C General Assignment and Assumption Agreement
Exhibit D-1 Master Technology Ownership and License Agreement
Exhibit D-2 Master Patent Ownership and License Agreement
Exhibit D-3 Master Trademark Ownership and License Agreement
Exhibit D-4 ICBD Technology Ownership and License Agreement
Exhibit E Employee Matters Agreement
Exhibit F Tax Sharing Agreement
Exhibit G Master IT Service Level Agreement
Exhibit H Real Estate Agreement
Exhibit I Environmental Matters Agreement
Exhibit J Master Confidential Disclosure Agreement
Exhibit K Indemnification and Insurance Matters Agreement
Exhibit L Intentionally Omitted
Exhibit M Reorganization of Operations Outside the US (the Non-US Plan)
-iv-
<PAGE>
SCHEDULES
Schedule 2.1(b) Subsidiaries of HP to be Transferred to Agilent
Schedule 2.2(b) Cash Held in Subsidiaries
Schedule 7.1(a) Affiliated Companies of HP to be Included in the HP Group
Schedule 7.1(b) Affiliated Companies of Agilent to be Included in the Agilent
Group
-v-
<PAGE>
MASTER SEPARATION AND DISTRIBUTION AGREEMENT
This Master Separation and Distribution Agreement (this "Agreement") is
entered into as of August 12, 1999, between Hewlett-Packard Company ("HP"), a
Delaware corporation, and Agilent Technologies, Inc. ("Agilent"), a Delaware
corporation. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in Article VII hereof.
RECITALS
WHEREAS, the Boards of Directors of HP and Agilent have each determined
that it would be appropriate and desirable for HP to contribute and transfer to
Agilent, and for Agilent to receive and assume, directly or indirectly,
substantially all of the assets and liabilities currently associated with the
Agilent Business and the stock, investments or similar interests currently held
by HP in subsidiaries and other entities that conduct such business (the
"Separation");
WHEREAS, HP has caused Agilent to be incorporated in order to effect the
Separation and HP currently owns all of the issued and outstanding common stock
of Agilent;
WHEREAS, HP and Agilent currently contemplate that, following the
contribution and assumption of assets and liabilities, Agilent will make an
initial public offering ("IPO") of an amount of its common stock pursuant to a
registration statement on Form S-1 pursuant to the Securities Act of 1933, as
amended (the "IPO Registration Statement"), that will reduce HP's ownership of
Agilent to not less than 80.1%;
WHEREAS, Agilent intends to distribute all of the proceeds of the IPO
(including the proceeds from the sale of shares pursuant to the exercise of the
Underwriters' over-allotment option (the "IPO Over-allotment Option")), net of
underwriting discounts and commissions (the "IPO Net Proceeds") to HP by means
of a dividend declared prior to the IPO, which IPO Net Proceeds HP ultimately
intends to use to satisfy obligations to creditors or to repurchase shares of HP
common stock within twelve (12) months following the closing of the IPO (the
"IPO Closing Date");
WHEREAS, HP currently contemplates that, several months following such
initial public offering, HP will distribute to the holders of its common stock,
$ 0.01 par value, by means of a pro rata distribution, all of the shares of
Agilent common stock owned by HP (the "Distribution");
WHEREAS, HP and Agilent intend that the contribution and assumption of
assets and liabilities and the Distribution will qualify as a tax-free
reorganization under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code
of 1986, as amended (the "Code"), and that this Agreement is intended to be, and
is hereby adopted as, a plan of reorganization under Section 368 of the Code;
and
WHEREAS, the parties intend in this Agreement, including the Exhibits and
Schedules hereto, to set forth the principal arrangements between them regarding
the separation of the Agilent Business.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I
SEPARATION
Section 1.1 Separation Date. Unless otherwise provided in this Agreement,
or in any agreement to be executed in connection with this Agreement, the
effective time and date of each transfer of property, assumption of liability,
license, undertaking, or agreement in connection with the Separation shall be
12:01 a.m., Pacific Time, November 1, 1999 or such other date as may be fixed by
the Board of Directors of HP (the "Separation Date").
Section 1.2 Closing of Transactions. Unless otherwise provided herein, the
closing of the transactions contemplated in Article II shall occur by the
lodging of each of the executed instruments of transfer, assumptions of
liability, undertakings, agreements, instruments or other documents executed or
to be executed with Wilson Sonsini Goodrich & Rosati ("WSGR"), 650 Page Mill
Road, Palo Alto, California 94304, to be held in escrow for delivery as provided
in Section 1.3 of this Agreement.
Section 1.3 Exchange of Secretary's Certificates. Upon receipt of a
certificate of the Secretary or an Assistant Secretary of HP in the form
attached to this Agreement as Exhibit A, WSGR shall deliver to Agilent on behalf
of HP all of the items required to be delivered by HP hereunder pursuant to
Section 2.1 of this Agreement and each such item shall be deemed to be delivered
to Agilent as of the Separation Date upon delivery of such certificate. Upon
receipt of a certificate of the Secretary or an Assistant Secretary of Agilent
in the form attached to this Agreement as Exhibit B, WSGR shall deliver to HP on
behalf of Agilent all of the items required to be delivered by Agilent hereunder
and each such item shall be deemed to be delivered to HP as of the Separation
Date upon receipt of such certificate.
ARTICLE II
DOCUMENTS AND ITEMS TO BE DELIVERED ON THE SEPARATION DATE
Section 2.1 Documents to Be Delivered By HP. On the Separation Date or such
later date as agreed in connection with the Non-US Plan, HP will deliver, or
will cause its appropriate Subsidiaries to deliver, to Agilent all of the
following items and agreements (collectively, together with all agreements and
documents contemplated by such agreements, the "Ancillary Agreements"):
(a) A duly executed General Assignment and Assumption Agreement (the
"Assignment Agreement") substantially in the form attached hereto as Exhibit C;
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(b) Certificates representing the stock and/or investments in the
Subsidiaries and other holdings of HP set forth on Schedule 2.1(b) with duly
executed stock powers in the form proper for transfer;
(c) A duly executed Master Technology Ownership and License Agreement
substantially in the form attached hereto as Exhibit D-1, a duly executed Master
Patent Ownership and License Agreement substantially in the form attached hereto
as Exhibit D-2, a duly executed Master Trademark Ownership and License Agreement
substantially in the form attached as Exhibit D-3 and a duly executed ICBD
Technology Ownership and License Agreement substantially in the form attached
hereto as Exhibit D-4, and;
(d) A duly executed Employee Matters Agreement substantially in the
form attached hereto as Exhibit E;
(e) A duly executed Tax Sharing Agreement substantially in the form
attached hereto as Exhibit F;
(f) A duly executed Master IT Service Level Agreement substantially
in the form attached hereto as Exhibit G;
(g) A duly executed Real Estate Matters Agreement substantially in
the form attached hereto as Exhibit H;
(h) A duly executed Environmental Matters Agreement substantially in
the form attached hereto as Exhibit I;
(i) A duly executed Master Confidential Disclosure Agreement
substantially in the form attached hereto as Exhibit J;
(j) A duly executed Indemnification and Insurance Matters Agreement
substantially in the form attached hereto as Exhibit K;
(k) Resignations of each person who is an officer or director of any
member of Agilent or its Subsidiaries, immediately prior to the Separation Date,
and who will be employees of HP from and after the Separation Date; and
(l) Such other agreements, documents or instruments as the parties
may agree are necessary or desirable in order to achieve the purposes hereof,
including, without limitation, all service level agreements entered into in
accordance with Section 5.3 and those documents referred to in Section 5.8.
Section 2.2 Cash to be Transferred by HP.
(a) Cash Requirements. On or around the Separation Date, HP and its
Subsidiaries will provide that Agilent and its Subsidiaries have sufficient cash
to satisfy the following obligations or requirements (as adjusted with the
parties' mutual agreement):
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(i) (A) HP's obligations under the Agreement for the Redemption
and Sale of Shares and Termination of Joint Venture Relationship dated July 6,
1999 by and between HP and Yokogawa Electric Corporation (the "YEW Agreement"),
which obligations Agilent will assume from HP pursuant to the Assignment
Agreement and (B) Hewlett-Packard Japan Ltd.'s obligations under the YEW
Agreement;
(ii) Working capital and acquisition requirements of $250
million;
(iii) An amount equal to:
(1) the Retained Receivables minus the Retained Payables,
plus or minus
(2) the liabilities retained by HP Japan related to the HP
Business, net of the assets retained by HP Japan related to the HP Business;
(iv) The requirements of Section 5.9 of the Tax Sharing
Agreement entitled Japan Restructuring Taxes; and
(v) As described in Section 3.1(a) of the Tax Sharing
Agreement, an amount equal to Taxes of Agilent Historical Affiliates for periods
before their acquisition by the HP Group.
all in accordance with the parties' best estimates on the Separation Date of
such amounts as of October 31, 1999; and
(b) Cash Held in Subsidiaries. Additional cash in amounts to be
determined by the parties on the Separation Date will be held in certain
Subsidiaries of Agilent, all of which are either listed on Schedule 2.2(b)
hereto or will be geographical counterparts of Subsidiaries of HP listed on
Schedule 2.2(b) hereto.
(c) True-Up. On December 15, 1999, the parties will recalculate the
cash payments made pursuant to this Section 2.2, based on the amounts included
in the HP balance sheet as of October 31, 1999 and the Agilent balance sheet as
of October 31, 1999. To the extent the new calculations differ from the
estimates upon which the cash payments made pursuant to this Section 2.2 were
based, the parties shall reallocate cash in the amount of such difference.
Section 2.3 Documents to Be Delivered by Agilent. As of the Separation
Date, Agilent will or will cause its appropriate Subsidiaries to deliver to HP
all of the following:
(a) In each case where Agilent is a party to any agreement or
instrument referred to in Section 2.1, a duly executed counterpart of such
agreement or instrument; and
(b) Resignations of each person who is an officer or director of any
member of HP or its Subsidiaries, immediately prior to the Separation Date, and
who will be employees of Agilent from and after the Separation Date.
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ARTICLE III
THE IPO AND ACTIONS PENDING THE IPO
Section 3.1 Transactions Prior to the IPO. Subject to the conditions
specified in Section 3.4, HP and Agilent shall use their reasonable commercial
efforts to consummate the IPO. Such efforts shall include, but not necessarily
be limited to, those specified in this Section 3.1
(a) Registration Statement. Agilent shall file the IPO Registration
Statement, and such amendments or supplements thereto, as may be necessary in
order to cause the same to become and remain effective as required by law or by
the managing underwriters for the IPO (the "Underwriters"), including, but not
limited to, filing such amendments to the IPO Registration Statement as may be
required by the underwriting agreement to be entered into among Agilent and the
Underwriters (the "Underwriting Agreement"), the Securities and Exchange
Commission (the "Commission") or federal, state or foreign securities laws. HP
and Agilent shall also cooperate in preparing, filing with the Securities and
Exchange Commission and causing to become effective a registration statement
registering the common stock of Agilent under the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), and any registration statements or
amendments thereof 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 Separation, the Distribution or the other
transactions contemplated by this Agreement.
(b) Underwriting Agreement. Agilent shall enter into the Underwriting
Agreement, in form and substance reasonably satisfactory to Agilent, and shall
comply with its obligations thereunder.
(c) Other Matters. HP and Agilent shall consult with each other and
the Underwriters regarding the timing, pricing and other material matters with
respect to the IPO.
(d) Blue Sky. Agilent shall use its reasonable commercial efforts to
take all such action as may be necessary or appropriate under state securities
and blue sky laws of the United States (and any comparable laws under any
foreign jurisdictions) in connection with the IPO.
(e) NYSE or Nasdaq Listing. Agilent shall prepare, file and use
reasonable commercial efforts to seek to make effective, an application for
listing of the common stock of Agilent issued in the IPO on the New York Stock
Exchange (the "NYSE") or the Nasdaq National Market ("Nasdaq"), subject to
official notice of issuance.
Section 3.2 Proceeds of the IPO. The IPO will be a primary offering of
common stock of Agilent. All of the IPO Net Proceeds will be distributed to HP
by means of a dividend declared prior to the IPO, which IPO Net Proceeds HP
ultimately intends to use to satisfy obligations to creditors or to repurchase
shares of HP common stock within twelve (12) months following the IPO Closing
Date.
Section 3.3 Cooperation. Agilent shall consult with, and cooperate in all
respects with, HP in connection with the pricing of the common stock of Agilent
to be offered in the IPO and shall,
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at HP'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.
Section 3.4 Conditions Precedent to Consummation of the IPO. As soon as
practicable after the Separation Date, the parties hereto shall use their
reasonable commercial efforts to satisfy the conditions listed below to the
consummation of the IPO. The IPO Closing Date is currently scheduled to occur
prior to December 31, 1999. The obligations of the parties to use their
reasonable commercial efforts to consummate the IPO shall be conditioned on the
satisfaction, or waiver by HP, of the following conditions:
(a) Registration Statement. The IPO Registration Statement shall have
been filed and declared effective by the Commission, and there shall be no stop-
order in effect with respect thereto.
(b) Blue Sky. 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) described in Section 3.1 shall have been taken and, where
applicable, have become effective or been accepted.
(c) NYSE or Nasdaq Listing. The common stock of Agilent to be issued
in the IPO shall have been accepted for listing on the NYSE or Nasdaq, on
official notice of issuance.
(d) Underwriting Agreement. Agilent shall have entered into the
Underwriting Agreement and all conditions to the obligations of Agilent and the
Underwriters shall have been satisfied or waived.
(e) Common Stock Ownership. HP shall be satisfied in its sole
discretion that it will own at least 80.1% of the outstanding common stock of
Agilent following the IPO. All other conditions to permit the Distribution to
qualify as a tax-free distribution to HP, Agilent and HP's stockholders shall,
to the extent applicable as of the time of the IPO, be satisfied. There shall be
no event or condition that is likely to cause any of such conditions not to be
satisfied as of the time of the Distribution or thereafter.
(f) No Legal Restraints. 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 Separation or the IPO or any of
the other transactions contemplated by this Agreement shall be in effect.
(g) Separation. The Separation shall have become effective.
(h) Other Actions. Such other actions as the parties hereto may,
based upon the advice of counsel, reasonably request to be taken prior to the
IPO in order to assure the successful completion of the IPO shall have been
taken.
(i) No Termination. This Agreement shall not have been terminated.
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ARTICLE IV
THE DISTRIBUTION
Section 4.1 The Distribution.
(a) Delivery of Shares for Distribution. Subject to Section 4.4
hereof, on or prior to the date the Distribution is effective (the "Distribution
Date"), HP will deliver to the distribution agent (the "Distribution Agent") to
be appointed by HP to distribute to the stockholders of HP the shares of common
stock of Agilent held by HP pursuant to the Distribution for the benefit of
holders of record of common stock of HP on the Record Date, a single stock
certificate, endorsed by HP in blank, representing all of the outstanding shares
of common stock of Agilent then owned by HP, and shall cause the transfer agent
for the shares of common stock of HP to instruct the Distribution Agent to
distribute on the Distribution Date the appropriate number of such shares of
common stock of Agilent to each such holder or designated transferee or
transferees of such holder.
(b) Shares Received. Subject to Sections 4.4 and 4.5, each holder of
common stock of HP on the Record Date (or such holder's designated transferee or
transferees) will be entitled to receive in the Distribution a number of shares
of common stock of Agilent equal to the number of shares of common stock of HP
held by such holder on the Record Date multiplied by a fraction the numerator of
which is the number of shares of common stock of Agilent beneficially owned by
HP on the Record Date and the denominator of which is the number of shares of
common stock of HP outstanding on the Record Date.
(c) Obligation to Provide Information. Agilent and HP, as the case
may be, will provide to the Distribution Agent all share certificates and any
information required in order to complete the Distribution on the basis
specified above.
Section 4.2 Actions Prior To The Distribution.
(a) Information Statement. HP and Agilent shall prepare and mail,
prior to the Distribution Date, to the holders of common stock of HP, such
information concerning Agilent and the Distribution and such other matters as HP
shall reasonably determine are necessary and as may be required by law. HP and
Agilent will prepare, and Agilent will, to the extent required under applicable
law, file with the Commission any such documentation which HP and Agilent
determines is necessary or desirable to effectuate the Distribution, and HP and
Agilent shall each use its reasonable commercial efforts to obtain all necessary
approvals from the Commission with respect thereto as soon as practicable.
(b) Blue Sky. HP and Agilent shall take all such actions as may be
necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.
(c) NYSE or Nasdaq Listing. Agilent shall prepare and file, and shall
use its reasonable commercial efforts to have approved, an application for the
listing of the common stock
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of Agilent to be distributed in the Distribution on the NYSE or Nasdaq, subject
to official notice of distribution.
(d) Conditions. HP and Agilent shall take all reasonable steps
necessary and appropriate to cause the conditions set forth in Section 4.4 to be
satisfied and to effect the Distribution on the Distribution Date.
Section 4.3 Sole Discretion of HP. HP currently intends, following the
consummation of the IPO, to complete the Distribution by June 1, 2000. HP shall,
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, HP 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. Agilent shall
cooperate with HP in all respects to accomplish the Distribution and shall, at
HP's direction, promptly take any and all actions necessary or desirable to
effect the Distribution, including, without limitation, the registration under
the Securities Act of the common stock of Agilent on an appropriate registration
form or forms to be designated by HP. HP shall 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 outside counsel for HP;
provided, however, that nothing herein shall prohibit Agilent from engaging (at
its own expense) its own financial, legal, accounting and other advisors in
connection with the Distribution.
Section 4.4 Conditions To Distribution. The following are conditions to
the consummation of the Distribution. The conditions are for the sole benefit of
HP and shall not give rise to or create any duty on the part of HP or the HP
Board of Directors to waive or not waive any such condition.
(a) IRS Ruling. HP shall have obtained a private letter ruling from
the Internal Revenue Service in form and substance satisfactory to HP (in its
sole discretion), and such ruling shall remain in effect as of the Distribution
Date, to the effect that (i) the transfer by the HP Group to the Agilent Group
of the property, subject to liabilities, of the Agilent Business in exchange for
the issuance to HP of the stock of Agilent, the distribution of the IPO Net
Proceeds and Agilent's assumption of liabilities, followed by the distribution
by HP of all of its Agilent stock to the stockholders of HP, will qualify as a
reorganization under Sections 368(a)(1)(D) and 355 of the Code; (ii) no gain or
loss will be recognized by HP on its transfer of the property of the Agilent
Business to Agilent in exchange for Agilent common stock and the distribution of
the IPO Net Proceeds, followed by the transfer of the IPO Net Proceeds to HP's
creditors and/or stockholders: (iii) no gain or loss will be recognized by
Agilent on its receipt of the property of the Agilent Business from HP in
exchange for the issuance of Agilent common stock; and (iv) no gain or loss will
be recognized by (and no amount will otherwise be included in the income of) the
stockholders of HP upon their receipt of Agilent common stock pursuant to the
Distribution.
(b) Government Approvals. Any material governmental approvals and
consents necessary to consummate the Distribution shall have been obtained and
be in full force and effect;
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(c) No Legal Restraints. 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 Distribution shall be in effect
and no other event outside the control of HP shall have occurred or failed to
occur that prevents the consummation of the Distribution; and
(d) No Material Adverse Effect. No other events or developments shall
have occurred subsequent to the IPO Closing Date that, in the judgment of the
Board of Directors of HP, would result in the Distribution having a material
adverse effect on HP or on the stockholders of HP.
Section 4.5 Fractional Shares. As soon as practicable after the
Distribution Date, HP shall direct the Distribution Agent to determine the
number of whole shares and fractional shares of common stock of Agilent
allocable to each holder of record or beneficial owner of common stock of HP as
of the Record Date, to aggregate all such fractional shares and sell the whole
shares obtained thereby at the direction of HP, in open market transactions, at
then prevailing trading prices, and to cause to be distributed to each such
holder or for the benefit of each such beneficial owner to which a fractional
share shall be allocable such holder's or owner's ratable share of the proceeds
of such sale, after making appropriate deductions of the amount required to be
withheld for federal income tax purposes and after deducting an amount equal to
all brokerage charges, commissions and transfer taxes attributed to such sale.
HP and the Distribution Agent shall use their reasonable commercial efforts to
aggregate the shares of common stock of HP that may be held by any beneficial
owner thereof through more than one account in determining the fractional share
allocable to such beneficial owner.
ARTICLE V
COVENANTS AND OTHER MATTERS
Section 5.1 Other Agreements. In addition to the specific agreements,
documents and instruments annexed to this Agreement, HP and Agilent agree to
execute or cause to be executed by the appropriate parties and deliver, as
appropriate, such other agreements, instruments and other documents as may be
necessary or desirable in order to effect the purposes of this Agreement and the
Ancillary Agreements.
Section 5.2 Further Instruments. At the request of Agilent and without
further consideration, HP will execute and deliver, and will cause its
applicable Subsidiaries to execute and deliver, to Agilent and its Subsidiaries
such other instruments of transfer, conveyance, assignment, substitution and
confirmation and take such action as Agilent may reasonably deem necessary or
desirable in order more effectively to transfer, convey and assign to Agilent
and its Subsidiaries and confirm Agilent's and its Subsidiaries' title to all of
the assets, rights and other things of value contemplated to be transferred to
Agilent and its Subsidiaries pursuant to this Agreement, the Ancillary
Agreements, and any documents referred to therein, to put Agilent and its
Subsidiaries in actual possession and operating control thereof and to permit
Agilent and its Subsidiaries to exercise all rights with respect thereto
(including, without limitation, rights under contracts and other arrangements as
to which the consent of any third party to the transfer thereof shall not have
previously been obtained). At the request of HP and without further
consideration, Agilent will
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execute and deliver, and will cause its applicable Subsidiaries to execute and
deliver, to HP and its Subsidiaries all instruments, assumptions, novations,
undertakings, substitutions or other documents and take such other action as HP
may reasonably deem necessary or desirable in order to have Agilent fully and
unconditionally assume and discharge the liabilities contemplated to be assumed
by Agilent under this Agreement or any document in connection herewith and to
relieve the HP Group of any liability or obligation with respect thereto and
evidence the same to third parties. Neither HP nor Agilent shall be obligated,
in connection with the foregoing, to expend money other than reasonable out-of-
pocket expenses, attorneys' fees and recording or similar fees. Furthermore,
each party, at the request of another party hereto, shall execute and deliver
such other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
Section 5.3 Additional Service Level Agreements. HP and its Subsidiaries
and Agilent and its Subsidiaries will enter into interim service level
agreements covering the provision of various interim services, including
financial, accounting, building services, legal, and other services by HP (and
its Subsidiaries) to Agilent (and its Subsidiaries) or, in certain
circumstances, vice versa. Such services will generally be provided for a fee
equal to the actual Direct Costs and Indirect Costs of providing such services
plus five percent (5%). The interim service level agreements will generally
provide for a term of two (2) years. However, some interim service level
agreements, including those for building services and information technology
services, may be extended beyond the initial two-year period. If these
agreements are extended, Agilent will reimburse HP at the fair market rental
value for the rental component of the building services and cost plus 10% for
information technology and other services and the non-rental components of
building services. "Direct Costs" shall include compensation and travel expenses
attributable to employees, temporary workers, and contractors directly engaged
in performing the services as well as materials and supplies consumed in
performing the services. "Indirect Costs" shall include occupancy, IT
supervision and other overhead burden of the department incurring the direct
costs of providing the service.
Section 5.4 Agreement For Exchange of Information. Each of HP and Agilent
agrees to provide, or cause to be provided, to each other, at any time before or
after the Distribution Date, as soon as reasonably practicable after written
request therefor, any Information in the possession or under the control of such
party that the requesting party reasonably needs (i) to comply with reporting,
disclosure, filing or other requirements imposed on the requesting party
(including under applicable securities laws) by a Governmental Authority having
jurisdiction over the requesting party, (ii) for use in any other judicial,
regulatory, administrative or other proceeding or in order to satisfy audit,
accounting, claims, regulatory, litigation or other similar requirements, (iii)
to comply with its obligations under this Agreement or any Ancillary Agreement
or (iv) in connection with the ongoing businesses of HP or Agilent, as the case
may be; provided, however, that in the event that any party determines that any
such provision of Information could be commercially detrimental, violate any law
or agreement, or waive any attorney-client privilege, the parties shall take all
reasonable measures to permit the compliance with such obligations in a manner
that avoids any such harm or consequence.
(a) Internal Accounting Controls; Financial Information. After the
Separation Date, (i) each party shall maintain in effect at its own cost and
expense adequate systems and controls for its business to the extent necessary
to enable the other party to satisfy its reporting, accounting, audit
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and other obligations, and (ii) each party shall provide, or cause to be
provided, to the other party and its Subsidiaries in such form as such
requesting party shall request, at no charge to the requesting party, all
financial and other data and information as the requesting party determines
necessary or advisable in order to prepare its financial statements and reports
or filings with any Governmental Authority.
(b) Ownership of Information. Any Information owned by a party that
is provided to a requesting party pursuant to this Section 5.4 shall be deemed
to remain the property of the providing party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.
(c) Record Retention. To facilitate the possible exchange of
Information pursuant to this Section 5.4 and other provisions of this Agreement
after the Distribution Date, each party agrees to use its reasonable commercial
efforts to retain all Information in their respective possession or control on
the Distribution Date substantially in accordance with the policies of HP as in
effect on the Separation Date. However, except as set forth in the Tax Sharing
Agreement, at any time after the Distribution Date, each party may amend their
respective record retention policies at such party's discretion; provided,
however, that if a party desires to effect the amendment within three (3) years
after the Distribution Date, the amending party must give thirty (30) days prior
written notice of such change in the policy to the other party to this
Agreement.
(i) No party will destroy, or permit any of its Subsidiaries to
destroy, any Information that exists on the Separation Date (other than
Information that is permitted to be destroyed under the current record retention
policy of such party) without first using its reasonable commercial efforts to
notify the other party of the proposed destruction and giving the other party
the opportunity to take possession of such Information prior to such
destruction.
(d) Limitation of Liability. No party shall have any liability to any
other party in the event that any Information exchanged or provided pursuant to
this Section is found to be inaccurate, in the absence of willful misconduct by
the party providing such Information. No party shall have any liability to any
other party if any Information is destroyed or lost after reasonable commercial
efforts by such party to comply with the provisions of Section 5.4(c).
(e) Other Agreements Providing For Exchange of Information. The
rights and obligations granted under this Section 5.4 are subject to any
specific limitations, qualifications or additional provisions on the sharing,
exchange or confidential treatment of Information set forth in this Agreement
and any Ancillary Agreement.
(f) Production of Witnesses; Records; Cooperation. After the
Distribution Date, except in the case of a legal or other proceeding by one
party against another party (which shall be governed by such discovery rules as
may be applicable under Section 5.9 or otherwise), each party hereto shall use
its reasonable commercial efforts to make available to each other party, upon
written request, the former, current and future directors, officers, employees,
other personnel and agents of such party as witnesses and any books, records or
other documents within its control or which it otherwise has the ability to make
available, to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and agents) or
books,
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records or other documents may reasonably be required in connection with any
legal, administrative or other proceeding in which the requesting party may from
time to time be involved, regardless of whether such legal, administrative or
other proceeding is a matter with respect to which indemnification may be sought
hereunder. The requesting party shall bear all costs and expenses in connection
therewith.
Section 5.5 Auditors and Audits; Annual and Quarterly Statements and
Accounting. Each party agrees that, for so long as HP is required in accordance
with United States generally accepted accounting principles to consolidate
Agilent's results of operations and financial position:
(a) Selection of Auditors. Agilent shall not select a different
accounting firm than PricewaterhouseCoopers LLP to serve as its (and its
Subsidiaries') independent certified public accountants ("Agilent's Auditors")
for purposes of providing an opinion on its consolidated financial statements
without HP's prior written consent (which shall not be unreasonably withheld).
(b) Date of Auditors' Opinion and Quarterly Reviews. Agilent shall
use its reasonable commercial efforts to enable the Agilent Auditors to complete
their audit such that they will date their opinion on Agilent's audited annual
financial statements on the same date that HP's independent certified public
accountants ("HP's Auditors") date their opinion on HP's audited annual
financial statements, and to enable HP to meet its timetable for the printing,
filing and public dissemination of HP's annual financial statements. Agilent
shall use its reasonable commercial efforts to enable the Agilent Auditors to
complete their quarterly review procedures such that they will provide clearance
on Agilent's quarterly financial statements on the same date that HP's Auditors
provide clearance on HP's quarterly financial statements.
(c) Annual and Quarterly Financial Statements. Agilent shall provide
to HP on a timely basis all Information that HP reasonably requires to meet its
schedule for the preparation, printing, filing, and public dissemination of HP's
annual and quarterly financial statements. Without limiting the generality of
the foregoing, Agilent will provide all required financial Information with
respect to Agilent and its Subsidiaries to Agilent's Auditors in a sufficient
and reasonable time and in sufficient detail to permit Agilent's Auditors to
take all steps and perform all reviews necessary to provide sufficient
assistance to HP's Auditors with respect to Information to be included or
contained in HP's annual and quarterly financial statements. Similarly, HP shall
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 Agilent's annual and quarterly financial statements. Without
limiting the generality of the foregoing, HP will provide all required financial
Information with respect to HP and its Subsidiaries to HP's Auditors in a
sufficient and reasonable time and in sufficient detail to permit HP'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 Agilent's annual and quarterly financial statements.
(d) Identity of Personnel Performing the Annual Audit and Quarterly
Reviews. Agilent shall authorize Agilent's Auditors to make available to HP's
Auditors both the personnel who performed or are performing the annual audits
and quarterly reviews of Agilent and work papers related to the annual audits
and quarterly reviews of Agilent, in all cases within a reasonable time prior to
Agilent's Auditors' opinion date, so that HP's Auditors are able to perform the
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procedures they consider necessary to take responsibility for the work of
Agilent's Auditors as it relates to HP's Auditors' report on HP's financial
statements, all within sufficient time to enable HP to meet its timetable for
the printing, filing and public dissemination of HP's annual and quarterly
statements. Similarly, HP shall authorize HP's Auditors to make available to
Agilent's Auditors both the personnel who performed or are performing the annual
audits and quarterly reviews of HP and work papers related to the annual audits
and quarterly reviews of HP, in all cases within a reasonable time prior to HP'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 HP'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 Agilent's annual and quarterly
financial statements.
(e) Access to Books and Records. Agilent shall provide HP's internal
auditors and their designees access to Agilent's and its Subsidiaries' books and
records so that HP may conduct reasonable audits relating to the financial
statements provided by Agilent pursuant hereto as well as to the internal
accounting controls and operations of Agilent and its Subsidiaries. Similarly,
HP shall provide Agilent's internal auditors and their designees access to HP's
and its Subsidiaries' books and records so that Agilent may conduct reasonable
audits relating to the financial statements provided by HP pursuant hereto as
well as to the internal accounting controls and operations of HP and its
Subsidiaries
(f) Notice of Change in Accounting Principles. Agilent shall give HP
as much prior notice as reasonably practical of any proposed determination of,
or any significant changes in, its accounting estimates or accounting principles
from those in effect on the Separation Date. Agilent will consult with HP and,
if requested by HP, Agilent will consult with HP's independent public
accountants with respect thereto. HP shall give Agilent as much prior notice as
reasonably practical of any proposed determination of, or any significant
changes in, its accounting estimates or accounting principles from those in
effect on the Separation Date.
(g) Conflict with Third-Party Agreements. Nothing in Sections 5.4 and
5.5 shall require Agilent to violate any agreement with any third parties
regarding the confidentiality of confidential and proprietary information
relating to that third party or its business; provided, however, that in the
event that Agilent is required under Sections 5.4 and 5.5 to disclose any such
information, Agilent shall use all commercially reasonable efforts to seek to
obtain such customer's consent to the disclosure of such information.
Section 5.6 Consistency with Past Practices. At all times HP will cause
the Agilent Business before the Separation Date to continue to ship products,
invoice customers, make payments, maintain properties and otherwise conduct
business in the ordinary course, consistent with past practices and will not
undertake or permit any arrangement with any third party which is intended to or
has the effect of delaying the payment of any account receivable beyond the
Separation Date or delaying or accelerating the payment of any account payable
before the Separation Date.
Section 5.7 Payment of Expenses. Except as otherwise provided in this
Agreement, the Ancillary Agreements or any other agreement between the parties
relating to the Separation, the IPO
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or the Distribution, all costs and expenses of the parties hereto in connection
with the IPO (excluding underwriting discounts and commissions) and the
Distribution and certain costs and expenses of the parties hereto in connection
with the Separation shall be paid by HP. Notwithstanding the foregoing, Agilent
shall pay any internal fees, costs and expenses incurred by Agilent in
connection with the Separation, the IPO and the Distribution.
Section 5.8 Foreign Subsidiaries. HP and Agilent shall cause each of their
foreign subsidiaries to execute such local transfer agreements, assignments,
assumptions, novations and other documents as shall be necessary to carry out
the plan of reorganization described in Exhibit M (the "Non-US Plan") hereto to
effect the purposes of this Agreement with respect to their respective
operations outside the United States.
Section 5.9 Dispute Resolution. Except as otherwise set forth in the
Ancillary Agreements, resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, or otherwise
(collectively, "Disputes"), shall be exclusively governed by and settled in
accordance with the provisions of this Section 5.9.
(a) Negotiation. The parties shall make a good faith attempt to
resolve any Dispute arising out of or relating to this Agreement through
negotiation. Within thirty (30) days after notice of a Dispute is given by
either party to the other party, each party shall select a first tier
negotiating team comprised of general manager level employees of such party and
shall meet and make a good faith attempt to resolve such Dispute and shall
continue to negotiate in good faith in an effort to resolve the Dispute or
renegotiate the applicable section or provision without the necessity of any
formal proceedings. If the first tier negotiating teams are unable to agree
within thirty (30) days of their first meeting, then each party shall select a
second tier negotiating team comprised of vice president level employees of such
party and shall meet within thirty (30) days after the end of the first thirty
(30) day negotiating period to attempt to resolve the matter. During the course
of negotiations under this Section 5.9(a), all reasonable requests made by one
party to the other for information, including requests for copies of relevant
documents, will be honored. The specific format for such negotiations will be
left to the discretion of the designated negotiating teams but may include the
preparation of agreed upon statements of fact or written statements of position
furnished to the other party.
(b) Non-Binding Mediation. In the event that any Dispute arising
out of or related to this Agreement is not settled by the parties within fifteen
(15) days after the first meeting of the second tier negotiating teams under
Section 5.9(a), the parties will attempt in good faith to resolve such Dispute
by non-binding mediation in accordance with the American Arbitration Association
Commercial Mediation Rules. The mediation shall be held within thirty (30) days
of the end of such fifteen (15) day negotiation period of the second tier
negotiating teams. Except as provided below in Section 5.9(c), no litigation for
the resolution of such dispute may be commenced until the parties try in good
faith to settle the dispute by such mediation in accordance with such rules and
either party has concluded in good faith that amicable resolution through
continued mediation of the matter does not appear likely. The costs of mediation
shall be shared equally by the parties to the mediation. Any settlement reached
by mediation shall be recorded in writing, signed by the parties, and shall be
binding on them.
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(c) Proceedings. Nothing herein, however, shall prohibit either
party from initiating litigation or other judicial or administrative proceedings
if such party would be substantially harmed by a failure to act during the time
that such good faith efforts are being made to resolve the Dispute through
negotiation or mediation. In the event that litigation is commenced under this
Section 5.9(c), the parties agree to continue to attempt to resolve any Dispute
according to the terms of Sections 5.9(a) and 5.9(b) during the course of such
litigation proceedings under this Section 5.9(c).
(d) Pay and Dispute. Except as provided herein or in any Ancillary
Agreement, in the event of any dispute regarding payment of a third-party
invoice (subject to standard verification of receipt of products or services),
the party named in a third party's invoice must make timely payment to such
third party, even if the party named in the invoice desires to pursue the
dispute resolution procedures outlined in this Section 5.9. If the party that
paid the invoice is found pursuant to this Section 5.9 to not be responsible for
such payment, such paying party shall be entitled to reimbursement, with
interest accrued at a compound annual rate of the Prime Rate plus 2%, from the
party found responsible for such payment.
Section 5.10 Governmental Approvals. To the extent that the Separation
requires any Governmental Approvals, the parties will use their reasonable
commercial efforts to obtain any such Governmental Approvals.
Section 5.11 No Representation or Warranty. HP does not, in this Agreement
or any other agreement, instrument or document contemplated by this Agreement,
make any representation as to, warranty of or covenant with respect to:
(a) the value of any asset or thing of value to be transferred to
Agilent;
(b) the freedom from encumbrance of any asset or thing of value to
be transferred to Agilent;
(c) the absence of defenses or freedom from counterclaims with
respect to any claim to be transferred to Agilent; or
(d) the legal sufficiency of any assignment, document or instrument
delivered hereunder to convey title to any asset or thing of value upon its
execution, deliver and filing.
Except as may expressly be set forth herein or in any Ancillary Agreement,
all assets to be transferred to Agilent shall be transferred "AS IS, WHERE IS"
and Agilent shall bear the economic and legal risk that any conveyance shall
prove to be insufficient to vest in Agilent good and marketable title, free and
clear of any lien, claim, equity or other encumbrance.
Section 5.12 Non-Solicitation of Employees. Each party agrees not to
directly solicit or recruit the other party's employees for a period of two
years following the Distribution Date if such solicitation or recruitment would
be disruptive or damaging or would interfere with the operation or business of
the other party. This prohibition on solicitation does not apply to actions
taken by a party (i) as a result of an employee's affirmative response to a
general recruitment effort carried out through a public solicitation or a
general solicitation or (ii) as a result of an employee's initiative.
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Section 5.13 Employee Agreements. Definition. As used in this Section 5.13,
"Employee Agreement" means the Agreement Regarding Confidential Information and
Proprietary Developments and corresponding agreements in foreign countries.
(a) Survival of HP Employee Agreement Obligations and HP's Common
Law Rights. The HP Employee Agreements of all former HP employees transferred to
Agilent as of the Distribution Date shall remain in full force and effect
according to their terms; provided, however, that none of the following acts
committed by former HP employees within the scope of their Agilent employment
shall constitute a breach of such HP Employee Agreements: (i) the use or
disclosure of Confidential Information (as that term is defined in the former HP
employee's HP Employee Agreement) for or on behalf of Agilent, if such
disclosure is consistent with the license rights granted to Agilent and
restrictions imposed on Agilent under this Agreement, any other Ancillary
Agreement or any other agreement between the parties, (ii) the disclosure and
assignment to Agilent of rights in Proprietary Developments authored or
conceived by the former HP employee after the Separation Date and resulting from
the use of, or based upon intellectual property (whether patented or not) which
is retained by HP (as Proprietary Developments are defined in the former HP
employee's HP Employee Agreement); provided, however, that in no event shall
such disclosure and assignment be regarded as assigning the underlying
intellectual property to Agilent, (iii) the rendering of any services, directly
or indirectly, to Agilent to the extent such services are consistent with the
assignment or license of rights granted to Agilent and the restrictions imposed
on Agilent under this Agreement, any other Ancillary Agreement or any other
agreement between the parties and (iv) solicitation of the employees of one
party by the other party prior to the Distribution Date. Further, HP retains any
rights it has under statute or common law with respect to actions by its former
employees to the extent such actions are inconsistent with the rights granted to
Agilent and restrictions imposed on Agilent under this Agreement, any other
Ancillary Agreement or any other agreement between the parties.
(b) Assignment, Cooperation for Compliance and Enforcement.
(i) HP retains all rights under the HP Employee Agreements
of all former HP employees necessary to permit HP to protect the rights and
interests of HP, but hereby transfers and assigns to Agilent its rights under
the HP Employee Agreements of all former HP employees to the extent required to
permit Agilent to enjoin, restrain, recover damages from or obtain specific
performance of the HP Employee Agreements or obtain other remedies against any
employee who breaches his/her HP Employee Agreement, and to the extent necessary
to permit Agilent to protect the rights and interests of the businesses being
transferred to Agilent on the Separation Date.
(ii) HP and Agilent agree, at their own respective cost and
expense, to use their reasonable efforts to cooperate as follows: (A) Agilent
shall advise HP of: (1) any violation(s) of the HP Employee Agreement by former
HP employees, and (2) any violation(s) of the Agilent Employee Agreement which
affect HP's rights; and (B) HP shall advise Agilent of any violations of the HP
Employee Agreement by current or former HP employees which affect Agilent's
rights; provided, however, that the foregoing obligations shall only apply to
violations which become known to an attorney within the legal department of the
party obligated to provide notice thereof.
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(iii) HP and Agilent each may separately enforce the HP
Employee Agreements of former HP employees to the extent necessary to reasonably
protect their respective interests, provided, however, that (i) Agilent shall
not commence any litigation relating thereto without first consulting with HP's
Director of Intellectual Property or his/her designee and (ii) HP shall not
commence any litigation relating thereto against any former HP employee who is
at the time an Agilent employee without first consulting with Agilent's Director
of Intellectual Property or his/her designee. If either party, in seeking to
enforce any HP Employee Agreement, notifies the other party that it requires, or
desires, the other party to join in such action, then the other party shall do
so. In addition, if either party commences or becomes a party to any action to
enforce a HP Employee Agreement of a former HP employee, the other party shall,
whether or not it becomes a party to the action, cooperate with the other party
by making available its files and employees who have information or knowledge
relevant to the dispute, subject to appropriate measures to protect the
confidentiality of any proprietary or confidential information that may be
disclosed in the course of such cooperation or action and subject to any
relevant privacy laws and regulations. Any such action shall be conducted at the
expense of the party bringing the action and the parties shall agree on a case
by case basis on compensation, if any, of the other party for the value of the
time of such other party's employees as reasonably required in connection with
the action.
(iv) HP and Agilent understand and acknowledge that matters
relating to the making, performance, enforcement, assignment and termination of
employee agreements are typically governed by the laws and regulations of the
national, federal, state or local governmental unit where an employee resides,
or where an employee's services are rendered, and that such laws and regulations
may supersede or limit the applicability or enforceability of this Section 5.13.
In such circumstances, HP and Agilent agree to take action with respect to the
employee agreements that best accomplishes the parties' objectives as set forth
in this Section 5.13 and that is consistent with applicable law.
Section 5.14 Cooperation in Obtaining New Agreements. HP understands that,
prior to the Separation Date, Agilent has derived benefits under certain
agreements between HP and third parties, which agreements are not being assigned
to Agilent in connection with the Separation. Upon the request of Agilent, HP
agrees to make introductions to appropriate Agilent personnel to HP's contacts
at such third parties, and agrees to provide reasonable assistance to Agilent,
at HP's own expense, so that Agilent may obtain agreements from such third
parties under substantially equivalent terms and conditions, including financial
terms and conditions, that apply to HP. Such assistance may include, but is not
limited to, (i) requesting and encouraging such third parties to enter into such
agreements with Agilent, (ii) attending meetings and negotiating sessions with
Agilent and such third parties, and (iii) participating in buying consortiums
with Agilent. HP also understands that there are certain agreements between HP
and third parties, which agreements are being assigned to Agilent in connection
with the Separation but which may require the consent of the applicable third
party. Upon the request of Agilent, HP agrees to assist Agilent in seeking and
obtaining the consent of such third parties to such assignment. The parties
expect that the activities contemplated by this Section will be substantially
completed by the Distribution Date, but in no event will HP have any obligations
hereunder after the first anniversary of the Distribution Date.
Section 5.15 Property Damage to Agilent Assets Prior to the Separation
Date. In the event of any property damage to any Agilent Assets prior to the
Separation Date, HP shall repair or
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otherwise address such damage in the ordinary course of business consistent with
past practices; provided, however, that nothing in this clause shall restrict HP
from disposing of any Assets in the ordinary course of business consistent with
past practices.
Section 5.16 Newly Discovered Environmental Conditions at Agilent
Schedule 1 Facilities. If between the date of this Agreement and the Separation
Date, Environmental Conditions (as defined in Section 4.21 of the
Indemnification and Insurance Matters Agreement) are discovered on an Agilent
Schedule 1 Facility (as defined in Section 4.11 of the Indemnification and
Insurance Matters Agreement) for which HP, consistent with its past practices,
would accrue a reserve, then HP and Agilent shall determine the allocation of
responsibility for any Environmental Actions (as defined in Section 4.20 of the
Indemnification and Insurance Matters Agreement) arising, whether before or
after the Separation Date, out of such Environmental Conditions, in a manner
consistent with the provisions of Section 1.4 of the Indemnification and
Insurance Matters Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Limitation of Liability. IN NO EVENT SHALL ANY MEMBER OF THE
HP GROUP OR AGILENT GROUP BE LIABLE TO ANY OTHER MEMBER OF THE HP GROUP OR
AGILENT GROUP FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE
DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED,
HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S
INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THE
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT.
Section 6.2 Entire Agreement. This Agreement, the other Ancillary
Agreements and the Exhibits and Schedules referenced or attached hereto and
thereto, constitutes the entire agreement between the parties with respect to
the subject matter hereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof.
Section 6.3 Governing Law. This Agreement shall be governed and construed
and enforced in accordance with the laws of the State of Delaware as to all
matters regardless of the laws that might otherwise govern under the principles
of conflicts of laws applicable thereto.
Section 6.4 Termination. This Agreement and all Ancillary Agreements may
be terminated and the Distribution abandoned at any time prior to the IPO
Closing Date by and in the sole discretion of HP without the approval of
Agilent. This Agreement may be terminated at any time after the IPO Closing Date
and before the Distribution Date by mutual consent of HP and
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Agilent. In the event of termination pursuant to this Section, no party shall
have any liability of any kind to the other party.
Section 6.5 Notices. Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii)
one (1) business day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one (1) business day after being deposited with
an overnight courier service or (v) four (4) days after being deposited in the
U.S. mail, First Class with postage prepaid, and addressed to the attention of
the party's General Counsel at the address of its principal executive office or
such other address as a party may request by notifying the other in writing.
Section 6.6 Counterparts. This Agreement, including the Schedules and
Exhibits hereto and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
Section 6.7 Binding Effect; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
not be assigned by any party hereto. This Agreement may be enforced separately
by each member of the HP Group and each member of the Agilent Group.
Section 6.8 Severability. If any term or other provision of this
Agreement or the Schedules or Exhibits attached hereto is determined by a
nonappealable decision by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the fullest
extent possible.
Section 6.9 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of either party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement or the Schedules or Exhibits attached hereto are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
Section 6.10 Amendment. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to such agreement.
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Section 6.11 Authority. Each of the parties hereto represents to the
other that (a) it has the corporate or other requisite power and authority to
execute, deliver and perform this Agreement, (b) the execution, delivery and
performance of this Agreement by it have been duly authorized by all necessary
corporate or other actions, (c) it has duly and validly executed and delivered
this Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.
Section 6.12 Interpretation. The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table of contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, Exhibit or Schedule, such reference shall be to an Article
or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
Section 6.13 Conflicting Agreements. In the event of conflict between
this Agreement and any Ancillary Agreement or other agreement executed in
connection herewith, the provisions of such other agreement shall prevail.
ARTICLE VII
DEFINITIONS
Section 7.1 Affiliated Company. "Affiliated Company" means, with respect
to HP, any entity in which HP holds a 50% or less ownership interest and that is
listed on Schedule 7.1(a) hereto and, with respect to Agilent, any entity in
which Agilent holds a 50% or less ownership interest and that is listed on
Schedule 7.1(b) hereto. Schedules 7.1(a) and 7.1(b) may be amended from time to
time after the date hereof upon mutual written consent of the parties.
Section 7.2 Agilent Assets. "Agilent Assets" has the meaning set forth
in Section 1.2 of the Assignment Agreement.
Section 7.3 Agilent Business. "Agilent Business" means (a) the business
and operations of the business entities of HP currently known under the
following names, as described in the IPO Registration Statement and as such
business and operations will continue following the Separation Date: (i) the
Test and Measurement Organization, (ii) the Semiconductor Products Group, (iii)
the Chemical Analysis Group, (iv) the Healthcare Solutions Group and (v) the
portion of HP Labs and infrastructure organizations related to these businesses
and (b) except as otherwise expressly provided herein, any terminated, divested
or discontinued businesses or operations that at the time of termination,
divestiture or discontinuation primarily related to the Agilent Business as then
conducted.
Section 7.4 Agilent Group. "Agilent Group" means Agilent, each
Subsidiary and Affiliated Company of Agilent immediately after the Separation
Date or that is contemplated to be a
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Subsidiary or Affiliated Company of Agilent pursuant to the Non-US Plan and each
Person that becomes a Subsidiary or Affiliate Company of Agilent after the
Separation Date.
Section 7.5 Agilent Pro Forma Balance Sheet. "Agilent Pro Forma Balance
Sheet" means the unaudited pro forma condensed consolidated balance sheet
appearing in the IPO Registration Statement.
Section 7.6 Agilent's Auditors. "Agilent's Auditors" means Agilent's
independent certified public accountants.
Section 7.7 Ancillary Agreements. "Ancillary Agreements" has the meaning
set forth in Section 2.1 hereof.
Section 7.8 Assignment Agreement. "Assignment Agreement" has the meaning
set forth in Section 2.1(a) hereof.
Section 7.9 Business Day. "Business Day" means a day other than a
Saturday, a Sunday or a day on which banking institutions located in the State
of California are authorized or obligated by law or executive order to close.
Section 7.10 Code. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
Section 7.11 Commission. "Commission" means the Securities and Exchange
Commission.
Section 7.12 Disputes. "Disputes" has the meaning set forth in Section 5.9
hereof.
Section 7.13 Distribution. "Distribution" has the meaning set forth in the
Recitals hereof.
Section 7.14 Distribution Agent. "Distribution Agent" has the meaning set
forth in Section 4.1 hereof.
Section 7.15 Distribution Date. "Distribution Date" has the meaning set
forth in Section 4.1 hereof.
Section 7.16 Employee Agreement. "Employee Agreement" has the meaning set
forth in Section 5.13(a) hereof.
Section 7.17 Exchange Act. "Exchange Act" means the Securities and
Exchange Act of 1934, as amended.
Section 7.18 Governmental Approvals. "Governmental Approvals" means any
notices, reports or other filings to be made, or any consents, registrations,
approvals, permits or authorizations to be obtained from, any Governmental
Authority.
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Section 7.19 "Governmental Authority" shall mean any federal, state,
local, foreign or international court, government, department, commission,
board, bureau, agency, official or other regulatory, administrative or
governmental authority.
Section 7.20 HP Business. "HP Business" means any business of HP other
than the Agilent Business.
Section 7.21 HP Group. "HP Group" means HP, each Subsidiary and Affiliated
Company of HP (other than any member of the Agilent Group) immediately after the
Separation Date, after giving effect to the Non-US Plan and each Person that
becomes a Subsidiary or Affiliate Company of HP after the Separation Date.
Section 7.22 HP's Auditors. "HP's Auditors" means HP's independent
certified public accountants.
Section 7.23 Information. "Information" means information, whether or not
patentable or copyrightable, in written, oral, electronic or other tangible or
intangible forms, stored in any medium, including studies, reports, records,
books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
Section 7.24 IPO. "IPO" has the meaning set forth in the Recitals hereof.
Section 7.25 IPO Closing Date. "IPO Closing Date" has the meaning set
forth in the Recitals hereof.
Section 7.26 IPO Net Proceeds. "IPO Net Proceeds" has the meaning set
forth in the Recitals hereof.
Section 7.27 IPO Over-allotment Option. "IPO Over-allotment Option" has
the meaning set forth in the Recitals hereof.
Section 7.28 IPO Registration Statement. "IPO Registration Statement"
means the registration statement on Form S-1 pursuant to the Securities Act of
1933, as amended, to be filed with the Commission registering the shares of
common stock of Agilent to be issued in the IPO, together with all amendments
thereto.
Section 7.29 Nasdaq. "Nasdaq" means the Nasdaq National Market.
Section 7.30 Non-US Plan. "Non-US Plan" has the meaning set forth in
Section 5.8 hereof.
Section 7.31 NYSE "NYSE" means the New York Stock Exchange.
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Section 7.32 Person. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
Section 7.33 Prime Rate. "Prime Rate" means the prime rate as published in
the Wall Street Journal on the date of determination.
Section 7.34 Record Date. "Record Date" means the close of business on the
date to be determined by the Board of Directors of HP as the record date for
determining the stockholders of HP entitled to receive shares of common stock of
Agilent in the Distribution.
Section 7.35 Retained Payables. "Retained Payables" means (i) all accounts
payable and other obligations of payment for goods or services purchased, leased
or otherwise received in the conduct of the Agilent Business that as of the
Separation Date are payable to a third Person by HP or any of HP's Subsidiaries,
whether past due, due or to become due, including any interest, sales or use
taxes, finance charges, late or returned check charges and other obligations of
HP or any of HP's Subsidiaries with respect thereto, and any obligations related
to any of the foregoing and (ii) all employee compensation Liabilities and other
miscellaneous Liabilities for which an adjustment is made in the Agilent Pro
Forma Balance Sheet.
Section 7.36 Retained Receivables. "Retained Receivables" means (i) all
accounts receivable and other rights to payment for goods or services sold,
leased or otherwise provided in the conduct of the Agilent Business that as of
the Separation Date are payable by a third Person to HP or any of HP's
Subsidiaries, whether past due, due or to become due, including any interest,
sales or use taxes, finance charges, late or returned check charges and other
obligations of the account debtor with respect thereto, and any proceeds of any
of the foregoing and (ii) all other miscellaneous Assets for which an adjustment
is made in the Agilent Pro Forma Balance Sheet.
Section 7.37 Separation. "Separation" has the meaning set forth in the
Recitals hereof.
Section 7.38 Separation Date. "Separation Date" has the meaning set forth
in Section 1.1 hereof.
Section 7.39 Subsidiary. "Subsidiary" means with respect to any specified
Person, any corporation, any limited liability company, any partnership or other
legal entity of which such Person or its Subsidiaries owns, directly or
indirectly, more than 50% of the stock or other equity interest entitled to vote
on the election of the members of the board of directors or similar governing
body. Unless context otherwise requires, reference to HP and its Subsidiaries
shall not include the subsidiaries of HP that will be transferred to Agilent
after giving effect to the Separation, including the actions taken pursuant to
the Non-US Plan.
Section 7.40 Underwriters. "Underwriters" means the underwriters of the
IPO.
Section 7.41 Underwriting Agreement. "Underwriting Agreement" has the
meaning set forth in Section 3.1(a) hereof.
-23-
<PAGE>
Section 7.42 WSGR. "WSGR" means Wilson Sonsini Goodrich & Rosati,
Professional Corporation.
-24-
<PAGE>
WHEREFORE, the parties have signed this Master Separation and Distribution
Agreement effective as of the date first set forth above.
HEWLETT-PACKARD COMPANY AGILENT TECHNOLOGIES, INC.
By: /s/ Robert P. Wayman By: /s/ Edward W. Barnholt
---------------------------- ----------------------------
Name: Robert P. Wayman Name: Edward W. Barnholt
-------------------------- --------------------------
Title: Chief Financial Officer Title: President & CEO
------------------------- -------------------------
<PAGE>
Schedule 2.1(b)
Subsidiaries and Other Holdings of HP to be Transferred to Agilent
Subsidiaries
Agilent Technologies World Trade, Inc.
Heartstream, Inc.
Pete, Inc.
Rockland Technologies Inc.
Scope Communications, Inc.
Telegra Corporation
Other Holdings
Candescent Technologies Corporation
Cascade Microtech Inc.
HP-Sci Tech Joint Software Development Center Co. Ltd.
i-Stat Corporation
Microelectrics & Computer Technology Group
<PAGE>
Schedule 2.2(b)
Cash Held in Subsidiaries
China Hewlett-Packard Company Limited
Heartstream, Inc.
Hewlett-Packard Belgium SA/NV
Hewlett-Packard Coordination Center, S.C.
Hewlett-Packard Espanola, S.A.
Hewlett-Packard Japan, Ltd.
Hewlett-Packard Malaysia Sdn Bhd
Hewlett-Packard Microwave Products (M) Sdn Bhd
Hewlett-Packard Oy
Hewlett-Packard S.A.S.
Hewlett-Packard Taiwan Ltd.
Yokogawa Analytical Systems, Inc.
<PAGE>
Schedule 7.1 (a)
Affiliated Companies of HP to be Included in the HP Group
Ericsson-HP Telecom (Sweden)
Ericsson-HP Telecom (France)
Hua-Pua
Hugin Expert
Idea LLC
ImagineCard
Intria-HP
Intria-HP Potomac
Liquidity Management Group
PT Berka Services
Putial Ome
Sopura Systems
Syc
<PAGE>
Schedule 7.1(b)
Affiliated Companies of Agilent to be Included in the Agilent Group
Chartered Semiconductor Partners Singapore
LumiLEDS
<PAGE>
Exhibit 2.2
General Assignment and Assumption Agreement
between
Hewlett-Packard Company
and
Agilent Technologies, Inc.
November 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I CONTRIBUTION AND ASSUMPTION........................................................................... 1
Section 1.1 Contribution of Assets and Assumption of Liabilities................................................. 1
Section 1.2 Agilent Assets....................................................................................... 2
Section 1.3 Agilent Liabilities.................................................................................. 3
Section 1.4 Non-US Plan.......................................................................................... 5
Section 1.5 Methods of Transfer and Assumption................................................................... 5
Section 1.6 Governmental Approvals and Consents.................................................................. 7
Section 1.7 Nonrecurring Costs and Expenses...................................................................... 7
Section 1.8 Novation of Assumed Agilent Liabilities.............................................................. 8
ARTICLE II LITIGATION........................................................................................... 8
Section 2.1 Allocation........................................................................................... 8
Section 2.2 Cooperation.......................................................................................... 9
ARTICLE III MISCELLANEOUS....................................................................................... 9
Section 3.1 Entire Agreement..................................................................................... 9
Section 3.2 Governing Law........................................................................................ 9
Section 3.3 Notices.............................................................................................. 10
Section 3.4 Parties in Interest.................................................................................. 10
Section 3.5 Counterparts......................................................................................... 10
Section 3.6 Binding Effect; Assignment........................................................................... 10
Section 3.7 Severability......................................................................................... 10
Section 3.8 Failure or Indulgence Not Waiver; Remedies Cumulative................................................ 10
Section 3.9 Amendment............................................................................................ 10
Section 3.10 Authority............................................................................................ 11
Section 3.11 Interpretation....................................................................................... 11
Section 3.12 Conflicting Agreements............................................................................... 11
ARTICLE IV DEFINITIONS.......................................................................................... 11
Section 4.1 Action............................................................................................... 11
Section 4.2 Affiliated Company................................................................................... 11
Section 4.3 Agilent Assets....................................................................................... 11
Section 4.4 Agilent Balance Sheet................................................................................ 11
Section 4.5 Agilent Business..................................................................................... 11
Section 4.6 Agilent Contingent Gain.............................................................................. 12
Section 4.7 Agilent Contingent Liability......................................................................... 12
Section 4.8 Agilent Contracts.................................................................................... 13
Section 4.9 Agilent Group........................................................................................ 13
Section 4.10 Agilent Liabilities.................................................................................. 14
Section 4.11 Agilent Pro Forma Balance Sheet...................................................................... 14
Section 4.12 Agilent World Trade.................................................................................. 14
Section 4.13 Ancillary Agreement.................................................................................. 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Section 4.14 Assets................................................................................................. 14
Section 4.15 Consents............................................................................................... 15
Section 4.16 Contracts.............................................................................................. 15
Section 4.17 Delayed Transfer Assets................................................................................ 15
Section 4.18 Distribution........................................................................................... 16
Section 4.19 Distribution Date...................................................................................... 16
Section 4.20 Environmental Actions.................................................................................. 16
Section 4.21 Excluded Assets........................................................................................ 16
Section 4.22 Excluded Liabilities................................................................................... 16
Section 4.23 Governmental Approvals................................................................................. 16
Section 4.24 Governmental Authority................................................................................. 16
Section 4.25 HP Group............................................................................................... 16
Section 4.26 Indemnification and Insurance Matters Agreement........................................................ 16
Section 4.27 Insurance Policies..................................................................................... 16
Section 4.28 Insured Agilent Liability.............................................................................. 16
Section 4.29 Intellectual Property.................................................................................. 16
Section 4.30 IPO Registration Statement............................................................................. 17
Section 4.31 Liabilities............................................................................................ 17
Section 4.32 Litigation Disclosure Letter........................................................................... 17
Section 4.33 Local Transfer Agreements.............................................................................. 17
Section 4.34 Non-US Plan............................................................................................ 17
Section 4.35 OFLs................................................................................................... 17
Section 4.36 Person................................................................................................. 18
Section 4.37 Retained Payables...................................................................................... 18
Section 4.38 Retained Receivables................................................................................... 18
Section 4.39 Security Interest...................................................................................... 18
Section 4.40 Separation............................................................................................. 18
Section 4.41 Separation Agreement................................................................................... 18
Section 4.42 Separation Date........................................................................................ 18
Section 4.43 Subsidiary............................................................................................. 19
Section 4.44 Taxes.................................................................................................. 19
</TABLE>
ii
<PAGE>
SCHEDULES
Schedule 1.1(c) Delayed Transfer Assets and Liabilities
Schedule 1.2(a)(xii) Specific Agilent Assets to be Transferred
Schedule 1.2(b)(i) Excluded Assets
Schedule 1.3(a)(vi) Divested Businesses Which Contain Liabilities to be
Transferred to Agilent
Schedule 1.3(a)(vii) Specific Agilent Liabilities
Schedule 1.3(b)(i) Excluded Liabilities
<PAGE>
GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT
This General Assignment and Assumption Agreement (this "Agreement") is
entered into on November 1, 1999 between Hewlett-Packard Company, a Delaware
corporation ("HP"), and Agilent Technologies, Inc., a Delaware corporation
("Agilent"). Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to such terms in Article IV hereof.
RECITALS
WHEREAS, HP hereby and by certain other instruments of even date herewith
transfers or will transfer to Agilent effective as of the Separation Date,
substantially all of the business and assets of the Agilent Business owned by HP
in accordance with the Master Separation and Distribution Agreement dated as of
August 12, 1999 between the parties (the "Separation Agreement"). It is the
intent of the parties hereto, by this Agreement and the other agreements and
instruments provided for in the Separation Agreement, that HP and its
Subsidiaries convey to Agilent and its Subsidiaries substantially all of the
business and assets of the Agilent Business.
WHEREAS, it is further intended between the parties that Agilent assume
certain of the liabilities related to the Agilent Business, as provided in this
Agreement, the Separation Agreement or the other agreements and instruments
provided for in the Separation Agreement.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I
CONTRIBUTION AND ASSUMPTION
Section 1.1 Contribution of Assets and Assumption of Liabilities.
(a) Transfer of Assets. Effective on the Separation Date, HP hereby
assigns, transfers, conveys and delivers to Agilent, and agrees to cause its
applicable Subsidiaries to assign, transfer, convey and deliver to Agilent's
applicable Subsidiaries pursuant to the relevant Local Transfer Agreements, and
Agilent hereby accepts from HP, and agrees to cause its applicable Subsidiaries
to accept from HP's applicable Subsidiaries, all of HP's and its applicable
Subsidiaries' respective right, title and interest in all Agilent Assets, other
than the Delayed Transfer Assets; provided, however, that any Agilent Assets
that are specifically assigned or transferred pursuant to another Ancillary
Agreement shall not be assigned or transferred pursuant to this Section 1.1(a).
(b) Assumption of Liabilities. Effective on the Separation Date, Agilent
hereby assumes and agrees faithfully to perform and fulfill, all the Agilent
Liabilities held by HP, other than the Delayed Transfer Liabilities, in
accordance with their respective terms, and agrees to cause its applicable
Subsidiaries to assume, perform and fulfill all the Agilent Liabilities held by
its Subsidiaries (other than the Delayed Transfer Liabilities), in accordance
with their respective terms.
<PAGE>
Agilent shall be responsible for all Agilent Liabilities held by HP, regardless
of when or where such Liabilities arose or arise, or whether the facts on which
they are based occurred prior to, on or after the date hereof, regardless of
where or against whom such Liabilities are asserted or determined (including any
Agilent Liabilities arising out of claims made by HP's or Agilent's respective
directors, officers, consultants, independent contractors, employees or agents
against any member of the HP Group or the Agilent Group) or whether asserted or
determined prior to the date hereof, and regardless of whether arising from or
alleged to arise from negligence, recklessness, violation of law, fraud or
misrepresentation by any member of the HP Group or the Agilent Group or any of
their respective directors, officers, employees or agents.
(c) Delayed Transfer Assets and Liabilities. Each of the parties hereto
agrees that the Delayed Transfer Assets will be assigned, transferred, conveyed
and delivered, and the Delayed Transfer Liabilities will be assumed, in
accordance with the terms of the agreements that provide for such assignment,
transfer, conveyance and delivery, or such assumption, after the date of this
Agreement or as otherwise set forth on Schedule 1.1(c). Following such
assignment, transfer, conveyance and delivery of any Delayed Transfer Asset, or
the assumption of any Delayed Transfer Liability, the applicable Delayed
Transfer Asset or Delayed Transfer Liability shall be treated for all purposes
of this Agreement and the Ancillary Agreements as an Agilent Asset or as an
Agilent Liability, as the case may be.
(d) Misallocated Assets. In the event that at any time or from time to
time (whether prior to, on or after the Separation Date), any party hereto (or
any member of such party's respective Group), shall receive or otherwise possess
any Asset that is allocated to any other Person pursuant to this Agreement or
any Ancillary Agreement, such party shall promptly transfer, or cause to be
transferred, such Asset to the Person so entitled thereto. Prior to any such
transfer, the Person receiving or possessing such Asset shall hold such Asset in
trust for any such other Person.
Section 1.2 Agilent Assets.
(a) Included Assets. For purposes of this Agreement, "Agilent Assets"
shall mean (without duplication) the following Assets, except as otherwise
provided for in any Ancillary Agreement or other express agreement of the
parties:
(i) all Assets reflected in the Agilent Balance Sheet, subject to
any dispositions of such Assets subsequent to the date of the Agilent Balance
Sheet;
(ii) all Assets that have been written off, expensed or fully
depreciated that, had they not been written off, expensed or fully depreciated,
would have been reflected in the Agilent Balance Sheet in accordance with the
principles and accounting policies under which the Agilent Balance Sheet was
prepared;
(iii) all Assets acquired by HP or its Subsidiaries after the date
of the Agilent Balance Sheet that would be reflected in the consolidated balance
sheet of Agilent as of the Separation Date if such consolidated balance sheet
was prepared using the same principles and accounting policies under which the
Agilent Balance Sheet was prepared;
-2-
<PAGE>
(iv) all Assets that are used primarily by the Agilent Business
at the Separation Date but are not reflected in the Agilent Balance Sheet due to
mistake or unintentional omission; provided, however, that no Asset shall be an
Agilent Asset unless Agilent or its Subsidiaries has, on or before the first
anniversary of the Distribution Date, given HP or its Subsidiaries notice that
such Asset is an Agilent Asset;
(v) all Agilent Contingent Gains;
(vi) all Agilent Contracts;
(vii) all issued and outstanding capital stock of Agilent World
Trade;
(viii) all issued and outstanding stock, investments or similar
interests of HP and the Subsidiaries of HP listed on Schedule 2.1(b) of the
Separation Agreement;
(ix) all computers, desks, equipment (including equipment used
for research and development) and other Assets used primarily by employees of HP
that will become employees of Agilent in connection with the Separation; and
(x) cash, as set forth in Section 2.2 of the Separation
Agreement;
(xi) to the extent permitted by law and subject to the
Indemnification and Insurance Matters Agreement, all rights of any member of the
Agilent Group under any of HP's Insurance Policies or other insurance policies
issued by Persons unaffiliated with HP; and
(xii) all Assets that are expressly contemplated by this
Agreement, the Separation Agreement or any other Ancillary Agreement (or
Schedule 1.2(a)(xii) or any other Schedule hereto or thereto) as Assets to be
transferred to Agilent or any other member of the Agilent Group.
(i) Notwithstanding the foregoing, any Assets held directly or
indirectly by Agilent World Trade or any Subsidiaries of HP listed on Schedule
2.1(b) of the Separation Agreement shall not be assigned or transferred pursuant
to Section 1.1(a), and the Agilent Assets shall not in any event include the
Excluded Assets referred to in Section 1.2(b) below.
(b) Excluded Assets. For the purposes of this Agreement, "Excluded
Assets" shall mean:
(i) the Assets listed or described on Schedule 1.2(b)(i);
(ii) the Retained Receivables; and
(iii) any Assets that are expressly contemplated by the Separation
Agreement, this Agreement or any other Ancillary Agreement (or the Schedules
hereto or thereto) as Assets to be retained by HP or any other member of the HP
Group.
Section 1.3 Agilent Liabilities.
-3-
<PAGE>
(a) Included Liabilities. For the purposes of this Agreement, "Agilent
Liabilities" shall mean (without duplication) the following Liabilities, except
as otherwise provided for in any Ancillary Agreement or other express agreement
of the parties:
(i) all Liabilities reflected in the Agilent Balance Sheet, subject
to any discharge of such Liabilities subsequent to the date of the Agilent
Balance Sheet;
(ii) all Liabilities of HP or its Subsidiaries that arise after the
date of the Agilent Balance Sheet that would be reflected in the consolidated
balance sheet of Agilent as of the Separation Date if such consolidated balance
sheet was prepared using the same principles and accounting policies under which
the Agilent Balance Sheet was prepared;
(iii) all Liabilities that are related primarily to the Agilent
Business at the Separation Date but are not reflected in the Agilent Balance
Sheet due to mistake or unintentional omission; provided, however, that no
Liability shall be an Agilent Liability unless HP or its Subsidiaries, on or
before the first anniversary of the Distribution Date, has given Agilent or its
Subsidiaries notice that such Liability is an Agilent Liability;
(iv) all Agilent Contingent Liabilities;
(v) all Liabilities (other than Liabilities for Taxes), whether
arising before, on or after the Separation Date, primarily relating to, arising
out of or resulting from:
(1) the operation of the Agilent Business, as conducted at
any time prior to, on or after the Separation Date (including any Liability
relating to, arising out of or resulting from any act or failure to act by any
director, officer, employee, agent or representative (whether or not such act or
failure to act is or was within such Person's authority));
(2) the operation of any business conducted by any member
of the Agilent Group at any time after the Separation Date (including any
Liability relating to, arising out of or resulting from any act or failure to
act by any director, officer, employee, agent or representative (whether or not
such act or failure to act is or was within such Person's authority)); or
(3) any Agilent Assets;
(vi) all Liabilities relating to, arising out of or resulting from
any of the terminated, divested or discontinued businesses and operations listed
or described on Schedule 1.3(a)(vi); and
(vii) all Liabilities that are expressly contemplated by this
Agreement, Schedule 1.3(a)(vii), the Separation Agreement or any other Ancillary
Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed by
Agilent or any member of the Agilent Group, and all agreements, obligations and
Liabilities of any member of the Agilent Group under this Agreement or any of
the Ancillary Agreements.
-4-
<PAGE>
Notwithstanding the foregoing, any Liabilities of Agilent World Trade or any
Subsidiaries of HP listed on Schedule 2.1(b) of the Separation Agreement shall
not be assumed pursuant to Section 1.2(a), and the Agilent Liabilities shall not
include the Excluded Liabilities referred to in Section 1.3(b) below.
(b) Excluded Liabilities. For the purposes of this Agreement, "Excluded
Liabilities" shall mean:
(i) all Liabilities listed or described in Schedule 1.3(b)(i);
(ii) the Retained Payables;
(iii) all Insured Agilent Liabilities;
(iv) all Environmental Actions set forth in Section 1.4(b) of the
Indemnification and Insurance Matters Agreement; and
(v) all Liabilities that are expressly contemplated by this
Agreement, the Separation Agreement or any other Ancillary Agreement (or the
Schedules hereto or thereto) as Liabilities to be retained or assumed by HP or
any other member of the HP Group, and all agreements and obligations of any
member of the HP Group under the Separation Agreement, this Agreement or any
other Ancillary Agreement.
Section 1.4 The Non-US Plan.
(a) Consummation of Non-US Plan. Each of HP and Agilent shall take, and
shall cause each member of its respective Group to take, such action as
reasonably necessary to consummate the transactions contemplated by the Non-US
Plan (whether prior to, on or after the Separation Date). Notwithstanding
anything in this Agreement, the Separation Agreement or in any other Ancillary
Agreement to the contrary, no party to a Local Transfer Agreement shall be
entitled to receive or retain any Asset unless such party shall have paid any
consideration contemplated to be paid in connection therewith pursuant to the
Non-US Plan.
(b) Transfer of Stock. Effective on the Separation Date, HP shall
transfer all of its right, title and interest in and to all of the issued and
outstanding capital stock in Agilent World Trade and the other Subsidiaries
listed in Schedule 2.1(b) of the Separation Agreement, to Agilent by means of a
contribution of such capital stock by HP to Agilent. The parties hereto shall
execute, or cause to be executed, such transfer instruments as they mutually
deem appropriate to effectuate and evidence such transfer.
Section 1.5 Methods of Transfer and Assumption.
(a) Terms of Other Ancillary Agreements Govern. The parties shall enter
into the other Ancillary Agreements, on or about the date of this Agreement. To
the extent that the transfer of any Agilent Asset or the assumption of any
Agilent Liability is expressly provided for by the terms of
-5-
<PAGE>
any other Ancillary Agreement, the terms of such other Ancillary Agreement shall
effect, and determine the manner of, the transfer or assumption. It is the
intent of the parties that pursuant to Sections 1.1, 1.2 and 1.3, the transfer
and assumption of all other Agilent Assets and Agilent Liabilities, other than
Delayed Transfer Assets and Delayed Transfer Liabilities, shall be made
effective as of the Separation Date; provided, however, that circumstances in
various jurisdictions outside the United States may require the transfer of
certain Assets and the assumption of certain Liabilities to occur in such other
manner and at such other time as the parties shall agree, as provided in Section
1.4 hereof.
(b) Mistaken Assignments and Assumptions. In addition to those transfers
and assumptions accurately identified and designated by the parties to take
place but which the parties are not able to effect prior to the Separation Date,
there may exist (i) Assets that the parties discover were, contrary to the
agreements between the parties, by mistake or omission, transferred to Agilent
or retained by HP or (ii) Liabilities that the parties discover were, contrary
to the agreements between the parties, by mistake or omission, assumed by
Agilent or not assumed by Agilent. The parties shall cooperate in good faith to
effect the transfer or re-transfer of such Assets, and/or the assumption or re-
assumption of such Liabilities, to or by the appropriate party and shall not use
the determination that remedial actions need to be taken to alter the original
intent of the parties hereto with respect to the Assets to be transferred to or
Liabilities to be assumed by Agilent. Each party shall reimburse the other or
make other financial adjustments (e.g., without limitation, cash reserves) or
other adjustments to remedy any mistakes or omissions relating to any of the
Assets transferred hereby or any of the Liabilities assumed hereby.
(c) Transfer of Assets and Liabilities Not Included in Agilent Assets and
Agilent Liabilities. In the event the parties discover Assets and Liabilities
that relate primarily to the Agilent Business but do not constitute Agilent
Assets under Section 1.2 or Agilent Liabilities under Section 1.3, the parties
shall cooperate in good faith to effect the transfer of such Assets at book
value, or the assumption of such Liabilities, to Agilent or its Subsidiaries and
shall not use the determination of remedial actions contemplated in the
Separation Agreement to alter the original intent of the parties hereto with
respect to the Assets to be transferred to or Liabilities to be assumed by
Agilent. Each party shall reimburse the other or make other financial
adjustments (e.g., without limitation, cash reserves) or other adjustments to
remedy any mistakes or omissions relating to any of the Assets transferred
hereby or any of the Liabilities assumed hereby.
(d) Documents Relating to Other Transfers of Assets and Assumption of
Liabilities. In furtherance of the assignment, transfer and conveyance of
Agilent Assets and the assumption of Agilent Liabilities set forth in Sections
1.5(a), (b) and (c) and certain Ancillary Agreements, simultaneously with the
execution and delivery hereof or as promptly as practicable thereafter, (i) HP
shall execute and deliver, and shall cause its Subsidiaries in accordance with
Local Transfer Agreements to execute and deliver, such bills of sale, stock
powers, certificates of title, assignments of contracts and other instruments of
transfer, conveyance and assignment as and to the extent necessary to evidence
the transfer, conveyance and assignment of all of HP's and its Subsidiaries'
right, title and interest in and to the Agilent Assets to Agilent and (ii)
Agilent shall execute and deliver, to HP and its Subsidiaries such bills of
sale, stock powers, certificates of title, assumptions
-6-
<PAGE>
of contracts and other instruments of assumption as and to the extent necessary
to evidence the valid and effective assumption of the Agilent Liabilities
by Agilent.
Section 1.6 Governmental Approvals and Consents.
(a) Transfer In Violation of Laws. If and to the extent that the valid,
complete and perfected transfer assignment or novation to the Agilent Group of
any Agilent Assets and Agilent Liabilities (or from the Agilent Group of any
Non-Agilent Assets) would be a violation of applicable laws or require any
Consent or Governmental Approval in connection with the Separation, the IPO or
the Distribution, then, unless HP shall otherwise determine, the transfer,
assignment or novation to or from the Agilent Group, as the case may be, of such
Agilent Assets or Non-Agilent Assets, respectively, shall be automatically
deemed deferred and any such purported transfer, assignment or novation shall be
null and void until such time as all legal impediments are removed and/or such
Consents or Governmental Approvals have been obtained. Notwithstanding the
foregoing, such Asset shall still be considered an Agilent Asset for purposes of
determining whether any Liability is an Agilent Liability; provided, however,
that if such covenants or Governmental Approvals have not been obtained within
six months of the Distribution Date, the parties will use their reasonable
commercial efforts to achieve an alternative solution in accordance with the
parties' intentions.
(b) Transfers Not Consummated Prior to Separation Date. If the transfer,
assignment or novation of any Assets intended to be transferred or assigned
hereunder, including pursuant to the Non-US Plan, is not consummated prior to or
on the Separation Date, whether as a result of the provisions of Section 1.6(a)
or for any other reason, then the Person retaining such Asset shall thereafter
hold such Asset for the use and benefit, insofar as reasonably possible, of the
Person entitled thereto (at the expense of the Person entitled thereto). In
addition, the Person retaining such Asset shall take such other actions as may
be reasonably requested by the Person to whom such Asset is to be transferred in
order to place such Person, insofar as reasonably possible, in the same position
as if such Asset had been transferred as contemplated hereby and so that all the
benefits and burdens relating to such Agilent Assets (or such Non-Agilent
Assets, as the case may be), including possession, use, risk of loss, potential
for gain, and dominion, control and command over such Assets, are to inure from
and after the Separation Date to the Agilent Group (or the HP Group, as the case
may be). If and when the Consents and/or Governmental Approvals, the absence of
which caused the deferral of transfer of any Asset pursuant to Section 1.6(a),
are obtained, the transfer of the applicable Asset shall be effected in
accordance with the terms of this Agreement and/or the applicable Ancillary
Agreement.
(c) Expenses. The Person retaining an Asset due to the deferral of the
transfer of such Asset shall not be obligated, in connection with the foregoing,
to expend any money unless the necessary funds are advanced by the Person
entitled to the Asset, other than reasonable out-of-pocket expenses, attorneys'
fees and recording or similar fees, all of which shall be promptly reimbursed by
the Person entitled to such Asset.
Section 1.7 Nonrecurring Costs and Expenses. Notwithstanding anything
herein to the contrary, any nonrecurring costs and expenses incurred by the
parties hereto to effect the transactions contemplated hereby which are not
allocated pursuant to the terms of the Separation
-7-
<PAGE>
Agreement, this Agreement or any other Ancillary Agreement shall be the
responsibility of the party which incurs such costs and expenses.
Section 1.8 Novation of Assumed Agilent Liabilities.
(a) Reasonable Commercial Efforts. Each of HP and Agilent, at the request
of the other, shall use their reasonable commercial efforts to obtain, or to
cause to be obtained, any consent, substitution, approval or amendment required
to novate (including with respect to any federal government contract) or assign
all rights and obligations under agreements, leases, licenses and other
obligations or Liabilities (including Agilent OFLs) of any nature whatsoever
that constitute Agilent Liabilities or to obtain in writing the unconditional
release of all parties to such arrangements other than any member of the Agilent
Group, so that, in any such case, Agilent and its Subsidiaries will be solely
responsible for such Liabilities; provided, however, that neither HP, Agilent
nor their Subsidiaries shall be obligated to pay any consideration therefor to
any third party from whom such consents, approvals, substitutions and amendments
are requested.
(b) Inability to Obtain Novation. If HP or Agilent is unable to obtain, or
to cause to be obtained, any such required consent, approval, release,
substitution or amendment, the applicable member of the HP Group shall continue
to be bound by such agreements, leases, licenses and other obligations and,
unless not permitted by law or the terms thereof (except to the extent expressly
set forth in this Agreement, the Separation Agreement or any other Ancillary
Agreement), Agilent shall, as agent or subcontractor for HP or such other
Person, as the case may be, pay, perform and discharge fully, or cause to be
paid, transferred or discharged all the obligations or other Liabilities of HP
or such other Person, as the case may be, thereunder from and after the date
hereof. HP shall, without further consideration, pay and remit, or cause to be
paid or remitted, to Agilent or its appropriate Subsidiary promptly all money,
rights and other consideration received by it or any member of its respective
Group in respect of such performance (unless any such consideration is an
Excluded Asset). If and when any such consent, approval, release, substitution
or amendment shall be obtained or such agreement, lease, license or other rights
or obligations shall otherwise become assignable or able to be novated, HP shall
thereafter assign, or cause to be assigned, all its rights, obligations and
other Liabilities thereunder or any rights or obligations of any member of its
respective Group to Agilent without payment of further consideration and Agilent
shall, without the payment of any further consideration, assume such rights and
obligations.
ARTICLE II
LITIGATION
Section 2.1 Allocation.
(a) Litigation to Be Transferred to Agilent. Notwithstanding any contrary
provisions in the provisions of the Indemnification and Insurance Matters
Agreement, on the Separation Date, the responsibilities for management of the
litigation identified in Section 2.1(a) of a litigation disclosure letter (the
"Litigation Disclosure Letter"), which will be delivered by HP to Agilent on the
Separation Date, shall be transferred in their entirety from HP and its
Subsidiaries to Agilent and its
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Subsidiaries. As of the Separation Date and thereafter, Agilent shall manage the
defense of this litigation and shall cause its applicable Subsidiaries to do the
same. HP and its Subsidiaries must first obtain the prior consent of Agilent or
its applicable Subsidiary for any action taken subsequent to the Separation Date
in connection with the litigation identified in the Litigation Disclosure
Letter, which consent cannot be unreasonably withheld or delayed. All other
matters relating to such litigation, including but not limited to
indemnification for such claims, shall be governed by the provisions of the
Indemnification and Insurance Matters Agreement.
(b) Litigation to be Defended by HP at Agilent's Expense. Notwithstanding
any contrary provisions in the Indemnification and Insurance Matters Agreement,
HP shall defend, and shall cause its applicable Subsidiaries to defend, the
litigation identified in Section 2.1(b) of the Litigation Disclosure Letter. All
other matters relating to such litigation, including but not limited to
indemnification for such claims, shall be governed by the provisions of the
Indemnification and Insurance Matters Agreement.
(c) All Other Litigation. All other litigation outstanding at the
Separation Date not included in the Litigation Disclosure Letter shall remain
with HP, and Agilent shall have no liability in connection with, or
responsibility for defending, such litigation.
Section 2.2 Cooperation. HP and Agilent and their respective Subsidiaries
shall cooperate with each other in the defense of any litigation covered under
this Article II and afford to each other reasonable access upon reasonable
advance notice to witnesses and information (other than information protected
from disclosure by applicable privileges) that is reasonably required to defend
this litigation as set forth in Section 5.4 of the Separation Agreement. The
foregoing agreement to cooperate includes, but is not limited to, an obligation
to provide access to qualified assistance to provide information, witnesses and
documents to respond to discovery requests in specific lawsuits. In such cases,
cooperation shall be timely so that the party responding to discovery may meet
all court-imposed deadlines. The party requesting information shall reimburse
the party providing information consistent with the terms of Section 5.4 of the
Separation Agreement. The obligations set forth in this paragraph are more
clearly defined in Section 5.4 of the Separation Agreement, to which reference
is hereby made.
ARTICLE III
MISCELLANEOUS
Section 3.1 Entire Agreement. This Agreement, the Master Separation
Agreement, the other Ancillary Agreements and the Exhibits and Schedules
referenced or attached hereto and thereto, constitutes the entire agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.
Section 3.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware as to all matters
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
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Section 3.3 Notices. Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii)
one (1) business day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one (1) business day after being deposited with
an overnight courier service or (v) four (4) days after being deposited in the
US mail, First Class with postage prepaid, and addressed to the attention of the
party's General Counsel at the address of its principal executive office or such
other address as a party may request by notifying the other in writing.
Section 3.4 Parties in Interest. This Agreement, including the Schedules
and Exhibits hereto, and the other documents referred to herein, shall be
binding upon and inure solely to the benefit of each party hereto and their
legal representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
Section 3.5 Counterparts. This Agreement, including the Schedules and
Exhibits hereto, and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
Section 3.6 Assignment. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective legal representatives
and successors. This Agreement may not be assigned by any party hereto.
Section 3.7 Severability. If any term or other provision of this Agreement
or the Schedules or Exhibits attached hereto is determined by a nonappealable
decision by a court, administrative agency or arbitrator to be invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest extent possible.
Section 3.8 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement or the Schedules or Exhibits attached hereto are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
Section 3.9 Amendment. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to such agreement.
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Section 3.10 Authority. Each of the parties hereto represents to the other
that (a) it has the corporate or other requisite power and authority to execute,
deliver and perform this Agreement, (b) the execution, delivery and performance
of this Agreement by it have been duly authorized by all necessary corporate or
other action, (c) it has duly and validly executed and delivered this Agreement,
and (d) this Agreement is a legal, valid and binding obligation, enforceable
against it in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equity principles.
Section 3.11 Interpretation. The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table of contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, Exhibit or Schedule, such reference shall be to an Article
or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
Section 3.12 Conflicting Agreements. In the event of conflict between this
Agreement and any other Ancillary Agreement or other agreement executed in
connection herewith, the provisions of Ancillary Agreement and such other
agreement shall prevail.
ARTICLE IV
DEFINITIONS
Section 4.1 Action. "Action" means any demand, action, suit, countersuit,
arbitration, inquiry, proceeding or investigation by or before any federal,
state, local, foreign or international governmental authority or any arbitration
or mediation tribunal.
Section 4.2 Affiliated Company. "Affiliated Company" means, with respect
to HP, any entity in which HP holds a 50% or less ownership interest and that is
listed on Schedule 7.1(a) to the Separation Agreement and, with respect to
Agilent, any entity in which Agilent holds a 50% or less ownership interest and
that is listed on Schedule 7.1(b) to the Separation Agreement. Schedules 7.1(a)
and 7.1(b) may be amended from time to time after the date hereof upon mutual
written consent of the parties.
Section 4.3 Agilent Assets. "Agilent Assets" has the meaning set forth in
Section 1.2 of this Agreement.
Section 4.4 Agilent Balance Sheet. "Agilent Balance Sheet" means the
audited consolidated balance sheet (including the notes thereto) of the Agilent
Business as of July 31, 1999 that is included in the IPO Registration Statement.
Section 4.5 Agilent Business. "Agilent Business" the business and
operations of the business entities of HP currently known under the following
names, as described in the IPO Registration Statement and as such business and
operations will continue following the Separation
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Date: (i) the Test and Measurement Organization, (ii) the Semiconductor Products
Group, (iii) the Chemical Analysis Group, (iv) the Healthcare Solutions Group
and (v) the portion of HP Labs and infrastructure organizations related to these
businesses and (b) except as otherwise expressly provided herein, any
terminated, divested or discontinued businesses or operations that at the time
of termination, divestiture or discontinuation primarily related to the Agilent
Business as then conducted.
Section 4.6 Agilent Contingent Gain. "Agilent Contingent Gain" means any
claim or other right of a member of the HP Group or the Agilent Group that
primarily relates to the Agilent Business, whenever arising, against any Person
other than a member of the HP Group or the Agilent Group, if and to the extent
that (i) such claim or right arises out of the events, acts or omissions
occurring as of the Separation Date (based on then existing law) and (ii) the
existence or scope of the obligation of such other Person as of the Separation
Date was not acknowledged, fixed or determined in any material respect, due to a
dispute or other uncertainty as of the Separation Date or as a result of the
failure of such claim or other right to have been discovered or asserted as of
the Separation Date. A claim or right meeting the foregoing definition shall be
considered an Agilent Contingent Gain regardless of whether there was any Action
pending, threatened or contemplated as of the Separation Date with respect
thereto. In the case of any claim or right a portion of which arises out of
events, acts or omissions occurring prior to the Separation Date and a portion
of which arises out of events, acts or omissions occurring on or after the
Separation Date, only that portion that arises out of events, acts or omissions
occurring prior to the Separation Date shall be considered an Agilent Contingent
Gain. For purposes of the foregoing, a claim or right shall be deemed to have
accrued as of the Separation Date if all the elements of the claim necessary for
its assertion shall have occurred on or prior to the Separation Date, such that
the claim or right, were it asserted in an Action on or prior to the Separation
Date, would not be dismissed by a court on ripeness or similar grounds.
Notwithstanding the foregoing, none of (i) any Insurance Proceeds, (ii) any
Excluded Assets, (iii) any reversal of any litigation or other reserve, or (iv)
any matters relating to Taxes (which are governed by the Tax Sharing Agreement)
shall be deemed to be an Agilent Contingent Gain.
Section 4.7 Agilent Contingent Liability. "Agilent Contingent Liability"
means any Liability, other than Liabilities for Taxes (which are governed by the
Tax Sharing Agreement), of a member of the HP Group or the Agilent Group that
primarily relates to the Agilent Business, whenever arising, to any Person other
than a member of the HP Group or the Agilent Group, if and to the extent that
(i) such Liability arises out of the events, acts or omissions occurring as of
the Separation Date and (ii) the existence or scope of the obligation of a
member of the HP Group or the Agilent Group as of the Separation Date with
respect to such Liability was not acknowledged, fixed or determined in any
material respect, due to a dispute or other uncertainty as of the Separation
Date or as a result of the failure of such Liability to have been discovered or
asserted as of the Separation Date (it being understood that the existence of a
litigation or other reserve with respect to any Liability shall not be
sufficient for such Liability to be considered acknowledged, fixed or
determined). In the case of any Liability a portion of which arises out of
events, acts or omissions occurring prior to the Separation Date and a portion
of which arises out of events, acts or omissions occurring on or after the
Separation Date, only that portion that arises out of events, acts or
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omissions occurring prior to the Separation Date shall be considered an Agilent
Contingent Liability. For purposes of the foregoing, a Liability shall be deemed
to have arisen out of events, acts or omissions occurring prior to the
Separation Date if all the elements necessary for the assertion of a claim with
respect to such Liability shall have occurred on or prior to the Separation
Date, such that the claim, were it asserted in an Action on or prior to the
Separation Date, would not be dismissed by a court on ripeness or similar
grounds. For purposes of clarification of the foregoing, the parties agree that
no Liability relating to, arising out of or resulting from any obligation of any
Person to perform the executory portion of any contract or agreement existing as
of the Separation Date, or to satisfy any obligation accrued under any Plan (as
defined in the Employee Matters Agreement) as of the Separation Date, shall
deemed to be an Agilent Contingent Liability. For purposes of determining
whether a claim relating to the Year 2000 problem is an Agilent Contingent
Liability, claims relating to products shipped prior to the Separation Date
shall be deemed to have arisen prior to the Separation Date.
Section 4.8 Agilent Contracts. "Agilent Contracts" means the following
contracts and agreements to which HP is a party or by which it or any of its
Assets is bound, whether or not in writing, except for any such contract or
agreement that is contemplated to be retained by HP or any member of the HP
Group pursuant to any provision of this Agreement or any other Ancillary
Agreement:
(i) any contract or agreement entered into in the name of, or
expressly on behalf of, any division or business unit of Agilent;
(ii) any contract or agreement that relates primarily to the Agilent
Business;
(iii) any contracts or agreements related to the computers, desks,
equipment and other Assets used or managed primarily by employees of HP that
will become employees of Agilent in connection with the Separation;
(iv) any contract or agreement that is otherwise expressly
contemplated pursuant to this Agreement, the Separation Agreement or any of the
other Ancillary Agreements to be assigned to Agilent;
(v) any guarantee, indemnity, representation, warranty or other
Liability of any member of the Agilent Group or the HP Group in respect of any
other Agilent Contract, any Agilent Liability or the Agilent Business (including
guarantees of financing incurred by customers or other third parties in
connection with purchases of products or services from the Agilent Business);
and
(vi) any Agilent OFL.
Section 4.9 Agilent Group. "Agilent Group" means Agilent, each Subsidiary
and Affiliated Company of Agilent immediately after the Separation Date or that
is contemplated to be a Subsidiary or Affiliated Company of Agilent pursuant to
the Non-US Plan and each Person that becomes a Subsidiary or Affiliate Company
of Agilent after the Separation Date.
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Section 4.10 Agilent Liabilities. "Agilent Liabilities" has the meaning
set forth in Section 1.3 of this Agreement.
Section 4.11 Agilent Pro Forma Balance Sheet. "Agilent Pro Forma Balance
Sheet" means the unaudited pro forma condensed consolidated balance sheet
appearing in the IPO Registration Statement.
Section 4.12 Agilent World Trade. "Agilent World Trade" refers to Agilent
World Trade, Inc., a Delaware corporation.
Section 4.13 Ancillary Agreement. "Ancillary Agreement" has the meaning
set forth in Section 2.1 of the Separation Agreement.
Section 4.14 Assets. "Assets" means assets, properties and rights
(including goodwill), wherever located (including in the possession of vendors
or other third parties or elsewhere), whether real, personal or mixed, tangible,
intangible or contingent, in each case whether or not recorded or reflected or
required to be recorded or reflected on the books and records or financial
statements of any Person, including the following:
(i) all accounting and other books, records and files whether in
paper, microfilm, microfiche, computer tape or disc, magnetic tape or any other
form;
(ii) all apparatus, computers and other electronic data processing
equipment, fixtures, machinery, equipment, furniture, office equipment,
automobiles, trucks, aircraft, rolling stock, vessels, motor vehicles and other
transportation equipment, special and general tools, test devices, prototypes
and models and other tangible personal property;
(iii) all inventories of materials, parts, raw materials, supplies,
work-in-process and finished goods and products;
(iv) all interests in real property of whatever nature, including
easements, whether as owner, mortgagee or holder of a Security Interest, lessor,
sublessor, lessee, sublessee or otherwise;
(v) all interests in any capital stock or other equity interests of
any Subsidiary or any other Person; all bonds, notes, debentures or other
securities issued by any Subsidiary or any other Person; all loans, advances or
other extensions of credit or capital contributions to any Subsidiary or any
other Person; and all other investments in securities of any Person;
(vi) all license agreements, leases of personal property, open
purchase orders for raw materials, supplies, parts or services, unfilled orders
for the manufacture and sale of products and other contracts, agreements or
commitments;
(vii) all deposits, letters of credit and performance and surety
bonds;
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(viii) all written technical information, data, specifications,
research and development information, engineering drawings, operating and
maintenance manuals, and materials and analyses prepared by consultants and
other third parties;
(ix) all Intellectual Property and licenses from third Persons
granting the right to use any Intellectual Property;
(x) all computer applications, programs and other software,
including operating software, network software, firmware, middleware, design
software, design tools, systems documentation and instructions;
(xi) all cost information, sales and pricing data, customer
prospect lists, supplier records, customer and supplier lists, customer and
vendor data, correspondence and lists, product literature, artwork, design,
development and manufacturing files, vendor and customer drawings, formulations
and specifications, quality records and reports and other books, records,
studies, surveys, reports, plans and documents;
(xii) all prepaid expenses, trade accounts and other accounts and
notes receivables;
(xiii) all rights under contracts or agreements, all claims or
rights against any Person arising from the ownership of any Asset, all rights in
connection with any bids or offers and all claims, choses in action or similar
rights, whether accrued or contingent;
(xiv) all rights under insurance policies and all rights in the
nature of insurance, indemnification or contribution;
(xv) all licenses (including radio and similar licenses),
permits, approvals and authorizations which have been issued by any Governmental
Authority;
(xvi) cash or cash equivalents, bank accounts, lock boxes and
other deposit arrangements; and
(xvii) interest rate, currency, commodity or other swap, collar,
cap or other hedging or similar agreements or arrangements.
Section 4.15 Consents. "Consents" means any consents, waivers or
approvals from, or notification requirements to, any third parties.
Section 4.16 Contracts. "Contracts" means any contract, agreement, lease,
license, sales order, purchase order, instrument or other commitment that is
binding on any Person or any part of its property under applicable law.
Section 4.17 Delayed Transfer Assets. "Delayed Transfer Assets" means any
Agilent Assets that are expressly provided in this Agreement, the Separation
Agreement or any other Ancillary Agreement to be transferred after the date of
this Agreement.
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Section 4.18 Distribution. "Distribution" means HP's pro rata
distribution to the holders of its common stock, $0.01 par value, several months
following the IPO, of all of the shares of Agilent common stock owned by HP.
Section 4.19 Distribution Date. "Distribution Date" has the meaning set
forth in Section 4.1 of the Separation Agreement.
Section 4.20 Environmental Actions. "Environmental Actions" has the
meaning set forth in Section 4.15 of the Indemnification and Insurance Matters
Agreement.
Section 4.21 Excluded Assets. "Agilent Assets" has the meaning set forth
in Section 1.2(b) of this Agreement.
Section 4.22 Excluded Liabilities. "Agilent Liabilities" has the meaning
set forth in Section 1.3(b) of this Agreement.
Section 4.23 Governmental Approvals. "Governmental Approvals" means any
notices, reports or other filings to be made, or any consents, registrations,
approvals, permits or authorizations to be obtained from, any Governmental
Authority.
Section 4.24 Governmental Authority. "Governmental Authority" means any
federal, state, local, foreign or international court, government, department,
commission, board, bureau, agency, official or other regulatory, administrative
or governmental authority.
Section 4.25 HP Group. "HP Group" means HP, each Subsidiary and
Affiliated Company of HP (other than any member of the Agilent Group)
immediately after the Separation Date, after giving effect to the Non-US Plan
and each Person that becomes a Subsidiary or Affiliate Company of HP after the
Separation Date.
Section 4.26 Indemnification and Insurance Matters Agreement.
"Indemnification and Insurance Matters Agreement" means the Indemnification and
Insurance Matters Agreement attached as Exhibit K to the Separation Agreement .
Section 4.27 Insurance Policies. "Insurance Policies" means ins rance
policies pursuant to which a Person makes a true risk transfer to an insurer.
Section 4.28 Insured Agilent Liability. "Insured Agilent Liability" means
any Agilent Liability to the extent that (i) it is covered under the terms of
HP's Insurance Policies in effect prior to the Distribution Date and (ii)
Agilent is not a named insured under, or otherwise entitled to the benefits of,
such Insurance Policies.
Section 4.29 Intellectual Property. "Intellectual Property" means all
domestic and foreign patents and patent applications, together with any
continuations, continuations-in-part or divisional applications thereof, and all
patents issuing thereon (including reissues, renewals and re-examinations of the
foregoing); design patents, invention disclosures; mask works; copyrights, and
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copyright applications and registrations; Web addresses, trademarks, service
marks, trade names, and trade dress, in each case together with any applications
and registrations therefor and all appurtenant goodwill relating thereto; trade
secrets, commercial and technical information, know-how, proprietary or
confidential information, including engineering, production and other designs,
notebooks, processes, drawings, specifications, formulae, and technology;
computer and electronic data processing programs and software (object and source
code), data bases and documentation thereof; inventions (whether patented or
not); utility models; registered designs, certificates of invention and all
other intellectual property under the laws of any country throughout the world.
Section 4.30 IPO Registration Statement. "IPO Registration Statement"
means the registration statement on Form S-1 pursuant to the Securities Act of
1933, as amended, to be filed with the Securities and Exchange Commission
registering the shares of common stock of Agilent to be issued in the initial
public offering, together with all amendments thereto.
Section 4.31 Liabilities. "Liabilities" means all debts, liabilities,
guarantees, assurances, commitments and obligations, whether fixed, contingent
or absolute, asserted or unasserted, matured or unmatured, liquidated or
unliquidated, accrued or not accrued, known or unknown, due or to become due,
whenever or however arising (including, without limitation, whether arising out
of any Contract or tort based on negligence or strict liability) and whether or
not the same would be required by generally accepted principles and accounting
policies to be reflected in financial statements or disclosed in the notes
thereto.
Section 4.32 Litigation Disclosure Letter. "Litigation Disclosure Letter"
has the meaning set forth in Section 2.1(a) of this Agreement.
Section 4.33 Local Transfer Agreements. "Local Transfer Agreements" means
the agreements necessary to effect the Non-US Plan (as defined in the Separation
Agreement).
Section 4.34 Non-US Plan. "Non-US Plan" has the meaning set forth in
Section 5.8 of the Separation Agreement .
Section 4.35 OFLs. "OFLs" mean all liabilities, obligations,
contingencies, instruments and other Liabilities of any member of the HP Group
of a financial nature with third parties existing on the date hereof or entered
into or established between the date hereof and the Separation Date, including
any of the following:
(i) foreign exchange contracts;
(ii) letters of credit;
(iii) guarantees of third party loans to customers;
(iv) surety bonds (excluding surety for workers' compensation self-
insurance);
(v) interest support agreements on third party loans to customers;
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(vi) performance bonds or guarantees issued by third parties;
(vii) swaps or other derivatives contracts; and
(viii) recourse arrangements on the sale of receivables or notes.
Section 4.36 Person. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
Section 4.37 Retained Payables. "Retained Payables" means (i) all accounts
payable and other obligations of payment for goods or services purchased, leased
or otherwise received in the conduct of the Agilent Business that as of the
Separation Date are payable to a third Person by HP or any of HP's Subsidiaries,
whether past due, due or to become due, including any interest, sales or use
taxes, finance charges, late or returned check charges and other obligations of
HP or any of HP's Subsidiaries with respect thereto, and any obligations related
to any of the foregoing and (ii) all employee compensation Liabilities and other
miscellaneous Liabilities for which an adjustment is made in the Agilent Pro
Forma Balance Sheet.
Section 4.38 Retained Receivables. "Retained Receivables" means (i) all
accounts receivable and other rights to payment for goods or services sold,
leased or otherwise provided in the conduct of the Agilent Business that as of
the Separation Date are payable by a third Person to HP or any of HP's
Subsidiaries, whether past due, due or to become due, including any interest,
sales or use taxes, finance charges, late or returned check charges and other
obligations of the account debtor with respect thereto, and any proceeds of any
of the foregoing and (ii) all other miscellaneous Assets for which an adjustment
is made in the Agilent Pro Forma Balance Sheet.
Section 4.39 Security Interest. "Security Interest" means any mortgage,
security interest, pledge, lien, charge, claim, option, right to acquire, voting
or other restriction, right-of-way, covenant, condition, easement, encroachment,
restriction on transfer, or other encumbrance of any nature whatsoever.
Section 4.40 Separation. "Separation" means the transfer and contribution
from HP to Agilent, and Agilent's receipt and assumption of, directly or
indirectly, substantially all of the Assets and Liabilities currently associated
with the Agilent Business and the stock, investments or similar interests
currently held by HP in subsidiaries and other entities that conduct such
business.
Section 4.41 Separation Agreement. "Separation Agreement" means the Master
Separation and Distribution Agreement dated as of August 12, 1999, of which this
is an Exhibit thereto.
Section 4.42 Separation Date. "Separation Date" means the effective date
and time of each transfer of property, assumption of liability, license,
undertaking, or agreement in connection
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with the Separation, which shall be 12:01 a.m., Pacific Time, November 1, 1999,
or such date as may be fixed by the Board of Directors of HP.
Section 4.43 Subsidiary. "Subsidiary" means with respect to any specified
Person, any corporation, any limited liability company, any partnership or other
legal entity of which such Person or its Subsidiaries owns, directly or
indirectly, more than 50% of the stock or other equity interest entitled to vote
on the election of the members of the board of directors or similar governing
body. Unless context otherwise requires, reference to HP and its Subsidiaries
shall not include the subsidiaries of HP that will be transferred to Agilent
after giving effect to the Separation, including the actions taken pursuant to
the Non-US Plan.
Section 4.44 Taxes. "Taxes" has the meaning set forth in the Tax Sharing
Agreement.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of the parties has caused the General Assignment
and Assumption Agreement to be executed on its behalf by its officers thereunto
duly authorized on the day and year first above written.
HEWLETT-PACKARD COMPANY
By: /s/ Robert P. Wayman
--------------------------------
Name: Robert P. Wayman
------------------------------
Title: Chief Financial Officer
-----------------------------
AGILENT TECHNOLOGIES, INC.
By: /s/ Edward W. Barnholt
--------------------------------
Name: Edward W. Barnholt
------------------------------
Title: President & CEO
-----------------------------
[Signature Page to General Assignment and Assumption Agreement]
<PAGE>
Schedule 1.1(c) Delayed Transfer Assets and Liabilities
None.
<PAGE>
Schedule 1.2(a)(xii) Specific Agilent Assets to be Transferred
None.
<PAGE>
Schedule 1.2(b)(i) Excluded Assets
None.
<PAGE>
Schedule 1.3(a)(vi) Divested Businesses Which Contain Liabilities to be
Transferred to Agilent
1. Businesses divested by HP pursuant to the Master Asset Purchase Agreement,
dated February 12, 1998, by and between Hewlett-Packard Company and Lucent
Technologies, Inc, as amended by Amendment No. 1 to the Master Asset
Purchase Agreement, dated March 9, 1998.
2. Businesses divested by HP pursuant to the Amended and Restated Asset
Purchase Agreement, dated October 9, 1998, by and between Hewlett-Packard
Company and Powerwave Technologies, Inc.
3. Divestiture of certain assets of the Video Communications Division to
Pinnacle Systems.
<PAGE>
Schedule 1.3(a)(vii) Specific Agilent Liabilities
None.
<PAGE>
Schedule 1.3(b)(i) Excluded Liabilities
None.
<PAGE>
EXHIBIT 2.3
EXHIBIT D-1
MASTER TECHNOLOGY OWNERSHIP AND
LICENSE AGREEMENT
between
HEWLETT-PACKARD COMPANY
and
AGILENT TECHNOLOGIES, INC.
Effective as of November 1, 1999
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MASTER TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT
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ARTICLE I DEFINITIONS.................................................................................... 1
1.1 AFFILIATED COMPANY............................................................................ 1
1.2 AGILENT BUSINESS.............................................................................. 1
1.3 AGILENT OWNED TECHNOLOGY...................................................................... 2
1.4 AGILENT PRODUCTS.............................................................................. 2
1.5 AGILENT PRODUCTS DATABASE..................................................................... 2
1.6 COPYRIGHTS.................................................................................... 2
1.7 DATABASE RIGHTS............................................................................... 2
1.8 HP PRODUCTS................................................................................... 2
1.9 IMPROVEMENTS.................................................................................. 2
1.10 INVENTION DISCLOSURE.......................................................................... 3
1.11 LICENSED AGILENT TECHNOLOGY................................................................... 3
1.12 LICENSED HP TECHNOLOGY........................................................................ 3
1.13 MASK WORK RIGHTS.............................................................................. 3
1.14 MASTER SEPARATION AGREEMENT................................................................... 3
1.15 PATENTS....................................................................................... 3
1.16 PERSON........................................................................................ 4
1.17 SELL.......................................................................................... 4
1.18 SEPARATION DATE............................................................................... 4
1.19 SUBSIDIARY.................................................................................... 4
1.20 TECHNOLOGY.................................................................................... 4
1.21 THIRD PARTY................................................................................... 5
ARTICLE II ALLOCATION OF OWNERSHIP....................................................................... 5
2.1 ASSIGNMENT.................................................................................... 5
2.2 PRIOR GRANTS.................................................................................. 5
2.3 ASSIGNMENT DISCLAIMER......................................................................... 5
2.4 COPIES IN ITS POSSESSION...................................................................... 5
ARTICLE III LICENSE GRANTS............................................................................... 6
3.1 LICENSE TO HP................................................................................. 6
3.2 LICENSE TO AGILENT............................................................................ 9
3.3 HAVE MADE RIGHTS.............................................................................. 11
3.4 IMPROVEMENTS.................................................................................. 12
3.5 DURATION OF SUBLICENSES TO SUBSIDIARIES AND AFFILIATED COMPANIES.............................. 12
3.6 NO PATENT LICENSES............................................................................ 12
3.7 THIRD PARTY TECHNOLOGY........................................................................ 12
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ARTICLE IV CONFIDENTIALITY............................................................................... 12
ARTICLE V TERMINATION.................................................................................... 13
5.1 VOLUNTARY TERMINATION....................................................................... 13
5.2 SURVIVAL.................................................................................... 13
5.3 NO OTHER TERMINATION........................................................................ 13
ARTICLE VI DISPUTE RESOLUTION............................................................................ 13
6.1 NEGOTIATION................................................................................. 13
6.2 NONBINDING MEDIATION........................................................................ 13
6.3 PROCEEDINGS................................................................................. 14
ARTICLE VII LIMITATION OF LIABILITY...................................................................... 14
ARTICLE VIII MISCELLANEOUS PROVISIONS.................................................................... 14
8.1 DISCLAIMER.................................................................................. 14
8.2 NO IMPLIED LICENSES......................................................................... 15
8.3 INFRINGEMENT SUITS.......................................................................... 15
8.4 NO OTHER OBLIGATIONS........................................................................ 15
8.5 ENTIRE AGREEMENT............................................................................ 15
8.6 GOVERNING LAW............................................................................... 16
8.7 DESCRIPTIVE HEADINGS........................................................................ 16
8.8 NOTICES..................................................................................... 16
8.9 NONASSIGNABILITY............................................................................ 16
8.10 SEVERABILITY................................................................................ 17
8.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE....................................... 17
8.12 AMENDMENT................................................................................... 17
8.13 COUNTERPARTS................................................................................ 17
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EXHIBIT A: AFFILIATED COMPANIES
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MASTER TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT
This Master Technology Ownership and License Agreement (the "Agreement") is
effective as of November 1, 1999 (the "Effective Date"), between Hewlett-Packard
Company, a Delaware corporation ("HP"), having an office at 3000 Hanover Street,
Palo Alto, California 94304, and Agilent Technologies, Inc., a Delaware
corporation ("Agilent"), having an office at 3000 Hanover Street, Palo Alto,
California 94304.
WHEREAS, the Board of Directors of HP has determined that it is in the best
interest of HP and its stockholders to separate HP's existing businesses into
two independent businesses;
WHEREAS, as part of the foregoing, HP and Agilent have entered into a
Master Separation Agreement (as defined below), which provides, among other
things, for the separation of certain Agilent assets and Agilent liabilities,
the initial public offering of Agilent stock, the distribution of such stock and
the execution and delivery of certain other agreements in order to facilitate
and provide for the foregoing;
WHEREAS, also as part of the foregoing, HP desires to assign to Agilent
ownership of certain technology and each party desires to license to the other
party certain of its technology; and
WHEREAS, also as part of the foregoing, the parties have also entered into
an ICBD Technology Ownership and License Agreement (the "ICBD Technology
Agreement") which provides for the ownership and licensing of certain integrated
circuit technology.
NOW, THEREFORE, in consideration of the mutual promises of the parties, and
of good and valuable consideration, it is agreed by and between the parties as
follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following capitalized terms are
defined in this Article I and shall have the meaning specified herein:
1.1 AFFILIATED COMPANY. "Affiliated Company" means, with respect to HP,
any entity in which HP holds a 50% or less ownership interest and that is listed
on Exhibit A hereto and, with respect to Agilent, any entity in which Agilent
holds a 50% or less ownership interest and that is listed on Exhibit A hereto;
provided, however, that any such entity listed in Exhibit A shall be considered
to be an Affiliated Company under this Agreement only if it agrees in writing to
be bound by the terms and conditions of this Agreement. Exhibit A may be amended
from time to time after the date hereof upon mutual consent of the parties.
1.2 AGILENT BUSINESS. "Agilent Business" means (a) the business and
operations of the following business entities of HP, as described in the IPO
Registration Statement (as defined in
<PAGE>
the Master Separation Agreement): (i) the Test and Measurement Organization,
(ii) the Semiconductor Products Group, (iii) the Chemical Analysis Group, (iv)
the Healthcare Solutions Group and (v) any related infrastructure organizations
and (b) except as otherwise expressly provided herein, any terminated, divested
or discontinued businesses or operations that at the time of termination,
divestiture or discontinuation primarily related to the Agilent Business as then
conducted.
1.3 AGILENT OWNED TECHNOLOGY. "Agilent Owned Technology" means (i) all
Technology associated with the development, design, testing, manufacture,
maintenance, support, debugging, quality control, repair, use, marketing and
sale of the products listed in the Agilent Products Database and the products
developed or being developed primarily by the Agilent Business as of the
Separation Date, (ii) all Technology developed or being developed primarily by
the Agilent Business as of the Separation Date and (iii) all other Technology
used exclusively by the Agilent Business.
1.4 AGILENT PRODUCTS. "Agilent Products" means any and all products and
services of the businesses in which Agilent or any of its Subsidiaries or
Affiliated Companies is now or hereafter engaged (including the business of
making (but not having made) Third Party products for Third Parties when
Agilent, its Subsidiaries or Affiliated Companies is acting as a contract
manufacturer or foundry for such Third Parties).
1.5 AGILENT PRODUCTS DATABASE. "Agilent Products Database" means the
Agilent Products Database, as it may be updated by the parties upon mutual
agreement to add products as of the Separation Date.
1.6 COPYRIGHTS. "Copyrights" mean (i) any copyright in any original works
of authorship fixed in any tangible medium of expression as set forth in 17
U.S.C. Section 101 et. seq., whether registered or unregistered, including any
applications for registration thereof, (ii) any corresponding foreign copyrights
under the laws of any jurisdiction, in each case, whether registered or
unregistered, and any applications for registration thereof, and (iii) moral
rights under the laws of any jurisdiction.
1.7 DATABASE RIGHTS. "Database Rights" means any rights in databases
under the laws of the United States or any other jurisdiction, whether
registered or unregistered, and any applications for registration thereof.
1.8 HP PRODUCTS. "HP Products" means any and all products and services of
the businesses in which HP or any of its Subsidiaries or Affiliated Companies is
now or hereafter engaged (including the business of making (but not having made)
Third Party products for Third Parties when HP, its Subsidiaries or Affiliated
Companies is acting as a contract manufacturer or foundry for such Third
Parties).
1.9 IMPROVEMENTS. "Improvements" to Technology means (i) with respect to
Copyrights, any modifications, derivative works, and translations of works of
authorship, (ii) with respect to Database Rights, any database that is created
by extraction or re-utilization of another
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database, and (iii) with respect to Mask Work Rights, trade secrets and other
intellectual property rights included within the definition of Technology and
not covered by Sections 1.9(i) - (ii) above, any improvements of Technology. For
the purposes of clarification, an item of Technology will be deemed to be an
Improvement of another item of Technology only if it is actually derived from
such other item of Technology and not merely because it may have the same or
similar functionality or use as such other item of Technology.
1.10 INVENTION DISCLOSURE. "Invention Disclosure" means a disclosure of an
invention (i) written for the purpose of allowing legal and business people to
determine whether to file a Patent application with respect to such invention
and (ii) recorded with a control number in the owning party's records.
1.11 LICENSED AGILENT TECHNOLOGY. "Licensed Agilent Technology" means any
Technology:
(a) which, as of the Separation Date, Agilent or any Subsidiary or
Affiliated Company of Agilent (i) owns or controls or (ii) otherwise has the
right to grant any licenses of the type and on the terms herein granted to HP
without the obligation to pay royalties or other consideration to Third Parties;
and
(b) which is known to or in the possession of HP or its Subsidiaries
or Affiliated Companies as of the Separation Date.
1.12 LICENSED HP TECHNOLOGY. "Licensed HP Technology" means any
Technology:
(a) which, as of the Separation Date, HP or any Subsidiary or
Affiliated Company of HP (i) owns or controls or (ii) otherwise has the right to
grant any licenses of the type and on the terms herein granted to Agilent
without the obligation to pay royalties or other consideration to Third Parties;
and
(b) which is known to or in the possession of Agilent, its
Subsidiaries or Affiliated Companies as of the Separation Date.
1.13 MASK WORK RIGHTS. "Mask Work Rights" means (i) any rights in mask
works, as defined in 17 U.S.C. Section 901, whether registered or unregistered,
including applications for registration thereof, and (ii) any foreign rights in
semiconductor topologies under the laws of any jurisdiction, whether registered
or unregistered, including applications for registration thereof.
1.14 MASTER SEPARATION AGREEMENT. "Master Separation Agreement" means the
Master Separation and Distribution Agreement between the parties.
1.15 PATENTS. "Patents" means patents, utility models, design patents,
design registrations, certificates of invention and other governmental grants
for the protection of inventions
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or industrial designs anywhere in the world and all reissues, renewals, re-
examinations and extensions of any of the foregoing.
1.16 PERSON. "Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, and a governmental entity or any
department, agency or political subdivision thereof.
1.17 SELL. To "Sell" a product means to sell, transfer, lease or otherwise
dispose of a product. "Sale" and "Sold" have the corollary meanings ascribed
thereto.
1.18 SEPARATION DATE. "Separation Date" means 12:01 a.m., Pacific Time,
November 1, 1999 or such other date as may be fixed by the Board of Directors of
HP.
1.19 SUBSIDIARY. "Subsidiary" means with respect to any specified Person,
any corporation, any limited liability company, any partnership or other legal
entity of which such Person owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote on the election of the members
of the board of directors or similar governing body. Unless the context
otherwise requires, reference to HP and its Subsidiaries shall not include the
subsidiaries of HP that will be transferred to Agilent after giving effect to
the Separation (as defined in the Master Separation Agreement), including the
actions taken pursuant to the Non-US Plan (as defined in the Master Separation
Agreement). For example, if HP owns 70% of the stock of another corporation, and
that corporation owns 60% of the equity interest of a limited liability company,
then that corporation is a Subsidiary of HP but that limited liability company
is not. However, if such corporation owns 90% of the equity interest of a
limited liability company, then that limited liability company is a Subsidiary
of HP. For the avoidance of doubt, this definition of Subsidiary is different
from the definition of Subsidiary in the Master Separation Agreement.
1.20 TECHNOLOGY. "Technology" means technological models, algorithms,
manufacturing processes, design processes, behavioral models, logic diagrams,
schematics, test vectors, know-how, computer and electronic data processing and
other apparatus programs and software (object code and source code), optical,
hydraulic and fluidic apparatus and processes, medical chemical, biochemical,
biological, macro-molecular and genetic compounds, processes, cell lines,
detection and analytical devices, databases and documentation thereof, trade
secrets, technical information, specifications, drawings, records,
documentation, works of authorship or other creative works, websites, ideas,
knowledge, data or the like. The term Technology includes Copyrights, Database
Rights, Mask Work Rights, trade secrets and any other intellectual property
right, but expressly does not include (i) any trademark, trade name, trade dress
or service mark, or applications for registration thereof or (ii) any Patents or
applications therefor, including any of the foregoing that may be based on
Invention Disclosures that are covered by the Master Patent Ownership and
Assignment Agreement between the parties, but does include trade secret rights
in and to inventions disclosed in such Patent applications and Invention
Disclosures. Notwithstanding the generality of the foregoing provisions of this
Section 1.20, however, the term "Technology" does not include ICBD Technology as
such term is defined in the ICBD Technology Agreement.
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1.21 THIRD PARTY. "Third Party" means a Person other than HP and its
Subsidiaries and Affiliated Companies and Agilent and its Subsidiaries and
Affiliated Companies.
ARTICLE II
ALLOCATION OF OWNERSHIP
2.1 ASSIGNMENT. Subject to Sections 2.2 and 2.3 below, HP hereby grants,
conveys and assigns (and agrees to cause its appropriate Subsidiaries to grant,
convey and assign) to Agilent, by execution hereof (or, where appropriate or
required, by execution of separate instruments of assignment), all its (and
their) right, title and interest in and to the Agilent Owned Technology, to be
held and enjoyed by Agilent, its successors and assigns. HP further grants,
conveys and assigns (and agrees to cause its appropriate Subsidiaries to grant,
convey and assign) to Agilent all its (and their) right, title and interest in
and to any and all causes of action and rights of recovery for past infringement
of Copyrights, Database Rights and Mask Work Rights in and to the Agilent Owned
Technology, and for past misappropriation of trade secrets in and to the Agilent
Owned Technology. HP further covenants that HP will, without demanding any
further consideration therefor, at the request and expense of Agilent (except
for the value of the time of HP employees), do (and cause its Subsidiaries to
do) all lawful and just acts that may be or become necessary for evidencing,
maintaining, recording and perfecting Agilent's rights to such Agilent Owned
Technology consistent with HP's general business practice as of the Separation
Date, including but not limited to, execution and acknowledgement of (and
causing its Subsidiaries to execute and acknowledge) assignments and other
instruments in a form reasonably required by Agilent for each Copyright, Mask
Work Right or Database Right jurisdiction.
2.2 PRIOR GRANTS. Agilent acknowledges and agrees that the foregoing
assignment is subject to any and all licenses or other rights that may have been
granted by HP or its Subsidiaries with respect to the Agilent Owned Technology
prior to the Separation Date. HP shall respond to reasonable inquiries from
Agilent regarding any such prior grants.
2.3 ASSIGNMENT DISCLAIMER. AGILENT ACKNOWLEDGES AND AGREES THAT THE
FOREGOING ASSIGNMENTS ARE MADE ON AN "AS IS," QUITCLAIM BASIS AND THAT NEITHER
HP NOR ANY SUBSIDIARY OR AFFILIATED COMPANY OF HP HAS MADE OR WILL MAKE ANY
WARRANTY WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION
ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
TITLE, ENFORCEABILITY OR NON-INFRINGEMENT.
2.4 COPIES IN ITS POSSESSION. Notwithstanding the allocation of ownership
in this Article II, each party has the right to retain copies of any Technology
that it has in its possession as of the Separation Date.
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ARTICLE III
LICENSE GRANTS
3.1 LICENSE TO HP.
(a) Agilent grants (and agrees to cause its appropriate Subsidiaries
or Affiliated Companies to grant) to HP the following personal, irrevocable,
nonexclusive, worldwide, fully paid, royalty-free and non-transferable (except
as specified in Section 8.9 below) licenses:
(i) under its and their Copyrights in and to the Licensed
Agilent Technology, (A) to reproduce and have reproduced the works of authorship
included in the Licensed Agilent Technology and Improvements thereof prepared by
or for HP, in whole or in part, as part of HP Products, (B) to prepare
Improvements or have Improvements prepared for it based upon the works of
authorship included in the Licensed Agilent Technology in order to create HP
Products, (C) to distribute (by any means and using any technology, whether now
known or unknown, including without limitation electronic transmission) copies
of the works of authorship included in the Licensed Agilent Technology and
Improvements thereof prepared by or for HP to the public by sale or other
transfer of ownership or by rental, lease or lending, as part of HP Products,
and (D) to perform (by any means and using any technology, whether now known or
unknown, including without limitation electronic transmission) and display the
works of authorship included in the Licensed Agilent Technology and Improvements
thereof prepared by or for HP, as part of HP Products;
(ii) under its and their Database Rights in and to the Licensed
Agilent Technology, to extract data from the databases included in the Licensed
Agilent Technology and to re-utilize such data to design, develop, manufacture
and have manufactured HP Products and to Sell such HP Products that incorporate
such data, databases and Improvements thereof prepared by or for HP;
(iii) under its and their Mask Work Rights in and to the Licensed
Agilent Technology, (A) to reproduce and have reproduced mask works and
semiconductor topologies included in the Licensed Agilent Technology and
embodied in HP Products by optical, electronic or any other means, (B) to import
or distribute a product in which any such mask work or semiconductor topology is
embodied, and (C) to induce or knowingly to cause a Third Party to do any of the
acts described in Sections 3.1(a)(iii)(A) and (B) above; and
(iv) under its and their trade secrets and other intellectual
property rights in and to the Licensed Agilent Technology (except the
intellectual property rights excluded from the definition of Technology), to use
the Licensed Agilent Technology and Improvements thereof prepared by or for HP
to design, develop, manufacture and have manufactured HP Products and to Sell
such HP Products .
(b) Without limiting the generality of the foregoing licenses granted
in Section 3.1(a) above, with respect to software included within the Licensed
Agilent Technology,
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such licenses include the right to use, modify, and reproduce such software and
Improvements thereof made by or for HP to create HP Products, in source code and
object code form, and to Sell such software and Improvements thereof made by or
for HP, in source code and object code form, as part of HP Products; provided,
however, that,
(i) with respect to Agilent's software products that are
commercially released as of the Separation Date, HP shall be limited to using no
more than ten percent (10%) of the lines of code of any such commercially
released software product in any HP Product Sold by HP to a Third Party. Any
other rights of HP to Sell such commercially released software products of
Agilent shall be solely as set forth in a separate written agreement. For
purposes of this Section 3.1(b), a "commercially released" product shall mean a
product that has been placed on an Agilent corporate price list or released by
Agilent to Third Parties for beta testing; and
(ii) with respect to Agilent software that is only used
internally, HP recognizes that such software was not designed for use in
products that are Sold to Third Parties and that Agilent has no obligation
whatsoever to support such software. Accordingly, HP agrees to use reasonable
care in selecting any such software for use in HP Products, taking into account
that such software will be difficult to support.
(c) The foregoing licenses in this Section 3.1 include the right to
have contract manufacturers and foundries manufacture HP Products for HP.
(d) HP may grant sublicenses within the scope of the licenses granted
under Sections 3.1(a) and (b) above as follows:
(i) HP may grant sublicenses to its Subsidiaries for so long as
they remain its Subsidiaries, with no right to grant further sublicenses other
than, in the case of a sublicensed Subsidiary, to another Subsidiary of such
party and as described in Section 3.1(d)(iii) below; provided that any such
sublicense may be made effective retroactively but not prior to the
sublicensee's becoming a Subsidiary;
(ii) HP may grant sublicenses to its Affiliated Companies for so
long as HP holds at least thirty percent (30%) ownership interest in the
Affiliated Companies, with no right to grant further sublicenses other than, in
the case of a sublicensed Affiliated Company, to the Affiliated Company's wholly
owned subsidiaries and as described in Section 3.1(d)(iii) below; provided that
any such sublicense may be made effective retroactively but not prior to the
sublicensee's becoming an Affiliated Company;
(iii) HP may grant sublicenses with respect to HP Products in the
form of software, in object code and source code form, to its distributors,
resellers, OEM customers, VAR customers, VAD customers, systems integrators and
other channels of distribution and to its end user customers; and
(iv) HP may grant sublicenses with respect to the relevant
Licensed Agilent Technology to the Transferee (as defined below), in the event
that HP transfers, after the
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Separation Date, a going business (but not all or substantially all of its
business or assets), provided that such transfer includes at least one
marketable product and tangible assets having a net value of at least ten
million U.S. Dollars ($10,000,000.00), regardless of whether such transfer is
part of (A) an asset sale to any Third Party, (B) a sale of shares or securities
in a Subsidiary or Affiliated Company to a Third Party such that (x) in the case
of a Subsidiary, the Subsidiary ceases to be a Subsidiary, or in the case of an
Affiliated Company, HP ceases to hold at least thirty percent (30%) of the
outstanding shares or securities in such Affiliated Company and (y) the Third
Party owns at least eighty percent (80%) of the outstanding shares or securities
representing the right to vote for the election of directors or other managing
authority, or (C) a sale of shares or securities in a Subsidiary or Affiliated
Company to a Third Party such that (x) in the case of a Subsidiary, the
Subsidiary ceases to be a Subsidiary, or in the case of an Affiliated Company,
Agilent ceases to hold at least thirty percent (30%) of the outstanding shares
or securities in such Affiliated Company and (y) no single Third Party owns at
least eighty percent (80%) of the outstanding shares or securities representing
the right to vote for the election of directors or other managing authority of
such ex-Subsidiary or ex-Affiliated Company; provided that:
(1) the Transferee shall have no right to grant further
sublicenses except as described in Section 3.1(d)(iii) above and except that the
Transferee shall have the right to grant sublicenses to any Third Party at least
eighty percent (80%) of whose outstanding shares or securities representing the
right to vote for the election of directors or other managing authority are,
directly or indirectly, owned by the Transferee, only for so long as such
ownership exists;
(2) such sublicenses shall not come into effect unless and
until such Transferee agrees in writing for the benefit of Agilent to be bound
by the terms of this Agreement, including but not limited to the confidentiality
obligations under Article IV;
(3) this Section 3.1(d)(iv) shall be excluded from such
sublicense in any event; and
(4) HP shall give Agilent prompt written notice of any such
sublicense and a copy of the portions of the relevant agreement between HP and
such Transferee containing the sublicense terms.
(5) As used in this Section 3.1(d)(iv), "Transferee" in the
case of Sections 3.1(d)(iv)(A) and (B) means the Third Party acquiring the going
business or eighty percent (80%) of the Subsidiary or Affiliated Company and in
the case of Section 3.1(d)(iv)(C) means the ex-Subsidiary or ex-Affiliated
Company only.
(6) The licenses granted above to the Licensed Agilent
Technology shall continue in perpetuity (or, in the case of Copyrights, Database
Rights and Mask Work Rights, until the expiration of the term thereof).
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3.2 LICENSE TO AGILENT.
(a) HP grants (and agrees to cause its appropriate Subsidiaries or
Affiliated Companies to grant) to Agilent the following personal, irrevocable,
nonexclusive, worldwide, fully paid, royalty-free and non-transferable (except
as specified in Section 8.9 below) licenses:
(i) under its and their Copyrights in and to the Licensed HP
Technology, (A) to reproduce and have reproduced the works of authorship
included in the Licensed HP Technology and Improvements thereof prepared by or
for Agilent, in whole or in part, as part of Agilent Products, (B) to prepare
Improvements or have Improvements prepared for it based upon the works of
authorship included in the Licensed HP Technology in order to create Agilent
Products, (C) to distribute (by any means and using any technology, whether now
known or unknown, including without limitation electronic transmission) copies
of the works of authorship included in the Licensed HP Technology and
Improvements thereof prepared by or for Agilent to the public by sale or other
transfer of ownership or by rental, lease or lending, as part of Agilent
Products, and (D) to perform (by any means and using any technology, whether now
known or unknown, including without limitation electronic transmission) and
display the works of authorship included in the Licensed HP Technology and
Improvements thereof prepared by or for Agilent, as part of Agilent Products;
(ii) under its and their Database Rights in and to the Licensed
HP Technology, to extract data from the databases included in the Licensed HP
Technology and to re-utilize such data to design, develop, manufacture and have
manufactured Agilent Products and to Sell such Agilent Products that incorporate
such data, databases and Improvements thereof prepared by or for Agilent;
(iii) under its and their Mask Work Rights in and to the
Licensed HP Technology, (A) to reproduce and have reproduced mask works and
semiconductor topologies included in the Licensed HP Technology and embodied in
Agilent Products by optical, electronic or any other means, (B) to import or
distribute a product in which any such mask work or semiconductor topology is
embodied, and (C) to induce or knowingly to cause a Third Party to do any of the
acts described in Sections 3.2(a)(iii)(A) and (B) above; and
(iv) under its and their trade secrets and other intellectual
property rights in and to the Licensed HP Technology (except the intellectual
property rights excluded from the definition of Technology), to use the Licensed
HP Technology and Improvements thereof prepared by or for Agilent to design,
develop, manufacture and have manufactured Agilent Products and to Sell such
Agilent Products.
(b) Without limiting the generality of the foregoing licenses granted
in Section 3.2(a) above, with respect to software included within the Licensed
HP Technology, such licenses include the right to use, modify, and reproduce
such software and Improvements thereof made by or for Agilent to create Agilent
Products, in source code and object code form, and to Sell such software and
Improvements thereof made by or for Agilent, in source code and object code
form, as part of Agilent Products; provided, however, that,
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(i) with respect to HP's software products that are
commercially released as of the Separation Date, Agilent shall be limited to
using no more than ten percent (10%) of the lines of code of any such
commercially released software product in any Agilent Product Sold by Agilent to
a Third Party. Any other rights of Agilent to Sell such commercially released
software products of HP shall be solely as set forth in a separate written
agreement. For purposes of this Section 3.2(b), a "commercially released"
product shall mean a product that has been placed on an HP corporate price list
or released by HP to Third Parties for beta testing; and
(ii) with respect to HP software that is only used internally,
Agilent recognizes that such software was not designed for use in products that
are Sold to Third Parties and that HP has no obligation whatsoever to support
such software. Accordingly, Agilent agrees to use reasonable care in selecting
any such software for use in Agilent Products, taking into account that such
software will be difficult to support.
(c) The foregoing licenses in this Section 3.2 include the right to
have contract manufacturers and foundries manufacture Agilent Products for
Agilent.
(d) Agilent may grant sublicenses within the scope of the licenses
granted under Sections 3.2(a) and (b) above as follows:
(i) Agilent may grant sublicenses to its Subsidiaries for so
long as they remain its Subsidiaries, with no right to grant further sublicenses
other than, in the case of a sublicensed Subsidiary, to another Subsidiary of
such party and as described in Section 3.2(d)(iii) below; provided that any such
sublicense may be made effective retroactively but not prior to the
sublicensee's becoming a Subsidiary;
(ii) Agilent may grant sublicenses to its Affiliated Companies
for so long as Agilent holds at least thirty percent (30%) ownership interest in
the Affiliated Companies with no right to grant further sublicenses other than,
in the case of a sublicensed Affiliated Company, to the Affiliated Company's
wholly owned subsidiaries and as described in Section 3.2(d)(iii) below;
provided that any such sublicense may be made effective retroactively but not
prior to the sublicensee's becoming an Affiliated Company;
(iii) Agilent may grant sublicenses with respect to Agilent
Products in the form of software, in object code and source code form, to its
distributors, resellers, OEM customers, VAR customers, VAD customers, systems
integrators and other channels of distribution and to its end user customers;
and
(iv) Agilent may grant sublicenses with respect to the relevant
Licensed HP Technology to the Transferee (as defined below), in the event that
Agilent transfers, after the Separation Date, a going business (but not all or
substantially all of its business or assets), provided that such transfer
includes at least one marketable product and tangible assets having a net value
of at least ten million U.S. Dollars ($10,000,000.00), regardless of whether
such transfer is part of (A) an asset sale to any Third Party, (B) a sale of
shares or securities in a Subsidiary or Affiliated Company to a Third Party such
that (x) in the case of a Subsidiary, the Subsidiary ceases to be a
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<PAGE>
Subsidiary, or in the case of an Affiliated Company, Agilent ceases to hold at
least thirty percent (30%) of the outstanding shares or securities in such
Affiliated Company and (y) the Third Party owns at least eighty percent (80%) of
the outstanding shares or securities representing the right to vote for the
election of directors or other managing authority, or (C) a sale of shares or
securities in a Subsidiary or Affiliated Company to a Third Party such that (x)
in the case of a Subsidiary, the Subsidiary ceases to be a Subsidiary, or in the
case of an Affiliated Company, Agilent ceases to hold at least thirty percent
(30%) of the outstanding shares or securities in such Affiliated Company and (y)
no single Third Party owns at least eighty percent (80%) of the outstanding
shares or securities representing the right to vote for the election of
directors or other managing authority of such ex-Subsidiary or ex-Affiliated
Company; provided that:
(1) the Transferee shall have no right to grant further
sublicenses except as described in Section 3.2(d)(iii) above and except that the
Transferee shall have the right to grant sublicenses to any Third Party at least
eighty percent (80%) of whose outstanding shares or securities representing the
right to vote for the election of directors or other managing authority are,
directly or indirectly, owned by the Transferee, only for so long as such
ownership exists;
(2) such sublicenses shall not come into effect unless and
until such Transferee agrees in writing for the benefit of HP to be bound by the
terms of this Agreement including but not limited to the confidentiality
obligations under Article IV;
(3) this Section 3.2(d)(iv) shall be excluded from such
sublicense in any event; and
(4) Agilent shall give HP prompt written notice of any such
sublicense and a copy of the portions of the relevant agreement between Agilent
and such Transferee containing the sublicense terms.
(5) As used in this Section 3.2(d)(iv), "Transferee" in the
case of Sections 3.2(d)(iv)(A) and (B) means the Third Party acquiring the going
business or eighty percent (80%) of the Subsidiary or Affiliated Company and in
the case of Section 3.2(d)(iv)(C) means the ex-Subsidiary or ex-Affiliated
Company only.
(e) The licenses granted above to the Licensed HP Technology shall
continue in perpetuity (or, in the case of Copyrights, Database Rights and Mask
Work Rights, until the expiration of the term thereof).
3.3 HAVE MADE RIGHTS. Each party understands and acknowledges that the
"have made" rights granted to it in Section 3.1 or 3.2, as applicable, and the
sublicenses of such "have made" rights granted pursuant to Sections 3.1(d)(i)
and (ii) and 3.2(d)(i) and (ii), as applicable, are intended to cover only the
products of such party, its Subsidiaries and Affiliated Companies (including
private label or OEM versions of such products), and are not intended to cover
foundry or contract manufacturing activities that such party may undertake
through Third Parties for Third Parties.
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<PAGE>
3.4 IMPROVEMENTS. As between the parties, after the Separation Date,
Agilent hereby retains all right, title and interest, including all intellectual
property rights, in and to any Improvements to Licensed HP Technology made by or
for Agilent in the exercise of the licenses granted to it hereunder, subject
only to the ownership of HP in the underlying Licensed HP Technology, and HP
hereby retains all right, title and interest, including all intellectual
property rights, in and to any Improvements to Licensed Agilent Technology made
by or for HP in the exercise of the licenses granted to it hereunder, subject
only to the ownership of Agilent in the underlying Licensed Agilent Technology.
Neither party shall have any obligation under this Agreement to notify the other
party of any Improvements made by or for it or to disclose or license any such
Improvements to the other party.
3.5 DURATION OF SUBLICENSES TO SUBSIDIARIES AND AFFILIATED COMPANIES. A
sublicense to a particular Subsidiary or Affiliated Company of a party hereto
granted pursuant to Section 3.1(d)(i) or (ii) or 3.2(d)(i) or (ii) shall
terminate upon the date that, in the case of a Subsidiary of a party, such
Subsidiary ceases to be a Subsidiary of such party, or, in the case of an
Affiliated Company of a party, such party ceases to hold at least a thirty
percent (30%) ownership interest in such Affiliated Company; provided, however,
that such cessation shall not affect such party's rights to grant further
sublicenses to such terminated Subsidiary or Affiliated Company as set forth in
Section 3.1(d)(iv) or 3.2(d)(iv) above. In the event that, at the time of such
cessation, such Subsidiary or Affiliated Company owns any Technology to which
the other party is licensed, such license shall continue for the term thereof.
3.6 NO PATENT LICENSES. Nothing contained in this Agreement shall be
construed as conferring to either party by implication, estoppel or otherwise
any license or right under any Patent or applications therefor, whether or not
the exercise of any right herein granted necessarily employs an invention of any
existing or later issued Patent. The applicable licenses granted between HP and
Agilent with respect to Patents are set forth in a separate Master Patent
Ownership and License Agreement.
3.7 THIRD PARTY TECHNOLOGY. The assignment of any applicable license
agreements with respect to Third Party Technology are set forth in a separate
General Assignment and Assumption Agreement between the parties.
ARTICLE IV
CONFIDENTIALITY
The terms of the Master Confidential Disclosure Agreement between the
parties shall apply to any Confidential Information (as defined therein) which
is the subject matter of this Agreement.
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<PAGE>
ARTICLE V
TERMINATION
5.1 VOLUNTARY TERMINATION. By written notice to the other party, each
party may voluntarily terminate all or a specified portion of the licenses and
rights granted to it hereunder by such other party. Such notice shall specify
the effective date of such termination and shall clearly specify any affected
Technology, product or service.
5.2 SURVIVAL. Any voluntary termination of licenses and rights of a party
under Section 5.1 shall not affect such party's licenses and rights with respect
to any licensed product made or service furnished prior to such termination, and
shall not affect the licenses and rights granted to the other party hereunder.
5.3 NO OTHER TERMINATION. Each party acknowledges and agrees that its
remedy for breach by the other party of the licenses granted to it hereunder or
of any other provision hereof shall be, subject to the requirements of Article
VI, to bring a claim to recover damages subject to the limits set forth in this
Agreement and to seek any other appropriate equitable relief, other than
termination of the licenses granted by it in this Agreement.
ARTICLE VI
DISPUTE RESOLUTION
6.1 NEGOTIATION. The parties shall make a good faith attempt to resolve
any dispute or claim arising out of or related to this Agreement through
negotiation. Within thirty (30) days after notice of a dispute or claim is given
by either party to the other party, the parties' first tier negotiating teams
(as determined by each party's Director of Intellectual Property or his or her
delegate) shall meet and make a good faith attempt to resolve such dispute or
claim and shall continue to negotiate in good faith in an effort to resolve the
dispute or claim or renegotiate the applicable section or provision without the
necessity of any formal proceedings. If the first tier negotiating teams are
unable to agree within thirty (30) days of their first meeting, then the
parties' second tier negotiating teams (as determined by each party's Director
of Intellectual Property or his or her delegate) shall meet within thirty (30)
days after the end of the first thirty (30) day negotiating period to attempt to
resolve the matter. During the course of negotiations under this Section 6.1,
all reasonable requests made by one party to the other for information,
including requests for copies of relevant documents, will be honored. The
specific format for such negotiations will be left to the discretion of the
designated negotiating teams but may include the preparation of agreed upon
statements of fact or written statements of position furnished to the other
party.
6.2 NONBINDING MEDIATION. In the event that any dispute or claim arising
out of or related to this Agreement is not settled by the parties within fifteen
(15) days after the first meeting of the second tier negotiating teams under
Section 6.1, the parties will attempt in good faith to resolve such dispute or
claim by nonbinding mediation in accordance with the American
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<PAGE>
Arbitration Association Commercial Mediation Rules. The mediation shall be held
within thirty (30) days of the end of such fifteen (15) day negotiation period
of the second tier negotiating teams. Except as provided below in Section 6.3,
no litigation for the resolution of such dispute may be commenced until the
parties try in good faith to settle the dispute by such mediation in accordance
with such rules and either party has concluded in good faith that amicable
resolution through continued mediation of the matter does not appear likely. The
costs of mediation shall be shared equally by the parties to the mediation. Any
settlement reached by mediation shall be recorded in writing, signed by the
parties, and shall be binding on them.
6.3 PROCEEDINGS. Nothing herein, however, shall prohibit either party
from initiating litigation or other judicial or administrative proceedings if
such party would be substantially harmed by a failure to act during the time
that such good faith efforts are being made to resolve the dispute or claim
through negotiation or mediation. In the event that litigation is commenced
under this Section 6.3, the parties agree to continue to attempt to resolve any
dispute or claim according to the terms of Sections 6.1 and 6.2 during the
course of such litigation proceedings under this Section 6.3.
ARTICLE VII
LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES OR AFFILIATED COMPANIES
BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES OR AFFILIATED COMPANIES FOR ANY
SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST
PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE)
ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE
FOREGOING LIMITATIONS SHALL NOT LIMIT DAMAGES FOR INFRINGEMENT AVAILABLE TO
EITHER PARTY UNDER APPLICABLE LAW IN THE EVENT OF BREACH BY THE OTHER PARTY OF
SECTIONS 3.1(a) OR 3.2(a) AND SHALL NOT LIMIT EACH PARTY'S OBLIGATIONS EXPRESSLY
ASSUMED IN EXHIBIT K OF THE MASTER SEPARATION AGREEMENT; PROVIDED FURTHER THAT
THE EXCLUSION OF PUNITIVE DAMAGES SHALL APPLY IN ANY EVENT.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL TECHNOLOGY
AND ANY OTHER INFORMATION OR MATERIALS LICENSED OR PROVIDED HEREUNDER IS
LICENSED OR PROVIDED ON AN "AS IS" BASIS, AND THAT NEITHER PARTY NOR ANY OF ITS
SUBSIDIARIES OR AFFILIATED COMPANIES MAKES ANY REPRESENTATIONS OR EXTENDS ANY
WARRANTIES WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO,
INCLUDING WITHOUT
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<PAGE>
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Without limiting the
generality of the foregoing, neither party nor any of its Subsidiaries or
Affiliated Companies makes any warranty or representation that any manufacture,
use, importation, offer for sale or sale of any product or service will be free
from infringement of any Patent or other intellectual property right of any
Third Party.
8.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be
construed as conferring any rights by implication, estoppel or otherwise, under
any intellectual property right, other than the rights expressly granted in this
Agreement with respect to the Licensed Agilent Technology and the Licensed HP
Technology. Neither party is required hereunder to furnish or disclose to the
other any technical or other information (including copies of the Licensed
Agilent Technology and the Licensed HP Technology), except as specifically
provided herein.
8.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder
to institute any action or suit against Third Parties for infringement of any
Copyrights, Database Rights or Mask Work Rights or misappropriation of any trade
secret rights in or to any Technology licensed to the other party hereunder, or
to defend any action or suit brought by a Third Party which challenges or
concerns the validity of any of such rights or which claims that any Technology
assigned or licensed to the other party hereunder infringes any Patent,
Copyright, Database Right, Mask Work Right or other intellectual property right
of any Third Party or constitutes a misappropriated trade secret of any Third
Party. HP shall not have any right to institute any action or suit against Third
Parties for infringement of any of the Copyrights, Database Rights or Mask Work
Rights in or to the Licensed Agilent Technology and Agilent shall not have any
right to institute any action or suit against Third Parties for infringement of
any of the Copyrights, Database Rights or Mask Work Rights in or to the Licensed
HP Technology.
8.4 NO OTHER OBLIGATIONS. NEITHER PARTY ASSUMES ANY RESPONSIBILITIES OR
OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES AND OBLIGATIONS
EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN AGREEMENT BETWEEN
THE PARTIES. Without limiting the generality of the foregoing, neither party,
nor any of its Subsidiaries or Affiliated Companies, is obligated to provide any
technical assistance.
8.5 ENTIRE AGREEMENT. This Agreement, the Master Separation Agreement and
the other Ancillary Agreements (as defined in the Master Separation Agreement)
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof. This Agreement shall prevail in the event of any conflicting
terms or legends which may appear on any portion of the Agilent Owned
Technology, Licensed Agilent Technology or Licensed HP Technology. To the extent
there is a conflict between this Agreement and the Master Assignment and
Assumption Agreement between the parties, the terms of this Agreement shall
govern.
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<PAGE>
8.6 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware as to all matters
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
8.7 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
8.8 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy with answer back, by express or overnight mail delivered by a
nationally recognized air courier (delivery charges prepaid), by registered or
certified mail (postage prepaid, return receipt requested) or by e-mail with
receipt confirmed by return e-mail to the respective parties as follows:
if to HP:
c/o Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Attention: Associate General Counsel and
Director of Intellectual Property
Telecopy: (650) 852-8194
if to Agilent:
c/o Agilent Technologies, Inc.
3000 Hanover Street
Palo Alto, CA 94304
Attention: Assistant General Counsel and
Director of Intellectual Property
Telecopy: (650) 813-3095
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by e-mail, telecopy or by air courier
shall be deemed effective on the first Business Day following the day on which
such notice or communication was sent. Any notice or communication sent by
registered or certified mail shall be deemed effective on the third Business Day
following the day on which such notice or communication was mailed. As used in
this Section 8.8, "Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions located in the State of California are
authorized or obligated by law or executive order to close.
8.9 NONASSIGNABILITY. Neither party may, directly or indirectly, in whole
or in part, whether by operation of law or otherwise, assign or transfer this
Agreement, without the other party's prior written consent, and any attempted
assignment, transfer or delegation without such
-16-
<PAGE>
prior written consent shall be voidable at the sole option of such other party.
Notwithstanding the foregoing, each party (or its permitted successive assignees
or transferees hereunder) may assign or transfer this Agreement as a whole
without consent to a Person that succeeds to all or substantially all of the
business or assets of such party. Without limiting the foregoing, this Agreement
will be binding upon and inure to the benefit of the parties and their permitted
successors and assigns.
8.10 SEVERABILITY. If any term or other provision of this Agreement is
determined by a nonappealable decision of a court, administrative agency or
arbitrator to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
8.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of either party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
8.12 AMENDMENT. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
such agreement.
8.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which, taken together, shall be considered to be one and
the same instrument.
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<PAGE>
WHEREFORE, the parties have signed this Master Technology Ownership and
License Agreement effective as of the date first set forth above.
HEWLETT-PACKARD COMPANY AGILENT TECHNOLOGIES, INC.
By: /s/ Ann O. Baskins By: /s/ Craig Nordlund
-------------------------- ----------------------------
Name: Ann O. Baskins Name: Craig Nordlund
------------------------ --------------------------
Title: Associate General Title: Senior Vice President,
----------------------- -------------------------
Counsel and Assistant General Counsel and
Secretary Secretary
[Signature Page to Master Technology Ownership and License Agreement]
<PAGE>
EXHIBIT A
TO MASTER TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT
AFFILIATED COMPANIES
1. HP Affiliated Companies
-----------------------
ImagineCard
Idea LLC
Intria-HP
Intria-HP Potomac
Ericsson-HP Telecom (Sweden)
Ericsson-HP Telecom (France)
Hua-Pua
Putial Ome
PT Berka Services
Liquidity Management Group
Hugin Expert
Syc
Sopura Systems
2. Agilent Affiliated Companies
----------------------------
Chartered Semiconductor Partners Singapore
LumiLEDS
<PAGE>
EXHIBIT 2.4
EXHIBIT D-2
MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT
Between
HEWLETT-PACKARD COMPANY
AND
AGILENT TECHNOLOGIES, INC.
Effective as of November 1, 1999
<PAGE>
MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE I DEFINITIONS........................................................................................ 1
1.1 AFFILIATED COMPANY......................................................................... 1
1.2 AGILENT PATENTS............................................................................ 2
1.3 AGILENT PRODUCTS........................................................................... 2
1.4 ALLOCATED PATENT ASSETS DATABASE........................................................... 2
1.5 ASSIGNED PATENTS........................................................................... 2
1.6 CAPTURE PERIOD............................................................................. 3
1.7 DISTRIBUTION DATE.......................................................................... 3
1.8 FIRST EFFECTIVE FILING DATE................................................................ 3
1.9 HP PATENTS................................................................................. 3
1.10 HP PRODUCTS................................................................................ 4
1.11 INVENTION DISCLOSURE....................................................................... 4
1.12 JOINT PATENTS.............................................................................. 4
1.13 LICENSED PATENTS........................................................................... 5
1.14 MASTER SEPARATION AGREEMENT................................................................ 5
1.15 PATENT FIELD DEFINITION DATABASE........................................................... 5
1.16 PATENTS.................................................................................... 5
1.17 PERSON..................................................................................... 5
1.18 SEPARATION DATE............................................................................ 5
1.19 SUBSIDIARY................................................................................. 5
1.20 THIRD PARTY................................................................................ 6
ARTICLE II ASSIGNMENTS....................................................................................... 6
2.1 ASSIGNED PATENTS........................................................................... 6
2.2 JOINT PATENTS.............................................................................. 6
2.3 PRIOR GRANTS............................................................................... 6
2.4 ASSIGNMENT DISCLAIMER...................................................................... 7
ARTICLE III LICENSES AND RIGHTS.............................................................................. 7
3.1 LICENSE GRANTS TO HP....................................................................... 7
3.2 LICENSE GRANTS TO AGILENT.................................................................. 7
3.3 SUBLICENSE RIGHTS.......................................................................... 7
3.4 HAVE MADE RIGHTS........................................................................... 8
3.5 DURATION................................................................................... 8
3.6 SALE OF A BUSINESS, SUBSIDIARY OR AFFILIATED COMPANY....................................... 9
3.7 SALE OF A PARTY OR ALL ASSETS OF A PARTY................................................... 11
3.8 RIGHTS TO JOINT PATENTS.................................................................... 11
3.9 PATENT APPLICATIONS AND INVENTION DISCLOSURES.............................................. 12
3.10 TURBO COOLER PATENTS....................................................................... 12
3.11 DISPLAY PATENTS............................................................................ 12
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE IV ADDITIONAL OBLIGATIONS................................................................................ 13
4.1 ADDITIONAL OBLIGATIONS WITH REGARD TO ASSIGNED PATENTS......................................... 13
4.2 ADDITIONAL OBLIGATIONS WITH REGARD TO HP PATENTS............................................... 13
4.3 ADDITIONAL OBLIGATIONS WITH REGARD TO JOINT PATENTS............................................ 14
4.4 DEFENSIVE PROTECTION MEASURES.................................................................. 15
4.5 STANDARDS BODIES............................................................................... 15
4.6 ASSIGNMENT OF PATENTS.......................................................................... 15
4.7 RESPONSE TO REQUESTS........................................................................... 15
4.8 RECORDATION OF LICENSES........................................................................ 15
ARTICLE V CONFIDENTIALITY........................................................................................ 16
ARTICLE VI TERMINATION........................................................................................... 16
6.1 VOLUNTARY TERMINATION.......................................................................... 16
6.2 SURVIVAL....................................................................................... 16
6.3 NO OTHER TERMINATION........................................................................... 16
ARTICLE VII DISPUTE RESOLUTION................................................................................... 17
7.1 NEGOTIATION.................................................................................... 17
7.2 NONBINDING MEDIATION........................................................................... 17
7.3 PROCEEDINGS.................................................................................... 17
ARTICLE VIII LIMITATION OF LIABILITY............................................................................. 18
ARTICLE IX MISCELLANEOUS PROVISIONS.............................................................................. 18
9.1 DISCLAIMER..................................................................................... 18
9.2 NO IMPLIED LICENSES............................................................................ 18
9.3 INFRINGEMENT SUITS............................................................................. 18
9.4 NO OTHER OBLIGATIONS........................................................................... 19
9.5 ENTIRE AGREEMENT............................................................................... 19
9.6 GOVERNING LAW.................................................................................. 19
9.7 DESCRIPTIVE HEADINGS........................................................................... 19
9.8 NOTICES........................................................................................ 19
9.9 NONASSIGNABILITY............................................................................... 20
9.10 SEVERABILITY................................................................................... 20
9.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.......................................... 20
9.12 AMENDMENT...................................................................................... 20
9.13 COUNTERPARTS................................................................................... 21
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(continued)
Page
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EXHIBIT A: AFFILIATED COMPANIES
EXHIBIT B: HP FIELD RESTRICTIONS
EXHIBIT C: AGILENT FIELD RESTRICTIONS
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<PAGE>
MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT
This Master Patent Ownership and License Agreement (the "Agreement") is
effective as of November 1, 1999 (the "Effective Date"), between Hewlett-Packard
Company, a Delaware corporation ("HP"), having an office at 3000 Hanover Street,
Palo Alto, California 94304 and Agilent Technologies, Inc., a Delaware
corporation ("Agilent"), having an office at 3000 Hanover Street, Palo Alto,
California 94304.
WHEREAS, the Board of Directors of HP has determined that it is in the best
interest of HP and its stockholders to separate HP's existing businesses into
two independent businesses;
WHEREAS, as part of the foregoing, HP and Agilent have entered into a
Master Separation Agreement (as defined below), which provides, among other
things, for the separation of certain Agilent assets and Agilent liabilities,
the initial public offering of Agilent stock, the distribution of such stock and
the execution and delivery of certain other agreements in order to facilitate
and provide for the foregoing;
WHEREAS, also as part of the foregoing, HP desires to assign to Agilent
certain patents, patent applications and invention disclosures that are owned or
controlled by HP prior to the Effective Date;
WHEREAS, the parties desire to facilitate such transaction by exchanging
licenses under certain of the patents and patent applications owned or
controlled by them;
WHEREAS, HP desires to receive and Agilent is willing to grant to HP
certain licenses and rights under patents and patent applications owned by
Agilent; and
WHEREAS, Agilent desires to receive and HP is willing to grant to Agilent
certain licenses and rights under patents and patent applications owned by HP.
NOW, THEREFORE, in consideration of the mutual promises of the parties, and
of good and valuable consideration, it is agreed by and between the parties as
follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following capitalized terms are
defined in this Article I and shall have the meaning specified herein:
1.1 AFFILIATED COMPANY. "Affiliated Company" means, with respect to HP,
any entity in which HP holds a 50% or less ownership interest and that is listed
on Exhibit A hereto and, with respect to Agilent, any entity in which Agilent
holds a 50% or less ownership interest and that is listed on Exhibit A hereto;
provided, however, that any such entity listed in Exhibit A shall be
<PAGE>
considered to be an Affiliated Company under this Agreement only if it agrees in
writing to be bound by the terms and conditions of this Agreement. Exhibit A may
be amended from time to time after the date hereof upon mutual consent of the
parties.
1.2 AGILENT PATENTS. "Agilent Patents" means:
(a) the Assigned Patents; except for design patents and design
registrations (other than typeface design patents and typeface design
registrations) with a First Effective Filing Date after the Separation Date; and
(b) every Non-Design Patent to the extent entitled to a First
Effective Filing Date prior to the expiration of the Capture Period, provided
that, at any time after the First Effective Filing Date of any such Non-Design
Patent and prior to the expiration of the Capture Period, Agilent (or any
Subsidiary or Affiliated Company of Agilent):
(i) has ownership or control of any such Non-Design Patent, or
(ii) otherwise has the right under such Non-Design Patent to
grant any licenses of the type and on the terms herein granted by Agilent
without the obligation to pay royalties or other consideration to Third Parties;
and
(c) applications for the foregoing Non-Design Patents described in
Section 1.2(b), including without limitation any continuations,
continuations-in-part, divisions and substitutions; but
(d) excluding from any Non-Design Patent or Non-Design Patent
application described in Sections 1.2(b) and (c) any claim (i) directed to
subject matter that does not appear in any Non-Design Patent application having
a First Effective Filing Date prior to the expiration of the Capture Period and
(ii) of which neither Agilent nor any person having a legal duty to assign
his/her interest therein to Agilent is entitled to be named as an inventor.
1.3 AGILENT PRODUCTS. "Agilent Products" means any and all products and
services of the businesses in which Agilent or any of its Subsidiaries or
Affiliated Companies is now or hereafter engaged (including the business of
making (but not having made) Third Party products for Third Parties when Agilent
is acting as a contract manufacturer or foundry for such Third Parties).
1.4 ALLOCATED PATENT ASSETS DATABASE. "Allocated Patent Assets Database"
means the Allocated Patent Assets Database, as it may be updated by the parties
upon mutual agreement to add Patents, Patent applications and Invention
Disclosures as of the Separation Date.
1.5 ASSIGNED PATENTS. "Assigned Patents" means only those
(a) Patents, Patent applications and Invention Disclosures allocated
to Agilent in the Allocated Patent Assets Database;
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(b) Patent applications filed on the foregoing Invention Disclosures
described in Section 1.5(a);
(c) continuations, continuations-in-part, divisions and substitutions
of any of the foregoing Patent applications described in Sections 1.5(a) and
(b);
(d) Patents which may issue on any of the foregoing Patent
applications described in Sections 1.5(a)-(c);
(e) renewals, reissues, reexaminations and extensions of the
foregoing Patents described in Sections 1.5(a) and (d); and
(f) foreign Patent applications and Patents that are counterparts of
any of the foregoing Patent applications or Patents described in Sections
1.5(a)-(e), including any Patent application or Patent to the extent that it
claims priority from any of the foregoing Patent applications or Patents
described in Sections 1.5(a)-(e); but
(g) excluding from any Patent or Patent application described in
Sections 1.5(c)-(f) any claim (i) directed to subject matter that does not
appear in any Patent application having a First Effective Filing Date prior to
the Separation Date and (ii) of which neither Agilent nor any person having a
legal duty to assign his/her interest therein to Agilent is entitled to be named
as an inventor.
1.6 CAPTURE PERIOD. "Capture Period" means the period ending five (5)
years from the Separation Date.
1.7 DISTRIBUTION DATE. "Distribution Date" has the meaning set forth in
the Master Separation Agreement.
1.8 FIRST EFFECTIVE FILING DATE. "First Effective Filing Date" means the
earliest effective filing date in the particular country for any Patent or any
application for any Patent. By way of example, it is understood that the First
Effective Filing Date for a United States Patent is the earlier of (i) the
actual filing date of the United States Patent application which issued into
such Patent, (ii) the priority date under 35 U.S.C. (S) 119 for such Patent, or
(iii) the priority date under 35 U.S.C. (S) 120 for such Patent.
1.9 HP PATENTS. "HP Patents" means:
(a) every Non-Design Patent to the extent entitled to a First
Effective Filing Date prior to the expiration of the Capture Period, provided
that, at any time after the First Effective Filing Date of any such Non-Design
Patent and prior to the expiration of the Capture Period, HP (or any Subsidiary
or Affiliated Company of HP):
(i) has ownership or control of any such Non-Design Patent, or
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(ii) otherwise has the right under such Non-Design Patent to
grant any licenses of the type and on the terms herein granted by HP without the
obligation to pay royalties or other consideration to Third Parties; and
(b) applications for the foregoing Non-Design Patents described in
Section 1.9(a), including without limitation any continuations,
continuations-in-part, divisions and substitutions; but
(c) excluding from any Non-Design Patent or Non-Design Patent
application described in Sections 1.9(a) and (b) any claim (i) directed to
subject matter that does not appear in any Patent application having a First
Effective Filing Date prior to the expiration of the Capture Period and (ii) of
which neither HP nor any person having a legal duty to assign his/her interest
therein to HP is entitled to be named as an inventor.
(d) Notwithstanding the foregoing, the term "HP Patents" does not
include Agilent Patents.
1.10 HP PRODUCTS. "HP Products" means any and all products and services of
the businesses in which HP or any of its Subsidiaries or Affiliated Companies is
now or hereafter engaged (including the business of making (but not having made)
Third Party products for Third Parties when HP is acting as a contract
manufacturer or foundry for such Third Parties).
1.11 INVENTION DISCLOSURE. "Invention Disclosure" means a disclosure of an
invention (i) written for the purpose of allowing legal and business people to
determine whether to file a Patent application with respect to such invention
and (ii) recorded with a control number in the owning party's records) with a
First Effective Filing Date after the Separation Date.
1.12 JOINT PATENTS. "Joint Patents" means:
(a) Patents, Patent applications and Invention Disclosures allocated
to the parties jointly in the Allocated Patent Assets Database;
(b) Patent applications filed on the foregoing Invention Disclosures
described in Section 1.12 (a);
(c) continuations, continuations-in-part, divisions and substitutions
of any of the foregoing Patent applications described in Sections 1.12 (a) and
(b);
(d) Patents which may issue on any of the foregoing Patent
applications described in Sections 1.12 (a)-(c);
(e) renewals, reissues and extensions of the foregoing Patents
described in Sections 1.12(a) and (d); and
(f) foreign Patent applications and Patents that are counterparts of
any of the foregoing Patent applications or Patents described in Sections 1.12
(a)-(e), including any Patent
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application or Patent that takes priority from any of the foregoing Patent
applications or Patents described in Sections 1.12 (a)-(e); but
(g) excluding from any Patent or Patent application described in
Sections 1.12 (c)-(f) any claim (i) directed to subject matter that does not
appear in any Patent application having a First Effective Filing Date prior to
the Separation Date and (ii) of which there is no joint inventorship including
at least one Agilent employee and at least one HP employee.
1.13 NON-DESIGN PATENTS. "Non-Design Patents" means Patents except for
design patents (other than typeface design patents and typeface design
registrations) to the extent that such design patents have a First Effective
Filing Date after the Separation Date.
1.14 MASTER SEPARATION AGREEMENT. "Master Separation Agreement" means the
Master Separation and Distribution Agreement between the parties.
1.15 PATENT FIELD DEFINITION DATABASE. "Patent Field Definition Database"
means the Patent Field Definition Database, as it may be updated by the parties
as of the Separation Date.
1.16 PATENTS. "Patents" means patents, utility models, design patents,
design registrations, certificates of invention and other governmental grants
for the protection of inventions or industrial designs anywhere in the world and
all reissues, renewals, re-examinations and extensions of any of the foregoing.
1.17 PERSON. "Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
1.18 SEPARATION DATE. "Separation Date" means 12:01 a.m., Pacific Time,
November 1, 1999 or such other date as may be fixed by the Board of Directors of
HP.
1.19 SUBSIDIARY. "Subsidiary" means with respect to any specified Person,
any corporation, any limited liability company, any partnership or other legal
entity of which such Person owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote on the election of the members
of the board of directors or similar governing body. Unless the context
otherwise requires, reference to HP and its Subsidiaries shall not include the
subsidiaries of HP that will be transferred to Agilent after giving effect to
the Separation (as defined in the Master Separation Agreement), including the
actions taken pursuant to the Non-US Plan (as defined in the Master Separation
Agreement). For example, if HP owns 70% of the stock of another corporation, and
that corporation owns 60% of the equity interest of a limited liability company,
then that corporation is a Subsidiary of HP but that limited liability company
is not. However, if such corporation owns 90% of the equity interest of a
limited liability company, then that limited liability company is a Subsidiary
of HP. For the avoidance of doubt, this definition of Subsidiary is different
from the definition of Subsidiary in the Master Separation Agreement.
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1.20 THIRD PARTY. "Third Party" means a Person other than HP and its
Subsidiaries and Affiliated Companies and Agilent and its Subsidiaries and
Affiliated Companies.
ARTICLE II
ASSIGNMENTS
2.1 ASSIGNED PATENTS. Subject to Sections 2.3 and 2.4 below, HP hereby
grants, conveys and assigns (and agrees to cause its appropriate Subsidiaries to
grant, convey and assign) to Agilent, by execution hereof (or, where appropriate
or required, by execution of separate instruments of assignment), all its (and
their) right, title and interest in and to the Assigned Patents, to be held and
enjoyed by Agilent, its successors and assigns. HP further grants, conveys and
assigns (and agrees to cause its appropriate Subsidiaries to grant, convey and
assign) to Agilent all its (and their) right, title and interest in and to any
and all causes of action and rights of recovery for past infringement of the
Assigned Patents and the right to claim priority from the Assigned Patents. HP
will, without demanding any further consideration therefor, at the request and
expense of Agilent (except for the value of the time of HP employees), do (and
cause its Subsidiaries to do) all lawful and just acts, that may be or become
necessary for prosecuting, sustaining, obtaining continuations of, or reissuing
said Assigned Patents and for evidencing, maintaining, recording and perfecting
Agilent's rights to said Assigned Patents, consistent with HP's general business
practice as of the Separation Date, including but not limited to execution and
acknowledgement of (and causing its Subsidiaries to execute and acknowledge)
assignments and other instruments in a form reasonably required by Agilent for
each Patent jurisdiction.
2.2 JOINT PATENTS. Subject to Sections 2.3, 2.4, 3.8 and 4.3 below, HP
hereby grants, conveys and assigns (and agrees to cause its appropriate
Subsidiaries to grant, convey and assign) to Agilent, by execution hereof (or,
where appropriate or required, by execution of separate instruments of
assignment), an undivided one-half interest in and to the Joint Patents, to be
held and enjoyed by Agilent, its successors and assigns. HP further grants,
conveys, and assigns (and agrees to cause its appropriate Subsidiaries to grant,
convey and assign) to Agilent an undivided one-half interest in and to any and
all causes of action and rights of recovery for past infringement of the Joint
Patents and the right to claim priority from the Joint Patents. HP will, without
demanding any further consideration therefor, at the request and expense of
Agilent (except for the value of the time of HP employees), do (and cause its
Subsidiaries to do) all lawful and just acts, that may be or become necessary
for evidencing, maintaining, recording and perfecting Agilent's rights to said
Joint Patents consistent with HP's general business practice as of the
Separation Date, including but not limited to execution and acknowledgement of
(and causing its Subsidiaries to execute and acknowledge) assignments and other
instruments in a form reasonably required by Agilent for each Patent
jurisdiction.
2.3 PRIOR GRANTS. Agilent acknowledges and agrees that the foregoing
assignments are subject to any and all licenses or other rights that may have
been granted by HP or its Subsidiaries with respect to the Assigned Patents and
the Joint Patents prior to the Separation Date. HP shall respond to reasonable
inquiries from Agilent regarding any such prior grants.
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2.4 ASSIGNMENT DISCLAIMER. AGILENT ACKNOWLEDGES AND AGREES THAT THE
FOREGOING ASSIGNMENTS ARE MADE ON AN "AS-IS," QUITCLAIM BASIS AND THAT NEITHER
HP NOR ANY SUBSIDIARY OR AFFILIATED COMPANY OF HP HAS MADE OR WILL MAKE ANY
WARRANTY WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION
ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
TITLE, ENFORCEABILITY, NON-INFRINGEMENT, OR VALIDITY OF PATENT CLAIMS (ISSUED OR
PENDING).
ARTICLE III
LICENSES AND RIGHTS
3.1 LICENSE GRANTS TO HP. Agilent grants (and agrees to cause its
appropriate Subsidiaries or Affiliated Companies to grant) to HP, under the
Agilent Patents, a personal, irrevocable, nonexclusive, worldwide, fully-paid,
royalty-free and non-transferable (except as set forth in Section 9.9) license
to make (including the right to practice methods, processes and procedures),
have made, use, lease, sell, offer for sale and import HP Products in all fields
of use except in the fields of use set forth on Exhibit B. In addition, the
foregoing license grants are subject to the special contract terms, if any, set
forth in the Allocated Patent Assets Database.
3.2 LICENSE GRANTS TO AGILENT. HP grants (and agrees to cause its
appropriate Subsidiaries or Affiliated Companies to grant) to Agilent, under the
HP Patents, a personal, irrevocable, nonexclusive, worldwide, fully-paid,
royalty-free and non-transferable (except as set forth in Section 9.9) license
to make (including the right to practice methods, processes and procedures),
have made, use, lease, sell, offer for sale and import Agilent Products in all
fields of use except in the fields of use set forth on Exhibit C. In addition,
the foregoing license grants are subject to the special contract terms, if any,
set forth in the Allocated Patent Assets Database.
3.3 SUBLICENSE RIGHTS.
(a) Subject to Sections 3.5 and 3.6, each party may grant sublicenses
to its respective Subsidiaries within the scope of its respective license
hereunder (with no right to grant further sublicenses other than, in the case of
a sublicensed Subsidiary, to another Subsidiary of such party and as described
in Sections 3.3(e) and (f) below).
(b) Subject to Sections 3.5 and 3.6, each party may grant sublicenses
to its respective Affiliated Companies within the scope of its respective
license hereunder (with no right to grant further sublicenses other than, in the
case of a sublicensed Affiliated Company, to such Affiliated Company's wholly-
owned subsidiaries and as described in Sections 3.3(e) and (f) below).
(c) Any sublicense under Section 3.3(a) or 3.3(b) may be made
effective retroactively, but not prior to the sublicensee's becoming a
Subsidiary or Affiliated Company of the granting party.
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(d) Each party may grant sublicenses to Third Parties within the
scope of their respective licenses hereunder with respect to the Patents
identified as sublicensable in the Allocated Patent Assets Database, subject to
prior written approval by the other party. Such sublicense shall be deemed
approved if not disapproved in writing within thirty (30) days of written
request to such other party. Such sublicense shall be subject to any special
contract terms applicable to Third Party sublicenses set forth in the Allocated
Patent Assets Database. The sublicense agreement between the sublicensor and the
Third Party sublicensee shall provide that the owner of the sublicensed Patent
may terminate the sublicense for breach upon written notice to the sublicensee,
subject to a cure period of not less than thirty (30) days, and may seek
immediate injunctive relief in the event of any breach.
(e) Any licenses granted by HP to its distributors, resellers, OEM
customers, VAR customers, VAD customers, systems integrators and other channels
of distribution and to its end user customers with respect to any HP Product in
the form of software, may include a sublicense under the Agilent Patents within
the scope of HP's license hereunder, provided that the scope of such sublicense
is limited to the exercise of the rights granted by HP with respect to the HP
Product.
(f) Any licenses granted by Agilent to its distributors, resellers,
OEM customers, VAR customers, VAD customers, systems integrators and other
channels of distribution and to its end user customers with respect to any
Agilent Product in the form of software may include a sublicense under the HP
Patents within the scope of Agilent's license hereunder, provided that the scope
of such sublicense is limited to the exercise of the rights granted by Agilent
with respect to the Agilent Product.
3.4 HAVE MADE RIGHTS. Each party understands and acknowledges that the
"have made" rights granted to it in Section 3.1 or 3.2, as applicable, and the
sublicenses of such "have made" rights granted pursuant to Sections 3.3(a) and
(b), as applicable, are intended to cover only the products of such party, its
Subsidiaries and Affiliated Companies (including private label or OEM versions
of such products), and are not intended to cover foundry or contract
manufacturing activities that such party may undertake through Third Parties for
Third Parties.
3.5 DURATION.
(a) All licenses granted herein with respect to each Patent shall expire
upon the expiration of the term of such Patent; provided, however, that licenses
for Patents falling within Section 1.2(b)(ii) or Section 1.9(a)(ii) shall expire
upon the expiration of the term of the grantor's license under such Patent.
(b) All sublicenses granted pursuant to this Agreement to a particular
Subsidiary or Affiliated Company of a party hereto shall terminate the date
that, in the case of a Subsidiary of a party, the Subsidiary ceases to be a
Subsidiary of such party, or, in the case of an Affiliated Company of a party,
such party ceases to hold at least a thirty percent (30%) ownership interest in
such Affiliated Company; provided however, that the foregoing shall not affect
the other party's obligations under Section 3.6 below. The licenses granted to
such other party hereunder with respect
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to Patents and Patent applications of such Subsidiary or Affiliated Company with
a First Effective Filing Date prior to the date of such cessation shall remain
in effect notwithstanding such cessation.
3.6 SALE OF A BUSINESS, SUBSIDIARY OR AFFILIATED COMPANY.
(a) If either party (the "Transferring Party"), after the Separation
Date, transfers a going business (but not all or substantially all of its
business or assets), and such transfer includes at least one marketable product
and tangible assets having a net value of at least ten million U.S. dollars
($10,000,000.00), regardless of whether such transfer is part of (i) an asset
sale to any Third Party, (ii) a sale of shares or securities in a Subsidiary or
Affiliated Company to a Third Party such that (A) in the case of a Subsidiary,
the Subsidiary ceases to be a Subsidiary, or in the case of an Affiliated
Company, the Transferring Party ceases to hold at least a thirty percent (30%)
of the outstanding shares or securities in such Affiliated Company and (B) the
Third Party owns at least eighty percent (80%) of the outstanding shares or
securities representing the right to vote for the election of directors or other
managing authority, or (iii) a sale of shares or securities in a Subsidiary or
Affiliated Company such that (A) in the case of a Subsidiary, the Subsidiary
ceases to be a Subsidiary, or in the case of an Affiliated Company, the
Transferring Party ceases to hold at least thirty percent (30%) of the
outstanding shares or securities in such Affiliated Company and (B) no single
Third Party owns at least eighty percent (80%) of the outstanding shares or
securities representing the right to vote for the election of directors or other
managing authority of such ex-Subsidiary or ex-Affiliated Company;
(b) then, upon written request to the other party (the "Non-
Transferring Party") jointly by the Transferring Party and the Transferee (as
defined below) within sixty (60) days following the transfer, the Non-
Transferring Party shall grant a royalty-free license to the Transferee under
the same terms as the license granted to the Transferring Party under this
Agreement subject to the following:
(i) the effective date of such license shall be the effective
date of such transfer,
(ii) the products, services and processes of the Transferee that
are subject to such license shall be limited to the products, services and
processes of the Subsidiary or Affiliated Company or the products, services and
processes in the transferred business that are commercially released or for
which substantial steps have been taken to commercialization and for new
versions that have merely minor incremental differences from such products,
services and processes,
(iii) the Patents of the Non-Transferring Party that are subject
to such license shall be limited to HP Patents or Agilent Patents, as the case
may be, that are entitled to a First Effective Filing Date on or before the date
of such transfer,
(iv) the Transferee shall have no right to grant sublicenses
(except as set forth in Sections 3.3(e) and (f) above) except that the
Transferee shall have the right to grant sublicenses to any Person at least
eighty percent (80%) of whose outstanding shares or securities representing the
right to vote for the election of directors or other managing authority are,
directly or
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indirectly, owned by the Transferee ("Transferee Subsidiaries"), only for so
long as such ownership exists, and
(v) this Section 3.6 shall be excluded from such license in any
event;
(c) provided, further, that the Transferee shall grant to the Non-
Transferring Party a royalty-free license under the same terms as the license
granted to the Non-Transferring Party by the Transferring Party under this
Agreement, subject to the following:
(i) the effective date of such license shall be the effective
date of the transfer,
(ii) the products, services and processes of the Non-Transferring
Party that are subject to such license shall be all the products, services and
processes that are subject to the license from the Transferring Party to the
Non-Transferring Party as of the effective date of the transfer, and
(iii) the Patents of the Transferee that are subject to such
license shall be limited to all the Non-Design Patents that are entitled to a
First Effective Filing Date on or before the date of such transfer and under
which, at any time commencing with the date of the transfer, the Transferee or
any of the Transferee Subsidiaries has ownership or control or otherwise has the
right to grant such license without the obligation to pay royalties or other
consideration to Third Parties; and
(d) provided, further, that in the event that the Non-Transferring
Party and the Transferee are engaged in litigation, arbitration or other formal
dispute resolution proceedings covering Patent infringement (pending in any
court, tribunal, or administrative agency or before any appointed or agreed upon
arbitrator in any jurisdiction worldwide), then the Non-Transferring Party shall
have no obligation to enter into a license with the Transferee under this
Section 3.6.
(e) Each party may exercise its rights as the Transferring Party
under this Section 3.6 no more than eight (8) times unless otherwise agreed to
in writing by the other party. Notwithstanding the foregoing limitation,
however, in any license granted by a Non-Transferring Party to a Transferee
under this Section 3.6, the Transferring Party may elect to relinquish its
license under this Agreement in the field of use covered by the license, and
such license shall not count toward the limit. In making such election, the
Transferring Party promptly shall notify the Non-Transferring Party. All notices
of transfer and all consents by HP and Agilent shall be effective only if
provided to or by the Director of Intellectual Property of the applicable party.
(f) As used above in this Section 3.6, "Transferee" in the case of
Sections 3.6(a)(i) and (ii) means the Third Party acquiring the going business
or eighty percent (80%) of the Subsidiary or Affiliated Company and in the case
of Section 3.6(a)(iii) means the ex-Subsidiary or ex-Affiliated Company only.
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3.7 SALE OF A PARTY OR ALL ASSETS OF A PARTY.
(a) Each party (or its permitted successive assignees or transferees
hereunder) may assign or transfer this Agreement as a whole without consent in
connection with a corporate reorganization which leaves such party substantially
equivalent in terms of business, assets and ownership as before the
reorganization (e.g., a reincorporation in another state).
(b) Each party (or its permitted successive assignees or transferees
hereunder) (the "Acquired Party") may assign or transfer this Agreement as a
whole without consent to a Person that succeeds to all or substantially all of
the business or assets of such party (the "Acquiring Party"); provided, however,
that in the event of any assignment or transfer under this Section 3.7(b) that
is not covered by Section 3.7(a) above:
(i) the Acquired Party promptly shall give notice of such
acquisition to the other party (the "Non-Acquired Party"),
(ii) the license granted to the Acquired Party by the Non-
Acquired Party pursuant to this Agreement, and any sublicenses granted by the
Acquired Party to its Subsidiaries and Affiliated Companies, shall automatically
become limited to the products, processes and services of the Acquired Party or
its Subsidiaries or Affiliated Companies that are commercially released or for
which substantial steps have been taken to commercialization as of the effective
date of the acquisition and for new versions that have merely minor incremental
differences from such products, processes and services and shall not in any
event include any products, processes or services of the Acquiring Party, and
the Capture Period for Patents under such license shall expire as of the
effective date of the acquisition; provided, however, that in any event such
license shall be terminable at will by the Non-Acquired Party if the Non-
Acquired Party and the Acquiring Party are engaged in litigation, arbitration or
other formal dispute resolution proceedings covering Patent infringement
(pending in any court, tribunal, or administrative agency or before any
appointed or agreed upon arbitrator in any jurisdiction worldwide) at the time
that the acquisition agreement is entered into, or if such proceedings are
initiated by the Acquiring Party within one hundred twenty-one days (121) days
after the date that the acquisition agreement is entered into, and
(iii) the license granted by the Acquired Party to the Non-
Acquired Party pursuant to this Agreement shall remain in place unchanged except
that the Capture Period for Patents under such license shall expire as of the
effective date of the acquisition.
3.8 RIGHTS TO JOINT PATENTS.
(a) Subject to the further restrictions in this Section 3.8(a), each
party has the right to practice the Joint Patents without restriction and
without the consent of the other party. Certain Joint Patents are subject to the
restriction that each party may not practice such Joint Patents, in certain
fields of use as indicated in the Allocated Patent Assets Database.
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(b) Each party may license the Joint Patents only with the prior
written consent of the other party, which consent will not be unreasonably
withheld. Such consent shall be deemed given if not withheld in writing within
thirty (30) days of written request to such other party.
(c) In the event that either party (the "Transferring Party") desires
to transfer its ownership interest in any or all Joint Patents to any Third
Party, it shall first give the other party (the "Non-Transferring Party") notice
and the opportunity to acquire any such Joint Patents for the same consideration
as that offered to the Third Party. The Non-Transferring Party shall have
fifteen (15) Business Days (as such term is defined in Section 9.8 below) to
determine whether to acquire such Joint Patents for the same consideration as
that offered to the Third Party. In the event that the Non-Transferring Party
fails to respond within such fifteen (15) Business Day period or declines to
accept such offer, then the Transferring Party may transfer its interest in such
Joint Patents to the Third Party on the same terms offered to the Non-
Transferring Party. If the Transferring Party desires to offer more favorable
terms to such Third Party or to any other Third Party, then the process set
forth in this Section 3.8(c) shall be repeated.
3.9 PATENT APPLICATIONS AND INVENTION DISCLOSURES. Each party agrees, at
its own expense, to provide to the other party copies of any Patents, Patent
applications and Invention Disclosures that are listed in the Allocated Patent
Assets Database in the form that such Patents, Patent applications and Invention
Disclosures exist as of the Separation Date. Neither party has any obligation to
disclose or provide copies to the other party any other Patents, Patent
applications or Invention Disclosures. The licenses granted under this Agreement
cover only statutory rights under Patents and statutory rights (if any) under
Patent applications. Trade secret and other non-Patent licenses with respect to
inventions described in Invention Disclosures and Patent applications shall be
solely as set forth in the Master Technology Ownership and License Agreement or
the ICBD Technology Ownership and License Agreement between the parties, as
applicable.
3.10 TURBO COOLER PATENTS. Certain Patents related to turbo coolers, as
identified in the Allocated Patent Assets Database, are subject to additional
terms as set forth in a separate written agreement between the parties.
3.11 DISPLAY PATENTS. In the event that either party (the "Transferring
Party") desires to transfer to any Third Party its ownership interest in any
Patents that are specifically identified as "Display Patents" in the Allocated
Patent Assets Database ("Display Patents"), it shall first give the other party
(the "Non-Transferring Party") notice and the opportunity to acquire those
Display Patents for the same consideration as that offered to the Third Party.
The Non-Transferring Party shall have fifteen (15) Business Days (as such term
is defined in Section 9.8 below) to determine whether to acquire such Display
Patents for the same consideration as that offered to the Third Party. In the
event that the Non-Transferring Party fails to respond within such fifteen (15)
Business Day period or declines to accept such offer, then the Transferring
Party may transfer its interest in those Display Patents to the Third Party on
the same terms offered to the Non-Transferring Party. If the Transferring Party
desires to offer more favorable terms to such Third Party or to any other Third
Party, then the process set forth in this Section 3.11 shall be repeated.
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ARTICLE IV
ADDITIONAL OBLIGATIONS
4.1 ADDITIONAL OBLIGATIONS WITH REGARD TO ASSIGNED PATENTS.
(a) The parties will cooperate to effect a smooth transfer of the
responsibility for prosecution, maintenance and enforcement of the Assigned
Patents from HP to Agilent. Until such transfer has been effected, HP agrees to
continue the prosecution and maintenance of, and ongoing litigation (if any)
with respect to, the Assigned Patents (including payment of maintenance fees),
and to maintain its files and records relating to the Assigned Patents using the
same standard of care and diligence that it uses with respect to the HP Patents.
Agilent will reimburse HP for all actual and reasonable expenses (excluding the
value of the time of HP employees) to continue to prosecute and maintain the
Assigned Patents after the Separation Date until the transfer of responsibility
for the Assigned Patents has been completed and to continue any such ongoing
litigation. The parties shall agree on a case by case basis on compensation, if
any, of HP for the value of time of HP's employees as reasonably required in
connection with any such litigation. HP will provide Agilent with the originals
or copies of its files relating to the Assigned Patents upon such transfer or at
such earlier time as the parties may agree.
(b) HP shall provide continuing reasonable support to Agilent with
respect to the Assigned Patents, including by way of example the following:
(i) executing all documents prepared by Agilent necessary for
prosecution, maintenance, and litigation of the Assigned Patents,
(ii) making available to Agilent or its counsel, inventors and
other persons employed by HP for interviews and/or testimony to assist in good
faith in further prosecution, maintenance or litigation of the Assigned Patents,
including the signing of documents related thereto,
(iii) forwarding copies of all correspondence sent and received
concerning the Assigned Patents within a reasonable period of time after receipt
by HP, and
(iv) making all relevant documents in the possession or control
of HP and corresponding to the Assigned Patents, or any licenses thereunder,
available to Agilent or its counsel.
Any actual and reasonable out-of-pocket expenses associated with any such
assistance shall be borne by Agilent, expressly excluding the value of the time
of such HP employees; provided, however, that in the case of assistance with
litigation, the parties shall agree on a case by case basis on compensation, if
any, of HP for the value of the time of HP's employees as reasonably required in
connection with such litigation.
4.2 ADDITIONAL OBLIGATIONS WITH REGARD TO HP PATENTS. Agilent
acknowledges that its employees and contractors who are former HP employees and
contractors
-13-
<PAGE>
have a continuing duty to assist HP with the prosecution of HP Patent
applications and, accordingly, Agilent agrees to make available, to HP or its
counsel, inventors and other persons employed by Agilent for interviews and/or
testimony to assist in good faith in further prosecution, maintenance or
litigation of the HP Patents, including the signing of documents related
thereto. Any actual and reasonable out-of-pocket expenses associated with such
assistance shall be borne by HP, expressly excluding the value of the time of
such Agilent personnel; provided, however, that in the case of assistance with
litigation, the parties shall agree on a case by case basis on compensation, if
any, of Agilent for the value of the time of Agilent's employees as reasonably
required in connection with such litigation.
4.3 ADDITIONAL OBLIGATIONS WITH REGARD TO JOINT PATENTS.
(a) The parties shall agree, through their respective Directors of
Intellectual Property or delegates thereof, from time to time on which party
shall be responsible for filing, prosecuting and maintaining any Joint Patents
and such party shall conduct such prosecution by generally accepted good Patent
filing and prosecution practices. The parties shall share equally any actual and
reasonable out-of-pocket expenses (expressly excluding the value of the time of
either party's employees) incurred in connection with such prosecution and
maintenance. From time to time, upon the request of the party responsible for
prosecuting and maintaining a particular Joint Patent application or Joint
Patent, the other party will provide the responsible party with copies of all
relevant filings and correspondence and will respond to reasonable inquiries
with respect thereto. The party not responsible for prosecuting and maintaining
a particular Joint Patent shall provide the following additional assistance to
the responsible party:
(i) executing all documents prepared by the responsible party
necessary for prosecution and maintenance of the Joint Patent,
(ii) making available to the responsible party or its counsel,
inventors and other persons employed by the other party for interviews and/or
testimony to assist in good faith in further prosecution or maintenance of the
Joint Patent, including the signing of documents related thereto,
(iii) forwarding copies of all correspondence sent and received
concerning the Joint Patent within a reasonable period of time after receipt,
and
(iv) making all relevant documents in the possession or control
of such other party and corresponding to the Joint Patent, or any licenses
thereunder, available to the responsible party or its counsel.
(b) Subject to Section 3.8(b), each party or any of its Subsidiaries
may, at its own expense, in good faith enforce any Joint Patents against any
Third Party infringer (including but not limited to past infringements) only
with the prior written consent of the other party, which consent will not be
unreasonably withheld. Such consent shall be deemed given if not withheld in
writing within thirty (30) days of written request. The parties shall agree on a
case by case basis on compensation, if any, of the other party for the value of
the time of such other party's employees as
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<PAGE>
reasonably required in connection with the action. If the enforcing party or any
of its Subsidiaries recovers any damages or compensation for any action which
the enforcing party or any of the Subsidiaries of the enforcing party solely
takes hereunder, including any settlement, the enforcing party or the
Subsidiaries of the enforcing party shall retain one hundred percent (100%) of
such damages or compensation. If the parties cooperate in any such enforcement
action, then any recovery of damages or compensation shall be allocated pursuant
to mutual written agreement.
4.4 DEFENSIVE PROTECTION MEASURES. For a period of five (5) years from the
Separation Date, the parties shall cooperate reasonably and in good faith to the
extent consistent with each party's own business objectives in the event that
either party is involved in Patent litigation or controversies in which it would
be helped in some way by the other party's Patents or relevant knowledge. Such
cooperation may include, by way of example, (i) cooperation with respect to
knowledge of prior art (whether the other party's or a Third Party's), (ii)
consent to the granting of licenses to such other party's Patents, and (iii)
assignment to such party of such other party's Patents for the purpose of
bringing a counterclaim against a Third Party. The party requesting such
cooperation shall bear the actual and reasonable out-of-pocket expenses of the
cooperating party (except for the value of the time of the cooperating party's
employees).
4.5 STANDARDS BODIES. For a period of five (5) years from the Separation
Date, the parties agree to cooperate reasonably and in good faith with each
other with respect to the licensing of each party's Patents in the context of
standards bodies, to the extent consistent with each party's own business
objectives.
4.6 ASSIGNMENT OF PATENTS. HP shall not assign or grant any rights under
any of the HP Patents unless such assignment or grant is made subject to the
licenses granted in this Agreement. Agilent shall not assign or grant any rights
under any of the Agilent Patents unless such assignment or grant is made subject
to the licenses granted in this Agreement.
4.7 RESPONSE TO REQUESTS. Each party shall, upon a request from the other
party sufficiently identifying any Patent or Patent application, inform the
other party as to the extent to which said Patent or Patent application is
subject to the licenses and other rights granted hereunder. If such licenses or
other rights under said Patent or Patent application are restricted in scope,
copies of all pertinent provisions of any contract or other arrangement creating
such restrictions shall, upon request, be furnished to the party making such
request, unless such disclosure is prevented by such contract or other
arrangement, and in such event, a statement of the nature of such restriction
shall be provided.
4.8 RECORDATION OF LICENSES.
(a) For any country, now or in the future, that requires the express
consent of all inventors or their assignees to the grant of licenses or rights
under Patents issued in such countries for joint inventions:
(i) each party shall give such consent, or shall obtain such
consent from its employees, its Subsidiaries or employees of any of its
Subsidiaries, as required to make full and
-15-
<PAGE>
effective any such licenses and rights respecting any joint invention granted to
a grantee hereunder by such party; and
(ii) each party shall take steps that are reasonable under the
circumstances to obtain from Third Parties whatever other consents are necessary
to make full and effective such licenses and rights respecting any joint
invention purported to be granted by it hereunder. If, in spite of such
reasonable steps, such party is unable to obtain the requisite consents from
such Third Parties, the resulting inability of such party to make full and
effective its purported grant of such licenses and rights shall not be
considered to be a breach of this Agreement.
(b) Each party agrees, without demanding any further consideration,
to execute (and to cause its Subsidiaries or Affiliated Companies to execute)
all documents reasonably requested by the other party to effect recordation of
the license relationship between the parties created by this Agreement.
ARTICLE V
CONFIDENTIALITY
The terms of the Master Confidential Disclosure Agreement between the
parties shall apply to any Confidential Information (as defined therein) which
is the subject matter of this Agreement.
ARTICLE VI
TERMINATION
6.1 VOLUNTARY TERMINATION. By written notice to the other party, each
party may voluntarily terminate all or a specified portion of the licenses and
rights granted to it hereunder by such other party. Such notice shall specify
the effective date of such termination and shall clearly specify any affected
Patent, Patent application, Invention Disclosure, product or service.
6.2 SURVIVAL. Any voluntary termination of licenses and rights of a party
under Section 6.1 shall not affect such party's licenses and rights with respect
to any licensed product made or service furnished prior to such termination, and
shall not affect the licenses and rights granted to the other party hereunder.
6.3 NO OTHER TERMINATION. Each party acknowledges and agrees that its
remedy for breach by the other party of the licenses granted to it hereunder or
of any other provision hereof, shall be, subject to the requirements of Article
VII, to bring a claim to recover damages subject to the limits set forth in this
Agreement and to seek any other appropriate equitable relief, other than
termination of the licenses granted by it in this Agreement.
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<PAGE>
ARTICLE VII
DISPUTE RESOLUTION
7.1 NEGOTIATION. The parties shall make a good faith attempt to resolve
any dispute or claim arising out of or related to this Agreement through
negotiation. Within thirty (30) days after notice of a dispute or claim is given
by either party to the other party, the parties' first tier negotiating teams
(as determined by each party's Director of Intellectual Property or his or her
delegate) shall meet and make a good faith attempt to resolve such dispute or
claim and shall continue to negotiate in good faith in an effort to resolve the
dispute or claim or renegotiate the applicable section or provision without the
necessity of any formal proceedings. If the first tier negotiating teams are
unable to agree within thirty (30) days of their first meeting, then the
parties' second tier negotiating teams (as determined by each party's Director
of Intellectual Property or his or her delegate) shall meet within thirty (30)
days after the end of the first thirty (30) day negotiating period to attempt to
resolve the matter. During the course of negotiations under this Section 7.1,
all reasonable requests made by one party to the other for information,
including requests for copies of relevant documents, will be honored. The
specific format for such negotiations will be left to the discretion of the
designated negotiating teams but may include the preparation of agreed upon
statements of fact or written statements of position furnished to the other
party.
7.2 NONBINDING MEDIATION. In the event that any dispute or claim arising
out of or related to this Agreement is not settled by the parties within fifteen
(15) days after the first meeting of the second tier negotiating teams under
Section 7.1, the parties will attempt in good faith to resolve such dispute or
claim by nonbinding mediation in accordance with the American Arbitration
Association Commercial Mediation Rules. The mediation shall be held within
thirty (30) days of the end of such fifteen (15) day negotiation period of the
second tier negotiating teams. Except as provided below in Section 7.3, no
litigation for the resolution of such dispute may be commenced until the parties
try in good faith to settle the dispute by such mediation in accordance with
such rules and either party has concluded in good faith that amicable resolution
through continued mediation of the matter does not appear likely. The costs of
mediation shall be shared equally by the parties to the mediation. Any
settlement reached by mediation shall be recorded in writing, signed by the
parties, and shall be binding on them.
7.3 PROCEEDINGS. Nothing herein, however, shall prohibit either party
from initiating litigation or other judicial or administrative proceedings if
such party would be substantially harmed by a failure to act during the time
that such good faith efforts are being made to resolve the dispute or claim
through negotiation or mediation. In the event that litigation is commenced
under this Section 7.3, the parties agree to continue to attempt to resolve any
dispute according to the terms of Sections 7.1 and 7.2 during the course of such
litigation proceedings under this Section 7.3.
ARTICLE VIII
LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES OR AFFILIATED COMPANIES
BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES OR AFFILIATED
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<PAGE>
COMPANIES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE
DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED,
HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT DAMAGES FOR INFRINGEMENT
AVAILABLE TO EITHER PARTY UNDER APPLICABLE LAW IN THE EVENT OF BREACH BY THE
OTHER PARTY OF SECTIONS 3.1, 3.2 OR 3.8(a) AND SHALL NOT LIMIT EACH PARTY'S
OBLIGATIONS EXPRESSLY ASSUMED IN EXHIBIT K OF THE MASTER SEPARATION AGREEMENT;
PROVIDED FURTHER THAT THE EXCLUSION OF PUNITIVE DAMAGES SHALL APPLY IN ANY
EVENT.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL PATENTS AND
ANY OTHER INFORMATION OR MATERIALS LICENSED OR PROVIDED HEREUNDER ARE LICENSED
OR PROVIDED ON AN "AS IS" BASIS AND THAT NEITHER PARTY NOR ANY OF ITS
SUBSIDIARIES OR AFFILIATED COMPANIES MAKES ANY REPRESENTATIONS OR EXTENDS ANY
WARRANTIES WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Without
limiting the generality of the foregoing, neither party nor any of its
Subsidiaries or Affiliated Companies makes any warranty or representation as to
the validity and/or scope of any Patent licensed by it to the other party
hereunder or any warranty or representation that any manufacture, use,
importation, offer for sale or sale of any product or service will be free from
infringement of any Patent or other intellectual property right of any Third
Party.
9.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be
construed as conferring any rights by implication, estoppel or otherwise, under
any intellectual property right, other than the rights expressly granted in this
Agreement with respect to the Agilent Patents and the HP Patents. Neither party
is required hereunder to furnish or disclose to the other any technical or other
information (including copies of the Agilent Patents and the HP Patents, Patent
applications or Invention Disclosures) except as specifically provided herein.
9.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder
to institute any action or suit against Third Parties for infringement of any of
the Agilent Patents or the HP Patents or to defend any action or suit brought by
a Third Party which challenges or concerns the validity of any of the Agilent
Patents or the HP Patents. Unless the parties otherwise agree pursuant to
Section 4.4, HP shall not have any right to institute any action or suit against
Third Parties for infringement of any of the Agilent Patents, and Agilent shall
not have any right to institute any action or suit against Third Parties for
infringement of any of the HP Patents.
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<PAGE>
9.4 NO OTHER OBLIGATIONS. NEITHER PARTY ASSUMES ANY RESPONSIBILITIES OR
OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES AND OBLIGATIONS
EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN AGREEMENT BETWEEN
THE PARTIES. Without limiting the generality of the foregoing, neither party,
nor any of its Subsidiaries or Affiliated Companies is obligated to (i) file any
Patent application, or to secure any Patent or Patent rights, (ii) to maintain
any Patent in force, or (iii) provide any technical assistance, except for the
obligations expressly assumed in this Agreement.
9.5 ENTIRE AGREEMENT. This Agreement, the Master Separation Agreement and
the other Ancillary Agreements (as defined in the Master Separation Agreement)
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof. To the extent there is a conflict between this Agreement and the
Master Assignment and Assumption Agreement between the parties, the terms of
this Agreement shall govern.
9.6 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware as to all matters
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
9.7 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
9.8 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy with answer back, by express or overnight mail delivered by a
nationally recognized air courier (delivery charges prepaid), by registered or
certified mail (postage prepaid, return receipt requested) or by e-mail with
receipt confirmed by return e-mail to the respective parties as follows:
if to HP:c/o Hewlett Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Attention: Associate General Counsel and
Director of Intellectual Property
Telecopy: (650) 852-8194
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<PAGE>
if to Agilent:
c/o Agilent Technologies, Inc.
3000 Hanover Street
Palo Alto, CA 94304
Attention: Assistant General Counsel and
Director of Intellectual Property
Telecopy: (650) 813-3095
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by e-mail, telecopy or by air courier
shall be deemed effective on the first Business Day following the day on which
such notice or communication was sent. Any notice or communication sent by
registered or certified mail shall be deemed effective on the third Business Day
following the day on which such notice or communication was mailed. As used in
this Section 9.8, "Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions located in the State of California are
authorized or obligated by law or executive order to close.
9.9 NONASSIGNABILITY. Except as set forth in Section 3.7, neither party
may, directly or indirectly, in whole or in part, whether by operation of law or
otherwise, assign or transfer this Agreement, without the other party's prior
written consent, and any attempted assignment, transfer or delegation without
such prior written consent shall be voidable at the sole option of such other
party. Without limiting the foregoing, this Agreement will be binding upon and
inure to the benefit of the parties and their permitted successors and assigns.
9.10 SEVERABILITY. If any term or other provision of this Agreement is
determined by a nonappealable decision of a court, administrative agency or
arbitrator to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
9.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of either party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
9.12 AMENDMENT. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
such agreement.
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<PAGE>
9.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which, taken together, shall be considered to be one and
the same instrument.
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<PAGE>
WHEREFORE, the parties have signed this Master Patent Ownership and License
Agreement effective as of the date first set forth above.
HEWLETT-PACKARD COMPANY AGILENT TECHNOLOGIES, INC.
By: /s/ Ann O. Baskins By: /s/ Craig Nordlund
---------------------------- ---------------------------------
Name: Ann O. Baskins Name: Craig Nordlund
-------------------------- -------------------------------
Title: Associate General Counsel Title: Senior Vice President, General
------------------------- ------------------------------
and Assistant Secretary Counsel and Secretary
[Signature Page to Master Patent Ownership and License Agreement]
<PAGE>
EXHIBIT A
TO MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT
AFFILIATED COMPANIES
1. HP Affiliated Companies
-----------------------
ImagineCard
Idea LLC
Intria-HP
Intria-HP Potomac
Ericsson-HP Telecom (Sweden)
Ericsson-HP Telecom (France)
Hua-Pua
Putial Ome
PT Berka Services
Liquidity Management Group
Hugin Expert
Syc
Sopura Systems
2. Agilent Affiliated Companies
---------------------------
Chartered Semiconductor Partners Singapore
LumiLEDS
<PAGE>
EXHIBIT B
TO MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT
HP FIELD RESTRICTIONS
1. Products for the Measurement or Analysis of Biological, Genetic or Chemical
Materials (as such terms are defined in the Patent Field Definition
Database)
2. Health Care Products (as such term is defined in the Patent Field
Definition Database)
<PAGE>
EXHIBIT C
TO MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT
AGILANT FIELD RESTRICTIONS
1. Inkjet Products, Printer Products (including Printer Supplies, Accessories
and Components) and Document Scanners (as such terms are defined in the
Patent Field Definition Database)
2. Computing Products (as such term is defined in the Patent Field Definition
Database)
<PAGE>
EXHIBIT 2.5
EXHIBIT D-3
MASTER TRADEMARK OWNERSHIP AND LICENSE AGREEMENT
BETWEEN
HEWLETT-PACKARD COMPANY
AND
AGILENT TECHNOLOGIES, INC.
Effective as of November 1, 1999
<PAGE>
MASTER TRADEMARK OWNERSHIP AND LICENSE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS.................................................. 1
1.1 AFFILIATED COMPANY.......................................... 1
1.2 AGILENT BUSINESS............................................ 1
1.3 AGILENT BUSINESS MARKS...................................... 2
1.4 AGILENT BUSINESS MARKS DATABASE............................. 2
1.5 AUTHORIZED DEALERS.......................................... 2
1.6 COLLATERAL MATERIALS........................................ 2
1.7 CORPORATE IDENTITY MATERIALS................................ 2
1.8 DISTRIBUTION DATE........................................... 2
1.9 LICENSED MARKS.............................................. 2
1.10 MAINTENANCE CONTRACTS....................................... 2
1.11 MARK........................................................ 2
1.12 MASTER SEPARATION AGREEMENT................................. 3
1.13 MEASUREMENT PRODUCT......................................... 3
1.14 PERSON...................................................... 3
1.15 QUALITY STANDARDS........................................... 3
1.16 SELL........................................................ 3
1.17 SEPARATION DATE............................................. 3
1.18 SUBSIDIARY.................................................. 3
1.19 THIRD PARTY................................................. 3
1.20 TRADEMARK USAGE GUIDELINES.................................. 4
ARTICLE II ASSIGNMENT.................................................. 4
2.1 ASSIGNMENT OF AGILENT BUSINESS MARKS........................ 4
2.2 PRIOR GRANTS................................................ 4
2.3 ASSIGNMENT DISCLAIMER....................................... 4
ARTICLE III LICENSES................................................... 4
3.1 LICENSE GRANT............................................... 4
3.2 LICENSE RESTRICTIONS........................................ 5
3.3 LICENSEE UNDERTAKINGS....................................... 5
3.4 NON-TRADEMARK USE........................................... 6
3.5 RESERVATION OF RIGHTS....................................... 6
3.6 THIRD PARTY LICENSES........................................ 6
ARTICLE IV PERMITTED SUBLICENSES....................................... 7
4.1 SUBLICENSES................................................. 7
4.2 AUTHORIZED DEALERS' USE OF MARKS............................ 7
4.3 ENFORCEMENT OF AGREEMENTS................................... 8
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE V ROYALTIES.................................................... 8
5.1 ROYALTIES................................................... 8
5.2 PAYMENTS AND ACCOUNTING..................................... 9
ARTICLE VI TRADEMARK USAGE GUIDELINES.................................. 10
6.1 TRADEMARK USAGE GUIDELINES.................................. 10
6.2 TRADEMARK REVIEWS........................................... 10
ARTICLE VII TRADEMARK USAGE GUIDELINE ENFORCEMENT...................... 10
7.1 INITIAL CURE PERIOD......................................... 10
7.2 SECOND CURE PERIOD.......................................... 10
7.3 FINAL CURE PERIOD........................................... 10
ARTICLE VIII QUALITY STANDARDS......................................... 11
8.1 GENERAL..................................................... 11
8.2 QUALITY STANDARDS........................................... 11
8.3 QUALITY CONTROL REVIEWS..................................... 11
8.4 PRODUCT DISCONTINUATION..................................... 11
ARTICLE IX QUALITY STANDARD ENFORCEMENT................................ 11
9.1 INITIAL CURE PERIOD......................................... 11
9.2 SECOND CURE PERIOD.......................................... 11
9.3 FINAL CURE PERIOD........................................... 12
ARTICLE X PROTECTION OF LICENSED MARKS................................. 12
10.1 OWNERSHIP AND RIGHTS........................................ 12
10.2 PROTECTION OF MARKS......................................... 12
10.3 SIMILAR MARKS............................................... 12
10.4 INFRINGEMENT PROCEEDINGS.................................... 13
ARTICLE XI TERMINATION................................................ 13
11.1 VOLUNTARY TERMINATION....................................... 13
11.2 SURVIVAL.................................................... 13
11.3 NO OTHER TERMINATION........................................ 13
ARTICLE XII DISPUTE RESOLUTION......................................... 13
12.1 NEGOTIATION................................................. 13
12.2 NONBINDING MEDIATION........................................ 14
12.3 PROCEEDINGS................................................. 14
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XIII LIMITATION OF LIABILITY................................... 14
ARTICLE XIV MISCELLANEOUS PROVISIONS................................... 15
14.1 DISCLAIMER.................................................. 15
14.2 NO IMPLIED LICENSES......................................... 15
14.3 INFRINGEMENT SUITS.......................................... 15
14.4 NO OTHER OBLIGATIONS........................................ 15
14.5 ENTIRE AGREEMENT............................................ 15
14.6 GOVERNING LAW............................................... 16
14.7 DESCRIPTIVE HEADINGS........................................ 16
14.8 NOTICES..................................................... 16
14.9 NONASSIGNABILITY............................................ 17
14.10 SEVERABILITY................................................ 17
14.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE....... 17
14.12 AMENDMENT................................................... 17
14.13 COUNTERPARTS................................................ 17
</TABLE>
EXHIBIT A: LICENSED MARKS
EXHIBIT B: AFFILIATED COMPANIES
-iii-
<PAGE>
MASTER TRADEMARK OWNERSHIP AND LICENSE AGREEMENT
This Master Trademark Ownership and License Agreement (the "Agreement") is
effective as of November 1, 1999 (the "Effective Date"), between Hewlett-Packard
Company, a Delaware corporation ("HP"), having an office at 3000 Hanover Street,
Palo Alto, California 94304, and Agilent Technologies, Inc., a Delaware
corporation ("Agilent"), having an office at 3000 Hanover Street, Palo Alto,
California 94304.
WHEREAS, the Board of Directors of HP has determined that it is in the best
interest of HP and its stockholders to separate HP's existing businesses into
two independent businesses;
WHEREAS, as part of the foregoing, HP and Agilent have entered into a
Master Separation Agreement (as defined below) which provides, among other
things, for the separation of certain Agilent assets and Agilent liabilities,
the initial public offering of Agilent stock, the distribution of such stock and
the execution and delivery of certain other agreements in order to facilitate
and provide for the foregoing;
WHEREAS, the parties desire that HP assign and transfer to Agilent the
Agilent Business Marks (as defined below); and
WHEREAS, the parties further desire that HP license the Licensed Marks (as
defined below) to Agilent after the separation of the Agilent businesses.
NOW, THEREFORE, in consideration of the mutual promises of the parties, and
of good and valuable consideration, it is agreed by and between the parties as
follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement, the following capitalized terms are
defined in this Article I and shall have the meaning specified herein:
1.1 AFFILIATED COMPANY. "Affiliated Company" means, with respect to HP,
any entity in which HP holds a 50% or less ownership interest and that is listed
on Exhibit A hereto and, with respect to Agilent, any entity in which Agilent
holds a 50% or less ownership interest and that is listed on Exhibit A hereto;
provided, however, that any such entity listed in Exhibit A shall be considered
to be an Affiliated Company under this Agreement only if it agrees in writing to
be bound by the terms and conditions of this Agreement. Exhibit A may be amended
from time to time after the date hereof upon mutual consent of the parties.
1.2 AGILENT BUSINESS. "Agilent Business" means (a) the business and
operations of the following business entities of HP, as described in the IPO
Registration Statement (as defined in the Master Separation Agreement): (i) the
Test and Measurement Organization, (ii) the Semiconductor Products Group, (iii)
the Chemical Analysis Group, (iv) the Healthcare Solutions Group and (v) any
related infrastructure organizations and (b) except as otherwise expressly
provided herein, any terminated, divested or discontinued businesses or
operations that at the time of
<PAGE>
termination, divestiture or discontinuation primarily related to the Agilent
Business as then conducted.
1.3 AGILENT BUSINESS MARKS. "Agilent Business Marks" means the Marks
listed in the Agilent Business Marks Database.
1.4 AGILENT BUSINESS MARKS DATABASE. "Agilent Business Marks Database"
means the Agilent Business Marks Database, as it may be updated by the parties
upon mutual agreement to add additional Marks as of the Separation Date.
1.5 AUTHORIZED DEALERS. "Authorized Dealers" means any distributor,
dealer, OEM customer, VAR customer, VAD customer, systems integrator or other
agent that on or after the Separation Date is authorized to market, advertise,
sell, lease, rent, service or otherwise offer Measurement Products. Agilent will
provide HP a list of the then current Authorized Dealers within a reasonable
period after HP's request.
1.6 COLLATERAL MATERIALS. "Collateral Materials" means all packaging,
tags, labels, advertising, promotions, display fixtures, instructions,
warranties and other materials of any and all types associated with the
Measurement Products that are marked with at least one of the Licensed Marks.
1.7 CORPORATE IDENTITY MATERIALS. "Corporate Identity Materials" means
materials that are not products or product-related and that Agilent may now or
hereafter use to communicate its identity, including, by way of example and
without limitation, business cards, letterhead, stationery, paper stock and
other supplies, signage on real property, buildings, fleet and uniforms.
1.8 DISTRIBUTION DATE. "Distribution Date" has the meaning set forth in
the Master Separation Agreement.
1.9 LICENSED MARKS. "Licensed Marks" means the Marks set forth on
Exhibit A hereto.
1.10 MAINTENANCE CONTRACTS. "Maintenance Contracts" means agreements
pursuant to which Agilent, its Subsidiaries or Affiliated Companies or its or
their Authorized Dealers or their designees provide repair and maintenance
services (whether preventive, diagnostic, remedial, warranty or non-warranty) in
connection with Measurement Products, including without limitation agreements
entered into by HP prior to the Separation Date and assigned to Agilent pursuant
to the Master Separation Agreement or the Ancillary Agreements (as such term is
defined in the Master Separation Agreement).
1.11 MARK. "Mark" means any trademark, service mark, trade name, domain
name, and the like, or other word, name, symbol or device, or any combination
thereof, used or intended to be used by a Person to identify and distinguish the
products or services of that Person from the products or services of others and
to indicate the source of such goods or services, including without
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limitation all registrations and applications therefor throughout the world and
all common law and other rights therein throughout the world.
1.12 MASTER SEPARATION AGREEMENT. "Master Separation Agreement" means the
Master Separation and Distribution Agreement between the parties.
1.13 MEASUREMENT PRODUCT. "Measurement Product" means any Agilent product
that is listed on an Agilent corporate price list as of the Distribution Date,
and new versions thereof that have merely minor incremental differences from any
such product. Measurement Products shall also include maintenance (whether
diagnostic, preventive, remedial, warranty or non-warranty), support and similar
services associated with Measurement Products, pursuant to Maintenance Contracts
or otherwise.
1.14 PERSON. "Person" means an individual, a partnership, a corporation,
a limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, and a governmental entity or any
department, agency or political subdivision thereof.
1.15 QUALITY STANDARDS. "Quality Standards" means standards of quality
applicable to the Measurement Products, as in use immediately prior to the
Separation Date, unless otherwise communicated in writing by HP from time to
time.
1.16 SELL. To "Sell" a product means to sell, transfer, lease or
otherwise dispose of a product. "Sale" and "Sold" have the corollary meanings
ascribed thereto.
1.17 SEPARATION DATE. "Separation Date" means 12:01 a.m., Pacific Time,
November 1, 1999 or such other date as may be fixed by the Board of Directors of
HP.
1.18 SUBSIDIARY. "Subsidiary" means with respect to any specified Person,
any corporation, any limited liability company, any partnership or other legal
entity of which such Person owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote on the election of the members
of the board of directors or similar governing body. Unless the context
otherwise requires, reference to HP and its Subsidiaries shall not include the
subsidiaries of HP that will be transferred to Agilent after giving effect to
the Separation (as defined in the Master Separation Agreement), including the
actions taken pursuant to the Non-US Plan (as defined in the Master Separation
Agreement). For example, if HP owns 70% of the stock of another corporation, and
that corporation owns 60% of the equity interest of a limited liability company,
then that corporation is a Subsidiary of HP but that limited liability company
is not. However, if such corporation owns 90% of the equity interest of a
limited liability company, then that limited liability company is a Subsidiary
of HP. For the avoidance of doubt, this definition of Subsidiary is different
from the definition of Subsidiary in the Master Separation Agreement.
1.19 THIRD PARTY. "Third Party" means a Person other than HP and its
Subsidiaries and Affiliated Companies and Agilent and its Subsidiaries and
Affiliated Companies.
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1.20 TRADEMARK USAGE GUIDELINES. "Trademark Usage Guidelines" means the
guidelines for proper usage of the Licensed Marks, as in use immediately prior
to the Separation Date, as such guidelines may be revised and updated in writing
by HP from time to time.
ARTICLE II
ASSIGNMENT
2.1 ASSIGNMENT OF AGILENT BUSINESS MARKS. Subject to Sections 2.2 and 2.3
below, HP hereby grants, conveys and assigns (and agrees to cause its
appropriate Subsidiaries to grant, convey and assign) to Agilent, by execution
hereof (or, where appropriate or required, by execution of separate instruments
of assignment), all its (and their) right, title and interest in and to the
Agilent Business Marks, including all goodwill of the Agilent Business
appurtenant thereto, to be held and enjoyed by Agilent, its successors and
assigns. HP further grants, conveys and assigns (and agrees to cause its
appropriate Subsidiaries to grant, convey and assign) to Agilent all its (and
their) right, title and interest in and to any and all causes of action and
rights of recovery for past infringement of the Agilent Business Marks. HP will,
without demanding any further consideration therefor, at the request and expense
of Agilent (except for the value of the time of HP employees), do (and to cause
its Subsidiaries to do) all lawful and just acts that may be or become necessary
for evidencing, maintaining, recording and perfecting Agilent's rights to such
Agilent Business Marks consistent with HP's general business practice as of the
Separation Date, including but not limited to execution and acknowledgement of
(and causing its Subsidiaries to execute and acknowledge) assignments and other
instruments in a form reasonably required by Agilent or the relevant
governmental or other authorities for each Mark in all jurisdictions in which HP
owns rights thereto.
2.2 PRIOR GRANTS. Agilent acknowledges and agrees that the foregoing
assignment is subject to any and all licenses or other rights that may have been
granted by HP or its Subsidiaries with respect to the Agilent Business Marks
prior to the Separation Date. HP shall respond to reasonable inquiries from
Agilent regarding any such prior grants.
2.3 ASSIGNMENT DISCLAIMER. AGILENT ACKNOWLEDGES AND AGREES THAT THE
FOREGOING ASSIGNMENTS ARE MADE ON AN "AS-IS," QUITCLAIM BASIS AND THAT NEITHER
HP NOR ANY SUBSIDIARY OR AFFILIATED COMPANY OF HP HAS MADE OR WILL MAKE ANY
WARRANTY WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OF TITLE, ENFORCEABILITY OR NON-INFRINGEMENT.
ARTICLE III
LICENSES
3.1 LICENSE GRANT. HP grants (and agrees to cause its appropriate
Subsidiaries to grant) to Agilent a personal, irrevocable, nonexclusive,
perpetual, worldwide, fully-paid and non-transferable (except as set forth in
Section 14.9) license to use the Licensed Marks on the Measurement Products and
in connection with the Sale and offer for Sale of Measurement Products (or, in
the case of Measurement Products in the form of software, in connection with
licensing of
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Measurement Products) and to use the Licensed Marks in the advertisement and
promotion of such Measurement Products.
3.2 LICENSE RESTRICTIONS.
(a) Once Agilent abandons the use of all of the Licensed Marks on a
particular Measurement Product, then Agilent agrees that its license granted
hereunder with respect to that Measurement Product shall thereupon terminate.
(b) Agilent may not make any use whatsoever, in whole or in part, of
the Licensed Marks, or any other Mark owned by HP, in connection with Agilent's
corporate, doing business as, or fictitious name, or on Corporate Identity
Materials without the prior written consent of HP, except as expressly set forth
in this Section 3.2(b) or in Section 3.4 below. Notwithstanding the foregoing,
Agilent may use any business cards, letterhead, stationery, paper stock and
other supplies, uniforms and the like throughout their useful life in connection
with the conduct of the Agilent Business, to the extent that, as of the
Separation Date, they are in use, in inventory or on order.
(c) Agilent may not use any Licensed Mark in direct association with
another Mark such that the two Marks appear to be a single Mark or in any other
composite manner with any Marks of Agilent or any Third Party (other than the
Agilent Business Marks as permitted herein).
(d) In all respects, Agilent's usage of the Licensed Marks pursuant
to the license granted hereunder shall be in a manner consistent with the high
standards, reputation and prestige represented by the Licensed Marks, and any
usage by Agilent that is inconsistent with the foregoing shall be deemed to be
outside the scope of the license granted hereunder. As a condition to the
license granted hereunder, Agilent shall at all times present, position and
promote the Measurement Products marked with one or more of the Licensed Marks
in a manner consistent with the high standards and prestige represented by the
Licensed Marks.
3.3 LICENSEE UNDERTAKINGS. As a condition to the licenses granted
hereunder, Agilent undertakes to HP that:
(a) Agilent shall not use the Licensed Marks (or any other Mark of
HP) in any manner contrary to public morals, in any manner which is deceptive or
misleading, which ridicules or is derogatory to the Licensed Marks, or which
compromises or reflects unfavorably upon the goodwill, good name, reputation or
image of HP or the Licensed Marks, or which might jeopardize or limit HP's
proprietary interest therein.
(b) Agilent shall not use the Licensed Marks in connection with any
products or services other than the Measurement Products, including, without
limitation, any other Agilent Business products.
(c) Agilent shall not (i) misrepresent to any Person the scope of its
authority under this Agreement, (ii) incur or authorize any expenses or
liabilities chargeable to HP, or (iii) take
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any actions that would impose upon HP any obligation or liability to a Third
Party other than obligations under this Agreement, or other obligations which HP
expressly approves in writing for Agilent to incur on its behalf.
(d) All press releases and corporate advertising and promotions that
embody the Licensed Marks and messages conveyed thereby shall be consistent with
the high standards and prestige represented by the Licensed Marks.
3.4 NON-TRADEMARK USE.
(a) Each party may make appropriate and truthful references to the
other party and the other party's products and technology.
(b) The parties acknowledge that the letters "HP" are a part of
several well-known generic acronyms, (for example, "HPLC" for "high performance
liquid chromatography", and "HPCE" for "high pressure capillary
electrophoresis"), or are part of the name of certain concepts or principles
(such as "the HP Way"). This Agreement does not apply to the proper use of such
acronyms or names.
(c) This Agreement does not apply to Agilent's use of "HP-IB" with
regard to the IEEE-488 Interface Bus.
3.5 RESERVATION OF RIGHTS. Except as otherwise expressly provided in this
Agreement, HP shall retain all rights in and to the Licensed Marks, including
without limitation:
(a) All rights of ownership in and to the Licensed Marks;
(b) The right to use (including the right of HP's Subsidiaries and
Affiliated Companies to use) the Licensed Marks, either alone or in combination
with other Marks, in connection with the marketing, offer or provision of any
product or service, including any product or service which competes with Agilent
Business products; and
(c) The right to license Third Parties to use the Licensed Marks.
3.6 THIRD PARTY LICENSES. HP agrees that it and its Subsidiaries and
Affiliated Companies will not license or transfer the Licensed Marks to Third
Parties (other than to and among Subsidiaries of HP) for use in connection with
products or services which compete with Measurement Products that are listed on
an Agilent corporate price list as of the Distribution Date until three (3)
years after the Separation Date. Such restriction shall be binding on any
successors and assigns of the Licensed Marks. The foregoing shall not, in any
event, limit any of the following: (i) any licenses that may have been granted
by HP with respect to the Licensed Marks prior to the Separation Date or (ii)
licenses granted to Third Parties in connection with any co-branding program
(including, by way of example and not by way of limitation, the OpenView
program). For purposes of clarification, a product will not necessarily be
deemed to compete with another product if it is merely complementary or merely
has some functions in common. Each party promptly will respond
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to requests from the other party regarding whether it considers one product to
compete with another product. Except as set forth in this Section 3.6, nothing
in this Agreement shall be construed to prevent HP from granting any licenses
for the use of the Licensed Marks, or from utilizing the Licensed Marks in any
manner whatsoever other than as provided in this Section 3.6.
ARTICLE IV
PERMITTED SUBLICENSES
4.1 SUBLICENSES
(a) SUBLICENSES TO SUBSIDIARIES AND AFFILIATED COMPANIES. Subject to
the terms and conditions of this Agreement, including all applicable Quality
Standards and Trademark Usage Guidelines and other restrictions in this
Agreement, Agilent may grant sublicenses to its Subsidiaries and Affiliated
Companies to use the Licensed Marks in accordance with the license grant in
Section 3.1 above; provided, that (i) Agilent enters into a written sublicense
agreement with each such Subsidiary and Affiliated Company sublicensee, and (ii)
such agreement does not include the right to grant further sublicenses other
than, in the case of a sublicensed Subsidiary of Agilent, to another Subsidiary
of Agilent. Agilent shall provide copies of such written sublicense agreements
to HP upon request. If Agilent grants any sublicense rights pursuant to this
Section 4.1(a) and any such sublicensed Subsidiary ceases to be a Subsidiary or
Agilent ceases to hold at least a thirty percent (30%) ownership interest in
such sublicensed Affiliated Company, then the sublicense granted to such
Subsidiary or Affiliated Company pursuant to this Section 4.1(a) shall terminate
one hundred eighty (180) days from the date of such cessation.
(b) SUBLICENSES TO TRANSFEREES. In addition, if Agilent, within five
(5) years after the Separation Date, transfers a going business (but not all or
substantially all of its business or assets), and such transfer includes at
least one marketable product and tangible assets having a net value of at least
ten million U.S. dollars ($10,000,000.00) then, subject to the terms and
conditions of this Agreement, including all applicable Quality Standards and
Trademark Usage Guidelines and other restrictions in this Agreement, Agilent may
grant sublicenses to the transferee of such business to use the Licensed Marks
on the Measurement Products that are in the transferred business as of the
effective date of the transfer in accordance with the license grant in Section
3.1 above; provided, that (i) Agilent enters into a written sublicense agreement
with the sublicensee, (ii) such agreement does not include the right to grant
further sublicenses and (iii) in any event, such sublicense shall terminate one
hundred eighty (180) days after the effective date of the transfer. Agilent
shall provide copies of such written sublicense agreements to HP upon request.
4.2 AUTHORIZED DEALERS' USE OF MARKS. Subject to the terms and conditions
of this Agreement, including all applicable Quality Standards and Trademark
Usage Guidelines and other restrictions in this Agreement, Agilent (and those
Subsidiaries and Affiliated Companies sublicensed to use the Licensed Marks
pursuant to Section 4.1) may allow Authorized Dealers to, and may allow such
Authorized Dealers to allow other Authorized Dealers to, use the Licensed Marks
in the advertisement and promotion of Measurement Products Sold by such
Authorized Dealers.
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4.3 ENFORCEMENT OF AGREEMENTS. Agilent shall take all appropriate measures
at Agilent's expense promptly and diligently to enforce the terms of any
sublicense agreement or other agreement with any Subsidiary, Affiliated Company
or Authorized Dealer, or of any existing agreement with any Authorized Dealer,
and shall restrain any such Subsidiary, Affiliated Company or Authorized Dealer
from violating such terms, including without limitation (i) monitoring the
Subsidiaries', Affiliated Companies' and Authorized Dealers' compliance with the
relevant Trademark Usage Guidelines and Quality Standards and causing any
noncomplying Subsidiary, Affiliated Company or Authorized Dealer promptly to
remedy any failure, (ii) terminating such agreement and/or (iii) commencing
legal action, in each case, using a standard of care consistent with HP's
practices as of the Separation Date. In the event that HP determines that
Agilent has failed promptly and diligently to enforce the terms of any such
agreement using such standard of care, HP reserves the right to enforce such
terms, and Agilent shall reimburse HP for its fully allocated direct costs and
expenses incurred in enforcing such agreement, plus all out-of-pocket costs and
expenses, plus five percent (5%) (or, if such costs and expenses are incurred
more than two (2) years after the Separation Date, ten percent (10%)).
ARTICLE V
ROYALTIES
5.1 ROYALTIES.
(a) Upon (i) any Sale occurring more than five (5) years after the
Separation Date by Agilent, its Subsidiaries or Affiliated Companies of tangible
Measurement Products that are marked with one or more of the Licensed Marks
(other than repaired, refurbished or reconstructed Measurement Products or
repair parts and other than Sales to HP, its Subsidiaries and its Affiliated
Companies), and (ii) the use by Agilent, its Subsidiaries or Affiliated
Companies of one or more of the Licensed Marks as a service mark in connection
with the sale of services associated with Measurement Products (other than
repair, maintenance and calibration services and other than sales to HP, its
Subsidiaries and its Affiliated Companies), Agilent shall pay to HP a royalty on
the Net Sales earned by Agilent in each Agilent fiscal quarter as a result of
such sale. The royalty rate shall be the standard royalty rate that is charged
by HP to the Agilent Business as of the Separation Date for use of the Licensed
Marks.
(b) As used in this Article V, "Net Sales" means the gross invoice
price from (i) royalty-bearing Sales under Section 5.1(a)(i) above and (ii)
royalty-bearing sales of services under Section 5.1(a)(ii) above, in any case
less (A) charges for handling, freight, sales taxes, insurance costs and import
duties where such items are included in the invoiced price, (B) point-of-sale
credits (or other similar adjustments to price) granted to independent
distributors and (C) credits actually granted or refunds actually given for
returns during such Agilent fiscal quarter. In the event that the foregoing
Measurement Products are Sold for no or nominal consideration or to a Subsidiary
or Affiliated Company or in any other circumstances in which the selling price
is established on other than an arms-length basis, the Net Sales on such Sales
shall be determined on the average selling price earned by Agilent during the
preceding Agilent fiscal quarter on Sales of like volumes of the applicable
Measurement Products to unaffiliated customers in arms-length sales. However, in
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the event that the foregoing Measurement Products are Sold to Agilent's
Subsidiaries or Affiliated Companies for resale to Third Parties, then the
royalties will be based on Net Sales from the Subsidiaries or Affiliated
Companies to the Third Parties and no royalties will be due on the Sales to the
Subsidiaries and Affiliated Companies.
(c) For the purposes of clarification, no royalty is due under this
Article V for uses of the Licensed Marks that are covered by Section 3.4.
5.2 PAYMENTS AND ACCOUNTING.
(a) With respect to the royalties set forth herein, Agilent shall
keep full, clear and accurate records until otherwise provided in Section
5.2(b). These records shall be retained for a period of three (3) years from the
date of payment notwithstanding the expiration or other termination of this
Agreement. HP shall have the right, through a mutually agreed upon independent
certified public accountant (consent to which shall not be unreasonably withheld
or delayed by Agilent), and at HP's expense, to examine and audit, not more than
once a year, and during normal business hours, all such records and such other
records and accounts as may under recognized accounting practices contain
information bearing upon the amount of royalty payable to HP under this
Agreement. Prompt adjustment shall be made by either party to compensate for any
errors and/or omissions disclosed by such examination or audit. Should any such
error and/or omission result in an underpayment of more than five percent (5%)
of the total royalties due for the period under audit, Agilent shall upon HP's
request pay for the cost of the audit and pay HP an additional fee equal to a
compound annual interest rate of ten percent (10%) of such error and/or
omission.
(b) Within forty-five (45) days after the end of each Agilent fiscal
quarter, Agilent shall furnish to HP a statement in suitable form showing all
Measurement Products and related services subject to royalties that were sold,
during such quarter, and the amount of royalty payable thereon. If no products
or services subject to royalty have been sold, that fact shall be shown on such
statement. Also, within such forty-five (45) days, Agilent shall pay to HP the
royalties payable hereunder for such quarter. HP and Agilent will determine the
form of the statement prior to submission of the first such statement. All
royalty and other payments to HP hereunder shall be in United States dollars.
Royalties based on sales in other currencies shall be converted to United States
dollars according to the official rate of exchange for that currency, as
published in the Wall Street Journal on the last day of the calendar month in
which the royalty accrued (or, if not published on that day, the last
publication day for the Wall Street Journal during that month). If two
consecutive Agilent fiscal quarters pass in which no royalties are due under
this Agreement and Agilent reasonably believes no royalties will be due, the
obligations pursuant to this Article V shall terminate. If Agilent resumes sale
of Measurement Products or related services that are subject to royalties, the
obligations of this Article V shall automatically resume.
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ARTICLE VI
TRADEMARK USAGE GUIDELINES
6.1 TRADEMARK USAGE GUIDELINES. Agilent and its Subsidiaries, Affiliated
Companies and Authorized Dealers shall use the Licensed Marks only in a manner
that is consistent with the Trademark Usage Guidelines.
6.2 TRADEMARK REVIEWS. At HP's request, Agilent agrees to furnish or make
available for inspection to HP samples of all Measurement Products and
Collateral Materials of Agilent, its Subsidiaries, Affiliated Companies and
Authorized Dealers that are marked with one or more of the Licensed Marks (to
the extent that Agilent has the right to obtain such samples). If Agilent is
notified or determines that it or any of its Subsidiaries, Affiliated Companies
or Authorized Dealers is not complying with any Trademark Usage Guidelines, it
shall notify HP and the provisions of Article VII and Section 4.3 shall apply to
such noncompliance.
ARTICLE VII
TRADEMARK USAGE GUIDELINE ENFORCEMENT
7.1 INITIAL CURE PERIOD. If HP becomes aware that Agilent or any
Subsidiary, Affiliated Company or Authorized Dealer is not complying with any
Trademark Usage Guidelines, HP shall notify Agilent in writing, setting forth in
reasonable detail a written description of the noncompliance and any requested
action for curing such noncompliance. Agilent shall then have sixty (60) days
with regard to noncompliance by Authorized Dealers and thirty (30) days with
regard to noncompliance by Agilent or any Subsidiary or Affiliated Company after
receipt of such notice ("Guideline Initial Cure Period") to correct such
noncompliance or submit to HP a written plan to correct such noncompliance which
written plan is reasonably acceptable to HP.
7.2 SECOND CURE PERIOD. If noncompliance with the Trademark Usage
Guidelines continues beyond the Guideline Initial Cure Period, Agilent and HP
shall each promptly appoint a representative to negotiate in good faith actions
that may be necessary to correct such noncompliance. The parties shall have
thirty (30) days following the expiration of the Guideline Initial Cure Period
to agree on corrective actions, and Agilent shall have thirty (30) days from the
date of an agreement of corrective actions to implement such corrective actions
and cure or cause the cure of such noncompliance ("Second Guideline Cure
Period").
7.3 FINAL CURE PERIOD. If the noncompliance with the Trademark Usage
Guidelines remains uncured after the expiration of the Second Guideline Cure
Period, then at HP's election, Agilent, or the noncomplying Subsidiary,
Affiliated Company or Authorized Dealer, whichever is applicable, promptly shall
cease using the noncomplying Collateral Materials until HP determines that
Agilent, or the noncomplying Subsidiary, Affiliated Company or Authorized
Dealer, whichever is applicable, has demonstrated its ability and commitment to
comply with the Trademark Usage Guidelines. Nothing in this Article VII shall be
deemed to limit Agilent's obligations under Section 4.3 above or to preclude HP
from exercising any rights or remedies under Section 4.3 above.
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ARTICLE VIII
QUALITY STANDARDS
8.1 GENERAL. Agilent acknowledges that the Measurement Products permitted
by this Agreement to be marked with one or more of the Licensed Marks must
continue to be of sufficiently high quality as to provide protection of the
Licensed Marks and the goodwill they symbolize, and Agilent further acknowledges
that the maintenance of the high quality standards associated with such products
is of the essence of this Agreement.
8.2 QUALITY STANDARDS. Agilent and its Authorized Dealers, Affiliated
Companies and Subsidiaries shall use the Licensed Marks only on and in
connection with Measurement Products that meet or exceed in all respects the
Quality Standards.
8.3 QUALITY CONTROL REVIEWS. At HP's request, Agilent agrees to furnish or
make available to HP for inspection sample Measurement Products marked with one
or more of the Licensed Marks. HP may also independently conduct customer
satisfaction surveys to determine if Agilent and its Subsidiaries, Affiliated
Companies and Authorized Dealers are meeting the Quality Standards. Agilent
shall cooperate with HP fully in the distribution of such surveys. In the event
of a challenge by HP, HP shall, at the request of Agilent, provide Agilent with
copies of customer surveys used by HP to determine if Agilent is meeting the
Quality Standards. If Agilent is notified or determines that it or any of its
Subsidiaries, Affiliated Companies or Authorized Dealers is not complying with
any Quality Standards, it shall notify HP and the provisions of Article IX and
Section 4.3 shall apply to such noncompliance.
8.4 PRODUCT DISCONTINUATION. If, at any time during or after the term of
this Agreement, Agilent discontinues the sale of a Measurement Product that has
been marked with one or more of the Licensed Marks, Agilent shall substantially
comply with the discontinuation procedure used by HP for such or similar
products immediately prior to Separation Date.
ARTICLE IX
QUALITY STANDARD ENFORCEMENT
9.1 INITIAL CURE PERIOD. If HP becomes aware that Agilent or any
Subsidiary, Affiliated Company or Authorized Dealer sublicensee is not complying
with any Quality Standards, HP shall notify Agilent in writing, setting forth in
reasonable detail a written description of the noncompliance and any requested
action for curing such noncompliance. Agilent shall then have thirty (30) days
after receipt of such notice ("Initial Cure Period") to correct such
noncompliance or submit to HP a written plan to correct such noncompliance which
written plan is reasonably acceptable to HP.
9.2 SECOND CURE PERIOD. If noncompliance with the Quality Standards
continues beyond the Initial Cure Period, Agilent and HP shall each promptly
appoint a representative to negotiate in good faith actions that may be
necessary to correct such noncompliance. The parties shall have thirty (30) days
following the expiration of the Initial Cure Period to agree on corrective
actions, and Agilent shall have thirty (30) days from the date of an agreement
of corrective actions to
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implement such corrective actions and cure or cause the cure of such
noncompliance ("Second Cure Period").
9.3 FINAL CURE PERIOD. If the noncompliance with the Quality Standards
remains uncured after the expiration of the Second Cure Period, then at HP's
election, Agilent, or the noncomplying Subsidiary, Affiliated Company or
Authorized Dealer, whichever is applicable, promptly shall cease offering the
noncomplying Measurement Products under the Licensed Marks until HP determines
that Agilent, or the noncomplying Subsidiary, Affiliated Company or Authorized
Dealer, whichever is applicable, has demonstrated its ability and commitment to
comply with the Quality Standards. Nothing in this Article IX shall be deemed to
limit Agilent's obligations under Section 4.3 above or to preclude HP from
exercising any rights or remedies under Section 4.3 above.
ARTICLE X
PROTECTION OF LICENSED MARKS
10.1 OWNERSHIP AND RIGHTS. Agilent agrees not to challenge the ownership
or validity of the Licensed Marks. Agilent shall not disparage, dilute or
adversely affect the validity of the Licensed Marks. Agilent's use of the
Licensed Marks shall inure exclusively to the benefit of HP, and Agilent shall
not acquire or assert any rights therein. Agilent recognizes the value of the
goodwill associated with the Licensed Marks, and that the Licensed Marks may
have acquired secondary meaning in the minds of the public.
10.2 PROTECTION OF MARKS. Agilent shall assist HP, at HP's request and
expense, in the procurement and maintenance of HP's intellectual property rights
in the Licensed Marks. Agilent will not grant or attempt to grant a security
interest in the Licensed Marks, or to record any such security interest in the
United States Patent and Trademark Office or elsewhere, against any trademark
application or registration belonging to HP. Agilent agrees to, and to cause its
Subsidiaries and Affiliated Companies to, execute all documents reasonably
requested by HP to effect further registration of, maintenance and renewal of
the Licensed Marks, recordation of the license relationship between HP and
Agilent, and recordation of Agilent as a registered user. HP makes no warranty
or representation that trademark registrations have been or will be applied for,
secured or maintained in the Licensed Marks throughout, or anywhere within, the
world. Agilent shall cause to appear on all Measurement Products, and all
Collateral Materials, such legends, markings and notices as may be required by
applicable law or reasonably requested by HP.
10.3 SIMILAR MARKS. Agilent agrees not to use or register in any country
any Mark that infringes HP's rights in the Licensed Marks, or any element
thereof. If any application for registration is, or has been, filed in any
country by Agilent which relates to any Mark that infringes HP's rights in the
Licensed Marks, Agilent shall immediately abandon any such application or
registration or assign it to HP. Agilent shall not challenge HP's ownership of
or the validity of the Licensed Marks or any application for registration
thereof throughout the world. Agilent shall not use or register in any country
any copyright, domain name, telephone number or any other intellectual property
right, whether recognized currently or in the future, or other designation which
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<PAGE>
would affect the ownership or rights of HP in and to the Licensed Marks, or
otherwise to take any action which would adversely affect any of such ownership
rights, or assist anyone else in doing so. Agilent shall cause its Subsidiaries,
Affiliated Companies and Authorized Dealers to comply with the provisions of
this Section 10.3.
10.4 INFRINGEMENT PROCEEDINGS. In the event that the Agilent Director of
Intellectual Property or Agilent Trademark Counsel learns of any infringement or
threatened infringement of the Licensed Marks, or any unfair competition,
passing-off or dilution with respect to the Licensed Marks, Agilent shall notify
HP or its authorized representative giving particulars thereof, and Agilent
shall provide necessary information and assistance to HP or its authorized
representatives at HP's expense in the event that HP decides that proceedings
should be commenced. Notwithstanding the foregoing, Agilent is not obligated to
monitor or police use of the Licensed Marks by Third Parties other than as
specifically set forth in Section 4.3. HP shall have exclusive control of any
litigation, opposition, cancellation or related legal proceedings. The decision
whether to bring, maintain or settle any such proceedings shall be at the
exclusive option and expense of HP, and all recoveries shall belong exclusively
to HP. Agilent shall not and shall have no right to initiate any such
litigation, opposition, cancellation or related legal proceedings in its own
name, but, at HP's request, agrees to be joined as a party in any action taken
by HP to enforce its rights in the Licensed Marks. HP shall incur no liability
to Agilent or any other Person under any legal theory by reason of HP's failure
or refusal to prosecute or by HP's refusal to permit Agilent to prosecute, any
alleged infringement by Third Parties, nor by reason of any settlement to which
HP may agree.
ARTICLE XI
TERMINATION
11.1 VOLUNTARY TERMINATION. By written notice to HP, Agilent may
voluntarily terminate all or a specified portion of the licenses and rights
granted to it hereunder by HP. Such notice shall specify the effective date of
such termination and shall clearly specify any affected Licensed Marks,
Measurement Products or services.
11.2 SURVIVAL. Any voluntary termination of licenses and rights of Agilent
under Section 11.1 shall not affect Agilent's licenses and rights with respect
to any Measurement Products made or furnished prior to such termination.
11.3 OTHER TERMINATION. HP acknowledges and agrees that its rights to
terminate the licenses granted to Agilent hereunder are solely as set forth in
Section 4.3 and Articles VII and IX.
ARTICLE XII
DISPUTE RESOLUTION
12.1 NEGOTIATION. The parties shall make a good faith attempt to resolve
any dispute or claim arising out of or related to this Agreement through
negotiation. Within thirty (30) days after notice of a dispute or claim is given
by either party to the other party, the parties' first tier
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negotiating teams (as determined by each party's Director of Intellectual
Property or his or her delegate) shall meet and make a good faith attempt to
resolve such dispute or claim and shall continue to negotiate in good faith in
an effort to resolve the dispute or claim or renegotiate the applicable section
or provision without the necessity of any formal proceedings. If the first tier
negotiating teams are unable to agree within thirty (30) days of their first
meeting, then the parties' second tier negotiating teams (as determined by each
party's Director of Intellectual Property or his or her delegate) shall meet
within thirty (30) days after the end of the first thirty (30) day negotiating
period to attempt to resolve the matter. During the course of negotiations under
this Section 12.1, all reasonable requests made by one party to the other for
information, including requests for copies of relevant documents, will be
honored. The specific format for such negotiations will be left to the
discretion of the designated negotiating teams but may include the preparation
of agreed upon statements of fact or written statements of position furnished to
the other party.
12.2 NONBINDING MEDIATION. In the event that any dispute or claim arising
out of or related to this Agreement is not settled by the parties within fifteen
(15) days after the first meeting of the second tier negotiating teams under
Section 12.1, the parties will attempt in good faith to resolve such dispute or
claim by nonbinding mediation in accordance with the American Arbitration
Association Commercial Mediation Rules. The mediation shall be held within
thirty (30) days of the end of such fifteen (15) day negotiation period of the
second tier negotiating teams. Except as provided below in Section 12.3, no
litigation for the resolution of such dispute may be commenced until the parties
try in good faith to settle the dispute by such mediation in accordance with
such rules, and either party has concluded in good faith that amicable
resolution through continued mediation of the matter does not appear likely. The
costs of mediation shall be shared equally by the parties to the mediation. Any
settlement reached by mediation shall be recorded in writing, signed by the
parties, and shall be binding on them.
12.3 PROCEEDINGS. Nothing herein, however, shall prohibit either party
from initiating litigation or other judicial or administrative proceedings if
such party would be substantially harmed by a failure to act during the time
that such good faith efforts are being made to resolve the dispute or claim
through negotiation or mediation. In the event that litigation is commenced
under this Section 12.3, the parties agree to continue to attempt to resolve any
dispute or claim according to the terms of Sections 12.1 and 12.2 during the
course of such litigation proceedings under this Section 12.3.
ARTICLE XIII
LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES OR AFFILIATED COMPANIES
BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES OR AFFILIATED COMPANIES FOR ANY
DAMAGES, INCLUDING WITHOUT LIMITATION SPECIAL, CONSEQUENTIAL, INDIRECT,
INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS OR ANY OTHER DAMAGES, HOWEVER
CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY
OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH
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<PAGE>
DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH
PARTY'S OBLIGATIONS EXPRESSLY ASSUMED IN EXHIBIT K OF THE MASTER SEPARATION
AGREEMENT; PROVIDED FURTHER THAT THE EXCLUSION OF PUNITIVE DAMAGES SHALL APPLY
IN ANY EVENT.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL LICENSED
MARKS AND ANY OTHER INFORMATION OR MATERIALS LICENSED OR PROVIDED HEREUNDER ARE
LICENSED OR PROVIDED ON AN "AS IS" BASIS AND THAT NEITHER PARTY NOR ANY OF ITS
SUBSIDIARIES OR AFFILIATED COMPANIES MAKES ANY REPRESENTATIONS OR EXTENDS ANY
WARRANTIES WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF TITLE, ENFORCEABILITY OR
NON-INFRINGEMENT. Without limiting the generality of the foregoing, neither HP
nor any of its Subsidiaries or Affiliated Companies makes any warranty or
representation as to the validity of any Mark licensed by it to Agilent or any
warranty or representation that any use of any Mark with respect to any product
or service will be free from infringement of any rights of any Third Party.
14.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be
construed as conferring any rights by implication, estoppel or otherwise, under
any intellectual property right, other than the rights expressly granted in this
Agreement with respect to the Licensed Marks. Neither party is required
hereunder to furnish or disclose to the other any information (including copies
of registrations of the Marks), except as specifically provided herein.
14.3 INFRINGEMENT SUITS. Except as set forth in Section 4.3, (i) neither
party shall have any obligation hereunder to institute any action or suit
against Third Parties for infringement of any of the Licensed Marks or to defend
any action or suit brought by a Third Party which challenges or concerns the
validity of any of the Licensed Marks and (ii) Agilent shall not have any right
to institute any action or suit against Third Parties for infringement of any of
the Licensed Marks.
14.4 NO OTHER OBLIGATIONS. NEITHER PARTY ASSUMES ANY RESPONSIBILITIES OR
OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES AND OBLIGATIONS
EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN AGREEMENT BETWEEN
THE PARTIES. Without limiting the generality of the foregoing, neither party,
nor any of its Subsidiaries or Affiliated Companies, is obligated to (i) file
any application for registration of any Mark, or to secure any rights in any
Marks, (ii) to maintain any Mark registration, or (iii) provide any assistance,
except for the obligations expressly assumed in this Agreement.
14.5 ENTIRE AGREEMENT. This Agreement, the Master Separation Agreement
and the other Ancillary Agreements (as defined in the Master Separation
Agreement) constitute the entire agreement between the parties with respect to
the subject matter hereof and shall supersede all prior
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<PAGE>
written and oral and all contemporaneous oral agreements and understandings with
respect to the subject matter hereof. To the extent there is a conflict between
this Agreement and the General Assignment and Assumption Agreement between the
parties, the terms of this Agreement shall govern.
14.6 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware as to all matters
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
14.7 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
14.8 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy with answer back, by express or overnight mail delivered by a
nationally recognized air courier (delivery charges prepaid), by registered or
certified mail (postage prepaid, return receipt requested) or by e-mail with
receipt confirmed by return e-mail to the respective parties as follows:
if to HP:
c/o Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Attention: Associate General Counsel and
Director of Intellectual Property
Telecopy: (650) 852-8194
if to Agilent:
c/o Agilent Technologies, Inc.
3000 Hanover Street
Palo Alto, CA 94304
Attention: Assistant General Counsel and
Director of Intellectual Property
Telecopy: (650) 813-3095
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by e-mail, telecopy or by air
courier shall be deemed effective on the first Business Day following the day on
which such notice or communication was sent. Any notice or communication sent
by registered or certified mail shall be deemed effective on the third Business
Day following the day on which such notice or communication was mailed. As used
in this Section 14.8, "Business Day" means day other than a
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<PAGE>
Saturday, a Sunday or a day on which banking institutions located in the State
of California are authorized or obligated by law or executive order to close.
14.9 NONASSIGNABILITY. Neither party may, directly or indirectly, in
whole or in part, whether by operation of law or otherwise, assign or transfer
this Agreement, without the other party's prior written consent, and any
attempted assignment, transfer or delegation without such prior written consent
shall be voidable at the sole option of such other party. Notwithstanding the
foregoing, each party (or its permitted successive assignees or transferees
hereunder) may assign or transfer this Agreement as a whole without consent to a
Person that succeeds to all or substantially all of the business or assets of
such party. Without limiting the foregoing, this Agreement will be binding upon
and inure to the benefit of the parties and their permitted successors and
assigns.
14.10 SEVERABILITY. If any term or other provision of this Agreement is
determined by a nonappealable decision of a court, administrative agency or
arbitrator to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
14.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of either party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
14.12 AMENDMENT. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
such agreement.
14.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which, taken together, shall be considered to be one and
the same instrument.
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<PAGE>
WHEREFORE, the parties have signed this Master Trademark Ownership and
License Agreement effective as of the date first set forth above.
HEWLETT-PACKARD COMPANY AGILENT TECHNOLOGIES, INC.
By: /s/ Ann O. Baskins By: /s/ Craig Nordlund
---------------------------- --------------------------------
Name: Ann O. Baskins Name: Craig Nordlund
-------------------------- ------------------------------
Title: Associate General Counsel Title: Senior Vice President,
------------------------- -----------------------------
and Assistant Secretary General Counsel and Secretary
[Signature Page to Master Trademark Ownership and License Agreement]
<PAGE>
EXHIBIT A
TO MASTER TRADEMARK OWNERSHIP AND LICENSE AGREEMENT
LICENSED MARKS
HP
Hewlett Packard
HP Symbol
<PAGE>
EXHIBIT B
TO MASTER TRADEMARK OWNERSHIP AND LICENSE AGREEMENT
AFFILIATED COMPANIES
1. HP Affiliated Companies
-----------------------
ImagineCard
Idea LLC
Intria-HP
Intria-HP Potomac
Ericsson-HP Telecom (Sweden)
Ericsson-HP Telecom (France)
Hua-Pua
Putial Ome
PT Berka Services
Liquidity Management Group
Hugin Expert
Syc
Sopura Systems
2. Agilent Affiliated Companies
----------------------------
Chartered Semiconductor Partners Singapore
LumiLEDS
<PAGE>
Exhibit 2.6
EXHIBIT D-4
ICBD TECHNOLOGY OWNERSHIP AND
LICENSE AGREEMENT
between
HEWLETT-PACKARD COMPANY
and
AGILENT TECHNOLOGIES, INC.
Effective as of November 1, 1999
<PAGE>
ICBD TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS....................................................... 1
1.1 AFFILIATED COMPANY............................................... 1
1.2 AGILENT ICBD PRODUCTS............................................ 1
1.3 AGILENT OWNED ICBD TECHNOLOGY.................................... 2
1.4 COPYRIGHTS....................................................... 2
1.5 DATABASE RIGHTS.................................................. 2
1.6 HP ICBD PRODUCTS................................................. 2
1.7 HP OWNED ICBD TECHNOLOGY......................................... 2
1.8 ICBD TECHNOLOGY.................................................. 2
1.9 ICBD TECHNOLOGY RESTRICTION DATABASE............................. 3
1.10 ICBD TECHNOLOGY DATABASE......................................... 3
1.11 IMPROVEMENTS..................................................... 3
1.12 INVENTION DISCLOSURE............................................. 3
1.13 JOINT ICBD TECHNOLOGY............................................ 3
1.14 LICENSED AGILENT ICBD TECHNOLOGY................................. 3
1.15 LICENSED HP ICBD TECHNOLOGY...................................... 3
1.16 MASK WORKS RIGHTS................................................ 4
1.17 MASTER SEPARATION AGREEMENT...................................... 4
1.18 PATENTS.......................................................... 4
1.19 PERSON........................................................... 4
1.20 SELL............................................................. 4
1.21 SEPARATION DATE.................................................. 4
1.22 SUBSIDIARY....................................................... 4
1.23 THIRD PARTY ..................................................... 4
ARTICLE II ALLOCATION OF OWNERSHIP.......................................... 5
2.1 CONFIRMATION OF OWNERSHIP........................................ 5
2.2 ASSIGNMENT....................................................... 5
2.3 JOINT ICBD TECHNOLOGY............................................ 5
2.4 PRIOR GRANTS..................................................... 6
2.5 ASSIGNMENT DISCLAIMER............................................ 6
2.6 PRIOR AGREEMENTS................................................. 6
2.7 COPIES IN ITS POSSESSION......................................... 6
ARTICLE III LICENSES AND RIGHTS............................................. 6
3.1 LICENSE TO HP UNDER THE LICENSED AGILENT ICBD TECHNOLOGY......... 6
3.2 LICENSE TO AGILENT UNDER THE HP OWNED ICBD TECHNOLOGY WITH
RESPECT TO HP ICBD PRODUCTS...................................... 9
3.3 LICENSE TO AGILENT UNDER THE LICENSED HP ICBD TECHNOLOGY......... 11
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.4 HAVE MADE RIGHTS................................................. 14
3.5 RIGHTS TO JOINT ICBD TECHNOLOGY.................................. 14
3.6 IMPROVEMENTS..................................................... 15
3.7 SUBSIDIARIES AND AFFILIATED COMPANIES............................ 16
3.8 NO PATENT LICENSES............................................... 16
3.9 THIRD PARTY TECHNOLOGY........................................... 16
ARTICLE IV USE RESTRICTIONS................................................. 16
ARTICLE V CONFIDENTIALITY................................................... 17
ARTICLE VI TERMINATION...................................................... 17
6.1 VOLUNTARY TERMINATION............................................ 17
6.2 SURVIVAL......................................................... 17
6.3 NO OTHER TERMINATION............................................. 17
ARTICLE VII DISPUTE RESOLUTION.............................................. 17
7.1 NEGOTIATION...................................................... 17
7.2 NONBINDING MEDIATION............................................. 18
7.3 PROCEEDINGS...................................................... 18
ARTICLE VIII LIMITATION OF LIABILITY........................................ 18
ARTICLE IX MISCELLANEOUS PROVISIONS......................................... 19
9.1 DISCLAIMER....................................................... 19
9.2 NO IMPLIED LICENSES.............................................. 19
9.3 INFRINGEMENT SUITS............................................... 19
9.4 NO OTHER OBLIGATIONS............................................. 19
9.5 ENTIRE AGREEMENT................................................. 20
9.6 GOVERNING LAW.................................................... 20
9.7 DESCRIPTIVE HEADINGS............................................. 20
9.8 NOTICES.......................................................... 20
9.9 NONASSIGNABILITY................................................. 21
9.10 SEVERABILITY..................................................... 21
9.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE............ 21
9.12 AMENDMENT........................................................ 21
9.13 COUNTERPARTS..................................................... 21
</TABLE>
EXHIBIT A: AFFILIATED COMPANIES
EXHIBIT B: FIELD RESTRICTIONS
ii
<PAGE>
ICBD TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT
This ICBD Technology Ownership and License Agreement (the "Agreement") is
effective as of November 1, 1999 (the "Effective Date"), between Hewlett-Packard
Company, a Delaware corporation ("HP"), having an office at 3000 Hanover Street,
Palo Alto, California 94304 and Agilent Technologies, Inc., a Delaware
corporation ("Agilent"), having an office at 3000 Hanover Street, Palo Alto,
California 94304.
WHEREAS, the Board of Directors of HP has determined that it is in the best
interest of HP and its stockholders to separate HP's existing businesses into
two independent businesses;
WHEREAS, as part of the foregoing, HP and Agilent have entered into a
Master Separation Agreement (as defined below), which provides, among other
things, for the separation of certain Agilent assets and Agilent liabilities,
the initial public offering of Agilent stock, the distribution of such stock and
the execution and delivery of certain other agreements in order to facilitate
and provide for the foregoing;
WHEREAS, also as part of the foregoing, HP and Agilent desire to confirm
HP's and Agilent's ownership of certain technology related to integrated
circuits; and
WHEREAS, each party further desires to receive, and the other party is
willing to grant, certain rights to use certain of such technology.
NOW, THEREFORE, in consideration of the mutual promises of the parties, and
of good and valuable consideration, it is agreed by and between the parties as
follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following capitalized terms are
defined in this Article I and shall have the meaning specified herein:
1.1 AFFILIATED COMPANY. "Affiliated Company" means, with respect to HP,
any entity in which HP holds a 50% or less ownership interest and that is listed
on Exhibit A hereto and, with respect to Agilent, any entity in which Agilent
holds a 50% or less ownership interest and that is listed on Exhibit A hereto;
provided, however, that any such entity listed in Exhibit A shall be considered
to be an Affiliated Company under this Agreement only if it agrees in writing to
be bound by the terms and conditions of this Agreement. Exhibit A may be amended
from time to time after the date hereof upon mutual consent of the parties.
1.2 AGILENT ICBD PRODUCTS. "Agilent ICBD Products" means any and all
semiconductor devices, at whatever stage of completion in the manufacturing
process, in die, wafer, packaged or chip form, integrated circuit modules
incorporating such semiconductor devices, and related software (whether embedded
in such devices or modules or Sold or licensed in connection
<PAGE>
with such devices or modules) that are used or Sold now or hereafter by Agilent,
its Subsidiaries or Affiliated Companies and are based on or incorporate the
Licensed HP ICBD Technology (including Third Party semiconductor devices,
integrated circuit modules and related software when Agilent, its Subsidiaries
or Affiliated Companies are making (but not having made) such products as a
contract manufacturer or foundry for such Third Parties).
1.3 AGILENT OWNED ICBD TECHNOLOGY. "Agilent Owned ICBD Technology" means
the ICBD Technology listed or described as such in the ICBD Technology Database.
1.4 COPYRIGHTS. "Copyrights" mean (i) any copyright in any original works
of authorship fixed in any tangible medium of expression as set forth in 17
U.S.C. Section 101 et. seq., whether registered or unregistered, including any
applications for registration thereof, (ii) any corresponding foreign copyrights
under the laws of any jurisdiction, in each case, whether registered or
unregistered, and any applications for registration thereof and (iii) moral
rights under the laws of any jurisdiction.
1.5 DATABASE RIGHTS. "Database Rights" means any rights in databases
under the laws of the United States or any other jurisdiction, whether
registered or unregistered, and any applications for registration thereof.
1.6 HP ICBD PRODUCTS. "HP ICBD Products" means any and all semiconductor
devices, at whatever stage of completion in the manufacturing process, in die,
wafer, packaged or chip form, integrated circuit modules incorporating such
semiconductor devices, and related software (whether embedded in such devices or
modules or Sold or licensed in connection with such devices or modules) that are
used or Sold now or hereafter by HP, its Subsidiaries or Affiliate Companies and
are based on or incorporate the Licensed Agilent ICBD Technology (including
Third Party semiconductor devices, integrated circuit modules and related
software when HP, its Subsidiaries or Affiliated Companies are making (but not
having made) such products as a contract manufacturer or foundry for such Third
Parties).
1.7 HP OWNED ICBD TECHNOLOGY. "HP Owned ICBD Technology" means ICBD
Technology listed or described as such in the ICBD Technology Database.
1.8 ICBD TECHNOLOGY. "ICBD Technology" means semiconductor topologies,
cell libraries, cores or other similar elements, logic modules, algorithms,
manufacturing processes, design processes, behavioral models, logic diagrams,
schematics, test vectors, know-how, computer and electronic data processing and
other apparatus programs and software (object code and source code), databases
and documentation thereof, trade secrets, technical information, specifications,
drawings, records, documentation, works of authorship or other creative works,
ideas, knowledge, data or the like, solely to the extent that any of the
foregoing are listed or described in the ICBD Technology Database. The term ICBD
Technology includes Copyrights, Database Rights, Mask Work Rights, trade secrets
and any other intellectual property right, but expressly does not include (i)
any trademark, trade name, trade dress or service mark or applications for
registration thereof, or (ii) any Patents, or applications therefor, including
any of the foregoing that may be based on Invention Disclosures that are covered
by the Master Patent Ownership and Assignment Agreement
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<PAGE>
between the parties, but does include trade secret rights in and to inventions
disclosed in such applications and Invention Disclosures.
1.9 ICBD TECHNOLOGY DATABASE. "ICBD Technology Database" means the ICBD
Technology Database, as it may be updated by the parties upon mutual agreement
to add ICBD Technology as of the Separation Date.
1.10 ICBD TECHNOLOGY FIELD DEFINITION DATABASE. "ICBD Technology Field
Definition Database" means the ICBD Technology Field Definition Database, as it
may be updated by the parties as of the Separation Date.
1.11 IMPROVEMENTS. "Improvements" to ICBD Technology means (i) with
respect to Copyrights, any modifications, derivative works, and translations of
works of authorship, (ii) with respect to Database Rights, any database that is
created by extraction or re-utilization of another database, and (iii) with
respect to Mask Work Rights, trade secrets and other intellectual property
rights included within the definition of ICBD Technology and not covered by
Sections 1.11(i) and (ii) above, any improvements of ICBD Technology. For the
purposes of clarification, an item of ICBD Technology will be deemed to be an
Improvement of another item of ICBD Technology only if it is actually derived
from such other item of ICBD Technology and not merely because it may have the
same or similar functionality or use as such other item of ICBD Technology.
1.12 INVENTION DISCLOSURE. "Invention Disclosure" means a disclosure of
an invention (i) written for the purpose of allowing legal and business people
to determine whether to file a Patent application with respect to such invention
and (ii) recorded with a control number in the owning party's records.
1.13 JOINT ICBD TECHNOLOGY. "Joint ICBD Technology" means the ICBD
Technology listed or described as such in the ICBD Technology Database.
1.14 LICENSED AGILENT ICBD TECHNOLOGY. "Licensed Agilent ICBD Technology"
means the ICBD Technology listed or described as such in the ICBD Technology
Database and:
(a) which, as of the Separation Date, Agilent or any Subsidiary or
Affiliated Company of Agilent (i) owns or controls or (ii) otherwise has the
right to grant any licenses of the type and on the terms herein granted to HP
without the obligation to pay royalties or other consideration to Third Parties;
and
(b) which is known to or in the possession of HP, its Subsidiaries or
Affiliated Companies as of the Separation Date.
1.15 LICENSED HP ICBD TECHNOLOGY. "Licensed HP ICBD Technology" means the
ICBD Technology listed or described as such in the ICBD Technology Database and:
(a) which, as of the Separation Date, HP or any Subsidiary or
Affiliated Company of HP (i) owns or controls or (ii) otherwise has the right to
grant any licenses of the type and on the
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<PAGE>
terms herein granted to Agilent without the obligation to pay royalties or other
consideration to Third Parties; and
(b) which is known to or in the possession of Agilent, its
Subsidiaries or Affiliated Companies as of the Separation Date.
1.16 MASK WORK RIGHTS. "Mask Work Rights" means (i) any rights in mask
works, as defined in 17 U.S.C. Section 901, whether registered or unregistered,
including applications for registration thereof, and (ii) any foreign rights in
semiconductor topologies under the laws of any jurisdiction, whether registered
or unregistered, including applications for registration thereof.
1.17 MASTER SEPARATION AGREEMENT. "Master Separation Agreement" means the
Master Separation and Distribution Agreement between the parties.
1.18 PATENTS. "Patents" means patents, utility models, design patents,
design registrations, certificates of invention and other governmental grants
for the protection of inventions or industrial designs anywhere in the world and
all reissues, renewals, re-examinations and extensions of any of the foregoing.
1.19 PERSON. "Person" means an individual, a partnership, a corporation,
a limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, and a governmental entity or any
department, agency, or political subdivision thereof.
1.20 SELL. To "Sell" a product means to sell, transfer, lease, or
otherwise dispose of a product. "Sale" and "Sold" have the corollary meanings
ascribed thereto.
1.21 SEPARATION DATE. "Separation Date" means 12:01 a.m., Pacific Time,
November 1, 1999 or such other date as may be fixed by the Board of Directors of
HP.
1.22 SUBSIDIARY. "Subsidiary" means with respect to any specified Person,
any corporation, any limited liability company, any partnership or other legal
entity of which such Person owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote on the election of the members
of the board of directors or similar governing body. Unless the context
otherwise requires, reference to HP and its Subsidiaries shall not include the
subsidiaries of HP that will be transferred to Agilent after giving effect to
the Separation (as defined in the Master Separation Agreement), including the
actions taken pursuant to the Non-US Plan (as defined in the Master Separation
Agreement). For example, if HP owns 70% of the stock of another corporation, and
that corporation owns 60% of the equity interest of a limited liability company,
then that corporation is a Subsidiary of HP but that limited liability company
is not. However, if such corporation owns 90% of the equity interest of a
limited liability company, then that limited liability company is a Subsidiary
of HP. For the avoidance of doubt, this definition of Subsidiary is different
from the definition of Subsidiary in the Master Separation Agreement.
1.23 THIRD PARTY. "Third Party" means a Person other than HP and its
Subsidiaries and Affiliated Companies and Agilent and its Subsidiaries and
Affiliated Companies.
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ARTICLE II
ALLOCATION OF OWNERSHIP
2.1 CONFIRMATION OF OWNERSHIP. The parties hereby agree and confirm that,
as between the parties, HP retains for itself all right, title and interest in
and to the HP Owned ICBD Technology (except for any licenses expressly granted
in Article III) and that no transfer or assignment of ownership rights is
intended by the parties. At any time during the period beginning on the
Separation Date and until a reasonable period after Agilent ceases to
manufacture a particular HP ICBD Product for HP, HP shall have the right to
access and to copy or have Agilent copy for HP any and all portions of the HP
Owned ICBD Technology related to such HP ICBD Product in the possession of
Agilent. Such access and copying shall be in accordance with a reasonable
request and schedule to be mutually agreed upon between Agilent and HP. All
costs associated with the assembling, copying and delivering of the HP Owned
ICBD Technology shall be borne by HP (except for the value of the time of
Agilent employees). HP shall respond to reasonable requests by Agilent
concerning whether a particular HP ICBD Product will continue to be manufactured
by Agilent.
2.2 ASSIGNMENT. Subject to Sections 2.4-2.6 below and to Article IV, HP
hereby grants, conveys and assigns (and agrees to cause its appropriate
Subsidiaries to grant, convey and assign) to Agilent, by execution hereof (or,
where appropriate or required, by execution of separate instruments of
assignment), all its (and their) right, title and interest in and to the Agilent
Owned ICBD Technology, to be held and enjoyed by Agilent, its successors and
assigns. HP further grants, conveys and assigns (and agrees to cause its
appropriate Subsidiaries to grant, convey and assign) to Agilent all its (and
their) right, title and interest in and to any and all causes of action and
rights of recovery for past infringement of Copyrights, Database Rights and Mask
Work Rights in and to the Agilent Owned ICBD Technology, and for past
misappropriation of trade secrets in and to the Agilent Owned ICBD Technology.
HP further covenants that HP will, without demanding any further consideration
therefor, at the request and expense of Agilent (except for the value of the
time of HP employees), do (and cause its Subsidiaries to do) all lawful and just
acts, that may be or become necessary for evidencing, maintaining, recording and
perfecting Agilent's rights to such Agilent Owned ICBD Technology consistent
with HP's general business practice as of the Separation Date, including but not
limited to, execution and acknowledgement of (and causing its Subsidiaries to
execute and acknowledge) assignments and other instruments in a form reasonably
required by Agilent for each Copyright, Mask Work Right, or Database Right
jurisdiction.
2.3 JOINT ICBD TECHNOLOGY. Subject to Sections 2.4-2.6 below and to
Article IV, HP hereby grants, conveys and assigns (and agrees to cause its
appropriate Subsidiaries to grant, convey and assign) to Agilent an undivided
one-half interest in and to the Joint ICBD Technology to be held and enjoyed by
Agilent, its successors and assigns. HP further grants, conveys and assigns (and
agrees to cause its appropriate Subsidiaries to grant, convey and assign) to
Agilent an undivided one-half interest in and to any and all causes of action
and rights of recovery for past infringement of Copyrights, Database Rights and
Mask Work Rights in and to the Joint ICBD Technology, and for past
misappropriation of trade secrets in and to the Joint ICBD Technology. HP
further covenants that HP will, without demanding any consideration therefor, at
the request and expense of Agilent (except for the value of the time of HP
employees), do (and cause its Subsidiaries to do) all lawful
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and just acts including the execution and acknowledgement of instruments, that
may be or become necessary for evidencing, maintaining and perfecting Agilent's
rights to such Joint ICBD Technology consistent with HP's general business
practice as of the Separation Date, including but not limited to, execution and
acknowledgement of (and causing its Subsidiaries to execute and acknowledge)
assignments and other instruments in a form reasonably required by Agilent for
each Copyright, Mask Work Right or Database Right jurisdiction.
2.4 PRIOR GRANTS. Agilent acknowledges and agrees that the foregoing
assignments are subject to any and all licenses or other rights that may have
been granted by HP or its Subsidiaries with respect to the Agilent Owned ICBD
Technology prior to the Separation Date. HP shall respond to reasonable
inquiries from Agilent regarding any such prior grants.
2.5 ASSIGNMENT DISCLAIMER. AGILENT ACKNOWLEDGES AND AGREES THAT THE
FOREGOING ASSIGNMENTS ARE MADE ON AN "AS IS," QUITCLAIM BASIS AND THAT NEITHER
HP NOR ANY SUBSIDIARY OR AFFILIATED COMPANY OF HP HAS MADE OR WILL MAKE ANY
WARRANTY WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION
ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
TITLE, ENFORCEABILITY OR NON-INFRINGEMENT.
2.6 PRIOR AGREEMENTS. Notwithstanding the foregoing provisions of this
Article II, the parties agree that this Agreement does not supersede any
existing agreements that may have been entered into before the Separation Date
regarding the allocation of ownership to any ICBD Technology as between HP and
Agilent.
2.7 COPIES IN ITS POSSESSION. Notwithstanding the allocation of ownership
in this Article II, each party has the right to retain copies of any ICBD
Technology that it has in its possession as of the Separation Date.
ARTICLE III
LICENSES AND RIGHTS
3.1 LICENSE TO HP UNDER THE LICENSED AGILENT ICBD TECHNOLOGY.
(a) Agilent grants (and agrees to cause its appropriate Subsidiaries
or Affiliated Companies to grant) to HP the following personal, irrevocable,
nonexclusive, worldwide, fully paid, royalty-free and non-transferable (except
as specified in Section 9.9 below) licenses:
(i) under its and their Copyrights in and to the Licensed
Agilent ICBD Technology, (A) to reproduce and have reproduced the works of
authorship included in the Licensed Agilent ICBD Technology and Improvements
thereof prepared by or for HP, in whole or in part, as part of HP ICBD Products,
(B) to prepare Improvements or have Improvements prepared for it based upon the
works of authorship included in the Licensed Agilent ICBD Technology in order to
create HP ICBD Products, (C) to distribute (by any means and using any
technology, whether now known or unknown, including without limitation
electronic transmission) copies of the works of authorship
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included in the Licensed Agilent ICBD Technology and Improvements thereof
prepared by or for HP to the public by sale or other transfer of ownership or by
rental, lease or lending, as part of HP ICBD Products, and (D) to perform (by
any means and using any technology, whether now known or unknown, including
without limitation electronic transmission) and display the works of authorship
included in the Licensed Agilent ICBD Technology and Improvements thereof
prepared by or for HP, as part of HP ICBD Products;
(ii) under its and their Database Rights in and to the Licensed
Agilent ICBD Technology, to extract data from the databases included in the
Licensed Agilent ICBD Technology and to re-utilize such data to design, develop,
manufacture and have manufactured HP ICBD Products and to Sell such HP ICBD
Products that incorporate such data, databases and Improvements thereof prepared
by or for HP;
(iii) under its and their Mask Work Rights in and to the Licensed
Agilent ICBD Technology, (A) to reproduce and have reproduced mask works and
semiconductor topologies included in the Licensed Agilent ICBD Technology and
embodied in HP ICBD Products by optical, electronic or any other means, (B) to
import or distribute a product in which any such mask work or semiconductor
topology is embodied, and (C) to induce or knowingly to cause another Person to
do any of the acts described in Sections 3.1(a)(iii)(A) and (B) above; and
(iv) under its and their trade secrets and other intellectual
property rights in and to the Licensed Agilent ICBD Technology (except the
intellectual property rights excluded from the definition of ICBD Technology),
to use the Licensed Agilent ICBD Technology and Improvements thereof prepared by
or for HP to design, develop, manufacture and have manufactured HP ICBD Products
and to Sell such HP ICBD Products.
(b) Without limiting the generality of the foregoing licenses granted
in Section 3.1(a) above,
(i) with respect to cores or other similar elements included
within the Licensed Agilent ICBD Technology, such licenses include the right to
synthesize, simulate, design, verify, monitor, analyze, compile, incorporate,
embed and integrate the cores or other similar elements and Improvements thereof
made by or for HP to design, develop and manufacture HP ICBD Products, and to
Sell HP ICBD Products worldwide;
(ii) with respect to software included within the Licensed
Agilent ICBD Technology, such licenses include the right to use, modify, and
reproduce such software and Improvements thereof made by or for HP to create HP
ICBD Products, in source code and object code form, and to Sell such software
and Improvements thereof made by or for HP, in source code and object code form,
as part of HP ICBD Products; and
(iii) the foregoing licenses include the right to have contract
manufacturers and foundries manufacture HP ICBD Products for HP.
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<PAGE>
(c) HP may grant sublicenses within the scope of the licenses granted
under Sections 3.1(a) and (b) above as follows:
(i) HP may grant sublicenses to its Subsidiaries for so long as
they remain its Subsidiaries, with no right to grant further sublicenses other
than, in the case of a sublicensed Subsidiary, to another Subsidiary of such
party and as described in Section 3.1(c) (iii) below; provided that any such
sublicense may be made effective retroactively but not prior to the
sublicensee's becoming a Subsidiary;
(ii) HP may grant sublicenses to its Affiliated Companies for so
long as HP holds at least thirty percent (30%) ownership interest in the
Affiliated Companies, with no right to grant further sublicenses other than, in
the case of a sublicensed Affiliated Company, to the Affiliated Company's wholly
owned subsidiaries and as described in Section 3.1(c)(iii) below; provided that
any such sublicense may be made effective retroactively but not prior to the
sublicensee's becoming an Affiliated Company;
(iii) HP may grant sublicenses with respect to HP ICBD Products
in the form of software, in object code and source code form, to its
distributors, resellers, OEM customers, VAR customers, VAD customers, systems
integrators and other channels of distribution and to its end user customers;
and
(iv) HP may grant sublicenses with respect to the relevant
Licensed Agilent ICBD Technology to the Transferee (as defined below), in the
event that HP transfers, after the Separation Date, a going business (but not
all or substantially all of its business or assets), provided that such transfer
includes at least one marketable product and tangible assets having a net value
of at least ten million U.S. Dollars ($10,000,000.00), regardless of whether
such transfer is part of (A) an asset sale to any Third Party, (B) a sale of
shares or securities in a Subsidiary or Affiliated Company to a Third Party such
that (x) in the case of a Subsidiary, the Subsidiary ceases to be a Subsidiary,
or in the case of an Affiliated Company, HP ceases to hold at least thirty
percent (30%) of the outstanding shares or securities in such Affiliated Company
and (y) the Third Party owns at least eighty percent (80%) of the outstanding
shares or securities representing the right to vote for the election of
directors or other managing authority, or (C) a sale of shares or securities in
a Subsidiary or Affiliated Company to a Third Party such that (x) in the case of
a Subsidiary, the Subsidiary ceases to be a Subsidiary, or in the case of an
Affiliated Company, Agilent ceases to hold at least thirty percent (30%) of the
outstanding shares or securities in such Affiliated Company and (y) no single
Third Party owns at least eighty percent (80%) of the outstanding shares or
securities representing the right to vote for the election of directors or other
managing authority of such ex-Subsidiary or ex-Affiliated Company; provided
that:
(1) the Transferee shall have no right to grant further
sublicenses except as described in Section 3.1(c)(iii) above and except that the
Transferee shall have the right to grant sublicenses to any Person at least
eighty percent (80%) of whose outstanding shares or securities representing the
right to vote for the election of directors or other managing authority are,
directly or indirectly, owned by the Transferee, only for so long as such
ownership exists;
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<PAGE>
(2) such sublicenses shall not come into effect unless and
until such Transferee agrees in writing for the benefit of Agilent to be bound
by the terms of this Agreement, including but not limited to the use
restrictions in Article IV and the confidentiality obligations under Article V;
(3) this Section 3.1(c)(iv) shall be excluded from such
sublicense in any event; and
(4) HP shall give Agilent prompt written notice of any such
sublicense and a copy of the portions of the relevant agreement between HP and
such Transferee containing the sublicense terms.
(5) HP may exercise its rights under this Section
3.1(c)(iv) no more than eight (8) times unless otherwise agreed to in writing by
Agilent. Notwithstanding the foregoing limitation, however, in any sublicense
granted by HP to a Transferee under this Section 3.1(c)(iv), HP may elect to
relinquish its license under this Agreement in the field of use covered by the
sublicense, and such sublicense shall not count toward the limit. In making such
election, HP promptly shall notify Agilent. All notices of transfer by HP and
all consents by Agilent shall be effective only if provided to or by the
Director of Intellectual Property of the applicable party.
(6) As used in this Section 3.1(c)(iv), "Transferee" in the
case of Sections 3.1(c)(iv)(A) and (B) means the Third Party acquiring the going
business or eighty percent (80%) of the Subsidiary or Affiliated Company and in
the case of Section 3.1(c)(iv)(C) means the ex-Subsidiary or ex-Affiliated
Company only.
(d) The licenses granted above to the Licensed Agilent ICBD
Technology shall continue in perpetuity (or, in the case of Copyrights, Database
Rights and Mask Work Rights, until the expiration of the term thereof).
3.2 LICENSE TO AGILENT UNDER THE HP OWNED ICBD TECHNOLOGY WITH RESPECT TO
HP ICBD PRODUCTS.
(a) HP grants (and agrees to cause its appropriate Subsidiaries or
Affiliated Companies to grant) to Agilent the following personal, irrevocable,
nonexclusive, worldwide, fully paid, royalty-free and non-transferable (except
as specified in Section 9.9 below) licenses:
(i) under its and their Copyrights in and to the HP Owned ICBD
Technology, (A) to reproduce and have reproduced the works of authorship
included in the HP Owned ICBD Technology and Improvements prepared for HP, in
whole or in part, as part of HP ICBD Products or any other products that Agilent
provides to HP or to Subsidiaries or Affiliated Companies of HP, (B) to prepare
Improvements or have Improvements prepared for HP based upon the works of
authorship included in the HP Owned ICBD Technology in order to create HP ICBD
Products or any other products that Agilent provides to HP or to Subsidiaries or
Affiliated Companies of HP, (C) to distribute (by any means and using any
technology, whether now known or unknown, including without limitation
electronic transmission) copies of the works of authorship included in the HP
Owned ICBD Technology and Improvements thereof prepared for HP to HP and
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such Subsidiaries and Affiliated Companies of HP and Third Parties as HP may
designate in writing to Agilent from time to time, by sale or other transfer of
ownership or by rental, lease or lending, as part of HP ICBD Products or any
other products that Agilent provides to HP or to Subsidiaries or Affiliated
Companies of HP, and (D) to perform (by any means and using any technology,
whether now known or unknown, including without limitation electronic
transmission) and display the works of authorship included in the HP Owned ICBD
Technology and Improvements thereof prepared for HP, as part of HP ICBD Products
or any other products that Agilent provides to HP or to Subsidiaries or
Affiliated Companies of HP;
(ii) under its and their Database Rights in and to the HP Owned
ICBD Technology, to extract data from the databases included in the HP Owned
ICBD Technology and to re-utilize such data to design, develop, and manufacture
HP ICBD Products for HP or any other products that Agilent provides to HP or to
Subsidiaries or Affiliated Companies of HP and to Sell such HP ICBD Products and
such other products that incorporate such data, databases and Improvements
thereof prepared for HP to HP and such Subsidiaries and Affiliated Companies of
HP and Third Parties as HP may designate in writing to Agilent from time to
time;
(iii) under its and their Mask Work Rights in and to the HP
Owned ICBD Technology, (A) to reproduce and have reproduced mask works and
semiconductor topologies included in the HP Owned ICBD Technology and embodied
in HP ICBD Products (or any other products that Agilent provides to HP or to
Subsidiaries or Affiliated Companies of HP) by optical, electronic or any other
means, (B) to import or distribute a product in which any such mask work or
semiconductor topology is embodied to HP and such Subsidiaries and Affiliated
Companies of HP and Third Parties as HP may designate in writing to Agilent from
time to time, and (C) to induce or knowingly to cause another Person to do any
of the acts described in Sections 3.2(a)(iii)(A) and (B) above solely on behalf
of HP; and
(iv) under its and their trade secrets and other intellectual
property rights in and to the HP Owned ICBD Technology (except the intellectual
property rights excluded from the definition of ICBD Technology), to use the HP
Owned ICBD Technology and Improvements thereof prepared for HP to design,
develop and manufacture HP ICBD Products or any other products that Agilent
provides to HP or to Subsidiaries or Affiliated Companies of HP and to Sell such
HP ICBD Products and other Products to HP and such Subsidiaries and Affiliated
Companies of HP and Third Parties as HP may designate in writing to Agilent from
time to time.
(b) Without limiting the generality of the foregoing licenses granted
in Section 3.2(a) above,
(i) with respect to cores or other similar elements included
within the HP Owned ICBD Technology, such licenses include the right to
synthesize, simulate, design, verify, monitor, analyze, compile, incorporate,
embed and integrate the cores or other similar elements and Improvements thereof
made for HP to design, develop and manufacture HP ICBD Products or any other
products that Agilent provides to HP or to Subsidiaries or Affiliated Companies
of HP, and to Sell HP ICBD Products and such other products to HP and such
Subsidiaries and Affiliated Companies of HP and Third Parties as HP may
designate in writing to Agilent from time to time;
(ii) with respect to software included within the HP Owned ICBD
Technology, such licenses include the right to use, modify, and reproduce such
software and Improvements thereof made for HP to create HP ICBD Products or any
other products that Agilent provides to HP or to Subsidiaries or Affiliated
Companies of HP, in source code and object code form, and to Sell such software
and Improvements thereof made for HP, in source code and object
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code form, as part of HP ICBD Products and other products to HP and such
Subsidiaries and Affiliated Companies of HP and Third Parties as HP may
designate in writing to Agilent from time to time; and
(iii) the foregoing licenses include the right to have contract
manufacturers and foundries including, but not limited to, Chartered Silicon
Partners, Ltd. and Chartered Silicon Manufacturing, manufacture HP ICBD Products
or any other products for HP.
(c) Agilent may grant sublicenses (with no further right to
sublicense) to its Subsidiaries and Affiliated Companies within the scope of the
license granted under Section 3.2(a) above for so long as, in the case of
Subsidiaries, they remain its Subsidiaries, or, in the case of Affiliated
Companies, Agilent holds at least thirty percent (30%) ownership interest in
such Affiliated Companies. Any such sublicense may be made effective
retroactively, but not prior to the sublicensee's becoming a Subsidiary or
Affiliated Company.
(d) The licenses granted in this Section 3.2 to the HP Owned ICBD
Technology shall continue only for so long as Agilent is making HP ICBD Products
for Sale to HP, its Subsidiaries, Affiliated Companies or Third Parties
designated by HP in writing.
(e) This Section 3.2 does not limit the licenses granted in Section
3.3 below with respect to Licensed HP ICBD Technology.
3.3 LICENSE TO AGILENT UNDER THE LICENSED HP ICBD TECHNOLOGY.
(a) Subject to Article IV, HP grants (and agrees to cause its
appropriate Subsidiaries or Affiliated Companies to grant) to Agilent the
following personal, irrevocable, nonexclusive, worldwide, fully paid, royalty-
free and non-transferable (except as specified in Section 9.9 below) licenses:
(i) under its and their Copyrights in and to the Licensed HP
ICBD Technology, (A) to reproduce and have reproduced the works of authorship
included in the Licensed HP ICBD Technology and Improvements thereof prepared by
or for Agilent, in whole or in part, as part of Agilent ICBD Products, (B) to
prepare Improvements or have Improvements prepared for it based upon the works
of authorship included in the Licensed HP ICBD Technology in order to create
Agilent ICBD Products, (C) to distribute (by any means and using any technology,
whether now known or unknown, including without limitation electronic
transmission) copies of the works of authorship included in the Licensed HP ICBD
Technology and Improvements thereof prepared by or for Agilent to the public by
sale or other transfer of ownership or by rental, lease or lending, as part of
Agilent ICBD Products, and (D) to perform (by any means and using any
technology, whether now known or unknown, including without limitation
electronic transmission) and display the works of authorship included in the
Licensed HP ICBD Technology and Improvements thereof prepared by or for Agilent,
as part of Agilent ICBD Products;
(ii) under its and their Database Rights in and to the Licensed
HP ICBD Technology, to extract data from the databases included in the Licensed
HP ICBD Technology and to re-utilize such data to design, develop, manufacture
and have manufactured Agilent ICBD
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Products and to Sell such Agilent ICBD Products that incorporate such data,
databases and Improvements thereof prepared by or for Agilent;
(iii) under its and their Mask Work Rights in and to the
Licensed HP ICBD Technology, (A) to reproduce and have reproduced mask works and
semiconductor topologies included in the Licensed HP ICBD Technology and
embodied in Agilent ICBD Products by optical, electronic or any other means, (B)
to import or distribute a product in which any such mask work or semiconductor
topology is embodied, and (C) to induce or knowingly to cause another Person to
do any of the acts described in Sections 3.3(a)(iii)(A) and (B) above; and
(iv) under its and their trade secrets and other intellectual
property rights in and to the Licensed HP ICBD Technology (except the
intellectual property rights excluded from the definition of ICBD Technology),
to use the Licensed HP ICBD Technology and Improvements thereof prepared by or
for Agilent to design, develop, manufacture and have manufactured Agilent ICBD
Products and to Sell such Agilent ICBD Products.
(b) Without limiting the generality of the foregoing licenses granted
in Section 3.3(a) above,
(i) with respect to cores or other similar elements included
within the Licensed HP ICBD Technology, such licenses include the right to
synthesize, simulate, design, verify, monitor, analyze, compile, incorporate,
embed and integrate the cores or other similar elements and Improvements thereof
made by or for Agilent to design, develop and manufacture Agilent ICBD Products,
and to Sell Agilent ICBD Products worldwide;
(ii) with respect to software included within the Licensed HP
ICBD Technology, such licenses include the right to use, modify, and reproduce
such software and Improvements thereof made by or for Agilent to create Agilent
ICBD Products, in source code and object code form, and to Sell such software
and Improvements thereof made by or for Agilent, in source code and object code
form, as part of Agilent ICBD Products; and
(iii) the foregoing licenses include the right to have contract
manufacturers and foundries manufacture Agilent ICBD Products for Agilent.
(c) Agilent may grant sublicenses within the scope of the licenses
granted under Sections 3.3(a) and (b) above as follows:
(i) Agilent may grant sublicenses to its Subsidiaries for so
long as they remain its Subsidiaries, with no right to grant further sublicenses
other than, in the case of a sublicensed Subsidiary, to another Subsidiary of
such party, and as described in Section 3.3(c)(iii) below; provided that any
such sublicense may be made effective retroactively but not prior to the
sublicensee's becoming a Subsidiary;
(ii) Agilent may grant sublicenses to its Affiliated Companies
for so long as Agilent holds at least thirty percent (30%) ownership interest in
the Affiliated Companies, with no right to grant further sublicenses other than,
in the case of a sublicensed Affiliated Company, to the
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Affiliated Company's wholly owned subsidiaries and as described in Section
3.3(c)(iii) below; provided that any such sublicense may be made effective
retroactively but not prior to the sublicensee's becoming an Affiliated Company;
(iii) Agilent may grant sublicenses with respect to Agilent ICBD
Products in the form of software, in object code and source code form, to its
distributors, resellers, OEM customers, VAR customers, VAD customers, systems
integrators and other channels of distribution and to its end user customers;
and
(iv) Agilent may grant sublicenses with respect to the relevant
Licensed HP ICBD Technology to the Transferee (as defined below), in the event
that Agilent transfers, after the Separation Date, a going business (but not all
or substantially all of its business or assets), provided that such transfer
includes at least one marketable product and tangible assets having a net value
of at least ten million U.S. Dollars ($10,000,000.00), regardless of whether
such transfer is part of (A) an asset sale to any Third Party, (B) a sale of
shares or securities in a Subsidiary or Affiliated Company to a Third Party such
that (x) in the case of a Subsidiary, the Subsidiary ceases to be a Subsidiary,
or in the case of an Affiliated Company, Agilent ceases to hold at least thirty
percent (30%) of the outstanding shares or securities in such Affiliated Company
and (y) the Third Party owns at least eighty percent (80%) of the outstanding
shares or securities representing the right to vote for the election of
directors or other managing authority, or (C) a sale of shares or securities in
a Subsidiary or Affiliated Company to a Third Party such that (x) in the case of
a Subsidiary, the Subsidiary ceases to be a Subsidiary, or in the case of an
Affiliated Company, Agilent ceases to hold at least thirty percent (30%) of the
outstanding shares or securities in such Affiliated Company and (y) no single
Third Party owns at least eighty percent (80%) of the outstanding shares or
securities representing the right to vote for the election of directors or other
managing authority of such ex-Subsidiary or ex-Affiliated Company; provided
that:
(1) the Transferee shall have no right to grant further
sublicenses except as described in Section 3.3(c)(iii) above and except that the
Transferee shall have the right to grant sublicenses to any Person at least
eighty percent (80%) of whose outstanding shares or securities representing the
right to vote for the election of directors or other managing authority are,
directly or indirectly, owned by the Transferee, only for so long as such
ownership exists;
(2) such sublicenses shall not come into effect unless and
until such Transferee agrees in writing for the benefit of HP to be bound by the
terms of this Agreement, including but not limited to the use restrictions in
Article IV and the confidentiality and obligations under Article V;
(3) this Section 3.3(c)(iv) shall be excluded from such
sublicense in any event; and
(4) Agilent shall give HP prompt written notice of any such
sublicense and a copy of the portions of the relevant agreement between Agilent
and such Transferee containing the sublicense terms.
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(5) Agilent may exercise its rights under this Section
3.3(c)(iv) no more than eight (8) times unless otherwise agreed to in writing by
HP. Notwithstanding the foregoing limitation, however, in any sublicense granted
by Agilent to a Transferee under this Section 3.3(c)(iv), Agilent may elect to
relinquish its license under this Agreement in the field of use covered by the
sublicense, and such sublicense shall not count toward the limit. In making such
election, Agilent promptly shall notify HP. All notices of transfer by Agilent
and all consents by HP shall be effective only if provided to or by the Director
of Intellectual Property of the applicable party.
(6) As used in this Section 3.3(c)(iv), "Transferee" in the
case of Sections 3.3(c)(iv)(A) and (B) means the Third Party acquiring the going
business or eighty percent (80%) of the Subsidiary or Affiliated Company and in
the case of Section 3.3(c)(iv)(C) means the ex-Subsidiary or ex-Affiliated
Company only.
(d) The licenses granted above to the Licensed HP ICBD Technology
shall continue in perpetuity (or, in the case of Copyrights, Database Rights and
Mask Work Rights, until the expiration of the term thereof).
3.4 HAVE MADE RIGHTS. Each party understands and acknowledges that the
"have made" rights granted to it in Section 3.1 or 3.3, as applicable, and the
sublicenses of such "have made" rights granted pursuant to Sections 3.1(c)(i)
and (ii) and 3.3(c)(i) and (ii), as applicable, are intended to cover only the
products of such party, its Subsidiaries and Affiliated Companies (including
private label or OEM versions of such products), and are not intended to cover
foundry or contract manufacturing activities that such party may undertake
through Third Parties for Third Parties.
3.5 RIGHTS TO JOINT ICBD TECHNOLOGY.
(a) Each party has the right to (i) use and exploit the Joint ICBD
Technology, (ii) license the Joint ICBD Technology to Third Parties and (iii)
transfer its ownership interest in any or all Joint ICBD Technology to any Third
Party, in each case (x) without restriction, (y) without the consent of the
other party and (z) without the obligation to account to the other party for
profits derived therefrom.
(b) Should either party (the "Registering Party") desire at any time
to register Copyrights, Database Rights or Mask Work Rights in and to the Joint
ICBD Technology in any jurisdiction, such party shall notify the other party
(the "Non-Registering Party") in writing of its intent and the reasons therefor.
The Non-Registering Party promptly shall communicate in writing any objections
it may have. In the absence of any written objections within thirty (30) days
after the date of its notice, the Registering Party shall be free to proceed
with the desired registration in the name of both HP and Agilent. In the event
of any such objections by the Non-Registering Party, the parties shall discuss
and negotiate reasonably and in good faith to resolve the objections based on
each party's business objectives with respect to the relevant item of Joint ICBD
Technology. The parties shall share equally any actual and reasonable out-of-
pocket expenses (expressly excluding the value of the time of either party's
employees) incurred in connection with any such registration. The
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Registering Party promptly shall provide the Non-Registering Party with copies
of each application and issued registration under this Section 3.5(b).
(c) Should either party become aware of any actual infringement or
misappropriation of Joint ICBD Technology, such party shall promptly communicate
the details to the other party and the parties will meet and confer regarding
any enforcement action with respect to such Joint ICBD Technology. If the
parties decide jointly to bring an action for infringement or misappropriation
of such Joint ICBD Technology, the parties shall equally share all actual and
reasonable expenses associated therewith (except for the value of the time of
each party's employees in connection with the action; each party shall alone
bear its employee expenses) and any resulting damages or compensation, including
any amounts paid in settlement. If the parties decide not to jointly bring such
an action, either party or any of its Subsidiaries may, at its own expense
(including, as the parties shall agree on a case by case basis, compensation, if
any, of the other party for the value of time of the other party's employees as
reasonably required in connection with the action), enforce any Joint ICBD
Technology against any Third Party infringer or misappropriating Person without
the consent of the other party, subject to the following: (i) neither party
shall have any obligation to be joined as a party plaintiff in such action
without its prior written consent, which may be granted or withheld in its sole
discretion, regardless of whether such joinder is required in order to confer
jurisdiction in the jurisdiction in which the action is to be brought, (ii) if
either party brings any such action on its own, including cases in which the
other party consents to be named as party plaintiff, the party bringing the
action agrees to defend, indemnify and hold harmless the other party for all
losses, costs, liabilities and expenses arising out of or related to the
bringing of such action, and (iii) the party bringing such action may not take
any action, or make any admissions, that may affect the validity of any
registration for Copyrights, Database Rights or Mask Work Rights covering Joint
ICBD Technology without the prior written consent of the other party. If the
enforcing party or its Subsidiaries recovers any damages or compensation for any
action the enforcing party or the Subsidiaries of the enforcing party takes
hereunder, including any settlement, the enforcing party or the Subsidiaries of
the enforcing party shall retain one hundred percent (100%) of such damages. If
the parties cooperate in any such enforcement action, then any recovery of
damages or compensation shall be allocated pursuant to mutual agreement.
3.6 IMPROVEMENTS.
(a) As between the parties, after the Separation Date, Agilent hereby
retains all right, title and interest, including all intellectual property
rights, in and to any Improvements to Licensed HP ICBD Technology or HP Owned
ICBD Technology made by or for Agilent in the exercise of the licenses granted
to it hereunder, subject only to the ownership of HP in the underlying Licensed
HP ICBD Technology and HP Owned ICBD Technology, and HP hereby retains all
right, title and interest, including all intellectual property rights, in and to
any Improvements to Licensed Agilent ICBD Technology made by or for HP in the
exercise of the licenses granted to it hereunder, subject only to the ownership
of Agilent in the underlying Licensed Agilent ICBD Technology. Unless otherwise
agreed by the parties in writing, Agilent has no obligation to disclose or
license to HP any Improvements to the Agilent Owned ICBD Technology, Licensed
Agilent ICBD Technology, HP Owned ICBD Technology, Licensed HP ICBD Technology
or Joint ICBD Technology made by or for Agilent and HP has no obligation to
disclose or license to
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Agilent any Improvements to HP Owned ICBD Technology, Licensed HP ICBD
Technology, Licensed Agilent ICBD Technology or Joint ICBD Technology made by or
for HP; provided, however, that each party agrees promptly to respond to
requests from the other party regarding any such Improvements that may have been
made by or for it in a defined technical area, and to negotiate in good faith
disclosing and licensing such Improvements to the other party.
(b) Notwithstanding the foregoing provisions of Section 3.6 (a), the
parties agree that this Agreement does not supersede any existing arrangements
that may have been made before the Separation Date regarding the allocation of
ownership to any Improvements as between HP and Agilent.
3.7 SUBSIDIARIES AND AFFILIATED COMPANIES. A sublicense to a particular
Subsidiary or Affiliated Company of a party hereto granted pursuant to Sections
3.1(c)(i) or (ii) or 3.3(c)(i) or (ii) shall terminate upon the date that, in
the case of a Subsidiary of a party, such Subsidiary ceases to be a Subsidiary
of such party, or, in the case of an Affiliated Company of a party, such party
ceases to hold at least a thirty percent (30%) ownership interest in such
Affiliated Company; provided, however, that such cessation shall not affect such
party's rights to grant further sublicenses to such terminated Subsidiary or
Affiliated Company as set forth in Sections 3.1(c)(iv) or 3.3(c)(iv) above. In
the event that, at the time of such cessation, such Subsidiary or Affiliated
Company owns any ICBD Technology to which the other party is licensed, such
license shall continue for the term thereof.
3.8 NO PATENT LICENSES. Nothing contained in this Agreement shall be
construed as conferring to either party by implication, estoppel or otherwise
any license or right under any Patent, or applications therefor, whether or not
the exercise of any right herein granted necessarily employs an invention of any
existing or later issued Patent. The applicable licenses granted between HP and
Agilent with respect to Patents are set forth in a separate Master Patent
Ownership and License Agreement.
3.9 THIRD PARTY TECHNOLOGY. The assignment of any applicable license
agreements with respect to Third Party ICBD Technology are set forth in a
separate General Assignment and Assumption Agreement between the parties.
ARTICLE IV
USE RESTRICTIONS
Agilent agrees that, other than HP ICBD Products for Sale to HP (or its
Subsidiaries or Affiliated Companies or Third Parties designated in writing by
HP), Agilent and its sublicensees will not use the Agilent Owned ICBD Technology
or Licensed HP ICBD Technology to design, develop, make, have made, import,
offer for Sale or Sell products in the fields of use set forth in Exhibit B. The
foregoing limitations shall terminate three (3) or ten (10) years after the
Separation Date, as indicated in the ICBD Technology Field Definition Database.
The foregoing restrictions in this Article IV shall not restrict Agilent or its
Subsidiaries or Affiliated Companies from continuing to design, develop, make,
have made, import, offer for Sale or Sell Agilent ICBD Products that are being
shipped by Agilent or its Subsidiaries or Affiliated Companies as of the
Separation Date in
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volumes comparable to (or less than) the volumes in which they are shipped as of
the Separation Date.
ARTICLE V
CONFIDENTIALITY
The terms of the Master Confidential Disclosure Agreement between the
parties shall apply to any Confidential Information (as defined therein) which
is the subject matter of this Agreement.
ARTICLE VI
TERMINATION
6.1 VOLUNTARY TERMINATION. By written notice to the other party, each
party may voluntarily terminate all or a specified portion of the licenses and
rights granted to it hereunder by such other party. Such notice shall specify
the effective date of such termination and shall clearly specify any affected
ICBD Technology, product or service.
6.2 SURVIVAL. Any voluntary termination of licenses and rights of a party
under Section 6.1 shall not affect such party's licenses and rights with respect
to any licensed product made or service furnished prior to such termination, and
shall not affect the licenses and rights granted to the other party hereunder.
6.3 NO OTHER TERMINATION. Each party acknowledges and agrees that its
remedy for breach by the other party of the licenses granted to it hereunder or
of any other provision hereof shall be, subject to the requirements of Article
VII, to bring a claim to recover damages subject to the limits set forth in this
Agreement and to seek any other appropriate equitable relief, other than
termination of the licenses granted by it in this Agreement.
ARTICLE VII
DISPUTE RESOLUTION
7.1 NEGOTIATION. The parties shall make a good faith attempt to resolve
any dispute or claim arising out of or related to this Agreement through
negotiation. Within thirty (30) days after notice of a dispute or claim is given
by either party to the other party, the parties' first tier negotiating teams
(as determined by each party's Director of Intellectual Property or his or her
delegate) shall meet and make a good faith attempt to resolve such dispute or
claim and shall continue to negotiate in good faith in an effort to resolve the
dispute or claim or renegotiate the applicable section or provision without the
necessity of any formal proceedings. If the first tier negotiating teams are
unable to agree within thirty (30) days of their first meeting, then the
parties' second tier negotiating teams (as determined by each party's Director
of Intellectual Property or his or her delegate) shall meet within thirty (30)
days after the end of the first thirty (30) day negotiating period to attempt to
resolve the matter. During the course of negotiations under this Section 7.1,
all reasonable requests made by one party to the other for information,
including requests for copies of relevant documents, will be honored. The
specific format for such negotiations will be left to the
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discretion of the designated negotiating teams but may include the preparation
of agreed upon statements of fact or written statements of position furnished to
the other party.
7.2 NONBINDING MEDIATION. In the event that any dispute or claim arising
out of or related to this Agreement is not settled by the parties within fifteen
(15) days after the first meeting of the second tier negotiating teams under
Section 7.1, the parties will attempt in good faith to resolve such dispute or
claim by nonbinding mediation in accordance with the American Arbitration
Association Commercial Mediation Rules. The mediation shall be held within
thirty (30) days of the end of such fifteen (15) day negotiation period of the
second tier negotiating teams. Except as provided below in Section 7.3, no
litigation for the resolution of such dispute may be commenced until the parties
try in good faith to settle the dispute by such mediation in accordance with
such rules and either party has concluded in good faith that amicable resolution
through continued mediation of the matter does not appear likely. The costs of
mediation shall be shared equally by the parties to the mediation. Any
settlement reached by mediation shall be recorded in writing, signed by the
parties, and shall be binding on them.
7.3 PROCEEDINGS. Nothing herein, however, shall prohibit either party from
initiating litigation or other judicial or administrative proceedings if such
party would be substantially harmed by a failure to act during the time that
such good faith efforts are being made to resolve the dispute or claim through
negotiation or mediation. In the event that litigation is commenced under this
Section 7.3, the parties agree to continue to attempt to resolve any dispute or
claim according to the terms of Sections 7.1 and 7.2 during the course of such
litigation proceedings under this Section 7.3.
ARTICLE VIII
LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES OR AFFILIATED COMPANIES
BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES OR AFFILIATED COMPANIES FOR ANY
SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST
PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE)
ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE
FOREGOING LIMITATIONS SHALL NOT LIMIT DAMAGES FOR INFRINGEMENT AVAILABLE TO
EITHER PARTY UNDER APPLICABLE LAW IN THE EVENT OF BREACH BY THE OTHER PARTY OF
SECTIONS 3.1(a), 3.2(a), 3.3(a) OR ARTICLE IV AND SHALL NOT LIMIT EACH PARTY'S
OBLIGATIONS EXPRESSLY ASSUMED IN EXHIBIT K OF THE MASTER SEPARATION AGREEMENT;
PROVIDED FURTHER THAT THE EXCLUSION OF PUNITIVE DAMAGES SHALL APPLY IN ANY
EVENT.
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ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL ICBD
TECHNOLOGY AND ANY OTHER INFORMATION OR MATERIALS LICENSED OR PROVIDED HEREUNDER
IS LICENSED OR PROVIDED ON AN "AS IS" BASIS, AND THAT NEITHER PARTY NOR ANY OF
ITS SUBSIDIARIES OR AFFILIATED COMPANIES MAKES ANY REPRESENTATIONS OR EXTENDS
ANY WARRANTIES WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO,
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Without
limiting the generality of the foregoing, neither party nor any of its
Subsidiaries or Affiliated Companies makes any warranty or representation that
any manufacture, use, importation, offer for sale or sale of any product or
service will be free from infringement of any Patent or other intellectual
property right of any Third Party.
9.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be
construed as conferring any rights by implication, estoppel or otherwise, under
any intellectual property right, other than the rights expressly granted in this
Agreement with respect to the Licensed Agilent ICBD Technology, the Licensed HP
ICBD Technology and the HP Owned ICBD Technology. Neither party is required
hereunder to furnish or disclose to the other any technical or other information
(including copies of the Licensed Agilent ICBD Technology and the Licensed HP
ICBD Technology), except as specifically provided herein.
9.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder
to institute any action or suit against Third Parties for infringement of any
Copyrights, Database Rights or Mask Work Rights or misappropriation of any trade
secret rights in or to any ICBD Technology licensed to the other party
hereunder, or to defend any action or suit brought by a Third Party which
challenges or concerns the validity of any of such rights or which claims that
any ICBD Technology assigned or licensed to the other party hereunder infringes
any Patent, Copyright, Database Right, Mask Work Right or other intellectual
property right of any Third Party or constitutes a misappropriated trade secret
of any Third Party. HP shall not have any right to institute any action or suit
against Third Parties for infringement of any of the Copyrights, Database Rights
or Mask Work Rights in or to the Licensed Agilent ICBD Technology and Agilent
shall not have any right to institute any action or suit against Third Parties
for infringement of any of the Copyrights, Database Rights or Mask Work Rights
in or to the Licensed HP ICBD Technology.
9.4 NO OTHER OBLIGATIONS. NEITHER PARTY ASSUMES ANY RESPONSIBILITIES OR
OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES AND OBLIGATIONS
EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN AGREEMENT BETWEEN
THE PARTIES. Without limiting the generality of the foregoing: (i) neither the
execution of this Agreement nor anything in it or in the HP Owned ICBD
Technology shall be construed as an obligation upon Agilent to make or Sell HP
ICBD Products; any such obligation shall be set forth in a separate written
agreement between the
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parties and (ii) neither party or any of its Subsidiaries or Affiliated
Companies is obligated to provide any technical assistance.
9.5 ENTIRE AGREEMENT. This Agreement, the Master Separation Agreement and
the other Ancillary Agreements (as defined in the Master Separation Agreement)
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof. This Agreement shall prevail in the event of any conflicting
terms or legends which may appear on any portion of the Agilent Owned ICBD
Technology, Licensed Agilent ICBD Technology, HP Owned ICBD Technology or
Licensed HP ICBD Technology. To the extent there is a conflict between this
Agreement and the Master Assignment and Assumption Agreement between the
parties, the terms of this Agreement shall govern.
9.6 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware as to all matters
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
9.7 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
9.8 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy with answer back, by express or overnight mail delivered by a
nationally recognized air courier (delivery charges prepaid), by registered or
certified mail (postage prepaid, return receipt requested) or by e-mail with
receipt confirmed by return e-mail to the respective parties as follows:
if to HP:
c/o Hewlett Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Attention: Associate General Counsel and
Director of Intellectual Property
Telecopy: (650) 852-8194
if to Agilent:
c/o Agilent Technologies, Inc.
3000 Hanover Street
Palo Alto, CA 94304
Attention: Assistant General Counsel and
Director of Intellectual Property
Telecopy: (650) 813-3095
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or to such other address as the party to whom notice is given may have
previously furnished to the other in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by e-mail, telecopy or by air courier
shall be deemed effective on the first Business Day following the day on which
such notice or communication was sent. Any notice or communication sent by
registered or certified mail shall be deemed effective on the third Business Day
following the day on which such notice or communication was mailed. As used in
this Section 9.8, "Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions located in the State of California are
authorized or obligated by law or executive order to close.
9.9 NONASSIGNABILITY. Neither party may, directly or indirectly, in whole
or in part, whether by operation of law or otherwise, assign or transfer this
Agreement, without the other party's prior written consent, and any attempted
assignment, transfer or delegation without such prior written consent shall be
voidable at the sole option of such other party. Notwithstanding the foregoing,
each party (or its permitted successive assignees or transferees hereunder) may
assign or transfer this Agreement as a whole without consent to a Person that
succeeds to all or substantially all of the business or assets of such party.
Without limiting the foregoing, this Agreement will be binding upon and inure to
the benefit of the parties and their permitted successors and assigns.
9.10 SEVERABILITY. If any term or other provision of this Agreement is
determined by a nonappealable decision of a court, administrative agency or
arbitrator to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
9.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of either party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
9.12 AMENDMENT. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
such agreement.
9.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which, taken together, shall be considered to be one and
the same instrument.
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WHEREFORE, the parties have signed this ICBD Technology Ownership and
License Agreement effective as of the date first set forth above.
HEWLETT-PACKARD COMPANY AGILENT TECHNOLOGIES, INC.
By: /s/ Ann O. Baskins By: /s/ Craig Nordlund
------------------------------ --------------------------------
Name: Ann O. Baskins Name: Craig Nordlund
---------------------------- ------------------------------
Title: Associate General Counsel Title: Senior Vice President,
--------------------------- -----------------------------
and Assistant Secretary General Counsel and Secretary
[Signature Page to ICBD Technology Ownership and License Agreement]
<PAGE>
EXHIBIT A
TO ICBD TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT
AFFILIATED COMPANIES
1. HP Affiliated Companies
-----------------------
ImagineCard
Idea LLC
Intria-HP
Intria-HP Potomac
Ericsson-HP Telecom (Sweden)
Ericsson-HP Telecom (France)
Hua-Pua
Putial Ome
PT Berka Services
Liquidity Management Group
Hugin Expert
Syc
Sopura Systems
2. Agilent Affiliated Companies
----------------------------
Chartered Semiconductor Partners Singapore
LumiLEDS
<PAGE>
EXHIBIT B
TO ICBD TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT
FIELD RESTRICTIONS
1. Inkjet Products, Printer Products (including Printer Supplies,
Accessories and Components), and Document Scanners (as such terms are defined in
the ICBD Technology Field Definition Database).
2. Computing Products (as such term is defined in the ICBD Technology
Field Definition Database).
<PAGE>
Exhibit 2.7
EMPLOYEE MATTERS AGREEMENT
BETWEEN
HEWLETT-PACKARD COMPANY
AND
AGILENT TECHNOLOGIES, INC.
DATED AS OF
NOVEMBER 1, 1999
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ARTICLE I DEFINITIONS................................................................................ 1
1.1 Affiliate................................................................................ 1
1.2 Agilent.................................................................................. 1
1.3 Agilent Business......................................................................... 2
1.4 Agilent Employee......................................................................... 2
1.5 Agilent Group............................................................................ 2
1.6 Agilent Master Trust..................................................................... 2
1.7 Agilent Stock Value...................................................................... 2
1.8 Agilent Terminated Employee.............................................................. 2
1.9 Agilent Transferred Employee............................................................. 3
1.10 Agilent WCP Claims....................................................................... 3
1.11 Agreement................................................................................ 3
1.12 Ancillary Agreements..................................................................... 3
1.13 ASO Contracts............................................................................ 3
1.14 Benefits Committee....................................................................... 3
1.15 Cash Profit Sharing Program.............................................................. 3
1.16 COBRA.................................................................................... 4
1.17 Code..................................................................................... 4
1.18 DCR Plan................................................................................. 4
1.19 Distribution............................................................................. 4
1.20 Distribution Date........................................................................ 4
1.21 DOL...................................................................................... 4
1.22 DPSP..................................................................................... 4
1.23 DPSP Transfer Date....................................................................... 4
1.24 ERISA.................................................................................... 4
1.25 Excess Benefit Plan...................................................................... 4
1.26 Excluded Options......................................................................... 4
1.27 Executive Deferred Compensation Plan..................................................... 4
1.28 Flexible Benefits Plan................................................................... 5
1.29 FMLA..................................................................................... 5
1.30 Food Subsidy Programs.................................................................... 5
1.31 Foreign Plan............................................................................. 5
1.32 Fringe Benefits.......................................................................... 5
1.33 FTO...................................................................................... 5
1.34 General Assignment and Assumption Agreement.............................................. 5
1.35 Group Insurance Policies................................................................. 5
1.36 Group Trust.............................................................................. 5
1.37 GUL...................................................................................... 5
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1.38 HCFA..................................................................................... 5
1.39 HCR Plan................................................................................. 6
1.40 Health and Welfare Plans................................................................. 6
1.41 Health Plans............................................................................. 6
1.42 HMO...................................................................................... 6
1.43 HMO Agreements........................................................................... 6
1.44 HP....................................................................................... 6
1.45 HP Employee.............................................................................. 6
1.46 HP Group................................................................................. 6
1.47 HP GUL Transfer Date..................................................................... 6
1.48 HP L-T Care Plan Transfer Date........................................................... 7
1.49 HP Master Trust.......................................................................... 7
1.50 HP Stock Value........................................................................... 7
1.51 HP Terminated Employee................................................................... 7
1.52 HP WCP................................................................................... 7
1.53 Income Protection Plan................................................................... 7
1.54 IPO...................................................................................... 7
1.55 IPO Closing Date......................................................................... 7
1.56 IPO Registration Statement............................................................... 7
1.57 IRG...................................................................................... 7
1.58 IRS...................................................................................... 7
1.59 L-T Care Plan............................................................................ 7
1.60 Leave of Absence Programs................................................................ 8
1.61 Legally Permissible...................................................................... 8
1.62 Liabilities.............................................................................. 8
1.63 Local Agreement.......................................................................... 8
1.64 Material Feature......................................................................... 8
1.65 Non-Qualified Plans...................................................................... 8
1.66 Non-U.S. Plan............................................................................ 8
1.67 Option................................................................................... 9
1.68 Outsource................................................................................ 9
1.69 Participating Company.................................................................... 9
1.70 Payroll Date............................................................................. 9
1.71 PBGC..................................................................................... 9
1.72 Person................................................................................... 9
1.73 Plan..................................................................................... 9
1.74 Post-Employment Programs................................................................. 9
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1.75 Premium Plan......................................................................................... 9
1.76 QDRO................................................................................................. 9
1.77 QMCSO................................................................................................ 10
1.78 Rabbi Trust.......................................................................................... 10
1.79 Ratio................................................................................................ 10
1.80 Record Date.......................................................................................... 10
1.81 Redeployment/Alternate Offer Program................................................................. 10
1.82 Restricted Stock..................................................................................... 10
1.83 Retirement Plans..................................................................................... 10
1.84 RP................................................................................................... 10
1.85 RP Transfer Date..................................................................................... 10
1.86 SEC.................................................................................................. 10
1.87 Separation........................................................................................... 11
1.88 Separation Agreement................................................................................. 11
1.89 Separation Date...................................................................................... 11
1.90 Stock Plan........................................................................................... 11
1.91 Stock Purchase Plan.................................................................................. 11
1.92 Subsidiary........................................................................................... 11
1.93 Survivor Protection Plan............................................................................. 11
1.94 Tax Sharing Agreement................................................................................ 11
1.95 TAXCAP............................................................................................... 12
1.96 Transition Period.................................................................................... 12
1.97 Unemployment Insurance Program....................................................................... 12
1.98 Variable Pay Plan.................................................................................... 12
1.99 VEBA................................................................................................. 12
1.100 VEBA Transfer Date................................................................................... 12
1.101 Voluntary Severance Incentive Plan................................................................... 12
ARTICLE II GENERAL PRINCIPLES.................................................................................... 13
2.1 Assumption of Agilent Liabilities.................................................................... 13
2.2 Establishment of Agilent Plans....................................................................... 13
2.3 Agilent's Participation in HP Plans.................................................................. 14
2.4 Terms of Participation by Agilent Transferred Employees in Agilent Plans............................. 15
2.5 Allocation of Costs and Expenses..................................................................... 16
2.6 Benefits Committee and Dispute Resolution............................................................ 16
2.7 Foreign Plans........................................................................................ 16
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ARTICLE III DEFINED BENEFIT PLAN................................................................................. 17
3.1 Establishment of Group Trust and Master RP Trust..................................................... 17
3.2 Assumption of RP Liabilities and Allocation of Interests in the Group Trust.......................... 17
3.3 No Distributions to Agilent Transferred Employees.................................................... 18
ARTICLE IV DEFINED CONTRIBUTION PLANS............................................................................ 19
4.1 TAXCAP............................................................................................... 19
4.2 DPSP................................................................................................. 20
ARTICLE V NON-QUALIFIED AND OTHER PLANS.......................................................................... 21
5.1 Excess Benefit Plan.................................................................................. 21
5.2 Executive Deferred Compensation Plan................................................................. 21
5.3 Officers Early Retirement Plan....................................................................... 22
5.4 IRG.................................................................................................. 22
ARTICLE VI HEALTH AND WELFARE PLANS.............................................................................. 23
6.1 VEBA Asset Transfers................................................................................. 23
6.2 Assumption of Health and Welfare Plan Liabilities.................................................... 24
6.3 Claims for Health and Welfare Plans.................................................................. 24
6.4 Post-Distribution Transitional Arrangements.......................................................... 25
6.5 Vendor Arrangements.................................................................................. 26
6.6 Group Long-Term Care Plan Asset Transfer............................................................. 26
6.7 Group Universal Life: Group Universal Life Insurance Program Cash Value and Reserve Transfers........ 26
6.8 IPP/State Voluntary Disability Plans................................................................. 27
6.9 Business Travel Accident Insurance................................................................... 27
6.10 Flexible Benefits Plan............................................................................... 27
6.11 Redeployment/Alternate Offer Program................................................................. 28
6.12 COBRA................................................................................................ 28
6.13 Leave of Absence Programs and FMLA................................................................... 28
6.14 Post-Employment Programs............................................................................. 29
6.15 HP Workers' Compensation Program..................................................................... 29
ARTICLE VII EQUITY AND OTHER COMPENSATION........................................................................ 32
7.1 HP Variable Pay Plan................................................................................. 32
7.2 HP Options and Stock Appreciation Rights............................................................. 32
7.3 HP Restricted Stock.................................................................................. 33
7.4 Stock Purchase Plan.................................................................................. 34
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7.5 Stock Service Award Program.......................................................................... 34
7.6 Cash Profit Sharing Program.......................................................................... 34
ARTICLE VIII FRINGE AND OTHER BENEFITS........................................................................... 36
8.1 Employee Assistance Program.......................................................................... 36
8.2 Educational Assistance Program....................................................................... 36
8.3 Adoption Assistance Program.......................................................................... 36
8.4 Cafeteria and Related Subsidies...................................................................... 36
8.5 Credit Union......................................................................................... 37
8.6 Employee Product Discounts........................................................................... 37
8.7 Employee Scholarship Program......................................................................... 37
8.8 Recreational Properties.............................................................................. 37
8.9 HP-Owned and Operated Aircraft....................................................................... 37
8.10 HP-Owned Cars........................................................................................ 37
8.11 Other Benefits....................................................................................... 38
ARTICLE IX ADMINISTRATIVE PROVISIONS............................................................................. 39
9.1 Additional Service Level Agreements.................................................................. 39
9.2 Payment of Liabilities, Plan Expenses and Related Matters............................................ 39
9.3 Sharing of Participant Information................................................................... 39
9.4 Reporting and Disclosure Communications to Participants.............................................. 40
9.5 Audits Regarding Vendor Contracts.................................................................... 40
9.6 Employee Identification Numbers...................................................................... 40
9.7 Beneficiary Designations............................................................................. 40
9.8 Requests for IRS and DOL Opinions.................................................................... 40
9.9 Fiduciary Matters.................................................................................... 41
9.10 Consent of Third Parties............................................................................. 41
9.11 World Wide Web....................................................................................... 41
9.12 Tax Cooperation...................................................................................... 41
ARTICLE X EMPLOYMENT-RELATED MATTERS............................................................................. 42
10.1 Terms of Agilent Employment.......................................................................... 42
10.2 HR Data Support Systems.............................................................................. 42
10.3 Non-Solicitation of Employees........................................................................ 42
10.4 Employment of Employees with U.S. Work Visas......................................................... 42
10.5 Confidentiality and Proprietary Information.......................................................... 42
10.6 FTO.................................................................................................. 43
10.7 Accrued Payroll, Bonuses, Profit Sharing and Commissions............................................. 43
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10.8 Payroll and Withholding.............................................................................. 43
10.9 Personnel and Pay Records............................................................................ 44
10.10 Unemployment Insurance Program....................................................................... 44
10.11 Non-Termination of Employment; No Third-Party Beneficiaries.......................................... 44
10.12 Employment Litigation................................................................................ 45
ARTICLE XI GENERAL PROVISIONS.................................................................................... 46
11.1 Effect if Payroll, Separation, IPO and/or Distribution Does Not Occur................................ 46
11.2 Relationship of Parties.............................................................................. 46
11.3 Affiliates........................................................................................... 46
11.4 Incorporation of Separation Agreement Provisions..................................................... 46
11.5 Governing Law........................................................................................ 46
11.6 Severability......................................................................................... 46
11.7 Amendment............................................................................................ 47
11.8 Termination.......................................................................................... 47
11.9 Conflict............................................................................................. 47
11.10 Counterparts......................................................................................... 47
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SCHEDULE 1.41 HEALTH AND WELFARE PLANS............................................................... i
SCHEDULE 6.1(a)(ii) ACTUARIAL ASSUMPTIONS FOR HP VEBA INCOME PROTECTION PLAN LIABILITIES............. ii
SCHEDULE 6.1(a)(iii) ACTUARIAL ASSUMPTIONS FOR HP VEBA SURVIVOR PROTECTION PLAN LIABILITIES.......... iii
SCHEDULE 6.5(a) THIRD PARTY ASO CONTRACTS............................................................ iv
SCHEDULE 6.5(b) GROUP INSURANCE POLICIES............................................................. v
SCHEDULE 6.5(c) THIRD PARTY HMO CONTRACTS............................................................ vi
SCHEDULE 6.6(a) ASSUMPTIONS FOR HP LONG-TERM CARE PLAN LIABILITIES................................... vii
SCHEDULE 6.15(d) WCP CLAIMS ACCRUED LIABILITIES ALLOCATION........................................... viii
SCHEDULE 7.2(c) OPTIONS HELD BY CERTAIN NON-U.S. AGILENT TRANSFERRED EMPLOYEES....................... ix
SCHEDULE 8.11 FRINGE BENEFITS........................................................................ xii
SCHEDULE 10.12(a) EMPLOYMENT LITIGATION TRANSFERRED CLAIMS........................................... xiii
SCHEDULE 10.12(b) EMPLOYMENT LITIGATION JOINTLY DEFEND CLAIMS........................................ xiv
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EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT (this "Agreement") is entered into on
November 1, 1999, between Hewlett-Packard Company ("HP"), a Delaware
corporation, and Agilent Technologies, Inc. ("Agilent"), a Delaware corporation.
Capitalized terms used herein (other than the formal names of HP Plans (as
defined below) and related trusts of HP) and not otherwise defined, shall have
the respective meanings assigned to them in Article I hereof.
WHEREAS, the Board of Directors of HP has determined that it is in the best
interests of HP and its shareholders to separate HP's existing businesses into
two (2) independent businesses, HP and the Agilent Business;
WHEREAS, in furtherance of the foregoing, HP and Agilent have agreed to
enter into this Agreement to allocate between them assets, liabilities and
responsibilities with respect to certain employee compensation, benefit plans
and programs, and certain employment matters;
WHEREAS, the foreign subsidiaries of Agilent and HP, as applicable, have or
will enter into separate agreements to specify the terms under which HP and
Agilent agree to allocate between them all assets, liabilities and
responsibilities relating to, and arising from Foreign Plans and certain
employment matters ("Local Agreements"); and
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
Wherever used in this Agreement, the following terms shall have the
meanings indicated below, unless a different meaning is plainly required by the
context. The singular shall include the plural, unless the context indicates
otherwise. Headings of sections are used for convenience of reference only, and
in case of conflict, the text of this Agreement, rather than such headings,
shall control:
1.1 Affiliate. "Affiliate" means, with respect to HP, any entity in which
---------
HP holds a fifty percent (50%) or less ownership (as listed on Schedule 7.1(a)
of the Separation Agreement), and with respect to Agilent, any entity in which
Agilent holds a fifty percent (50%) or less ownership (as listed on Schedule
7.1(b) of the Separation Agreement).
1.2 Agilent. "Agilent" means Agilent Technologies, Inc., a Delaware
-------
corporation. In all such instances in which Agilent is referred to in this
Agreement, it shall also be deemed to include a reference to each member of the
Agilent Group, unless it specifically provides otherwise; Agilent
<PAGE>
shall be solely responsible to HP for ensuring that each member of the Agilent
Group complies with the applicable terms of this Agreement.
1.3 Agilent Business. "Agilent Business" means (a) the business and
----------------
operations of the business entities of HP currently known under the following
names, as described in the IPO Registration Statement and as such business and
operations will continue following the Separation Date: (i) the Test and
Measurement Organization, (ii) the Semiconductor Products Group, (iii) the
Chemical Analysis Group, (iv) the Healthcare Solutions Group, (v) a portion of
HP Labs, and (vi) any related infrastructure organizations, and (b) except as
otherwise expressly provided in the General Assignment and Assumption Agreement,
any terminated, divested, or discontinued businesses or operations that at the
time of termination, divestiture or discontinuation primarily related to the
Agilent Business as then conducted.
1.4 Agilent Employee. "Agilent Employee" means any individual who is: (a)
----------------
either actively employed by, or on leave of absence from, the Agilent Group on
the Payroll Date; (b) either actively employed by, or on leave of absence from,
the HP Group as either part of a work group or organization, or common support
function that, at any time after the Payroll Date and before the Distribution
Date, moves to the employ of the Agilent Group from the employ of the HP Group;
(c) an Agilent Terminated Employee; (d) employed by the Agilent Group; (e) any
other employee or group of employees designated as Agilent Employees (as of the
specified date) by HP and Agilent by mutual agreement; or (f) an alternate payee
under a QDRO, alternate recipient under a QMCSO, beneficiary, covered dependent,
or qualified beneficiary (as such term is defined under COBRA), in each case, of
an employee or former employee, described in Subsections 1.4(a) through (e) with
respect to that employee's or former employee's benefit under the applicable
Plan(s) (unless specified otherwise in this Agreement, such an alternate payee,
alternate recipient, beneficiary, covered dependent, or qualified beneficiary
shall not otherwise be considered an Agilent Employee with respect to any
benefits he or she accrues or accrued under any applicable Plan(s), unless he or
she is an Agilent Employee by virtue of Subsections 1.4(a) through (e)).
1.5 Agilent Group. "Agilent Group" means Agilent and each Subsidiary and
-------------
Affiliate of Agilent as of the Payroll Date, or that is contemplated to be a
Subsidiary or Affiliate of Agilent after the Payroll Date pursuant to the Non-
U.S. Plan other than any Subsidiary or Affiliate that is contemplated not to be
controlled by Agilent pursuant to the Non-U.S. Plan.
1.6 Agilent Master Trust. "Agilent Master Trust" is defined in Subsection
--------------------
3.1(b).
1.7 Agilent Stock Value. "Agilent Stock Value" means the opening per-share
-------------------
price of Agilent common stock as listed on the NYSE or Nasdaq, as applicable, on
the first trading day after the Distribution Date.
1.8 Agilent Terminated Employee. "Agilent Terminated Employee" means any
---------------------------
individual who is: (a) a former employee of the HP Group who was terminated from
the Agilent Business on or before the Payroll Date; or (b) a former employee of
the Agilent Group. Notwithstanding the foregoing, "Agilent Terminated Employee"
shall not, unless otherwise
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expressly provided to the contrary in this Agreement, include: (a) an individual
who is an HP Employee at the Distribution Date; or (b) an individual who is
otherwise an Agilent Terminated Employee, but who is subsequently employed by
the HP Group prior to the Distribution Date.
1.9 Agilent Transferred Employee. "Agilent Transferred Employee" means any
----------------------------
individual who, as of the Distribution Date, is: (a) either actively employed
by, or on a leave of absence from, the Agilent Group; (b) an Agilent Terminated
Employee; (c) an alternate payee under a QDRO, alternate recipient under a
QMCSO, beneficiary, covered dependent, or qualified beneficiary (as such term is
defined under COBRA), in each case, of an employee or former employee, described
in Subsection 1.9(a) or (b) with respect to that employee's or former employee's
benefit under the applicable Plan(s) (unless specified otherwise in this
Agreement, such an alternate payee, alternate recipient, beneficiary, covered
dependent, or qualified beneficiary shall not otherwise be considered an Agilent
Transferred Employee with respect to any benefits he or she accrues or accrued
under any applicable Plan(s), unless he or she is an Agilent Transferred
Employee by virtue of Subsection 1.9(a) or (b)); or (d) an employee or group of
employees designated by HP and Agilent, by mutual agreement, as Agilent
Transferred Employees. An employee may be an Agilent Transferred Employee
pursuant to this Section regardless of whether such employee is, as of the
Distribution Date, alive, actively employed, on a temporary leave of absence
from active employment, on layoff, terminated from employment, retired or on any
other type of employment or post-employment status relative to an HP Plan, and
regardless of whether, as of the Distribution Date, such employee is then
receiving any benefits from an HP Plan.
1.10 Agilent WCP Claims. "Agilent WCP Claims" is defined in Subsection
------------------
6.15(a)(i).
1.11 Agreement. "Agreement" means this Employee Matters Agreement,
---------
including all the Addendums, Schedules and Exhibits hereto, and all amendments
made hereto from time to time.
1.12 Ancillary Agreements. "Ancillary Agreements" means all of the
--------------------
underlying agreements, documents and instruments referred to, contemplated by,
or made a part of the Separation Agreement.
1.13 ASO Contracts. "ASO Contracts" is defined in Subsection 6.5(a) and the
-------------
Schedule 6.5(a).
1.14 Benefits Committee. "Benefits Committee" means the benefits committee
------------------
established pursuant to Section 2.6.
1.15 Cash Profit Sharing Program. "Cash Profit Sharing Program," when
---------------------------
immediately preceded by "HP," means the HP Cash Profit Sharing Program. When
immediately preceded by "Agilent," "Cash Profit Sharing Program" means the cash
profit sharing program to be established by Agilent pursuant to Sections 2.2 and
7.6 that corresponds to the HP Cash Profit Sharing Plan.
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1.16 COBRA. "COBRA" means the continuation coverage requirements for
-----
"group health plans" under Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended from time to time, and as codified in
Code Section 4980B and ERISA Sections 601 through 608.
1.17 Code. "Code" means the Internal Revenue Code of 1986, as amended from
----
time to time.
1.18 DCR Plan. "DCR Plan," when immediately preceded by "HP," means the HP
--------
Dependent Care Reimbursement Plan. When immediately preceded by "Agilent," "DCR
Plan" means the dependent care reimbursement plan to be established by Agilent
pursuant to Sections 2.2 and 6.10 that corresponds to the HP DCR Plan.
1.19 Distribution. "Distribution" means HP's pro rata distribution to the
------------
holders of its common stock, $0.01 par value, several months following the IPO,
of all the shares of Agilent common stock owned by HP.
1.20 Distribution Date. "Distribution Date" means the date that the
-----------------
Distribution is effective.
1.21 DOL. "DOL" means the United States Department of Labor.
---
1.22 DPSP. "DPSP," when immediately preceded by "HP," means the HP
----
Deferred Profit-Sharing Plan, a defined contribution plan. When immediately
preceded by "Agilent," "DPSP" means the profit-sharing plan to be established by
Agilent pursuant to Sections 2.2 and 4.2 and that corresponds to the HP DPSP.
1.23 DPSP Transfer Date. "DPSP Transfer Date" is defined in Subsection
------------------
4.2(e)(ii).
1.24 ERISA. "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
1.25 Excess Benefit Plan. "Excess Benefit Plan," when immediately preceded
-------------------
by "HP," means the HP Excess Benefit Retirement Plan. When immediately preceded
by "Agilent," "Excess Benefit Plan" means the non-qualified supplemental excess
benefit retirement plan to be established by Agilent pursuant to Sections 2.2
and 5.1 that corresponds to the HP Excess Benefit Plan.
1.26 Excluded Options. "Excluded Options" is defined in Section 7.2(b).
----------------
1.27 Executive Deferred Compensation Plan. "Executive Deferred
------------------------------------
Compensation Plan," when immediately preceded by "HP," means the HP Executive
Deferred Compensation Plan. When immediately preceded by "Agilent," "Executive
Deferred Compensation Plan" means the deferred compensation plan to be
established by Agilent pursuant to Sections 2.2 and 5.2 that corresponds to the
HP Executive Deferred Compensation Plan.
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1.28 Flexible Benefits Plan. "Flexible Benefits Plan," when immediately
----------------------
preceded by "HP," means the HP Premium Plan, the HP HCR Plan, and the HP DCR
Plan. When immediately preceded by "Agilent," Flexible Benefits Plan means the
Agilent Premium Plan, the Agilent HCR Plan, and the Agilent DCR Plan to be
established by Agilent pursuant to Sections 2.2 and 6.10 that correspond to the
respective HP Flexible Benefits Plan.
1.29 FMLA. "FMLA" means the Family and Medical Leave Act of 1993, as
----
amended from time to time.
1.30 Food Subsidy Programs. "Food Subsidy Programs" is defined in Section
---------------------
8.4.
1.31 Foreign Plan. "Foreign Plan," when immediately preceded by "HP,"
------------
means a Plan maintained by the HP Group for the benefit of its employees outside
the U.S. When immediately preceded by "Agilent," "Foreign Plan" means a Plan to
be established by Agilent for the benefit of its employees outside the U.S.
1.32 Fringe Benefits. "Fringe Benefits," when immediately preceded by "HP"
---------------
means the HP employee assistance program, the educational assistance program and
other fringe benefits, plans, programs and arrangements sponsored and maintained
by HP (as set forth in Article VIII and the Schedule attached thereto). When
immediately preceded by "Agilent," "Fringe Benefits" means the fringe benefits,
plans, programs and arrangements to be established by Agilent pursuant to
Section 2.2 and Article VIII that correspond to the respective HP Fringe
Benefits.
1.33 FTO. "FTO," when immediately preceded by "HP," means the HP Flexible
---
Time Off Policy. When immediately preceded by "Agilent," "FTO" means the Agilent
flexible time off policy to be established by Agilent pursuant to Sections 2.2
and 10.6 that corresponds to the HP FTO Policy.
1.34 General Assignment and Assumption Agreement. "General Assignment and
-------------------------------------------
Assumption Agreement" means the Ancillary Agreement which is Exhibit C to the
Separation Agreement.
1.35 Group Insurance Policies. "Group Insurance Policies" is defined in
------------------------
Subsection 6.5(b) and the Schedule thereto.
1.36 Group Trust. "Group Trust" is defined in Subsection 3.1(a).
-----------
1.37 GUL. "GUL," when immediately preceded by "HP," means the HP Group
---
Universal Life Insurance Program. When immediately preceded by "Agilent," "GUL"
means the group universal life insurance program to be established by Agilent
pursuant to Sections 2.2 and 6.7 that corresponds to the HP GUL.
1.38 HCFA. "HCFA" means the United States Health Care Financing
----
Administration.
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1.39 HCR Plan. "HCR Plan," when immediately preceded by "HP," means the HP
--------
Health Care Reimbursement Plan. When immediately preceded by "Agilent," "HCR
Plan" means the health care reimbursement plan to be established by Agilent
pursuant to Sections 2.2 and 6.10 that corresponds to the HP HCR Plan.
1.40 Health and Welfare Plans. "Health and Welfare Plans," when
------------------------
immediately preceded by "HP," means the HP Health Plans, the HP Flexible Benefit
Plan, and the health and welfare plans listed on Schedule 1.40 established and
maintained by HP for the benefit of employees and retirees of the HP Group, and
such other welfare plans or programs as may apply to such employees and retirees
as of the Distribution Date. When immediately preceded by "Agilent," "Health and
Welfare Plans" means the Agilent Health Plans, the Agilent Flexible Benefit
Plan, and the health and welfare plans to be established by Agilent pursuant to
Section 2.2 and Article VI that correspond to the respective HP Health and
Welfare Plans.
1.41 Health Plans. "Health Plans," when immediately preceded by "HP,"
------------
means the Medical Plan Option A, Medical Plan Option B, HMO, Regular Dental
Plan, Dental Plan II, Community Dental Network ("CDN") (available in San Diego,
California only), Continued Group Medical and SeniorMed Programs, and any
similar or successor plans, programs or arrangements. When immediately preceded
by "Agilent," "Health Plans" means the health plans, programs and arrangements
to be established by Agilent pursuant to Section 2.2 and Article VI that
correspond to the respective HP Health Plans.
1.42 HMO. "HMO" means a health maintenance organization that provides
---
benefits under the HP Health Plans or the Agilent Health Plans.
1.43 HMO Agreements. "HMO Agreements" is defined in Subsection 6.5(c) and
--------------
Schedule 6.5(c).
1.44 HP. "HP" means Hewlett-Packard Company, a Delaware corporation. In
--
all such instances in which HP is referred to in this Agreement, it shall also
be deemed to include a reference to each member of the HP Group, unless it
specifically provides otherwise; HP shall be solely responsible to Agilent for
ensuring that each member of the HP Group complies with the applicable terms of
this Agreement.
1.45 HP Employee. "HP Employee" means an individual who, on the
-----------
Distribution Date, is: (a) either actively employed by, or on leave of absence
from, the HP Group; (b) an HP Terminated Employee; or (c) an employee or group
of employees designated as HP Employees by HP and Agilent, by mutual agreement.
1.46 HP Group. "HP Group" means HP and each Subsidiary and Affiliate of HP
--------
(or any predecessor organization thereof).
1.47 HP GUL Transfer Date. "HP GUL Transfer Date" is defined in Subsection
--------------------
6.7(c)(iii).
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1.48 HP L-T Care Plan Transfer Date. "HP L-T Care Plan Transfer Date" is
------------------------------
defined in Subsection 6.6(b)(ii).
1.49 HP Master Trust. "HP Master Trust" is defined in Subsection 3.1(c).
---------------
1.50 HP Stock Value. "HP Stock Value" means the closing per-share price of
--------------
HP common stock as listed on the NYSE on the last trading day before the
Distribution Date.
1.51 HP Terminated Employee. "HP Terminated Employee" means any individual
----------------------
who is a former employee of the HP Group and who, on the Distribution Date, is
not an Agilent Transferred Employee.
1.52 HP WCP. "HP WCP" means the HP Workers' Compensation Program,
------
comprised of the various arrangements established by a member of the HP Group to
comply with the workers' compensation requirements of the states in which the HP
Group conducts business.
1.53 Income Protection Plan. "Income Protection Plan" or "IPP," when
----------------------
immediately preceded by "HP," means the HP Income Protection Plan for short-term
and long-term disabilities which is offered through the HP Employee Benefits
Organization Trust (or, where an employee works in a state that offers a
statutory state disability plan, then "Income Protection Plan" refers to the
alternative voluntary state disability plan offered under the Income Protection
Plan). When immediately preceded by "Agilent," "Income Protection Plan" or "IPP"
means the Income Protection Plan to be established by Agilent pursuant to
Section 2.2 and Article VI that corresponds to the HP IPP Plan.
1.54 IPO. "IPO" means the initial public offering of Agilent common stock
---
pursuant to a registration statement on Form S-1 pursuant to the Securities Act
of 1933, as amended.
1.55 IPO Closing Date. "IPO Closing Date" means the closing of the IPO
----------------
which is currently scheduled to occur prior to December 31, 1999.
1.56 IPO Registration Statement. "IPO Registration Statement" means the
--------------------------
registration statement on Form S-1 pursuant to the Securities Act of 1933 as
amended, to be filed with the SEC registering the shares of common stock of
Agilent to be issued in the IPO, together with all amendments thereto.
1.57 IRG. "IRG," when immediately preceded by "HP," means the HP
---
International Retirement Guaranty. When immediately preceded by "Agilent," "IRG"
means the international retirement guarantee program to be established by
Agilent pursuant to Sections 2.2 and 5.4.
1.58 IRS. "IRS" means the United States Internal Revenue Service.
---
1.59 L-T Care Plan. "L-T Care Plan," when immediately preceded by "HP,"
-------------
means the HP Group Long-Term Care Plan. When immediately preceded by "Agilent,"
"L-T Care Plan" means the
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group long-term care plan to be established by Agilent pursuant to Sections 2.2
and 6.6 that corresponds to the HP L-T Care Plan.
1.60 Leave of Absence Programs. "Leave of Absence Programs," when
-------------------------
immediately preceded by "HP," means the personal, medical, military and FMLA
leave offered from time to time under the personnel policies and practices of
HP. When immediately preceded by "Agilent," "Leave of Absence Programs" means
the leave of absence programs to be established by Agilent pursuant to Sections
2.2 and 6.13 that correspond to the respective HP Leave of Absence Programs.
1.61 Legally Permissible. "Legally Permissible" is defined in Subsection
-------------------
6.15(a)(iv).
1.62 Liabilities. "Liabilities" means all debts, liabilities, guarantees,
-----------
assurances, commitments, and obligations, whether fixed, contingent or absolute,
asserted or unasserted, matured or unmatured, liquidated or unliquidated,
accrued or not accrued, known or unknown, due or to become due, whenever or
however arising (including, without limitation, whether arising out of any
Contract or tort based on negligence or strict liability) and whether or not the
same would be required by generally accepted principles and accounting policies
to be reflected in financial statements or disclosed in the notes thereto.
"Contract" means any contract, agreement, lease, license, sales order, purchase
order, instrument or other commitment that is binding on any Person or any part
of its property under applicable law.
1.63 Local Agreement. "Local Agreement" is defined in Section 2.7.
---------------
1.64 Material Feature. "Material Feature" means any feature of a Plan that
----------------
could reasonably be expected to be of material importance to the sponsoring
employer or the participants (or their dependents or beneficiaries) (in the
aggregate) of that Plan, which could include, depending on the type and purpose
of the particular Plan, the class or classes of employees eligible to
participate in such Plan, the nature, type, form, source, and level of benefits
provided under such Plan and the amount or level of contributions, if any,
required to be made by participants (or their dependents or beneficiaries) to
such Plan.
1.65 Non-Qualified Plans. "Non-Qualified Plans" when immediately preceded
-------------------
by "HP," means the HP Excess Benefit Plan, the HP Executive Deferred
Compensation Plan, and the HP Officers Early Retirement Plan. When immediately
preceded by "Agilent," "Non-Qualified Plan" means the deferred compensation and
excess benefit plans, programs, or arrangements to be established by Agilent
pursuant to Section 2.2 and Article V.
1.66 Non-U.S. Plan. "Non-U.S. Plan" means the local transfer agreements,
-------------
assignments, assumptions, novations and other documents executed by the foreign
subsidiaries of HP and Agilent as shall be necessary to carry out the plan of
reorganization described in Exhibit M to the Separation Agreement to effect the
purposes of the Separation Agreement with respect to HP and Agilent's respective
operations outside the U.S.
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1.67 Option. "Option," when immediately preceded by "HP," means an option
------
to purchase HP common stock pursuant to a Stock Plan. When immediately preceded
by "Agilent," "Option" means an option to purchase Agilent common stock pursuant
to a Stock Plan.
1.68 Outsource. "Outsource" is defined in Subsections 6.3(b) and
---------
6.15(a)(iii) for purposes of each such respective section.
1.69 Participating Company. "Participating Company" means: (a) HP; (b) any
---------------------
Person (other than an individual) that HP has approved for participation in, has
accepted participation in, and which is participating in, a Plan sponsored by
HP; or (c) any Person (other than an individual) which, by the terms of such
Plan, participates in such Plan or any employees of which, by the terms of such
Plan, participate in or are covered by such Plan.
1.70 Payroll Date. "Payroll Date" means November 1, 1999, or such later
------------
date on which Agilent Employees are first added to Agilent's U.S. payroll.
1.71 PBGC. "PBGC" means the Pension Benefit Guaranty Corporation.
----
1.72 Person. "Person" means an individual, a partnership, a corporation, a
------
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, and a governmental entity or any
department, agency or political subdivision thereof.
1.73 Plan. "Plan," means any plan, policy, program, payroll practice,
----
arrangement, contract, trust, insurance policy, or any agreement or funding
vehicle providing compensation or benefits to employees, former employees or
directors of HP or Agilent.
1.74 Post-Employment Programs. "Post-Employment Programs," when
------------------------
immediately preceded by "HP," means the HP Continued Group Medical, HP
SeniorMed, and HP Retiree Life Programs that permit certain retirees and former
employees of the HP Group, and their eligible spouses, domestic partners, and
dependents to continue to receive coverage and benefits under certain HP Health
and Welfare Plans (other than dental plans) for a designated period of time.
When immediately preceded by "Agilent," "Post-Employment Programs" means such
continuation programs to be established by Agilent pursuant to Sections 2.2 and
6.14 that correspond to the HP Post-Employment Programs.
1.75 Premium Plan. "Premium Plan," when immediately preceded by "HP,"
------------
means the HP Medical/Dental Pre-Tax Premium Plan. When immediately preceded by
"Agilent," "Premium Plan" means the medical/dental pre-tax premium plan to be
established by Agilent pursuant to Sections 2.2 and 6.10 that corresponds to the
HP Premium Plan.
1.76 QDRO. "QDRO" means a domestic relations order which qualifies under
----
Code Section 414(p) and ERISA Section 206(d) and which creates or recognizes an
alternate payee's right to, or assigns to an alternate payee, all or a portion
of the benefits payable to a participant under any of the HP Retirement Plans.
-9-
<PAGE>
1.77 QMCSO. "QMCSO" means a medical child support order which qualifies
-----
under ERISA Section 609(a) and which creates or recognizes the existence of an
alternate recipient's right to, or assigns to an alternate recipient the right
to, receive benefits for which a participant or beneficiary is eligible under
any of the Health Plans.
1.78 Rabbi Trust. "Rabbi Trust," when immediately preceded by "HP," means
-----------
the rabbi trust established for purposes of holding assets under the HP
Executive Deferred Compensation Plan. When immediately preceded by "Agilent,"
"Rabbi Trust" means the grantor trust to be established by Agilent pursuant to
Section 5.2 that corresponds to the HP Rabbi Trust.
1.79 Ratio. "Ratio" means the ratio determined by dividing the Agilent
-----
Stock Value by the HP Stock Value.
1.80 Record Date. "Record Date" means the close of business on the date to
-----------
be determined by the Board of Directors of HP as the record date for determining
the stockholders of HP entitled to receive shares of common stock of Agilent in
the Distribution.
1.81 Redeployment/Alternate Offer Program. "Redeployment/Alternate Offer
------------------------------------
Program," when immediately preceded by "HP," means the HP Redeployment/Alternate
Offer Program. When immediately preceded by "Agilent," "Redeployment/Alternate
Offer Program" means the redeployment/alternate offer program to be established
by Agilent pursuant to Sections 2.2 and 6.11 that corresponds to the HP
Redeployment/Alternate Offer Program.
1.82 Restricted Stock. "Restricted Stock" when immediately preceded by
----------------
"HP," means shares of HP common stock that are subject to transfer restrictions
or to employment and/or performance vesting conditions, pursuant to an HP Stock
Plan. When immediately preceded by "Agilent," "Restricted Stock" means shares of
Agilent common stock that are subject to transfer restrictions or to employment
and/or performance vesting conditions, pursuant to an Agilent Stock Plan.
1.83 Retirement Plans. "Retirement Plans," when immediately preceded by
----------------
"HP," means the HP TAXCAP, the HP DPSP and the HP RP. When immediately preceded
by "Agilent," "Retirement Plans" means all defined contribution and defined
benefit plans to be established by Agilent pursuant to Section 2.2, and Articles
III and IV that correspond to the respective HP Retirement Plan.
1.84 RP. "RP," when immediately preceded by "HP," means the HP Retirement
--
Plan, a defined benefit plan. When immediately preceded by "Agilent," "RP" means
the defined benefit plan to be established by Agilent pursuant to Section 2.2
and Article III that corresponds to the HP RP.
1.85 RP Transfer Date. "RP Transfer Date" is defined in Subsection
----------------
3.2(b)(iv).
1.86 SEC. "SEC" means the United States Securities and Exchange
---
Commission.
-10-
<PAGE>
1.87 Separation. "Separation" means the contribution and transfer from HP
----------
to Agilent, and Agilent's receipt and assumption of, directly or indirectly,
substantially all of the assets and liabilities (as defined in Section 1.3 of
the General Assignment and Assumption Agreement) currently associated with the
Agilent Business and the stock, investments or similar interests currently held
by HP in subsidiaries and other entities that conduct such business.
1.88 Separation Agreement. "Separation Agreement" means the Master
--------------------
Separation and Distribution Agreement of which this is an Exhibit thereto.
1.89 Separation Date. "Separation Date" means the effective date and time
---------------
of each transfer of property, assumption of liability, license, undertaking, or
agreement in connection with the Separation which shall be 12:01 a.m., Pacific
Time, November 1, 1999, or such other date as may be fixed by the Board of
Directors of HP.
1.90 Stock Plan. "Stock Plan," when immediately preceded by "HP," means
----------
any plan, program or arrangement, other than the Stock Purchase Plan, pursuant
to which employees and other service providers hold Options, HP Restricted
Stock, or other HP equity incentives. When immediately preceded by "Agilent,"
"Stock Plan" means substantially similar plans, programs or arrangements to be
established by Agilent pursuant to Section 2.2 and Article VII.
1.91 Stock Purchase Plan. "Stock Purchase Plan," when immediately preceded
-------------------
by "HP," means the HP Employee Stock Purchase Plan. When immediately preceded by
"Agilent," "Stock Purchase Plan" means the employee stock purchase plan to be
established by Agilent pursuant to Sections 2.2 and 7.4 that corresponds to the
HP Stock Purchase Plan.
1.92 Subsidiary. "Subsidiary" means, with respect to any specified Person,
----------
any corporation, any limited liability company, any partnership or other legal
entity of which such Person or its Subsidiaries owns, directly or indirectly,
more than fifty percent (50%) of the stock or other equity interest entitled to
vote on the election of the members of the board of directors or similar
governing body. Unless the context otherwise requires, reference to HP and its
Subsidiaries shall not include the subsidiaries of HP that will be transferred
to Agilent after giving effect to the Separation, including the actions taken
pursuant to the Non-U.S. Plans.
1.93 Survivor Protection Plan. "Survivor Protection Plan," when
------------------------
immediately preceded by "HP," means the HP Accidental Death and Dismemberment
("AD&D") Plan, the HP LIFE Insurance Plan, the HP Retiree Survivor's Benefit
Plan, and any other similar or successor programs, plans or arrangements. When
immediately preceded by "Agilent," "Survivor Protection Plan" means the life
insurance programs, plans and arrangements to be established by Agilent pursuant
to Section 2.2 that correspond to the HP Survivor Protection Plan.
1.94 Tax Sharing Agreement. "Tax Sharing Agreement" means the Ancillary
---------------------
Agreement which is Exhibit F to the Separation Agreement.
-11-
<PAGE>
1.95 TAXCAP. "TAXCAP," when immediately preceded by "HP," means the HP Tax
------
Saving Capital Accumulation Plan, a stock bonus, defined contribution plan. When
immediately preceded by "Agilent," "TAXCAP" means the stock bonus, defined
contribution plan to be established by Agilent pursuant to Sections 2.2 and 4.1
that corresponds to the HP TAXCAP.
1.96 Transition Period. "Transition Period" means, for each designated
-----------------
Plan, the period beginning as of the Distribution Date and ending on the date
that no member of the Agilent Group is using HP benefit delivery and
administrative services with respect to that Plan.
1.97 Unemployment Insurance Program. "Unemployment Insurance Program,"
------------------------------
when immediately preceded by "HP," means the group unemployment insurance
policies purchased by HP from time to time. When immediately preceded by
"Agilent," "Unemployment Insurance Program" means any group unemployment
insurance policies to be established by Agilent pursuant to Section 10.10.
1.98 Variable Pay Plan. "Variable Pay Plan," when immediately preceded by
-----------------
"HP," means the HP Variable Pay Plan. When immediately preceded by "Agilent,"
"Variable Pay Plan" means the variable pay plan to be established by Agilent
pursuant to Sections 2.2 and 7.1 that corresponds to the HP Variable Pay Plan.
1.99 VEBA. "VEBA," when immediately preceded by "HP," means the HP
----
Employee Benefits Organization Trust which is intended to be a voluntary
employees' beneficiary association under Code Section 501(c)(9). When
immediately preceded by "Agilent," "VEBA" means any voluntary employees'
beneficiary association trust to be established by Agilent pursuant to Sections
2.2 and 6.1 that corresponds to the HP VEBA.
1.100 VEBA Transfer Date. "VEBA Transfer Date" is defined in Subsection
------------------
6.1(b)(ii).
1.101 Voluntary Severance Incentive Plan. "Voluntary Severance Incentive
----------------------------------
Plan" when immediately preceded by "HP," means the HP Voluntary Severance
Incentive Plan, an ERISA severance program. When immediately preceded by
"Agilent," "Voluntary Severance Incentive Plan" means the severance program to
be established by Agilent pursuant to Section 2.2.
-12-
<PAGE>
ARTICLE II
GENERAL PRINCIPLES
------------------
2.1 Assumption of Agilent Liabilities. Except as specified otherwise in
---------------------------------
this Agreement, or as mutually agreed upon by Agilent and HP from time to time,
Agilent hereby assumes and agrees to pay, perform, fulfill and discharge, in
accordance with their respective terms, all of the following: (a) all
Liabilities to or relating to Agilent Transferred Employees, in each case
relating to, arising out of or resulting from employment by the HP Group before
becoming Agilent Transferred Employees, respectively (including Liabilities
arising under or relating to HP Plans and Agilent Plans); (b) all other
Liabilities to or relating to Agilent Employees or Agilent Transferred
Employees, to the extent relating to, arising out of, or resulting from future,
present or former employment with the Agilent Group (including Liabilities
arising under or relating to HP Plans and Agilent Plans); (c) all Liabilities
relating to, arising out of or resulting from any other actual or alleged
employment relationship with the Agilent Group; and (d) all other Liabilities
relating to, arising out of, or resulting from obligations, liabilities and
responsibilities expressly assumed or retained by the Agilent Group, or an
Agilent Plan pursuant to this Agreement. Except as specified otherwise in this
Agreement or as otherwise mutually agreed upon by HP and Agilent from time to
time, HP shall transfer to Agilent amounts equal to trust assets, insurance
reserves, and other related assets as consistent with the applicable Plan
transition that arises out of or relates to Agilent's pro rata interest in each
HP Plan.
2.2 Establishment of Agilent Plans.
------------------------------
(a) VEBA/Health and Welfare Plans. Except as specified otherwise in
-----------------------------
this Agreement, effective as of the Distribution Date or such other date(s) as
HP and Agilent may mutually agree, Agilent shall adopt the Agilent VEBA and the
Agilent Health and Welfare Plans. The foregoing Agilent Plans as in effect as of
the Distribution Date shall be substantially identical in all Material Features
to the comparable HP Plans as in effect on the Distribution Date.
(b) Retirement Plans and Fringe Benefits. Except as specified
------------------------------------
otherwise in this Agreement, effective as of the Distribution Date or such other
date(s) as HP and Agilent may mutually agree, Agilent shall adopt the Agilent
Retirement Plans and the Agilent Fringe Benefits. The foregoing Agilent Plans as
in effect as of the Distribution Date shall be substantially identical in all
Material Features to the comparable HP Plans as in effect on the Distribution
Date.
(c) Equity and Other Compensation. Except as specified otherwise in
-----------------------------
this Agreement, effective on or before the Payroll Date or such other date(s) as
HP and Agilent may mutually agree, Agilent shall adopt the Agilent Stock Plans,
the Agilent Variable Pay Plan and the Agilent Cash Profit Sharing Program.
Effective on or before the IPO or such other date as HP and Agilent may mutually
agree, Agilent shall adopt the Agilent Stock Purchase Plan. The foregoing
Agilent Plans as in effect as of the Payroll Date (IPO in the case of the Stock
Purchase Plan) shall be
-13-
<PAGE>
substantially identical in all Material Features to the comparable HP Plans as
in effect on the Payroll Date (IPO in the case of the Stock Purchase Plan).
(d) Other Plans. Except as specified otherwise in this Agreement,
-----------
effective as of the Payroll Date or such other date(s) as HP and Agilent may
mutually agree, Agilent shall adopt such Plans that are directly associated with
Agilent's U.S. payroll system or as otherwise may be determined to be
appropriate, including, without limitation, the Agilent Executive Deferred
Compensation Plan and the Agilent Leave of Absence Programs. The foregoing
Agilent Plans as in effect as of the Payroll Date shall be substantially
identical in all Material Features to the comparable HP Plans as in effect on
the Payroll Date.
(e) Agilent Under No Obligation to Maintain Plans. Except as
---------------------------------------------
specified otherwise in this Agreement, nothing in this Agreement shall preclude
Agilent, at any time after the Distribution Date from amending, merging,
modifying, terminating, eliminating, reducing, or otherwise altering in any
respect any Agilent Plan, any benefit under any Agilent Plan or any trust,
insurance policy or funding vehicle related to any Agilent Plan (to the extent
permitted by law).
2.3 Agilent's Participation in HP Plans.
-----------------------------------
(a) Participation in HP Plans. Except as specified otherwise in this
-------------------------
Agreement, or as HP and Agilent may mutually agree, effective as of the Payroll
Date, Agilent shall become a Participating Company in the HP Plans in effect as
of the Payroll Date, to the extent that Agilent has not yet established a
comparable Plan. Effective as of any date on or after the Payroll Date and
before the Distribution Date (or such other date as HP or Agilent may mutually
agree upon), any member of the Agilent Group not described in the preceding
sentence may, at its request and with the consent of HP and Agilent, become a
Participating Company in any or all of the HP Plans, to the extent that Agilent
has not yet established a comparable Plan.
(b) HP's General Obligations as Plan Sponsor. To the extent that
----------------------------------------
Agilent is a Participating Company in any HP Plan(s), HP shall continue to
administer, or cause to be administered, in accordance with their terms and
applicable law, such HP Plan(s), and shall have the sole and absolute discretion
and authority to interpret the HP Plan(s), as set forth therein. HP shall not,
without first consulting with Agilent, amend any Material Feature of any HP Plan
in which Agilent is a Participating Company, except to the extent such amendment
would not affect any benefits of Agilent Employees or Agilent Transferred
Employees under such Plan or as may be necessary or appropriate to comply with
applicable law.
(c) Agilent's General Obligations as Participating Company. Agilent
------------------------------------------------------
shall perform with respect to its participation in the HP Plans, the duties of a
Participating Company as set forth in each such Plan or any procedures adopted
pursuant thereto, including (without limitation): (i) assisting in the
administration of claims, to the extent requested by the claims administrator of
the applicable HP Plan; (ii) cooperating fully with HP Plan auditors, benefit
personnel and benefit vendors; (iii) preserving the confidentiality of all
financial arrangements HP has or may have with any vendors, claims
administrators, trustees or any other entity or individual with whom HP has
-14-
<PAGE>
entered into an agreement relating to the HP Plans; and (iv) preserving the
confidentiality of participant information (including, without limitation,
health information in relation to FMLA leaves) to the extent not specified
otherwise in this Agreement.
(d) Termination of Participating Company Status. Except as otherwise
-------------------------------------------
may be mutually agreed upon by HP and Agilent, effective as of the Distribution
Date or such other date as Agilent establishes a comparable Plan (as specified
in Section 2.2 or otherwise in this Agreement), Agilent shall automatically
cease to be a Participating Company in the corresponding HP Plan.
2.4 Terms of Participation by Agilent Transferred Employees in Agilent
------------------------------------------------------------------
Plans
-----
(a) Non-Duplication of Benefits. As of the Distribution Date or such
---------------------------
later date that applies to the particular Agilent Plan established thereafter,
the Agilent Plans shall be, with respect to Agilent Transferred Employees, in
all respects the successors in interest to, and shall not provide benefits that
duplicate benefits provided by, the corresponding HP Plans. HP and Agilent shall
agree on methods and procedures, including amending the respective Plan
documents, to prevent Agilent Transferred Employees from receiving duplicate
benefits from the HP Plans and the Agilent Plans.
(b) Service Credit. Except as specified otherwise in this Agreement,
--------------
with respect to Agilent Transferred Employees, each Agilent Plan shall provide
that all service, all compensation and all other benefit-affecting
determinations that, as of the Distribution Date, were recognized under the
corresponding HP Plan shall, as of the Distribution Date, receive full
recognition and credit and be taken into account under such Agilent Plan to the
same extent as if such items occurred under such Agilent Plan, except to the
extent that duplication of benefits would result. Notwithstanding the foregoing,
HP and Agilent shall recognize service with either HP or Agilent that was
recognized as of the Distribution Date, except to the extent provided in
Subsection 2.4(a) above. The service crediting provisions shall be subject to
any respectively applicable "service bridging," "break in service," "employment
date," or "eligibility date" rules under the Agilent Plans and the HP Plans.
(c) Assumption of Liabilities. The provisions of this Agreement for
-------------------------
the transfer of assets relating to HP Plans to Agilent and/or the appropriate
Agilent Plans are based upon the understanding of the parties that Agilent
and/or the appropriate Agilent Plan will assume all Liabilities of the
corresponding HP Plan to or relating to Agilent Transferred Employees, as
provided for herein. If any such Liabilities are not effectively assumed by
Agilent and/or the appropriate Agilent Plan, then the amount of transferred
assets shall be recomputed accordingly, taking into account the retention of
such Liabilities by such HP Plan, and assets shall be transferred from Agilent
and/or the appropriate Agilent Plan to HP and/or the appropriate HP Plan so as
to place Agilent and/or the appropriate Agilent Plan in the position it would
have been in, had the initial asset transfer been made in accordance with such
recomputed amount of assets.
-15-
<PAGE>
2.5 Allocation of Costs and Expenses. Except as otherwise provided in this
--------------------------------
Agreement or in any underlying service level agreement between HP and Agilent
(as discussed in Section 9.1) relating to the Separation, the IPO, or the
Distribution, all costs and expenses of either party hereto in connection with
the IPO (excluding underwriting discounts and commissions) and the Distribution,
and certain costs and expenses of the parties hereto in connection with the
Separation, shall be paid by HP. Notwithstanding the foregoing, Agilent shall
pay any internal fees, costs and expenses incurred by Agilent in connection with
the Separation, the IPO and the Distribution.
2.6 Benefits Committee and Dispute Resolution. From the date of this
-----------------------------------------
Agreement through the later of the Distribution Date or the end of the
Transition Period, as applicable, the management of the Plans shall be conducted
under the supervision of the Benefits Committee. The Benefits Committee shall be
comprised of an equal number of representatives from HP and Agilent as appointed
by their respective Vice President, Human Resources, and shall provide strategic
oversight and direction of the cohesive administration of the Plans. Issues that
cannot be resolved by the Benefits Committee shall be decided, at the request of
either party, by the Agilent Vice President, Human Resources (or his or her
authorized delegate) and the HP Vice President, Human Resources (or his or her
authorized delegate). After the exhaustion of the process, as specified herein,
any outstanding issue shall be resolved in accordance with Section 5.9, entitled
"Dispute Resolution," of the Separation Agreement.
2.7 Foreign Plans. Agilent and HP each authorize their non-U.S.
-------------
subsidiaries to enter into separate local agreements with the counterpart of the
other party ("Local Agreements"). Agilent and HP intend that the Local
Agreements will generally specify the terms under which HP and Agilent agree to
allocate between them all assets, liabilities and responsibilities relating to,
and arising from Foreign Plans and certain employment matters. To the extent,
however, that any such Local Agreement does not address a particular principle
or plan, then the intent of the parties relating to comparable U.S. matters or
issues as reflected in this Agreement shall govern (to the extent permitted by
law).
-16-
<PAGE>
ARTICLE III
DEFINED BENEFIT PLAN
--------------------
3.1 Establishment of Group Trust and Master RP Trust
------------------------------------------------
(a) Group Trust. Prior to the Distribution Date, HP shall cause the
-----------
Master Trust Agreement pursuant to the HP DPSP and HP RP to qualify as a group
trust under IRS Revenue Ruling 81-100 (the "Group Trust").
(b) Agilent Master Trust. Effective as of the Distribution Date,
--------------------
Agilent shall establish, or cause to be established, a separate master trust
which is intended to be qualified under Code Section 401(a) and exempt from
taxation under Code Section 501(a)(1) (the "Agilent Master Trust"), to hold the
assets of the Agilent RP and the Agilent DPSP.
(c) HP Master Trust. Effective as of the Distribution Date, HP shall
---------------
establish, or cause to be established, a new separate master trust which is
intended to be qualified under Code Section 401(a) and exempt from taxation
under Code Section 501(a)(1) (the "HP Master Trust"), to hold the assets of the
HP RP and the HP DPSP.
(d) Share of Group Trust Assets. Effective as of the Distribution
---------------------------
Date, the HP Master Trust and the Agilent Master Trust each shall own a pro rata
share of the portion of the assets of the Group Trust attributable to the HP RP
and the Agilent RP, as described in Subsection 3.2(b) below. The assets shall
remain in the Group Trust until such later date or dates that one or both of the
HP RP and the Agilent RP request to transfer from the Group Trust of some or all
of their pro rata shares of such Group Trust assets to the respective HP Master
Trust and Agilent Master Trust.
(e) Investment Management of Group Trust Assets. Effective as of the
-------------------------------------------
Distribution Date, HP and Agilent shall establish procedures to jointly manage
and invest the assets of the HP Master Trust and the Agilent Master Trust held
in the Group Trust that are attributable to the HP RP and the Agilent RP. Such
procedures may include the management of some or all of the Group Trust Assets
by employees of HP or Agilent, or by outside investment managers.
3.2 Assumption of RP Liabilities and Allocation of Interests in the Group
---------------------------------------------------------------------
Trust
-----
(a) Assumption of Liabilities by Agilent RP. Effective as of the
---------------------------------------
Distribution Date, all accrued benefits of Agilent Transferred Employees under
the HP RP will be transferred to the Agilent RP. The Agilent RP shall assume and
be solely responsible for all Liabilities for or relating to the accrued
benefits of the Agilent Transferred Employees under the HP RP as of the
Distribution Date.
-17-
<PAGE>
(b) Asset Allocation and Transfers.
------------------------------
(i) As soon as reasonably practicable after the Distribution Date,
HP shall engage actuaries and cause to be determined for the HP RP: (A) the
total accrued benefit Liabilities as of the Distribution Date (without regard to
any benefit Liabilities funded through the Code Section 401(h) account in the HP
RP) for all participants in the HP RP, calculated on a projected benefit
obligation basis in accordance with Statement of Financial Accounting Standards
87 ("FAS 87"), and (B) the present value of all of the retiree health benefit
Liabilities that are funded in part through the Code Section 401(h) account
portion of the HP RP as of the Distribution Date, calculated on an accumulated
post-retirement benefit obligation basis in accordance with Statement of
Financial Accounting Standards 106 ("FAS 106"). The particular actuarial
assumptions that will be used to value the benefit Liabilities described in the
preceding sentence shall be generally consistent with the actuarial assumptions
used by HP in prior valuations for purposes of satisfying, respectively, its FAS
87 and FAS 106 reporting obligations, and shall be agreed to by HP and Agilent
prior to the Distribution Date .
(ii) The Agilent RP's share of the HP RP assets (other than those HP
RP assets attributable to the Code Section 401(h) account in the HP RP) shall be
equal to the percentage that the benefit Liabilities for the Agilent Transferred
Employees bears to the total benefit Liabilities determined under Subsection 3.2
(b)(i)(A) above.
(iii) The Agilent RP's share of the HP RP assets in the Code Section
401(h) account portion of the HP RP shall be equal to the percentage that the
retiree health benefit Liabilities for the Agilent Transferred Employees bears
to the total retiree health benefit Liabilities determined under Subsection
3.2(b)(i)(B) above.
(iv) As soon as reasonably practicable after the Distribution Date
(the "RP Transfer Date"), the proportions calculated in Subsection 3.2(b)(ii)
and (b)(iii) above of the respective retirement and 401(h) assets of the HP RP
valued as of the RP Transfer Date shall be transferred to the Agilent RP. In
this regard, no contributions shall be made by HP or Agilent to either the HP RP
or the Agilent RP between the Distribution Date and the RP Transfer Date.
3.3 No Distributions to Agilent Transferred Employees. The HP RP and the
-------------------------------------------------
Agilent RP shall provide that no distribution of retirement benefits shall be
made to any Agilent Transferred Employee on account of the Agilent Group ceasing
to be an Affiliate of the HP Group as of the Distribution Date.
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<PAGE>
ARTICLE IV
DEFINED CONTRIBUTION PLANS
--------------------------
4.1 TAXCAP
------
(a) TAXCAP Trust. Effective as of the Distribution Date, Agilent
------------
shall establish, or cause to be established, a separate trust, which is intended
to be qualified under Code Section 401(a), exempt from taxation under Code
Section 501(a)(1), and forming the Agilent TAXCAP.
(b) TAXCAP: Assumption of Liabilities and Transfer of Assets.
--------------------------------------------------------
Effective as of the Distribution Date: (i) the Agilent TAXCAP shall assume and
be solely responsible for all Liabilities for or relating to Agilent Transferred
Employees under the HP TAXCAP; and (ii) HP shall cause the accounts of the
Agilent Transferred Employees under the HP TAXCAP that are held by its related
trust as of the Distribution Date to be transferred to the Agilent TAXCAP and
its related trust, and Agilent shall cause such transferred accounts to be
accepted by such plan and its related trust. As soon as reasonably practicable
after the Distribution Date, Agilent shall use its commercially reasonable best
efforts to enter into agreements satisfactory to Agilent to accomplish such
assumption and transfer, the maintenance of the necessary participant records,
the appointment of Fidelity Management Trust Company as the initial trustee
under the Agilent TAXCAP, and the engagement of Fidelity Institutional
Retirement Services Company as the initial recordkeeper under the Agilent
TAXCAP. Agilent and HP each agree to use their commercially reasonable best
efforts to accomplish this spin-off.
(c) TAXCAP: Stock Bonus Plan Considerations. As a result of the
----------------------------------------
spin- off of the HP TAXCAP, both the resulting HP TAXCAP and Agilent TAXCAP
shall be comprised in part of HP and Agilent employer securities. Agilent and HP
shall assume sole responsibility for ensuring that their respective company
stock funds, and underlying employer securities held in each such fund, are
maintained in compliance with all requirements of the SEC including, without
limitation, filing Forms S-8 and 11-K, and the prospectus requirements for such
funds.
(d) No Distribution to Agilent Transferred Employees. The HP TAXCAP
------------------------------------------------
and the Agilent TAXCAP shall provide that no distribution of account balances
shall be made to any Agilent Transferred Employee on account of the Agilent
Group ceasing to be an Affiliate of the HP Group as of the Distribution Date.
-19-
<PAGE>
4.2 DPSP
----
(a) Agilent Master Trust. Effective as of the Distribution Date, the
--------------------
Agilent Master Trust established under Subsection 3.1(b) shall hold the assets
of the Agilent DPSP and the Agilent RP.
(b) Share Group Trust Assets. Effective as of the Distribution Date,
------------------------
the HP Master Trust and the Agilent Master Trust each shall own a pro rata share
of the portion of the assets of the Group Trust attributable to the HP DPSP and
the Agilent DPSP as described in Subsection 4.2(e) below. The assets shall
remain in the Group Trust until such later date or dates that one or both of the
HP DPSP and Agilent DPSP request a transfer from the Group Trust of some or all
of their pro rata shares of such Group Trust assets to the respective HP Master
Trust and Agilent Master Trust.
(c) Investment Management of Group Trust Assets. Effective as of the
-------------------------------------------
Distribution Date, HP and Agilent shall establish procedures to jointly manage
and invest the assets of the HP Master Trust and the Agilent Master Trust held
in the Group Trust that are attributable to the HP DPSP and the Agilent DPSP.
Such procedures may include the management of some or all of the Group Trust
assets by employees of HP or Agilent, or by outside investment managers.
(d) Assumption of Liabilities by Agilent DPSP. Effective as of the
-----------------------------------------
Distribution Date, all accrued benefits of the Agilent Transferred Employees
under the HP DPSP will be transferred to the Agilent DPSP. The Agilent DPSP
shall assume and be solely responsible for all Liabilities for or relating to
Agilent Transferred Employees under the HP DPSP as of the Distribution Date.
(e) Asset Allocation and Transfers.
------------------------------
(i) The Agilent DPSP assets shall be equal to the percentage
that the value of the accounts of Agilent Transferred Employees in the HP DPSP
bears to the total value of all participant accounts in the HP DPSP as of the
Distribution Date, adjusted to reflect the amounts of any HP DPSP and Agilent
DPSP benefit payments, if any, made to participants between the Distribution
Date and the DPSP Transfer Date described in Subsection 4.2(e)(ii) below.
(ii) As soon as reasonably practicable after the Distribution
Date (the "DPSP Transfer Date"), the percentage calculated in Subsection
4.2(e)(i) above of the assets of the HP DPSP valued as of the DPSP Transfer Date
shall be transferred to the Agilent DPSP.
(f) No Distribution to Agilent Transferred Employees. The HP DPSP and
------------------------------------------------
the Agilent DPSP shall provide that no distribution of account balances shall be
made to any Agilent Transferred Employee on account of the Agilent Group ceasing
to be an Affiliate of the HP Group as of the Distribution Date.
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<PAGE>
ARTICLE V
NON-QUALIFIED AND OTHER PLANS
-----------------------------
5.1 Excess Benefit Plan
-------------------
(a) Establishment of Agilent Excess Benefit Plan. Effective as of the
--------------------------------------------
Distribution Date, Agilent shall establish the Agilent Excess Benefit Plan which
shall be substantially identical in all Material Features to the HP Excess
Benefit Plan.
(b) Assumption of Liabilities by Agilent Excess Benefit Plan.
--------------------------------------------------------
Effective as of the Distribution Date, all accrued benefits of Agilent
Transferred Employees under the HP Excess Benefit Plan will be transferred to
the Agilent Excess Benefit Plan. The Agilent Excess Benefit Plan shall assume
and be solely responsible for all Liabilities for or relating to the accrued
benefits of the Agilent Transferred Employees under the HP Excess Benefit Plan
as of the Distribution Date. To the extent not attributable to accounts
maintained for the Agilent Transferred Employees under the HP Excess Benefit
Plan, such HP Excess Benefit Plan Liabilities shall be determined as described
in Subsection 3.2(b)(i)(A). Otherwise, such HP Excess Benefit Plan Liabilities
shall be equal to the value as of the Distribution Date of the accounts
maintained for the Agilent Transferred Employees under the HP Excess Benefit
Plan.
5.2 Executive Deferred Compensation Plan
------------------------------------
(a) Establishment of Agilent Rabbi Trust. Effective no later than
------------------------------------
the Payroll Date, Agilent shall establish the Agilent Executive Deferred
Compensation Plan and the Agilent Rabbi Trust.
(b) Allocation and Assumption of Liabilities. HP shall determine the
----------------------------------------
amount of Liabilities under the HP Executive Deferred Compensation Plan as of
the Payroll Date, attributable to Agilent Employees. As soon as administratively
practicable thereafter, HP shall pay to Agilent or to the trustee of the Agilent
Rabbi Trust, as Agilent specifies, an amount of HP's assets equal to such
Liabilities. Coincident with the receipt of such transfer of assets, Agilent
shall assume all responsibilities and obligations attributable to such
Liabilities.
(c) Participation in Executive Deferred Compensation Plans. Effective
------------------------------------------------------
as of the Payroll Date, eligible Agilent Employees shall become eligible to
commence participation in the Agilent Executive Deferred Compensation Plan.
Agilent Employees who are currently participating in the HP Executive Deferred
Compensation Plan shall continue their participation in that Plan (according to
its terms) to the Payroll Date.
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5.3 Officers Early Retirement Plan. HP shall continue to administer the
------------------------------
HP Officers Early Retirement Plan for Agilent Employees who are in periodic pay
status as of October 31, 1999. Agilent shall reimburse HP for any and all costs
and expenses relating to such distributions and the related administration.
5.4 IRG. Agilent shall assume and be solely responsible for all
---
Liabilities for, or relating to, or arising from, the IRG of Agilent Employees
and Agilent Transferred Employees under the HP IRG. Whichever of HP or Agilent
pays such IRG benefit shall be entitled to reimbursement from the other based on
the applicable portion of such IRG benefit attributable to that individual's
employment with the other. HP and Agilent agree to cooperate with the other to
calculate such IRG benefits.
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ARTICLE VI
HEALTH AND WELFARE PLANS
------------------------
6.1 VEBA Asset Transfers.
--------------------
(a) Calculation of Liabilities and Reserves. This Section 6.1 shall
---------------------------------------
govern the transfer of assets from the HP VEBA to the Agilent VEBA. As soon as
reasonably practicable after the Distribution Date, HP shall engage actuaries
and cause to be determined for the HP VEBA the total benefit Liabilities as of
the Distribution Date for all participants in the following plans: (i) the HP
VEBA Income Protection Plan, using the actuarial assumptions set forth in
Schedule 6.1(a)(i); and (ii) the HP VEBA Survivor Protection Plan, using the
actuarial assumptions set forth in Schedule 6.1(a)(ii). As soon as reasonably
practicable after the Distribution Date, HP shall determine the total reserves
for the HP VEBA Voluntary Severance Incentive Plan as of the Distribution Date,
which shall be equal to the total of the maximum permissible reserves calculated
separately for the HP Employees and the Agilent Transferred Employees as of the
Distribution Date using the rules in Code Section 419A.
(b) Asset Allocations and Transfers.
-------------------------------
(i) The Agilent VEBA's share of the HP VEBA assets that are allocated
within the HP VEBA to each of the Plans described below shall be determined as
follows: (A) for the portions of the HP Health Plans funded through the HP VEBA,
assets equal to the percentage that the number of Agilent Employees (solely for
this purpose, defined as any individual who is either actively employed by, or
on any leave of absence from, the Agilent Group on the Distribution Date)
participating in, respectively, the medical (excluding HMO) and the dental
portions of the HP Health Plans funded through the HP VEBA bears to the total
number of participants in, respectively, the medical (excluding HMO) and the
dental portions of the HP Health Plans funded through the HP VEBA as of the
Distribution Date; (B) for the HP VEBA Income Protection Plan, assets equal to
the percentage that the benefit Liabilities for the Agilent Transferred
Employees on long-term disability bears to the total benefit Liabilities of all
of the participants on long-term disability in such Plan as of the Distribution
Date determined under Subsection 6.1(a) above; (C) for the HP VEBA Survivor
Protection Plan, assets equal to the percentage that the benefit Liabilities for
the Agilent Transferred Employees in, respectively, the active employee and
retiree life insurance portions of the HP VEBA Survivor Protection Plan bears to
the total benefit Liabilities of all of the participants in, respectively, the
active employee and retire life insurance portions of such Plan as of the
Distribution Date determined under Subsection 6.1(a) above; and (D) for the HP
VEBA Voluntary Severance Incentive Plan, assets equal to the percentage that the
reserves allocated to Agilent Transferred Employees bears to the total reserves
as of the Distribution Date determined under Subsection 6.1(a) above.
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(ii) As soon as reasonably practicable after the Distribution Date
(the "VEBA Transfer Date"), the proportions calculated in Subsection 6.1(b)(i)
above of the assets allocated within the HP VEBA to each of the Plans described
in Subsection 6.1(b)(i) above valued as of the VEBA Transfer Date shall be
transferred to accounts within the Agilent VEBA maintained for the corresponding
Agilent Plans.
6.2 Assumption of Health and Welfare Plan Liabilities.
-------------------------------------------------
(a) General. Except as specified otherwise in this Agreement, as of
-------
the Distribution Date, all Liabilities for or relating to Agilent Transferred
Employees under the HP Health and Welfare Plans shall cease to be Liabilities of
the HP Health and Welfare Plans and shall be assumed by the corresponding
Agilent Health and Welfare Plans.
(b) Pending Treatments. Notwithstanding Subsection 6.2(a) above, all
------------------
treatments which have been pre-certified for or are being provided to an Agilent
Transferred Employee as of the Distribution Date shall be provided without
interruption under the appropriate HP Health and Welfare Plan until such
treatment is concluded or discontinued pursuant to applicable Plan rules and
limitations, but Agilent shall continue to be responsible for all Liabilities
relating to, arising out of, or resulting from such on-going treatments as of
the Distribution Date.
(c) Pending Commitments. Agilent shall assume, effective as of the
-------------------
Distribution Date, all Liabilities relating to, arising out of or resulting from
special commitments made by HP before the Distribution Date to provide benefits
to or with respect to Agilent Transferred Employees for care or services not
covered by any HP Health and Welfare Plans, but only if such special commitments
were made with prior written consent of the Agilent Vice President, Human
Resources or his or her authorized delegate, to the extent such commitments are
made after the Separation Date. Before the Distribution Date, HP shall transfer
to Agilent copies of all documentation, and a complete written description, of
the terms of all such special commitments to Agilent Transferred Employees.
6.3 Claims for Health and Welfare Plans.
-----------------------------------
(a) Administration of HP Claims. HP shall administer claims incurred
---------------------------
under the HP Health and Welfare Plans by Agilent Employees before the
Distribution Date but only to the extent that Agilent has not, before the
Distribution Date, established and assumed administrative responsibility for a
comparable Plan. Any determination made or settlements entered into by HP with
respect to such claims shall be final and binding. HP shall transfer to Agilent,
effective as of the Distribution Date, responsibility for administering all
claims incurred by Agilent Transferred Employees before the Distribution Date
(including any claims that were administered by HP as of, on, or after the
Distribution Date). Agilent shall administer such claims in a substantially
similar manner, using substantially similar methods and procedures, as HP used
in administering such claims. Agilent shall have sole and absolute discretionary
authority to make any necessary determinations with respect to such claims,
including entering into settlements with respect to such claims.
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(b) Outsourcing of Claims by HP. HP shall have the right to engage a
---------------------------
third party administrator, vendor, or insurance company to administer
("Outsource") claims incurred under the HP Health and Welfare Plans, including
claims incurred by Agilent Employees and Agilent Transferred Employees before
the Distribution Date. HP may determine the manner and extent of such
Outsourcing, including the selection of one or more third party administrators,
vendors, or insurance companies and the ability to transfer the liability for
such claims to one or more independent insurance companies. HP has Outsourced
administration of many HP Health and Welfare Plans, as set forth in Section 6.5
and the Schedule thereto. To the extent not otherwise set forth in Section 6.5
and the Schedule thereto, HP shall promptly notify Agilent of its intent to
further Outsource such claims, and the material terms and conditions of the
Outsourcing, before the effective date thereof.
(c) Outsourcing of Claims by Agilent. HP shall use its commercially
--------------------------------
reasonable best efforts for and on behalf of Agilent to procure Outsourcing
arrangements with its third party administrators, vendors, or insurance
companies with the Material Features of each of HP's current Outsourcing
arrangements. Agilent agrees, as of the Distribution Date or such other date as
Agilent and HP may mutually agree upon, to Outsource claims under the Agilent
Health and Welfare Plans pursuant to arrangements procured by HP.
6.4 Post-Distribution Transitional Arrangements.
-------------------------------------------
(a) Continuance of Elections, Co-Payments and Maximum Benefits.
----------------------------------------------------------
(i) As of the Distribution Date or such other date as HP and Agilent
may mutually agree, Agilent shall cause the Agilent Health and Welfare Plans to
recognize and maintain all coverage and contribution elections made by Agilent
Employees and Agilent Transferred Employees under the HP Health and Welfare
Plans and apply such elections under the Agilent Health and Welfare Plans for
the remainder of the period or periods for which such elections are by their
terms applicable. The transfer or other movement of employment between HP to
Agilent at any time upon or before the Distribution Date shall neither
constitute nor be treated as a "status change" or termination of employment
under the HP Health and Welfare Plans or the Agilent Health and Welfare Plans.
(ii) On and after the Distribution Date, Agilent shall cause the
Agilent Health Plans to recognize and give credit for (A) all amounts applied to
deductibles, out-of-pocket maximums, co-payments and other applicable benefit
coverage limits with respect to which such expenses have been incurred by
Agilent Transferred Employees under the HP Health Plans for the remainder of the
calendar year in which the Distribution Date occurs, and (B) all benefits paid
to Agilent Transferred Employees under the HP Health Plans for purposes of
determining when such persons have reached their lifetime maximum benefits under
the Agilent Health Plans.
(b) HCFA Administration. As of the Distribution Date, Agilent shall assume
-------------------
all Liabilities relating to, arising out of or resulting from claims verified by
HP or Agilent under the HCFA data match reports that relate to Agilent
Transferred Employees.
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6.5 Vendor Arrangements. HP shall use its commercially reasonable best
-------------------
efforts for and on behalf of Agilent to procure, effective as of the
Distribution Date or such other date as HP and Agilent mutually agree upon: (a)
third party ASO Contracts with the Material Features of the ASO Contracts
entered into by HP, as set forth in Schedule 6.5(a) (the "ASO Contracts); (b)
Group Insurance Policies, with the Material Features of the Group Insurance
Policies entered into by HP, as set forth in Schedule 6.5(b) (the "Group
Insurance Policies"); and (c) HMO Agreements with the Material Features of the
HMO Agreements entered into by HP, as set forth in Schedule 6.5(c) (the "HMO
Agreements"). In each case, Agilent shall, as of the Distribution Date or such
other date as HP and Agilent mutually agree upon, establish, adopt and/or
implement such contracts, agreements or arrangements.
6.6 Group Long-Term Care Plan Asset Transfer.
----------------------------------------
(a) Calculation of Liabilities. This Section shall govern the
--------------------------
transfer of assets from the trust fund for the HP L-T Care Plan to a trust fund
for the Agilent L-T Care Plan that will be established by Agilent as of the
Distribution Date or such other date as HP and Agilent may mutually agree. As
soon as reasonably practicable after the Distribution Date, HP shall engage
actuaries and cause to be determined for the HP L-T Care Plan the total benefit
Liabilities for all participants in such Plan as of the Distribution Date using
the assumptions set forth in Schedule 6.6(a).
(b) Asset Allocation and Transfer.
-----------------------------
(i) The Agilent L-T Care Plan's share of the HP L-T Care Plan
assets shall be equal to the percentage that the benefit Liabilities for the
Agilent Transferred Employees bears to the total benefit Liabilities of all
participants in the HP L-T Care Plan determined under Subsection 6.6(a) above.
(ii) As soon as reasonably practicable after the Distribution
Date or such other date as HP and Agilent may mutually agree (the "HP L-T Care
Plan Transfer Date"), the proportion calculated in Subsection 6.6(b)(i) above of
the assets of the HP L-T Care Plan valued as of the HP L-T Care Plan Transfer
Date shall be transferred to the Agilent L-T Care Plan.
6.7 Group Universal Life: Group Universal Life Insurance Program Cash
----------------------------------------------------------------------
Value and Reserve Transfers.
- -----------------------------
(a) General. This Section shall govern the transfer of certain cash
-------
values and of a portion of the premium stabilization reserve from the insurance
contract maintained for the HP GUL to an insurance contract for the Agilent GUL
that will be established by Agilent as of the Distribution Date or such other
date as HP and Agilent may mutually agree.
(b) Calculation of Liabilities. As soon as reasonably practicable
--------------------------
after the Distribution Date, the HP GUL program administrator (currently Kirke
Van Orsdel, a division of Seabury & Smith, Inc.) shall determine actuarially the
total HP GUL benefit Liabilities for all
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<PAGE>
participants in the HP GUL as of the Distribution Date. Such actuarial
determination shall be made using actuarial and other assumptions proposed by
the HP GUL program administrator that have been agreed to by HP and Agilent
prior to the Distribution Date.
(c) Allocations and Transfers.
-------------------------
(i) The Agilent GUL cash values shall be equal to the total of
the cash values allocated to the accounts of the Agilent Transferred Employees
under the HP GUL as of the HP GUL Transfer Date as defined in Subsection
6.7(c)(iii) below.
(ii) The Agilent GUL's share of the HP GUL premium
stabilization reserve shall be equal to the percentage that the benefit
Liabilities for the Agilent Transferred Employees bears to the total benefit
Liabilities of all of the participants in the HP GUL determined under Subsection
6.7(b) above.
(iii) As soon as reasonably practicable after the Distribution
Date or such other date as HP and Agilent may mutually agree (the "HP GUL
Transfer Date"), the cash values described in Subsection 6.7(c)(i) above, and
the proportion calculated in Subsection 6.7(c)(ii) above of the amount of the HP
GUL premium stabilization reserve valued as of the HP GUL Transfer Date, shall
be transferred to the Agilent GUL.
6.8 IPP/State Voluntary Disability Plans. Effective on the Payroll Date,
------------------------------------
Agilent shall adopt state voluntary disability plans for California, New York
and New Jersey which are substantially identical in all Material Features to the
HP state voluntary disability plan for each such respective state. Each such
state voluntary disability plan shall be a component program under the HP Income
Protection Plan.
6.9 Business Travel Accident Insurance. Through the Distribution Date,
----------------------------------
Agilent shall remain a Participating Company in the HP business travel accident
insurance policy. HP shall be responsible for administering or causing to be
administered the HP business travel accident insurance policy with respect to
Agilent Employees. Agilent shall reimburse HP for any and all direct and
indirect expenses and costs attributable to Agilent Employees. HP shall use its
commercially reasonable best efforts for and on behalf of Agilent to procure a
business travel accident insurance policy with the Material Features of the HP
business travel accident policy, effective as of the Distribution Date or such
other date as HP and Agilent mutually agree upon. Accordingly, effective as of
the Distribution Date, Agilent shall be solely responsible for maintaining its
own business travel accident insurance policy.
6.10 Flexible Benefits Plan. Through December 31, 1999, Agilent and
----------------------
designated members of the Agilent Group shall remain Participating Companies in
the HP Flexible Benefits Plan. The existing elections for Agilent Employees
shall remain in effect through December 31, 1999. HP shall be responsible for
administering, or causing to be administered, the HP Flexible Benefits Plan for
Agilent Employees through December 31, 1999. Agilent shall reimburse HP for any
and all direct and indirect expenses and costs attributable to Agilent
Employees. Effective on
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January 1, 2000, Agilent shall establish, or caused to
be established, the Agilent Flexible Benefits Plan and shall be solely
responsible for implementing and maintaining the Agilent Flexible Benefits Plan.
6.11 Redeployment/Alternate Offer Program. Through the Payroll Date, HP
------------------------------------
shall be responsible for administering the Redeployment/Alternate Offer Program
with respect to Agilent Employees. HP and Agilent shall mutually agree on which
affected employees will be offered to participate in the Redeployment/Alternate
Offer Program. Agilent shall be responsible for providing HP with all the
necessary information regarding Agilent Employees and Agilent Terminated
Employees to the extent such employees are eligible for the
Redeployment/Alternate Offer Program. Agilent shall reimburse HP for any and all
direct and indirect expenses and costs attributable to Agilent Employees.
Effective as of the Payroll Date, Agilent shall assume all outstanding
commitments related to the HP Redeployment/Alternate Offer Program and after
such date Agilent shall be solely responsible for implementing and maintaining
its own Redeployment/Alternate Offer Program.
6.12 COBRA. HP shall be responsible through the Distribution Date, for
-----
compliance with the health care continuation coverage requirements of COBRA and
the HP Health and Welfare Plans with respect to Agilent Employees and qualified
beneficiaries (as such term is defined under COBRA). Agilent shall be
responsible for providing HP with all necessary employee change notices and
related information for covered dependents, spouses, qualified beneficiaries (as
such term is defined under COBRA), and alternate recipients pursuant to QMCSO,
in accordance with applicable HP COBRA policies and procedures. As soon as
administratively practicable after the Distribution Date, HP shall provide
Agilent, through hard copy, electronic format or such other mechanism as is
appropriate under the circumstances, with a list of all qualified beneficiaries
(as such term is defined under COBRA) that relate to the Agilent Group and the
relevant information pertaining to their coverage elections and remaining COBRA
time periods. Effective as of the Distribution Date, Agilent shall be solely
responsible for compliance with the health care continuation coverage
requirements of COBRA and the Agilent Health and Welfare Plans for Agilent
Transferred Employees and their qualified beneficiaries (as such term is defined
under COBRA).
6.13 Leave of Absence Programs and FMLA.
----------------------------------
(a) Allocation of Responsibilities After Payroll Date. Effective as
-------------------------------------------------
of the Payroll Date: (i) Agilent shall adopt Leave of Absence Programs which are
substantially identical in all Material Features to the HP Leave of Absence
Programs as in effect on the Payroll Date; (ii) Agilent shall honor all terms
and conditions of leaves of absence which have been granted to any Agilent
Employee under an HP Leave of Absence Program or FMLA before the Payroll Date by
HP, including such leaves that are to commence after the Payroll Date; (iii)
Agilent shall be solely responsible for administering leaves of absence and
complying with FMLA with respect to Agilent Employees and Agilent Transferred
Employees; and (iv) Agilent shall recognize all periods of service of Agilent
Employees and Agilent Transferred Employees with the HP Group, as applicable, to
the extent such service is recognized by the HP Group for the purpose of
eligibility for leave
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<PAGE>
entitlement under the HP Leave of Absence Programs and FMLA; provided, however,
that no duplication of benefits shall, to the extent permitted by law, be
required by the foregoing.
(b) Disclosure. As soon as administratively practicable after the
----------
Payroll Date, HP shall provide to Agilent copies of all records pertaining to
the HP Leave of Absence Programs and FMLA with respect to all Agilent Employees
and Agilent Transferred Employees to the extent such records have not been
previously provided.
6.14 Post-Employment Programs. As soon as administratively practicable
------------------------
after the Distribution Date, HP shall provide Agilent, though hard copy,
electronic format or such other mechanism as is appropriate under the
circumstances, with a list detailing all Agilent Transferred Employees who are,
to the best knowledge of HP, eligible to participate in the HP Post-Employment
Programs as of the Distribution Date, and the type coverage and level of
coverage for which they are eligible, as applicable. Effective as of the
Distribution Date, Agilent shall be solely responsible for the Agilent Post-
Employment Programs for Agilent Transferred Employees.
6.15 HP Workers' Compensation Program.
--------------------------------
(a) Administration of Claims.
------------------------
(i) Through the Payroll Date or such other date as HP and
Agilent may mutually agree, HP shall continue to be responsible for the
administration of all claims that (A) are, or have been, incurred under the HP
WCP before the Payroll Date by Agilent Employees ("Agilent WCP Claims"), and (B)
have been historically administered by HP or its third party administrator.
(ii) Effective as of the Payroll Date or such other date as HP
and Agilent may mutually agree: (A) Agilent shall, to the extent Legally
Permissible (as defined in Subsection 6.15(a)(iv) below), be responsible for the
administration of all Agilent WCP Claims, and (B) HP shall be responsible for
the administration of all Agilent WCP Claims not administered by Agilent
pursuant to clause (A), regardless of whether it is under the self-insured or
insured portion of the HP WCP. Any determination made, or settlement entered
into, by or on behalf of either party or its insurance company with respect to
Agilent WCP Claims for which it is administratively responsible shall be final
and binding upon the other party. Agilent shall reimburse HP for any and all
direct and indirect costs and expenses related thereto.
(iii) Each party shall fully cooperate with the other with
respect to the administration and reporting of Agilent WCP Claims, the payment
of Agilent WCP Claims determined to be payable, and the transfer of the
administration of any Agilent WCP Claims to the other party as determined under
Subsection 6.15(a)(ii) above. Either party shall have the right to "Outsource"
(i.e., transfer the administration of claims to a third party administrator or
cause claims to be paid through insurance) any and all Agilent WCP Claims for
which it is administratively responsible. HP has Outsourced administration of
many Agilent WCP claims, as set forth in the relevant portion of Schedule
6.5(a). To the extent not otherwise set forth in Schedule 6.5(a), HP shall
promptly notify Agilent of its intent to further Outsource such WCP Claims, and
the material
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<PAGE>
terms and conditions of the Outsourcing before the effective date thereof. HP
shall use its commercially reasonably best efforts for and on behalf of Agilent
to procure Outsourcing arrangements with its third party administrators,
vendors, or insurance companies with the Material Features of each of HP's
current Outsourcing arrangements. Agilent agrees, as of the Payroll Date, or
such other date as Agilent and HP may mutually agree, to Outsource Agilent WCP
Claims pursuant to arrangements procured by HP.
(iv) For purposes of this Subsection 6.15(a), "Legally Permissible"
shall be determined on a state-by-state basis, and shall mean that
administration of Agilent WCP Claims by Agilent both (A) is permissible under
the applicable state's workers' compensation laws (taking into account all
relevant facts, including that Agilent may have a self-insurance certificate in
that state), and (B) would not have a material adverse effect on HP's self-
insurance certificate within that state. If it is determined that, in a
particular state, it is Legally Permissible for Agilent to administer Agilent
WCP Claims, then Agilent shall be responsible for the administration of all
Agilent WCP Claims incurred in that state, whether previously administered by or
on behalf of HP. If it is determined that, in a particular state, it is not
Legally Permissible for Agilent to administer Agilent WCP Claims, then HP shall
be responsible for the administration of all Agilent WCP Claims incurred in that
state, whether previously administered by or on behalf of HP.
(b) Self-Insurance Status.
---------------------
(i) HP shall amend its certificates of self-insurance with respect to
workers' compensation and any other applicable policies to include Agilent until
the Distribution Date, and Agilent shall fully cooperate with HP in obtaining
such amendments. HP shall use its commercially reasonable best efforts to obtain
self-insurance status for workers' compensation for Agilent effective as of the
Distribution Date in those jurisdictions in which Agilent conducts business, in
which HP is self-insured, and where HP and Agilent mutually agree that such
status is beneficial to Agilent. Agilent hereby authorizes HP to take all
actions necessary and appropriate on its behalf in order to obtain such self-
insurance status. All costs incurred by HP in amending such certificates,
including without limitation filing fees, adjustments of security and excess
loss policies and amendments of safety programs, shall be shared pro rata by HP
and Agilent.
(ii) HP shall also arrange a contingent insured or other arrangement
for payment of workers' compensation claims, into which Agilent shall enter if
and to the extent that HP fails to obtain self-insured status for Agilent as
provided in Subsection 6.15(b)(i) above, unless Agilent obtains another such
arrangement that is effective as of the Distribution Date, in which event
Agilent shall reimburse HP for any costs and expenses incurred by HP in
procuring such contingent arrangement.
(c) Insurance Policy.
----------------
(i) Effective as of the Payroll Date, in all states other than those
states where Agilent is to be self-insured pursuant to Subsection 6.15(b) above,
HP shall use its commercially reasonable best efforts to procure workers'
compensation insurance policies on behalf
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<PAGE>
of Agilent from the issuing insurance companies (as set forth in the relevant
portion of Schedule 6.5(b)) or different insurance companies which are
substantially identical in all Material Features to the policies previously
maintained by HP; provided that the retention under such Agilent policies shall
be as determined by Agilent.
(ii) HP shall use its commercially reasonable best efforts to maintain
the premium rates for all workers' compensation insurance policies for both HP
and Agilent in effect for periods through the Distribution Date to be based on
the aggregate number of employees covered under the workers' compensation
insurance policies of both HP and Agilent. Any premiums due under the separate
workers' compensation insurance issued to Agilent shall be payable by Agilent.
(d) Assumption of WCP Liabilities by Agilent. Effective as of the Payroll
----------------------------------------
Date, Agilent shall assume and be solely responsible for all Liabilities for or
relating to Agilent WCP Claims. Such Liabilities shall be determined and
allocated as established in Schedule 6.15(d).
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ARTICLE VII
EQUITY AND OTHER COMPENSATION
-----------------------------
7.1 HP Variable Pay Plan. Employees of the Agilent Business (including,
--------------------
for this purpose, any employees of HP who are designated as employees of the
Agilent Business for purposes of the Separation) shall cease their participation
in the HP Variable Pay Plan effective November 1, 1999. Effective as of the
Payroll Date, Agilent shall establish a replacement Agilent Variable Pay Plan
for Agilent Employees and Agilent Transferred Employees for Agilent fiscal
period(s) beginning on and after November 1, 1999 to be administered by the
Compensation Committee of the Agilent Board of Directors in accordance with Code
Section 162(m).
7.2 HP Options and Stock Appreciation Rights.
----------------------------------------
(a) Option Assumption by Agilent. At the Distribution Date, each
----------------------------
outstanding HP Option held by Agilent Transferred Employees, whether vested or
unvested, other than Excluded Options (as defined in Subsection 7.2(b) below,
together with any HP Options held by members of the Agilent Board of Directors
with respect to which an assumption election (pursuant to Subsection 7.2(b)
below) has been made, shall be, in connection with the Distribution, assumed by
Agilent. Each HP Option so assumed by Agilent shall continue to have, and be
subject to, the same terms and conditions set forth in the Stock Plans and as
provided in the respective option agreements governing such HP Option as of the
Distribution Date, except that (i) such HP Option shall be exercisable for that
number of whole shares of Agilent common stock equal to the quotient of the
number of shares of HP common stock that were issuable upon exercise of such HP
Option as of the Distribution Date divided by the Ratio, rounded down to the
nearest whole number of shares of Agilent common stock, and (ii) the per share
exercise price for the shares of Agilent common stock issuable upon exercise of
such assumed HP Option shall be equal to the product determined by multiplying
the exercise price per share of HP common stock at which such HP Option was
exercisable as of the Distribution Date by the Ratio, rounded up to the nearest
whole cent.
(b) Excluded Options. Before the Distribution Date, HP shall offer to
----------------
Agilent Employees who hold HP Options that were granted before February 12,
1999, the opportunity to amend such HP Options so as to (i) waive the
accelerated vesting and option cancellation that would otherwise occur under the
HP Stock Plans in connection with the Distribution, and (ii) allow for the
assumption of such HP Options by Agilent in accordance with Subsection 7.2(a)
above. To the extent such Option holders do not agree to such amendment of their
HP Options, such HP Options, together with HP Options held by Agilent Employees
who retire from the HP Group (or, if applicable, the Agilent Group) before
January 10, 2000 ("Excluded Options"), shall not be assumed under Subsection
7.2(a) above but shall instead be governed by the applicable HP Stock Plan. HP
and Agilent shall agree on the treatment of HP Options held by Agilent Employees
who retire on or after January 10, 2000, but before the Distribution Date.
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(c) Certain Non-U.S. Optionees. Except as may otherwise be agreed
--------------------------
upon by HP and Agilent and/or as set forth in Schedule 7.2(c), this Section 7.2
shall govern the treatment of HP Options held by non-U.S. Agilent Transferred
Employees.
(d) Stock Appreciation Rights. At the Distribution Date, each HP
-------------------------
stock appreciation right held by Agilent Employees, whether vested or unvested,
other than HP stock appreciation rights held by Agilent Employees who have
retired from the HP Group (or, if applicable, the Agilent Group) shall be, in
connection with the Distribution, assumed by Agilent. Each HP stock appreciation
right so assumed by Agilent shall continue to have, and be subject to, the same
terms and conditions set forth in the Plans and in the respective stock
appreciation rights agreement governing such HP stock appreciation right as of
the Distribution Date, except that (i) such HP stock appreciation right shall be
measured with reference to that number of whole shares of Agilent common stock
equal to the quotient of the number of shares of HP common stock relating to
such stock appreciation right divided by the Ratio, rounded down to the nearest
whole number of shares of Agilent common stock, and (ii) the per share grant
price for the Agilent stock appreciation right shall be equal to the product as
determined by multiplying the grant price per share of the HP stock appreciation
right by the Ratio, rounded up to the nearest whole cent. Stock appreciation
rights that are not assumed under this Subsection 7.2(d) shall be governed by
the applicable HP Stock Plan.
(e) Outside Director Options. Before the Distribution Date, HP shall
------------------------
offer to non-employee members of the Agilent Board of Directors who hold HP
Options the opportunity to elect for Agilent to assume such HP Options in
accordance with Subsection 7.2(a) above. To the extent such Option holders do
not elect such an assumption of their HP Options, such HP Options shall not be
assumed under Subsection 7.2(a) above but shall instead be governed by the
applicable HP Stock Plan.
7.3 HP Restricted Stock. Except as otherwise provided herein and subject
-------------------
to the terms of the applicable HP Stock Plans, on the Distribution Date, HP
Restricted Stock (including any Agilent common stock issued with respect to such
HP Restricted Stock in connection with the Distribution) held by Agilent
Transferred Employees shall be forfeited in accordance with the terms of the
applicable HP Stock Plans. Before the IPO, each Agilent Employee who holds HP
Restricted Stock, shall be given the opportunity to elect to receive (a) Agilent
Options as of the IPO, or (b) Agilent Restricted Stock at the Record Date, the
Distribution Date, or such other date as HP and Agilent may determine. The value
of an Agilent Employee's resulting Agilent Option or Agilent Restricted Stock
award shall be substantially equivalent to the value of his or her forfeited HP
Restricted Stock award determined (a) immediately before the IPO, in the case of
Agilent Options, and (b) immediately before the Record Date, the Distribution
Date, or such other date as HP and Agilent may determine, in the case of Agilent
Restricted Stock, in either case such value to be reasonably determined by
Agilent. The resulting Agilent Options or Agilent Restricted Stock, as
applicable, shall vest under circumstances substantially identical to the
vesting conditions applicable to the corresponding HP Restricted Stock, provided
that, in the case of HP Restricted Stock that is subject to performance-based
vesting, the resulting Agilent Options or Agilent Restricted Stock shall vest in
a manner prescribed by Agilent, and provided further that HP and Agilent shall
agree on the treatment with
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respect to HP Restricted Stock held by Agilent Employees who retire from the HP
Group (or, if applicable, the Agilent Group) on or before the IPO or the
Distribution Date, as applicable.
7.4 Stock Purchase Plan. Through January 31, 2000 or such later date as
-------------------
HP and Agilent may mutually agree, Agilent Employees shall continue to
participate in the HP Stock Purchase Plan. Effective on or before February 1,
2000, Agilent shall establish a Stock Purchase Plan for the benefit of Agilent
Employees and Agilent Transferred Employees that is substantially similar in all
Material Features to the corresponding HP Stock Purchase Plan. On the
Distribution Date, unvested HP "Company Shares" (within the meaning of the HP
Stock Purchase Plan), together with any Agilent common stock issued with respect
to such HP Company Shares in connection with the Distribution, held by Agilent
Transferred Employees shall be forfeited in accordance with the terms of the HP
Stock Purchase Plan. As of the Distribution Date, each such Agilent Transferred
Employee shall receive replacement Agilent Company Shares under the Agilent
Stock Purchase Plan. The value of an Agilent Transferred Employee's resulting
Agilent Company Shares shall be substantially equivalent to the value of his or
her forfeited HP Company Shares (including any Agilent common stock issued with
respect to such HP Company Shares in connection with the Distribution)
determined immediately before the Distribution Date, such value to be reasonably
determined by Agilent. The resulting Agilent Company Shares shall vest under
circumstances substantially identical to the vesting conditions applicable to
the corresponding HP Company Shares, provided that the restrictions on transfer
applicable to the corresponding HP "Employee Shares" (within the meaning of the
HP Stock Purchase Plan) shall not apply. In the event an Agilent Employee who is
participating in the Agilent Stock Purchase Plan transfers employment to the HP
Group before the Distribution Date, or in the event an HP Group Employee who is
participating in the HP Stock Purchase Plan becomes an Agilent Employee before
the Distribution Date, such individual's Stock Purchase Plan contributions and
participation for the purchase period then in effect shall, directly or
indirectly, transfer to the Stock Purchase Plan of whichever of HP or Agilent
employs such individual on the last day of the applicable purchase period. HP
and Agilent agree to cooperate with the other to coordinate any such transfer of
Stock Purchase Plan participation.
7.5 Stock Service Award Program. Effective January 1, 2000, or such other
---------------------------
date as HP and Agilent may mutually agree, Agilent shall establish a stock
service award program for Agilent Employees and Agilent Transferred Employees.
The foregoing Agilent Plan shall be substantially identical in all Material
Features to the comparable HP Plan as in effect immediately prior thereto.
7.6 Cash Profit Sharing Program. Through October 31, 1999, employees of
---------------------------
the Agilent Business (including, for this purpose, any employees of HP who are
designated as employees of the Agilent Business for purposes of the Separation)
shall continue to participate in the HP Cash Profit Sharing Program as may be in
effect from time to time and HP shall retain all Liabilities relating thereto.
Effective on and after November 1, 1999, Agilent shall provide a Cash Profit
Sharing Program for the benefit of Agilent Employees and Agilent Transferred
Employees which has the Material Features of the HP Cash Profit-Sharing Program.
An Agilent Employee who transfers employment to the HP Group after the Payroll
Date but before the Distribution Date, or an HP Group employee who becomes an
Agilent Employee after the Payroll Date but before the Distribution Date,
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shall receive a profit sharing benefit as calculated and paid under the Cash
Profit Sharing Program of whichever of HP or Agilent employs such individual on
the last day of the applicable fiscal half, based on the individual's eligible
compensation for the entire profit sharing period. Whichever of HP or Agilent
pays such benefit shall be entitled to reimbursement from the other based on the
portion of such benefit that relates to a transferred employee's pre-transfer
service. HP and Agilent agree to cooperate with the other to calculate such
profit sharing benefits and in connection with cost reimbursement policies and
procedures.
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ARTICLE VIII
FRINGE AND OTHER BENEFITS
-------------------------
8.1 Employee Assistance Program. HP shall use its commercially reasonable
---------------------------
best efforts for and on behalf of Agilent to procure, effective as of the
Distribution Date or such other date as HP and Agilent may mutually agree,
contracts and/or arrangements with HP's vendors that contain the Material
Features of HP's contracts and/or arrangements providing for an employee
assistance program. Agilent shall enter into such contracts and/or arrangements
as procured by HP. Agilent shall cease to be a Participating Company in the HP
employee assistance program coincident with Agilent's establishment of the
Agilent employee assistance program. Agilent shall reimburse HP for any and all
direct and indirect costs and expense related to its participation in the HP
employee assistance program and HP's procurement of any and all contracts and/or
arrangements on behalf of Agilent.
8.2 Educational Assistance Program. Effective as of the Payroll Date or
------------------------------
such other date as Agilent and HP may mutually agree, Agilent shall provide an
Agilent educational assistance program to Agilent Employees which has the
Material Features of the HP educational assistance program. Agilent shall cease
to be a Participating Company in the HP educational assistance program
coincident with Agilent's establishment of the Agilent educational assistance
program. At such time, any and all outstanding approved reimbursements under the
HP educational assistance program for Agilent Employees shall be made by
Agilent. Furthermore, Agilent shall reimburse HP for any and all direct and
indirect costs and expenses related to its participation in the HP educational
assistance program.
8.3 Adoption Assistance Program. Effective as of the Payroll Date,
---------------------------
Agilent shall provide an Agilent adoption assistance program to Agilent
Employees which has the Material Features of the HP adoption assistance program.
As of the Payroll Date, the HP adoption assistance program shall cease to
provide reimbursement to any Agilent Employees and any and all outstanding
approved reimbursements shall be made by Agilent.
8.4 Cafeteria and Related Subsidies. HP shall continue to make its
-------------------------------
cafeterias, vending machines, catering services, and other food or beverage
provision facilities or systems (collectively, "Food Subsidy Programs"),
available to Agilent Employees on substantially similar terms and conditions as
are offered to employees of the HP Group until the Distribution Date. HP and
Agilent shall use their commercially reasonable best efforts to mutually agree
on the appropriate methods and/or processes to ensure continued tax-favored
status of HP's Food Subsidy Programs under the Code. Agilent shall reimburse HP
for any and all direct and indirect costs and expenses related to allowing
Agilent access to HP's Food Subsidy Program.
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<PAGE>
8.5 Credit Union. HP shall use its commercially reasonable best efforts
------------
to make the HP Employees' Federal Credit Union available to Agilent Employees on
substantially similar terms and conditions as are offered to employees of the HP
Group, through such date as Agilent and HP mutually agree. Agilent shall
reimburse HP for any and all direct and indirect costs and expenses related
thereto.
8.6 Employee Product Discounts. HP shall make qualified employee
--------------------------
discounts available to Agilent Employees on substantially similar terms and
conditions as such discounts are made available to employees of the HP Group
through the Distribution Date. Agilent shall reimburse HP for any and all direct
and indirect cost and expenses relating thereto.
8.7 Employee Scholarship Program. Through April 30, 2000, HP shall
----------------------------
continue to maintain and administer the HP employee scholarship program on
substantially the same terms and conditions as are currently in effect. Through
the Distribution Date, Agilent shall continue to withhold payroll deductions for
the HP employee scholarship program from Agilent Employees on the same terms and
conditions as are currently in effect. The annual selection made in April or
May, 2000 of eligible recipients for the HP employee scholarship program shall
be made from a pool of both Agilent and HP employees and shall be funded by the
HP employee scholarship program. Effective on May 1, 2000, Agilent Transferred
Employees shall no longer be eligible to participate in the HP employee
scholarship program. Effective on May 1, 2000, Agilent shall provide an Agilent
employee scholarship program to Agilent Transferred Employees which has the
Material Features of the HP employee scholarship program and to which Agilent
Employees and Agilent Transferred Employees payroll deductions shall be
contributed.
8.8 Recreational Properties. HP shall transfer title to certain of its
-----------------------
recreational facilities pursuant to Exhibit H to the Separation Agreement. HP
and Agilent mutually agree to establish policies to permit the employees of the
other party access to the recreational properties and facilities and to allocate
between them the costs and expenses associated therewith.
8.9 HP-Owned and Operated Aircraft. HP and Agilent shall use their
------------------------------
commercially reasonable best efforts to determine the terms and conditions
pursuant to which Agilent shall be entitled to use HP-owned and operated
aircraft through the Distribution Date or such other date as HP and Agilent may
mutually agree. Agilent shall reimburse HP for any and all direct and indirect
costs and expenses associated with the use by Agilent of HP-owned and operated
aircraft. Provided, however, that such terms, conditions and reimbursements
shall be consistent with all of the following: (a) Subpart F of Part 91 of the
Federal Aviation Regulations, as amended from time to time; and (b) the
representations made in, or arising from, HP's request for a private letter
ruling filed with the IRS under cover letter dated March 31, 1999.
8.10 HP-Owned Cars. HP and Agilent shall use their commercially reasonable
-------------
best efforts to determine the terms and conditions pursuant to which Agilent
shall be entitled to use HP-owned cars through the Distribution Date or such
other date as HP and Agilent may mutually agree.
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<PAGE>
8.11 Other Benefits. To the extent that HP maintains, sponsors or provides
--------------
other fringe benefits including, without limitation the benefits specified in
Schedule 8.11 to its employees, then HP shall, to the extent permitted by law,
continue to make such benefits available to Agilent Employees on substantially
similar terms and conditions as are offered to the employees of the HP Group
through the Distribution Date or such other date upon which Agilent and HP
mutually agree. Agilent shall reimburse HP for any and all direct and indirect
costs and expenses arising out of or relating to making any such fringe benefits
available to its employees. Agilent and HP agree to make commercially reasonable
best efforts to mutually agree on whether, when, and on what terms any member of
the Agilent Group shall maintain, sponsor or offer fringe benefits.
-38-
<PAGE>
8.11 Other Benefits. To the extent that HP maintains, sponsors or provides
--------------
other fringe benefits including, without limitation the benefits specified in
Schedule 8.11 to its employees, then HP shall, to the extent permitted by law,
continue to make such benefits available to Agilent Employees on substantially
similar terms and conditions as are offered to the employees of the HP Group
through the Distribution Date or such other date upon which Agilent and HP
mutually agree. Agilent shall reimburse HP for any and all direct and indirect
costs and expenses arising out of or relating to making any such fringe benefits
available to its employees. Agilent and HP agree to make commercially reasonable
best efforts to mutually agree on whether, when, and on what terms any member of
the Agilent Group shall maintain, sponsor or offer fringe benefits.
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<PAGE>
this Agreement in the custody of the other party or its agents, to the extent
necessary or appropriate for such administration.
9.4 Reporting and Disclosure Communications to Participants. While Agilent
-------------------------------------------------------
is a Participating Company in the HP Plans, Agilent shall take, or cause to be
taken, all actions necessary or appropriate to facilitate the distribution of
all HP Plan-related communications and materials to employees, participants and
beneficiaries, including (without limitation) summary plan descriptions and
related summaries of material modification(s), summary annual reports,
investment information, prospectuses, notices and enrollment material for the HP
Plans and Agilent Plans. Agilent shall reimburse HP for the costs and expenses
relating to the copies of all such documents provided to Agilent, except to the
extent such costs are charged pursuant to Section 9.1 (or are otherwise
addressed in this Agreement) or pursuant to an Ancillary Agreement. Agilent
shall assist, and Agilent shall cause each other applicable member of the
Agilent Group to assist, HP in complying with all reporting and disclosure
requirements of ERISA, including the preparation of Form Series 5500 annual
reports for the HP Plans, where applicable.
9.5 Audits Regarding Vendor Contracts. From the period beginning as of the
---------------------------------
Distribution Date and ending on such date as HP and Agilent may mutually agree,
HP and Agilent and their duly authorized representatives shall have the right to
conduct joint audits with respect to any vendor contracts that relate to both
the HP Health and Welfare Plans and the Agilent Health and Welfare Plans. The
scope of such audits shall encompass the review of all correspondence, account
records, claim forms, canceled drafts (unless retained by the bank), provider
bills, medical records submitted with claims, billing corrections, vendor's
internal corrections of previous errors and any other documents or instruments
relating to the services performed by the vendor under the applicable vendor
contracts. HP and Agilent shall agree on the performance standards, audit
methodology, auditing policy and quality measures, reporting requirements, and
the manner in which costs incurred in connection with such audits will be
shared.
9.6 Employee Identification Numbers. Until the Distribution Date, HP and
-------------------------------
Agilent shall not change any employee identification numbers assigned by HP. HP
and Agilent mutually agree to establish a policy pursuant to which employee
identification numbers assigned to either employees of HP or Agilent shall not
be duplicated between HP and Agilent.
9.7 Beneficiary Designations. Subject to Section 9.10, all beneficiary
------------------------
designations made by Agilent Employees and Agilent Transferred Employees for the
HP Plans shall be transferred to and be in full force and effect under the
corresponding Agilent Plans until such beneficiary designations are replaced or
revoked by the Agilent Employees and Agilent Transferred Employee who made the
beneficiary designation.
9.8 Requests for IRS and DOL Opinions. HP and Agilent shall make such
---------------------------------
applications to regulatory agencies, including the IRS and DOL, as may be
necessary or appropriate. Agilent and HP shall cooperate fully with one another
on any issue relating to the transactions contemplated by this Agreement for
which HP and/or Agilent elects to seek a determination letter or private letter
ruling from the IRS or an advisory opinion from the DOL.
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9.9 Fiduciary Matters. HP and Agilent each acknowledge that actions
-----------------
contemplated to be taken pursuant to this Agreement may be subject to fiduciary
duties or standards of conduct under ERISA or other applicable law, and no party
shall be deemed to be in violation of this Agreement if such party fails to
comply with any provisions hereof based upon such party's good faith
determination that to do so would violate such a fiduciary duty or standard.
9.10 Consent of Third Parties. If any provision of this Agreement is
------------------------
dependent on the consent of any third party (such as a vendor) and such consent
is withheld, HP and Agilent shall use their commercially reasonable best efforts
to implement the applicable provisions of this Agreement. If any provision of
this Agreement cannot be implemented due to the failure of such third party to
consent, HP and Agilent shall negotiate in good faith to implement the provision
in a mutually satisfactory manner.
9.11 World Wide Web. Through the Distribution Date or such other date as
--------------
Agilent and HP may mutually agree, HP shall make its intranet site available to
Agilent Employees on substantially the same terms as such intranet site is made
available to HP Employees. Agilent shall reimburse HP for any and all costs and
expenses related thereto. HP and Agilent shall use their commercially reasonable
best efforts to mutually agree on the appropriate methods for Agilent to
establish its own intranet site.
9.12 Tax Cooperation. In connection with the interpretation and
---------------
administration of this Agreement, HP and Agilent shall take into account the
agreements and policies established pursuant to the Separation Agreement and the
parties' intent to qualify the Distribution as a tax-free reorganization under
Code Sections 368(a)(1)(D) and 355.
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ARTICLE X
EMPLOYMENT-RELATED MATTERS
--------------------------
10.1 Terms of Agilent Employment. All basic terms and conditions of
---------------------------
employment for Agilent Employees and Agilent Transferred Employees including,
without limitation, their pay and benefits in the aggregate, shall remain
substantially the same as the terms and conditions that were in place when the
Agilent Employee or Agilent Transferred Employee was employed by the HP Group,
as applicable. Notwithstanding the foregoing, Agilent Employees and Agilent
Transferred Employees shall be required to execute a new agreement regarding
confidential information and proprietary developments in a form approved by
Agilent. In addition, nothing in the Separation Agreement, this Agreement, or
any Ancillary Agreement should be construed to change the at-will status of any
of the employees of the HP Group or the Agilent Group.
10.2 HR Data Support Systems. HP shall provide human resources data
-----------------------
support for Agilent Employees and Agilent Transferred Employees for a period
mutually agreed upon between HP and Agilent. HP and Agilent each reserves the
right to discontinue Agilent's access to any HP human resources data support
systems with reasonable notice. Agilent agrees to fully reimburse HP for any and
all associated costs and expenses relating to its use of the HP human resources
data support systems.
10.3 Non-Solicitation of Employees. Subject to Section 5.12 of the
-----------------------------
Separation Agreement, HP and Agilent each agree not to directly solicit or
recruit the other party's employees for a period of two (2) years following the
Distribution Date, if such solicitation or recruitment would be disruptive or
damaging or would interfere with the operation or business of the other party.
Notwithstanding the foregoing, this prohibition on solicitation does not apply
to actions taken by a party either: (a) as a result of an employee's affirmative
response to a general recruitment effort carried out through a public
solicitation or general solicitation, or (b) as a result of an employee's
initiative.
10.4 Employment of Employees with U.S. Work Visas. Agilent Employees who,
--------------------------------------------
on the Payroll Date, are employed in the U.S. pursuant to a work or training
visa which authorizes employment only by the HP Group shall remain employed by
the HP Group until the visa is amended or a new visa is granted to authorize
employment by the Agilent Group and, at that time, shall become an employee of
the Agilent Group with substantially similar rights as all other Agilent
Employees. During the period from the Payroll Date until the amended or new visa
is issued, such employee shall continue to participate in HP Plans and Agilent
shall, as and when invoiced by HP, promptly reimburse HP for its direct and
indirect costs and expenses relating to compensation and benefits.
10.5 Confidentiality and Proprietary Information. No provision of the
-------------------------------------------
Separation Agreement or any Ancillary Agreement shall be deemed to release any
individual for any violation of the HP non-competition guideline or any
agreement or policy pertaining to confidential or
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proprietary information of any member of the HP Group, or otherwise relieve any
individual of his or her obligations under such non-competition guideline,
agreement, or policy.
10.6 FTO. Effective as of the Payroll Date, Agilent shall establish the
---
Agilent FTO policy which is substantially identical in all Material Features to
the HP FTO policy. Effective as soon as administratively practicable after the
Payroll Date, HP shall transfer to Agilent all data and information relating to
the HP FTO policy. Effective as soon as administratively practicable following
the Payroll Date (or such other date as HP and Agilent may mutually agree),
Agilent shall assume all Liabilities attributable to Agilent Employees under the
HP FTO policy. In the event that an HP Employee or Agilent Employee transfers
his or her employment to the other party before the Distribution Date, such
transfer of employment shall not result in a payout or constitute a termination
event for purposes of the FTO policy, and no duplication of benefits shall occur
as a result of any such transfer of employment between HP and Agilent.
Furthermore, the Liability attributable to any Agilent Employee or HP Employee
who transfers employment between HP and Agilent prior to the Distribution Date
shall be assumed by the employer subsequent to the transfer.
10.7 Accrued Payroll, Bonuses, Profit Sharing and Commissions. HP shall
--------------------------------------------------------
retain all Liabilities relating to, arising out of, or attributable to payroll,
bonuses, profit sharing and commissions accrued by employees of the Agilent
Business through October 31, 1999. HP and Agilent shall agree on the manner and
method of payment for all payroll, bonuses, profit sharing and commissions
agreed to on behalf of employees who have been employed in the Agilent Business
on or before October 31, 1999. Effective on and after the Payroll Date, Agilent
shall establish its own payroll system for Agilent Employees. Effective on and
after November 1, 1999, Agilent shall establish its own commission policy for
Agilent Employees.
10.8 Payroll and Withholding.
-----------------------
(a) Income Reporting, Withholding. HP and Agilent will use their
-----------------------------
commercially reasonable best efforts to cause the HP human resources management
system ("HRMS") to be split into two separate systems on the Payroll Date.
Agilent shall perform the income reporting and withholding function under its
own employer identification number for Agilent Employees and other service
providers, commencing with service periods beginning on or after the Payroll
Date. HP shall perform the income reporting and withholding function for HP
Employees and other service providers.
(b) Delivery of, and Access to, Documents and Other Information.
-----------------------------------------------------------
Concurrently with the Payroll Date, HP shall cause to be delivered to Agilent,
the employee information set forth on all Forms W-4 executed by HP Employees
designated as Agilent Employees as of the Payroll Date. For the period beginning
on the Payroll Date and ending on the Distribution Date (and for such additional
period as HP and Agilent may mutually agree), HP shall make reasonably available
to Agilent all forms, documents or information, no matter in what format stored,
relating to compensation or payments made to any employee or service provider of
Agilent. Such information may include, but is not limited to, information
concerning employee payroll deductions, payroll adjustments, records of time
worked, tax records (e.g., Forms W-2, W-4, 940 and 941), and
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information concerning garnishment of wages or other payments. Agilent agrees to
fully reimburse HP for the cost associated with such availability and access.
(c) Consistency of Tax Positions; Duplication. HP and Agilent shall
-----------------------------------------
individually and collectively make commercially reasonable best efforts to avoid
unnecessarily duplicated federal, state or local payroll taxes, insurance or
workers' compensation contributions, or unemployment contributions arising on or
after the Payroll Date. HP and Agilent shall take consistent reporting and
withholding positions with respect to any such taxes or contributions.
10.9 Personnel and Pay Records. For the period beginning on the Payroll
-------------------------
Date and ending on the Distribution Date (and for such additional period as HP
and Agilent may mutually agree), HP shall make reasonably available to Agilent,
subject to applicable laws on confidentiality and data protection, all current
and historic forms, documents or information, no matter in what format stored,
relating to pre-Distribution Date personnel, medical records, and payroll
information. Such forms, documents or information may include, but is not
limited to: (a) information regarding an Agilent Employee's ranking or
promotions; (b) the existence and nature of garnishment orders or other judicial
or administrative actions or orders affecting an employee's or service
provider's compensation; and (c) performance evaluations. Agilent shall fully
reimburse HP for the cost associated with such availability and access.
10.10 Unemployment Insurance Program.
------------------------------
(a) Coverage Through Distribution Date. Unless otherwise directed by
----------------------------------
Agilent, HP shall use its commercially reasonable best efforts to cause Agilent
to be covered under the HP Unemployment Insurance Program through the
Distribution Date. Agilent shall reimburse HP for its allocable share of fees
paid and related costs and expenses by HP to its unemployment insurance
vendor(s) for services rendered during such period. Agilent shall cooperate with
the unemployment insurance vendor(s) by providing information in its possession
that is necessary for administration of the HP Unemployment Insurance Program.
(b) Coverage Post-Distribution Date. Before the Distribution Date,
-------------------------------
HP shall use its commercially reasonable best efforts for and on behalf of
Agilent to procure an agreement with its unemployment insurance vendor(s) with
the Material Features of the HP unemployment insurance agreement, including,
without limitation, administration of all unemployment compensation claims of
Agilent Transferred Employees and Agilent Employees, regardless of whether such
claims were filed before, on, or after the Distribution Date.
(c) Tax Experience Rating. Unless otherwise directed by Agilent, HP
---------------------
shall take commercially reasonable best efforts to assist Agilent as well as all
members of the Agilent Group in retaining the HP experience rating on or after
the Payroll Date.
10.11 Non-Termination of Employment; No Third-Party Beneficiaries. No
-----------------------------------------------------------
provision of this Agreement, the Separation Agreement, or any Ancillary
Agreement shall be construed to create any right, or accelerate entitlement, to
any compensation or benefit whatsoever on the part of any Agilent
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Employee, Agilent Transferred Employee or other future, present or former
employee of HP or Agilent under any HP Plan or Agilent Plan or otherwise.
Without limiting the generality of the foregoing: (a) neither the Distribution
or Separation, nor the termination of the Participating Company status of
Agilent or any member of the Agilent Group shall cause any employee to be deemed
to have incurred a termination of employment; and (b) no transfer of employment
between HP and Agilent before the Distribution Date shall be deemed a
termination of employment for any purpose hereunder.
10.12 Employment Litigation.
---------------------
(a) Claims to be Transferred to Agilent. On the Separation Date,
-----------------------------------
the legal responsibility for claims identified in Schedule 10.12(a) shall be
transferred in their entirety from HP to Agilent. Thereafter, Agilent shall
assume the defense of these claims. Agilent hereby indemnifies, defends and
holds harmless HP against these claims. Agilent shall reimburse HP for any
reasonable attorneys' fees and other expenses reasonably incurred by HP
subsequent to the Separation Date in connection with investigating and/or
defending against any such claim, including, without limitation, reimbursement
for any services provided by members of the HP legal staff.
(b) Claims to be Jointly Defended by HP and Agilent. HP and Agilent
-----------------------------------------------
shall jointly defend the claims identified in Schedule 10.12(b); provided,
however, that (i) Agilent shall indemnify and hold harmless HP against any
judgments entered against HP on the claims identified in Schedule 10.12(b) or
settlements of the claims identified in Schedule 10.12(b), provided, however,
that HP shall not compromise or settle any such claim regarding Agilent
Employees without the prior consent of Agilent, which such consent shall not be
unreasonably withheld or delayed, and provided further, however, that such
compromise or settlement shall release Agilent in full from any further
liability with respect to such claim; and (ii) Agilent and HP shall share pro
rata the attorneys' fees and all other expenses reasonably incurred subsequent
to the Separation Date in connection with defending against the unemployment
claims identified in Schedule 10.12(b) based on the number of employees of each
organization that are claimants in the litigation.
(c) Unscheduled Claims. Agilent shall have the sole responsibility
------------------
for all employment-related claims regarding Agilent Employees and Agilent
Transferred Employees that exist, or come into existence, on or after the
Separation Date arising out of or relating to their employment in the Agilent
Business or the Agilent Group.
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ARTICLE XI
GENERAL PROVISIONS
------------------
11.1 Effect if Payroll, Separation, IPO and/or Distribution Does Not
---------------------------------------------------------------
Occur. Subject to Section 11.8, if the Separation, IPO and/or Distribution does
- -----
not occur, then all actions and events that are, under this Agreement, to be
taken or occur effective as of the Payroll Date, Separation Date, IPO, and/or
Distribution Date, or otherwise in connection with the Separation, IPO and/or
Distribution, shall not be taken or occur except to the extent specifically
agreed by Agilent and HP.
11.2 Relationship of Parties. Nothing in this Agreement shall be deemed or
-----------------------
construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, the
understanding and agreement being that no provision contained herein, and no act
of the parties, shall be deemed to create any relationship between the parties
other than the relationship set forth herein.
11.3 Affiliates. Each of HP and Agilent shall cause to be performed, and
----------
hereby guarantee the performance of, any and all actions of the HP Group or the
Agilent Group, respectively.
11.4 Incorporation of Separation Agreement Provisions. The following
------------------------------------------------
provisions of the Separation Agreement are hereby incorporated herein by
reference, and unless otherwise expressly specified herein, such provisions
shall apply as if fully set forth herein (references in this Section to an
"Article" or "Section" shall mean Articles or Sections of the Separation
Agreement, and, except as expressly set forth below, references in the material
incorporated herein by reference shall be references to the Separation
Agreement): Section 5.4 (relating to Agreement for Exchange of Information);
Section 5.9 (relating to Dispute Resolution); Section 5.11 (relating to No
Representation and Warranty); Article V (relating to Covenants and Other
Matters); and Article VI (relating to Miscellaneous) other than Section 6.3
(relating to Governing Law).
11.5 Governing Law. To the extent not preempted by applicable federal law,
-------------
this Agreement shall be governed by, construed and interpreted in accordance
with the laws of the State of Delaware, irrespective of the choice of law
principles of the State of Delaware, as to all matters, including matters of
validity, construction, effect, performance and remedies.
11.6 Severability. If any term or other provision of this Agreement is
------------
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible and in an
acceptable manner to the end that transactions contemplated hereby are fulfilled
to the fullest possible extent.
-46-
<PAGE>
11.7 Amendment. The Board of Directors of Agilent and HP may mutually
---------
agree to amend the provisions of this Agreement at any time or times, either
prospectively or retroactively, to such extent and in such manner as the Boards
mutually deem advisable. Each Board may delegate its amendment power, in whole
or in part, to one or more Persons or committees as it deems advisable.
Accordingly, each Board hereby gives its Vice President, Human Resources the
full power and authority to mutually adopt an amendment to this Agreement
(subject to each of their authority to amend Plans).
11.8 Termination. This Agreement may be terminated at any time prior to
-----------
the IPO Closing Date by and in the sole discretion of HP without the approval of
Agilent. This Agreement may be terminated at any time after the IPO Closing Date
and before the Distribution Date by mutual consent of HP and Agilent. In the
event of termination pursuant to this Section, no party shall have any liability
of any kind to the other party.
11.9 Conflict. In the event of any conflict between the provisions of this
--------
Agreement and the Separation Agreement, any Ancillary Agreement, or Plan, the
provisions of this Agreement shall control. In the event of any conflict between
the provisions of this Agreement and any Local Agreement, the provisions of the
Local Agreement shall control.
11.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same Agreement.
-47-
<PAGE>
IN WITNESS WHEREOF, each of the parties have caused this Employee Matters
Agreement to be executed on its behalf by its officers thereunto duly authorized
on the day and year first above written.
HEWLETT-PACKARD COMPANY
By: /s/ Ann O. Baskins
----------------------------------------
Name: Ann O. Baskins
--------------------------------------
Title: Associate General Counsel and
-------------------------------------
Assistant Secretary
AGILENT TECHNOLOGIES, INC.
By: /s/ Craig Nordlund
----------------------------------------
Name: Craig Nordlund
--------------------------------------
Title: Senior Vice President, General
-------------------------------------
Counsel and Secretary
[Signature Page to Employee Matters Agreement]
-48-
<PAGE>
SCHEDULE 1.40
HEALTH AND WELFARE PLANS
Business Travel Accident Insurance
Cafeteria Plan
COBRA Program
Community Dental Network ("CDN")
Continued Group Medical Program
Dental Plan II
Dependent Care Reimbursement Plan
Group Universal Life Plan
Health Care Reimbursement Plan
HMOs (as set forth more fully in Schedule 6.5(c))
Income Protection Plan (STD & LTD)
- California Voluntary Plan
- New Jersey Voluntary Plan
- New York Voluntary Plan
Leave of Absence Programs
- FMLA Leave
- Medical Leave
- Military Leave
- Personal Leave
Long Term Care Plan
Medical Plan Option A
Medical Plan Option B
Redeployment/Alternate Offer Program
Regular Dental Plan
SeniorMed Program
Supplemental Income Protection Plan
Survivor Protection Plan
- Accidental Death & Dismemberment ("AD&D")
- HP Life Insurance
- Retiree Life
Voluntary Severance Incentive Plan
Workers' Compensation Program
-i-
<PAGE>
SCHEDULE 6.1(a)(i)
ACTUARIAL ASSUMPTIONS FOR HP VEBA
INCOME PROTECTION PLAN LIABILITIES
Actuarial Assumptions:
- ---------------------
1. Interest Rate: An interest rate of seven percent (7%) per annum is used
for discounting.
2. Termination of Disability Through Death or Recovery: The 1987
Commissioner's Group Disability Tables are used (Transactions, Society of
Actuaries, Vol. XXXIX, 1987).
3. Short-Term Disabilities: Statistics compiled by HP are assumed to
accurately reflect the Plan's short-term disability experience.
4. Unknown Payment Amounts: It is assumed that the average monthly payment
for long-term disability claims with unknown claims will increase linearly
over time.
5. Benefit Offsets: All short-term disabilities that are assumed to progress
to long-term disability status and all long-term claims with unknown claim
amounts are reduced by Social Security implicitly through the linear
regress used to determine unknown payment amounts.
6. Short-Term Disabilities Expected to Progress to Long-Term Disability
Status: A number of disabilities equal to the number of known disabilities
in the twelve (12)-month period ending twelve (12) months prior to the
Distribution Date are assumed to progress to long-term status.
7. Administrative Expenses: Assumed at approximately three and one-half
percent (3.5%) of benefit costs.
Methods:
- -------
Long-term disability reserves are determined from open long-term disability
claims and those short-term disability claims that are assumed to progress to
long-term disability status. The actual claim amount is valued, if known. An
assigned amount, determined using the assumptions described above, is valued for
unknown claim amounts. The full present value of future claim payments is
determined based upon the interest rate and termination of disability
assumptions.
Short-term disability reserves for known short-term disability claims are valued
based upon (1) expected future duration of the disability, (2) the average
weekly payment, and (3) the number of such known, open claims.
Short-term disability reserves for unknown short-term disability claims are
valued based upon (1) the average duration of the short-term disability claims
paid, (2) the average weekly benefit, (3) the number of claims received in the
measurement period, estimated at thirty-eight percent (38%) of open claims, and
(4) the number of working days necessary to process a new claim.
-ii-
<PAGE>
SCHEDULE 6.1(a)(ii)
ACTUARIAL ASSUMPTIONS FOR HP VEBA
SURVIVOR PROTECTION PLAN LIABILITIES
Actuarial Methods and Assumptions
- ---------------------------------
1. Interest Rate: An interest rate of seven percent (7%) per annum is used
for discounting.
2. Mortality of Disabled Employees: Table V-A, of the Pension Benefit
Guaranty Corporation, for Disabled Male Participants Receiving Social
Security Disability Benefits.
3. Mortality of Nondisabled Employees: 1983 Group Annuity Mortality Table
Graduated, Unloaded Rates.
4. Preretirement Turnover: Rates used in the HP RP valuation. Rates are
based upon a combination of age and service. Employees eligible for
retirement benefits are assumed to retire in accordance with the retirement
probabilities.
5. Retirement: Rates used in the HP RP valuation. Early retirement starts at
age fifty five (55) with one hundred percent (100%) probability of
retirement assumed at age seventy (70). Employees not eligible for
retirement benefits are assumed to turn over in accordance with the
preretirement turnover probabilities.
Methods
- -------
Known claims reserves for continued protection for disabled employees are
determined from open disabled life claims. Unknown claims reserves for
continued protection for disabled employees are determined from those claims
that were opened in 1998 and the first half of 1999. Those claims have been
assumed to be equal in number and in average benefit to claims that were open
but unknown on the Distribution Date.
The past service liability for retiree death benefit protection is valued using
the Projected Unit Credit method. Under the Projected Unit Credit method, the
present value of future benefits is equal to the discounted value of the retiree
death benefit. That value is prorated over the working lifetime of the
employee. The portion of the proration that is attributable to past service is
called the Accumulated Benefit Obligation. All of the present value of future
benefits is included in the Accumulated Benefit Obligation for retired
employees. The present value of vested benefits is equal to the present value
of future benefits for those employees who have satisfied the Plan's age and
service retirement criteria, zero (0) for other employees.
-iii-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 6.5(a)
THIRD PARTY ASO CONTRACTS
- ------------------------------- ------------------------------------- -------------------------------------
Plan Vendor Services
- ------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Medical Plan Option A HealthCare Compare Claims Administration
Medical Plan Option B Administrative Services, Inc.
Regular Dental Plan "
Dental Plan II Automatic Data Processing, Inc. Open Enrollment Administration
Continued Group Medical dba:
Program (non-HMO) BADP
SeniorMed Program (non-HMO) BJohnson & Higgins
Kirke-Van Orsdel, Inc.
("J&H/KVI")
BHealth Benefits of America
- ------------------------------- ------------------------------------- -------------------------------------
Continued Group Medical Program Automatic Data Processing, Inc. Premium Collection
Senior Med Program dba:
Leave of Absence Program BADP and
(Medical Benefits) BJohnson & Higgins/Kirke-
COBRA Program Van Orsdel, Inc. Open Enrollment
("J&H/KVI") Administration
BHealth Benefits of America
- ------------------------------- ------------------------------------- -------------------------------------
Medical Plan Option A Geo Access, Inc. Provides and maintains online
Medical Plan Option B database of service providers
Regular Dental Plan available under all indicated plans.
Dental Plan II
HMOs
- ------------------------------- ------------------------------------- -------------------------------------
Income Protection Plan (STD & Voluntary Plan Claims Administration
LTD) Administrators, Inc. ("VPA")
BCalifornia Voluntary Plan
BNew York Voluntary Plan
BNew Jersey Voluntary Plan
- ------------------------------- ------------------------------------- -------------------------------------
Group Universal Life Plan Kirke Van Orsdel, a division of Premium Collection and Claims
Seabury & Smith, Inc. (KVI) Administration
- ------------------------------- ------------------------------------- -------------------------------------
Long Term Care Plan U.S. Care, Inc. Eligibility Determination and
Claims Administration
- ------------------------------- ------------------------------------- -------------------------------------
Health Care Reimbursement United HealthCare Insurance Company Claims Administration
Plan
Dependent Care Reimbursement
Plan
- ------------------------------- ------------------------------------- -------------------------------------
Workers' Compensation Program Sedgwick CMS, Inc. (Non-CA) Claims Administration
Presidium Inc. (CA)
- ------------------------------- ------------------------------------- -------------------------------------
</TABLE>
-iv-
<PAGE>
SCHEDULE 6.5(b)
GROUP INSURANCE POLICIES
- -----------------------------------------------------------------------------
Plan Insurer
- -----------------------------------------------------------------------------
HP Life Insurance Connecticut General Life Insurance
Retiree Life Company (CIGNA)
- -----------------------------------------------------------------------------
Group Universal Life Plan Connecticut General Life Insurance
Company (CIGNA)
- -----------------------------------------------------------------------------
Business Travel Accident UNUM Life Insurance Company of America
Insurance (UNUM)
- -----------------------------------------------------------------------------
Workers' Compensation Old Republic Insurance Company
Program General Reinsurance Company
The Travelers Insurance Companies
- -----------------------------------------------------------------------------
-v-
<PAGE>
SCHEDULE 6.5(c)
THIRD PARTY HMO CONTRACTS
Aetna U.S. Healthcare
AmeriHealth HMO, Inc.
Av-Med Health Plan
Blue Choice Healthcare Plan
Capital District Physicians Health Plan
Care Choices/Mercy Health Plans
ChoiceCare Health Plans, Inc.
CIGNA HealthCare of Colorado
CIGNA Healthcare/COMED
ConnectiCare, Inc.
FreeState Health Plan, Inc.
Group Health Cooperative of Puget Sound
Group Health Northwest
Harvard Pilgrim Health Care
Health Alliance Plan of Michigan
HealthAmerica PA, Inc.
Health Net
Health Plan of the Redwoods
HealthPlus
Healthsource New Hampshire
HMO Blue New England
HMO Blue of Idaho
HMO Illinois
Humana (Louisville)
Humana Health Plans of Puerto Rico
Humana/Wisconsin Health Organization
Independent Health
Intergroup of Arizona
Intergroup of Utah, Inc.
Kaiser Permanente-California
Kaiser Permanente-Colorado
Kaiser Permanente-Georgia
Kaiser Permanente-Hawaii
Kaiser Permanente-Mid-Atlantic States
Kaiser Permanente-North Carolina
Kaiser Permanente-NW Region
Lifeguard, Inc.
Matthew Thornton Health Plan, Inc.
Medica Choice
Medica Primary
Optimum Choice, Inc.
Oxford Health Plans
PacifiCare of California
PacifiCare of Colorado
PacifiCare of Oregon
PacifiCare of Texas
Preferred Care
Prepaid Health Plan (PHP)
Principal Health Care of Kansas City
Prudential HealthCare
Prudential HealthCare HMO
Prudential HealthCare of Indiana
QualChoice
QualMed
Regence HMO Oregon
Rush Prudential Health Plans
Texas Health Choice
Tufts Health Plan
United Health Care of Alabama
United HealthCare of Georgia
United HealthCare of the Midlands
United HealthCare of the Midwest, Inc.
United HealthCare of Ohio-Columbus
United HealthCare of Ohio-Dayton
-vi-
<PAGE>
SCHEDULE 6.6(a)
ASSUMPTIONS FOR HP LONG-TERM CARE
PLAN LIABILITIES
1. Administrative Expenses - Seven Dollars and Forty Three Cents ($7.43) per
member per month. Administrative expenses are assumed to increase for
inflation at three percent (3%) per year.
2. Voluntary Termination - three percent (3%) per year
3. Mortality - 1983 Group Annuity Mortality Table
4. Morbidity
Incidence and continuance rates are based on the 1985 Nursing Home Study
adjusted based on insurer experience, other studies and the effect of additional
benefits. Sample rates of incidence (probability of disability) and severity
(present value of incurred claims) are as follows:
Rate of Present Value of
Age Disability Incurred Claim
------- ---------- --------------
$80 $120 $160
--- ---- ----
35 .000579 25,404 45,755 65,002
45 .001569 24,645 45,190 66,813
55 .002109 24,595 45,972 71,094
65 .006623 25,562 47,959 72,627
75 .029038 26,576 49,589 71,825
85 .109395 26,384 47,861 66,779
95 .189596 24,854 44,236 60,157
5. Discount Rate - six percent (6%)
-vii-
<PAGE>
SCHEDULE 6.15(d)
WCP CLAIMS
ACCRUED LIABILITIES ALLOCATION
HP Risk Management provides direction to liability programs within HP that
generate claims. These claims usually extend beyond a year. Federal regulations
require HP to estimate the ultimate cost of those claims and to accrue that
future cost on the books at a consolidated level.
Basis of Calculation: Actuarial analysis using the past ten (10) years of HP
claims history, supplemented by insurance industry data. Accrued amounts
represent projected ultimate claims cost, with an approximate eighty percent
(80%) confidence level. The worker's compensation accrual amount has been
discounted to NPV at sixty-five percent (65%) in accordance with tax and
accounting rules.
Self-Insured Liabilities to be Allocated:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Liability Estimated as of October 31, Proposed HP Proposed Agilent
1999
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Workers' Compensation $50M $28M $22M
Liability
- ---------------------------------------------------------------------------------------
</TABLE>
Historical Basis of Allocation Distribution:
1. Worker's Compensation: Distributed to entity on a performance based model.
a. Seventy-five percent (75%) on a three (3) year claims frequency
severity
b. Twenty-five percent (25%) exposure headcount and payroll
2. Proposed Basis of Allocation to HP and Agilent:
Use of existing model with the inclusion of proportionate share of
corporate and AGO costs
-viii-
<PAGE>
SCHEDULE 7.2(c)
OPTIONS HELD BY CERTAIN NON-U.S.
AGILENT TRANSFERRED EMPLOYEES
United Kingdom
- --------------
Notwithstanding anything in Section 7.2 to the contrary, and unless
otherwise mutually agreed by HP and Agilent, United Kingdom ("UK") Agilent
Employees holding UK approved HP Options shall not be eligible for assumption by
Agilent; such HP Options shall remain exercisable in accordance with the terms
of the applicable HP Stock Plan; provided, however, that the exercise price and
the number of shares of HP common stock relating to such HP Options shall not be
adjusted by HP in connection with the Distribution. UK Agilent Transferred
Employees who (i) are actively employed by or on leave of absence from, the
Agilent Group as of the Distribution Date, and (ii) hold such HP Options shall
receive additional Agilent Stock Options as of the Distribution Date for a
number of shares of Agilent common stock and with exercise prices that are
reasonably determined by Agilent to provide a value which, when added to the
value of such HP Options immediately after the Distribution Date, provides value
that is substantially equivalent to the value of such HP Options immediately
prior to the Distribution Date.
France
- ------
Notwithstanding anything in Section 7.2 to the contrary, and unless
otherwise mutually agreed by HP and Agilent, French Agilent Employees holding HP
Options shall not be eligible for assumption by Agilent; such HP Options shall
remain exercisable in accordance with the terms of the applicable HP Stock Plan;
provided, however, that the exercise price and the number of shares of HP common
stock relating to such HP Options shall not be adjusted by HP in connection with
the Distribution. French Agilent Transferred Employees who hold such HP Options
shall receive cash and/or additional Agilent Stock Options as reasonably
determined by Agilent to provide a value which, when added to the value of such
HP Options immediately after the Distribution Date, provides value that is
substantially equivalent to the value of such HP Options immediately prior to
the Distribution Date.
Australia
- ---------
Notwithstanding anything in Section 7.2 to the contrary, and unless
otherwise mutually agreed by HP and Agilent, before the Distribution Date HP
shall offer Australian Agilent employees holding HP Options the opportunity to
amend such HP Options so as to (i) waive the accelerated vesting and option
cancellation that would otherwise occur under the HP Stock Plans in connection
with the Distribution, and (ii) allow for the assumption of such HP Options in
accordance with
-ix-
<PAGE>
Section 7.2(a). To the extent such Option holders do not elect such an
assumption of their HP Options, such HP Options shall remain exercisable in
accordance with the terms of the applicable HP Stock Plan.
Cliff Options
- -------------
A. Definitions. For purposes of this Schedule 7.2(c), the following
-----------
definitions shall apply:
(i) Agilent IPO Option. "Agilent IPO Option" means an option as
------------------
described in E below to purchase Agilent common stock granted pursuant to an
Agilent Stock Plan on the IPO date in replacement of cancelled HP Cliff Options
pursuant to C and D below.
(ii) Cliff Option. "Cliff Option," when immediately preceded by "HP,"
------------
means an option to purchase or receive, at the holder's election and subject to
employment-based vesting and other conditions, HP common stock pursuant to a
Stock Plan. When immediately preceded by "Agilent," "Cliff Option" means a
similar option with respect to Agilent common stock.
(iii) Post-February 11, 1999 Option. "Post-February 11, 1999 Option"
-----------------------------
means an HP Cliff Option granted on or after February 12, 1999.
(iv) Pre-February 12, 1999 Option. "Pre-February 12, 1999 Option"
----------------------------
means an HP Cliff Option granted before February 12, 1999.
B. General Rule. Notwithstanding anything in Section 7.2 to the contrary,
------------
unless otherwise mutually agreed by HP and Agilent, unvested HP Cliff Options
held by non-U.S. Agilent Employees shall, unless elected otherwise by such
Employees as provided below, (i) in the case of Pre-February 12, 1999 Options,
vest on the Distribution Date and remain exercisable for a period of three
months thereafter (subject to the terms of the applicable HP Stock Plan), or
(ii) in the case of Post-February 11, 1999 Options, be assumed by Agilent in
accordance with Section 7.2(a).
C. Employee Election -- Pre-February 12, 1999 Options. Before the IPO,
--------------------------------------------------
each Agilent Employee with a Pre-February 12, 1999 Option shall be given the
opportunity to elect, in lieu of B(i) above: (i) with respect to HP Cliff
Options scheduled to vest on or after December 1, 1999, or the IPO date, if
later, to cancel such HP Cliff Options in return for Agilent IPO Options; or
(ii) with respect to HP Cliff Options scheduled to vest on or after the
Distribution Date, to have Agilent assume such HP Cliff Options in accordance
with B(ii) above.
D. Employee Election -- Post-February 11, 1999 Options. Before the IPO,
---------------------------------------------------
each Agilent Employee with a Post-February 11, 1999 Option shall be given the
opportunity to elect, in lieu of B(ii) above, Agilent IPO Options.
E. Agilent IPO Options. The value of an Agilent IPO Option shall be
-------------------
substantially equivalent to the value of the cancelled HP Cliff Option to which
it relates determined immediately
-x-
<PAGE>
before the IPO, such value to be reasonably determined by Agilent. Agilent IPO
Options shall have a ten-year term and shall vest under circumstances
substantially identical to the vesting conditions applicable to the
corresponding HP Cliff Option.
F. Retirement. Notwithstanding the foregoing, Agilent Employees who
----------
retire before the Distribution Date holding HP Cliff Options will not be subject
to the foregoing but shall instead continue to hold HP Cliff Options in
accordance with the terms of the applicable HP Stock Plan.
-xi-
<PAGE>
SCHEDULE 8.11
FRINGE BENEFITS
Executive Physical Program
Executive Financial Services
Commuter Assistance Program
On-Site workout facilities
LifeWorks
-xii-
<PAGE>
SCHEDULE 10.12(a)
EMPLOYMENT LITIGATION
TRANSFERRED CLAIMS
Borbely, Daniel v. HP (98-0284), Employment Discrimination
Brown, Frances v. HP (92-0062), Employment
Carter, Kimberly v. HP (99-0001), Employment
Cirelli, Linda v. HP (99-0056), Employment Discrimination
Garrett, Terry v. HP (95-0028), Employment Discrimination
Maier, Craig v. HP (97-0097), Employment Discrimination
Reed, Robert v. HP (98-0296), Employment
Serino, Kimberly v. HP (98-0280), Employment Discrimination
Truong v. HP (98-0023), Employment
-xiii-
<PAGE>
SCHEDULE 10.12(b)
EMPLOYMENT LITIGATION
JOINTLY DEFEND CLAIMS
[None]
-xiv-
<PAGE>
EXHIBIT 2.8
TAX SHARING AGREEMENT
BY AND AMONG
HEWLETT-PACKARD COMPANY
AND ITS AFFILIATES
AND
AGILENT TECHNOLOGIES, INC.
AND ITS AFFILIATES
Dated November 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions................................................... 2
1.1 In General............................................... 2
----------
"Additional Japan Restructuring Tax"..................... 2
"Additional Restructuring Tax"........................... 2
"After Tax Amount"....................................... 2
"Agilent Affiliate"...................................... 3
"Agilent Business"....................................... 3
"Agilent Group".......................................... 3
"Agilent Group Combined Tax Liability"................... 3
"Agilent Group Federal Income Tax Liability"............. 3
"Agilent Historic Affiliate"............................. 3
"Agilent Uncontrolled Affiliate"......................... 3
"Agilent VP"............................................. 3
"Applicable Spinoff"..................................... 4
"Audit".................................................. 4
"Carryback Period"....................................... 4
"Cash Distribution"...................................... 4
"Code"................................................... 4
"Combined Group"......................................... 4
"Combined Return"........................................ 4
"Consolidated Group"..................................... 4
"Consolidated Return".................................... 4
"Consolidated Return Year" .............................. 4
"Contemplated Domestic Restructuring Taxes".............. 5
"Contemplated Foreign Restructuring Taxes"............... 5
"Contemplated Japan Restructuring Tax"................... 5
"Customs Taxes".......................................... 5
"Distribution Date"...................................... 5
"Domestic Restructuring"................................. 5
"Domestic Restructuring Tax"............................. 5
"Estimated Tax Installment Date"......................... 5
"Federal Income Tax"..................................... 5
"Federal Income Tax Benefit" ............................ 6
"Federal Tax"............................................ 6
"Filing Party"........................................... 6
"Final Determination".................................... 6
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
"Foreign Operating Tax".................................. 6
"Foreign Restructuring".................................. 6
"Foreign Restructuring Tax".............................. 7
"Foreign Tax Authority".................................. 7
"Hewlett-Packard Affiliate".............................. 7
"Hewlett-Packard Business"............................... 7
"Hewlett-Packard Foreign Sales Corporation".............. 7
"Hewlett-Packard Uncontrolled Affiliate"................. 7
"Hewlett-Packard VP"..................................... 7
"Income Taxes"........................................... 7
"Indemnifying Party"..................................... 8
"Indemnitee"............................................. 8
"Internal Distribution".................................. 8
"Initial Private Letter Ruling".......................... 8
"Interest Accrual Period"................................ 8
"Interim Period"......................................... 8
"IPO".................................................... 8
"Japan Restructuring Tax"................................ 8
"Joint Responsibility Item".............................. 8
"Non-Federal Combined Tax"............................... 8
"Non-Federal Separate Tax"............................... 8
"Non-Federal Tax"........................................ 8
"Non-Filing Party"....................................... 9
"Option"................................................. 9
"Payment Period"......................................... 9
"Post-Distribution Period"............................... 9
"Pre-Distribution Period"................................ 9
"Pre-Separation Period".................................. 9
"Privilege".............................................. 9
"Pro Forma Agilent Group Combined Return"................ 9
"Pro Forma Agilent Group Consolidated Return"............ 9
"Public Distribution" ................................... 9
"Redetermination Amount"................................. 10
"Restriction Period"..................................... 10
"Restructuring Tax"...................................... 10
"Ruling Documents"....................................... 10
"Separate Return"........................................ 10
"Separation"............................................. 10
"Separation Agreement"................................... 10
"Separation Date"........................................ 10
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
"Service"................................................ 10
"Sole Responsibility Item" .............................. 10
"Spinoff"................................................ 10
"Supplemental Ruling".................................... 11
"Supplemental Ruling Documents".......................... 11
"Tax".................................................... 11
"Tax Arbiter"............................................ 11
"Tax Asset".............................................. 11
"Tax Authority".......................................... 11
"Tax Benefit"............................................ 11
"Tax Detriment".......................................... 12
"Tax Item"............................................... 12
"Tax Law"................................................ 12
"Tax Return"............................................. 12
"Treasury Regulations"................................... 12
1.2 Construction Principles.................................. 12
-----------------------
Section 2. Preparation and Filing of Tax Returns......................... 13
2.1 In General............................................... 13
----------
2.2 Provision of Tax Return Information...................... 13
-----------------------------------
2.3 Manner of Filing Tax Returns............................. 15
----------------------------
2.4 Review of Tax Returns.................................... 16
---------------------
2.5 Agent.................................................... 17
-----
Section 3. Tax Sharing................................................... 17
3.1 In General............................................... 17
----------
3.2 Agilent Group Federal Income Tax Liability............... 18
------------------------------------------
3.3 Agilent Group Combined Tax Liability..................... 18
------------------------------------
3.4 Cooperation.............................................. 19
-----------
Section 4. Payment of Taxes and Tax Sharing Amounts...................... 19
4.1 Federal Income Taxes..................................... 19
--------------------
4.2 Non-Federal Combined Taxes............................... 19
--------------------------
4.3 Non-Federal Separate Taxes............................... 19
--------------------------
4.4 Other Federal Taxes...................................... 19
-------------------
4.5 Tax Sharing Installment Payments......................... 20
--------------------------------
4.6 Tax Sharing True-up Payments............................. 20
----------------------------
4.7 Redetermination Amounts.................................. 21
-----------------------
Section 5. Restructuring Taxes and Deconsolidation....................... 22
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
5.1 Liability for Restructuring Taxes........................ 22
---------------------------------
5.2 Agilent Representations.................................. 23
-----------------------
5.3 Hewlett-Packard Representations.......................... 25
-------------------------------
5.4 Private Letter Rulings................................... 27
----------------------
5.5 Carrybacks............................................... 28
----------
5.6 Allocation of Tax Items.................................. 29
-----------------------
5.7 Continuing Covenants..................................... 29
--------------------
5.8 Allocation of Tax Assets................................. 30
------------------------
5.9 Japan Restructuring Taxes................................ 30
-------------------------
5.10 Certain Foreign Operating Taxes.......................... 33
-------------------------------
5.11 Other Restructuring Taxes................................ 34
-------------------------
Section 6. Additional Obligations........................................ 35
6.1 Indemnification.......................................... 35
---------------
6.2 Payments................................................. 36
--------
6.3 Prompt Performance....................................... 37
------------------
6.4 After Tax Amounts........................................ 37
-----------------
6.5 Interest................................................. 37
--------
6.6 Tax Records. ........................................... 37
-----------
Section 7. Audits........................................................ 38
7.1 In General............................................... 38
----------
7.2 Notice................................................... 39
------
7.3 Participation Rights..................................... 39
--------------------
7.4 Limitations.............................................. 40
-----------
7.5 Failure to Notify, Etc................................... 42
-----------------------
7.6 Affirmative Claims....................................... 43
------------------
7.7 Remedies................................................. 43
--------
Section 8. Stock Options and Restricted Stock............................ 44
8.1 In General............................................... 44
----------
8.2 Notices, Withholding, Reporting.......................... 44
-------------------------------
8.3 Adjustments.............................................. 44
-----------
Section 9. Other Tax Matters............................................. 45
9.1 Other Adjustments........................................ 45
-----------------
9.2 Research Tax Credit...................................... 45
-------------------
9.3 Foreign Sales Corporation Matters........................ 45
---------------------------------
9.4 Intercompany Pricing Adjustments......................... 45
--------------------------------
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Section 10. Miscellaneous................................................. 46
10.1 Effectiveness........................................... 46
-------------
10.2 Notices................................................. 46
-------
10.3 Changes in Law.......................................... 47
--------------
10.4 Confidentiality......................................... 47
---------------
10.5 Successors.............................................. 48
----------
10.6 Affiliates.............................................. 48
----------
10.7 Authorization, Etc...................................... 49
-------------------
10.8 Entire Agreement........................................ 49
----------------
10.9 Applicable Law; Jurisdiction............................ 49
----------------------------
10.10 Dispute Resolution...................................... 49
------------------
10.11 Counterparts............................................ 50
------------
10.12 Severability............................................ 50
------------
10.13 No Third Party Beneficiaries............................ 50
----------------------------
10.14 Waivers, Etc............................................ 50
-------------
10.15 Setoff.................................................. 50
------
</TABLE>
v
<PAGE>
TAX SHARING AGREEMENT
---------------------
THIS TAX SHARING AGREEMENT (this "Agreement"), dated as of November 1,
1999, by and among Hewlett-Packard Company ("Hewlett-Packard"), a Delaware
corporation and each Hewlett-Packard Affiliate (as defined below), and Agilent
Technologies, Inc. ("Agilent"), a Delaware corporation and currently a direct,
wholly owned subsidiary of Hewlett-Packard, and each Agilent Affiliate (as
defined below) is entered into in connection with the Spinoff (as defined
below).
RECITALS
--------
WHEREAS, as set forth in the Master Separation and Distribution
Agreement dated as of August 12, 1999 (the "Separation Agreement"), and subject
to the terms and conditions thereof, Hewlett-Packard wishes to transfer and
assign to Agilent substantially all of the assets and liabilities currently
associated with the Agilent Business (as defined below) and the stock,
investments and similar interests currently held by Hewlett-Packard in
subsidiaries and other entities that conduct such business (the "Separation");
WHEREAS, following the Separation, Hewlett-Packard and Agilent
currently contemplate that Agilent will make an initial public offering (the
"IPO") of Agilent Common Stock that will reduce Hewlett-Packard's ownership of
Agilent on a fully-diluted basis to not less than 80.1 percent;
WHEREAS, Agilent intends to distribute all of the proceeds of the IPO
to Hewlett-Packard and Hewlett-Packard intends to segregate such funds for
distribution to its creditors or shareholders (the "Cash Distribution");
WHEREAS, Hewlett-Packard intends to distribute all of its shares of
Agilent Common Stock, on a pro rata basis, to the holders of the common stock of
Hewlett-Packard, subject to the terms and conditions of the Separation Agreement
(the "Public Distribution");
WHEREAS, prior to consummating the Separation and the Public
Distribution, various Hewlett-Packard Affiliates and the Agilent Affiliates will
have undertaken certain restructuring transactions designed to separate the
Agilent Business from the Hewlett-Packard Business in jurisdictions outside of
the United States, as defined in Section 7701(a)(9) of the Code, (the "Foreign
Restructuring"), and Hewlett-Packard World Trade, Inc., a wholly owned Delaware
subsidiary of
<PAGE>
Hewlett-Packard, will contribute all of its property relating to the Agilent
Business into Agilent World Trade, Inc., a newly formed Delaware corporation,
and will distribute all of the stock of Agilent World Trade, Inc. to Hewlett-
Packard (the "Internal Distribution");
WHEREAS, the Separation, the Public Distribution, the Internal
Distribution and certain of the transactions involved in the Foreign
Restructuring are intended to qualify as tax free reorganizations and
distributions under Sections 368(a)(1)(D) and 355 of the Code; and
WHEREAS, in contemplation of the Public Distribution pursuant to which
Agilent and its domestic subsidiaries will cease to be members of the Hewlett-
Packard Group (as defined below), the parties hereto have determined to enter
into this Agreement, setting forth their agreement with respect to certain tax
matters.
AGREEMENT
---------
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
Section 1. Definitions
1.1 In General. As used in this Agreement, the following capitalized
----------
terms shall have the following meanings:
"Additional Japan Restructuring Tax" means any Additional
Restructuring Tax incurred with respect to the sale of the Hewlett-Packard
Business by Hewlett-Packard Japan to the Hewlett-Packard Affiliate that will
continue to conduct such business in Japan after the Separation Date
("Additional Japan Restructuring Tax")
"Additional Restructuring Tax" has the meaning set forth in Section
5.1(b) of this Agreement.
"After Tax Amount" means any additional amount necessary to reflect
the hypothetical Tax consequences of the receipt or accrual of any payment
required to be made under this Agreement (including payment of an additional
amount or amounts hereunder and the effect of the deductions available for
interest paid or accrued and for Taxes such as state and local income Taxes),
determined by
2
<PAGE>
using the highest marginal corporate Tax rate (or rates, in the case of an item
that affects more than one Tax) for the relevant taxable period (or portion
thereof).
"Agilent Affiliate" means any corporation or other entity directly or
indirectly controlled by Agilent.
"Agilent Business" has the meaning set forth in the Separation
Agreement.
"Agilent Group" means the affiliated group of corporations as defined
in Section 1504(a) of the Code, or similar group of entities as defined under
corresponding provisions of the laws of other jurisdictions, of which Agilent
would be the common parent corporation immediately after the Separation Date if
it were not a subsidiary of Hewlett-Packard, and any corporation or other entity
which may become a member of such group from time to time.
"Agilent Group Combined Tax Liability" means, with respect to any
taxable period, the Agilent Group's liability for Non-Federal Combined Taxes as
determined under Section 3.3 of this Agreement.
"Agilent Group Federal Income Tax Liability" means, with respect to
any taxable period, the Agilent Group's liability for Federal Income Taxes as
determined under Section 3.2 of this Agreement.
"Agilent Historic Affiliate" means any Agilent Affiliate that was
directly or indirectly controlled by Hewlett-Packard on or before October 31,
1999, or any Agilent Uncontrolled Affiliate in which Hewlett-Packard directly or
indirectly owned an equity or other ownership interest on or before October 31,
1999, in either case including the companies listed in Appendix E of this
Agreement.
"Agilent Uncontrolled Affiliate" means any corporation or other entity
in which Agilent directly or indirectly owns an equity or other ownership
interest but which Agilent does not directly or indirectly control.
"Agilent VP" means the vice president of Agilent with authority over
Tax matters.
3
<PAGE>
"Applicable Spinoff" means each of the transactions identified in
Appendix D of this Agreement, each of which is intended to qualify as a non-
recognition transaction under the Code.
"Audit" includes any audit, assessment of Taxes, other examination by
any Tax Authority, proceeding, or appeal of such a proceeding relating to Taxes,
whether administrative or judicial, including proceedings relating to competent
authority determinations.
"Carryback Period" has the meaning set forth in Section 5.5(a) of this
Agreement.
"Cash Distribution" has the meaning set forth in the Recitals to this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Group" means a group of corporations or other entities that
files a Combined Return.
"Combined Return" means any Tax Return with respect to Non-Federal
Taxes filed on a consolidated, combined (including nexus combination, worldwide
combination, domestic combination, line of business combination or any other
form of combination) or unitary basis wherein Agilent or one or more Agilent
Affiliates join in the filing of such Tax Return (for any taxable period or
portion thereof) with Hewlett-Packard or one or more Hewlett-Packard Affiliates.
"Consolidated Group" means an affiliated group of corporations within
the meaning of Section 1504(a) of the Code that files a Consolidated Return.
"Consolidated Return" means any Tax Return with respect to Federal
Income Taxes filed on a consolidated basis wherein Agilent or one or more
Agilent Affiliates join in the filing of such Tax Return (for any taxable period
or portion thereof) with Hewlett-Packard or one or more Hewlett-Packard
Affiliates.
"Consolidated Return Year" means any taxable year for which a
Consolidated Return is filed.
4
<PAGE>
"Contemplated Domestic Restructuring Taxes" means the Domestic
Restructuring Taxes set forth in Appendix C of this Agreement.
"Contemplated Foreign Restructuring Taxes" means the Foreign
Restructuring Taxes as calculated and agreed to by Hewlett-Packard and Agilent
on or before December 15, 1999.
"Contemplated Japan Restructuring Tax" means the Contemplated Foreign
Restructuring Tax imposed with respect to the sale of the Hewlett-Packard
Business by Hewlett-Packard Japan to the Hewlett-Packard Affiliate that will
continue to conduct such business in Japan after the Separation Date.
"Customs Taxes" means any Federal Taxes that are administered by the
United States Customs Service, together with reasonable professional fees
incurred in connection therewith.
"Distribution Date" has the meaning set forth in the Separation
Agreement.
"Domestic Restructuring" means the transactions undertaken by Hewlett-
Packard and Agilent (and their respective affiliates) designed to separate the
Agilent Business from the Hewlett-Packard Business in the United States, as
defined in Section 7701(a)(9) of the Code, including the Internal Distribution,
the Separation, the Cash Payment and the Public Distribution.
"Domestic Restructuring Tax" means any Tax imposed by the United
States, or any political subdivision thereof, upon Hewlett-Packard (or any
Hewlett-Packard Affiliate) or Agilent (or any Agilent Affiliate) directly in
connection with the Domestic Restructuring, together with reasonable
professional fees incurred in connection therewith.
"Estimated Tax Installment Date" means the estimated Tax installment
due dates prescribed in Section 6655(c) of the Code (presently February 15,
April 15, July 15 and October 15), and any other date on which an installment of
estimated Taxes is required to be made.
"Federal Income Tax" means any Tax imposed under Subtitle A of the
Code (including the Taxes imposed by Sections 11, 55, 59A, and 1201(a) of the
Code), and any interest, additions to Tax or penalties applicable or related
thereto,
5
<PAGE>
and any other income-based United States Federal Tax which is hereinafter
imposed upon corporations.
"Federal Income Tax Benefit" means, with respect to any Carryback
Period, the amount determined under Section 5.5(a) of this Agreement.
"Federal Tax" means any Tax imposed or required to be withheld by any
Tax Authority of the United States.
"Filing Party" has the meaning set forth in Section 2.3(c) of this
Agreement.
"Final Determination" means any of (1) the final resolution of any Tax
(or other matter) for a taxable period, including related interest or penalties,
that, under applicable law, is not subject to further appeal, review or
modification through proceedings or otherwise, including (A) by the expiration
of a statute of limitations or a period for the filing of claims for refunds,
amending Tax Returns, appealing from adverse determinations, or recovering any
refund (including by offset), (B) by a decision, judgment, decree, or other
order by a court of competent jurisdiction, which has become final and
unappealable, (C) by a closing agreement or an accepted offer in compromise
under Section 7121 or 7122 of the Code, or comparable agreements under laws of
other jurisdictions, (D) by execution of an Internal Revenue Service Form 870 or
870AD, or by a comparable form under the laws of other jurisdictions (excluding,
however, with respect to a particular Tax Item for a particular taxable period
any such form that reserves (whether by its terms or by operation of law) the
right of the taxpayer to file a claim for refund and/or the right of the Tax
Authority to assert a further deficiency with respect to such Tax Item for such
period), or (E) by any allowance of a refund or credit, but only after the
expiration of all periods during which such refund or credit may be recovered
(including by way of offset), or (2) the payment of Tax by any member of the
Consolidated Group or Combined Group with respect to any Tax Item disallowed or
adjusted by a Tax Authority provided that the party liable for payment of such
tax determines that no action should be taken to recoup such payment.
"Foreign Operating Tax" means any Tax imposed by any Foreign Tax
Authority other than a Restructuring Tax.
"Foreign Restructuring" has the meaning set forth in the Recitals to
this Agreement.
6
<PAGE>
"Foreign Restructuring Tax" means any Tax imposed by any Tax Authority
upon Hewlett-Packard (or any Hewlett-Packard Affiliate) or Agilent (or any
Agilent Affiliate) directly in connection with the Foreign Restructuring,
together with reasonable professional fees incurred in connection therewith.
"Foreign Tax Authority" means any Tax Authority other than a Tax
Authority of the United States (as defined in Section 7701(a)(9) of the Code) or
any political subdivision thereof.
"Hewlett-Packard Affiliate" means any corporation or other entity
directly or indirectly controlled by Hewlett-Packard, but excluding Agilent or
any Agilent Affiliate.
"Hewlett-Packard Business" means any business of Hewlett-Packard other
than the Agilent Business.
"Hewlett-Packard Foreign Sales Corporation" means any Hewlett-Packard
Affiliate that is a FSC, within the meaning of Section 922 of the Code.
"Hewlett-Packard Group" means the affiliated group of corporations as
defined in Section 1504(a) of the Code, or similar group of entities as defined
under corresponding provisions of the laws of other jurisdictions, of which
Hewlett-Packard is the common parent corporation, and any corporation or other
entity which may be, may have been or may become a member of such group from
time to time, but excluding any member of the Agilent Group.
"Hewlett-Packard Uncontrolled Affiliate" means any corporation or
other entity (other than Agilent, any Agilent Affiliate or any Agilent
Uncontrolled Affiliate) in which Hewlett-Packard directly or indirectly owns an
equity or other ownership interest but which Hewlett-Packard does not directly
or indirectly control.
"Hewlett-Packard VP" means the vice president of Hewlett-Packard with
authority over Tax matters.
"Income Taxes" means (1) any Tax based upon, measured by, or
calculated with respect to (A) net income or profits (including any capital
gains Tax, minimum Tax and any Tax on items of Tax preference, but not including
sales, use, real or personal property, gross or net receipts, transfer or
similar Taxes) or (B) multiple bases if one or more of the bases upon which such
Tax may be based,
7
<PAGE>
measured by, or calculated with respect to, is described in clause (A) above, or
(2) any U.S. state or local franchise Tax.
"Indemnifying Party" has the meaning set forth in Section 6.2(a) of
this Agreement.
"Indemnitee" has the meaning set forth in Section 6.2(a) of this
Agreement.
"Internal Distribution" has the meaning set forth in the Recitals to
this Agreement.
"Initial Private Letter Ruling" means the first private letter ruling
issued by the Service to Hewlett-Packard in connection with the Spinoff.
"Interest Accrual Period" has the meaning set forth in Section 6.5 of
this Agreement.
"Interim Period" means any taxable period that begins on or after the
Separation Date but before the Distribution Date.
"IPO" has the meaning set forth in the Recitals to this Agreement.
"Japan Restructuring Tax" means any Contemplated Japan Restructuring
Tax and any Additional Japan Restructuring Tax.
"Joint Responsibility Item" means any Tax Item for which the Non-
Filing Party's responsibility under this Agreement could exceed one million
dollars ($1,000,000), but not a Sole Responsibility Item.
"Non-Federal Combined Tax" means any Non-Federal Tax with respect to
which a Combined Return is filed or could be filed.
"Non-Federal Separate Tax" means any Non-Federal Tax other than a Non-
Federal Combined Tax.
"Non-Federal Tax" means any Tax that is not a Federal Tax.
8
<PAGE>
"Non-Filing Party" has the meaning set forth in Section 2.3(e) of this
Agreement.
"Option" means an option to acquire common stock, or other equity-
based incentives the economic value of which is designed to mirror that of an
option, including non-qualified stock options, discounted non-qualified stock
options, cliff options to the extent stock is issued or issuable (as opposed to
cash compensation), and tandem stock options to the extent stock is issued or
issuable (as opposed to cash compensation).
"Payment Period" has the meaning set forth in Section 6.5 of this
Agreement.
"Post-Distribution Period" means a taxable period beginning on or
after the Distribution Date.
"Pre-Distribution Period" means any Pre-Separation Period and/or
Interim Period.
"Pre-Separation Period" means a taxable period beginning before the
Separation Date.
"Privilege" means any privilege that may be asserted under applicable
law including, any privilege arising under or relating to the attorney-client
relationship (including the attorney-client and work product privileges), the
accountant-client privilege, and any privilege relating to internal evaluation
processes.
"Pro Forma Agilent Group Combined Return" means a pro forma Non-
Federal Combined Tax Return or other schedule prepared pursuant to Section 3.3
of this Agreement.
"Pro Forma Agilent Group Consolidated Return" means a pro forma
consolidated Federal Income Tax Return or other schedule prepared pursuant to
Section 3.2 of this Agreement.
"Public Distribution" has the meaning set forth in the Recitals to
this Agreement.
9
<PAGE>
"Redetermination Amount" means, with respect to any Tax for any
taxable period, the amount determined under Section 4.7 of this Agreement.
"Restriction Period" means the period beginning on the date hereof and
ending thirty (30) months after the Distribution Date.
"Restructuring Tax" means a Domestic Restructuring Tax or a Foreign
Restructuring Tax, in each case including both Contemplated and Additional
Restructuring Taxes.
"Ruling Documents" means (1) the request for a ruling under Section
355 and various other Sections of the Code, filed with the Service in connection
with the Spinoff, together with any supplemental filings or ruling requests or
other materials subsequently submitted on behalf of Hewlett-Packard, its
subsidiaries and shareholders to the Service, the appendices and exhibits
thereto, and any rulings issued by the Service to Hewlett-Packard (or any
Hewlett-Packard Affiliate) in connection with the Spinoff or (2) any similar
filings submitted to, or rulings issued by, any other Tax Authority in
connection with the Spinoff.
"Separate Return" means any Tax Return with respect to Non-Federal
Separate Taxes filed by Hewlett-Packard, Agilent, or any of their respective
affiliates.
"Separation" has the meaning set forth in the Recitals to this
Agreement.
"Separation Agreement" has the meaning set forth in the Recitals to
this Agreement.
"Separation Date" has the meaning set forth in the Separation
Agreement.
"Service" means the Internal Revenue Service.
"Sole Responsibility Item" means any Tax Item for which the Non-Filing
Party has the entire economic liability under this Agreement.
"Spinoff" means the separation of the Agilent Business from the
Hewlett-Packard Business, and the Public Distribution.
10
<PAGE>
"Supplemental Ruling" means (1) any ruling issued by the Service in
connection with the Spinoff other than the Initial Private Letter Ruling or (2)
any similar ruling issued by any other Tax Authority addressing the application
of a provision of the laws of another jurisdiction to the Spinoff.
"Supplemental Ruling Documents" has the meaning set forth in Section
5.4(b)(i) of this Agreement.
"Tax" includes any charges, fees, levies, imposts, duties, or other
assessments of a similar nature, including income, alternative or add-on
minimum, gross receipts, profits, lease, service, service use, wage, wage
withholding, employment, workers compensation, business occupation, occupation,
premiums, environmental, estimated, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
withholding, social security, unemployment, disability, ad valorem, estimated,
highway use, commercial rent, capital stock, paid up capital, recording,
registration, property, real property gains, value added, business license,
custom duties, or other tax or governmental fee of any kind whatsoever, imposed
or required to be withheld by any Tax Authority including any interest,
additions to tax, or penalties applicable or related thereto.
"Tax Arbiter" means a nationally recognized tax attorney or tax
accountant that is a member of a nationally recognized law firm or accounting
firm which firm is independent of both parties.
"Tax Asset" means any Tax Item that has accrued for Tax purposes, but
has not been used during a taxable period, and that could reduce a Tax in
another taxable period, including a net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or credit
related to alternative minimum tax.
"Tax Authority" means any governmental authority or any subdivision,
agency, commission or authority thereof or any quasi-governmental or private
body having jurisdiction over the assessment, determination, collection or
imposition of any Tax (including the Service).
"Tax Benefit" means a reduction in the Tax liability of a taxpayer (or
of the affiliated group of which it is a member) for any taxable period. Except
as otherwise provided in this Agreement, a Tax Benefit shall be deemed to have
been realized or received from a Tax Item in a taxable period only if and to the
extent that the Tax liability of the taxpayer (or of the affiliated group of
which it is a member)
11
<PAGE>
for such period, after taking into account the effect of the Tax Item on the Tax
liability of such taxpayer in the current period and all prior periods, is less
than it would have been if such Tax liability were determined without regard to
such Tax Item.
"Tax Detriment" means an increase in the Tax liability of a taxpayer
(or of the affiliated group of which it is a member) for any taxable period.
Except as otherwise provided in this Agreement, a Tax Detriment shall be deemed
to have been realized or received from a Tax Item in a taxable period only if
and to the extent that the Tax liability of the taxpayer (or of the affiliated
group of which it is a member) for such period, after taking into account the
effect of the Tax Item on the Tax liability of such taxpayer in the current
period and all prior periods, is more than it would have been if such Tax
liability were determined without regard to such Tax Item.
"Tax Item" means any item of income, gain, loss, deduction or credit,
or other attribute that may have the effect of increasing or decreasing any Tax.
"Tax Law" means any federal, state, local or foreign law with respect
to Taxes, including the Code and Treasury Regulations.
"Tax Return" means any return, report, certificate, form or similar
statement or document (including, any related or supporting information or
schedule attached thereto and any information return, amended tax return, claim
for refund or declaration of estimated tax) required to be supplied to, or filed
with, a Tax Authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
"Treasury Regulations" means the final, temporary and proposed income
tax regulations promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).
1.2 Construction Principles. As used in this Agreement, words in any
-----------------------
gender shall be deemed to include all other genders, the singular shall be
deemed to include the plural and vice versa, and the captions and section
headings are inserted for convenience of reference only and are not intended to
have any significance for the interpretation of, or construction of, the
provisions of this Agreement.
12
<PAGE>
Section 2. Preparation and Filing of Tax Returns
2.1 In General.
----------
(1) Hewlett-Packard shall have the responsibility for the
preparation and filing of (1) all Tax Returns with respect to Hewlett-Packard,
any Hewlett-Packard Affiliate, Agilent and/or any Agilent Affiliate (other than
returns required to be filed after October 31, 1999 of an Agilent Historic
Affiliate or returns required to be filed with respect to an Agilent Historic
Affiliate for taxable periods prior to any acquisition of such Agilent Historic
Affiliate by Hewlett-Packard or any Hewlett-Packard Affiliate) for any Pre-
Separation Period and (2) all Consolidated Returns and all Combined Returns for
any Interim Period.
(2) Except as provided in Section 2.1(a) of this Agreement,
Agilent shall have the responsibility for the preparation and filing of all Tax
Returns for (1) Agilent and any Agilent Affiliate which are required to be filed
for any Interim Period and any Post-Distribution Period, (2) any Agilent
Historic Affiliate which are required to be filed after October 31, 1999 and (3)
any Agilent Historic Affiliate for taxable periods prior to the acquisition of
such Agilent Historic Affiliate by Hewlett-Packard or any Hewlett-Packard
Affiliate.
2.2 Provision of Tax Return Information.
-----------------------------------
(1) Agilent shall provide Hewlett-Packard all documents and
information, and make available employees and officers of Agilent as Hewlett-
Packard reasonably requests, on a mutually convenient basis during normal
business hours, to aid Hewlett-Packard in preparing any Tax Return described in
Section 2.1(a) of this Agreement to the extent that such Tax Return relates to
the business, assets or activities that are transferred to Agilent (or any
Agilent Affiliate), any Pro Forma Agilent Group Consolidated Returns described
in Section 4.6(a) of this Agreement, and any Pro Forma Agilent Group Combined
Returns described in Section 4.6(b) of this Agreement, or to contest any Audit
of any such Tax Return. Without limiting the foregoing, in this regard, Agilent
agrees to provide (1) the information set forth in Appendix A to this Agreement,
on or before the dates set forth therein, with respect to Consolidated Returns,
and (2) the information set forth in Appendix B to this Agreement, on or before
the dates set forth therein, with respect to Combined Returns.
(2) In the case of any Tax Return for a Pre-Distribution
Period described in Section 2.1(a) of this Agreement, Hewlett-Packard shall
provide
13
<PAGE>
employees of Agilent responsible for preparing its Tax Returns with access to
each such Tax Return, and will provide Agilent with a copy of that portion of
each such Tax Return to the extent it relates to Agilent or any Agilent
Affiliate, together with all related Tax accounting work papers, not later than
five (5) days after the receipt of a written request therefor. In addition,
Hewlett-Packard will provide employees of Agilent responsible for preparing its
Tax Returns with access to any private letter rulings, together with any
requests therefor and related documents, issued to Hewlett-Packard prior to the
Distribution Date, and will provide Agilent with a copy of such rulings or
documents to the extent that the issues discussed therein are relevant to
Agilent or an Agilent Affiliate, not later than five (5) days after the receipt
of a written request therefor.
(3) Hewlett-Packard shall provide Agilent all documents and
information, and make available employees and officers of Hewlett-Packard as
Agilent reasonably requests, on a mutually convenient basis during normal
business hours to aid Agilent in preparing any Tax Return described in Section
2.1(b) of this Agreement, or to contest any Audit of any such Tax Return.
(4) Notwithstanding any other provision of this Agreement,
neither Hewlett-Packard nor any Hewlett-Packard Affiliate shall be required to
provide Agilent or any Agilent Affiliate access to or copies of any information
that relates to Hewlett-Packard or any Hewlett-Packard Affiliate and not to the
business or assets of Agilent or any Agilent Affiliate. In addition, in the
event that Hewlett-Packard determines that the provision of any information to
Agilent or any Agilent Affiliate could be commercially detrimental, violate any
law or agreement or waive any Privilege, the parties shall take all reasonable
measures to permit the compliance with such obligations in a manner that avoids
any such harm or consequence.
(5) To the extent that Agilent acquires Tax Return software
from Hewlett-Packard, any information that relates solely to Hewlett-Packard
(and not to the business or assets of Agilent) that is included in such software
shall be deleted from such software as soon as practicable (unless such removal
would adversely affect the Agilent information included in such software) and
Agilent shall inform Hewlett-Packard of the deletions that are made.
14
<PAGE>
2.3 Manner of Filing Tax Returns.
----------------------------
(1) All Tax Returns filed after the date of this Agreement by
Hewlett-Packard, any Hewlett-Packard Affiliate, Agilent and/or any Agilent
Affiliate shall be (1) prepared in a manner that is consistent with (A) the
Ruling Documents and (B) Sections 5.6 and 5.8 of this Agreement, and (2) filed
on a timely basis (including extensions) by the party responsible for such
filing under Section 2.1 of this Agreement.
(2) Hewlett-Packard (for itself and the Hewlett-Packard
Affiliates) and Agilent (for itself and the Agilent Affiliates) agree to file
all Tax Returns for any Pre-Distribution Period, and to take all other actions
in a manner consistent with the position that Agilent and the Agilent Affiliates
are part of any Consolidated Group and any Combined Group for all days through
and including the Distribution Date.
(3) Except as otherwise provided in this Section 2.3 or Sections
2.4 and 7.6 of this Agreement, the party that is required to file a return under
Section 2.1 of this Agreement (the "Filing Party") shall have the exclusive
right to determine (1) the manner in which such Tax Return shall be prepared and
filed, including the elections, methods of accounting, positions, conventions
and principles of taxation to be used and the manner in which any Tax Item shall
be reported, (2) whether any extensions may be requested, (3) the elections that
will be made in such Tax Return, (4) whether any amended Tax Returns shall be
filed, (5) whether any claims for refund shall be made, (6) whether any refunds
shall be paid by way of refund or credited against any liability for the related
Tax, and (7) whether to retain outside specialists to prepare such Tax Return,
whom to retain for such purpose and the scope of any such retainer.
(4) In the event that a Tax Item affects a Tax Return described
in Section 2.1(a) of this Agreement and also affects a Tax Return described in
Section 2.1(b) of this Agreement that is filed after the date of this Agreement,
the Filing Party shall conform the treatment of such Tax Item in any Tax Return
described in Section 2.1(b) of this Agreement to the treatment of such Tax Item
in the applicable Tax Return described in Section 2.1(a) of this Agreement.
(5) Any Tax Return described in (1) Section 2.1(a) of this
Agreement (but only with respect to Tax Items of Agilent or an Agilent
Affiliate) or (2) Section 2.1(b) of this Agreement, in either case which Tax
Return is filed after the date of this Agreement, shall be prepared on a basis
consistent with the elections,
15
<PAGE>
methods of accounting, positions, conventions and principles of taxation and the
manner in which any Tax Item or other information is reported as reflected on
the most recently filed prior Tax Returns involving similar matters. The
preceding sentence shall not apply (1) to the extent otherwise required by
Section 2.3(a)(1) of this Agreement, (2) if the Filing Party obtains the prior
written consent (which consent shall not be unreasonably withheld) of the other
party (the "Non-Filing Party"), or (3) if there is a change in controlling law.
(6) Any Tax Return filed by Hewlett-Packard or Agilent with
respect to any Pre-Distribution Period will be filed in conformance with
Hewlett-Packard's existing intercompany pricing guidelines and any existing or
future agreements (copies of which have been or will be provided to the Agilent
VP) with respect thereto entered into with any Tax Authority, except to the
extent that Agilent enters into an agreement with any Tax Authority for the same
period and any such agreement does not result in any Tax Detriment to Hewlett-
Packard with respect to the Interim Period.
2.4 Review of Tax Returns.
---------------------
(1) The Filing Party shall provide the Non-Filing Party a draft
copy of any Tax Return that the Filing Party has prepared, together with all
related Tax and accounting work papers, not later than thirty (30) days before
the due date, including extensions, for filing such Tax Return with the
applicable Tax Authority; provided, however, that the Filing Party may redact
-------- -------
portions of any such Tax Return or related work papers to the extent that the
information set forth therein does not reasonably relate to the Non-Filing
Party. To the extent that the Filing Party makes any such redactions, the Filing
Party will provide an index of such redactions to the Non-Filing Party.
(2) The Filing Party shall accept any request by the Non-Filing
Party, that is made not later than one hundred five (105) days before the due
date, including extensions, for filing the applicable Tax Return, to incorporate
any election, method of accounting or other position, convention or principle of
taxation on such Tax Return to the extent that it relates to a Tax Item with
respect to the Non-Filing Party or any affiliate thereof, or the activities or
business of either, provided that, if reasonably requested by the Filing Party,
--------
the Non-Filing Party produces a written opinion of nationally recognized tax
counsel that there is substantial authority (within the meaning of Section 6662
of the Code) in support of such election, method of accounting or other
position, convention or principle of taxation.
16
<PAGE>
(3) Hewlett-Packard shall make its employees reasonably
available, to the extent consistent with Hewlett-Packard's process for preparing
a Consolidated Return or a Combined Return, at mutually convenient times during
normal business hours to discuss information pertinent to Agilent or any Agilent
Affiliate contained in such Consolidated Return or Combined Return prior to the
date on which Hewlett-Packard intends to file such Consolidated Return or
Combined Return.
2.5 Agent. Agilent hereby irrevocably designates, and agrees to cause
-----
each Agilent Affiliate to so designate, Hewlett-Packard as its sole and
exclusive agent and attorney-in-fact to take such action (including execution of
documents) as Hewlett-Packard, in its sole discretion, may deem appropriate in
any and all matters (including Audits) relating to any Tax Return described in
Section 2.1(a) of this Agreement; provided, however, that Hewlett-Packard shall
-------- -------
not exercise its rights as agent and attorney-in-fact in any manner that is
inconsistent with the rights granted to Agilent under this Agreement, and
nothing in this Section 2.5 shall limit the rights granted to Agilent under this
Agreement.
Section 3. Tax Sharing
3.1 In General.
----------
(1) Hewlett-Packard shall be responsible for, and shall
indemnify and hold harmless Agilent against, all Taxes that relate to Hewlett-
Packard, any Hewlett-Packard Affiliate, Agilent or any Agilent Affiliate for all
Pre-Separation Periods other than (1) Restructuring Taxes for which Agilent or
any Agilent Affiliate is liable under Section 5 of this Agreement, (2) Taxes of
any Agilent Historic Affiliate (other than Hewlett-Packard Japan, Ltd. or
Yokogawa Analytical Systems, Inc.) which are unpaid as of October 31, 1999 or
(3) Customs Taxes for which Agilent is liable under Section 3.1(c) of this
Agreement. In addition, Hewlett-Packard shall indemnify and hold harmless
Agilent against all Taxes that relate to any Hewlett-Packard Uncontrolled
Affiliate or any Agilent Uncontrolled Affiliate for all Pre-Separation Periods
other than Taxes of any such entity that is an Agilent Historic Affiliate and
which are unpaid as of October 31, 1999.
(2) For each Interim Period, Agilent shall be liable for an
amount equal to the sum of the Agilent Group Federal Income Tax Liability and
the Agilent Group Combined Tax Liability for such taxable period.
17
<PAGE>
(3) For each Pre-Separation Period, Agilent shall be liable for
eighteen percent (18%) of any Customs Taxes with respect to such taxable period
that are imposed as a result of any Final Determination with respect to the
Audit with respect to Customs Taxes that is currently pending as of the date of
this Agreement.
(4) Agilent shall indemnify and hold harmless Hewlett-Packard
against any liability for Taxes imposed on any Agilent Uncontrolled Affiliate
with respect to taxable periods beginning on or after the Separation Date, and
Hewlett-Packard shall indemnify and hold harmless Agilent against any liability
for Taxes imposed on any Hewlett-Packard Uncontrolled Affiliate with respect to
taxable periods beginning on or after the Separation Date.
3.2 Agilent Group Federal Income Tax Liability. No later than fifteen
------------------------------------------
(15) days after the filing of the Consolidated Return for the Interim Period,
Hewlett-Packard and Agilent shall prepare a Pro Forma Agilent Group Consolidated
Return. The Agilent Group Federal Income Tax Liability shall be the Agilent
Group's liability for Federal Income Taxes for such taxable period, as
determined on such Pro Forma Agilent Group Consolidated Return prepared:
(1) on the basis of the Consolidated Return for such period,
determined by including only Tax Items created by Agilent or any Agilent
Affiliate (or otherwise allocated thereto under Section 5.8 of this Agreement)
which are included in, and actually utilized on, the Consolidated Return; and
(2) applying the highest marginal corporate Tax rate in effect
for such taxable period (or any portion thereof).
3.3 Agilent Group Combined Tax Liability. With respect to any
------------------------------------
Interim Period, the Agilent Group Combined Tax Liability shall be the sum for
such taxable period of the Agilent Group's liability for each Non-Federal
Combined Tax, as determined on a Pro Forma Agilent Group Combined Return
prepared in a manner consistent with the principles and procedures set forth in
Section 3.2 of this Agreement.
3.4 Cooperation. Hewlett-Packard shall make its employees available
-----------
to Agilent, at mutually convenient times during normal business hours, as
Agilent reasonably requests, to explain each Pro Forma Agilent Group
Consolidated Return prepared after the date of this Agreement pursuant to
Section 3.2 of this Agreement and each Pro Forma Agilent Group Combined Return
prepared after the date of this Agreement pursuant to Section 3.3 of this
Agreement. Hewlett-Packard
18
<PAGE>
shall accept all reasonable suggestions made by Agilent to incorporate any
election, method of accounting or other position, convention or principle of
taxation on such Pro Forma Agilent Group Consolidated Returns and Pro Forma
Agilent Group Combined Returns, provided that, if requested by Hewlett-Packard,
--------
Agilent produces a written opinion of nationally recognized tax counsel that
there is substantial authority (within the meaning of Section 6662 of the Code)
in support of such election, method of accounting or other position, convention
or principle of taxation.
Section 4. Payment of Taxes and Tax Sharing Amounts
4.1 Federal Income Taxes. Hewlett-Packard shall pay (or cause to be
--------------------
paid) to the Service all Federal Income Taxes, if any, of any Consolidated Group
due and payable for all Pre-Distribution Periods.
4.2 Non-Federal Combined Taxes. Hewlett-Packard shall pay (or cause
--------------------------
to be paid) to the appropriate Tax Authorities all Non-Federal Combined Taxes,
if any, of any Combined Group due and payable for all Pre-Distribution Periods.
4.3 Non-Federal Separate Taxes. Agilent shall pay (or cause to be
--------------------------
paid) to the appropriate Tax Authorities all Non-Federal Separate Taxes, if any,
that relate to the Agilent Group and any Agilent Affiliate, and Hewlett-Packard
shall pay (or cause to be paid) to the appropriate Tax Authorities all Non-
Federal Separate Taxes, if any, that relate to the Hewlett-Packard Group and any
Hewlett-Packard Affiliate.
4.4 Other Federal Taxes. The parties shall each pay (or cause to be
-------------------
paid) to the appropriate Tax Authorities all of their respective Federal Taxes
(excluding Federal Income Taxes for Pre-Distribution Periods, which are governed
by Section 4.1 of this Agreement), if any.
19
<PAGE>
4.5 Tax Sharing Installment Payments.
--------------------------------
(1) Federal Income Taxes. Not later than eight (8) business days
--------------------
prior to each Estimated Tax Installment Date with respect to Federal Income
Taxes for any Interim Period (four (4) business days in the case of the first
Estimated Tax Installment Date for any Interim Period), Hewlett-Packard shall
notify Agilent of its determination, under the principles of Section 6655 of the
Code, of the estimated amount of the related installment of the Agilent Group
Federal Income Tax Liability. Agilent shall pay to Hewlett-Packard not later
than such Estimated Tax Installment Date the amount thus determined.
(2) Non-Federal Combined Taxes. Not later than eight (8)
--------------------------
business days prior to each Estimated Tax Installment Date with respect to Non-
Federal Combined Taxes for any Interim Period (four (4) business days in the
case of the first Estimated Tax Installment Date for any Interim Period),
Hewlett-Packard shall notify Agilent of its determination of the estimated
amount of the related installment of the Agilent Group Combined Tax Liability.
Agilent shall pay to Hewlett-Packard not later than such Estimated Tax
Installment Date the amount thus determined.
4.6 Tax Sharing True-up Payments.
----------------------------
(1) Federal Income Taxes. Not later than fifteen (15) business
--------------------
days after the completion of the Pro Forma Agilent Group Consolidated Return
reflecting the Agilent Group Federal Income Tax Liability for any Interim
Period, Agilent shall pay to Hewlett-Packard, or Hewlett-Packard shall pay to
Agilent, as appropriate, an amount equal to the difference, if any, between the
Agilent Group Federal Income Tax Liability for such period and the aggregate
amount paid by Agilent with respect to such period under Section 4.5(a) of this
Agreement; provided that in the event that Hewlett-Packard is entitled to a
--------
refund on its Consolidated Return for such period and Hewlett-Packard is
required to make a payment to Agilent under this Section 4.6(a), then Hewlett-
Packard shall make such payment not later than forty-five (45) days after the
completion of the Pro Forma Agilent Group Consolidated Return reflecting the
Agilent Group Federal Income Tax Liability for such period.
(2) Non-Federal Combined Taxes. Not later than fifteen (15)
--------------------------
business days after the completion of Pro Forma Agilent Group Combined Return
reflecting the Agilent Group Combined Tax Liability for any Interim Period,
Agilent shall pay to Hewlett-Packard, or Hewlett-Packard shall pay to Agilent,
as
20
<PAGE>
appropriate, an amount equal to the difference, if any, between the Agilent
Group Combined Tax Liability for such period and the amount paid by Agilent with
respect to such period under Section 4.5(b) of this Agreement; provided that in
--------
the event that Hewlett-Packard is entitled to a refund on a Combined Return for
such period and Hewlett-Packard is required to make a payment to Agilent under
this Section 4.6(b), then Hewlett-Packard shall make such payment not later than
forty-five (45) days after the completion of the Pro Forma Agilent Group
Combined Return reflecting the Agilent Group Combined Tax Liability for such
period.
(3) Treatment of Certain Tax Items. If a Tax Item (other than
------------------------------
a Tax Item or portion thereof taken into account under Sections 5.9, 5.10 or
5.11 of this Agreement) created by Agilent or any Agilent Affiliate (or
otherwise allocated thereto under Section 5.8 of this Agreement) is used on a
Consolidated Return or Combined Return and a portion of the Tax Item so used did
not otherwise reduce the amount that Agilent is required to pay Hewlett-Packard
under this Section 4 for such period, then for purposes of this Section 4.6, the
Agilent Group Federal Income Tax Liability or the Agilent Group Combined Tax
Liability, as the case may be, shall be reduced by the amount of any reduction
of Hewlett-Packard's Tax liability with respect to such Consolidated Return or
Combined Return resulting from the use of such portion of such Tax Item. Any
reduction pursuant to the preceding sentence may result in a negative amount so
as to cause the amount payable by Hewlett-Packard under this Section 4.6 to
exceed the aggregate amounts, if any, paid by Agilent under Section 4.5 for the
applicable period.
4.7 Redetermination Amounts.
-----------------------
(1) For any Interim Period, in the event of a redetermination of
any Tax Item of any member of a Consolidated Group or Combined Group (other than
Tax Items relating to Restructuring Taxes and Foreign Operating Taxes which are
subject to Section 5 of this Agreement), as a result of a refund of Taxes paid,
a Final Determination or any settlement or compromise with any Tax Authority,
Hewlett-Packard and Agilent shall prepare jointly, in accordance with the
principles and procedures set forth in Section 3 of this Agreement, revised Pro
Forma Agilent Consolidated Returns and/or revised Pro Forma Agilent Combined
Returns, as appropriate, to reflect the redetermination of such Tax Item as a
result of such refund, Final Determination, settlement or compromise. Agilent
shall pay to Hewlett-Packard, or Hewlett-Packard shall pay to Agilent, as
appropriate, an amount equal to the difference, if any, between the Tax
liability reflected on such revised pro forma tax returns and the Tax liability
for such period as originally computed pursuant to Section 3 of this Agreement.
21
<PAGE>
(2) To the extent that one party is compensated for the use of a
Tax Asset on a Consolidated Return or Combined Return under this Section 4.7,
and such use permanently prevents the other party from using a Tax Asset in a
subsequent period, then the first party shall reimburse the second party for
such amount.
(3) To the extent that Hewlett-Packard receives a refund with
respect to Taxes paid on a Separate Return of an Agilent Historic Affiliate for
any Pre-Separation Period, Hewlett-Packard shall pay the amount of such refund
to Agilent.
Section 5. Restructuring Taxes and Deconsolidation
5.1 Liability for Restructuring Taxes.
---------------------------------
(1) In General. Except as otherwise provided in this Agreement,
----------
all Contemplated Domestic Restructuring Taxes and all Contemplated Foreign
Restructuring Taxes shall be the obligation of the entity that is liable for
such Taxes under the Tax Law.
(2) Increases in Restructuring Taxes. In the event that Hewlett-
--------------------------------
Packard, any Hewlett-Packard Affiliate, Agilent, or any Agilent Affiliate incurs
any Domestic Restructuring Taxes or Foreign Restructuring Taxes other than
Contemplated Domestic Restructuring Taxes or Contemplated Foreign Restructuring
Taxes, the amount of such additional Taxes (the "Additional Restructuring
Taxes") shall be allocated between Hewlett-Packard and Agilent as follows:
(1) Liability for Breach of Representation. To the
--------------------------------------
extent that any Additional Restructuring Taxes are primarily attributable to a
breach of representation made by Agilent pursuant to Section 5.2 of this
Agreement, then one hundred percent (100%) of the amount of such Additional
Restructuring Taxes shall be allocated to Agilent. To the extent that any
Additional Restructuring Taxes are primarily attributable to a breach of
representation made by Hewlett-Packard pursuant to Section 5.3 of this
Agreement, then one hundred percent (100%) of the amount of such Additional
Restructuring Taxes shall be allocated to Hewlett-Packard.
(2) Tax Liability for Foreign Restructuring. To the
---------------------------------------
extent that any Additional Restructuring Taxes imposed by any Tax
22
<PAGE>
Authority with respect to the Foreign Restructuring are primarily attributable
to any action taken, or the failure to take any action, by Hewlett-Packard (or
any Hewlett-Packard Affiliate) or Agilent (or any Agilent Affiliate), including
any Taxes imposed as a result of any violation of any agreement entered into
with a Foreign Tax Authority with respect to the Foreign Restructuring, then one
hundred percent (100%) of the amount of such Additional Restructuring Taxes
shall be allocated to such party.
(3) Other Liability. Except as provided in Section
---------------
5.1(b)(i) or (ii), any Additional Restructuring Taxes shall be allocated eighty-
two percent (82%) to Hewlett-Packard and eighteen percent (18%) to Agilent.
5.2 Agilent Representations and Covenants. Agilent, for itself and
-------------------------------------
the Agilent Affiliates, hereby represents, warrants and covenants that:
(1) Agilent has reviewed the information and representations
made in the Ruling Documents submitted to the Service prior to the date of this
Agreement (and any Supplemental Ruling Documents), copies of which were
delivered to the Agilent VP on September 17, 1999, and, to Agilent's knowledge,
all of such information or representations that relate to Agilent or any Agilent
Affiliate, or the business or operations of either, are true, correct and
complete.
(2) Agilent will not, and will cause each Agilent Affiliate not
to, take any action, or fail or omit to take any action, that would cause any of
the information or representations made in the Ruling Documents or Supplemental
Ruling Documents that relate to Agilent or any Agilent Affiliate, or the
business or operations of either, to be untrue, regardless of whether such
information or representations were included in the Initial Private Letter
Ruling (or any Supplemental Ruling).
(3) Neither Agilent nor any Agilent Affiliate will, directly or
indirectly, during the Restriction Period:
(1) enter into, or otherwise be a party to, any
transaction or arrangement (including, without limitation, stock issuances,
stock acquisitions, and transactions involving the stock or substantially all of
the assets of Agilent or any Agilent Affiliate) pursuant to which one or more
persons acquire stock of Agilent or any Agilent Affiliate representing a "50-
percent or greater interest" within the meaning of Section 355(d)(4) of the Code
that would cause Section 355(e) of the Code to apply to any Applicable Spinoff;
or
23
<PAGE>
(2) take or fail to take any other action (including,
without limitation, any cessation, transfer to affiliates or disposition of its
active trade or business, and certain reacquisitions of its stock and payments
of extraordinary dividends to its shareholders) that would cause any Applicable
Spinoff to fail to qualify for nonrecognition of gain or loss under the Code.
(4) During the Restriction Period:
(1) neither Agilent nor any Agilent Affiliate will,
directly or indirectly, in a single transaction or in a series of transactions:
(1) issue stock or other equity interests of Agilent or any Agilent Affiliate
(including, without limitation, options, rights, warrants or securities
exercisable for, or convertible into stock of Agilent or any Agilent Affiliate,
or any similar arrangement); or (2) redeem, purchase or otherwise reacquire any
of its capital stock (other than through stock purchases meeting the
requirements of section 4.05(1)(b) of Rev. Proc. 96-30, 1996-1 C.B. 696); which,
when aggregated with all other such specified transactions undertaken during the
Restriction Period, would involve the acquisition (determined under the
principles of Section 355 of the Code) by one or more persons of more than
thirty-five percent (35%) of the stock of Agilent or any Agilent Affiliate
(including stock issued by Agilent in the IPO):
(2) Agilent will not undertake any transaction that is
treated as a liquidation or merger under the Code; and
(3) no Agilent Affiliate will liquidate or merge with
or into any other entity (other than in a liquidation or merger with or into
another Agilent Affiliate that would not affect the qualification of an
Applicable Spinoff as a reorganization under Sections 368(a) and/or 355 of the
Code);
unless (1) Hewlett-Packard consents in writing, which consent shall not be
unreasonably withheld, or (2) Hewlett-Packard obtains, at Agilent's request, a
Supplemental Ruling from the applicable Tax Authority that such transaction or
series of transactions will not adversely affect the Tax treatment of any
Applicable Spinoff. If the Service issues guidance or Treasury Regulations are
issued under Section 355(e) of the Code, the parties hereby agree to meet to
review the conditions and requirements set forth in this Section 5.2(d) and to
consider making appropriate revisions thereto. Not later than fifteen (15) days
prior to consummating any of the transactions described in the first sentence of
this Section 5.2(d), Agilent shall provide notice of such transaction to the
Agilent VP; not later than five (5) days prior to consummating
24
<PAGE>
any of the transactions described in the first sentence of this Section 5.2(d),
Agilent shall provide notice of such transaction to the Hewlett-Packard VP (such
notice to be provided under method (1) or (3) of Section 11.2 of this
Agreement); provided, however, that in the event that Agilent determines that
-------- -------
such notice could be commercially detrimental, violate any law or agreement or
waive any Privilege, the parties shall take all reasonable measures to permit
Agilent's compliance with its obligations under this Section 5.2(d) (including
its obligations to obtain Hewlett-Packard's consent or a Supplemental Ruling) in
a manner that avoids any such harm or consequence. Nothing in this Section
5.2(d) shall limit the liability of either party to this Agreement for any
Restructuring Taxes that are the responsibility of such party under this
Agreement.
(5) Agilent recognizes that any failure by it or any Agilent
Affiliate to comply with their obligations under this Section 5.2 may result in
Additional Restructuring Taxes which could cause irreparable harm to Hewlett-
Packard, the Hewlett-Packard Affiliates and their stockholders, and that such
persons may be inadequately compensated by monetary damages for such failure.
Accordingly, if (1) Agilent or any Agilent Affiliate shall fail to comply with
any obligation under this Section 5.2 which would be reasonably foreseeable to
result in any Additional Restructuring Taxes, and (2) Agilent shall fail to
provide Hewlett-Packard with a written opinion of nationally recognized tax
counsel that such failure to comply with such obligation will not result in any
increase in Taxes of Hewlett-Packard or any Hewlett-Packard Affiliate, and such
opinion is provided to Hewlett-Packard for its review and approval, which
approval will not be unreasonably withheld, then Hewlett-Packard and each
Hewlett-Packard Affiliate shall be entitled to injunctive relief in addition to
all other remedies.
5.3 Hewlett-Packard Representations. Hewlett-Packard, for itself and
-------------------------------
the Hewlett-Packard Affiliates, hereby represents, warrants and covenants that:
(1) Hewlett-Packard has reviewed the information and
representations made in the Ruling Documents submitted to the Service prior to
the date of this Agreement (and any Supplemental Ruling Documents), and, to its
knowledge, all of such information or representations that relate to Hewlett-
Packard or any Hewlett-Packard Affiliate, or the business or operations of
either, are true, correct and complete.
(2) Hewlett-Packard will not, and will cause each Hewlett-
Packard Affiliate not to, take any action, or fail or omit to take any action,
that would cause any of the information or representations made in the Ruling
Documents or
25
<PAGE>
Supplemental Ruling Documents to be untrue, regardless of whether such
information or representations were included in the Initial Private Letter
Ruling (or any Supplemental Ruling).
(3) Neither Hewlett-Packard nor any Hewlett-Packard Affiliate
will, directly or indirectly, during the Restriction Period:
(1) enter into, or otherwise be a party to, any
transaction or arrangement (including, without limitation, stock issuances,
stock acquisitions, and transactions involving the stock or substantially all of
the assets of Hewlett-Packard or any Hewlett-Packard Affiliate) pursuant to
which one or more persons acquire stock of Hewlett-Packard or any Hewlett-
Packard Affiliate representing a "50-percent or greater interest" within the
meaning of Section 355(d)(4) of the Code that would cause Section 355(e) of the
Code to apply to any Applicable Spinoff; or
(2) take or fail to take any other action (including,
without limitation, any cessation, transfer to affiliates or disposition of its
active trade or business, and certain reacquisitions of its stock and payments
of extraordinary dividends to its shareholders) that would cause any Applicable
Spinoff to fail to qualify for nonrecognition of gain or loss under the Code.
(4) Hewlett-Packard recognizes that any failure by it or any
Hewlett-Packard Affiliate to comply with their obligations under this Section
5.3 may result in Additional Restructuring Taxes which could cause irreparable
harm to Agilent, the Agilent Affiliates and their stockholders, and that such
persons may be inadequately compensated by monetary damages for such failure.
Accordingly, if (1) Hewlett-Packard or any Hewlett-Packard Affiliate shall fail
to comply with any obligation under this Section 5.3 which would be reasonably
foreseeable to result in any Additional Restructuring Taxes, and (2) Hewlett-
Packard shall fail to provide Agilent with a written opinion of nationally
recognized tax counsel that such failure to comply with such obligation will not
result in any increase in Taxes of Agilent any Agilent Affiliate, and such
opinion is provided to Agilent for its review and approval, which approval will
not be unreasonably withheld, then Agilent and each Agilent Affiliate shall be
entitled to injunctive relief in addition to all other remedies.
5.4 Private Letter Rulings.
----------------------
(1) Information. Hewlett-Packard has provided Agilent with a
-----------
copy of the Initial Private Letter Ruling and copies of the Ruling Documents
26
<PAGE>
submitted on or prior to the date hereof, and shall provide Agilent with copies
of any additional Ruling Documents prepared after the date hereof prior to the
submission of such Ruling Documents to a Tax Authority.
(2) Supplemental Rulings.
--------------------
(1) In General. Hewlett-Packard agrees that at the
----------
reasonable request of Agilent, Hewlett-Packard shall cooperate with Agilent and
use its reasonable best efforts to seek to obtain, as expeditiously as possible,
a Supplemental Ruling or other guidance from the Service or any other Tax
Authority for the purpose of confirming (1) the continuing validity of (A) the
Initial Private Letter Ruling, (B) any similar ruling issued by any Tax
Authority addressing the application of a provision of the laws of another
jurisdiction to the Internal Distribution or the Public Distribution and/or (C)
any Supplemental Rulings issued previously, and (2) compliance on the part of
Agilent or an Agilent Affiliate with its obligations under Section 5.2 of this
Agreement. However, Hewlett-Packard shall not be obligated to seek a
Supplemental Ruling if it reasonably believes that seeking such Supplemental
Ruling would adversely affect Hewlett-Packard or any Hewlett-Packard Affiliate.
Further, in no event shall Hewlett-Packard be required to file any Supplemental
Ruling unless Agilent represents that (1) it has read the request for the
Supplemental Ruling and any materials, appendices and exhibits submitted or
filed therewith (the "Supplemental Ruling Documents") and (2) all information
and representations, if any, relating to Agilent and any Agilent Affiliate
contained in the Supplemental Ruling Documents are true, correct and complete in
all material respects. Agilent shall reimburse Hewlett-Packard for all costs and
expenses incurred by Hewlett-Packard in obtaining a Supplemental Ruling
requested by Agilent. Agilent hereby agrees that only Hewlett-Packard shall
apply for a Supplemental Ruling, unless such Supplemental Ruling relates to a
ruling addressing the Spinoff issued by any Foreign Tax Authority to Agilent or
any Agilent Affiliate. Agilent further agrees that it shall not seek any
guidance (whether written or oral) from the Service or any other Tax Authority
concerning the Spinoff except as set forth in this Section 5.4(b). For the
avoidance of doubt, the preceding sentence shall not in any way limit the
ability of any outside counsel to Agilent to request informal guidance from the
Service regarding such issues on an anonymous basis.
(2) Participation Rights. If Hewlett-Packard
--------------------
determines to obtain a Supplemental Ruling or other guidance after the date of
this Agreement: (1) Hewlett-Packard shall keep Agilent informed in a timely
manner of all material actions taken or proposed to be taken by Hewlett-Packard
in connection therewith; (2) Hewlett-Packard shall (A) reasonably in advance of
the
27
<PAGE>
submission of any such Supplemental Ruling Documents provide Agilent with a
draft copy thereof, (B) reasonably consider Agilent's comments on such draft
copy, and (C) provide Agilent with a final copy; and (3) to the extent that such
Supplemental Ruling relates to Agilent or any Agilent Affiliate, Hewlett-Packard
shall (A) incorporate Agilent's comments on all submissions of Supplemental
Ruling Documents, and (B) provide Agilent with notice reasonably in advance of,
and Agilent shall have the right to attend, any meetings with the Tax Authority
(subject to the approval of the Tax Authority) that relate to such Supplemental
Ruling.
5.5 Carrybacks.
----------
(1) In General. Hewlett-Packard agrees to pay to Agilent the
----------
Federal Income Tax Benefit from the use in any Pre-Distribution Period (the
"Carryback Period") of a carryback of any Tax Asset of the Agilent Group from a
Post-Distribution Period (other than a carryback of any Tax Asset attributable
to Restructuring Taxes or Foreign Operating Taxes taken into account under
Sections 5.9, 5.10 or 5.11 of this Agreement); provided, however, that if such
-------- -------
carryback permanently prevents Hewlett-Packard from using a Tax Asset, Agilent
shall reimburse Hewlett-Packard for such payment to the extent of such
disallowance. The Federal Income Tax Benefit of a carryback of a Tax Asset shall
be considered equal to the greater of (1) the increase in the amount Hewlett-
Packard would have paid Agilent or (2) the decrease in the amount Agilent would
have paid Hewlett-Packard had the amount of such Tax Asset applied to the
Carryback Period arisen in such Carryback Period and the provisions of Sections
3 and 4 of this Agreement applied to such period. If subsequent to the payment
by Hewlett-Packard to Agilent of the Federal Income Tax Benefit of a carryback
of a Tax Asset of the Agilent Group, there shall be a Final Determination which
results in a (1) change to the amount of the Tax Asset so carried back or (2)
change to the amount of such Federal Income Tax Benefit, Agilent shall repay to
Hewlett-Packard, or Hewlett-Packard shall repay to Agilent, as the case may be,
any amount which would not have been payable to such other party pursuant to
this Section 5.5 had the amount of the benefit been determined in light of these
events. Agilent shall indemnify Hewlett-Packard and hold it harmless from and
against any interest, addition to Tax or penalty payable by any member of the
Hewlett-Packard Group as a result of any such event. Nothing in this Section 5.5
shall require Hewlett-Packard to file an amended Tax Return or claim for refund
of Federal Income Taxes; provided, however, that Hewlett-Packard shall use its
-------- -------
reasonable best efforts to use any carryback of a Tax Asset of the Agilent Group
that is carried back under this Section 5.5. Nothing in this Agreement is
intended to limit the ability of Agilent and the Agilent Affiliates to implement
Tax
28
<PAGE>
planning strategies designed to reduce or eliminate any carryback of any Tax
Assets of the Agilent Group from any Post-Distribution Period to any Interim
Period.
(2) Net Operating Losses. Notwithstanding any other provision
--------------------
of this Agreement, unless Hewlett-Packard otherwise expressly agrees in writing,
Agilent hereby expressly agrees to elect (under Section 172(b)(3) of the Code
and, to the extent feasible, any similar provision of any state, local or
foreign Tax Law) to relinquish any right to carryback net operating losses (in
which event no payment shall be due from Hewlett-Packard to Agilent in respect
of such net operating losses).
5.6 Allocation of Tax Items. All Tax computations for (1) any
-----------------------
Interim Periods ending on the Distribution Date and (2) the immediately
following taxable period of Agilent or any Agilent Affiliate, shall be made
pursuant to the principles of Section 1.1502-76(b) of the Treasury Regulations
or of a corresponding provision under the laws of other jurisdictions, as
determined by Hewlett-Packard, taking into account all reasonable suggestions
made by Agilent with respect thereto.
5.7 Continuing Covenants. Hewlett-Packard (for itself and each
--------------------
Hewlett-Packard Affiliate) and Agilent (for itself and each Agilent Affiliate)
agree (1) not to take any action reasonably expected to result in an increased
Tax liability to the other, a reduction in a Tax Asset of the other or an
increased liability to the other under this Agreement and (2) to take any action
reasonably requested by the other that would reasonably be expected to result in
a Tax Benefit or avoid a Tax Detriment to the other, provided that such action
does not result in any additional cost not fully compensated for by the
requesting party. The parties hereby acknowledge that the preceding sentence is
not intended to limit, and therefore shall not apply to, the rights of the
parties with respect to matters otherwise covered by this Agreement.
5.8 Allocation of Tax Assets.
------------------------
(1) In General. Hewlett-Packard and Agilent shall cooperate in
----------
determining the allocation of any Tax Assets among Hewlett-Packard, each
Hewlett-Packard Affiliate, Agilent and each Agilent Affiliate that is occasioned
by the Spinoff. The parties hereby agree that in the absence of controlling
legal authority or unless otherwise provided under this Agreement, Tax Assets
shall be allocated to the legal entity that incurred the cost or burden
associated with the creation of such Tax Asset.
29
<PAGE>
(2) Earnings and Profits. Hewlett-Packard will advise Agilent
--------------------
in writing of the decrease in Hewlett-Packard earnings and profits attributable
to the Public Distribution under Section 312(h) of the Code, as well as the
amounts of any allocations required under Temp. Treas. Reg. ? 7.367(b)-10T or
Treas. Reg. ?? 1.1248-2 or -3 (or other applicable Treasury Regulations), as a
result of the Spinoff (i) not later than April 30, 2000, with respect to
transactions completed during fiscal year 1999 and (ii) not later than April 30,
2001 with respect to transactions completed during fiscal year 2000; provided,
--------
however, that Hewlett-Packard shall provide Agilent with estimates of such
- -------
amounts (determined in accordance with past practice) prior to such anniversary
as reasonably requested by Agilent. In the event that any temporary or final
amendments to the Treasury Regulations referenced in the preceding sentence are
promulgated after the date of this Agreement that provide for any election to
apply such regulations retroactively (including any election that would permit
retroactive application of the rules set forth in Prop. Treas. Reg. ?
1.367(b)-5), then any such election shall be made only to the extent that the
Hewlett-Packard VP and Agilent VP agree to make such election.
5.9 Japan Restructuring Taxes.
-------------------------
(1) In General. Hewlett-Packard or a Hewlett-Packard Affiliate
----------
shall provide Agilent or an Agilent Affiliate with funding as of November 1,
1999 in an amount equal to the sum of:
(1) one hundred percent (100%) of the amount of the
Contemplated Japan Restructuring Tax to the extent that the parties reasonably
expect any foreign tax credits attributable thereto to be allocated to any
Hewlett-Packard Affiliate for Federal Income Tax purposes; plus
(2) sixty percent (60%) of the amount of any remaining
Contemplated Japan Restructuring Tax.
The funding to be provided by Hewlett-Packard to Agilent under this Section
5.9(a) shall be provided according to the procedures set forth in Section 2.2 of
the Separation Agreement. To the extent that the allocations referred to in
paragraphs (a)(i) and (ii) have not been ascertained as of December 15, 1999, a
subsequent adjustment to the funding to be provided by Hewlett-Packard to
Agilent under this Section 5.9(a) may be made at such time as such allocation is
ascertained, to the extent agreed by Hewlett-Packard and Agilent.
30
<PAGE>
(2) Use of Foreign Tax Credits by Hewlett-Packard. To the extent
---------------------------------------------
that Hewlett-Packard or a Hewlett-Packard Affiliate receives a Tax Benefit
attributable to an increase in foreign tax credits by reason of any Japan
Restructuring Tax, Hewlett-Packard shall pay Agilent forty percent (40%) of its
Tax Benefit, to the extent that such credits relate to the Contemplated Japan
Restructuring Tax funded by Hewlett-Packard under paragraph (a)(ii) of this
Section 5.9; eighteen percent (18%) of its Tax Benefit, to the extent that such
credits relate to an Additional Japan Restructuring Tax funded by Hewlett-
Packard and Agilent under Section 5.1(b)(iii) of this Agreement; and one hundred
percent (100%) of its Tax Benefit, to the extent that such credits relate to an
Additional Japan Restructuring Tax funded entirely by Agilent under Section
5.1(b)(i) or (ii) of this Agreement. For purposes of this Section 5.9(b),
Hewlett-Packard's Tax Benefit shall be determined first by measuring the
incremental impact on Hewlett-Packard's Federal Income Tax liability (after
taking into account the impact of all other Tax Items to Hewlett-Packard but
without regard to any Tax Items relating to any Additional Japan Restructuring
Taxes) solely as a result of any increase in foreign tax credits attributable to
Contemplated Japan Restructuring Taxes, and then by measuring the incremental
impact on Hewlett-Packard's Federal Income Tax liability (after taking into
account any Tax Items relating to any Contemplated Japan Restructuring Taxes)
solely as a result of any increase in foreign tax credits attributable to
Additional Japan Restructuring Taxes. This Section 5.9(b) shall apply to a Tax
Benefit with respect to Hewlett-Packard's liability on the Consolidated Return
for the fiscal year ending October 31, 2000 only to the extent that such Tax
Benefit is not attributable to foreign tax credits treated as used on the Pro
Forma Agilent Consolidated Return for such period (such use determined without
regard to any carryback of Japan Restructuring Taxes). Appendix F to this
Agreement sets forth examples illustrating the intended application of this
Section 5.9(b).
(3) Use of Foreign Tax Credits by Agilent. To the extent that
-------------------------------------
Agilent receives a Tax Benefit attributable to an increase in foreign tax
credits by reason of any Japan Restructuring Tax, Agilent shall pay Hewlett-
Packard one hundred percent (100%) of its Tax Benefit, to the extent that such
credits relate to the Contemplated Restructuring Tax funded by Hewlett-Packard
under paragraph (a)(i) of this Section 5.9; sixty percent (60%) of its Tax
Benefit, to the extent that such credits relate to the Contemplated Japan
Restructuring Tax funded by Hewlett-Packard under paragraph (a)(ii) of this
Section 5.9; eighty-two percent (82%) of its Tax Benefit, to the extent that
such credits relate to an Additional Japan Restructuring Tax funded by Hewlett-
Packard and Agilent under Section 5.1(b)(iii) of this Agreement; and one hundred
percent (100%) of its Tax Benefit, to the extent that such credits relate to an
Additional Japan Restructuring Tax funded entirely by
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<PAGE>
Hewlett-Packard under Section 5.1(b)(i) or (ii) of this Agreement. For purposes
of this Section 5.9(c), Agilent's Tax Benefit shall be determined first by
measuring the incremental impact on Agilent's Federal Income Tax liability
(after taking into account the impact of all other Tax Items to Agilent but
without regard to any Tax Items relating to any Additional Japan Restructuring
Taxes) solely as a result of any increase in foreign tax credits attributable to
Contemplated Japan Restructuring Taxes, and then by measuring the incremental
impact on Agilent's Federal Income Tax liability (after taking into account any
Tax Items relating to any Contemplated Japan Restructuring Taxes) solely as a
result of any increase in foreign tax credits attributable to Additional Japan
Restructuring Taxes. In making this determination with respect to the Interim
Period, Agilent shall be treated as receiving a Tax Benefit only to the extent
any credits are treated as used on the Pro Forma Agilent Consolidated Return for
such period (such use determined without regard to any carryback of Japan
Restructuring Taxes). Appendix F to this Agreement sets forth examples
illustrating the intended application of this Section 5.9(c).
(4) Subsequent Adjustments. If taking into account subsequent
----------------------
events (including, for example, carrybacks of other foreign tax credits and
Final Determinations that affect foreign tax credit computations), and taking
into account any previous adjustments pursuant to this Section 5.9(d), one of
the parties determines that it did not receive any portion of the Tax Benefit
for which it previously had made a payment to the other party pursuant to
paragraph (b) or (c) of this Section 5.9, Agilent shall pay Hewlett-Packard, or
Hewlett-Packard shall pay Agilent, as appropriate, an amount such that the net
payment (if any) equals the portion of the net Tax Benefit (taking into account
such subsequent events) specified in paragraph (b) or (c) of this Section 5.9.
(5) Other Contemplated Restructuring Taxes. The parties will
--------------------------------------
determine the impact, if any, on the amount of cash to be transferred by
Hewlett-Packard to Agilent as soon as practicable after the amount of each
Contemplated Restructuring Tax is ascertained.
5.10 Certain Foreign Operating Taxes.
-------------------------------
(1) Fiscal Year 1999 and Prior Periods. If Agilent or any
----------------------------------
Agilent Affiliate receives any Tax Benefit (including any reduction in the
amount required to be paid by Agilent to Hewlett-Packard under Section 4 of this
Agreement with respect to any Pro Forma Agilent Consolidated Return) solely as a
result of receiving a dividend or deemed distribution to which a foreign tax
credit for Foreign Operating Taxes accrued by any Hewlett-Packard Affiliate,
Hewlett-Packard Japan
32
<PAGE>
Ltd. or Yokogawa Analytical Systems, Inc. with respect to fiscal year 1999 or
any prior period is attributable (including the amount of any such credits that
are used by Agilent as a result of a carryback), Agilent shall pay the amount of
such Tax Benefit to Hewlett-Packard; for this purpose Agilent's Tax Benefit
shall be determined by measuring the incremental impact on Agilent's Federal
Income Tax liability prior to taking into account the impact of any
Restructuring Tax, but after the impact of all other Tax Items to Agilent.
Appendix F to this Agreement sets forth examples illustrating the intended
application of this Section 5.10(a).
(2) Fiscal Years 2000 and 2001. If Hewlett-Packard or any
--------------------------
Hewlett-Packard Affiliate receives any Tax Benefit (other than any Tax Benefit
that reduces the amount required to be paid by Agilent to Hewlett-Packard under
Section 4 of this Agreement with respect to any Pro Forma Agilent Consolidated
Return) solely as a result of receiving a dividend or deemed distribution to
which a credit for Foreign Operating Taxes accrued by any Agilent Affiliate with
respect to fiscal years 2000 or 2001 is attributable (including the amount of
any such credits that are used by Hewlett-Packard as a result of a carryback),
Hewlett-Packard shall pay the amount of such Tax Benefit to Agilent; for this
purpose Hewlett-Packard's Tax Benefit shall be determined by measuring the
incremental impact on Hewlett-Packard's Federal Income Tax liability prior to
taking into account the impact of any Restructuring Tax, but after the impact of
all other Tax Items to Hewlett-Packard. Appendix F to this Agreement sets forth
examples illustrating the intended application of this Section 5.10(b).
(3) Ordering Rule. For purposes of determining whether Hewlett-
-------------
Packard (or any Hewlett-Packard Affiliate) or Agilent (or any Agilent Affiliate)
receives a Tax Benefit attributable to Foreign Operating Taxes, any earnings
that gave rise to a Foreign Operating Tax (including any amount deemed received
under Section 78 of the Code that is attributable to such earnings) shall be
taken into account only with respect to such Foreign Operating Tax and not with
respect to any Restructuring Tax.
(4) Subsequent Adjustments. If taking into account subsequent
----------------------
events (including, for example, carrybacks of other foreign tax credits and
Final Determinations that affect foreign tax credit computations), and taking
into account any previous adjustments pursuant to this Section 5.10(d), one of
the parties determines that it did not receive any portion of the Tax Benefit
for which it previously had made a payment to the other party pursuant to
paragraph (a) or (b) of this Section 5.10, Agilent shall pay Hewlett-Packard, or
Hewlett-Packard shall pay Agilent, as appropriate, an amount such that the net
payment (if any) equals the
33
<PAGE>
portion of the net Tax Benefit (taking into account such subsequent events)
specified in paragraph (a) or (b) of this Section 5.10.
5.11 Other Restructuring Taxes.
-------------------------
(1) Use of Foreign Tax Credits by Hewlett-Packard. If
---------------------------------------------
Hewlett-Packard or any Hewlett-Packard Affiliate receives any Tax Benefit (other
than any Tax Benefit that reduces the amount required to be paid by Agilent to
Hewlett-Packard under Section 4 of this Agreement with respect to any Pro Forma
Agilent Consolidated Return) solely as a result of any increase in foreign tax
credits attributable to any Restructuring Tax (other than any Japan
Restructuring Tax) funded by Agilent under Section 5.1 of this Agreement,
Hewlett-Packard shall pay the amount of such Tax Benefit to Agilent that is
attributable to the portion of such Restructuring Tax funded by Agilent; for
this purpose Hewlett-Packard's Tax Benefit shall be determined by measuring the
incremental impact on Hewlett-Packard's Federal Income Tax liability prior to
taking into account the impact of any Japan Restructuring Tax, but after the
impact of all other Tax Items to Hewlett-Packard (including any Foreign
Operating Taxes taken into account under Section 5.10 of this Agreement).
(2) Use of Foreign Tax Credits by Agilent. If Agilent or any
-------------------------------------
Agilent Affiliate receives any Tax Benefit (including any reduction in the
amount required to be paid by Agilent to Hewlett-Packard under Section 4 of this
Agreement with respect to any Pro Forma Agilent Consolidated Return) solely as a
result of any increase in foreign tax credits attributable to any Restructuring
Tax (other than any Japan Restructuring Tax) funded by Hewlett-Packard under
Section 5.1 of this Agreement, Agilent shall pay the amount of such Tax Benefit
to Hewlett-Packard that is attributable to the portion of such Restructuring Tax
funded by Hewlett-Packard; for this purpose Agilent's Tax Benefit shall be
determined by measuring the incremental impact on Agilent's Federal Income Tax
liability prior to taking into account the impact of any Japan Restructuring
Tax, but after the impact of all other Tax Items to Agilent (including any
Foreign Operating Taxes taken into account under Section 5.10 of this
Agreement).
(3) Subsequent Adjustments. If taking into account subsequent
----------------------
events (including, for example, carrybacks of other foreign tax credits and
Final Determinations that affect foreign tax credit computations), and taking
into account any previous adjustments pursuant to this Section 5.11(c), one of
the parties determines that it did not receive any portion of the Tax Benefit
for which it previously had made a payment to the other party pursuant to
paragraph (a) or (b) of this
34
<PAGE>
Section 5.11, Agilent shall pay Hewlett-Packard, or Hewlett-Packard shall pay
Agilent, as appropriate, an amount such that the net payment (if any) equals the
portion of the net Tax Benefit (taking into account such subsequent events)
specified in paragraph (a) or (b) of this Section 5.11.
Section 6. Additional Obligations
6.1 Indemnification.
---------------
(1) In General. Hewlett-Packard and each Hewlett-Packard
----------
Affiliate shall jointly and severally indemnify Agilent, each Agilent Affiliate
and their respective directors, officers and employees, and hold them harmless
from and against any and all Taxes for which Hewlett-Packard or any Hewlett-
Packard Affiliate is liable under this Agreement and any loss, cost, damage or
expense, including reasonable attorneys' fees and costs, that is attributable
to, or results from the failure of Hewlett-Packard, any Hewlett-Packard
Affiliate or any director, officer or employee to make any payment required to
be made under this Agreement. Agilent and each Agilent Affiliate shall jointly
and severally indemnify Hewlett-Packard, each Hewlett-Packard Affiliate and
their respective directors, officers and employees, and hold them harmless from
and against any and all Taxes for which Agilent or any Agilent Affiliate is
liable under this Agreement and any loss, cost, damage or expense, including
reasonable attorneys' fees and costs, that is attributable to, or results from,
the failure of Agilent, any Agilent Affiliate or any director, officer or
employee to make any payment required to be made under this Agreement.
(2) Inaccurate or Incomplete Information. Hewlett-Packard and
------------------------------------
each Hewlett-Packard Affiliate shall jointly and severally indemnify Agilent,
each Agilent Affiliate and their respective directors, officers and employees,
and hold them harmless from and against any cost, fine, penalty, or other
expense of any kind attributable to the negligence of Hewlett-Packard or any
Hewlett-Packard Affiliate in supplying Agilent or any Agilent Affiliate with
inaccurate or incomplete information, in connection with the preparation of any
Tax Return. Agilent and each Agilent Affiliate shall jointly and severally
indemnify Hewlett-Packard, each Hewlett-Packard Affiliate and their respective
directors, officers and employees, and hold them harmless from and against any
cost, fine, penalty, or other expenses of any kind attributable to the
negligence of Agilent or any Agilent Affiliate in supplying Hewlett-Packard or
any Hewlett-Packard Affiliate with inaccurate or incomplete information, in
connection with the preparation of any Tax Return.
35
<PAGE>
(3) No Indemnification for Tax Items. Nothing in this Agreement
--------------------------------
shall be construed as a guarantee of the existence or amount of any loss,
credit, carryforward, basis or other Tax Item, whether past, present or future,
of Hewlett-Packard, any Hewlett-Packard Affiliate, Agilent or any Agilent
Affiliate.
6.2 Payments.
--------
(1) In General. Except as otherwise provided under this
----------
Agreement, to the extent that one party (the "Indemnifying Party") has an
indemnification or payment obligation to the other party (the "Indemnitee")
pursuant to this Agreement, the Indemnitee shall provide the Indemnifying Party
with its calculation of the amount of such indemnification payment. Such
calculation shall provide sufficient detail to permit the Indemnifying Party to
reasonably understand the calculations. All indemnification payments shall be
made to the Indemnitee or to the appropriate Tax Authority as specified by the
Indemnitee within the time prescribed for payment in this agreement, or if no
period is prescribed, within thirty (30) days after delivery by the Indemnitee
to the Indemnifying Party of written notice of a payment by or the incurrence of
such an amount based on a Final Determination, together with a computation of
the amounts due.
(2) Electronic Payments. Any payment required under this
-------------------
Agreement in an amount in excess of one million dollars ($1,000,000.00) shall be
made by electronic funds transfer of immediately available funds.
(3) Treatment of Payments. Unless otherwise required by any
---------------------
Final Determination, the parties agree to treat any payments (other than
payments of interest pursuant to Sections 5.5 or 6.5 of this Agreement and
payments of After Tax Amounts pursuant to Section 6.4 of this Agreement)
pursuant to this Agreement as relating back to the last taxable period beginning
on or before the Distribution Date and, accordingly, as not includible in
income.
6.3 Prompt Performance. All actions required to be taken by any
------------------
party under this agreement shall be performed within the time prescribed for
performance in this agreement, or if no period is prescribed, such actions shall
be performed promptly.
6.4 After Tax Amounts. If pursuant to a Final Determination it is
-----------------
determined that the receipt or accrual of any payment made under this Agreement
(other than payments of interest pursuant to Sections 5.5 or 6.5 of this
Agreement) is subject to any Tax, the party making such payment shall be liable
for (a) the After
36
<PAGE>
Tax Amount with respect to such payment and (b) interest at the rate described
in Section 6.5 of this Agreement on the amount of such Tax from the date such
Tax accrues through the date of payment of such After Tax Amount. A party making
a demand for a payment pursuant to this Agreement and for a payment of an After
Tax Amount with respect to such payment shall separately specify and compute
such After Tax Amount. However, a party may choose not to specify an After Tax
Amount in a demand for payment pursuant to this Agreement without thereby being
deemed to have waived its right subsequently to demand an After Tax Amount with
respect to such payment.
6.5 Interest. Payments pursuant to this Agreement that are not made
--------
within the period prescribed in this Agreement (the "Payment Period") shall bear
interest for the period from and including the date immediately following the
last date of the Payment Period through and including the date of payment (the
"Interest Accrual Period") at a per annum rate equal to the prime rate as
published in The Wall Street Journal on the date of determination, plus two
percent (2%). Such interest will be payable at the same time as the payment to
which it relates and shall be calculated on the basis of a year of 365 days and
the actual number of days for which due.
6.6 Tax Records. The parties to this Agreement hereby agree to
-----------
retain and provide on demand books, records, documentation and other information
relating to any Tax Return until the later of (1) the expiration of the
applicable statute of limitations (giving effect to any extension, waiver or
mitigation thereof) and (2) in the event any claim is made under this Agreement
for which such information is relevant, until a Final Determination with respect
to such claim.
Section 7. Audits
7.1 In General.
----------
(1) Except as otherwise provided in this Agreement, the Filing
Party shall have the right to control, contest, and represent the interests of
Hewlett-Packard, any Hewlett-Packard Affiliate, Agilent or any Agilent Affiliate
in any Audit relating to any Tax Return that the Filing Party is responsible for
filing under Section 2.1 of this Agreement and to resolve, settle or agree to
any deficiency, claim or adjustment proposed, asserted or assessed in connection
with or as a result of any such Audit. The Filing Party's rights shall extend to
any matter pertaining to the management and control of an Audit, including
execution of waivers, choice of forum, scheduling of conferences and the
resolution of any Tax Item.
37
<PAGE>
(2) Notwithstanding Section 7.1(a), for so long as Hewlett-
Packard owns fifty percent (50%) or more of the outstanding stock (by vote or
value) of Agilent, the entering into of any resolution, settlement or agreement
or any decision in connection with (including the entering into of) any judicial
or administrative proceeding relating to Taxes of Hewlett-Packard Japan or
Yokogawa Analytical Systems by Agilent or any Agilent Affiliate shall be subject
to Hewlett-Packard's review and approval, which approval shall not be
unreasonably withheld.
(3) Notwithstanding Sections 7.1(a) and (b), and subject to the
conditions and limitations set forth in Sections 7.2, 7.3 and 7.4 of this
Agreement,
(1) the Non-Filing Party shall have control over
decisions to resolve, settle or otherwise agree to any deficiency, claim or
adjustment with respect to any Sole Responsibility Item; and
(2) the Filing Party and the Non-Filing Party shall
have joint control over decisions to resolve, settle or otherwise agree to any
deficiency, claim or adjustment with respect to any Joint Responsibility Item.
7.2 Notice. If after the date of this Agreement, Hewlett-Packard (or
------
any Hewlett-Packard Affiliate) or Agilent (or any Agilent Affiliate) receives
written notice of, or relating to, an Audit from a Tax Authority that asserts,
proposes or recommends a deficiency, claim or adjustment that, if sustained,
could result in Taxes for which the other party is responsible under this
Agreement, then the party receiving such notice shall provide a copy of such
notice to such other party within ten (10) days of receipt thereof.
7.3 Participation Rights.
--------------------
(1) If a Tax Authority asserts, proposes or recommends a
deficiency, claim or adjustment that, if sustained, could result in Taxes for
which the Non-Filing Party is responsible under this Agreement, then the Filing
Party shall keep the Non-Filing Party informed in a timely manner of all actions
taken or proposed to be taken by the Filing Party in connection with such
deficiency, claim or adjustment.
(2) In the case of an Audit with respect to any Sole
Responsibility Item or Joint Responsibility Item, the Filing Party shall:
38
<PAGE>
(1) in the case of any material correspondence or filing
submitted to the Tax Authority or any judicial authority that relates to the
merits of such deficiency, claim or adjustment (1) reasonably in advance of such
submission, but subject to applicable time constraints imposed by such Tax
Authority or judicial authority, provide the Non-Filing Party with a draft copy
of the portion of such correspondence or filing that relates to such deficiency,
claim or adjustment, (2) incorporate, subject to applicable time constraints
imposed by such Tax Authority or judicial authority, the Non-Filing Party's
comments and changes on such draft copy of such correspondence or filing, and
(3) provide the Non-Filing Party with a final copy of the portion of such
correspondence or filing that relates to such deficiency, claim or adjustment;
and
(2) provide the Non-Filing Party with notice reasonably in
advance of, and the Non-Filing Party shall have the right to attend, any
meetings with the Tax Authority (including meetings with examiners) or hearings
or proceedings before any judicial authority to the extent they relate to such
deficiency, claim or adjustment.
(3) At the Filing Party's reasonable request (or upon the Filing
Party's consent to a request by the Non-Filing Party, which consent shall not be
unreasonably withheld), the Non-Filing Party shall assume responsibility for (1)
presenting the merits with respect to (A) any deficiency, claim or adjustment
that, if sustained, would result in Taxes for which the Non-Filing Party is
responsible under this Agreement, or (B) subject to Section 7.6 of this
Agreement, any affirmative claim relating to a Tax Item of the Non-Filing Party,
or (2) resolving, settling or agreeing to any such deficiency, claim or
adjustment. Any such request (or consent) by the Filing Party shall be subject
to the Non-Filing Party's continued compliance with the conditions of Section
7.4 of this Agreement and to such other conditions as the Filing Party and Non-
Filing Party reasonably agree.
7.4 Limitations.
-----------
(1) In General. The Filing Party shall have no obligation to
----------
contest, or to continue to contest, any deficiency, claim or adjustment and the
Non-Filing Party shall have no rights to control under Section 7.1(c) of this
Agreement or to participate under Section 7.3 of this Agreement unless:
(1) within thirty (30) days of a reasonable request by
the Filing Party, the Non-Filing Party shall deliver to the Filing Party a
39
<PAGE>
written opinion of nationally recognized tax counsel to the effect that the Non-
Filing Party's position with respect to such deficiency, claim or adjustment is
supported by substantial authority (within the meaning of Section 6662 of the
Code);
(2) the Non-Filing Party shall have agreed to be bound
by a Final Determination of such deficiency, claim or adjustment;
(3) the Non-Filing Party shall have agreed to pay, and
shall be currently paying, all reasonable out of pocket costs and expenses
incurred by the Filing Party to contest such deficiency, claim or assessment
including reasonable outside attorney's, accountants' and investigatory fees and
disbursements;
(4) the Non-Filing Party shall have advanced to the
Filing Party, on an interest-free basis (and with no additional net after-tax
cost to the Filing Party), the amount of Tax in controversy (but not in excess
of the lesser of (A) the amount of Tax for which the Non-Filing Party could be
liable under this Agreement or (B) the amounts actually expended by the Filing
Party for this item) to the extent necessary for the contest to proceed in the
forum selected by the Filing Party;
(5) the Non-Filing Party shall have provided to the
Filing Party all documents and information, and shall have made available
employees and officers of the Non-Filing Party, as may be necessary, useful or
reasonably required by the Filing Party in contesting such deficiency, claim or
adjustment; and
(6) the contest of such deficiency, claim or
adjustment shall involve no material danger of the sale, forfeiture or loss of,
or the creation of any lien on, any asset of the Filing Party (except if the
Non-Filing Party shall have adequately bonded such lien or otherwise made
provision to protect the interests of the Filing Party in a manner reasonably
satisfactory to the Filing Party).
(2) Settlement. Notwithstanding Section 7.4(a), the Filing Party
----------
may resolve, settle or agree to any deficiency, claim or adjustment proposed,
asserted or assessed in connection with any Audit of any Tax Return that it is
responsible for filing under Section 2.1 of this Agreement without the Non-
Filing Party's consent (and shall have no obligation to appeal such deficiency,
claim or adjustment in any judicial forum) if such deficiency, claim or
adjustment would result in:
40
<PAGE>
(1) a liability of the Non-Filing Party with respect
to a Sole Responsibility Item, unless within sixty (60) days of a reasonable
request by the Filing Party, the Non-Filing Party delivers to the Filing Party a
written opinion of nationally recognized tax counsel to the effect that it is
more likely than not that the Non-Filing Party's position with respect to such
deficiency, claim or adjustment will be upheld on appeal (or that it is more
likely than not that a determination with respect to such deficiency, claim or
adjustment will be reversed or substantially modified upon appeal in a manner
favorable to the Non-Filing Party), provided that if the Filing Party delivers
--------
to the Non-Filing Party a written opinion of counsel to the effect that
appealing such determination in a judicial forum would be detrimental to the
Filing Party, then the Non-Filing Party shall be required to deliver a written
opinion of nationally recognized tax counsel to the effect that such
determination should be reversed or substantially modified upon appeal in a
manner favorable to the Non-Filing Party; or
(2) a liability of the Non-Filing Party with respect
to a Joint Responsibility Item, unless within sixty (60) days of a request by
the Filing Party, the Non-Filing Party delivers to the Filing Party a written
opinion of nationally recognized tax counsel to the effect that the Non-Filing
Party's position with respect to such deficiency, claim or adjustment should be
upheld on appeal (or that a determination with respect to such deficiency, claim
or adjustment should be reversed or substantially modified upon appeal in a
manner favorable to the Non-Filing Party).
(3) Waiver. Notwithstanding any other provision of
------
this Section 7.4, the Filing Party may resolve, settle, or agree to any
deficiency, claim or adjustment for any taxable period that, if sustained, would
result in (1) a Redetermination Amount resulting from a redetermination of a Tax
Item of the Non-Filing Party or (2) any Restructuring Taxes for which the Non-
Filing Party could be responsible under this Agreement if the Filing Party
notifies the Non-Filing Party in writing that it waives the payment by the Non-
Filing Party for such taxable period of any amount that would not be payable by
the Non-Filing Party under this Agreement but for such deficiency, claim or
adjustment (but not including amounts described in Section 7.4(a)(iii) of this
Agreement that relate to the conduct to date of the contest). In such event, the
Filing Party shall promptly reimburse the Non-Filing Party for all amounts
previously advanced by the Non-Filing Party to the Filing Party in connection
with such deficiency, claim or adjustment under Section 7.4(a)(iv) of this
Agreement. In addition, the Filing Party shall reimburse the Non-Filing Party
for any Tax Detriment that directly results from the settlement of such
deficiency, claim or adjustment. No waiver by the Filing Party under this
Section 7.4(c) with respect to
41
<PAGE>
any deficiency, claim or adjustment relating to any single Tax Item, position,
issue or transaction or relating to any single Tax for any one taxable period
shall operate as a waiver with respect to any other deficiency, claim or
adjustment.
7.5 Failure to Notify, Etc. The failure of the Filing Party promptly
-----------------------
to notify the Non-Filing Party of any matter relating to a particular Tax for a
taxable period or to take any action specified in Section 7.3 of this Agreement
shall not relieve the Non-Filing Party of any liability and/or obligation which
it may have to the Filing Party under this Agreement with respect to such Tax
for such taxable period except to the extent that the Non-Filing Party's rights
hereunder are materially prejudiced by such failure and in no event shall such
failure relieve the Non-Filing Party of any other liability and/or obligation
which it may have to the Filing Party.
7.6 Affirmative Claims.
------------------
(1) In General. Subject to the principles of Sections 7.3 and
----------
7.4 of this Agreement, the Filing Party shall assert any affirmative claim
(including, without limitation, by filing an amended return or claim for refund)
relating to a Tax Item of the Non-Filing Party to the relevant Tax Authority
provided that (1) the Non-Filing Party agrees in advance to provide full
compensation to the Filing Party for any cost or detriment to the Filing Party
that would result from successfully asserting such claim, and (2) the Non-Filing
Party reasonably requests that such claim be asserted within the applicable time
period set forth in Section 7.6(b) or 7.6(c) of this Agreement. The Filing Party
may, in its sole discretion, assert any affirmative claim that does not satisfy
the foregoing conditions or that is not described in Section 7.6(b) or 7.6(c) of
this Agreement.
(2) Consolidated Return Years. Agilent shall request that
-------------------------
Hewlett-Packard assert any affirmative claims relating to a Tax Item of a member
of the Agilent Group for a Consolidated Return Year no later than the date that
is one hundred eighty (180) days after the date on which Hewlett-Packard
delivers written notice to Agilent that an examination of the Consolidated
Return for the applicable Consolidated Return Year is to begin.
(3) Combined Returns. The Non-Filing Party shall request that
----------------
the Filing Party assert any affirmative claims relating to a Tax Item of the
Non-Filing Party for a Pre-Distribution Period for which a Combined Return has
been filed no later than the date that is one hundred eighty (180) days (but
subject to applicable time constraints imposed by the Tax Authority) after the
date on which the
42
<PAGE>
Filing Party delivers written notice to the Non-Filing Party that an examination
of the Combined Return for the applicable Pre-Distribution Period has begun or
is to begin.
7.7 Remedies. Except as otherwise provided in this Agreement, the
--------
parties hereby agree that the sole and exclusive remedy for a breach by the
Filing Party of the Filing Party's obligations to the Non-Filing Party with
respect to a deficiency, claim or adjustment relating to the redetermination of
a Tax Item of the Non-Filing Party for a taxable period shall first be a
reduction in the amount that would otherwise be payable by the Non-Filing Party
for such taxable period and then an increase in amount that would otherwise be
payable by the Filing Party for such taxable period, in either case because of
the breach. The parties further agree that no claim against the Filing Party and
no defense to the Non-Filing Party's liabilities to the Filing Party under this
Agreement shall arise from the resolution by the Filing Party of any deficiency,
claim or adjustment relating to the redetermination of any Tax Item of the
Filing Party.
Section 8. Stock Options and Restricted Stock
8.1 In General. The parties hereto agree that Hewlett-Packard shall
----------
be entitled to any Tax Benefit arising by reason of exercises of Options to
purchase shares of Hewlett-Packard stock, and that Agilent shall be entitled to
any Tax Benefit arising by reason of exercises of Options to purchase shares of
Agilent stock. In addition, Hewlett-Packard shall be entitled to any Tax Benefit
arising by reason of the lapse of any restrictions with respect to shares of
Hewlett-Packard stock, Agilent stock or other property subject to a substantial
risk of forfeiture (within the meaning of Section 83 of the Code) held by an
employee of Hewlett-Packard, and Agilent shall be entitled to any Tax Benefit
arising by reason of the lapse of any restrictions with respect to shares of
Agilent stock, Hewlett-Packard stock or other property subject to a substantial
risk of forfeiture (within the meaning of Section 83 of the Code) held by an
employee of Agilent. The parties hereto agree to report all Tax deductions with
respect to stock options and other equity issued to their employees consistently
with this Section 8.1, to the extent permitted by the Tax Law.
8.2 Notices, Withholding, Reporting. Hewlett-Packard shall promptly
-------------------------------
notify Agilent of any post-Separation Date event giving rise to income to any
Agilent Group employees or former employees in connection with exercises of
options to purchase shares of Hewlett-Packard stock, or the lapse of any
restrictions with respect to shares of Hewlett-Packard stock or other property
subject to a substantial risk of forfeiture (within the meaning of Section 83 of
the Code). If
43
<PAGE>
required by the Tax Law, Agilent shall withhold applicable Taxes and satisfy
applicable Tax reporting obligations in connection therewith.
8.3 Adjustments. If Agilent or any Agilent Affiliate receives any
-----------
Tax Benefit to which Hewlett-Packard is entitled under Section 8.1 of this
Agreement, Agilent shall pay the amount of such Tax Benefit to Hewlett-Packard.
If Hewlett-Packard or any Hewlett-Packard Affiliate receives any Tax Benefit to
which Agilent is entitled under Section 8.1 of this Agreement, Hewlett-Packard
shall pay the amount of such Tax Benefit to Agilent.
Section 9. Other Tax Matters
9.1 Other Adjustments. Except as otherwise provided under this
-----------------
Agreement, if, pursuant to a Final Determination, a party to this Agreement
suffers an unanticipated Tax Detriment and, as a result, the other party to this
Agreement obtains a corresponding unanticipated Tax Benefit, and such Tax
Detriment is not otherwise compensated under this Agreement, then the party
obtaining such Tax Benefit shall make a payment to the other party in an amount
equal to such Tax Benefit.
9.2 Research Tax Credit. Within 180 days after the Distribution
-------------------
Date, Hewlett-Packard will furnish the Agilent Group, pursuant to Section 41 of
the Code, a draft of the base period information the Agilent Group will need to
properly compute its research tax credits for any taxable period beginning on or
after the Separation Date, and within thirty (30) days of receipt of such draft,
Agilent shall provide Hewlett-Packard with any comments thereon. Hewlett-Packard
shall reasonably consider all reasonable suggestions on such draft, and shall
provide the final base period information to Agilent no later than 240 days
after the Distribution Date.
9.3 Foreign Sales Corporation Matters.
---------------------------------
(1) For purposes of this Agreement, any Tax Items with respect
to a Hewlett-Packard Foreign Sales Corporation that relate to the Agilent
Business shall be allocated to Agilent and, to the extent not otherwise
reimbursed under this Agreement, Agilent shall reimburse Hewlett-Packard for any
Tax Detriment attributable thereto. In addition, any commissions that relate to
the Agilent Business shall be paid by Agilent.
44
<PAGE>
(2) In the event that any Tax Items are allocated to Agilent
pursuant to Section 9.3(a), Hewlett-Packard will pay (or will cause to be paid)
to Agilent (or a designated Agilent Affiliate) an amount equal to that portion
of the after-tax commission (as determined after taking into account any
expenses) of the applicable Hewlett-Packard Foreign Sales Corporation that
relates to the Agilent Business.
9.4 Intercompany Pricing Adjustments. If, pursuant to any agreement
--------------------------------
entered into by Hewlett-Packard with any Tax Authority, intercompany pricing
adjustments are required or permitted to be made by Hewlett-Packard (Malaysia)
Sdn Bhd, Hewlett-Packard Medical Products (Quindao) Ltd. or Hewlett-Packard
Shanghai Analytical Products Co. Ltd. with respect to fiscal year 1999 or prior
periods, then, subject to Section 2.3(f) of this Agreement, any such required or
permitted payments shall be made.
Section 10. Miscellaneous
10.1 Effectiveness. This Agreement shall become effective upon
-------------
execution by the parties hereto.
10.2 Notices. Any notice, request, instruction or other document to
-------
be given or delivered under this Agreement by any party to another party shall
be in writing and shall be deemed to have been duly given or delivered when (1)
delivered in person, (2) deposited in the United States mail, postage prepaid
and sent certified mail, return receipt requested or (3) delivered to Federal
Express or similar service for overnight delivery to the address of the party
set forth below:
If to Hewlett-Packard or any Hewlett-Packard Affiliate, to the
Hewlett-Packard VP, with a copy to the General Counsel of Hewlett-Packard, at:
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, California 94304
45
<PAGE>
A copy of any notice, request, instruction or other document to be given to
Hewlett-Packard or any Hewlett-Packard Affiliate that relates to Japanese
Operating Tax or Japanese Restructuring Tax matters shall also be delivered to:
Hewlett-Packard Japan Ltd.
Attention: Tax Department
9-1 Takakura-cho, Hachioji-shi
Tokyo 192-8510
Japan
If to Agilent or any Agilent Affiliate, to the Agilent VP, with a copy
to the General Counsel of Agilent:
Agilent Technologies Inc.
3000 Hanover Street
Palo Alto, California 94304
Any party may, by written notice to the other parties, change the address or the
party to which any notice, request, instruction or other document is to be
delivered.
10.3 Changes in Law.
--------------
(1) Any reference to a provision of the Code or a law of
another jurisdiction shall include a reference to any applicable successor
provision or law.
(2) If, due to any change in applicable law or regulations or
their interpretation by any court of law or other governing body having
jurisdiction subsequent to the date of this Agreement, performance of any
provision of this Agreement or any transaction contemplated thereby shall become
impracticable or impossible, the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such provision.
10.4 Confidentiality. Each party shall hold and cause its directors,
---------------
officers, employees, advisors and consultants to hold in strict confidence,
unless compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law, all information (other
than any such information relating solely to the business or affairs of such
party) concerning the other parties hereto furnished it by such other party or
its representatives pursuant to this
46
<PAGE>
Agreement (except to the extent that such information can be shown to have been
(1) in the public domain through no fault of such party or (2) later lawfully
acquired from other sources not under a duty of confidentiality by the party to
which it was furnished), and each party shall not release or disclose such
information to any other person, except its directors, officers, employees,
auditors, attorneys, financial advisors, bankers and other consultants who shall
be advised of and agree to be bound by the provisions of this Section 10.4. Each
party shall be deemed to have satisfied its obligation to hold confidential
information concerning or supplied by the other party if it exercises the same
care as it takes to preserve confidentiality for its own similar information.
10.5 Successors. This Agreement shall be binding on and inure to the
----------
benefit and detriment of any successor, by merger, acquisition of assets or
otherwise, to any of the parties hereto, to the same extent as if such successor
had been an original party.
10.6 Affiliates. Hewlett-Packard shall cause to be performed, and
----------
hereby guarantees the performance of, all actions, agreements and obligations
set forth herein to be performed by any Hewlett-Packard Affiliate, and Agilent
shall cause to be performed, and hereby guarantees the performance of, all
actions, agreements and obligations set forth herein to be performed by any
Agilent Affiliate; provided, however, that (1) if it is contemplated that an
-------- -------
Agilent Affiliate may cease to be an Agilent Affiliate as a result of a transfer
of its stock or other ownership interests to a third party in exchange for
consideration in an amount approximately equal to the fair market value of the
stock or other ownership interests transferred and such consideration is not
distributed outside of the Agilent Group to the shareholders of Agilent then
Agilent shall request in writing no later than thirty (30) days prior to such
cessation that Hewlett-Packard execute a release of such Agilent Affiliate from
its obligations under this Agreement effective as of such transfer provided that
Agilent shall have confirmed in writing its obligations and the obligations of
its remaining Agilent Affiliates with respect to their own obligations and those
of the departing Agilent Affiliate and that such departing Agilent Affiliate
shall have executed a release of any rights it may have against Hewlett-Packard
or any Hewlett-Packard Affiliate by reason of this Agreement, and (2) if it is
contemplated that a Hewlett-Packard Affiliate may cease to be a Hewlett-Packard
Affiliate as a result of a transfer of its stock or other ownership interests to
a third party in exchange for consideration in an amount approximately equal to
the fair market value of the stock or other ownership interests transferred and
such consideration is not distributed outside of the Hewlett-Packard Group to
the shareholders of Hewlett-Packard then Hewlett-Packard shall request in
writing no later than thirty (30) days
47
<PAGE>
prior to such cessation that Agilent execute a release of such Hewlett-Packard
Affiliate from its obligations under this Agreement effective as of such
transfer provided that Hewlett-Packard shall have confirmed in writing its
obligations and the obligations of its remaining Hewlett-Packard Affiliates with
respect to their own obligations and the obligations of the departing Hewlett-
Packard Affiliate and that such departing Hewlett-Packard Affiliate shall have
executed a release of any rights it may have against Agilent or any Agilent
Affiliate by reason of this Agreement.
10.7 Authorization, Etc. Each of the parties hereto hereby
------------------
represents and warrants that it has the power and authority to execute, deliver
and perform this Agreement, that this Agreement has been duly authorized by all
necessary corporate action on the part of such party, that this Agreement
constitutes a legal, valid and binding obligation of each such party and that
the execution, delivery and performance of this Agreement by such party does not
contravene or conflict with any provision of law or of its charter or bylaws or
any agreement, instrument or order binding on such party.
10.8 Entire Agreement. This Agreement contains the entire agreement
----------------
among the parties hereto with respect to the subject matter hereof and
supersedes any prior Tax sharing agreements between Hewlett-Packard (or any of
its Affiliates) and Agilent (or any of its Affiliates) and such prior tax
sharing agreements shall have no further force and effect.
10.9 Applicable Law; Jurisdiction. This Agreement shall be governed
----------------------------
by and construed and enforced in accordance with the laws of the State of
Delaware without giving effect to laws and principles relating to conflicts of
law. Each party to this Agreement irrevocably and unconditionally consent to
submit to the exclusive jurisdiction of the Chancery Court in and for New Castle
County, Delaware and of the courts of the United States of America located in
the State of Delaware for any actions, suits or proceedings arising out of or
relating to this agreement and the transactions contemplated hereby (and agree
not to commence any action, suit or proceeding relating thereto except in such
courts), and further agree that service of any process, summons, notice or
document by U.S. registered mail at the address set forth in Section 10.2 of
this Agreement shall be effective service of process for any action, suit or
proceeding brought against you in any such court. You hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this agreement or the transactions contemplated
hereby, in the Chancery Court in and for New Castle County, Delaware and of the
courts of the United States of America located in the State of Delaware, and
hereby further irrevocably and unconditionally waive and agree not to plead or
48
<PAGE>
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
10.10 Dispute Resolution. The resolution of any and all disputes
------------------
arising from or in connection with this Agreement shall be governed by and
settled in accordance with the provisions of Section 5.9 of the Separation
Agreement; provided, however, that at the request of Hewlett-Packard or Agilent,
-------- -------
a Tax Arbiter will be appointed for purposes of the non-binding mediation
procedures described in Section 5.9(b) of the Separation Agreement.
10.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
10.12 Severability. If any term, provision, covenant, or restriction
------------
of this Agreement is held by a court of competent jurisdiction (or an arbitrator
or arbitration panel) to be invalid, void, or unenforceable, the remainder of
the terms, provisions, covenants, and restrictions set forth herein shall remain
in full force and effect, and shall in no way be affected, impaired, or
invalidated. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions,
covenants, and restrictions without including any of such which may be hereafter
declared invalid, void, or unenforceable. In the event that any such term,
provision, covenant or restriction is held to be invalid, void or unenforceable,
the parties hereto shall use their best efforts to find and employ an alternate
means to achieve the same or substantially the same result as that contemplated
by such terms, provisions, covenant, or restriction.
10.13 No Third Party Beneficiaries. This Agreement is solely for the
----------------------------
benefit of Hewlett-Packard, the Hewlett-Packard Affiliates, Agilent and the
Agilent Affiliates. This Agreement should not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, cause of action or other
rights in excess of those existing without this Agreement.
10.14 Waivers, Etc. No failure or delay on the part of the parties
-------------
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such right or power, preclude
any other or further exercise thereof or the exercise of any other right or
power. No modification or waiver of any provision of this Agreement nor consent
to any departure by the parties therefrom shall in any event be effective unless
the same shall be in writing, and then
49
<PAGE>
tions contemplated hereby, in the Chancery Court in and for New Castle County,
Delaware and of the courts of the United States of America located in the State
of Delaware, and hereby further irrevocably and unconditionally waive and agree
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
10.10 Dispute Resolution. The resolution of any and all disputes
------------------
arising from or in connection with this Agreement shall be governed by and
settled in accordance with the provisions of Section 5.9 of the Separation
Agreement; provided, however, that at the request of Hewlett-Packard or
-------- -------
Agilent, a Tax Arbiter will be appointed for purposes of the non-binding
mediation procedures described in Section 5.9(b) of the Separation Agreement.
10.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
10.12 Severability. If any term, provision, covenant, or restriction
------------
of this Agreement is held by a court of competent jurisdiction (or an arbitrator
or arbitration panel) to be invalid, void, or unenforceable, the remainder of
the terms, provisions, covenants, and restrictions set forth herein shall remain
in full force and effect, and shall in no way be affected, impaired, or
invalidated. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions,
covenants, and restrictions without including any of such which may be hereafter
declared invalid, void, or unenforceable. In the event that any such term,
provision, covenant or restriction is held to be invalid, void or unenforceable,
the parties hereto shall use their best efforts to find and employ an alternate
means to achieve the same or substantially the same result as that contemplated
by such terms, provisions, covenant, or restriction.
10.13 No Third Party Beneficiaries. This Agreement is solely for the
----------------------------
benefit of Hewlett-Packard, the Hewlett-Packard Affiliates, Agilent and the
Agilent Affiliates. This Agreement should not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, cause of action or other
rights in excess of those existing without this Agreement.
10.14 Waivers, Etc. No failure or delay on the part of the parties in
-------------
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such right or power, preclude
any other or further exercise thereof or the exercise of any other right or
power. No modification or waiver of any provision of this Agreement nor consent
to any departure by the parties therefrom shall in any event be effective unless
the same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.
10.15 Setoff. All payments to be made by any party under this
------
Agreement may be netted against payments due to such party under this Agreement,
but otherwise shall be made without setoff, counterclaim or withholding, all of
which are hereby expressly waived.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by a duly authorized officer as of the date first above
written.
HEWLETT-PACKARD COMPANY
on behalf of itself and the Hewlett-Packard Affiliates
By /s/ LESTER D. EZRATI
--------------------------------------------
Name: Lester D. Ezrati
Title: Vice President
Tax, Licensing & Customs
AGILENT TECHNOLOGIES INC.
on behalf of itself and the Agilent Affiliates
By /s/ LISA PESCHCKE-KOEDT
--------------------------------------------
Name: Lisa Peschcke-Koedt
Title: Vice President
Global Tax & Trade
50
<PAGE>
APPENDIX A
Information to be Provided to Hewlett-Packard by Agilent
With respect to Consolidated Returns
On or before February 1, 2001:
. Trial balances
. Schedule M adjustments
On or before April 1, 2001:
. Earnings and profits of Agilent and each Agilent Affiliate
. Research credit calculations
. Foreign tax credit calculations
. Qualified exports for HP Foreign Sales Corporation
. All information necessary to perform calculations under Section 861 of
the Code and the Treasury Regulations thereunder
All information should be in machine readable form, wherever possible.
A-1
<PAGE>
APPENDIX B
Information to be Provided to Hewlett-Packard by Agilent
With respect to Combined Returns
On or before April 1, 2001:
. List of states in which Agilent or any Agilent Affiliate has nexus for
state income and franchise Tax purposes
. Property factor information
. Sales factor information
. Payroll factor information
. Business/non-business income split for all applicable states
All information should be in machine readable form, wherever possible.
B-1
<PAGE>
APPENDIX C
Contemplated Domestic Restructuring Taxes
None
C-1
<PAGE>
APPENDIX D
Applicable Spinoffs
1. The Public Distribution.
2. The Internal Distribution.
3. Each additional Foreign Restructuring transaction identified in a
written schedule agreed to by the Hewlett-Packard VP and the
Agilent VP on or before December 15, 1999.
D-1
<PAGE>
APPENDIX E
Certain Agilent Historic Affiliates
Agilent Tecnologias de Costa Rico S.A.
Biomolecular Separations
BT&D
Caliper Technologies
Cascade Microtech Inc.
Cerjac
Chartered Silicon Partners Pte Ltd.
Diametrics Medical Inc.
Discovery Partners
EESof
Four Pi
Heartstream, Inc.
Hewlett-Packard Japan, Ltd.
Hewlett-Packard (Malaysia) Sdn Bhd
Hewlett-Packard Medical Products (Qindao) Ltd.
Hewlett-Packard Microsensor Tech
Hewlett-Packard Microwave Products (M) Sdn Bhd
Hewlett-Packard Shanghai Analytical Products Co. Ltd.
Hewlett-Packard Singapore Vision Operation Pte Ltd.
Infinity
Irori Inc.
i-Stat Corporation
Libra Syscom
LumiLEDS
Metrix Network Systems
Microelectrics & Computer Technology Group
Microelectronics Tech
Micronics Japan
Optimization Systems Associates
Pete, Inc.
Quinton
Quosnetics
Rockland Technologies Inc.
Scope Communications, Inc.
Security Force Software
E-1
<PAGE>
Shanghai Huatek Software Engineering Company Ltd.
Telecom Technologies, Inc.
Telegra Corporation
Versatest
Vital Technology PTE
Yokogawa Analytical Systems, Inc.
E-2
<PAGE>
APPENDIX F
Illustrative Foreign Tax Credit Examples
Example 1: All FY1999 and FY2000 Foreign Operating Taxes and the Contemplated
Japan Restructuring Tax are included by Hewlett-Packard
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------
1999 2000 2001
---- ---- ----
---------------------------------------------------------------
Pretax operating earnings 100 140 160
---------------------------------------------------------------
Foreign Operating Taxes (50%) (50) (70) (80)
---------------------------------------------------------------
Current earnings 50 70 80
---------------------------------------------------------------
Contemplated Japan Restructuring
Tax (100) n/a n/a
---------------------------------------------------------------
Earnings and Profits (50) 20 80
---------------------------------------------------------------
---------------------------------------------------------------
Dividend Income n/a 20 80
---------------------------------------------------------------
Section 78 gross-up n/a 220 80
---------------------------------------------------------------
US taxable income n/a 240 160
---------------------------------------------------------------
US tax (35%) n/a 84 56
---------------------------------------------------------------
Foreign tax credit n/a (220) (24)
---------------------------------------------------------------
---------------------------------------------------------------
Tax Benefit n/a 136 24
---------------------------------------------------------------
</TABLE>
. Assuming that no foreign tax credits with respect to the Contemplated Japan
Restructuring Tax are allocated to any Hewlett-Packard Affiliate under
Section 367(b) of the Code and the applicable regulations, then under
Section 5.9(a) of the Agreement, Hewlett-Packard will be required to
provide Agilent with funding equal to 60, which is sixty percent of the
Contemplated Japan Restructuring Tax.
. The stacking rules of Sections 5.9 and 5.10 require that any Tax Benefit
with respect to Foreign Operating Taxes be taken into account prior to
taking into account any Tax Benefit with respect to the Japan Restructuring
Tax. Because all of the foreign tax credits with respect to the FY1999
Foreign
F-1
<PAGE>
Operating Tax are funded and included by Hewlett-Packard, Agilent will
receive no Tax Benefit with respect thereto, so no adjustments are required
under Section 5.10(a). However, because all of the foreign tax credits with
respect to the FY2000 Foreign Operating Tax are funded by Agilent but
included by Hewlett-Packard, an adjustment will be required under Section
5.10(b).
. The required adjustment under Section 5.10(b) is made by measuring the
incremental impact on Hewlett-Packard's Federal Income Tax liability after
the impact of all other Tax Items to Hewlett-Packard (other than the Japan
Restructuring Tax). Accordingly, the FY2000 Foreign Operating Taxes are
taken into account after the FY1999 Foreign Operating Taxes.
<TABLE>
<S> <C>
--------------------------------------------
FY1999 operating earnings 100
--------------------------------------------
US tax (35%) (35)
--------------------------------------------
FY1999 Foreign Operating Tax 50
--------------------------------------------
--------------------------------------------
FY1999 Operating Tax Benefit 15
--------------------------------------------
--------------------------------------------
FY2000 operating earnings 140
--------------------------------------------
US tax (35%) (49)
--------------------------------------------
FY2000 Foreign Operating Tax 70
--------------------------------------------
--------------------------------------------
FY2000 Operating Tax Benefit 21
--------------------------------------------
</TABLE>
Thus, Hewlett-Packard retains the first 15 of its total 136 of Tax Benefit,
because that amount relates to the FY1999 Foreign Operating Taxes. The Tax
Benefit attributable to FY2000 Foreign Operating Taxes, which is 21, must
be paid to Agilent under Section 5.10(b) of the Agreement. (No adjustment
is required with respect to FY2001 Foreign Operating Taxes because they are
included by Agilent.)
. Finally, Hewlett-Packard's Tax Benefit with respect to the Contemplated
Japan Restructuring Tax must be taken into account. Because 36 of its total
136 of Tax Benefit was attributable to Foreign Operating Taxes, only 100 of
Tax Benefit remains. Under Section 5.9(b), forty percent of this amount, or
40, must be paid by Hewlett-Packard to Agilent.
F-2
<PAGE>
. To summarize, Hewlett-Packard is required to provide Agilent with initial
funding of 60 for the Contemplated Japan Restructuring Tax. In addition,
Hewlett-Packard must make an additional payment to Agilent of 61, which
represents 21 of Tax Benefit attributable to the FY2000 Foreign Operating
Taxes and 40 of Tax Benefit attributable to the Japan Restructuring Tax.
Example 2: All FY1999 and FY2000 Foreign Operating Taxes and the Japan
Restructuring Tax are included by Agilent
<TABLE>
<CAPTION>
----------------------------------------------------------------
1999 2000 2001
---- ---- ----
----------------------------------------------------------------
<S> <C> <C> <C>
Pretax operating earnings 100 140 160
----------------------------------------------------------------
Foreign Operating Taxes (50%) (50) (70) (80)
----------------------------------------------------------------
Current earnings 50 70 80
----------------------------------------------------------------
Contemplated Japan Restructuring Tax (120) n/a n/a
----------------------------------------------------------------
Earnings and Profits (70) 0 80
----------------------------------------------------------------
----------------------------------------------------------------
Dividend Income n/a n/a 80
----------------------------------------------------------------
Section 78 gross-up n/a n/a 320
----------------------------------------------------------------
US taxable income n/a n/a 400
----------------------------------------------------------------
US tax (35%) n/a n/a 140
----------------------------------------------------------------
Foreign tax credit n/a n/a (320)
----------------------------------------------------------------
----------------------------------------------------------------
Tax Benefit n/a n/a 180
----------------------------------------------------------------
</TABLE>
. Assuming that no foreign tax credits with respect to the Contemplated Japan
Restructuring Tax are allocated to any Hewlett-Packard Affiliate under
Section 367(b) of the Code and the applicable regulations, then under
Section 5.9(a) of the Agreement, Hewlett-Packard will be required to
provide Agilent with funding equal to 72, which is sixty percent of the
Contemplated Japan Restructuring Tax.
F-3
<PAGE>
. The stacking rules of Sections 5.9 and 5.10 require that any Tax Benefit
with respect to Foreign Operating Taxes be taken into account prior to
taking into account any Tax Benefit with respect to the Japan Restructuring
Tax. Because all of the foreign tax credits with respect to the FY1999
Foreign Operating Tax are funded by Hewlett-Packard but included by
Agilent, an adjustment will be required under Section 5.10(a). However,
because all of the foreign tax credits with respect to the FY2000 and
FY2001 Foreign Operating Tax are funded and included by Agilent, no
adjustment will be required under Section 5.10(b).
. The required adjustment under Section 5.10(a) is made by measuring the
incremental impact on Agilent's Federal Income Tax liability after the
impact of all other Tax Items to Agilent (other than the Japan
Restructuring Tax). Accordingly, the FY2000 and FY2001 Foreign Operating
Taxes are taken into account before the FY1999 Foreign Operating Taxes.
<TABLE>
<CAPTION>
--------------------------------------------------
<S> <C>
FY2000/FY2001 operating earnings 300
--------------------------------------------------
US tax (35%) (105)
--------------------------------------------------
FY2000/2001 Foreign Oper. Tax 150
--------------------------------------------------
--------------------------------------------------
FY2000/2001 Oper. Tax Benefit 45
--------------------------------------------------
--------------------------------------------------
FY1999 operating earnings 100
--------------------------------------------------
US tax (35%) (35)
--------------------------------------------------
FY1999 Foreign Operating Tax 50
--------------------------------------------------
--------------------------------------------------
FY1999 Operating Tax Benefit 15
--------------------------------------------------
</TABLE>
Thus, Agilent retains the first 45 of its total 180 of Tax Benefit, because
that amount relates to the FY2000 and FY2001 Foreign Operating Taxes. The
Tax Benefit attributable to FY1999 Foreign Operating Taxes, which is 15,
must be paid to Hewlett-Packard under Section 5.10(a) of the Agreement.
. Finally, Agilent's Tax Benefit with respect to the Contemplated Japan
Restructuring Tax must be taken into account. Because 60 of its total 180
of Tax Benefit was attributable to Foreign Operating Taxes, only 120 of Tax
F-4
<PAGE>
Benefit remains. Under Section 5.9(c), sixty percent of this amount, or
72, must be paid by Agilent to Hewlett-Packard.
. To summarize, Hewlett-Packard is required to provide Agilent with initial
funding of 72 for the Japan Restructuring Tax. Agilent, however, is
required to make a subsequent payment to Hewlett-Packard of 87, which
represents 15 of Tax Benefit attributable to the FY1999 Foreign Operating
Taxes and 72 of Tax Benefit attributable to the Contemplated Japan
Restructuring Tax.
Example 3: Same as Example 2, but Agilent exceeds its Section 904 limitation.
. Assuming that Agilent is able to use only 100 of its 180 of available Tax
Benefit in FY2001, then the first 45 of Tax Benefit would be allocated to
the FY2000/FY2001 Foreign Operating Taxes, and the next 15 of Tax Benefit
would be allocated to the FY1999 Foreign Operating Taxes. The remaining 40
of Tax Benefit would be allocated to the Japan Restructuring Tax, 24 (60%
of 40) of which would represent the amount required to be paid to Hewlett-
Packard. Accordingly, Agilent would be required to make a payment of 39
(15 + 24) to Hewlett-Packard.
. The remaining 80 of Tax Benefit that could not be used by Agilent in FY2001
would be available for carryback or carryforward. If Agilent were able to
carry back this Tax Benefit into the Consolidated Return, then Hewlett-
Packard would be able to use the Tax Benefit. In such a case, because the
entire carryback relates to the Japan Restructuring Tax, a payment of 40
percent of the amount of the Tax Benefit carryback would be required to be
made by Hewlett-Packard to Agilent under Section 5.9(b) of the Agreement.
Thus, Hewlett-Packard would be required to pay Agilent 32.
. To the extent that the excess Tax Benefit could not be used by Agilent in
FY2001 or carried back into the Consolidated Return (because, for example,
other foreign tax credit also were carried back into the Consolidated
Return), Agilent would retain such excess as a carryforward. If Agilent
used that Tax Benefit in a subsequent year, then Agilent would be required
to pay 60 percent of the amount so used to Hewlett-Packard pursuant to
Section 5.9(c) and (d) of the Agreement.
F-5
<PAGE>
Example 4: Some (but not all) FY1999 and FY2000 Foreign Operating Taxes are
included by Hewlett-Packard
<TABLE>
<CAPTION>
-----------------------------------------------------------
1999 2000 2001
---- ---- ----
-----------------------------------------------------------
<S> <C> <C> <C>
Pretax operating earnings 100 140 160
-----------------------------------------------------------
Foreign Operating Taxes (50%) (50) (70) (80)
-----------------------------------------------------------
Current earnings 50 70 80
-----------------------------------------------------------
Contemplated Japan Restructuring Tax (100) n/a n/a
-----------------------------------------------------------
Earnings and Profits (50) 20 90
-----------------------------------------------------------
-----------------------------------------------------------
Dividend Income n/a 10 90
-----------------------------------------------------------
Section 78 gross-up n/a 110 190
-----------------------------------------------------------
US taxable income n/a 120 280
-----------------------------------------------------------
US tax (35%) n/a 42 98
-----------------------------------------------------------
Foreign tax credit n/a (110) (190)
-----------------------------------------------------------
-----------------------------------------------------------
Tax Benefit n/a 68 92
-----------------------------------------------------------
</TABLE>
. Because the dividend to Hewlett-Packard in FY2000 attracts only part of the
credits attributable to the FY1999 and FY2000 Foreign Operating Tax and the
Contemplated Japan Restructuring Tax, the Tax Benefit available to Hewlett-
Packard is less than in Example 1. Of the 68 of available Tax Benefit, the
first 15 is allocable to the FY1999 Foreign Operating Tax. The next 21 is
allocable to the FY2000 Foreign Operating Tax and, accordingly, must be
paid by Hewlett-Packard to Agilent. The remaining 32 of Tax Benefit is
allocable to the Contemplated Japan Restructuring Tax, 12.8 of which must
be paid by Hewlett-Packard to Agilent.
. The dividend to Agilent in FY2001 attracts both FY2001 Foreign Operating
Taxes and the remaining credits attributable to the Contemplated Japan
Restructuring Tax. The first 24 of Agilent's 92 Tax Benefit, therefore, is
retained by Agilent. The remaining 68 of Tax Benefit, however, is subject
to
F-6
<PAGE>
adjustment under Section 5.9(b) of the Agreement. Thus, Agilent is required
to make a payment of 40.8 to Hewlett-Packard.
Example 5: Subsequent Adjustments
. Assume that the facts are the same as Example 1, but that upon examination
of the Consolidated Return for FY2000, the Service disallows 110 of the Tax
Benefit claimed by Hewlett-Packard on that Tax Return. Because the last 100
of the Tax Benefit claimed by Hewlett-Packard in FY2000 related to the
Contemplated Japan Restructuring Tax, the amount paid by Hewlett-Packard to
Agilent under Section 5.9(b) of the Agreement would be subject to
adjustment under Section 5.9(d) of the Agreement. In addition, because the
next 10 of Tax Benefit related to the FY2000 Foreign Operating Tax, that
amount also would be subject to adjustment under Section 5.9(d) of the
Agreement. As a result, Agilent would be required to make a payment of 50
to Hewlett-Packard, representing the 40 previously paid by Hewlett-Packard
to Agilent with respect to the Contemplated Japan Restructuring Tax and 10
of the 21 previously paid by Hewlett-Packard to Agilent with respect to the
FY2000 Foreign Operating Tax.
F-7
<PAGE>
EXHIBIT 2.9
MASTER IT SERVICE LEVEL AGREEMENT
This Master IT Service Level Agreement (the "Agreement") is effective as of
November 1, 1999 (the "Effective Date"), between Hewlett-Packard Company, a
Delaware corporation ("HP"), having an office at 3000 Hanover Street, Palo Alto,
California 94304 and Agilent Technologies, Inc., a Delaware corporation
("Agilent"), having an office at 3000 Hanover Street, Palo Alto, California
94304.
1. Definitions. For the purpose of this Agreement, the following capitalized
-----------
terms shall have the following meanings:
1.1 "Ancillary Agreements" shall have the meaning set forth in Separation
--------------------
and Distribution Agreement.
1.2 "Additional Services" shall have the meaning set forth in Section 3.2.
-------------------
1.3 "Cover Sheet" shall have the meaning set forth in Section 2.
-----------
1.4 "Distribution Date" shall have the meaning set forth in the Separation
-----------------
and Distribution Agreement.
1.5 "Impracticable" shall have the meaning set forth in Section 7.2.
-------------
1.6 "Providing Company" shall mean, with respect to any particular Service
-----------------
the party or its Subsidiaries identified on the applicable Cover Sheet as the
party to provide such Service.
1.7 "Receiving Company" shall mean, with respect to any particular
-----------------
Service, the party or its Subsidiaries identified on the applicable Cover Sheet
as the party to receive such Service.
1.8 "Separation and Distribution Agreement" shall mean that certain Master
-------------------------------------
Separation and Distribution Agreement between HP and Agilent.
1.9 "Separation Date" shall have the meaning set forth in the Separation
---------------
and Distribution Agreement.
1.10 "Service(s)" shall have the meaning set forth in Section 3.1.
----------
1.11 "Subsidiary" shall have the meaning set forth in the Separation and
----------
Distribution Agreement.
1.12 "System" shall mean the software, hardware, data store or maintenance
------
and support components or portions of such components of a set of information
technology assets identified in the corresponding Exhibit A attached hereto.
---------
<PAGE>
2. Cover Sheets. This Agreement is a master agreement for various IT services.
------------
Each Service shall be covered by a single set of exhibits (each set, a "Set of
Exhibits") with a cover sheet (each, a "Cover Sheet"). Each Set of Exhibits
for each Service shall include the following Exhibits, as appropriate for that
Service:
Exhibit A: Statement of Services
Exhibit B: Compensation
Exhibit C: Software License Terms (if applicable)
Exhibit D: Confidential Disclosure Agreement
Exhibit E: Escalation Teams
For each Service, the parties shall set forth, among other things, the
identities of the Providing Company and the Receiving Company, the time period
during which the Service will be provided, a summary of the Service to be
provided and approval by each party on a Cover Sheet; a description of the
Service on the corresponding Exhibit A; and the estimated charge, if any, for
---------
the Service and any other terms applicable thereto on the corresponding Exhibit
-------
B. Obligations regarding each Set of Exhibits and its Cover Sheet shall be
- -
effective upon execution of the Cover Sheet. Each Set of Exhibits and its Cover
Sheet shall be deemed a part of this Agreement and incorporated herein wherever
reference to it is made.
3. Services.
--------
3.1 Services Generally. Except as otherwise provided herein, for the term
------------------
determined pursuant to Section 4 hereof, Providing Company shall provide or
cause to be provided to Receiving Company the services described in the Exhibit
-------
A's attached hereto. The service described on a single Exhibit A shall be
- --- ---------
referred herein as a "Service". Collectively, the services described on all the
Exhibit A's (including Additional Services) shall be referred herein as
- ---------
"Services".
3.2 Additional Services. From time to time after the Effective Date, the
-------------------
parties may identify additional services that one party will provide to the
other party in accordance with the terms of this Agreement (the "Additional
Services"). Accordingly, the parties shall execute additional Cover Sheets and
complete additional Sets of Exhibits for such Additional Services pursuant to
Section 2. Except as set forth in Section 3.3, the parties may agree in writing
on Additional Services during the term of this Agreement.
3.3 Obligations as to Additional Services. Except as set forth in the next
-------------------------------------
sentence, the Providing Company shall be obligated to perform, at a reasonable
charge, any Additional Service that: (A) was provided by the Providing Company
immediately prior to the Separation Date and that Receiving Company reasonably
believes was inadvertently or unintentionally omitted from the list of Services
or (B) is essential to effectuate an orderly transition under the Separation and
Distribution Agreement unless such performance would significantly disrupt
Providing Company's operations or materially increase the scope of its
responsibility under this Agreement. If Providing Company reasonably believes
the performance of Additional Services required under subparagraphs (A) or (B)
would significantly disrupt its operations or materially increase the scope of
its responsibility under this Agreement, the Providing Company and Receiving
Company shall negotiate in good faith to establish terms under which Providing
Company can provide such Additional Services, but the Providing Company shall
not be obligated to provide such Additional Services if, following good faith
negotiation, it is unable to reach agreement on such terms.
4. Term. The term of this Agreement shall commence on the Effective Date and
----
shall remain in effect until November 1, 2001 (the "Expiration Date"), unless
earlier terminated under Section 8. This Agreement may be extended by the
parties in writing either in whole or with respect to one or more of the
Services, provided, however, that such extension shall only apply to the
Services for which the Agreement was extended. The parties shall be deemed to
have extended this Agreement with respect to a specific Service if the Cover
Sheet for such Service specifies a completion date beyond the aforementioned
Expiration Date. The parties may
<PAGE>
agree on an earlier expiration date respecting a specific Service by specifying
such date on the Cover Sheet for that Service. Services shall be provided up to
and including the date set forth in the applicable Cover Sheet, subject to
earlier termination as provided herein.
5. Compensation.
------------
5.1 Charges for Services. Receiving Company shall pay Providing Company
--------------------
the charges, if any, set forth on the Exhibit B's for each of the Services
listed therein as adjusted, from time to time, in accordance with the process
and procedures established under Section 5.4 hereof. Such fees shall include
the direct costs and indirect costs of providing the Services plus five percent
(5%). However, if the term of this Agreement is extended beyond the Expiration
Date as provided in Section 4, Agilent will reimburse HP such costs plus 10% for
the Services. Wherever practical, fees shall be based on actual incurred costs,
not budgeted or estimated costs. The parties also intend for charges to be easy
to administer and justify and, therefore, they hereby acknowledge it may be
counterproductive to try to recover every cost, charge or expense particularly
those that are insignificant or de minimis. The parties shall use good faith
efforts to discuss any situation in which the actual charge for a Service is
reasonably expected to exceed the estimated charge, if any, set forth on an
Exhibit B for a particular Service, provided, however, that the incurrence of
charges in excess of any such estimate shall not justify stopping the provision
of, or payment for, Services under this Agreement.
5.2 Payment Terms. Providing Company shall bill Receiving Company monthly
-------------
for all charges pursuant to this Agreement. Such bills shall be accompanied by
reasonable documentation or other reasonable explanation supporting such
charges. Receiving Company shall pay Providing Company for all Services
provided hereunder within thirty-five (35) days after receipt of an invoice
therefor. Late payments shall bear interest at the Prime Rate plus two percent
(2%) per annum.
5.3 Performance Under Ancillary Agreements. Notwithstanding anything to
--------------------------------------
the contrary contained herein, Receiving Company shall not be charged under this
Agreement for any obligations that are specifically required to be performed
under the Separation and Distribution Agreement or any other Ancillary Agreement
and any such other obligations shall be performed and charged for (if
applicable) in accordance with the terms of the Separation and Distribution
Agreement or such other Ancillary Agreement.
5.4 Error Correction; True-Ups; Accounting. Before the Separation Date,
--------------------------------------
the parties shall agree on a process and procedure for conducting internal
audits and making adjustments to charges as a result of the movement of
employees and functions between parties, the discovery of errors or omissions in
charges, as well as a true-up of amounts owed. The parties shall set forth the
agreed upon process and procedure in Schedule I hereto. In no event shall such
----------
processes and procedures extend beyond one (1) year after completion of a
Service.
5.5 Pricing Adjustments. In the event of a tax audit adjustment relating
-------------------
to the pricing of any or all Services provided pursuant to this Agreement in
which it is determined by a taxing authority that any of the charges,
individually or in combination, did not result in an arm's-length payment, as
determined under internationally accepted arm's-length standards, then the
parties, including a Providing Company subcontractor providing or receiving
Services hereunder, may agree to make corresponding adjustments to the charges
in question for such period to the extent necessary to achieve arm's-length
pricing. Any adjustment made pursuant to this Section 5.5 shall be reflected in
the parties' legal books and records, and the resulting overpayment or
underpayment shall create an obligation to be paid in the manner specified in
Section 5.2.
6. General Obligations; Standard of Care.
-------------------------------------
<PAGE>
6.1 Performance Metrics: Providing Company. Subject to Section 7.3, the
--------------------------------------
Providing Company shall maintain sufficient resources to perform its obligations
hereunder. Specific performance metrics for the Providing Company for a
specific Service may be set forth in the corresponding Exhibit A. Where none is
---------
set forth, the Providing Company shall use reasonable efforts to provide
Services in accordance with the policies, procedures and practices in effect
before the date hereof and shall exercise the same care and skill as it
exercises in performing similar services for itself. In addition, where none is
set forth for Services in which a System is replicated or transferred, the
Providing Company will use reasonable efforts to replicate and/or transfer each
System so that it has substantially the same functionality for Receiving Company
as it did immediately before the date hereof taking into account changes
reasonably expected and customary in a new operating environment.
6.2 Disclaimer of Warranties. PROVIDING COMPANY MAKES NO WARRANTIES,
------------------------
EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT
TO THE SERVICES, SOFTWARE OR OTHER DELIVERABLES PROVIDED BY IT HEREUNDER.
6.3 Performance Metrics: Receiving Company. Specific performance metrics
--------------------------------------
for the Receiving Company for a specific Service may be set forth in the
corresponding Exhibit A. Where none is set forth, the Receiving Company shall
---------
use reasonable efforts, in connection with receiving Services, to follow the
policies, procedures and practices in effect before the date hereof including
providing information and documentation sufficient for Providing Company to
perform the Services as they were performed before the date hereof and making
available, as reasonably requested by the Providing Company, sufficient
resources and timely decisions, approvals and acceptances in order that
Providing Company may accomplish its obligations hereunder in a timely manner.
6.4 Transitional Nature of Services; Changes. The parties acknowledge the
----------------------------------------
transitional nature of the Services and that Providing Company may make changes
from time to time in the manner of performing the Services if Providing Company
is making similar changes in performing similar services for itself and if
Providing Company furnishes to Receiving Company reasonable notice regarding
such changes. Notwithstanding the foregoing, for a period of six (6) months
from the Effective Date, Providing Company will not make any material change to
Systems affecting Receiving Company without first providing thirty (30) days
prior written notice and obtaining Receiving Company's prior written consent,
which consent shall not be unreasonably withheld or delayed.
6.5 Responsibility for Errors; Delays. Providing Company's sole
---------------------------------
responsibility to Receiving Company:
(a) for errors or omissions in Services, shall be to furnish correct
information, payment and/or adjustment in the Services, at no
additional cost or expense to Receiving Company; provided,
Receiving Company must promptly advise Providing Company of any
such error or omission of which it becomes aware after having
used reasonable efforts to detect any such errors or omissions in
accordance with the standard of care set forth in Section 6.1;
(b) for failure to deliver any Service because of Impracticability,
shall be to use reasonable efforts, subject to Section 7.3, to
make the Services available and/or to resume performing the
Services as promptly as reasonably practicable;
(c) for an error, bug, fault or deficiency in a replicated or
transferred System (a "System Error") that did not exist in the
System immediately before the Separation Date, shall be to use
reasonable efforts, subject to Section 7.3 and taking into
account the importance
<PAGE>
of the affected System to the Receiving Company's business
operations, to cooperate with Receiving Company to correct such
System Error at no additional cost or expense to Receiving
Company (such correction may take the form of new or revised
software or an appropriate work-around); provided, Receiving
Company must advise Providing Company of any such System Error
within sixty (60) days after completion of the activities set
forth in (A) the Exhibit A for the System containing a System
---------
Error or (B) the Exhibit A for any feeder System that caused the
---------
System Error, whichever is later; and
(d) for failure to complete any of the Services related to
replication or transfer of System(s) because of Impracticability,
shall be to use reasonable efforts, subject to Section 7.3, to
make the Systems available to Receiving Company from a Providing
Company facility until Providing Company can resume replication
or transfer activities or until the parties devise an appropriate
alternative approach pursuant to Section 6.6.
6.6 Good Faith Cooperation; Consents. The parties will use good faith
--------------------------------
efforts to cooperate with each other in all matters relating to the provision
and receipt of Services. Such cooperation shall include exchanging information,
providing electronic access to Systems used in connection with Services,
performing true-ups and adjustments and obtaining all third party consents,
licenses, sublicenses or approvals necessary to permit each party to perform its
obligations hereunder (including by way of example, not by way of limitation,
rights to use third party software needed for the performance of Services). The
costs of obtaining such third party consents, licenses, sublicenses or approvals
shall be borne by the Receiving Company. The parties will maintain
documentation supporting the information contained in the Exhibits and cooperate
with each other in making such information available as needed in the event of a
tax audit, whether in the United States or any other country.
6.7 Alternatives. If Providing Company reasonably believes it is unable to
------------
provide any Service because of a failure to obtain necessary consents, licenses,
sublicenses or approvals pursuant to Section 6.6 or because of Impracticability,
the parties shall cooperate to determine the best alternative approach. Until
such alternative approach is found or the problem otherwise resolved to the
satisfaction of the parties, the Providing Company shall use reasonable efforts,
subject to Section 7.2 and Section 7.3, to continue providing the Service or, in
the case of Systems, to support the function to which the System relates or
permit Receiving Company to have access to the System so Receiving Company can
support the function itself. To the extent an agreed upon alternative approach
requires payment above and beyond that which is included in the Providing
Company's charge for the Service in question, the parties shall share equally in
making any such payment unless they otherwise agree in writing.
7. Certain Limitations.
-------------------
7.1 Service Boundaries. Except as provided in an Exhibit A for a specific
------------------ ---------
Service: (i) Providing Company shall be required to provide the Services only to
the extent and only at the locations such Services are being provided by
Providing Company for the Receiving Company immediately prior to the Effective
Date; and (ii) the Services will be available only for purposes of conducting
the business of the Receiving Company substantially in the manner it was
conducted prior to the Effective Date.
7.2 Impracticability. Providing Company shall not be required to provide
----------------
any Service to the extent the performance of such Service becomes
"Impracticable" as a result of a cause or causes outside the reasonable control
of Providing Company including unfeasible technological requirements, or to the
extent the performance of such Services would require Providing Company to
violate any applicable laws, rules or regulations or would result in the breach
of any software license or other applicable contract.
<PAGE>
7.3 Additional Resources. Except as provided in an Exhibit A for a
-------------------- ---------
specific Service, in providing the Services, Providing Company shall not be
obligated to: (i) hire any additional employees; (ii) maintain the employment of
any specific employee; (iii) purchase, lease or license any additional equipment
or software; or (iv) pay any costs related to the transfer or conversion of
Receiving Company's data to Receiving Company or any alternate supplier of
Services.
8. Termination.
-----------
8.1 Termination. The Receiving Company may terminate this Agreement, either
-----------
with respect to all or with respect to any one or more of the Services provided
to such Receiving Company hereunder, for any reason or for no reason, at any
time upon six (6) months prior written notice to the Providing Company. In
addition, subject to the provisions of Section 16 below, either party may
terminate this Agreement with respect to a specific Service if the other party
materially breaches a material provision with regard to that particular Service
and does not cure such breach (or does not take reasonable steps required under
the circumstances to cure such breach going forward) within sixty (60) business
days after being given notice of the breach; provided, however, that the non-
terminating party may request that the parties engage in a dispute resolution
negotiation as specified in Section 16 below prior to termination for breach.
8.2 Survival. Those Sections of this Agreement that, by their nature, are
--------
intended to survive termination will survive in accordance with their terms.
Notwithstanding the foregoing, in the event of any termination with respect to
one or more, but less than all Services, this Agreement shall continue in full
force and effect with respect to any Services not terminated hereby.
8.3 User Ids, Passwords. The parties shall use good faith efforts at the
-------------------
termination or expiration of this Agreement or any specific Service hereto, to
ensure that all applicable user IDs and passwords are canceled and, subject to
Section 7.3, that any applicable data pertaining solely to the other parties are
deleted or removed from Systems.
9. Relationship Between the Parties. The relationship between the parties
--------------------------------
established under this Agreement is that of independent contractors and neither
party is an employee, agent, partner, or joint venturer of or with the other.
Providing Company will be solely responsible for any employment-related taxes,
insurance premiums or other employment benefits respecting its personnel's
performance of Services under this Agreement. Receiving Company agrees to grant
Providing Company personnel access to sites, systems and information (subject to
the provisions of confidentiality stated below) as necessary for Providing
Company to perform it obligations hereunder. Providing Company personnel agree
to obey any and all security regulations and other published policies of
Receiving Company.
10. Subcontractors. Providing Company may engage a "Subcontractor" to perform
--------------
all or any portion of Providing Company's duties under this Agreement, provided
that any such Subcontractor agrees in writing to be bound by confidentiality
obligations at least as protective as the terms of Section 13 regarding
confidentiality below, and provided further that Providing Company remains
responsible for the performance of such Subcontractor. As used in this
Agreement, "Subcontractor" will mean any individual, partnership, corporation,
firm, association, unincorporated organization, joint venture, trust or other
entity engaged to perform hereunder.
11. Intellectual Property.
---------------------
11.1 Unless otherwise agreed by the parties under the Ancillary Agreements
or any separate license or technology agreement, if Providing Company supplies
Receiving Company with a deliverable that in whole or in part consists of
software, firmware, or other computer code (referred to as a "Software
Deliverable"), such Software Deliverables will be supplied in object code form
only and will be subject to
<PAGE>
the Providing Company software license terms attached hereto as Exhibit C. In
---------
the event that such Software Deliverables are licensed to Providing Company by
third parties, Receiving Company agrees to be bound by any different or
additional conditions that are required by such third parties and are
communicated in writing by Providing Company to Receiving Company.
11.2 This Agreement and the performance of this Agreement will not affect
the ownership of any copyrights or other intellectual property rights allocated
in the Ancillary Agreements.
11.3 Neither party will gain, by virtue of this Agreement, any rights of
ownership of copyrights, patents, trade secrets, trademarks or any other
intellectual property rights owned by the other.
11.4 Except as set forth in Section 11.2, Providing Company will own all
copyrights, patents, trade secrets, trademarks and other intellectual property
rights subsisting in the Software Deliverables and other works developed by
Providing Company for purposes of this Agreement.
11.5 Receiving Company grants Providing Company a non-exclusive, worldwide,
royalty-free license to use, copy, and make derivative works of, distribute,
display, perform and transmit Providing Company's pre-existing copyrighted works
or other intellectual property rights solely to the extent necessary to perform
its obligations under this Agreement.
12. Infringement Defense. To the extent Providing Company delivers or licenses
--------------------
any intellectual property to Receiving Company after the Separation Date in
performance of this Agreement, Providing Company agrees to defend Receiving
Company and its directors, officers, employees and agents against any and all
claims, actions or suits (any of the foregoing, a "Claim") incurred by or
asserted against Receiving Company based upon infringement of a third party
patent or other intellectual property right. Receiving Company agrees to notify
Providing Company promptly of any Claim and permit Providing Company at
Providing Company's expense to defend such Claim and will cooperate in the
defense thereof. Providing Company agrees to pay any awards or settlement
amounts arising from a Claim. Neither Providing Company nor Receiving Company
will enter into or permit any settlement of any such Claim without the express
written consent of the other party. Receiving Company may, at its option and
expense, have its own counsel participate in any proceeding that is under the
direction of Providing Company and will cooperate with Providing Company and its
insurer in the disposition of any such matter.
13. Confidentiality. During the term of this Agreement, a party (the
---------------
"Recipient") may receive or have access to certain information of the other
party (the "Discloser") that is marked as "Confidential Information," including,
though not limited to, information or data related to either party's products
(including the discovery, invention, research, improvement, development,
manufacture, or sale thereof), processes, or general business operations
(including sales, costs, profits, pricing methods, organization, employee or
customer lists and processes), and any information obtained through access to
any information assets or information systems (including computers, networks,
voice mail, etc.), which, if not otherwise described above, is of such a nature
that a reasonable person would believe to be confidential. The Recipient will
protect the confidentiality of Confidential Information under the terms of the
Confidential Disclosure Agreement attached as Exhibit D.
---------
14. Limitation of Liability. NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY
-----------------------
LOST PROFITS, LOSS OF DATA, LOSS OF USE, COST OF COVER, BUSINESS INTERRUPTION
OR OTHER SPECIAL, INCIDENTAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES,
HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY, ARISING FROM THE PERFORMANCE OF,
OR RELATING TO, THIS AGREEMENT. THE FOREGOING LIMITATION WILL NOT LIMIT
PROVIDING COMPANY'S OBLIGATIONS WITH RESPECT TO PAYMENT OF DAMAGES OF ANY KIND
INCLUDED IN AN AWARD OR SETTLEMENT OF A THIRD PARTY
<PAGE>
CLAIM UNDER ANY INDEMNITY OR INFRINGEMENT DEFENSE PROVISIONS SPECIFIED HEREIN.
15. Force Majeure. Each party will be excused for any failure or delay in
-------------
performing any of its obligations under this Agreement, other than the
obligations of Receiving Company to make certain payments to Providing Company
pursuant to Section 5 hereof for services rendered, if such failure or delay is
caused by Force Majeure. "Force Majeure" means any act of God or the public
enemy, any accident, explosion, fire, storm, earthquake, flood, or any other
circumstance or event beyond the reasonable control of the party relying upon
such circumstance or event.
16. Dispute Resolution.
------------------
16.1 Negotiation. The parties shall make a good faith attempt to resolve
-----------
any dispute or claim arising out of or related to this Agreement through
negotiation. Within thirty (30) days after notice of a dispute or claim is
given by either party to the other party, the parties' first tier negotiating
teams specified in Exhibit E shall meet and make a good faith attempt to resolve
---------
such dispute or claim and shall continue to negotiate in good faith in an effort
to resolve the dispute or claim or renegotiate the applicable section or
provision without the necessity of any formal proceedings. If the first tier
negotiating teams are unable to agree within thirty (30) days of their first
meeting, then the parties' second tier negotiating teams specified in Exhibit E
---------
shall meet within thirty (30) days after the end of the first thirty (30) day
negotiating period to attempt to resolve the matter. During the course of
negotiations under this Section 16.1, all reasonable requests made by one party
to the other for information, including requests for copies of relevant
documents, will be honored. The specific format for such negotiations will be
left to the discretion of the designated negotiating teams but may include the
preparation of agreed upon statements of fact or written statements of position
furnished to the other party.
16.2 Nonbinding Mediation. In the event that any dispute or claim arising
--------------------
out of or related to this Agreement is not settled by the parties within fifteen
(15) days after the first meeting of the second tier negotiating teams under
Section 16.1, the parties will attempt in good faith to resolve such dispute or
claim by nonbinding mediation in accordance with the American Arbitration
Association Commercial Mediation Rules. The mediation shall be held within
thirty (30) days of the end of such fifteen (15) day negotiation period of the
second tier negotiating teams. Except as provided below in Section 16.3, no
litigation for the resolution of such dispute may be commenced until the parties
try in good faith to settle the dispute by such mediation in accordance with
such rules and either party has concluded in good faith that amicable resolution
through continued mediation of the matter does not appear likely. The costs of
mediation shall be shared equally by the parties to the mediation. Any
settlement reached by mediation shall be recorded in writing, signed by the
parties, and shall be binding on them.
16.3 Proceedings. Nothing herein, however, shall prohibit either party from
-----------
initiating litigation or other judicial or administrative proceedings if such
party would be substantially harmed by a failure to act during the time that
such good faith efforts are being made to resolve the dispute or claim through
negotiation or mediation. In the event that litigation is commenced under this
Section 16.3, the parties agree to continue to attempt to resolve any dispute
according to the terms of Sections 16.1 and 16.2 during the course of such
litigation proceedings under this Section 16.3.
17. Miscellaneous.
---------------
17.1 Entire Agreement. This Agreement, the Separation and Distribution
----------------
Agreement and the other Ancillary Agreements constitute the entire agreement
between the parties with respect to the subject matter
<PAGE>
hereof and shall supersede all prior written and oral and all contemporaneous
oral agreements and understandings with respect to the subject matter hereof.
17.2 Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of California regardless of the laws that
might otherwise govern under principles of conflicts of laws applicable thereto.
17.3 Descriptive Headings. The descriptive headings herein are inserted
--------------------
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
17.4 Notices. All notices and other communications hereunder will be in
-------
writing and will be deemed to have been duly given when delivered in person, by
telecopy with answer back, by express or overnight mail delivered by a
nationally recognized air courier (delivery charges prepaid), or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties as follows:
if to HP:
c/o HP Company
3000 Hanover Street
Palo Alto, CA 94304
Attention: General Counsel
Telecopy: (650)
if to Agilent:
c/o Agilent Technologies, Inc.
3000 Hanover Street
Palo Alto, CA 94304
Attention: General Counsel
Telecopy: (650)
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person will be deemed effective upon
delivery. Any notice or communication sent by telecopy or by air courier will be
deemed effective on the first business day at the place at which such notice or
communication is received following the day on which such notice or
communication was sent. Any notice or communication sent by registered or
certified mail will be deemed effective on the third business day at the place
from which such notice or communication was mailed following the day on which
such notice or communication was mailed. As used in this Agreement, "business
day" means day other than a Saturday, a Sunday or a day on which banking
institutions located in the State of California are authorized or obligated by
law or executive order to close.
17.6 Nonassignability. Except as specifically permitted under Section 10
----------------
above, neither party may, directly or indirectly, in whole or in part, whether
by operation of law or otherwise, assign or transfer this Agreement, without the
other party's prior written consent, and any attempted assignment, transfer or
delegation without such prior written consent shall be voidable at the sole
option of such other party. Notwithstanding the foregoing, each party (or its
permitted successive assignees or transferees hereunder) may assign or transfer
this Agreement as a whole without consent to an entity that succeeds to all or
substantially all of the business or assets of such party. Without limiting the
foregoing, this Agreement will be binding upon and inure to the benefit of the
parties and their permitted successors and assigns.
17.7 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions
<PAGE>
contemplated is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible.
17.8 No Waiver; Remedies Cumulative. No failure or delay on the part of
------------------------------
any party in the exercise of any right hereunder will impair such right or be
construed to be a waiver of, or acquiescence in, any breach of any provision of
this Agreement, nor will any single or partial exercise of any such right
preclude other or further exercise of any other right. All rights and remedies
existing under this Agreement are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
17.9 Amendment. No change or amendment will be made to this Agreement
---------
except by an instrument in writing signed on behalf of each of the parties to
such Agreement.
17.10 Addendum. The three (3) addenda attached hereto are hereby
--------
incorporated into this Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Master IT Service
Level Agreement to be executed in duplicate originals by its duly authorized
representatives.
HEWLETT-PACKARD COMPANY
By: /s/ Ann O. Baskins
-------------------------------------
Name: Ann O. Baskins
-----------------------------------
Title: Associate General Counsel and
----------------------------------
Assistant Secretary
AGILENT TECHNOLOGIES, INC.
By: /s/ Craig Nordlund
-------------------------------------
Name: Craig Nordlund
-----------------------------------
Title: Senior Vice President, General
----------------------------------
Counsel and Secretary
[Signature Page to Master IT Service Level Agreement]
<PAGE>
Real Estate Matters Agreement
between
Hewlett-Packard Company
and
Agilent Technologies, Inc.
November 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PROPERTY IN THE UNITED STATES................................. 1
Section 1.1 Owned Property........................................... 1
Section 1.2 Leased Property.......................................... 1
Section 1.3 Sublease Properties...................................... 2
Section 1.4 New Lease Properties..................................... 2
Section 1.5 Obtaining the Lease Consents............................. 2
Section 1.6 Occupation by Agilent.................................... 3
Section 1.7 Obligation to Complete................................... 4
Section 1.8 Form of Transfer......................................... 5
Section 1.9 Casualty; Lease Termination.............................. 6
Section 1.10 Tenant's Fixtures and Fittings........................... 6
Section 1.11 Services................................................. 6
Section 1.12 Adjustments.............................................. 6
Section 1.13 Costs.................................................... 7
ARTICLE II PROPERTY OUTSIDE THE UNITED STATES........................... 7
ARTICLE III MISCELLANEOUS............................................... 8
Section 3.1 Entire Agreement......................................... 8
Section 3.2 Governing Law............................................ 8
Section 3.3 Notices.................................................. 8
Section 3.4 Parties in Interest...................................... 8
Section 3.5 Counterparts............................................. 8
Section 3.6 Binding Effect; Assignment............................... 8
Section 3.7 Severability............................................. 8
Section 3.8 Failure or Indulgence Not Waiver......................... 9
Section 3.9 Amendment................................................ 9
Section 3.10 Authority................................................ 9
Section 3.11 Interpretation........................................... 9
ARTICLE IV DEFINITIONS.................................................. 9
</TABLE>
i
<PAGE>
REAL ESTATE MATTERS AGREEMENT
This Real Estate Matters Agreement (this "Agreement") is entered into on
November 1, 1999 between Hewlett-Packard Company, a Delaware corporation ("HP"),
and Agilent Technologies, Inc., a Delaware corporation ("Agilent"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to such terms in the Separation Agreement (as defined below).
RECITALS
WHEREAS, HP has transferred or will transfer to Agilent effective as of the
Separation Date, substantially all of the business and assets of the Agilent
Business owned by HP in accordance with the Master Separation and Distribution
Agreement dated as of August 12, 1999 between the parties (the "Separation
Agreement").
WHEREAS, the parties desire to set forth certain agreements regarding real
estate matters.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE 1
PROPERTY IN THE UNITED STATES
Section 1.1 Owned Property
(a) HP shall convey or cause its applicable Subsidiary to convey each of
the Owned Properties (together with all rights and easements appurtenant
thereto) to Agilent, subject to the other provisions of this Agreement and (to
the extent not inconsistent with the provisions of this Agreement) the terms of
the Separation Agreement and the other Ancillary Agreements. Such conveyance
shall be completed on the Separation Date.
(b) Subject to the completion of the conveyance to Agilent of the relevant
Owned Property, with respect to each Owned Property which is a Leaseback
Property, Agilent shall grant to HP a lease of that part of the relevant Owned
Property identified in the Colocation Sites Spreadsheet and HP shall accept the
same. Such lease shall be completed immediately following completion of the
transfer of the relevant Owned Property to Agilent.
Section 1.2 Leased Property
(a) HP shall assign or cause its applicable Subsidiary to assign, and
Agilent shall accept and assume, HP's or its Subsidiary's interest in the Leased
Properties, subject to the other provisions of this Agreement and (to the extent
not inconsistent with the provisions of this Agreement) the terms of the
Separation Agreement and the other Ancillary Agreements. Such assignment shall
be completed on the later of: (i) the Separation Date; and (ii) the earlier of
(A) the tenth (10/th/) business day after the relevant Lease Consent has been
granted and (B) the date agreed upon by the parties in accordance with Section
1.7(a) below.
<PAGE>
(b) Subject to the completion of the assignment to Agilent of the relevant
Leased Property, with respect to each Leased Property which is also a Leaseback
Property, Agilent shall grant to HP a sublease of that part of the relevant
Leased Property identified in the Colocation Sites Spreadsheet and HP shall
accept the same. Such sublease shall be completed immediately following
completion of the transfer of the relevant Leased Property to Agilent.
Section 1.3 Sublease Properties
HP shall grant or cause its applicable Subsidiary to grant to Agilent a
sublease of that part of the relevant Sublease Property identified in the
Colocation Sites Spreadsheet and Agilent shall accept the same, subject to the
other provisions of this Agreement and (to the extent not inconsistent with the
provisions of this Agreement) the terms of the Separation Agreement and the
other Ancillary Agreements. Such sublease shall be completed on the later of:
(a) the Separation Date; and (b) the earlier of (i) the tenth (10/th/) business
day after the relevant Lease Consent has been granted and (ii) the date agreed
upon by the parties in accordance with Section 1.7(a) below.
Section 1.4 New Lease Properties
HP shall grant or cause its applicable Subsidiary to grant to Agilent a
lease of those parts of the New Lease Properties identified in the Colocation
Sites Spreadsheet and Agilent shall accept the same, subject to the other
provisions of this Agreement and (to the extent not inconsistent with the
provisions of this Agreement) the terms of the Separation Agreement and the
other Ancillary Agreements. Such lease shall be completed on the Separation
Date.
Section 1.5 Obtaining the Lease Consents
(a) Except with respect to any Properties which the parties agree should
be dealt with by the Service Level Agreements referred to in Section 1.11 below,
HP confirms that, with respect to each Leased Property, Sublease Property and
Leaseback Property which is a Leased Property, an application has been made or
will be made by the Separation Date to the relevant Landlord for the Lease
Consents required with respect to the transactions contemplated by this
Agreement.
(b) HP and Agilent will each use their reasonable commercial efforts to
obtain the Lease Consents, but HP shall not be required to commence judicial
proceedings for a declaration that a Lease Consent has been unreasonably
withheld or delayed, nor shall HP be required to pay any consideration in excess
of that required by the Relevant Lease or that which is typical in the open
market to obtain the relevant Lease Consent.
(c) Agilent and HP will promptly satisfy the lawful requirements of the
Landlord, and Agilent will take all steps to assist HP in obtaining the Lease
Consents, including, without limitation:
(i) if properly required by the Landlord, entering into an agreement
with the relevant Landlord to observe and perform the tenant's obligations
contained in the Relevant Lease throughout the remainder of the term of the
Relevant Lease, subject to any statutory limitations of such liability;
(ii) if properly required by the Landlord, providing a guarantee,
surety or other security (including, without limitation, a security deposit) for
the obligations of Agilent as tenant under
2
<PAGE>
the Relevant Lease, and otherwise taking all steps which are necessary and which
Agilent is capable of doing to meet the lawful requirements of the Landlord so
as to ensure that the Lease Consents are obtained; and
(iii) using all reasonable commercial efforts to assist HP with
obtaining the Landlord's consent to the release of any guarantee, surety or
other security which HP or its Subsidiary may have previously provided to the
Landlord and, if required, offering the same or equivalent security to the
Landlord in order to obtain such release.
Notwithstanding the foregoing, (1) except with respect to guarantees, sureties
or other security referenced in Section 1.5(c)(ii) above, Agilent shall not be
required to obtain a release of any obligation entered into by HP or its
Subsidiary with any Landlord or other third party with respect to any Property
and (2) Agilent shall not communicate directly with any of the Landlords unless
Agilent can show HP reasonable grounds for doing so.
(d) If, with respect to any Leased Properties, HP and Agilent are unable
to obtain a release by the Landlord of any guarantee, surety or other security
which HP or its Subsidiary has previously provided to the Landlord, Agilent
shall indemnify, defend, protect and hold harmless HP and its Subsidiary from
and after the Separation Date against all losses, costs, claims, damages, or
liabilities incurred by HP or its Subsidiary as a result of such guarantee,
surety or other security.
Section 1.6 Occupation by Agilent
(a) Subject to compliance with Section 1.6(b) below, in the event that the
Actual Completion Date for any Leased Property or Sublease Property does not
occur on the Separation Date, Agilent shall, commencing on the Separation Date,
be entitled to occupy and receive the rental income from the relevant Property
(except to the extent that the same is a Retained Part) as a licensee upon the
terms and conditions contained in HP's Lease (as to Leased Properties) or upon
the terms and conditions contained in the Sublease Form (as to Sublease
Properties). Such license shall not be revocable prior to the date for
completion as provided in Sections 1.2(a) and 1.3 unless an enforcement action
or forfeiture by the relevant Landlord due to Agilent's occupation of the
Property constituting a breach of HP's Lease cannot, in the reasonable opinion
of HP, be avoided other than by requiring Agilent to immediately vacate the
relevant Property, in which case HP may by notice to Agilent immediately require
Agilent to vacate the relevant Property. Agilent will be responsible for all
costs, expenses and liabilities incurred by HP or its applicable Subsidiary as a
consequence of such occupation, except for any losses, claims, costs, demands
and liabilities incurred by HP or its Subsidiary as a result of any enforcement
action taken by the Landlord against HP or its Subsidiary with respect to any
breach by HP or its Subsidiary of the Relevant Lease in permitting Agilent to so
occupy the Property without obtaining the required Lease Consent, for which HP
or its Subsidiary shall be solely responsible. Agilent shall not be entitled to
make any claim or demand against, or obtain reimbursement from, HP or its
applicable Subsidiary with respect to any costs, losses, claims, liabilities or
damages incurred by Agilent as a consequence of being obliged to vacate the
Property or in obtaining alternative premises, including, without limitation,
any enforcement action which a Landlord may take against Agilent.
(b) In the event that the Actual Completion Date for any Leased Property
or Sublease Property does not occur on the Separation Date, whether or not
Agilent occupies a Property as licensee
3
<PAGE>
as provided in Section 1.6(a) above, Agilent shall, effective as of the
Separation Date, (i) pay HP all rents, service charges, insurance premiums and
other sums payable by HP or its applicable Subsidiary under any Relevant Lease
(as to Leased Properties) or under the Sublease Form (as to Sublease
Properties), (ii) observe the tenant's covenants, obligations and conditions
contained in HP's Lease (as to Leased Properties) or in the Sublease Form (as to
Sublease Properties) and (iii) indemnify, defend, protect and hold harmless HP
and its applicable Subsidiary from and against all losses, costs, claims,
damages and liabilities arising on account of any breach thereof by Agilent.
(c) HP shall supply promptly to Agilent copies of all invoices, demands,
notices and other communications received by HP or its or its applicable
Subsidiaries or agents in connection with any of the matters for which Agilent
may be liable to make any payment or perform any obligation pursuant to Section
1.6(b), and shall, at Agilent's cost, take any steps and pass on any objections
which Agilent may have in connection with any such matters. Agilent shall
promptly supply to HP any notices, demands, invoices and other communications
received by Agilent or its agents from any Landlord while Agilent occupies any
Property without the relevant Lease Consent.
Section 1.7 Obligation to Complete
(a) If, with respect to any Leased Property or Sublease Property, at any
time the relevant Lease Consent is formally and unconditionally refused in
writing, HP and Agilent shall commence good faith negotiations and use
commercially reasonable efforts to determine how to allocate the applicable
Property, based on the relative importance of the applicable Property to the
operations of each party, the size of the applicable Property, the number of
employees of each party at the applicable Property and the potential risk and
liability to each party in the event an enforcement action is brought by the
applicable Landlord. Such commercially reasonable efforts shall include
consideration of alternate structures to accommodate the needs of both parties
and the allocation of the costs thereof, including entering into amendments of
the size, term or other terms of the Relevant Lease, restructuring a proposed
lease assignment to be a sublease and relocating one party. If the parties are
unable to agree upon an allocation of the Property within fifteen (15) days
after commencement of negotiations between the parties as described above, then
either party may, by delivering written notice to the other, require that the
matter be referred to the Chief Financial Officers of both parties. In such
event, the Chief Financial Officers shall use commercially reasonable efforts to
determine the allocation of the Property, including having a meeting or
telephone conference within ten (10) days thereafter. If the parties are unable
to agree upon the allocation of an applicable Property within fifteen (15) days
after the matter is referred to the Chief Financial Officers of the parties as
described above, the disposition of the applicable Property and the risks
associated therewith shall be allocated between the parties as set forth in
subparts (b) and (c) of this section below.
(b) If, with respect to any Leased Property, the parties are unable to
agree upon the allocation of a Property as set forth in Section 1.7(a), HP may
by written notice to Agilent elect to apply to the relevant Landlord for consent
to sublease all of the relevant Property to Agilent for the remainder of the
Relevant Lease term less three (3) days at a rent equal to the rent from time to
time under the Relevant Lease, but otherwise on substantially the same terms and
conditions as the Relevant Lease. If HP makes such an election, until such time
as the relevant Lease Consent is obtained and a sublease is completed, the
provisions of Section 1.6 will apply and, on the grant of the Lease Consent
required to sublease the
4
<PAGE>
Leased Property in question, HP shall sublease or cause its applicable
Subsidiary to sublease to Agilent the relevant Property in accordance with
Section 1.3.
(c) If the parties are unable to agree upon the allocation of a Property
as set forth in Section 1.7(a) and HP does not make an election pursuant to
Section 1.7(b) above, HP may elect by written notice to Agilent to require
Agilent to vacate the relevant Property immediately or by such other date as may
be specified in the notice served by HP (the "Notice Date"), in which case
Agilent shall vacate the relevant Property on the Notice Date but shall
indemnify HP and its applicable Subsidiary from and against all costs, claims,
losses, liabilities and damages in relation to the relevant Property arising
from and including the Separation Date to and including the later of the Notice
Date and date on which Agilent vacates the relevant Property, except for any
costs, losses, damages, claims and liabilities incurred by HP or its Subsidiary
with respect to any enforcement action taken by the Landlord against HP or its
Subsidiary with respect to any breach by HP or its Subsidiary of the Relevant
Lease in permitting Agilent to so occupy the Property without obtaining the
required Lease Consent. Agilent shall not be entitled to make any claim or
demand against or obtain reimbursement from HP or its applicable Subsidiary with
respect to any costs, losses, claims, liabilities or damages incurred by Agilent
as a consequence of being obliged to vacate the Property or obtaining
alternative premises, including, without limitation, any enforcement action
which a Landlord may take against Agilent.
Section 1.8 Form of Transfer
(a) The transfer or assignment to Agilent of each relevant Owned Property
and Leased Property shall be in substantially the form attached in Schedule 1 or
2, as applicable, with such amendments as are reasonably required by HP with
respect to a particular Property, including, without limitation, in all cases
where a relevant Landlord has required a guarantor or surety to guarantee the
obligations of Agilent contained in the relevant Lease Consent or any other
document which Agilent is required to complete, the giving of such guarantee by
a guarantor or surety, and the giving by Agilent and any guarantor or surety of
Agilent's obligations of direct obligations to HP or third parties where
required under the terms of any of the Lease Consent or any covenant, condition,
restriction, easement, lease or other encumbrance to which the Property is
subject.
(b) The subleases to be granted to Agilent with respect to the Sublease
Properties shall be substantially in the form of the Sublease Form and shall
include such amendments which in the reasonable opinion of HP are necessary with
respect to a particular Property or the relevant Lease Consent. Such amendments
shall be submitted to Agilent for approval, which approval shall not be
unreasonably withheld or delayed.
(c) The leases and subleases to be granted by Agilent to HP with respect
to the Leaseback Properties shall be substantially in the form of the Lease Form
or the Sublease Form, as applicable, with such amendments as are, in the
reasonable opinion of HP, necessary with respect to a particular Property. Such
amendments shall be submitted to Agilent for approval, which approval shall not
be unreasonably withheld.
(d) The leases to be granted to Agilent with respect to the New Lease
Properties shall be substantially in the form of the Lease Form and shall
include such amendments which in the reasonable
5
<PAGE>
opinion of HP are necessary with respect to a particular Property. Such
amendments shall be submitted to Agilent for approval, which approval shall not
be unreasonably withheld or delayed.
Section 1.9 Casualty; Lease Termination
The parties hereto shall grant and accept transfers, assignments, leases or
subleases of the Properties as described in this Agreement, regardless of any
casualty damage or other change in the condition of the Properties. In
addition, subject to HP's obligations in Section 5.6 of the Separation
Agreement, in the event that HP's Lease with respect to a Leased Property or a
Sublease Property is terminated prior to the Separation Date, (a) HP shall not
be required to assign or sublease such Property, (b) Agilent shall not be
required to accept an assignment or sublease of such Property and (c) neither
party shall have any further liability with respect to such Property hereunder.
Section 1.10 Tenant's Fixtures and Fittings
The provisions of the Separation Agreement and the other Ancillary
Agreements shall apply to any trade fixtures and personal property located at
each Property (excluding any trade fixtures and personal property owned by third
parties).
Section 1.11 Services
(a) HP and Agilent each agree that, on or about the Separation Date, they
shall each enter into a Service Level Agreement with the other whereby, with
respect to each of the Sublease Properties, the New Lease Properties and the
Leaseback Properties, each party shall agree to supply to, or perform for the
benefit of, the other party (and the other party shall accept) such Real Estate
Services as each party currently supplies to or performs for the benefit of the
other with respect to such Properties, on the same terms and conditions as
currently apply, and at the cost and other terms as set forth in the Service
Level Agreements.
(b) Notwithstanding anything to the contrary herein, the parties agree and
acknowledge that there may be circumstances in which the parties mutually agree
that a formal lease or sublease will not be entered into in order to establish
shared occupancy of a Property, in which case such occupancy shall be (and the
Service Level Agreement referenced in Section 1.11(a) above shall provide that
the applicable party may occupy the relevant Property) on the terms and
conditions set forth in Sections 2-28 of the Lease Form or the terms and
conditions set forth in Sections 3 through the first sentence of Section 17 of
the Sublease Form, respectively.
Section 1.12 Adjustments
(a) HP and Agilent each acknowledge and agree that Additional Properties
may be acquired by HP prior to the Separation Date. Such Additional Properties
shall be treated hereunder as Owned Properties, Leased Properties, Sublease
Properties, New Lease Properties and/or Leaseback Properties by mutual agreement
of the parties based on whether the Additional Property was acquired by or for
the Agilent Business or HP's other businesses. In the event that the parties
are unable to agree by the Separation Date as to how any Additional Property is
to be treated, the matter shall be determined in accordance with the procedure
set forth in Section 1.7(a) above. In the event that the parties are unable
6
<PAGE>
to agree within ten (10) business days of the Separation Date as to the
allocation of an Additional Property, the matter in dispute shall be determined
in accordance with the following guidelines:
(i) Properties which are occupied as to fifty percent (50%) or more
of the total area for the purposes of the Agilent Business shall be treated as
Owned Properties or Leased Properties (as appropriate) and the part which is not
occupied by the Agilent Business or a third party shall be treated as a
Leaseback Property; and
(ii) Properties which are occupied as to less than fifty percent
(50%) for the purposes of the Agilent Business shall be treated as Sublease
Properties or New Lease Properties (as appropriate).
(b) Following agreement or determination with respect to the Additional
Properties, the parties shall enter into and complete all such documents as may
be required to give effect to such agreement or determination.
(c) HP and Agilent each acknowledge and agree that their respective
requirements with regard to each of the Properties may alter between the date of
this Agreement and the Separation Date, in which case the parties may mutually
agree in writing to re-characterize the relevant Property as an Owned Property,
Leased Property, Sublease Property, New Lease Property and/or Leaseback Property
as appropriate.
Section 1.13 Costs
HP shall pay all reasonable costs and expenses incurred in connection with
obtaining the Lease Consents, including, without limitation, Landlord's consent
fees and attorneys' fees and any costs and expenses relating to re-negotiation
of HP's Leases. HP shall also pay all reasonable costs and expenses in
connection with the transfer of the Owned Properties and Leased Properties,
including title insurance premiums, escrow fees, recording fees, and any
transfer taxes arising as a result of the transfers.
ARTICLE II
PROPERTY OUTSIDE THE UNITED STATES
With respect to each of the properties located outside the United States
listed in the Owned and Leased Property Spreadsheet and the Colocation Sites
Spreadsheet, as well as any additional properties acquired by HP or a Subsidiary
prior to the Separation Date, HP and Agilent shall each enter into (if
necessary) or procure that its relevant Subsidiary enter into an agreement with
the other party or such Subsidiary of the other party as the other party may
direct whereby the parties thereto agree to transfer, assign, lease, sublease,
or leaseback, as the case may be, such property, as specified in such
spreadsheets in accordance with the Non-US Plan (or with respect to any
additional properties, in the manner agreed upon by the parties in accordance
with the applicable agreement). Such transfers, assignments, leases, subleases
or leasebacks shall, so far as the law in the jurisdiction in which such
property is located permits, be on terms and conditions substantially the same
as the terms and conditions of this Agreement. In the event of a conflict
between the terms of this Agreement and the terms of such local agreements, the
terms of the local agreements shall prevail.
7
<PAGE>
ARTICLE III
MISCELLANEOUS
Section 3.1 Entire Agreement. This Agreement, the Separation Agreement,
the other Ancillary Agreements and the Exhibits and Schedules referenced or
attached hereto and thereto, constitutes the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all prior
written and oral and all contemporaneous oral agreements and understandings with
respect to the subject matter hereof.
Section 3.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware as to all matters
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto. Notwithstanding the foregoing, the applicable
Property transfers shall be performed in accordance with the laws of the state
in which the applicable Property is located.
Section 3.3 Notices. Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii)
one (1) business day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one (1) business day after being deposited with
an overnight courier service or (v) four (4) days after being deposited in the
U.S. mail, First Class with postage prepaid, and addressed to the attention of
the party's General Counsel at the address of its principal executive office or
such other address as a party may request by notifying the other in writing.
Section 3.4 Parties in Interest. This Agreement, including the Schedules
and Exhibits hereto, and the other documents referred to herein, shall be
binding upon and inure solely to the benefit of each party hereto and their
legal representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
Section 3.5 Counterparts. This Agreement, including the Schedules and
Exhibits hereto, and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
Section 3.6 Binding Effect; Assignment. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective legal
representatives and successors. This Agreement may not be assigned by any party
hereto. The Schedules and/or Exhibits attached hereto or referred to herein are
an integral part of this Agreement and are hereby incorporated into this
Agreement and made a part hereof as if set forth in full herein.
Section 3.7 Severability. If any term or other provision of this
Agreement or the Schedules or Exhibits attached hereto is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to
8
<PAGE>
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the fullest extent possible.
Section 3.8 Failure or Indulgence Not Waiver. No failure or delay on the
part of any party hereto in the exercise of right hereunder shall impair such
right or be construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor shall any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right.
Section 3.9 Amendment. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to such agreement.
Section 3.10 Authority. Each of the parties hereto represents to the
other that (a) it has the corporate or other requisite power and authority to
execute, deliver and perform this Agreement, (b) the execution, delivery and
performance of this Agreement by it have been duly authorized by all necessary
corporate or other action, (c) it has duly and validly executed and delivered
this Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.
Section 3.11 Interpretation. The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table or contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, Exhibit or Schedule, such reference shall be to an Article
or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
ARTICLE IV
DEFINITIONS
The following terms, as used herein, shall have the following meanings:
Actual Completion Date means, with respect to each Property, the date upon which
completion of the transfer, assignment, lease or sublease of that Property
actually takes place.
Additional Properties means any leased or owned properties acquired by HP in the
United States after the date of the Separation Agreement and before the
Separation Date.
Colocation Sites Spreadsheet means the spreadsheet prepared by HP entitled
"Colocation Sites" dated October 13, 1999, as updated from time to time prior to
the Separation Date by mutual written agreement of the parties.
HP's Lease means, in relation to each Property, the lease(s) or sublease(s) or
license(s) under which HP or its applicable Subsidiary holds such Property and
any other supplemental document completed prior to the Actual Completion Date.
9
<PAGE>
Landlord means the landlord under HP's Lease, and its successors and assigns,
and includes the holder of any other interest which is superior to the interest
of the landlord under HP's Lease.
Lease Consents means all consents, waivers or amendments required from the
Landlord or other third parties under the Relevant Leases to assign the
Relevant Leases to Agilent or to sublease the Sublease Properties to Agilent or
to sublease the Leaseback Properties to HP.
Lease Form means the form lease attached hereto as Schedule 4.
Leaseback Properties means each of (a) those Owned Properties located in the
United States identified as "Owned" and listed in the "Leaseback Properties"
area of the Colocation Sites Spreadsheet, with respect to part of which Agilent
is to grant a lease to HP and (b) those Leased Properties located in the United
States identified as "Leased" and listed in the "Leaseback Properties" area of
the Colocation Spreadsheet, with respect to part of which Agilent is to grant a
sublease to HP.
Leased Properties means those Properties located in the United States identified
as "Leased" and listed in the Owned and Leased Properties Spreadsheet.
New Lease Properties means those Properties located in the United States
identified as "Owned" and listed in the "Sublease and New Lease Properties" area
of the Colocation Sites Spreadsheet.
Owned and Leased Properties Spreadsheet means the spreadsheet prepared by HP
entitled "Owned & Leased Properties to be Transferred" dated October 13, 1999,
as updated from time to time prior to the Separation Date by mutual written
agreement of the parties.
Owned Properties means those Properties located in the United States identified
as "Owned" and listed in the Owned and Leased Properties Spreadsheet.
Property means the Owned Properties, the Leased Properties, the Sublease
Properties, the New Lease Properties, the Leaseback Properties and the
Additional Properties.
Real Estate Services means any services relating to the occupation or use of a
Property or the carrying out of either the Agilent Business or HP's other
businesses at a Property, including, without limitation, cleaning, garbage
disposal, repair, maintenance, receptionist services, utilities, mail delivery,
copying and facsimile services.
Relevant Leases means those of HP's Leases with respect to which the Landlord's
consent is required for assignment or sublease to a third party or which
prohibit assignments or subleases.
Retained Parts means those parts of the Owned Properties and the Leased
Properties which, following transfer or assignment to Agilent, are intended to
be leased or subleased to HP and those parts of the Sublease Properties and the
New Lease Properties which will not, and which are not intended to, be leased or
subleased to Agilent in accordance with this Agreement.
Sublease Form means the form sublease attached hereto as Schedule 3.
10
<PAGE>
Sublease Property means those Properties located in the United States identified
as "Leased" and listed in the "Sublease and New Lease Properties" area of the
Colocation Sites Spreadsheet.
[SIGNATURES ON FOLLOWING PAGE]
11
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Real Estate Matters
Agreement to be executed on its behalf by its officers thereunto duly authorized
on the day and year first above written.
HEWLETT-PACKARD COMPANY
By: /s/ Ann O. Baskins
------------------------------------------
Name: Ann O. Baskins
----------------------------------------
Title: Associate General Counsel and
---------------------------------------
Assistant Secretary
---------------------------------------
AGILENT TECHNOLOGIES, INC.
By: /s/ Craig Nordlund
------------------------------------------
Name: Craig Nordlund
----------------------------------------
Title: Senior Vice President, General Counsel
---------------------------------------
and Secretary
---------------------------------------
[Signature Page to Real Estate Matters Agreement]
<PAGE>
Schedule 1
----------
Form Transfer for Owned Properties
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attn: Real Estate Department/Susan P. Reinstra
MAIL TAX STATEMENTS TO:
Agilent Technologies, Inc.
3000 Hanover Street
Palo Alto, CA 94304
Attn: Tax Department
Documentary Transfer Tax is not of public record and is shown on a separate
sheet attached to this deed.
__________________________________________________________________________
GRANT DEED
FOR VALUABLE CONSIDERATION, the receipt of which is hereby acknowledged,
HEWLETT-PACKARD COMPANY, a Delaware corporation, successor by merger to HEWLETT-
PACKARD COMPANY, a California corporation, hereby grants to AGILENT
TECHNOLOGIES, INC., a Delaware corporation, the real property located in the
City of ____________, County of ____________, State of ____________, described
on Exhibit A attached hereto and made a part hereof.
Executed as of October ___, 1999.
HEWLETT-PACKARD COMPANY,
a Delaware corporation
By:__________________________
Name:________________________
Its:_________________________
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
Assessor's Parcel No.: _______________
2
<PAGE>
STATE OF______________________)
COUNTY OF_____________________)
On ___________________, before me, _________________________, a Notary
Public in and for said County and State, personally appeared
_________________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s) or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
____________________________
3
<PAGE>
Schedule 2
----------
Form Transfer for Leased Properties
ASSIGNMENT OF LEASE
-------------------
THIS ASSIGNMENT OF LEASE (this "Assignment") is dated for reference
purposes as of November 1, 1999 and is made between Hewlett-Packard Company, a
Delaware corporation ("Assignor") and Agilent Technologies, Inc., a Delaware
corporation ("Assignee").
RECITALS
--------
This Assignment is made with reference to the following facts and with the
following intentions:
A. __________, or its predecessor in interest, as landlord ("Landlord"),
and Assignor or a predecessor in interest to Assignor, as tenant, entered into
that certain lease dated as of _______________ (the "Lease"), whereby Landlord
leased to Assignor certain premises located at
________________________________________ (the "Premises").
B. Assignor wishes to assign all of its right, title and interest under
the Lease to Assignee, and Assignee wishes to accept such assignment.
1. Assignment: For good and valuable consideration, receipt of which is
----------
hereby acknowledged, Assignor hereby assigns, transfers and conveys to Assignee,
and Assignee hereby accepts such assignment and assumes all of Assignor's
obligations and rights in, under and to the Lease and the Premises.
2. Effective Date: This Assignment shall be effective on (a) November 1,
--------------
1999 or (b) if Landlord's consent is required under the Lease to the assignment
of the Lease as described herein, such later date as Assignor receives
Landlord's written consent.
3. Miscellaneous: Assignor shall, at any time and from time to time,
-------------
execute such additional documents and take such additional actions as Assignee
or its successors or assigns may reasonably request to carry out the purposes of
this Assignment. This Assignment shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. If either
party brings any action or legal proceeding with respect to this Assignment, the
prevailing party in such action shall be entitled to recover its reasonable
attorneys' fees and costs. If any one or more of the provisions contained in
this Assignment shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. This Assignment
may be executed in one or more counterparts, each of which shall be an original,
but all of which, taken together, shall constitute one and the same Assignment.
This Assignment is subject to the exclusions set forth in Section 1.3(b)(i)-(iv)
of the General Assignment and Assumption Agreement dated as of November 1, 1999
between Assignor and Assignee.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
intending it to be effective as of the Effective Date.
ASSIGNOR: ASSIGNEE:
HEWLETT-PACKARD COMPANY, AGILENT TECHNOLOGIES, INC.,
a Delaware corporation a Delaware corporation
By:__________________________ By:__________________________
Its:_________________________ Its:_________________________
Date:________________________ Date:________________________
2
<PAGE>
Schedule 3
----------
Form Sublease for Sublease Properties
and Leased Leaseback Properties
SUBLEASE
--------
This Sublease (this "Sublease") is entered into between _________________,
a Delaware corporation ("Sublessor") and ________________, a Delaware
corporation ("Sublessee"), as of November 1, 1999.
1. Premises Subleased. Sublessor hereby subleases to sublessee, and
------------------
sublessee hereby subleases from sublessor, upon the terms and conditions set
forth herein, certain premises (the "premises") consisting of approximately
_____ square feet, commonly known ______________________________, as shown on
exhibit a hereto.
2. Master Lease and Master Lessor. The Premises consist of a portion of
------------------------------
the premises (the "Master Premises") that are leased by Sublessor from
_________________________ ("Master Lessor") pursuant to a lease dated
_______________ (the "Master Lease"). In connection with its use of the
Premises, subject to any rules of Master Lessor, Sublessee shall also have the
non-exclusive right to use the common areas outside the Master Premises that
Sublessor has the right to use under the Master Lease and, subject to
Sublessor's reasonable rules and regulations, the hallways, stairways,
restrooms, kitchens, break rooms and other areas of the Master Premises that may
be reasonably necessary for Sublessee's use of the Premises as shown on Exhibit
A hereto (the "Shared Areas").
3. Term. The term of this Sublease (the "Term") shall commence on
----
November 1, 1999 and end on the date the current term of the Master Lease
expires, unless this Sublease is sooner terminated pursuant to its terms or the
Master Lease terminates for any reason. Notwithstanding the foregoing, either
party may terminate this Sublease by delivering to the other party at least
sixty (60) days prior written notice, which termination shall be effective as of
the later of the date set forth in the notice or October 31, 2001. Any
occupation by Sublessee following the expiration of the Term shall not
constitute an extension or renewal of this Sublease or the Term.
4. Rent. Sublessee shall pay Sublessor as rent for the Premises ("Base
----
Rent") its pro rata share (based on the ratio of the square footage of the
Premises to the square footage of the Master Premises (its "Pro Rata Share")) of
the rent payable under the Master Lease, together with an amount equal to
Sublessee's pro rata share (based on the ratio of square footage of the Premises
(excluding the Shared Areas) to the square footage of the Master Premises
(excluding the Shared Areas), of the rent payable under the Master Lease with
respect to the Shared Areas. Such amounts shall be due and payable within
thirty (30) days of delivery by Landlord of an invoice therefor, without
deduction or offset and without prior notice or demand, at the address indicated
by Sublessor in writing from time to time. Such Base Rent shall increase from
time to time based on increases in the base rent under the Master Lease. In
addition, Sublessee shall pay, as and when due under the Master Lease, (a) its
Pro Rata Share of all operating expenses, taxes, insurance and other costs
payable under the Master Lease and (b) all costs directly incurred by or at the
request of Sublessee with respect to its use of the Premises. All amounts
required to be paid by Sublessee under this Sublease other than Base Rent shall
be deemed additional rent.
5. Premises Subject to Master Lease. This Sublease is subject to all of
--------------------------------
the provisions of the Master Lease, and Sublessee shall be bound with respect to
the Premises by all the terms, covenants, and conditions of the Master Lease.
Except as set forth below, or to the extent inconsistent with the express
provisions of this Sublease, the terms and conditions of this Sublease shall
include all of the terms of the Master Lease and such terms are incorporated
into this Sublease as if fully set forth herein, except that: (a) each reference
in such incorporated sections to "Lease", "Premises", "Landlord" and "Tenant" or
like terms shall be deemed a reference to "Sublease", "Premises", "Sublessor"
and "Sublessee", respectively; (b) with respect to work, services, repairs,
restoration, insurance, indemnities, representations, warranties or the
performance of any other obligation of Master Lessor under the Master Lease, the
sole obligation of Sublessor shall be to request the same
2
<PAGE>
in writing from Master Lessor as and when requested to do so by Sublessee, and
to use Sublessor's reasonable efforts to obtain Master Lessor's performance; (c)
with respect to any obligation of Sublessee to be performed under this Sublease,
wherever the Master Lease grants to Sublessor a specified number of days to
perform its obligations under the Lease, except as otherwise provided herein,
Sublessee shall have three (3) fewer days to perform the obligation, including,
without limitation, curing any defaults (provided, however, in no event shall
any such period be reduced to less than two (2) days); (d) with respect to any
approval required to be obtained from the landlord under the Master Lease, such
consent must be obtained from both Master Lessor and Sublessor; (e) in any case
where the landlord has the right to manage, supervise, control, repair, alter,
regulate the use of, enter or use the Premises, such right shall be deemed to be
for the benefit of both Master Lessor and Sublessor; (f) in any case where the
tenant is to indemnify, release or waive claims against the landlord, such
indemnity, release or waiver shall be deemed to run from Sublessee to both
Master Lessor and Sublessor; (g) in any case where the tenant is to execute and
deliver certain documents or notices to the landlord, such obligation shall be
deemed to run from Sublessee to both Master Lessor and Sublessor; (h) all
amounts payable under the Master Lease shall be paid to Sublessor; (i) Sublessee
shall not have the right to exercise any extension, expansion, contraction,
purchase, early termination or other rights personal to Tenant under the Master
Lease; and (j) Sublessee shall not have the right to make any alterations to the
Premises without the prior written consent of Sublessor and, if required under
the Master Lease, Master Lessor. Notwithstanding the foregoing, (a) the
following provisions of the Master Lease shall not be incorporated
herein:_________________
6. Use; Condition of the Premises. Sublessee may use the Premises only
------------------------------
for the purposes permitted under the Master Lease. Sublessee accepts the
Premises in "as is" condition.
7. Insurance; Waiver. Sublessee shall procure and maintain all insurance
-----------------
policies required by the tenant under the Master Lease with respect to the
Premises. All such liability policies shall name Sublessor and Master Lessor as
additional insureds. Notwithstanding anything to the contrary herein, Sublessor
and Sublessee hereby release each other, and their respective agents, employees,
subtenants, assignees and contractors, from all liability for damage to any
property that is caused by or results from a risk which is actually insured
against or which would normally be covered by "all risk" property insurance,
without regard to the negligence or willful misconduct of the entity so
released.
8. Indemnity. Each party shall defend, indemnify, protect and hold
---------
harmless the other from and against any and all liability, loss, claim, damage
and cost (including attorneys' fees) to the extent due to the negligence or
willful misconduct of the indemnifying party or its agents, employees or
contractors or the indemnifying party's violation of the terms of this Sublease
or the Master Lease. This indemnification shall survive the termination of this
Sublease.
9. Notices. Any notice given under this Sublease shall be in writing and
-------
shall be hand delivered or mailed (by registered mail, return receipt requested,
postage prepaid), addressed as follows: (a) if to Sublessee: (i) the Premises,
Attn.: __________ and (ii) _______________, Palo Alto, CA 94304, Attn.:
__________ of Real Estate; and (b) if to Sublessor: (i) the Premises, Attn.:
__________ and (ii) _______________, Palo Alto, CA 94304, Attn.: __________ of
Real Estate. Any notice shall be deemed to have been given when hand delivered
or, if mailed, three (3) business days after mailing.
10. Remedies of Sublessor Upon Default. If Sublessee defaults under any
----------------------------------
provision of this Sublease (after expiration of applicable notice and cure
periods), Sublessor shall be entitled to all of the remedies granted to Master
Lessor under the Master Lease, in addition to any remedies available at law or
in equity.
11. Nonassignment. Sublessee shall have no right to sublet the Premises
-------------
or to transfer any interest of Sublessee herein, except with the prior written
consent of Sublessor (which consent may be withheld in Sublessor's sole and
absolute discretion) and, if required under the Master Lease, Master Lessor, and
otherwise in strict accordance with the terms of the Master Lease, as
incorporated herein. Consent to one transfer shall not be deemed to constitute
consent to a subsequent transfer.
12. Repair; Surrender of the Premises. Sublessor shall have the right to
---------------------------------
perform any of Sublessee's repair, maintenance or other obligations under this
Sublease and charge Sublessee the actual cost thereof. Sublessee shall pay
Sublessor for such costs within thirty (30) days of delivery of an invoice
therefor. Upon the termination of this Sublease,
2
<PAGE>
Sublessee shall remove all of its personal property and surrender the Premises
in the same condition as of the date hereof, ordinary wear and tear and damage
due to casualty and condemnation excepted.
13. Right to Cure Defaults. If Sublessee fails to perform any act on its
----------------------
part to be performed hereunder, Sublessor may, but shall not be obligated to,
after passage of any applicable notice and cure periods (except in the case of
an emergency, in which case no cure period is required), make such payment or
perform such act. All such sums paid, and all reasonable costs and expenses of
performing any such act, shall be deemed additional rent payable by Sublessee to
Sublessor upon demand.
14. Right to Enter. Provided Sublessor complies with all of Sublessee's
--------------
reasonable security measures, Sublessor or its agents may, upon reasonable
notice, enter the Premises at any reasonable time for the purpose of inspecting
the same, supplying any service to be provided by Sublessor to Sublessee or for
any other purpose permitted under this Sublease.
15. Quiet Enjoyment; Sublessor's Obligations. Sublessee shall peacefully
----------------------------------------
have, hold and enjoy the Premises, subject to the terms and conditions of this
Sublease. Sublessor shall perform all of its obligations under the Master Lease
to the extent Sublessee has not expressly agreed to perform such obligations
under this Sublease. Sublessor shall not terminate or take any action which
could give rise to the right of Master Lessor to terminate the Master Lease,
amend or waive any provisions under the Master Lease or make any elections,
exercise any right or remedy or give any approval under the Master Lease that
could result in a substantial interference with Sublessee's use of the Premises
or materially increase Sublessee's obligations or decrease Sublessee's rights
under this Sublease without, in each instance, Sublessee's prior written
consent. Sublessor, with respect to the obligations of Master Lessor under the
Master Lease, shall request Master Lessor in writing to perform such obligations
as and when requested to do so by Sublessee, and to use Sublessor's reasonable
efforts to obtain Master Lessor's performance.
16. Hazardous Materials. Sublessee shall not, without the prior written
-------------------
consent of Sublessor, use, store, transport or dispose of any Hazardous Material
in or about the Premises, except for Hazardous Materials of a type and in
amounts used by Sublessee immediately prior to the Commencement Date, to the
extent permitted under the Master Lease. Sublessee, at its sole cost, shall
comply with all laws and the provisions of the Master Lease relating to its use
of Hazardous Materials. If Hazardous Materials stored, used, disposed of,
emitted, or released on or about the Building by Sublessee or its agents,
employees or contractors result in contamination of the Building or the water or
soil thereunder, then Sublessee shall promptly take any and all action necessary
to clean up such contamination as required by law and the provisions of the
Master Lease. Sublessee shall indemnify, defend, protect, and hold Sublessor
and its officers, directors, employees, successors and assigns harmless from and
against, all losses, damages, claims, costs, and liabilities, including
attorneys' fees and costs, arising out of Sublessee's use, discharge, disposal,
storage, transport, release or emission of Hazardous Materials on or about the
Building during the Term in violation of applicable law or the provisions of the
Master Lease. "Hazardous Materials" shall mean any material or substance that
is now or hereafter designated by any applicable governmental authority to be,
or regulated by an applicable governmental authority as, radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the environment.
17. Parking; Signage. Sublessee shall have the right to use its Pro Rata
----------------
Share of the parking spaces available to Sublessor under the Master Lease.
Sublessor may, in Sublessor's sole and absolute discretion, upon request by
Sublessee, use reasonable efforts to cause Master Lessor to provide Sublessee
with directory and other signage, in accordance with a design and at a location
acceptable to Master Lessor, Sublessor and Sublessee and in accordance with all
applicable laws.
18. Miscellaneous. This Sublease shall in all respects be governed by and
-------------
construed in accordance with the laws of the state in which the Premises are
located. If any term of this Sublease is held to be invalid or unenforceable by
any court of competent jurisdiction, then the remainder of this Sublease shall
remain in full force and effect to the fullest extent possible under the law,
and shall not be affected or impaired. This Sublease may not be amended except
by the written agreement of all parties hereto. Time is of the essence with
respect to the performance of every provision of this Sublease in which time of
performance is a factor. Any executed copy of this Sublease shall be deemed an
original for all purposes. This Sublease shall, subject to the provisions
regarding assignment and subletting, apply to and bind the respective heirs,
successors, executors, administrators and assigns of Sublessor and Sublessee.
The language in all parts of this Sublease shall
3
<PAGE>
in all cases be construed as a whole according to its fair meaning, and not
strictly for or against either Sublessor or Sublessee. The captions used in this
Sublease are for convenience only and shall not be considered in the
construction or interpretation of any provision hereof. When a party is required
to do something by this Sublease, it shall do so at its sole cost and expense
without right of reimbursement from the other party unless specific provision is
made therefor. If either party brings any action or legal proceeding with
respect to this Sublease, the prevailing party shall be entitled to recover
reasonable attorneys' and experts' fees and court costs. Whenever one party's
consent or approval is required to be given as a condition to the other party's
right to take any action pursuant to this Sublease, unless another standard is
expressly set forth, such consent or approval shall not be unreasonably withheld
or delayed. This Sublease may be executed in counterparts. In the event that a
Service Level Agreement between the parties is in effect with respect to the
Premises, the parties intend that all elements of Base Rent payable hereunder
shall be paid to Sublessor pursuant to the Service Level Agreement. Accordingly,
insofar as Sublessee has paid all elements of Base Rent under the Service Level
Agreement, such payment shall constitute payment of Base Rent hereunder.
In witness whereof, the parties have executed this Sublease as of the date first
written above.
SUBLESSOR: SUBLESSEE:
___________________________, __________________________,
a Delaware corporation a Delaware corporation
By:____________________________ By:_____________________________
Name:__________________________ Name:___________________________
Its:___________________________ Its:____________________________
4
<PAGE>
EXHIBIT A
---------
THE PREMISES, INCLUDING SHARED AREAS
5
<PAGE>
Schedule 4
----------
Form Lease for New Lease Properties
and Owned Leaseback Properties
LEASE
-----
This Lease (this "Lease") is entered into between ____________________, a
Delaware corporation ("Landlord") and ____________________, a Delaware
corporation ("Tenant") as of November 1, 1999.
1. Premises. Landlord hereby leases to Tenant, and Tenant hereby leases
--------
from Landlord, upon the terms and conditions set forth herein, certain premises
consisting of approximately _____ square feet (the "Premises") within the
building (the "Building") owned by Landlord, commonly known as
_____________________________, as shown on Exhibit A hereto. In connection with
---------
its use of the Premises, Tenant shall also have the non-exclusive right to use,
subject to Landlord's reasonable rules and regulations, the hallways, stairways,
restrooms, kitchens, break rooms and other areas of the Building that may be
reasonably necessary for Tenant's use of the Premises (the "Shared Areas"), as
shown on Exhibit A hereto.
---------
2. Term. The term of this Lease (the "Term") shall commence on November
----
1, 1999 (the "Commencement Date") and end on October 31, 2001, unless this Lease
is sooner terminated pursuant to its terms.
3. Rent. Tenant shall pay Landlord as rent for the Premises
----
("Base Rent") for each month during the Term, an amount equal to the Occupancy
Cost of the Premises, including use of the Shared Areas, plus an administrative
fee equal to five percent (5%) of such cost. As used herein, "Occupancy Cost"
shall refer to (a) the "triple net" rental value of the Premises (which shall
mean the management reporting depreciation on the land, the land improvements,
the building, the building improvements and the building-related building
equipment with respect to the Building, based on Hewlett-Packard Company's
methods and procedures as of the date hereof (the "Rental Component")) and (b) a
pro rata share of Landlord's actual cost of the following with respect to the
Building and property on which the Building is located: Landlord's liability and
property insurance, property taxes and assessments, utilities (to the extent not
separately metered), maintenance to the common areas and areas for the common
benefit of all of the occupants of the Building and other charges reasonably and
customarily charged by landlords for similar premises (the "Non-Rental
Component"). Such amounts shall be due and payable within thirty (30) days of
delivery by Landlord of an invoice therefor, without any deduction or offset and
without prior notice or demand, at the address indicated by Landlord from time
to time. Rent for any period which is for less than one (1) month of the Term
shall be a pro rata portion of the monthly installment. All amounts required to
be paid by Tenant under this Lease other than Base Rent shall be deemed
Additional Rent (which, collectively with Base Rent, shall be deemed "Rent").
Notwithstanding the provisions of the first two sentences of this section, in
the event the Term extends or is extended by agreement of the parties beyond
October 31, 2001, unless the parties otherwise expressly agree in writing, Base
Rent shall be an amount equal to the Occupancy Cost of the Premises, including
the use of the Shared Areas, plus an administrative fee equal to ten percent
(10%) of the Non-Rental Component of the Occupancy Cost; provided that the
Rental Component shall be equal to the fair market value of the Premises on a
"triple net" basis. In such event, the parties shall negotiate in good faith to
determine the fair market value of the Premises. In the event the parties are
unable to agree upon the fair market value prior to August 1, 2001, the fair
market rent shall be determined by three appraisers selected and governed by the
rules of the American Arbitration Association.
4. Use; Compliance with Laws; Rules. Tenant may use the Premises only
--------------------------------
for the uses made of the Premises by Tenant immediately prior to the
Commencement Date. Tenant shall promptly observe and comply with all laws with
respect to Tenant's use of the Premises; provided, however, that Tenant shall
not be required to comply with any laws
1
<PAGE>
requiring the construction of alterations in the Premises, unless due to
Tenant's particular use of the Premises. Tenant shall not do or permit anything
to be done in, about or with respect to the Premises which would (a) injure the
Premises or (b) vibrate, shake, overload, or impair the efficient operation of
the Premises or the building systems located therein. Tenant shall comply with
all reasonable rules and regulations promulgated from time to time by Landlord.
5. Insurance. Landlord shall obtain and keep in full force and effect,
---------
at Landlord's sole cost, a policy of "all risk" property insurance insuring the
Premises. Tenant shall obtain and keep in full force and effect, at Tenant's
sole cost, a commercial general liability policy of insurance protecting Tenant
against claims for bodily injury, personal injury and property damage based
upon, involving or arising out of Tenant's use or occupancy of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $2,000,000 per
occurrence. The policy shall include coverage for liability assumed under this
Lease as an "insured contract" for the performance of Tenant's indemnity
obligations under this Lease, and shall name Landlord as an additional insured.
In addition, Tenant shall obtain and keep in full force and effect, at Tenant's
sole cost, a policy of "all risk" property insurance insuring Tenant's personal
property in the Premises. Tenant shall deliver certificates evidencing such
insurance to Landlord upon request. Each such insurance policy shall be in a
form and from an insurance company reasonably acceptable to Landlord.
6. Taxes. Landlord shall pay before delinquency all real property taxes
-----
on the Building. Tenant shall pay before delinquency all taxes imposed against
Tenant's personal property.
7. Release and Waiver of Subrogation. Notwithstanding anything to the
---------------------------------
contrary herein, Landlord and Tenant hereby release each other, and their
respective agents, employees, subtenants, and contractors, from all liability
for damage to any property that is caused by or results from a risk which is
actually insured against or which would normally be covered by "all risk"
property insurance, without regard to the negligence or willful misconduct of
the entity so released.
8. Indemnity. Each party shall defend, indemnify, protect and hold
---------
harmless the other from and against any and all liability, loss, claim, damage
and cost (including attorneys' fees) to the extent due to the negligence or
willful misconduct of the indemnifying party or its agents, employees or
contractors or the indemnifying party's violation of the terms of this Lease.
This indemnification shall survive the termination of this Lease.
9. Hazardous Materials. Tenant shall not, without the prior written
-------------------
consent of Landlord, use, store, transport or dispose of any Hazardous Material
in or about the Premises, except for Hazardous Materials of a type and in
amounts used by Tenant immediately prior to the Commencement Date. Tenant, at
its sole cost, shall comply with all laws relating to its use of Hazardous
Materials. If Hazardous Materials stored, used, disposed of, emitted, or
released on or about the Building by Tenant or its agents, employees or
contractors result in contamination of the Building or the water or soil
thereunder, then Tenant shall promptly take any and all action necessary to
clean up such contamination as required by law. Tenant shall indemnify, defend,
protect and hold Landlord and its officers, directors, employees, successors and
assigns harmless from and against, all losses, damages, claims, costs and
liabilities, including attorneys' fees and costs, arising out of Tenant's use,
discharge, disposal, storage, transport, release or emission of Hazardous
Materials on or about the Building during the Term in violation of applicable
law. "Hazardous Materials" shall mean any material or substance that is now or
hereafter designated by any applicable governmental authority to be, or
regulated by any applicable governmental authority as, radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the environment.
10. Repairs. Tenant accepts the Premises in "as is" condition. Tenant
-------
shall maintain in good order and condition the Premises; provided, however, that
Tenant shall in no event be required to perform any repairs and maintenance (a)
necessitated by the acts or omissions of Landlord or its agents, employees or
invitees, (b) to any of the building systems servicing the Premises or any
structural portions of the Premises, or (c) which could be properly treated as a
capital expenditure under generally accepted accounting principles as in effect
from time to time. Except for obligations which are Tenant's responsibility
pursuant to the preceding sentence, Landlord shall maintain the Building in
good, working order.
11. Alterations. No alterations or improvements shall be made to the
-----------
Premises without the prior written consent of Landlord. All work performed in
connection with alterations shall comply within all laws and applicable
2
<PAGE>
requirements of insurance carriers and shall be performed in a good and
workmanlike manner by a licensed contractor approved by Landlord. Tenant shall
keep the Building free of any liens arising out of work performed by or for
Tenant. All alterations that cannot be removed without material damage to the
Premises shall be deemed part of the Premises upon installation. Unless Landlord
waives such right at the time it consents to any alteration, Landlord shall have
the right to require Tenant to remove any alterations it constructs in the
Premises upon the termination of this Lease.
12. Services. Landlord shall provide to Tenant electricity, water and
--------
heating, ventilating and air conditioning and other utilities at the levels
provided immediately prior to the Commencement Date, as well as the other
services described in the Service Level Agreement entered into between the
parties. Landlord shall not, however, be liable for the interruption of any such
services or utilities for causes beyond Landlord's reasonable control.
13. Damage. If the Premises are damaged by any peril, Landlord shall
------
restore the Premises to substantially the same condition as existed immediately
prior to such damage, unless this Lease is terminated by Landlord or Tenant as
set forth below. Landlord shall have the right to terminate this Lease, which
option may be exercised by delivery to Tenant of a written notice within thirty
(30) days after the date of such damage, in the event that: (a) the Premises are
damaged by a peril both not covered by the type of insurance Landlord is
required to carry under this Lease and not actually covered by valid and
collectible insurance carried by Landlord to such an extent that the estimated
cost to restore the Premises exceeds five percent (5%) of the then actual
replacement cost thereof (and Tenant does not agree to pay the uninsured
amount); or (b) the damage to the Premises cannot reasonably be restored within
one hundred eighty (180) days. If the Premises are damaged due to any peril,
Tenant shall be entitled to an abatement of all Rent to the extent of the
interference with Tenant's use of the Premises occasioned thereby. If the damage
resulting therefrom cannot be (or is not in fact) repaired within one hundred
eighty (180) days following the occurrence of such event, then Tenant also shall
be entitled to terminate this Lease by delivery of written notice of termination
to Landlord at any time prior to restoration of the Premises.
14. Condemnation. If all or any part of the Premises is taken by the
------------
exercise of the power of eminent domain or a voluntary transfer in lieu thereof
(a "Condemnation"), this Lease shall terminate as to the part of the Premises
taken. If the Premises cannot be restored within one hundred eighty days (180)
days of the Condemnation and made reasonably suitable for Tenant's continued
occupancy, then Tenant shall have the right to terminate this Lease by delivery
of written notice to Landlord within thirty (30) days of such Condemnation. If
this Lease is not terminated following a Condemnation, Landlord shall make all
repairs and alterations that are reasonably necessary to make the portion of the
Premises not taken a complete architectural unit reasonably suitable for
Tenant's occupancy, and Rent shall be reduced in proportion to the reduction in
utility to the Premises following the Condemnation. Tenant shall be entitled to
receive any Condemnation proceeds for the unamortized value of alterations
installed in the Premises at Tenant's expense, Tenant's relocation costs and
lost goodwill. The balance of the award shall be the property of Landlord.
15. Assignment and Subletting. Tenant may not assign this Lease, sublet
-------------------------
the Premises or permit any use of the Premises by another party (collectively,
"Transfer"), without the prior written consent of Landlord, which consent may be
withheld in Landlord's sole and absolute discretion. An assignment or transfer
by operation of law or otherwise in connection with a merger, consolidation,
reorganization, stock sale or other like transaction shall also constitute a
Transfer requiring Landlord's consent hereunder. Landlord's consent to one
Transfer shall not constitute consent to a subsequent transfer.
16. Default. Tenant shall be in default of its obligations under this
-------
Lease if any of the following events occur: (a) Tenant fails to pay any Rent
when due, when such failure continues for five (5) days after written notice
from Landlord to Tenant of a delinquency; (b) Tenant fails to perform any term,
covenant or condition of this Lease (except those requiring payment of Rent) and
fails to cure such breach within thirty (30) days after delivery of a written
notice specifying the nature of the breach; provided, however, that if more than
thirty (30) days reasonably are required to remedy the failure, then Tenant
shall not be in default if Tenant commences the cure within the thirty (30) day
period and thereafter diligently endeavors to complete the cure; (c) Tenant
makes a general assignment of its assets for the benefit of its creditors,
including attachment of, execution on, or the appointment of a custodian or
receiver with respect to a substantial part of Tenant's property or any property
essential to the conduct of its business; or (d) a petition is filed by or
against Tenant under the bankruptcy laws of the United States or any other
debtors' relief law or statute, unless such petition is dismissed within sixty
(60) days after filing.
3
<PAGE>
17. Remedies. In the event of any default by Tenant, Landlord shall have
--------
the following remedies, in addition to all other rights and remedies provided by
any law or otherwise provided in this Lease, to which Landlord may resort
cumulatively or in the alternative:
a. Landlord may, at Landlord's election, keep this Lease in effect
and enforce by an action at law or in equity all of its rights and remedies
under this Lease, including (i) the right to recover the Rent and other sums as
they become due by appropriate legal action, (ii) the right to make payments
required of Tenant or perform Tenant's obligations and be reimbursed by Tenant
for the cost thereof, (iii) the remedies of injunctive relief and specific
performance to compel Tenant to perform its obligations under this Lease, and
(iv) the right to recover the Rent as it becomes due under this Lease. Landlord
shall have the remedy described in California Civil Code Section 1951.4
(landlord may continue lease in effect after tenant's breach and abandonment and
recover rent as is becomes due, if tenant has the right to sublet or assign,
subject only to reasonable limitations).
b. Landlord may, at Landlord's election, terminate this Lease by
giving Tenant written notice of termination, in which event this Lease shall
terminate on the date set forth for termination in such notice. Any such
termination shall not relieve Tenant from its obligation to pay sums then due
Landlord or from any claim against Tenant for damages or Rent previously accrued
or then accruing. In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to damages in an amount as permitted under
applicable law, including, without limitation: (i) the worth at the time of
award of the amount by which the unpaid Rent for the balance of the term after
the time of award exceeds the amount of such rental loss that Tenant proves
could be reasonably avoided, computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%); and (ii) any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease, or which in the ordinary course of things would be likely to
result therefrom.
18. Right to Cure Defaults. If Tenant fails to pay any sum of money to
----------------------
Landlord, or fails to perform any other act on its part to be performed
hereunder, then Landlord may, but shall not be obligated to, after passage of
any applicable notice and cure periods (except in the case of an emergency, in
which case no cure period is required), make such payment or perform such act.
All such sums paid, and all reasonable costs and expenses of performing any such
act, shall be deemed Additional Rent payable by Tenant to Landlord upon demand.
19. Surrender; Holdover. Prior to expiration of this Lease, Tenant shall
-------------------
remove all of its personal property and shall surrender the Premises to Landlord
broom clean, in the same condition as exists on the Commencement Date,
reasonable wear and tear, alterations that Landlord agrees in writing may be
surrendered, casualty and condemnation, excepted. If the Premises are not so
surrendered, then Tenant shall be liable to Landlord for all costs incurred by
Landlord in returning the Premises to the required condition. In the event that
Tenant does not surrender the Premises upon the expiration or earlier
termination of this Lease as required above, Tenant shall indemnify, defend,
protect and hold harmless Landlord from and against all loss, cost, claim,
damage and liability resulting from Tenant's delay in surrendering the Premises
and pay Landlord holdover rent in an amount equal to one hundred fifty percent
(150%) of the Base Rent payable under this Lease during the last month of the
Term.
20. Estoppel Certificates. Within ten (10) calendar days after receipt of
---------------------
written demand by either party, the other party shall execute and deliver to the
requesting party an estoppel certificate (a) certifying that this Lease is
unmodified and in full force and effect or, if modified, the nature of such
modification; (b) acknowledging, to the best of the responding party's
knowledge, that there are no uncured defaults on the part of the requesting
party; and (c) certifying such other information as is reasonably required by
the requesting party.
21. Subordination. This Lease is subject and subordinate to all present
-------------
and future ground leases, underlying leases, mortgages, deeds of trust or other
encumbrances, and all renewals, modifications and replacements thereof affecting
any portion of the Building (collectively, the "Mortgages"). Notwithstanding the
foregoing, such subordination to future Mortgages shall be conditioned upon
Tenant's receipt of a recognition agreement from the holder of the applicable
Mortgage in form reasonably acceptable to Tenant.
4
<PAGE>
22. Landlord's Right to Enter. Provided Landlord complies with all of
-------------------------
Tenant's reasonable security measures, Landlord or its agents may, upon
reasonable notice (except in the case of emergency), enter the Premises at any
reasonable time for the purpose of inspecting the same, supplying any service to
be provided by Landlord to Tenant, making necessary alterations or repairs or
for any other purpose permitted under this Lease.
23. Late Charge. If Tenant fails to pay to Landlord any amount due
-----------
hereunder within five (5) days after the due date, Tenant shall pay Landlord
upon demand a late charge equal to five percent (5%) of the delinquent amount
accruing from the due date. In addition, Tenant shall pay to Landlord interest
on all amounts due, at the rate of prime plus two percent (2%) or the maximum
rate allowed by law, whichever is less, from the due date to and including the
date of the payment.
24. Notices. Any notice given under this Lease shall be in writing and
-------
shall be hand delivered or mailed (by registered mail, return receipt requested,
postage prepaid), addressed as follows: (a) if to Tenant: (i) the Premises,
Attn.: _______________ and (ii) ____________________, Palo Alto, CA 94304,
Attn.: __________ of Real Estate; and (b) if to Landlord: (i) the Premises,
Attn.: __________ and (ii) ____________________, Palo Alto, CA 94304, Attn.:
__________ of Real Estate. Any notice shall be deemed to have been given when
hand delivered or, if mailed, three (3) business days after mailing.
25. Effect of Conveyance. As used in this Lease, the term "Landlord"
--------------------
means the owner of the Building, or the holder of a leasehold interest in the
Building pursuant to a superior lease. In the event of any assignment or
transfer of the Premises by Landlord, Landlord shall be and hereby is entirely
relieved of all covenants and obligations of Landlord accruing after the date of
such transfer, and it shall be deemed and construed that any transferee has
assumed and shall carry out all covenants and obligations thereafter to be
performed by Landlord hereunder.
26. Parking. Tenant shall have the right to use throughout the Term its
-------
pro rata share (based on the ratio of the square footage of the Premises to the
square footage of the Building ("Pro Rata Share")) of the parking spaces in the
Building's parking lot.
27. Signage. Landlord may, in Landlord's sole and absolute discretion,
-------
upon request by Tenant, provide Tenant with directory signage and other signage
(taking into consideration Tenant's Pro Rata Share of the Building), in
accordance with a design and at a location that is mutually acceptable to
Landlord and Tenant and in accordance with applicable laws.
28. Miscellaneous. This Lease shall in all respects be governed by and
construed in accordance with the laws of the state in which the Premises are
located. If any term of this Lease is held to be invalid or unenforceable by any
court of competent jurisdiction, then the remainder of this Lease shall remain
in full force and effect to the fullest extent possible under the law, and shall
not be affected or impaired. This Lease may not be amended except by the written
agreement of all parties hereto. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. Any executed copy of this Lease shall be deemed an original for all
purposes. This Lease shall, subject to the provisions regarding assignment and
subletting, apply to and bind the respective heirs, successors, executors,
administrators and assigns of Landlord and Tenant. The language in all parts of
this Lease shall in all cases be construed as a whole according to its fair
meaning, and not strictly for or against either Landlord or Tenant. The captions
used in this Lease are for convenience only and shall not be considered in the
construction or interpretation of any provision hereof. When a party is required
to do something by this Lease, it shall do so at its sole cost and expense
without right of reimbursement from the other party unless specific provision is
made therefor. If either party brings any action or legal proceeding with
respect to this Lease, the prevailing party shall be entitled to recover
reasonable attorneys' and experts' fees and court costs. Whenever one party's
consent or approval is required to be given as a condition to the other party's
right to take any action pursuant to this Lease, unless another standard is
expressly set forth, such consent or approval shall not be unreasonably withheld
or delayed. This Lease may be executed in counterparts. In the event that a
Service Level Agreement between the parties is in effect with respect to the
Premises, the parties intend that all elements of Base Rent payable hereunder
shall be paid to Landlord
5
<PAGE>
pursuant to the Service Level Agreement. Accordingly, insofar as Tenant has paid
all elements of Base Rent under the Service Level Agreement, such payment shall
constitute payment of Base Rent hereunder.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day
first above written.
LANDLORD: TENANT:
______________________________, ______________________________,
a Delaware corporation a Delaware corporation
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Its:___________________________ Its:___________________________
6
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Real Estate
Matters Agreement to be executed on its behalf by its officers thereunto duly
authorized on the day and year first above written.
HEWLETT-PACKARD COMPANY
By: /s/ Ann O. Baskins
-----------------------------------------
Name: Ann O. Baskins
---------------------------------------
Title: Associate General Counsel
and Assistant Secretary
--------------------------------------
AGILENT TECHNOLOGIES, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
[Signature Page to Real Estate Matters Agreement]
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Real Estate
Matters Agreement to be executed on its behalf by its officers thereunto duly
authorized on the day and year first above written.
HEWLETT-PACKARD COMPANY
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
AGILENT TECHNOLOGIES, INC.
By: /s/ Craig Nordlund
---------------------------------------------
Name: Craig Nordlund
-------------------------------------------
Senior Vice President, General Counsel
Title: and Secretary
------------------------------------------
[Signature Page to Real Estate Matters Agreement]
<PAGE>
EXHIBIT A
---------
THE PREMISES, INCLUDING SHARED AREAS
7
<PAGE>
Exhibit 2.11
ENVIRONMENTAL MATTERS AGREEMENT
Between
Hewlett-Packard Company
and
Agilent Technologies, Inc.
November 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. FACILITY REMEDIATION............................................................................ 1
Section 1.1. Responsibility For Remediation........................................................ 1
Section 1.2. Standard of Performance............................................................... 2
Section 1.3. Performance and Planning of Remedial Activities....................................... 2
Section 1.4. Compliance With Laws.................................................................. 3
Section 1.5. Safety................................................................................ 3
Section 1.6. Confidentiality....................................................................... 4
Section 1.7. Insurance............................................................................. 4
Section 1.8. Construction Activities and Repair Activities......................................... 5
ARTICLE II. SITE ACCESS AND SUPPORT........................................................................ 5
Section 2.1. Site Access........................................................................... 5
Section 2.2. Utilities and Support Services........................................................ 6
Section 2.3. Site Activities....................................................................... 6
ARTICLE III. REGULATORY PROCESSES.......................................................................... 7
Section 3.1. Procedures For Remediation and Other Work............................................. 7
Section 3.2. Communications........................................................................ 7
Section 3.3. Regular Meetings...................................................................... 7
Section 3.4. HP Project Managers/Agilent Liaison................................................... 7
Section 3.5. Inspection............................................................................ 8
Section 3.6. Notifications......................................................................... 8
Section 3.7. Dispute Resolution.................................................................... 8
ARTICLE IV. INDEMNITY AND LIENS............................................................................ 9
Section 4.1. Indemnity............................................................................. 9
Section 4.2. Liens................................................................................. 9
Section 4.3. Limitation on Liability............................................................... 9
ARTICLE V. MISCELLANEOUS................................................................................... 9
Section 5.1. Sale of an Agilent Schedule 2 Facility................................................ 10
Section 5.2. Notices............................................................................... 10
Section 5.3. Governing Law......................................................................... 14
Section 5.4. Counterparts.......................................................................... 14
Section 5.5. Parties in Interest................................................................... 14
Section 5.6. Assignment............................................................................ 15
Section 5.7. Authority............................................................................. 15
Section 5.8. Interpretation........................................................................ 15
Section 5.9. Amendments............................................................................ 15
Section 5.10. Severability.......................................................................... 15
Section 5.11. Failure or Indulgence Not Waiver...................................................... 15
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 5.12. Entire Agreement.................................................................... 16
Section 5.13. Authority........................................................................... 16
ARTICLE VI. DEFINITIONS................................................................................... 16
Section 6.1. Agilent Group....................................................................... 16
Section 6.2. Agilent Indemnitees................................................................. 16
Section 6.3. Agilent Schedule 2 Facilities....................................................... 16
Section 6.4. Authorized Tenant................................................................... 16
Section 6.5. Claims Committee.................................................................... 16
Section 6.6. Construction Activity............................................................... 17
Section 6.7. Environmental Conditions............................................................ 17
Section 6.8. Environmental Laws.................................................................. 17
Section 6.9. Exacerbation........................................................................ 17
Section 6.10. Governmental Authority.............................................................. 17
Section 6.11. Hazardous Materials................................................................. 17
Section 6.12. HP Group............................................................................ 17
Section 6.13. HP Indemnitees...................................................................... 17
Section 6.14. HP's Remediation Obligation......................................................... 17
Section 6.15. Incremental Construction Costs...................................................... 18
Section 6.16. Losses.............................................................................. 18
Section 6.17. Person.............................................................................. 18
Section 6.18. Release............................................................................. 18
Section 6.19. Remedial Activities................................................................. 18
Section 6.20. Remedial Activity Plans............................................................. 18
Section 6.21. Repair Activity..................................................................... 18
</TABLE>
EXHIBITS
--------
Exhibit 1 - Agilent Schedule 2 Facilities
Exhibit 2 - Orders from a Governmental Authority
-ii-
<PAGE>
ENVIRONMENTAL MATTERS AGREEMENT
This Environmental Matters Agreement (this "Agreement") is entered into on
November 1, 1999 by and between Hewlett-Packard Company, a Delaware corporation
("HP"), and Agilent Technologies, Inc., a Delaware corporation ("Agilent").
Capitalized terms used in this Agreement and not otherwise defined in this
Agreement shall have the meaning ascribed to them in the Separation Agreement,
Assignment Agreement or Indemnification Agreement (as defined below), as
applicable.
RECITALS
WHEREAS, HP hereby and by certain other instruments of even date herewith
transfers or will transfer to Agilent effective as of the Separation Date, the
Agilent Business in accordance with the Master Separation and Distribution
Agreement dated as of August 12, 1999 between the parties ("Separation
Agreement") and the Ancillary Agreements, including, but not limited to the
General Assignment and Assumption Agreement ("Assignment Agreement"), attached
as Exhibit C to the Separation Agreement, and the Indemnification and Insurance
---------
Matters Agreement ("Indemnification Agreement"), attached as Exhibit K to the
---------
Separation Agreement. It is the intent of the parties hereto, by this Agreement
and the other agreements and instruments provided for in the Separation
Agreement, to convey to Agilent the Agilent Business.
WHEREAS, under the terms of, the Indemnification Agreement, HP has agreed
to indemnify, defend and hold harmless Agilent from and against costs associated
with certain Environmental Conditions at the Agilent Schedule 2 Facilities.
WHEREAS, HP hereby agrees to perform remedial activities at the Agilent
Schedule 2 Facilities, consistent with such indemnity obligations and under the
terms and conditions of this Agreement.
WHEREAS, HP and Agilent desire to establish general requirements and mutual
obligations with respect to the performance by HP of remedial activities at the
Agilent Schedule 2 Facilities as set forth above.
NOW THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I.
FACILITY REMEDIATION
Section 1.1. Responsibility For Remediation. At its own cost and expense, HP
shall perform, or cause to be performed, any and all Remedial Activities that
are necessary to fulfill HP's Remediation Obligation. To the extent legally
permitted, HP shall also take all responsibility as generator for any
<PAGE>
Hazardous Materials generated by performance of these Remedial Activities. To
the extent required by Environmental Laws, HP will also obtain any permits,
authorizations or approvals necessary to conduct HP's Remediation Obligation,
except such permits, if any, as must under applicable laws be obtained by a
member of the Agilent Group, or otherwise by an owner or tenant of the relevant
Agilent Schedule 2 Facility.
Section 1.2. Standard of Performance. HP's Remediation Obligation shall be
performed in accordance with: (i) any applicable Remedial Activity Plans, as
approved by the Governmental Authority; and (ii) all applicable Environmental
Laws as enforced by the Governmental Authority[ies] with jurisdiction over the
Remedial Activities or HP's Remediation Obligation. Notwithstanding the
foregoing or anything to the contrary in this Agreement, in the event Agilent or
any successor-in-interest to Agilent at an Agilent Schedule 2 Facility decides
to change the use of such facility from its existing use on the Separation Date
(for example from industrial to commercial use or commercial to residential
use), in no event shall HP's Remediation Obligation require HP to comply with
any stricter standard applied to such Agilent Schedule 2 Facility as a result of
such change in use. Further, HP's Remedial Activities shall be performed in such
a manner as to minimize, to the greatest extent feasible, the impact on the use
of the Agilent Schedule 2 Facility and the ongoing operations of any member of
the Agilent Group or other Authorized Tenant of the Agilent Schedule 2 Facility.
Section 1.3. Performance and Planning of Remedial Activities.
(a) Information to be Provided by HP to Agilent. HP shall provide to
-------------------------------------------
Agilent in a timely fashion, a copy of: (i) any documents submitted to any
Governmental Authority regarding any Remedial Activities performed or to be
performed by or on behalf of HP under this Agreement, and (ii) analytical
results of any environmental sampling conducted on any Agilent Schedule 2
Facilities by or on behalf of HP under this Agreement.
(b) Agilent Opportunity to Comment. HP shall provide Agilent with a
------------------------------
reasonable opportunity to timely review and comment upon, prior to their
submission to the Governmental Authority, any report, plan, proposal or other
document that: (i) proposes the performance of any Remedial Activities that
would disrupt or interfere with the then current day to day operations of any
Authorized Tenant of the Agilent Schedule 2 Facilities; (ii) involves the
construction on any of the Agilent Schedule 2 Facilities of any above ground
remedial fixtures (other than repair and maintenance of any such fixtures or
equipment as are present at the Agilent Schedule 2 Facilities on the Separation
Date); (iii) proposes any remedy or closure at any of the Agilent Schedule 2
Facilities which allows Environmental Conditions to remain on the Agilent
Schedule 2 Facility after remediation has been completed; or (iv) involves the
setting of health and safety standards with respect to exposure to Hazardous
Materials at any Agilent Schedule 2 Facility.
(c) Agilent Participation. Agilent, or its designated representative,
---------------------
shall have the right, but not the obligation, to be present and at any meeting
with or hearing before any Governmental Authority regarding any proposed
Remedial Activities or proposed Remedial Activity Plans described in Section 1.3
(b) above. HP and Agilent further agree to confer in good faith in advance
-2-
<PAGE>
of any such meeting or hearing with respect to any outstanding matters to be
addressed at such meeting or hearing and for the purpose of resolving such
matter to their mutual satisfaction and presenting a unified position to the
Governmental Authority, to the extent consistent with the respective positions
of the parties. If the parties cannot reach agreement after such consultation
and Agilent reasonably determines that any proposed Remedial Activities or
Remedial Activity Plans will have an adverse impact on the use of, or operations
on a particular Agilent Schedule 2 Facility, then Agilent shall have the right
to make objections to such proposals to the relevant Governmental Authority.
(d) Consultation With Agilent. HP agrees to consult fully with Agilent
-------------------------
regarding any proposed Remedial Activities or proposed Remedial Activity Plans
described in Section 1.3(b) above. HP and Agilent agree to use good faith best
efforts to reach agreement on such Remedial Activities or Remedial Activity
Plans. In the event that the parties cannot reach agreement after such
consultation and Agilent reasonably determines that any proposed Remedial
Activities or Remedial Activity Plans will have an adverse impact on the use of,
or operations on a particular Agilent Schedule 2 Facility, Agilent shall have
the right to make objections to such proposals to the relevant Governmental
Authority. The parties also agree that in the event they cannot reach agreement,
HP may submit to the Governmental Authority its proposed Remedial Activities or
proposed Remedial Activity, as required to meet any deadline which is not, by
its terms, subject to extension, to avoid fines and penalties or for the
protection of human health, and HP may also proceed with implementation of any
aspects of such Remedial Activities or Remedial Activity Plans.
(e) Performance of the Remedial Activities. Following approval of any
--------------------------------------
Remedial Activity Plans by the applicable Governmental Authority, HP shall
proceed with appropriate diligence and expedition to implement and complete the
Remedial Activities in accordance with the Remedial Activity Plans and this
Agreement.
(f) Agilent's Assistance. Agilent shall use, or cause the relevant
--------------------
member of the Agilent Group or other Authorized Tenant of the Agilent Schedule 2
Facilities to use, its reasonable best efforts to assist HP in the development,
approval, and implementation of Remedial Activity Plans in accordance with
applicable laws, including applicable Environmental Laws.
Section 1.4. Compliance With Laws. HP shall require that its employees,
consultants, contractors, and subcontractors perform all Remedial Activities
under this Agreement in accordance with applicable laws, including applicable
Environmental Laws.
Section 1.5. Safety. HP shall be responsible for the maintenance of order and
discipline of its employees, consultants, contractors, and subcontractors
engaged in the performance of Remedial Activities under this Agreement, and HP
shall require that such Remedial Activities be performed in compliance, in all
material respects, with applicable laws, regulations, rules, ordinances, codes
or requirements of any Governmental Authority (including those relating to
occupational safety and health). Except in case of emergency and to the extent
that prior notice of such policies is given to HP, HP also will require its
employees, consultants, contractors, and subcontractors engaged in performance
of Remedial Activities on behalf of HP under this Agreement to observe any
health,
-3-
<PAGE>
safety and environmental and site security policies established by Agilent, or
by any other Authorized Tenant, for third-party contractors and other non-
employees who perform work or services at the Agilent Schedule 2 Facility.
Agilent shall have the right to require that a contractor, subcontractor or
other representative of HP discontinue any Remedial Activities to the extent
such activities pose an imminent risk to property, health, safety or the
environment. In such instance, Agilent shall immediately notify HP by telephone
that it has taken such action.
Section 1.6. Confidentiality. HP shall treat as confidential property and not
disclose to others during or subsequent to the term of this Agreement, any
information marked "confidential" regarding any Agilent Group member's or
Agilent Schedule 2 Facility Authorized Tenant's plans, programs, facility,
processes, products, costs, equipment, operations or customers which may come
into the knowledge of HP or its employees, consultants, contractors or
subcontractors, unless required by law or ordered to disclose such by a court or
administrative body after prior notice to Agilent of the request or order to
disclose. HP shall also treat as confidential any non-public information that is
disclosed to HP regarding matters covered under Section 5.1, including, without
limitation, the identity of any potential purchaser of an Agilent Schedule 2
Facility and any terms and conditions of the purchase and sale agreement for an
Agilent Schedule 2 Facility. Agilent shall treat as confidential any non-public
information relating to HP that is disclosed to Agilent regarding matters
covered under Section 5.1, including, without limitation, any terms and
conditions of the purchase and sale agreement for an Agilent Schedule 2 Facility
affecting HP's Remediation Obligation. Agilent shall treat as confidential any
proprietary remediation technology or information utilized by HP in performance
of this Agreement. This provision shall not apply to any information which at
the time of disclosure is publicly available or in the public domain through no
fault of the disclosing party. Upon request, HP and Agilent agree to require
their consultants, contractors and subcontractors who will receive confidential
information to sign a confidentiality agreement substantially similar to the
terms of this provision.
Section 1.7. Insurance.
(a) The consultants, contractors and subcontractors who perform
Remedial Activities under this Agreement shall provide and maintain (or HP shall
provide and maintain), comprehensive general liability insurance and
comprehensive automobile liability insurance naming Agilent, and any Authorized
Tenant of the applicable Agilent Schedule 2 Facility, as additional insureds and
providing coverage for claims for damages for bodily injury, including wrongful
death, and property damage which may arise from or in connection with the
performance of any Remedial Activities. Minimum amounts required are:
Bodily Injury - $2,000,000 each person, $2,000,000 each accident
Property Damage - $2,000,000 each accident
Errors and Omissions - $1,000,000 each occurrence
Workers' Compensation Insurance - In the amount required by law
-4-
<PAGE>
(b) Before commencing Remedial Activities at any Agilent Schedule 2
Facility, the party providing the insurance set forth in Section 1.7(a) above
shall provide Agilent with certificates of insurance or other appropriate
evidence that the insurance required by Section 1.7(a) above has been obtained.
Section 1.8. Construction Activities and Repair Activities.
(a) The provisions of this Section 1.8 shall apply to any Construction
Activity or Repair Activity by Agilent or by any Authorized Tenant which
involves disturbance or invasion of any Environmental Condition that is part of
HP's Remediation Obligation.
(b) If testing conducted in the proposed construction or repair area
before initiation of the Construction Activity or the Repair Activity
demonstrates that the proposed construction or repair area contains an
Environmental Condition in the soil or subsurface that is part of HP's
Remediation Obligation and, further, if Agilent provides notice to HP of such
Environmental Condition and of said proposed Construction Activity or Repair
Activity in the manner provided in Section 5.2, then HP shall (i) promptly and
diligently conduct HP's Remediation Obligation of such Environmental Condition
identified by the testing to the extent required by the standard of performance
set out in Section 1.2 above; and (ii) HP shall reimburse Agilent or the
Authorized Tenant for all reasonable Incremental Construction Costs resulting
from such Construction Activity or Repair Activity. In the event Agilent or an
Authorized Tenant anticipates incurring Incremental Construction Costs, Agilent
shall provide HP reasonable advance notice before the costs are incurred.
(c) In the event, as a result of any Construction Activity or Repair
Activity, any of the then existing above ground or underground remediation
systems (including, without limitation, pump and treat equipment, underground
piping, monitoring or extraction wells, carbon absorption systems and the like)
are damaged or destroyed, or are required to otherwise be relocated, Agilent
shall reimburse HP for all costs associated with such damage, destruction or
removal.
ARTICLE II.
SITE ACCESS AND SUPPORT
Section 2.1. Site Access.
(a) Agilent shall afford or cause to be afforded to HP and to HP's
employees, consultants, contractors and subcontractors, reasonable access on the
terms set forth in this Section 2.1 to all of the Agilent Schedule 2 Facilities
for the purpose of performing Remedial Activities:
(i) HP shall provide reasonable advance notice to the Agilent
Liaison (as defined in Sections 3.4 and 5.2) of the need for access to any of
the Agilent Schedule 2 Facilities, including the purpose and scope of work to be
performed, the nature and duration of the access, and such other information as
Agilent may reasonably request.
-5-
<PAGE>
(ii) Remedial Activities for which Agilent shall be responsible for
providing access include, without limitation, borings, excavations, monitoring,
assessments and evaluations, and construction, installation, operation, and
maintenance of necessary equipment and supporting facilities for the treatment
of soil and groundwater, and all other Remedial Activities, in all cases as
described in the applicable Remedial Activity Plans or as otherwise reasonably
required to fulfill HP's Remediation Obligation.
(b) Agilent shall provide HP with access to and use of those areas
necessary for HP's performance of Remedial Activities under this Agreement,
including areas for groundwater treatment equipment and storage and staging of
materials and equipment. HP agrees that with respect to its use of any portion
of an Agilent Schedule 2 Facility for Remedial Activities, HP shall provide
secondary containment for any above ground treatment systems and any Hazardous
Materials to be stored on-site overnight or for any longer period (excluding
contaminated soils which shall be safely maintained and secured until removal
from the Agilent Schedule 2 Facility). HP shall also provide and be responsible
for proper security with respect to such storage and treatment system areas.
Section 2.2. Utilities and Support Services. It is HP's intent not to utilize
any Agilent utilities or similar support services for implementation of HP's
Remediation Obligation under this Agreement. If HP requests any such utilities
or support services from Agilent for use by HP, or HP's employees, consultants,
contractors, and subcontractors engaged in the performance of Remedial
Activities under this Agreement, Agilent agrees that it will negotiate in good
faith with HP to reach an agreement to provide such utilities and support
services.
Section 2.3. Site Activities. Agilent, its employees, consultants, lessees,
contractors, subcontractors or others under Agilent's control or direction, and
any Authorized Tenant of any portion of the Agilent Schedule 2 Facility, shall
use, operate, and conduct their activities and operations at the Agilent
Schedule 2 Facility in a manner that will interfere to the least extent feasible
with the Remedial Activities conducted by or on behalf of HP under this
Agreement. Agilent shall provide prior written notice to the HP Project Manager
(as defined in Sections 3.4 and 5.2) of the need for, scope and duration of any
activity, process, or operation at the Agilent Schedule 2 Facility (including
without limitation excavation, demolition, landscaping or groundwater pumping)
that could have a material adverse effect on the performance of Remedial
Activities by HP. Agilent shall provide such notice promptly upon becoming aware
of such potential adverse effect. Agilent shall also provide in a timely fashion
to HP any analytical results of soil or groundwater sampling at an Agilent
Schedule 2 Facility performed by or on behalf of Agilent, or which otherwise
comes in to the possession of Agilent.
-6-
<PAGE>
ARTICLE III.
REGULATORY PROCESSES
Section 3.1. Procedures For Remediation and Other Work.
(a) The parties hereto retain all rights to appeal, seek relief from,
or otherwise contest any order or other action by any Governmental Authority
with jurisdiction over the matters that are the subject of this Agreement, in a
manner consistent with this Agreement and the Indemnification Agreement.
(b) Agilent agrees to support and cooperate with HP, as necessary, in
any such challenge by HP of a requirement as to which Agilent has previously
agreed with HP. HP agrees that it will not challenge any decision in a manner
which will interfere with the operation of the applicable Agilent Schedule 2
Facility. HP further agrees to be responsible for any penalties which may accrue
against or be incurred by Agilent or any member of the Agilent Group or
Authorized Tenant of the Agilent Schedule 2 Facility as a result of such
challenge by HP during the pendency of any such challenge and to promptly pay
any such penalties within the time permitted by law but in any event promptly
after exhaustion of any administrative or judicial appeals.
Section 3.2. Communications. In the event of any written notices or other
written communication or action by a Governmental Authority relating to or
affecting the Remedial Activities or any Remedial Activity Plans, or any
communication from the public evidencing any concerns about the Remedial
Activities or Environmental Conditions, the party receiving such notice,
communication, or action shall provide a copy to the other party in a timely
fashion (or, with respect to any written notice by a Governmental Authority that
any Remedial Activities or Environmental Conditions violate Environmental Laws,
within five (5) business days of the receipt of such notice) in accordance with
Section 5.2. Subject to Agilent's rights under Sections 1.3(c) and (d) above, HP
shall be responsible for all contacts and communications with Governmental
Authorities in connection with HP's Remediation Obligation and any other matters
arising under this Agreement which are the obligation of HP. HP also agrees to
promptly reimburse Agilent for any reasonable "out-of-pocket" costs (excluding
any internal Agilent charges for administration, management or supervision or
other internal charges) incurred by Agilent in providing support to HP during
such challenge.
Section 3.3. Regular Meetings. HP shall schedule, as appropriate, regular
meetings with Agilent to provide information on the status of HP's Remediation
Obligation, including without limitation, the development, approval, and
implementation of Remedial Activity Plans, and to consult with and coordinate
with Agilent HP's Remedial Activities under this Agreement.
Section 3.4. HP Project Managers/Agilent Liaison. For consultation and
coordination with Agilent regarding HP's Remedial Activities under this
Agreement, and to manage their respective activities and responsibilities under
this Agreement, HP shall designate a Project Manager and Agilent shall designate
an Agilent Liaison for each Agilent Schedule 2 Facility. Designation of a
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<PAGE>
Project Manager and of an Agilent Liaison shall be by notice as provided in
Section 5.2 of this Agreement. HP may replace any of its Project Managers, and
Agilent may replace any of its Liaisons, by providing the same notice under
Section 5.2.
Section 3.5. Inspection. Agilent shall have the right to inspect and observe
the Remedial Activities performed by or on behalf of HP under this Agreement, at
reasonable times and after reasonable prior notice to HP. Inspection or failure
to inspect by Agilent shall not constitute a waiver of any provision of this
Agreement, or of any of Agilent's rights hereunder. However, Agilent's right or
exercise of inspection shall not extend to or include any right or authority to
supervise or direct any of HP's employees, consultants, contractors or
subcontractors in their performance of any Remedial Activities.
Section 3.6. Notifications. HP, Agilent, and any Authorized Tenant shall
notify the other parties within ten (10) days following the occurrence of any
Release that causes contamination to soil or groundwater on any Agilent Schedule
2 Facility or otherwise: (i) requires investigation, monitoring, remediation or
removal under the Environmental Laws; (ii) may adversely affect any Remedial
Activities or Remedial Activity Plans; (iii) is reported to such party's
insurance carrier; or (iv) is reported to any Governmental Authority under
Environmental Laws. HP also agrees to give Agilent prompt advance notice (if and
to the extent HP has notice) of any inspection to be performed on any Agilent
Schedule 2 Facility by any Governmental Authority in connection with the
Remedial Activities or HP's Remediation Obligation. Agilent also agrees to give
HP prompt advance notice (if and to the extent Agilent has notice) of any
inspection to be performed on any Agilent Schedule 2 Facility by any
Governmental Authority with jurisdiction over the Remedial Activities or HP's
Remediation Obligation.
Section 3.7. Dispute Resolution. If a dispute or disagreement occurs between
HP and Agilent concerning any matter arising under this Agreement, the HP
Project Manager and the Agilent Liaison shall consult and attempt to resolve the
dispute or disagreement. If the HP Project Manager and Agilent Liaison are
unable to reach an agreement on the dispute or disagreement within fifteen (15)
days (or such other longer period of time as may be mutually agreed to in
writing by the HP Project Manager and the Agilent Liaison), then the dispute or
disagreement shall be referred to the Claims Committee. If the Claims Committee
is unable to reach an agreement on the dispute within thirty (30) days, then the
dispute shall be handled in accordance with the Dispute Resolution procedures
set forth in the Section 5.9 of the Separation Agreement. In no event shall the
existence of a dispute or disagreement between HP and Agilent, or their
consultation under this Section 3.7 to attempt to resolve it, delay the filing
or submission of any document, or the performance of any action or activity,
beyond the legally required deadline nor prevent either party from pursuing any
remedy to which it is entitled under the Indemnification Agreement.
-8-
<PAGE>
ARTICLE IV.
INDEMNITY AND LIENS
Section 4.1. Indemnity.
(a) Indemnification by HP. In addition to, and without in any way
limiting the indemnification obligations of HP in the Indemnification Agreement,
HP shall protect, indemnify, defend and hold harmless the Agilent Indemnitees
and any Authorized Tenant from and against any Liabilities and Environmental
Actions to the extent arising at any time out of, relating to, or resulting from
the negligence or willful misconduct of any member of the HP Group or their
agents, employees, consultants or contractors in connection with the Remedial
Activities or any other obligations of HP under this Agreement.
(b) Indemnification by Agilent. In addition to, and without in any
way limiting the indemnification obligations of Agilent in the Indemnification
Agreement, Agilent shall protect, indemnify, defend and hold harmless the HP
Indemnitees from and against any Liabilities and Environmental Actions to the
extent arising at any time out of, relating to, or resulting from: (i)
Exacerbation, to the extent caused by the operations or activities of any member
of the Agilent Group or their agents, employees, consultants, contractors or
Authorized Tenants occurring at any Agilent Schedule 2 Facility; or (ii) the
negligence or willful misconduct of any member of the Agilent Group, or their
agents, employees, consultants, contractors or Authorized Tenants at any Agilent
Schedule 2 Facility in connection with the Remedial Activities or any
obligations of Agilent under this Agreement.
Section 4.2. Liens. HP shall not permit or suffer any mechanics' or
materialmen's or other liens arising from the provision of labor or materials
for work performed as part of or in connection with any Remedial Activities
undertaken by or on behalf of HP under this Agreement. If Agilent becomes aware
of any such liens, Agilent shall provide prompt notice of said lien to HP, but
failure to provide such notice shall relieve HP from its obligations only to the
extent of the prejudice caused thereby. If any such liens attach or claims
therefor are made, then, within ten (10) days after receipt of notice thereof,
HP will procure the discharge thereof by payment, bond, or such other means as
may be required or permitted by applicable law.
Section 4.3. Limitation on Liability. IN NO EVENT SHALL ANY MEMBER OF THE
AGILENT GROUP OR ANY MEMBER OF THE HP GROUP BE LIABLE TO THE OTHER UNDER THIS
ARTICLE IV FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE
DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED,
HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S
INDEMNIFICATION OBLIGATIONS WITH RESPECT TO ANY LOSSES ASSERTED AGAINST AN
INDEMNIFIED PARTY BY
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<PAGE>
ANY THIRD PARTIES (INCLUDING, WITHOUT LIMITATION, ANY GOVERNMENTAL AUTHORITIES)
UNDER SECTION 4.1.
ARTICLE V.
MISCELLANEOUS
Section 5.1. Sale of an Agilent Schedule 2 Facility. In the event that any
member of the Agilent Group decides to sell an Agilent Schedule 2 Facility at
which HP (or its agents or permitted assignees) is continuing to perform
Remedial Activities, Agilent shall promptly notify HP of the intent to sell.
Agilent shall permit HP to: (i) participate in the negotiations with third
parties regarding environmental issues and environmental disclosures related to
the sale of the Agilent Schedule 2 Facility; and (ii) promptly review and
comment to Agilent or the third party upon any portion of a draft purchase and
sale agreement for an Agilent Schedule 2 Facility that addresses environmental
liabilities and obligations so that HP has the reasonable opportunity to
minimize any adverse impact of the sale of an Agilent Schedule 2 Facility on
HP's Remediation Obligations; provided that HP shall not have the right to
prevent Agilent from selling the Agilent Schedule 2 Facility.
Section 5.2. Notices.
(a) All notices or other communications hereunder shall be made in writing
and shall be given either by personal delivery, by nationally recognized
overnight courier (with charges prepaid) or by facsimile transmission (with
telephone confirmation), and shall be deemed to have been given or made if
personally delivered, on the day of such personal delivery; if sent by overnight
courier, on the next business day following the date deposited with such
overnight courier service; or if by facsimile transmission, on the business day
transmitted to receiving facsimile machine with receipt confirmed by telephone,
in each case addressed to the respective parties at the following addresses (or
such other address for a party as shall be specified by like notice):
IF TO HP:
With Respect to All Sites
-------------------------
Jonathan Bauer
Hewlett-Packard Company
1501 Page Mill Rd.
Palo Alto, CA 94304
Telephone: (650) 857-8805
Facsimile: (650) 852-8691
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With Respect to Specific Sites
------------------------------
Colorado Springs, Colorado
--------------------------
Loveland, Colorado
------------------
Paul Paschke
Hewlett-Packard Company
24 Inverness Place East
Englewood, CO 80112
Phone: (303) 649-5547
Facsimile: (303) 649-5535
3500 Deer Creek Road, Palo Alto, California
-------------------------------------------
3175 Bowers Avenue, Santa Clara, California
-------------------------------------------
Alison Rempel
Hewlett-Packard Company
1501 Page Mill Rd.
Palo Alto, CA 94304
Telephone: (650) 857-5290
Facsimile: (650) 852-8691
395 Page Mill Rd., Palo Alto, California
----------------------------------------
150 Green Pond Road, Rockaway, New Jersey
-----------------------------------------
1201 Piner Road-3273 Airway Road, Santa Rosa, California
--------------------------------------------------------
1400 Fountain Grove Parkway, Santa Rosa, California
---------------------------------------------------
Elizabeth McDonald
Hewlett-Packard Company
1501 Page Mill Rd.
Palo Alto, CA 94304
Telephone: (650) 857-8153
Facsimile: (650) 852-8691
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<PAGE>
5301 Stevens Creek Blvd., Santa Clara, California
-------------------------------------------------
Jonathan Bauer
Hewlett-Packard Company
1501 Page Mill Rd.
Palo Alto, CA 94304
Telephone: (650) 857-8805
Facsimile: (650) 852-8691
IF TO AGILENT:
With Respect to All Sites
-------------------------
Alvaro Rego
Agilent Technologies, Inc.
5301 Stevens Creek Blvd.
Santa Clara, CA 95052
Telephone: (408) 345-8086
Facsimile: (408) 345-8630
With Respect to Specific Sites
------------------------------
Colorado Springs, Colorado
--------------------------
Michael Kreidel
Agilent Technologies, Inc.
1900 Garden of the Gods Road
Colorado Springs, CO 80907
Telephone: (719) 590-3093
Facsimile: (719) 590-3545
Loveland, Colorado
------------------
Cheryl Berg
Agilent Technologies, Inc.
815 SW 14/th/ Street
Loveland, CO 80537
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<PAGE>
Telephone: (970) 679-2364
Facsimile: (970) 679-5122
3500 Deer Creek Road, Palo Alto, California
-------------------------------------------
Scott Nixon
Agilent Technologies, Inc.
3500 Deer Creek Road
Palo Alto, CA 94304
Telephone: (650) 857-3835
Facsimile: (650) 852-2994
395 Page Mill Road, Palo Alto, California
-----------------------------------------
5301 Stevens Creek Road, Santa Clara, California
------------------------------------------------
Robin Ross
Agilent Technologies, Inc.
5301 Stevens Creek Blvd.
Santa Clara, CA 95052
Telephone: (408) 553-4067
Facsimile: (408) 553-7877
150 Green Pond Road, Rockaway, New Jersey
-----------------------------------------
Mary Bacchetta
Agilent Technologies, Inc.
150 Green Pond Road
Rockaway, NJ 07866
Telephone: (973) 586-5898
Facsimile: (973) 586-5361
3175 Bowers Avenue, Santa Clara, California
-------------------------------------------
Rebecca Bond
Agilent Technologies, Inc.
370 West Trimble Road
San Jose, CA 95131
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Telephone: (408) 435-4151
Facsimile: (408) 435-4155
1201 Piner Road-3273 Airway Road, Santa Rosa, California
--------------------------------------------------------
1400 Fountain Grove Parkway, Santa Rosa, California
---------------------------------------------------
Robert Brown
Agilent Technologies, Inc.
1400 Fountain Grove Parkway
Santa Rosa, CA 95403
Telephone: (707) 577-2107
Facsimile: (707) 577-4055
(b) Notice provided, as specified in this section, to the HP Project
Manager or Agilent Liaison, as applicable, shall also satisfy the requirements
of this section.
(c) Either party may change its address or designated individual for notice
under this section by delivery of written notice to the other party as provided
in this section.
Section 5.3. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware as to all matters
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
Section 5.4. Counterparts. This Agreement, including the Schedules and
Exhibits hereto, and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
Section 5.5. Parties in Interest. This Agreement shall be binding upon HP,
HP's Subsidiaries, Agilent and Agilent's Subsidiaries. This Agreement shall
inure solely to the benefit of the Agilent Indemnitees and the HP Indemnitees
and their respective permitted assigns, and except as set forth in this Section
5.5, nothing in this Agreement, express or implied, is intended to confer upon
any other Person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
HP hereby agrees to execute, for the benefit of any Agilent Indemnitee,
such documents as may be reasonably requested by such Agilent Indemnitee,
evidencing HP's agreement that the obligations of HP set forth in this Agreement
inure to the benefit of and are enforceable by such Agilent Indemnitee. Agilent
hereby agrees to execute, for the benefit of any HP Indemnitee, such documents
as may be reasonably requested by such HP Indemnitee, evidencing Agilent's
agreement that the obligations of Agilent set forth in this Agreement inure to
the benefit of and are enforceable by such HP Indemnitee.
-14-
<PAGE>
Section 5.6. Assignment. Neither party may assign this Agreement without the
express written consent of the other party, which consent can only be withheld
if the party denying consent, in the reasonable exercise of its discretion,
determines that such assignment would materially increase its obligations, or
materially diminish its rights under this Agreement. This Agreement shall be
deemed to constitute a separate Agreement for each Agilent Schedule 2 Facility
such that the Agreement can be separately assigned to a third party by either HP
or Agilent (subject to the conditions of this Section 5.6) with respect to one
or more Agilent Schedule 2 Facilit[ies], and not assigned as to other Agilent
Schedule 2 Facilities.
Section 5.7. Authority. Each of the parties hereto represents to the other
that (a) it has the corporate or other requisite power and authority to execute,
deliver and perform this Agreement, (b) the execution, delivery and performance
of this Agreement by it have been duly authorized by all necessary corporate or
other action, (c) it has duly and validly executed and delivered this Agreement,
and (d) this Agreement is a legal, valid and binding obligation, enforceable
against it in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equity principles.
Section 5.8. Interpretation. The headings contained in this Agreement, in any
Exhibit or Schedule hereto and in the table or contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, Exhibit or Schedule, such reference shall be to an Article
or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
Section 5.9. Amendments. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
this Agreement.
Section 5.10. Severability. If any term or other provision of this Agreement
or the Schedules or Exhibits attached hereto is determined by a nonappealable
decision by a court, administrative agency or arbitrator to be invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest extent possible.
Section 5.11. Failure or Indulgence Not Waiver. No failure or delay on the
part of either party hereto in the exercise of any right hereunder shall impair
such right or be construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right.
-15-
<PAGE>
Section 5.12. Entire Agreement. This Agreement, the Master Separation
Agreement, the other Ancillary Agreements and the Exhibits and Schedules
attached hereto and thereto, constitutes the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all prior
written and oral and all contemporaneous oral agreements and understandings with
respect to the subject matter hereof.
Section 5.13. Authority. Each of the parties hereto represents to the other
that (a) it has the corporate or other requisite power and authority to execute,
deliver and perform this Agreement, (b) the execution, delivery and performance
of this Agreement by it have been duly authorized by all necessary corporate or
other action, (c) it has duly and validly executed and delivered this Agreement,
and (d) this Agreement is a legal, valid and binding obligation, enforceable
against it in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equity principles.
ARTICLE VI.
DEFINITIONS
Section 6.1. Agilent Group. "Agilent Group" means Agilent, each Subsidiary
and Affiliated Company of Agilent immediately after the Separation Date or that
is contemplated to be a Subsidiary or Affiliated Company of Agilent pursuant to
the Non-US Plan and each Person that becomes a Subsidiary or Affiliate Company
of Agilent after the Separation Date.
Section 6.2. Agilent Indemnitees. "Agilent Indemnitees" means Agilent, each
member of the Agilent Group and each of their respective directors, officers and
employees.
Section 6.3. Agilent Schedule 2 Facilities. "Agilent Schedule 2 Facilities"
means the real property, groundwater, surface water and improvements thereon
which shall be owned or occupied by a member of the Agilent Group on and after
the Separation Date and which are identified a disclosure schedule entitled "The
Agilent Schedule 2 Facilities", which schedule shall be delivered to Agilent by
HP on the Separation Date and attached to this Agreement as Exhibit 1.
---------
Section 6.4. Authorized Tenant. "Authorized Tenant" means, any owner, lessee,
sublessee or other party with a contractual right to occupy all or any portion
of an Agilent Schedule 2 Facility (or their agents, employees, consultants,
contractors) during the period of time that any Agilent Group member has the
contractual right to occupy (as an owner, tenant or otherwise) such Agilent
Schedule 2 Facility.
Section 6.5. Claims Committee. "Claims Committee" means a committee composed
of (i) either the General Counsel or Associate General Counsel of HP and (i)
either the General Counsel or Associate General Counsel of Agilent.
-16-
<PAGE>
Section 6.6. Construction Activity. "Construction Activity" means any
expansion or modification of any existing improvement or construction of a new
improvement by any member of the Agilent Group or any Authorized Tenant on any
Agilent Schedule 2 Facility.
Section 6.7. Environmental Conditions. "Environmental Conditions" means the
presence in the environment, including the soil, groundwater, surface water or
ambient air, of any Hazardous Material at a level which requires investigation
or remediation (including, without limitation, investigation, study, health or
risk assessment, monitoring, removal, treatment or transport) under any
Environmental Laws.
Section 6.8. Environmental Laws. "Environmental Laws" means all laws and
regulations of any Governmental Authority with jurisdiction that relate to the
protection of the environment (including ambient air, surface water, ground
water, land surface or subsurface strata) including laws and regulations
relating to the Release of Hazardous Materials, or otherwise relating to the
treatment, storage, disposal, transport or handling of Hazardous Materials, or
to the exposure of any individual to a Release of Hazardous Materials.
Section 6.9. Exacerbation. "Exacerbation" means any exacerbation, aggravation
or worsening of any Environmental Conditions on, under or about any of the
Agilent Schedule 2 Facilities that is caused by any member of the Agilent Group
or an Authorized Tenant to such an extent that: (i) Remedial Activities that
were not previously required as part of HP's Remediation Obligation become
necessary to fulfill HP's Remediation Obligation, or (ii) HP otherwise incurs
additional costs with respect to HP's Remediation Obligation.
Section 6.10. Governmental Authority. "Governmental Authority" means any
federal, state, local, foreign or international court, government, department,
commission, board, bureau, agency, official or other regulatory, administrative
or governmental authority.
Section 6.11. Hazardous Materials. "Hazardous Materials" means chemicals,
pollutants, contaminants, wastes, toxic substances, radioactive and biological
materials, hazardous substances, petroleum and petroleum products or any
fraction thereof.
Section 6.12. HP Group. "HP Group" means HP, each Subsidiary and Affiliated
Company of HP (other than any member of the Agilent Group) immediately after the
Separation Date, after giving effect to the Non-US Plan and each Person that
becomes a Subsidiary or Affiliate Company of HP after the Separation Date.
Section 6.13. HP Indemnitees. "HP Indemnitees" means HP, each member of the HP
Group and each of their respective directors, officers and employees.
Section 6.14. HP's Remediation Obligation. "HP's Remediation Obligation" means
all Remedial Activities (as defined below) which are necessary or required in
order to comply with and fulfill Environmental Laws (including without
limitation the orders of Governmental Authorities listed on Exhibit 2 to this
---------
Agreement and any consent decrees, consent agreement, or memorandums
-17-
<PAGE>
of understanding with Governmental Authorities, and permits, approvals, plans,
settlement agreements) and that are applicable to Environmental Conditions on,
under or about any Agilent Schedule 2 Facility as to which HP is obligated to
indemnify Agilent under Section 1.4(b)(i) of the Indemnification Agreement.
Section 6.15. Incremental Construction Costs. "Incremental Construction Costs"
means, with respect to any Construction Activity in an area of any of the
Agilent Schedule 2 Facilities that is affected by Environmental Conditions, the
excess of (A) costs reasonably incurred by Agilent or any Authorized Tenant in
connection with the Construction Activity to the extent such costs are
necessitated by the presence of the Environmental Conditions, over (B) the costs
that would have been incurred by Agilent or any Authorized Tenant in connection
with the Construction Activity had such Environmental Conditions not been
present.
Section 6.16. Losses. "Losses" means all losses, damages, claims, obligations,
suits, judgments, fines, penalties, liabilities, costs and expenses of any kind
or character.
Section 6.17. Person. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
Section 6.18. Release. "Release" means any release, spilled, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching,
or migration into the indoor or outdoor environment, , without limitation, the
movement Hazardous Materials through ambient air, soil, surface water,
groundwater, wetlands, land or subsurface strata.
Section 6.19. Remedial Activities. "Remedial Activities" means any activities
undertaken or required to be undertaken by or on behalf of HP in performance of
HP's Remediation Obligation including, without limitation: reporting,
investigation, feasibility study, remediation, treatment, removal, transport,
disposal, characterization, sampling, health assessment, risk assessment,
encapsulation, monitoring, study, report, assessment or analysis of
Environmental Conditions
Section 6.20. Remedial Activity Plans. "Remedial Activity Plans" means any plan
or other document prepared by or on behalf of HP which describes the
specifications for construction, operation, maintenance, performance,
termination or completion of any Remedial Activities that are part of HP's
Remedial Obligation, including any changes, modifications or amendments thereto.
Section 6.21. Repair Activity. "Repair Activity" means any repair, maintenance
or replacement of any improvements, utilities, fixtures and equipment or
tangible personal property that are present on any Agilent Schedule 2 Facility
as of the Separation Date.
-18-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Environmental Matters Agreement to be duly executed in its name and on its
behalf, all as of the date first written above.
HEWLETT-PACKARD COMPANY
By: /s/ Ann O. Baskins
-----------------------------------
Name: Ann O. Baskins
---------------------------------
Title: Associate General Counsel and
--------------------------------
Assistant Secretary
AGILENT TECHNOLOGIES, INC.
By: /s/ Craig Nordlund
-----------------------------------
Name: Craig Nordlund
---------------------------------
Title: Senior Vice President, General
--------------------------------
Counsel and Secretary
[Signature Page to the Environmental Matters Agreement]
<PAGE>
EXHIBIT 1
---------
Agilent Schedule 2 Facilities
1. Colorado Springs, CO - 1900 Garden of the Gods Road, Colorado Springs, CO
80907-3483
2. Loveland, CO - 815 SW 14th Street, Loveland, CO 90537
3. Palo Alto, CA - HP Labs - Building 24-26, 3500 Deer Creek Road, Palo Alto,
CA 94304
4. Palo Alto, CA - 395 Page Mill Road, Palo Alto, CA 94304
5. Rockaway, NJ - 150 Green Pond Road, Rockaway, NJ 07866
6. Santa Clara, CA - 3175 Bowers Avenue, Santa Clara, CA, 95052
7. Sonoma, CA - 1201 Piner Road / 3273 Airway Road, Santa Rosa, CA 95401
8. Sonoma, CA - 1400 Fountain Grove Parkway, Santa Rosa, CA 95401
9. Santa Clara, CA - 5301 Stevens Creek Blvd., Santa Clara, CA 95052
<PAGE>
Colorado Springs, CO
--------------------
1900 Garden of the Gods Road
Colorado Springs, CO 80907-3483
Legal Description
File No. 1167920
Page 1 of 1
Parcel 1:
Lot 1,
Block 1,
Hewlett-Packard First Filing,
County of El Paso,
State of Colorado.
Parcel 2:
Lot 1,
Hewlett-Packard Filing No. 3,
County of El Paso,
State of Colorado.
<PAGE>
Loveland, CO
------------
815 SW 14/th/ Street
Loveland, CO 90537
Legal Description: [See attached]
<PAGE>
LEGAL DESCRIPTION
FILE NO. 1168084
PAGE 1 OF 7
PARCEL 1:
TRACT 1,
2ND SOUTH INDUSTRIAL ADDITION TO THE CITY OF LOVELAND,
AS PER THE PLAT RECORDED APRIL 21, 1961 AT RECEPTION NO. 797343.
COUNTY OF LARIMER,
STATE OF COLORADO.
AND
TRACT 2,
3RD SOUTH INDUSTRIAL ADDITION TO THE CITY OF LOVELAND,
AS PER THE PLAT RECORDED AUGUST 24, 1961. AT RECEPTION NO. 803973,
COUNTY OF LARIMER,
STATE OF COLORADO.
AND
TRACT 3,
BIG THOMPSON INDUSTRIAL PARK,
AS PER THE PLAT RECORDED DECEMBER 10, 1968 AT RECEPTION NO. 957248,
COUNTY OF LARIMER,
STATE OF COLORADO.
PARCEL 2:
LOVELAND TECHNOLOGICAL CENTER ADDITION TO THE CITY OF LOVELAND, AS
PER THE PLAT RECORDED JANUARY 16 1984 IN BOOK 2254 AT PAGE 1445 AT RECEPTION
NO. 546431,
COUNTY OF LARIMER,
STATE OF COLORADO.
<PAGE>
LEGAL DESCRIPTION
FILE NO. 1168084
PAGE 2 OF 7
PARCEL 3:
TRACT 1,
FOURTH SOUTH INDUSTRIAL ADDITION TO THE CITY OF LOVELAND,
AS PER THE PLAT RECORDED APRIL 27, 1979 AT RECEPTION NO. 303908.
COUNTY OF LARIMER,
STATE OF COLORADO.
PARCEL 4:
A TRACT OF LAND AS DESCRIBED IN DEED RECORDED DECEMBER 5, 1990 AT RECEPTION NO.
90055865, DESCRIBED AS FOLLOWS:
ALL THAT PORTION OF SECTION 23, TOWNSHIP 5 NORTH, RANGE 69 WEST OF THE 6TH
P.M., LARIMER COUNTY, COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
CONSIDERING THE NORTH LINE OF THE NORTHWEST ONE-QUARTER OF SAID SECTION 23 AS
BEARING SOUTH 89 DEGREES 53 MINUTES 04 SECONDS WEST AND WITH ALL BEARINGS
CONTAINED HEREIN RELATIVE THERETO.
COMMENCING AT THE NORTHEAST CORNER OF SAID NORTHWEST ONE-QUARTER OF SECTION
23;
THENCE ALONG SAID NORTH LINE OF THE NORTHWEST ONE-QUARTER OF SECTION 23 SOUTH 89
DEGREES 53 MINUTES 04 SECONDS WEST 1323.19 FEET TO THE WEST LINE OF THE EAST
ONE-HALF OF SAID NORTHWEST ONE-QUARTER OF SECTION 23;
THENCE ALONG SAID WEST LINE SOUTH 00 DEGREES 22 MINUTES 40 SECONDS WEST 30.00
FEET TO THE SOUTH RIGHT-OF-WAY LINE OF WEST FIRST STREET ACCORDING TO THE
RECORDED PLAT OF CENTENNIAL PARK SECOND ADDITION TO THE CITY OF LOVELAND, COUNTY
OF LARIMER, STATE OF COLORADO AND A LINE WHICH IS PARALLEL WITH AND 30.00 FEET
(MEASURED AT RIGHT ANGLES) SOUTH OF SAID NORTH LINE OF THE NORTHWEST ONE-QUARTER
OF SECTION 23 AND THE TRUE POINT OF BEGINNING;
THENCE CONTINUING ALONG SAID WEST LINE OF THE EAST ONE-HALF OF THE NORTHWEST
ONE-QUARTER OF SECTION 23 SOUTH 00 DEGREES 22 MINUTES 40 SECONDS WEST 2597.85
FEET TO THE NORTH LINE OF THE SOUTHWEST ONE-QUARTER OF SAID SECTION 23;
THENCE ALONG THE WEST LINE OF THE NORTHEAST ONE-QUARTER OF SAID SOUTHWEST
ONE-QUARTER OF SECTION 23 SOUTH 00 DEGREES 22 MINUTES 07 SECONDS WEST 879.23
FEET TO THE NORTH LINE OF FOURTH SOUTH INDUSTRIAL ADDITION TO THE CITY OF
LOVELAND, COLORADO;
THENCE ALONG SAID NORTH LINE THE FOLLOWING TWO (2) COURSES AND DISTANCES:
1) NORTH 89 DEGREES 56 MINUTES 18 SECONDS EAST 1325.76 FEET;
2) NORTH 89 DEGREES 56 MINUTES 02 SECONDS EAST 119.66 FEET TO THE EAST LINE OF
SAID FOURTH SOUTH INDUSTRIAL ADDITION AND THE WEST LINE OF VALLEY SUBSTATION
ADDITION TO THE CITY OF LOVELAND, COLORADO;
<PAGE>
LEGAL DESCRIPTION
FILE NO. 1168084
PAGE 3 OF 7
PARCEL 4 (CONT'D):
THENCE ALONG THE NORTH LINE OF SAID VALLEY SUBSTATION ADDITION NORTH 89 DEGREES
56 MINUTES 02 SECONDS EAST 192.37 FEET TO THE EASTERLY LINE OF SAID VALLEY
SUBSTATION ADDITION AND THE APPROXIMATE CENTERLINE OF THE BIG THOMPSON DITCH AND
MANUFACTURING COMPANY DITCH NO. 2;
THENCE ALONG SAID EASTERLY LINE AND SAID APPROXIMATE CENTERLINE THE FOLLOWING
FOUR (4) COURSES AND DISTANCES:
1) SOUTH 15 DEGREES O5 MINUTES 36 SECONDS EAST 58.83 FEET
2) SOUTH 29 DEGREES 13 MINUTES 06 SECONDS EAST 140.66 FEET;
3) SOUTH 47 DEGREES 14 MINUTES 15 SECONDS EAST 355.23 FEET;
4) SOUTH 60 DEGREES 03 MINUTES 39 SECONDS EAST 28.89 FEET TO THE SOUTH LINE OF
THE NORTHWEST ONE-QUARTER OF THE SOUTHEAST ONE-QUARTER OF SAID SECTION 23;
THENCE ALONG SAID SOUTH LINE NORTH 89 DEGREES 56 MINUTES 02 SECONDS EAST 583.29
FEET TO THE EASTERLY LINE OF SECOND FAIRGROUNDS ADDITION TO THE CITY OF
LOVELAND, COLORADO AND THE WESTERLY LINE OF A 40 FOOT RIGHT-OF-WAY FOR COUNTY
ROAD NO. l5D AS DESCRIBED AND RECORDED IN BOOK 5 AT PAGE 74, RECORDS OF SAID
COUNTY:
THENCE ALONG SAID EASTERLY LINE AND SAID WESTERLY LINE NORTH 00 DEGREES 22
MINUTES 11 SECONDS WEST 611.86 FEET TO THE BEGINNING OF A TANGENT CURVE TO THE
RIGHT HAVING A CENTRAL ANGLE OF 27 DEGREES 17 MINUTES 22 SECONDS AND A RADIUS OF
1534.35 FEET;
THENCE CONTINUING ALONG SAID EASTERLY LINE AND SAID WESTERLY LINE AND ALONG THE
ARC OF SAID CURVE NORTHEASTERLY 730.79 FEET TO THE END OF SAID CURVE AND TO THE
SOUTH LINE OF THE NORTHEAST ONE-QUARTER OF SAID SECTION 23;
** THENCE ALONG SAID SOUTH LINE NORTH 89 DEGREES 54 MINUTES 24 SECONDS EAST
45.06 FEET TO THE NORTHWESTERLY RIGHT-OF-WAY LINE OF THE BURLINGTON NORTHERN
RAILROAD AND THE BEGINNING OF A CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 06
DEGREES 46 MINUTES 21 SECONDS AND A RADIUS OF 1494.35 FEET;
THENCE ALONG SAID NORTH-WESTERLY RIGHT-OF-WAY LINE AND ALONG THE ARC OF SAID
CURVE NORTHEASTERLY 176.63 FEET TO THE END OF SAID CURVE;
THENCE CONTINUING ALONG SAID NORTHWESTERLY RIGHT-OF-WAY LINE AND TANGENT FROM
SAID CURVE NORTH 34 DEGREES 28 MINUTES 36 SECONDS EAST 83.77 FEET TO A LINE
WHICH IS PARALLEL WITH AND 220.00 FEET (MEASURED AT RIGHT ANGLES) NORTH OF SAID
SOUTH LINE OF THE NORTHEAST ONE-QUARTER OF SECTION 23;
<PAGE>
LEGAL DESCRIPTION
FILE NO. 1168084
PACE 4 OF 7
PARCEL 4 (CONT'D):
THENCE LEAVING SAID NORTHWESTERLY RIGHT-OF-WAY LINE AND ALONG SAID PARALLEL
LINE SOUTH 89 DEGREES 54 MINUTES 24 SECONDS WEST 48.58 FEET;
THENCE LEAVING SAID PARALLEL LINE NORTH 38 DEGREES 20 MINUTES 59 SECONDS EAST
148.05 FEET TO THE NORTHERLY LINE OF THAT CERTAIN PARCEL OF LAND DESCRIBED AND
RECORDED AS EXHIBIT "A" IN BOOK 2069 AT PAGE 0298, RECORDS OF SAID COUNTY;
THENCE ALONG SAID NORTHERLY LINE NORTH 55 DEGREES 41 MINUTES 19 SECONDS WEST
385.48 FEET;
THENCE LEAVING SAID NORTHERLY LINE NORTH 61 DEGREES 41 MINUTES 41 SECONDS WEST
299.85 FEET;
THENCE NORTH 25 DEGREES 54 MINUTES 11 SECONDS WEST 49.69 FEET;
THENCE NORTH 03 DEGREES 55 MINUTES 53 SECONDS WEST 71.81 FEET;
THENCE NORTH 13 DEGREES 27 MINUTES 27 SECONDS EAST 282.79 FEET;
THENCE NORTH 38 DEGREES 56 MINUTES 04 SECONDS EAST 245.63 FEET;
THENCE NORTH 24 DEGREES 36 MINUTES 54 SECONDS EAST 171.57 FEET TO THE EAST LINE
OF SAID NORTHWEST ONE-QUARTER OF THE NORTHEAST ONE-QUARTER OF SECTION 23;
THENCE ALONG SAID EAST LINE NORTH 00 DEGREES 18 MINUTES 41 SECONDS EAST 287.16
FEET TO THE SOUTHERLY LINE OF THAT CERTAIN PARCEL OF LAND DESCRIBED AND RECORDED
IN BOOK 245 AT PAGE 38, RECORDS OF SAID COUNTY;
THENCE LEAVING SAID EAST LINE AND ALONG SAID SOUTHERLY LINE NORTH 38 DEGREES 21
MINUTES 19 SECONDS WEST 128.00 FEET;
THENCE LEAVING SAID SOUTHERLY LINE NORTH 67 DEGREES 02 MINUTES 38 SECONDS WEST
160.50 FEET;
THENCE NORTH 40 DEGREES 28 MINUTES 14 SECONDS WEST 199.06 FEET;
THENCE SOUTH 67 DEGREES 37 MINUTES 39 SECONDS WEST 284.26 FEET;
THENCE SOUTH 79 DEGREES 54 MINUTES 27 SECONDS WEST 176.78 FEET;
THENCE NORTH 89 DEGREES 27 MINUTES 41 SECONDS WEST 216.20 FEET;
THENCE NORTH 60 DEGREES 07 MINUTES 26 SECONDS WEST 187.85 FEET;
THENCE NORTH 36 DEGREES 38 MINUTES 29 SECONDS WEST 291.50 FEET;
THENCE NORTH 24 DEGREES 58 MINUTES 43 SECONDS WEST 407.63 FEET
TO THE SAID SOUTH RIGHT-OF-WAY LINE OF WEST FIRST STREET AND A LINE WHICH IS
PARALLEL WITH AND 30.00 FEET (MEASURED AT RIGHT ANGLES) SOUTH OF THE NORTH LINE
OF THE NORTHWEST ONE-QUARTER OF SECTION 23;
THENCE ALONG SAID SOUTH RIGHT-OF-WAY LINE AND SAID PARALLEL LINE SOUTH 89
DEGREES 53 MINUTES 04 SECONDS WEST 1122.96 FEET TO THE TRUE POINT OF BEGINNING,
AND
<PAGE>
LEGAL DESCRIPTION
FILE NO. 1168084
PAGE 5 OF 7
A TRACT OF LAND IN DEED RECORDED APRIL 28, 1992 AT RECEPTION NO. 92022673,
DESCRIBED AS FOLLOWS:
ALL THAT PORTION OF THE NORTHEAST ONE-QUARTER OF SECTION 23, TOWNSHIP
5 NORTH, RANGE 69 WEST, OF THE 6TH P.M., LARIMER COUNTY, COLORADO, MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
CONSIDERING THE NORTH LINE OF THE NORTHWEST ONE-QUARTER OF SAID SECTION 23 AS
BEARING SOUTH 89 DEGREES 53 MINUTES 53 SECONDS WEST AND WITH ALL BEARINGS
CONTAINED HEREIN RELATIVE THERETO.
COMMENCING AT THE NORTHEAST CORNER OF SAID SECTION 23;
THENCE ALONG SAID NORTH LINE OF THE NORTHEAST ONE-QUARTER OF SECTION 23 SOUTH
89 DEGREES 53 MINUTES 53 SECONDS WEST 1323.01 FEET TO THE WEST LINE OF THE
EAST ONE-HALF OF SAID NORTHEAST ONE-QUARTER OF SECTION 23:
THENCE ALONG SAID WEST LINE SOUTH 00 DEGREES 18 MINUTES 41 SECONDS WEST
2628.54 FEET TO THE SOUTH LINE OF SAID NORTHEAST ONE-QUARTER OF SECTION 23:
* THENCE ALONG SAID SOUTH LINE NORTH 89 DEGREES 54 MINUTES 24 SECONDS EAST
53.53 FEET TO THE EASTERLY LINE OF THAT CERTAIN PARCEL OF LAND DESCRIBED AND
RECORDED AS EXHIBIT "A" IN BOOK 2069 AT PAGE 0298, RECORDS OF SAID COUNTY AND A
LINE, WHICH IS PARALLEL WITH AND 80.00 FEET (MEASURED AT RIGHT ANGLES)
NORTHWESTERLY OF THE NORTHWESTERLY RIGHT-OF-WAY LINE OF THE BURLINGTON
NORTHERN RAILROAD AND THE TRUE POINT OF BEGINNING, SAID TRUE POINT OF
BEGINNING BEING THE BEGINNING OF A CURVE TO THE RIGHT HAVING A CENTRAL ANGLE
OF 08 DEGREES 17 MINUTES 49 SECONDS AND A RADIUS OF 1574.35 FEET;
THENCE ALONG SAID EASTERLY LINE OF LAND IN BOOK 2069 AT PAGE 0298, SAID
PARALLEL LINE, AND THE ARC OF SAID CURVE NORTHEASTERLY 227.98 FEET TO THE END
OF SAID CURVE;
THENCE CONTINUING ALONG SAID EASTERLY LINE OF LAND IN BOOK 2069 AT PAGE 0298,
SAID PARALLEL LINE, AND TANGENT FROM SAID CURVE NORTH 34 DEGREES 28 MINUTES
36 SECONDS EAST 203.77 FEET TO THE NORTHERLY LINE OF SAID LAND IN BOOK 2069 AT
PAGE 0298 AND TO THE NORTHEASTERLY LINE OF THAT CERTAIN PARCEL OF LAND
DESCRIBED IN DEED RECORDED IN B00K 580, PAGE 219, RECORDS OF SAID COUNTY;
THENCE LEAVING SAID EASTERLY LINE OF LAND IN BOOK 2069 AT PAGE 0298 AND ALONG
SAID NORTHEASTERLY LINE OF LAND IN BOOK 580 AT PAGE 219 SOUTH 55 DEGREES 41
MINUTES 19 SECONDS EAST 5O.00 FEET TO A LINE WHICH IS PARALLEL WITH AND
30.00 FEET (MEASURED AT RIGHT ANGLES) NORTHWESTERLY OF SAID NORTHWESTERLY
RIGHT-OF-WAY LINE OF THE BURLINGTON NORTHERN RAILROAD;
THENCE ALONG SAID PARALLEL LINE SOUTH 34 DEGREES 28 MINUTES 36 SECONDS WEST
139.00 FEET;
<PAGE>
LEGAL DESCRIPTION
FILE NO. 1168084
PAGE 6 OF 7
PARCEL 4 (CONT'D):
THENCE LEAVING SAID PARALLEL LINE SOUTH 55 DEGREES 41 MINUTES 19 SECONDS EAST
30.00 FEET TO SAID NORTHWESTERLY RIGHT-OF-WAY LINE OF THE BURLINGTON NORTHERN
RAILROAD;
THENCE ALONG SAID NORTHWESTERLY RIGHT-OF-WAY LINE SOUTH 34 DEGREES 28 MINUTES
36 SECONDS WEST 65.00 FEET TO THE BEGINNING OF A TANGENT CURVE TO THE LEFT
HAVING A CENTRAL ANGLE OF 06 DEGREES 46 MINUTES 21 SECONDS AND A RADIUS OF
1494.35 FEET;
THENCE CONTINUING ALONG SAID NORTHWESTERLY RIGHT-OF-WAY LINE, AND ALONG THE
ARC OF SAID CURVE SOUTHWESTERLY 176.63 FEET TO SAID SOUTH LINE OF THE
NORTHEAST ONE-QUARTER OF SECTION 23;
THENCE NON-TANGENT FROM SAID CURVE, LEAVING SAID NORTHWESTERLY RIGHT-OF-WAY
LINE, AND ALONG SAID SOUTH LINE OF THE NORTHEAST ONE-QUARTER OF SECTION 23 SOUTH
89 DEGREES 54 MINUTES 24 SECONDS WEST 89.81 FEET TO THE TRUE POINT OF BEGINNING,
COUNTY OF LARIMER,
STATE OF COLORADO,
EXCEPTING FROM THE ABOVE DESCRIBED LAND, THAT PORTION CONVEYED TO THE CITY OF
LOVELAND IN DEED RECORDED MAY 6, 1992 AT RECEPTION NO. 92024828; AND
EXCEPTING THEREFROM, ANY PORTION CONTAINED WITHIN THE HEWLETT-PACKARD ROOSEVELT
ADDITION RECORDED OCTOBER 5, 1998 AT RECEPTION NO. 98086644; AND
EXCEPTING THEREFROM, ANY PORTION CONTAINED WITHIN THE CMS ADDITION TO THE CITY
OF LOVELAND RECORDED AUGUST 17, 1994 AT RECEPTION NO. 94069415.
NOTE: THE LEGAL DESCRIPTIONS CONTAINED IN PARCEL 4 ARE SUBJECT TO SATISFACTORY
COMPLETION OF REQUIREMENTS CONTAINED IN SCHEDULE B, SECTION 1 HEREIN.
PARCEL 5:
LOT 4,
BIG THOMPSON INDUSTRIAL PARK,
AS PER THE PLAT RECORDED DECEMBER 10, 1968 AT RECEPTION NO. 957248,
COUNTY OF LARIMER,
STATE OF COLORADO.
<PAGE>
LEGAL DESCRIPTION
FILE NO.1168084
PAGE 7 OF 7
PARCEL 6:
LOT 2,
BLOCK 1,
BIG THOMPSON INDUSTRIAL PARK SECOND SUBDIVISION TO THE CITY OF LOVELAND, AS PER
THE PLAT RECORDED SEPTEMBER 12, 1989 AT RECEPTION NO. 89041700,
COUNTY OF LARIMER,
STATE OF COLORADO.
PARCEL 7:
TRACT A,
HEWLETT-PACKARD ROOSEVELT ADDITION TO THE CITY OF LOVELAND,
AS PER THE PLAT RECORDED OCTOBER 5, 1998 AT RECEPTION NO. 98086644,
COUNTY OF LARIMER,
STATE OF COLORADO.
PARCEL 8:
TRACT 1,
CMS ADDITION TO THE CITY OF LOVELAND,
AS PER THE PLAT RECORDED AUGUST 17, 1994 AT RECEPTION NO. 94069415,
COUNTY OF LARIMER,
STATE OF COLORADO.
<PAGE>
<PAGE>
Palo Alto, CA
-------------
HP Labs
Building 24-26
3500 Deer Creek Road
Palo Alto, CA 94304
As identified in Lease made and entered into as of the 29/th/ day of October
1969 by and between The Board of Trustees of the Leland Stanford Junior
University and Fairchild Camera and Instrument Corporation and amended by
Agreement for Assignment of Lease dated August 26, 1974, by Lease Amendment
Agreement dated as of June 24, 1983, by Lease Amendment dated as of July 31,
1985, and by Lease Amendment Agreement dated as of June 22, 1989 by and between
The Board of Trustees of the Leland Stanford Junior University, and Hewlett-
Packard Company for certain parcels of land described on Exhibit A (attached
hereto).
<PAGE>
Parcel 1
All that certain real property situate in the City of Palo Alto, County of Santa
Clara, being a portion of Parcel A as said parcel is shown on that certain
Parcel Map recorded May 22, 1969, in Book 254 of Parcel Maps at page 1, Official
Records of Santa Clara County, more particularly described as follows:
BEGINNING at a point on the Southwesterly line of Road "B" (70 feet in width) as
said road is shown on the aforementioned Parcel Map, said point of beginning
bearing South 65(degrees)06'26" East 347.24 feet from the Westerly terminus of
the course North 65(degrees)06'26" West 659.31 feet as said course is shown on
the aforementioned Parcel Map; thence from said point of beginning along the
Southwesterly line of the aforementioned Road "B" South 65(degrees)06'26" East
312.07 feet; thence along the arc of a curve to the right, having a radius of
965 feet, through a central angle of 41(degrees)46'06", a distance of 703.48
feet; thence South 23(degrees)20'20" East 148.15 feet; thence leaving the
Southwesterly line of the aforementioned Road "B" South 66(degrees)39'40" West
581.37 feet; thence North 23(degrees)20'20" West 648.61 feet; thence North
65(degrees)06'26" West 236.00 feet; thence North 24(degrees)53'34" East 14.76
feet; thence along the arc of a tangent curve to the left, having a radius of 20
feet, through a central angle of 21(degrees)40'04", a distance of 7.56 feet;
thence along the arc of a reverse curve to the right, having a radius of 110
feet, through a central angle of 22(degrees)50'07", a distance of 43.84 feet;
thence along the arc of a compound curve to the right, having a radius of 305
feet, through a central angle of 31(degrees)51'09", a distance of 169.56 feet;
thence along the arc of a reverse curve to the left, having a radius of 10 feet,
through a central angle of 31(degrees)01'12", a distance of 5.41 feet; thence a
central angle of 31(degrees)01'12", a distance of 5.41 feet; thence North
24(degrees)53'34" East 115.06 feet to the point of beginning.
CONTAINING 11.074 acres of land, more or less.
RESERVING THEREFROM a 10-foot water line easement as said easement is recorded
in Book 6346 of Official Records of Santa Clara County at page 554, the
centerline of which is more particularly described as follows:
BEGINNING at a point on the Westerly line of the aforementioned Parcel 1, said
point bearing South 24(degrees)53'34" West 16.36 feet from the point of
beginning of the aforementioned Parcel 1; thence from said point of beginning
South 76(degrees)25'02" East 60.43 feet; thence North 69(degrees)53'34" East
6.38 feet to a point on the Southwesterly line of the aforementioned Road "B",
said point being the terminus of said centerline.
Exhibit A
<PAGE>
Parcel 2
All that certain real property situate in the City of Palo Alto, County of Santa
Clara, being a portion of Parcel A as said parcel is shown on that certain
Parcel Map recorded May 22, 1969, in Book 254 of Parcel Maps at page 1, Official
Records of Santa Clara County, more particularly described as follows:
BEGINNING at a point in the Southwesterly line of Road "B" (70 feet in width)
as, said Road "B" is shown on the aforesaid Parcel Map, said point bearing
South 23(degrees)20'20" East 148.15 feet from the Northerly terminus of the
course North 23(degrees)20'20" West 440.00 feet as said course is shown on the
aforementioned Parcel Map; thence from said point of beginning along the
Southwesterly line of Road "B" South 23(degrees)20'20" East 291.85 feet; thence
South 14(degrees)36'34" East 79.07 feet; thence South 23(degrees)20'20" East
85.00 feet; thence along the arc of a tangent curve to the right, having a
radius of 20 feet, through a central angle of 90(degrees)00', a distance of
31.42 feet to a point on the Northerly line of Arastradero Road as said
Arastradero Road is shown on the aforementioned Parcel Map; thence South
66(degrees)39'40" West 488.00 feet; thence North 23(degrees)20'20" West 475.00
feet; thence North 66(degrees)39'40" East 520.00 feet to the point of
beginning.
CONTAINING 5.629 acres of land, more or less.
Exhibit A
<PAGE>
Parcel 3
All that certain real property situate in the City of Palo Alto, County of Santa
Clara, being a portion of Parcel A as said parcel is shown on that certain
Parcel Map recorded May 22, 1969, in Book 254 of Parcel Maps at page 1, Official
Records of Santa Clara County, more particularly described as follows:
BEGINNING at the most Northerly corner of the aforementioned Parcel A, said
point of beginning also lying on the Southwesterly line of Road "B" (70 feet in
width) as said Road "B" is shown on the aforementioned Parcel Map; thence from
said point of beginning South 12(degrees)46'51" East 522.61 feet; then South
30(degrees)41'51" East 1330.33 feet; thence North 66(degrees)39'40" East 167.44
feet; thence North 23(degrees)20'20" West 475.00 feet; thence South
66(degrees)39'40" West 61.37 feet; thence North 23(degrees)20'20" West 648.61
feet; thence South 66(degrees)39'40" West 61.37 feet; thence North
23(degrees)20'20" West 648.61 feet; thence North 65(degrees)06'26" West 236.00
feet; thence North 24(degrees)53'34" East 14.76 feet; thence along the arc of a
tangent curve to the left, having a radius of 20 feet, through a central angle
of 21(degrees)40'04", a distance of 7.56 feet; thence along the arc of a reverse
curve to the right, having a radius of 110 feet, through a central angle of
22(degrees)50'07", a distance of 43.84 feet; thence along the arc of a compound
curve to the right, having a radius of 305 feet, through a central angle of
31(degrees)51'09", a distance of 169.56 feet; thence along the arc of a reverse
curve to the left, having a radius of 10 feet, through a central angle of
31(degrees)01'12", a distance of 5.41 feet; thence North 24(degrees)53'34" East
115.06 feet to a point on the Southwesterly line of the aforementioned Road "B";
thence along the Southwesterly line of the aforementioned Road "B" North
65(degrees)06'26" West 347.24 feet; thence along the arc of a tangent curve to
the left, having a radius of 765 feet, through a central angle of
8(degrees)06'51", a distance of 108.34 feet to the point of beginning.
CONTAINING 8.576 acres of land, more or less.
RESERVING THEREFROM a 10-foot water line easement as said easement is filed for
record in Book 6346, Official Records of Santa Clara County, at page 554, the
centerline of which is more particularly described as follows:
BEGINNING at a point on the Southwesterly line of the aforementioned Road "B",
said point bearing South 65(degrees)06'26" East 129.16 feet from the Westerly
terminus of the course North 65(degrees)06'26" West 659.31 feet, as said course
is shown on the aforementioned Parcel Map; thence from said point of beginning
South 20(degrees)06'26" East 46.21 feet; thence South 56(degrees)34'35" East
60.00 feet; thence South 76(degrees)25'02" East 128.57 feet to a point on the
Easterly line of Parcel 3, said point being the terminus of said centerline.
EXHIBIT A
<PAGE>
Palo Alto, CA
-------------
395 Page Mill Road
Palo Alto, CA 94304
Legal Description:
All that certain real property situated in the City of Palo Alto, County of
Santa Clara, State of California, more particularly described as follows:
All of Parcel 1, as said Parcel is shown upon that certain Parcel Map entitled,
"Parcel Map, consisting of all of Block 4 'Map of Sunnyside Addition to the Town
of Mayfield' (K Maps, 47) and portions Lots 1, 2, 7 & 8 of 'Lambert Tract, Town
of Mayfield' (C Misc. Records, 350)", which Map was field for record in the
Office of the Recorder of the County of Santa Clara, State of California on June
27, 1975 in Book 358 of Maps, at Page 23.
<PAGE>
Rockaway, NJ
------------
150 Green Pond Road
Rockaway, NJ 07866
Legal Description: [See attached]
<PAGE>
- --------------------------------------------------------------------------------
Issued By:
CHICAGO TITLE INSURANCE COMPANY Schedule A - Description
- --------------------------------------------------------------------------------
COMMERCIAL COMMITMENT FOR TITLE INSURANCE
----------
Your Reference: NBU #160990328/HEWLETT PACKARD - TBA Commitment No: 9921-80019
----------
4. The land referred to in this Commitment is described as follows:
ALL THAT CERTAIN TRACT, PARCEL AND LOT OF LAND LYING AND BEING SITUATE IN
THE TOWNSHIP OF ROCKAWAY, COUNTY OF MORRIS, STATE OF NEW JERSEY, BEING
MORE PARTICULARLY DESCRIBED AS FOLLOWS:
TRACT ONE
BEGINNING AT A POINT LOCATED ON THE NORTHERLY SIDE OF MERIDEN ROAD 50.57
FEET ON A COURSE OF NORTH 06 DEGREES 22 MINUTES 20 SECONDS WEST FROM A
CONCRETE MONUMENT SET ON THE SOUTHERLY SIDE OF MERIDEN ROAD AT A POINT
WHERE THE LANDS OF THE GRANTOR HEREIN ADJOIN LANDS OF HEWLETT-PACKARD
COMPANY AND FROM SAID BEGINNING RUNNING THENCE
(1) SOUTH 06 DEGREES 22 MINUTES 20 SECONDS EAST AND ALONG THE SAID LANDS
OF HEWLETT-PACKARD CO., CROSSING THE AFORESAID CONCRETE MONUMENT, 1,708.08
FEET TO A POINT MARKED BY AN IRON PIPE; THENCE
(2) SOUTH 12 DEGREES 17 MINUTES WEST STILL ALONG LANDS OF HEWLETT-PACKARD
264 FEET TO A POINT MARKED BY AN IRON PIPE AT THE BASE OF A CHERRY TREE;
THENCE
(3) SOUTH 33 DEGREES 56 MINUTES WEST 1,445.40 FEET TO A POINT IN THE LINE
OF LANDS NOW OR FORMERLY OWNED BY WILLIAM NICK; THENCE
(4) NORTH 83 DEGREES 14 MINUTES EAST ALONG THE LANDS OF SAID WILLIAM NICK
41.40 FEET TO A POINT IN THE CENTERLINE OF BEAVER BROOK; THENCE
(5) IN A GENERALLY NORTHEASTERLY DIRECTION ALONG THE CENTERLINE OF BEAVER
BROOK THE VARIOUS COURSES AND DISTANCES THEREOF APPROXIMATELY 3,550 FEET,
MORE OR LESS TO THE POINT AT WHICH THE CENTERLINE OF BEAVER BROOK
INTERSECTS THE WESTERLY LINE OF LANDS NOW OR FORMERLY OF EDWARD COUGHLAN;
THENCE
(6) NORTH 39 DEGREES 22 MINUTES 50 SECONDS WEST ALONG SAID LINE OF LANDS
OF COUGHLAN AND ALSO ALONG THE WESTERLY LINE OF LANDS NOW OR FORMERLY OF
CONQRUENT MACHINE CO., INC., 930.20 FEET TO A POINT ON THE SOUTHERLY SIDE
OF MERIDEN ROAD, WHICH LINE PASSES OVER A NEWLY SET CONCRETE MONUMENT 16
FEET FROM ITS TERMINUS; THENCE
(7) SOUTH 87 DEGREES 23 MINUTES WEST CROSSING MERIDEN ROAD TO ITS
NORTHERLY SIDE 303.90 FEET TO A POINT; THENCE
(8) NORTH 78 DEGREES 22 MINUTES 30 SECONDS WEST, ALONG THE NORTHERLY SIDE
OF
(Continued on Next Page)
Page A2 - 1
<PAGE>
- --------------------------------------------------------------------------------
Issued By:
CHICAGO TITLE INSURANCE COMPANY Schedule A - Description (cont'd
- --------------------------------------------------------------------------------
COMMERCIAL COMMITMENT FOR TITLE INSURANCE
----------
Your Reference: NBU #160990328/HEWLETT PACKARD - TBA Commitment No: 9921-80019
----------
MERIDEN ROAD 267.27 FEET TO THE POINT AND PLACE OF BEGINNING.
TRACT TWO
BEGINNING AT A STAKE IN THE FIRST LINE OF A TRACT OF 51.48 ACRES OF LAND
CONVEYED BY COLUMBUS BEACH AND WIFE TO BEAMAN STICKLE BY DEED DATED
JULY 1, 1955 AND RECORDED IN THE MORRIS COUNTY RECORD OF DEEDS IN BOOK S-5,
PAGES 80 & c., SAID STAKE BEING AT A POINT IN SAID FIRST LINE WHERE IT IS
INTERSECTED BY THE SOUTHEASTERLY RIGHT OF WAY LINE OF THE HIBERNIA MINE
RAILROAD, AND BEING DISTANT FIVE HUNDRED EIGHTY EIGHT AND FORTY TWO ONE-
HUNDREDTHS (588.42) FEET ON A COURSE OF NORTH 51 DEGREES19 MINUTES WEST
FROM THE BEGINNING CORNER OF SAID 51.48 ACRE TRACT, SAID STAKE BEING ALSO
DISTANT 1438.23 FEET ON A COURSE OF SOUTH 38 DEGREES 36 MINUTES WEST FROM
NEW JERSEY GEODETIC CONTROL SURVEY MONUMENT #4305 AND FROM SAID BEGINNING
POINT RUNS; THENCE
(1) ALONG THE SOUTHEASTERLY RIGHT OF WAY LINE OF SAID HIBERNIA MINE
RAILROAD NORTH 39 DEGREES FIFTY THREE MINUTES EAST 1101.75 FEET TO A STAKE;
THENCE
(2) STILL ALONG SAID RIGHT OF WAY LINE NORTH 46 DEGREES 39 MINUTES EAST
373.91 FEET TO A STAKE; (NOTE: THIS POINT IS DISTANT 83.96 FEET ON A COURSE
OF SOUTH 74 DEGREES 52 MINUTES EAST FROM SAID GEODETIC CONTROL SURVEY
MONUMENT #4305); THENCE
(3) FOLLOWING ALONG THE SOUTHEASTERLY RIGHT OF WAY LINE OF SAID RAILROAD
NORTH 44 DEGREES 56 MINUTES EAST 176.97 FEET TO A STAKE; THENCE
(4) NORTH 43 DEGREES 39 MINUTES EAST 556.06 FEET TO A STAKE; THENCE
(5) NORTH 44 DEGREES 58 MINUTES EAST 488.10 FEET TO A STAKE; THENCE
(6) NORTH 42 DEGREES 41 MINUTES EAST 560.83 FEET TO A STAKE; (NOTE: THIS
POINT IS DISTANT 52.17 FEET ON A COURSE OF NORTH 66 DEGREES 51 MINUTES
EAST FROM NEW JERSEY GEODETIC CONTROL SURVEY MONUMENT #4306); THENCE
(7) STILL FOLLOWING ALONG THE EASTERLY RIGHT OF WAY LINE OF SAIDHIBERNIA
MINE RAILROAD NORTH 38 DEGREES 43 MINUTES EAST 98.79 FEET TO A STAKE;
THENCE
(8) NORTH 32 DEGREES 30 MINUTES EAST 82.41 FEET TO A STAKE; THENCE
(9) NORTH 26 DEGREES 37 MINUTES EAST 101.75 FEET TO A STAKE; THENCE
(10) NORTH 16 DEGREES 43 MINUTES EAST 105.69 FEET TO A STAKE; THENCE
(11) NORTH 6 DEGREES 24 MINUTES EAST 113.42 FEET TO A STAKE; THENCE
(12) NORTH 5 DEGREES 27 MINUTES WEST 156.36 FEET TO A STAKE; THENCE
(13) NORTH 08 DEGREES 41 MINUTES WEST 943.80 FEET TO A STAKE AT THE
Page A2 - 2
<PAGE>
- --------------------------------------------------------------------------------
Issued By:
CHICAGO TITLE INSURANCE COMPANY Schedule A - Description (cont'd
- --------------------------------------------------------------------------------
COMMERCIAL COMMITMENT FOR TITLE INSURANCE
----------
Your Reference: NBU #160990328/HEWLETT PACKARD - TBA Commitment No: 9921-80019
----------
INTERSECTION OF THE SAID EASTERLY RIGHT-OF-WAY LINE OF THE HIBERNIA MINE
RAILROAD WITH THE SOUTHEASTERLY RIGHT OF WAY LINE OF THE OLD BRANCH
RAILROAD LEADING TO THE BEACH GLEN MINE THEN ALONG THE SOUTHEASTERLY
RIGHT-OF-WAY LINE OF SAID BRANCH RAILROAD THE FOLLOWING COURSES; THENCE
(14) NORTH 3 DEGREES 11 MINUTES WEST 118.22 FEET TO A STAKE; THENCE
(15) NORTH 11 DEGREES 57 MINUTES EAST 152.32 FEET TO A STAKE; THENCE
(16) NORTH 17 DEGREES 36 MINUTES EAST 195.55 FEET TO A STAKE; THENCE
(17) NORTH 21 DEGREES 46 MINUTES EAST 99.80 FEET TO A STAKE; THENCE
(18) NORTH 30 DEGREES 29 MINUTES EAST 82.98 FEET TO A STAKE; THENCE
(19) NORTH 37 DEGREES 40 MINUTES EAST 79.42 FEET TO A STAKE AT THE
INTERSECTION OF THE SOUTHEASTERLY RIGHT OF WAY LINE OF THE AFORESAID BRANCH
RAILROAD WITH THE SOUTHEASTERLY SIDE OF THE ROAD LEADING FROM BEACH GLEN TO
MERIDEN; THENCE
(20) ALONG THE SOUTHEASTERLY SIDE OF SAID ROAD LEADING TO MERIDEN NORTH 56
DEGREES 10 MINUTES EAST 326.63 FEET TO A STAKE; THENCE
(21) STILL ALONG THE SOUTHEASTERLY SIDE OF SAID ROAD NORTH 79 DEGREES 15
MINUTES EAST 164.29 FEET TO AN OLD IRON PIPE AT THE END OF A POST AND WIRE
FENCE; THENCE
(22) LEAVING SAID ROAD AND FOLLOWING ALONG THE SAID POST AND WIRE FENCE
LINE SOUTH 13 DEGREES 34 MINUTES EAST 613.86 FEET TO AN IRON PIN AT AN
ANGLE POINT IN SAID FENCE LINE; THENCE
(23) STILL ALONG SAID FENCE SOUTH 13 DEGREES 10 MINUTES EAST 973.82 FEET
TO AN IRON PIN AT ANOTHER ANGLE POINT IN SAID FENCE LINE; THENCE
(24) STILL ALONG SAID FENCE SOUTH 1 DEGREE 10 MINUTES WEST 330 FEET TO AN
IRON PIN AT ANOTHER ANGLE POINT IN SAID FENCE LINE; THENCE
(25) STILL ALONG SAID POST AND WIRE FENCE SOUTH 27 DEGREES 1 MINUTE WEST
1419.45 FEET TO A POINT BY BEAVER BROOK; THENCE
(26) SOUTH 54 DEGREES 19 MINUTES WEST 380.82 FEET TO A POINT ON THE
NORTHWESTERLY EDGE OF SAID BEAVER BROOK, AND IN AN OLD POST AND WIRE FENCE
LINE; THENCE
(27) ALONG SAID FENCE LINE NORTH 41 DEGREES 25 MINUTES WEST 129.36 FEET
TO AN IRON POINT AT AN ANGLE POINT THEREIN; THENCE
(28) CONTINUING ALONG SAID FENCE LINE SOUTH 30 DEGREES 37 MINUTES WEST
Page A2 - 3
<PAGE>
- --------------------------------------------------------------------------------
Issued By:
CHICAGO TITLE INSURANCE COMPANY Schedule A - Description (cont'd
- --------------------------------------------------------------------------------
COMMERCIAL COMMITMENT FOR TITLE INSURANCE
----------
Your Reference: NBU #160990328/HEWLETT PACKARD - TBA Commitment No: 9921-80019
----------
310.09 FEET TO AN OLD IRON BAR AT ANOTHER ANGLE POINT THEREIN; THENCE
(29) STILL ALONG SAID FENCE SOUTH 70 DEGREES 34 MINUTES WEST 1310.18 FEET
TO A STAKE AT AN ANGLE POINT THEREIN; THENCE
(30) STILL ALONG SAID FENCE LINE SOUTH 16 DEGREES 23 MINUTES WEST 1273.13
FEET TO A CONCRETE MONUMENT; SAID MONUMENT MARKING THE BEGINNING CORNER OF
THE AFORESAID TRACT OF 51.48 ACRES CONVEYED TO BEAMAN STICKLE, THENCE
(31) ALONG THE FIRST LINE OF SAID 51.48 ACRE TRACT NORTH 51 DEGREES 19
MINUTES WEST 588.42 FEET TO THE POINT AND PLACE OF BEGINNING.
BEING ALSO KNOWN AS (REPORTED FOR INFORMATIONAL PURPOSES ONLY):
LOTS 2 AND 3, BLOCK 22203, ON THE OFFICIAL TAX MAP OF THE TOWNSHIP OF
ROCKAWAY IN THE COUNTY OF MORRIS
Page A2 - 4
<PAGE>
Santa Clara, CA
---------------
3175 Bowers Avenue
Santa Clara, CA 95052
As identified in the Lease entered into October 2, 1978 by and between Kihong
Kwon, M.D. and Won Mi Kwon, husband and wife, and Avantek, Inc. for the tract or
tracts of land situated in the City of Santa Clara, the County of Santa Clara,
and the State of California, more particularly described as Parcel L-1, as said
parcel is shown on that certain Parcel Map filed October 5, 1973, in Book 331 of
Maps, at page 11, Records of Santa Clara County, together with the buildings and
other improvements now or hereafter located thereon, and as modified by the
First Amendment to Lease dated July 31, 1993 between Kihong Kwon, M.D. and Won
Mi Kwon, and Avantek, Inc. and as identified in the Indenture of Lease dated
April 10, 1974 by and between the Prudential Insurance Company of America and
Avantek, Inc. for the real property together with the buildings and improvements
as described as follows: Parcel "M-1," as shown on that Parcel Map filed on
October 5, 1973, in Book 331 of Maps, page 11, Santa Clara County Records, and
as amended by the Amendment to Lease executed April 1, 1978, and by the
Amendment to Lease Number One dated August 15, 1988, and by the Third Amendment
to Lease executed September 20, 1993, and the Fourth Amendment to Lease dated
July 15, 1998.
<PAGE>
Sonoma, CA
----------
1201 Piner Road/
3273 Airway Road
Santa Rosa, CA 95401
Identified in the Lease Agreement dated January 18, 1973 by and between Paul V.
Wright and Hewlett-Packard Company for premises located near the northwest
corner of Airway Drive and Piner Road in Santa Rosa, California, and contained
in Sonoma County Assessor's parcel numbers 015-670-27 and 015-670-28, as amended
by the Amendment to Lease Agreement dated March 26, 1979, and by the Second
Amendment to Lease dated June 1, 1985.
<PAGE>
Sonoma, CA
----------
1400 Fountain Grove Parkway
Santa Rosa, CA 95401
Legal Description: [See attached]
DESCRIPTION
TRACT ONE:
PARCEL ONE:
PARCEL 1, AS SHOWN UPON THE PARCEL MAP NO. 507, FILED FEBRUARY 1, 1993, IN BOOK
503 OF MAPS, AT PAGES 16, 17, 18, AND 19, SONOMA COUNTY RECORDS.
APN 173-010-001 AND 173-670-022
PARCEL TWO:
AN EASEMENT FOR DRAINAGE PURPOSES, TOGETHER WITH INCIDENTALS THERETO, AS SHOWN
UPON THE PARCEL MAP NO. 507, HEREINABOVE DESCRIBED.
TRACT TWO:
PARCEL ONE:
PARCEL 2, AS SHOWN UPON THE PARCEL MAP NO. 507, FILED FEBRUARY 1, 1993, IN BOOK
503 OF MAPS, AT PAGES 16, 17, 18 AND 19, SONOMA COUNTY RECORDS.
APN 173-010-002
PARCEL TWO:
AN EASEMENT FOR A WELL, ACCESS AND UTILITY PURPOSES, TOGETHER WITH INCIDENTALS
THERETO, AS SHOWN UPON THE PARCEL MAP NO. 507, HEREINABOVE DESCRIBED.
173-010-002
<PAGE>
Santa Clara, CA
---------------
5301 Stevens Creek Blvd.,
Santa Clara, CA
Legal Description: [See attached]
<PAGE>
DESCRIPTION
All that certain Real Property in the City of Santa Clara, County of Santa
Clara, State of California, described as follows:
PARCEL ONE:
Beginning at a point on the Southeasterly corner of Parcel "B", as shown on that
certain Record of Survey filed June 15, 1964 in Book 180 of Maps, page 20, Santa
Clara County Records, said point lying in the Northeasterly line of Junipero
Serra Freeway; thence along the Northeasterly line of said Freeway South 59 deg
44' 31" East 217.90 feet to a point on the Westerly line of Lot "B" as shown on
that certain Map entitled, "Map of the Estate of Nich Zarevich", filed August
20, 1945 in Book 6 of Maps, page 56, Santa Clara County Records; thence along
the Westerly line of Lot "B", North 0 deg 22' East 1212.87 feet to a point on
the common corner of said Lot "B", and Lot "A", of said Map of the Estate of
Nick Zarevich; thence South 89 deg 19' 12" West and along the Northerly line of
said Lot "A", 460.90 feet to the point on the most Northeasterly corner of
Cupertino Union School District Land; thence South 0 deg 38' 10" East 170.00
feet to a point on the most Northwesterly corner of Parcel "A" of said Record of
Survey herein above mentioned; thence along the Northerly line of said Parcel
"A" North 89 deg 19' 12" East 263.21 feet; thence South 0 deg 38' 10" East and
along the Easterly line of said Parcel "A" and Parcel "B" of said Record of
Survey, 935.22 feet to the Point of Beginning, and being a portion of Lot "A" of
that certain Map entitled, "Map of the Estate of Nick Zarevich", filed for
record August 20, 1945 in Book 6 of Maps, page 56, Santa Clara County Records.
PARCEL TWO:
Beginning at the point of intersection of the center line of Stevens Creek Road
with Lawrence Station Road, as said Roads are shown upon the Map hereinafter
referred to; thence along the center line of said Stevens Creek Road South 89
deg 19' 49" West 1350.28 feet to a point that is distant North 89 deg 56' East
1049.22 feet from the Southwesterly corner of that certain 100 acre tract
of land conveyed by Amanda E. Dougherty, to Nick Zarevich, et ux, by deed dated
December 11, 1930, recorded in Book 543 of Official Records, page 433, Santa
Clara County Records, and from which point an iron witness pipe set eight
inches below the surface of the ground in the Northerly line of said Stevens
Crek Road bears North 0 deg 22' East 30.00 feet; thence leaving said Road and
running Northerly along the general center line between two rows of fruit trees
and being the Westerly line of Parcel One as described in the Decree of
Distribution recorded March 15, 1961 in Book 5104 of Official Records, page
213, North 0 deg 38' 44" West 1648.65 feet to an iron pipe set eight inches
below the surface of the ground in the Northerly line of said 100 acre tract;
thence Easterly along said Northerly line of said 100 acre tract North 89 deg
19' 12" East 1585.04 feet to a Harrow Tooth set flush at the Northeasterly
corner of said 100 acre tract, in the center line of the Lawrence Station Road
(formerly called the Saratoga and Alviso Road) and from which an iron witness
pipe set eight inches below the surface of the ground in the Westerly line of
said Road bears South 89 deg 56' 15' West 25.00 feet; thence Southerly
along said center line of said Lawrence Station Road, which here forms the
Easterly line of said 100 acre tract South 0 deg 04' 20" West 501.16 feet
to a railroad spike set flush; thence continuing along the center line of
said Road, South 15 deg 18' 23" West 254.33 feet; South 12 deg 17' 35"
West.
<PAGE>
DESCRIPTION
682.53 feet and South 3 deg 51' 48" West 238.49 feet to the Point of Beginning,
and being a portion of Lot B, as shown upon that certain Map entitled, "Map
showing part of the property of the Estate of Nick Zarevich, Deceased", recorded
in Book 6 of Maps, page 56, Santa Clara County Records.
Excepting therefrom all that portion thereof conveyed to the State of
California, by Deed dated June 21, 1962, recorded September 7, 1962 in Book 5712
of Official Records, page 687, and more particularly described as follows:
A portion of Lot B, as said Lot is shown upon that certain Map entitled, "Map
showing part of the property of the Estate of Nick Zarevich, Dec'd", which Map
was filed for record August 20, 1945 in Book 6 of Maps, at page 56, Santa Clara
County Records, more particularly described as follows:
Commencing at the Southwesterly corner of said Lot B; thence along the
Westerly line thereof North 1 deg 03' 04" East 435.78 feet; thence (1) South 59
deg 44' 31" East 599.83 feet; thence (2) along tangent curve to the left with
a radius of 600.00 feet, through an angle of 22 deg 47' 52" an arc length of
238.74 feet; thence (3) South 82 deg 32' 23" East 24.18 feet; thence (4) South
89 deg 22' 57" East 114.00 feet; thence South 0 deg 37' 03" West 62.00 feet to
the Southerly line of said Lot; thence along last said line North 89 deg 22' 57"
West 887.89 feet to the point of commencement.
Also Excepting therefrom all that portion thereof lying within the bounds of
Parcel "A", as shown upon that certain Map entitled, "Record of Survey,
Lawrence Expressway, a portion of the lands of Ivan Zarevich, et ux, being a
portion of the Quito Rancho", filed for record June 12, 1963 in Book 162 of
Maps, page 30, Santa Clara County Records.
Also Excepting therefrom that portion thereof conveyed to the County of Santa
Clara by Deed recorded June 13, 1968 in Book 8156 page 103, and more
particularly described as follows:
Beginning at the Northwesterly corner of Parcel "A" as said Parcel is shown on
that Record of Survey recorded in Book 162 of Maps at page 30, Santa Clara
County Records; said point being a nail and tab set in concrete; thence along
the Westerly line of said Parcel "A", S 00 deg 04' 20" E 135.46 feet to a found
3/4" iron pipe; thence on a tangent curve to the right having a radius of
1140.00 feet through a central angle of 12 deg 21' 47" an arc length of 245.98
feet to a found 3/4" iron pipe; thence S 12 deg 17' 27" W 243.77 feet; thence
leaving said Westerly line N 03 deg 57' 09" W 19.56 feet; thence N 12 deg 23'
44" E 150.00 feet; thence N 08 deg 36' 38" E, 99.00 feet; thence on a tangent
curve to the left having a radius of 27.00 feet through a central angle of 122
deg 29' 49", an arc length of 57.73 feet; thence N 37 deg 38' 44" W, 60.00
feet; thence N 52 deg 21' 16" E, 50.81 feet; thence on a tangent curve to the
left having a radius of 140.00 feet through a central angle of 52 deg 27' 23"
an arc length of 128.18 feet; thence N 00 deg 06' 07" W, 135.33 feet to a
Northerly line of lands formerly of Zarevich; thence along said Northerly line
N 89 deg 19' 12" E 11.97 feet to the Point of Beginning.
<PAGE>
EXHIBIT 2
---------
Orders from a Governmental Authority
1. Colorado Springs, CO - 1900 Garden of the Gods Road, Colorado Springs, CO
80907-3483
. Colorado Department of Public Health and Environment (CDPHE):
Compliance Order on Consent No. 89-12-11-01
2. Loveland, CO - 815 SW 14/th/ Street, Loveland, CO 90537
. Colorado Department of Public Health and Environment (CPDHE):
Compliance Order on Consent No. 87-3-13-1
3. Palo Alto, CA - HP Labs - Building 24-26, 3500 Deer Creek Road, Palo Alto,
CA 94304 Regional Water Quality Control Board (RWQCB), San Francisco Bay
Region: Order No. 89-029, as modified by Order No. 95-160
4. Palo Alto, CA - 395 Page Mill Road, Palo Alto, CA 94304
. Regional Water Quality Control Board (RWQCB), San Francisco Bay
Region: Order No. 94-130
5. Rockaway, NJ - 150 Green Pond Road, Rockaway, NJ 07866
. New Jersey Department of Environmental Protection (NJDEP): Memorandum
of Agreement with NJDEP pursuant to N.J.A.C. 7:26C-3.3 and other
provisions of state law, as recited therein
6. San Jose, CA - 3175 Bowers Avenue, Santa Clara, CA, 95052
. Regional Water Quality Control Board (RWQCB), San Francisco Bay
Region: Order No. 98-092
7. Sonoma, CA - 1201 Piner Road / 3273 Airway Road, Santa Rosa, CA 95401
. Regional Water Quality Control Board (RWQCB), North Coast Region:
Order No. 98-6. Original order is Cleanup and Abatement Order Nos. 81-
31, 82-33, 83-79
<PAGE>
8. Sonoma, CA - 1400 Fountain Grove Parkway, Santa Rosa, CA 95401
. Regional Water Quality Control Board (RWQCB), North Coast Region:
Groundwater Self-Monitoring Program dated 9/9/97 as approved by RWQCB.
Original order is Cleanup and Abatement Order Nos. 82-36 and 83-80
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<PAGE>
Exhibit 2.12
MASTER CONFIDENTIAL DISCLOSURE AGREEMENT
between
HEWLETT-PACKARD COMPANY
and
AGILENT TECHNOLOGIES, INC.
Effective as of November 1, 1999
<PAGE>
MASTER CONFIDENTIAL DISCLOSURE AGREEMENT
This Master Confidential Disclosure Agreement (the "Agreement") is
effective as of November 1, 1999 (the "Effective Date"), between Hewlett-Packard
Company, a Delaware corporation ("HP"), having an office at 3000 Hanover Street,
Palo Alto, California 94304 and Agilent Technologies, Inc., a Delaware
corporation ("Agilent"), having an office at 3000 Hanover Street, Palo Alto,
California 94304.
WHEREAS, the Board of Directors of HP has determined that it is in the best
interest of HP and its stockholders to separate HP's existing businesses into
two independent businesses;
WHEREAS, as part of the foregoing, HP and Agilent have entered into a
Master Separation Agreement (as defined below), which provides, among other
things, for the separation of certain Agilent assets and Agilent liabilities,
the initial public offering of Agilent stock, the distribution of such stock and
the execution and delivery of certain other agreements in order to facilitate
and provide for the foregoing; and
WHEREAS, also as part of the foregoing, the parties further desire to enter
into this Agreement to provide for the protection of their Confidential
Information (as defined below).
NOW, THEREFORE, in consideration of the mutual promises of the parties, and
of good and valuable consideration, it is agreed by and between the parties as
follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following capitalized terms are
defined in this Article I and shall have the meaning specified herein:
1.1 AFFILIATED COMPANY. "Affiliated Company" means, with respect to HP,
any entity in which HP holds a 50% or less ownership interest and that is listed
on Exhibit A hereto and, with respect to Agilent, any entity in which Agilent
holds a 50% or less ownership interest and that is listed on Exhibit A hereto;
provided, however, that any such entity listed in Exhibit A shall be considered
to be an Affiliated Company under this Agreement only if it agrees in writing to
be bound by the terms and conditions of this Agreement. Exhibit A may be amended
from time to time after the date hereof upon mutual consent of the parties.
1.2 ANCILLARY AGREEMENTS. "Ancillary Agreements" means the items and
agreements listed in Section 2.1 of the Master Separation Agreement and all
agreements and documents contemplated by such agreements.
1.3 CONFIDENTIAL INFORMATION.
(a) "Confidential Information" means information, technical data and
know-how which is not otherwise in the public domain and of which the owner
actively undertakes to restrict or
<PAGE>
control the disclosure to Third Parties in a manner reasonably intended to
maintain its confidentiality, and which is either (i) the subject of any
Transaction Agreement and known to or in the possession of the Receiving Party
as of the Separation Date or (ii) disclosed to the Receiving Party pursuant to
any Transaction Agreement during the period from the Separation Date to November
1, 2001. Confidential Information may include information relating to, by way of
example, research, products, services, customers, markets, software,
developments, inventions, processes, designs, drawings, engineering, marketing
or finances, and may be in writing, disclosed orally or learned by inspection of
computer programming code, equipment or facilities.
(b) Confidential Information of Third Parties that is known to, in
the possession of or acquired by a Receiving Party pursuant to a relationship
with the Disclosing Party shall be deemed the Disclosing Party's Confidential
Information for purposes herein.
(c) Notwithstanding the foregoing provisions of this Section 1.3,
Confidential Information shall exclude information that: (i) was in the
Receiving Party's possession before receipt from the Disclosing Party and
obtained from a source other than the Disclosing Party and other than through
the prior relationship of the Disclosing Party and the Receiving Party before
the Separation Date; (ii) is or becomes a matter of public knowledge through no
fault of the Receiving Party; (iii) is rightfully received by the Receiving
Party from a Third Party without a duty of confidentiality; (iv) is disclosed by
the Disclosing Party to a Third Party without a duty of confidentiality on the
Third Party; (v) is independently developed by the Receiving Party; (iv) is
disclosed under operation of law; or (vii) is disclosed by the Receiving Party
with the Disclosing Party's prior written approval.
1.4 CONFIDENTIALITY PERIOD. "Confidentiality Period" means, (i) with
respect to Confidential Information that is not Highly Confidential Information,
three (3) years, and (ii) with respect to Highly Confidential Information, ten
(10) years, after either (A) the Separation Date with respect to Confidential
Information of the Disclosing Party that is known to or in the possession of the
Receiving Party as of the Separation Date or (B) the date of disclosure with
respect to Confidential Information that is disclosed by the Disclosing Party to
the Receiving Party after the Separation Date. Notwithstanding the foregoing,
the Confidentiality Period with respect to Highly Confidential Information
described in Section 1.7(ii) shall continue only for so long as the restriction
in Article IV of the ICBD Technology Agreement continues with respect to such
Highly Confidential Information, but, in any event no less than three (3) years.
1.5 DISCLOSING PARTY. "Disclosing Party" means the party owning or
disclosing the relevant Confidential Information.
1.6 DISTRIBUTION DATE. "Distribution Date" has the meaning set forth in
the Master Separation Agreement.
1.7 HIGHLY CONFIDENTIAL INFORMATION. "Highly Confidential Information"
means Confidential Information that is (i) source code for products that are
commercially released or for which substantial steps have been taken to
commercialization; (ii) ICBD Technology (as defined in the ICBD Technology
Agreement) that is Confidential Information; or (iii) listed in the Highly
Confidential Information Database.
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<PAGE>
1.8 HIGHLY CONFIDENTIAL INFORMATION DATABASE. "Highly Confidential
Information Database" means the Highly Confidential Information Database, as it
may be updated by the parties upon mutual agreement to add Highly Confidential
Information.
1.9 ICBD TECHNOLOGY AGREEMENT. "ICBD Technology Agreement" means the ICBD
Technology Ownership and License Agreement between the parties.
1.10 MASTER SEPARATION AGREEMENT. "Master Separation Agreement" means the
Master Separation and Distribution Agreement between the parties.
1.11 PERSON. "Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, and a governmental entity or any
department, agency or political subdivision thereof.
1.12 RECEIVING PARTY. "Receiving Party" means the non-owning party or
recipient of the relevant Confidential Information.
1.13 SEPARATION DATE. "Separation Date" means 12:01 a.m., Pacific Time,
November 1, 1999 or such other date as may be fixed by the Board of Directors of
HP.
1.14 SUBSIDIARY. "Subsidiary" means with respect to any specified Person,
any corporation, any limited liability company, any partnership or other legal
entity of which such Person owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote on the election of the members
of the board of directors or similar governing body. Unless the context
otherwise requires, reference to HP and its Subsidiaries shall not include the
subsidiaries of HP that will be transferred to Agilent after giving effect to
the Separation (as defined in the Master Separation Agreement), including the
actions taken pursuant to the Non-US Plan (as defined in the Master Separation
Agreement). For example, if HP owns 70% of the stock of another corporation, and
that corporation owns 60% of the equity interest of a limited liability company,
then that corporation is a Subsidiary of HP but that limited liability company
is not. However, if such corporation owns 90% of the equity interest of a
limited liability company, then that limited liability company is a Subsidiary
of HP. For the avoidance of doubt, this definition of Subsidiary is different
from the definition of Subsidiary in the Master Separation Agreement.
1.15 THIRD PARTY. "Third Party" means a Person other than HP and its
Subsidiaries and Affiliated Companies and Agilent and its Subsidiaries and
Affiliated Companies.
1.16 TRANSACTION AGREEMENTS. "Transaction Agreements" means the Master
Separation Agreement and the Ancillary Agreements.
ARTICLE II
CONFIDENTIALITY
2.1 CONFIDENTIALITY AND NON-USE OBLIGATIONS. During the Confidentiality
Period, the Receiving Party shall (i) protect the Confidential Information of
the Disclosing Party by using the same degree of care, but no less than a
reasonable degree of care, to prevent the
-3-
<PAGE>
unauthorized use, dissemination, or publication of the Confidential Information
as Receiving Party uses to protect its own confidential information of a like
nature, (ii) not use such Confidential Information in violation of any use
restriction in any Transaction Agreement, and (iii) not disclose such
Confidential Information to any Third Party, except as expressly permitted under
this Agreement, in the Transaction Agreements or in any other agreements entered
into between the parties in writing, without prior written consent of the
Disclosing Party.
2.2 DISCLOSURE TO SUBLICENSEES. The Receiving Party has the right to
disclose to its sublicensees permitted under a Transaction Agreement portions of
Confidential Information as reasonably necessary in the exercise of the
Receiving Party's sublicense rights under such Transaction Agreement, subject to
the sublicensee's agreement in writing to confidentiality and non-use terms at
least as protective of the Disclosing Party as the provisions of this Agreement.
2.3 CONTRACT MANUFACTURERS AND FOUNDRIES. The Receiving Party has the
right to disclose to its contract manufacturers and foundries permitted under
any Transaction Agreement portions of the Confidential Information as reasonably
necessary in the exercise of the Receiving Party's "have made" rights under any
Transaction Agreement, subject to the contract manufacturer's and foundry's
agreement in writing to confidentiality and non-use terms at least as protective
of the Disclosing Party as the provisions of this Agreement.
2.4 RESIDUALS. Notwithstanding any other provision of this Agreement, the
Receiving Party shall be free, and the Disclosing Party hereby grants to the
Receiving Party the right, to use for any purpose the Residuals resulting from
access to or work with the Confidential Information of the Disclosing Party.
"Residuals" means information retained in the unaided memory of an individual
who has had access to Confidential Information without conscious attempt by such
individual to memorize such information. The Receiving Party shall have no
obligation to pay royalties for any use of Residuals.
2.5 COMPELLED DISCLOSURE. If the Receiving Party or any of its respective
Subsidiaries or Affiliated Companies believes that it will be compelled by a
court or other authority to disclose Confidential Information of the Disclosing
Party, it shall (i) give the Disclosing Party prompt written notice so that the
Disclosing Party may take steps to oppose such disclosure, but in any event the
Receiving Party shall not be prohibited from complying with such requirement and
(ii) cooperate with the Disclosing Party in its attempts to oppose such
disclosure.
2.6 NO RESTRICTION ON DISCLOSING PARTY. Nothing in this Agreement shall
restrict the Disclosing Party from using, disclosing, or disseminating its own
Confidential Information in any way.
2.7 NO RESTRICTION ON REASSIGNMENT. This Agreement shall not restrict
reassignment of the Receiving Party's employees.
2.8 THIRD PARTY RESTRICTIONS. Nothing in the Agreement supersedes any
restriction imposed by Third Parties on their Confidential Information, and
there is no obligation on the Disclosing Party to conform Third Party agreements
to the terms of this Agreement.
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<PAGE>
ARTICLE III
WARRANTY DISCLAIMER
EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL CONFIDENTIAL INFORMATION IS
PROVIDED ON AN "AS IS, WHERE IS" BASIS AND THAT NEITHER PARTY NOR ANY OF ITS
SUBSIDIARIES OR AFFILIATED COMPANIES HAS MADE OR WILL MAKE ANY WARRANTY
WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE,
ENFORCEABILITY OR NON-INFRINGEMENT.
ARTICLE IV
CONFIDENTIALITY OF AGREEMENT
Each party agrees that the terms and conditions of the Transaction
Agreements marked as confidential shall be treated as Confidential Information
and that neither party will disclose such terms or conditions to any Third Party
without the prior written consent of the other party, provided, however, that
each party may disclose such terms and conditions of such agreements marked as
confidential:
(a) as required by any court or other governmental body (subject to
Section 2.5);
(b) as otherwise required by law (subject to Section 2.5);
(c) in confidence, to legal counsel of the parties, accountants, and
other professional advisors;
(d) in confidence to banks, investors and other financing sources and
their advisors;
(e) in connection with the enforcement of this Agreement or rights
under this Agreement; or
(f) in confidence, in connection with an actual or prospective merger
or acquisition or similar transaction.
ARTICLE V
TERM AND TERMINATION
5.1 TERM. This Agreement shall remain in full force and effect unless and
until terminated by the mutual written agreement of the parties.
-5-
<PAGE>
5.2 SURVIVAL. Articles II (with respect to Confidential Information
acquired or disclosed prior to the date of termination), III, IV, VI, VII and
VIII shall survive any termination of this Agreement.
ARTICLE VI
DISPUTE RESOLUTION
6.1 NEGOTIATION. The parties shall make a good faith attempt to resolve
any dispute or claim arising out of or related to this Agreement through
negotiation. Within thirty (30) days after notice of a dispute or claim is given
by either party to the other party, the parties' first tier negotiating teams
(as determined by each party's Director of Intellectual Property or his or her
delegate) shall meet and make a good faith attempt to resolve such dispute or
claim and shall continue to negotiate in good faith in an effort to resolve the
dispute or claim or renegotiate the applicable section or provision without the
necessity of any formal proceedings. If the first tier negotiating teams are
unable to agree within thirty (30) days of their first meeting, then the
parties' second tier negotiating teams (as determined by each party's Director
of Intellectual Property or his or her delegate) shall meet within thirty (30)
days after the end of the first thirty (30) day negotiating period to attempt to
resolve the matter. During the course of negotiations under this Section 6.1,
all reasonable requests made by one party to the other for information,
including requests for copies of relevant documents, will be honored. The
specific format for such negotiations will be left to the discretion of the
designated negotiating teams but may include the preparation of agreed upon
statements of fact or written statements of position furnished to the other
party.
6.2 NONBINDING MEDIATION. In the event that any dispute or claim arising
out of or related to this Agreement is not settled by the parties within fifteen
(15) days after the first meeting of the second tier negotiating teams under
Section 6.1, the parties will attempt in good faith to resolve such dispute or
claim by nonbinding mediation in accordance with the American Arbitration
Association Commercial Mediation Rules. The mediation shall be held within
thirty (30) days of the end of such fifteen (15) day negotiation period of the
second tier negotiating teams. Except as provided below in Section 6.3, no
litigation for the resolution of such dispute may be commenced until the parties
try in good faith to settle the dispute by such mediation in accordance with
such rules and either party has concluded in good faith that amicable resolution
through continued mediation of the matter does not appear likely. The costs of
mediation shall be shared equally by the parties to the mediation. Any
settlement reached by mediation shall be recorded in writing, signed by the
parties, and shall be binding on them.
6.3 PROCEEDINGS. Nothing herein, however, shall prohibit either party from
initiating litigation or other judicial or administrative proceedings if such
party would be substantially harmed by a failure to act during the time that
such good faith efforts are being made to resolve the dispute or claim through
negotiation or mediation. In the event that litigation is commenced under this
Section 6.3, the parties agree to continue to attempt to resolve any dispute or
claim according to the terms of Sections 6.1 and 6.2 during the course of such
litigation proceedings under this Section 6.3.
-6-
<PAGE>
ARTICLE VII
LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES OR AFFILIATED COMPANIES
BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES OR AFFILIATED COMPANIES FOR ANY
SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST
PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE)
ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 EXPORT RESTRICTIONS. Both parties shall adhere to all applicable laws,
regulations and rules relating to the export of technical data, and shall not
export or reexport any technical data, any products received from Disclosing
Party, or the direct product of such technical data, to any proscribed country
listed in such applicable laws, regulations and rules unless properly
authorized.
8.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be
construed as conferring any rights by implication, estoppel or otherwise, under
any intellectual property right, other than the rights expressly granted in this
Agreement with respect to Confidential Information. Neither party is required
hereunder to furnish or disclose to the other any technical or other
information.
8.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder
to institute any action or suit against Third Parties for misappropriation of
any of its Confidential Information or to defend any action or suit brought by a
Third Party that alleges infringement of any intellectual property rights by the
Receiving Party's authorized use of the Disclosing Party's Confidential
Information.
8.4 NO OTHER OBLIGATIONS. NEITHER PARTY ASSUMES ANY RESPONSIBILITIES OR
OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES AND OBLIGATIONS
EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN AGREEMENT BETWEEN
THE PARTIES.
8.5 ENTIRE AGREEMENT. This Agreement, the Master Separation Agreement and
the other Ancillary Agreements constitute the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all prior
written and oral and all contemporaneous oral agreements and understandings with
respect to the subject matter hereof. Notwithstanding the foregoing, the parties
agree that any agreements entered into between them on or after the Separation
Date for the protection of specific Confidential Information shall supersede the
terms of this Agreement with respect to such Confidential Information.
-7-
<PAGE>
8.6 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware as to all matters
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
8.7 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
8.8 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy with answer back, by express or overnight mail delivered by a
nationally recognized air courier (delivery charges prepaid), by registered or
certified mail (postage prepaid, return receipt requested) or by e-mail with
receipt confirmed by return e-mail to the respective parties as follows:
if to HP:
c/o Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Attention: Associate General Counsel and
Director of Intellectual Property
Telecopy: (650) 852-8194
if to Agilent:
c/o Agilent Technologies, Inc.
3000 Hanover Street
Palo Alto, CA 94304
Attention: Assistant General Counsel and
Director of Intellectual Property
Telecopy: (650) 813-3095
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by e-mail, telecopy or by air courier
shall be deemed effective on the first Business Day following the day on which
such notice or communication was sent. Any notice or communication sent by
registered or certified mail shall be deemed effective on the third Business Day
following the day on which such notice or communication was mailed. As used in
this Section 8.8, "Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions located in the State of California are
authorized or obligated by law or executive order to close.
8.9 NONASSIGNABILITY. Neither party may, directly or indirectly, in whole
or in part, whether by operation of law or otherwise, assign or transfer this
Agreement, without the other party's prior written consent, and any attempted
assignment, transfer or delegation without such prior written consent shall be
voidable at the sole option of such other party. Notwithstanding the
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<PAGE>
foregoing, each party (or its permitted successive assignees or transferees
hereunder) may assign or transfer this Agreement as a whole without consent to a
Person that succeeds to all or substantially all of the business or assets of
such party. Without limiting the foregoing, this Agreement will be binding upon
and inure to the benefit of the parties and their permitted successors and
assigns.
8.10 SEVERABILITY. If any term or other provision of this Agreement is
determined by a nonappealable decision of a court, administrative agency or
binding arbitrator by any court or in any binding arbitration to be invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
8.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of either party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
8.12 AMENDMENT. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
such agreement.
8.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which, taken together, shall be considered to be one and
the same instrument.
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<PAGE>
WHEREFORE, the parties have signed this Master Confidential Disclosure
Agreement effective as of the date first set forth above.
HEWLETT-PACKARD COMPANY AGILENT TECHNOLOGIES, INC.
By: /s/ Ann O. Baskins By: /s/ Craig Nordlund
---------------------------- --------------------------------
Name: Ann O. Baskins Name: Craig Nordlund
-------------------------- ------------------------------
Title: Associate General Counsel Title: Senior Vice President,
------------------------- -----------------------------
and Assistant Secretary General Counsel and Secretary
<PAGE>
EXHIBIT A
TO MASTER CONFIDENTIAL DISCLOSURE AGREEMENT
AFFILIATED COMPANIES
1. Hewlett-Packard Company Affiliated Companies
--------------------------------------------
ImagineCard
Idea LLC
Intria-HP
Intria-HP Potomac
Ericsson-HP Telecom (Sweden)
Ericsson-HP Telecom (France)
Hua-Pua
Putial Ome
PT Berka Services
Liquidity Management Group
Hugin Expert
Syc
Sopura Systems
2. Agilent Affiliated Companies
----------------------------
Chartered Semiconductor Partners Singapore
LumiLEDS
<PAGE>
Exhibit 2.13
Indemnification and Insurance Matters Agreement
between
Hewlett-Packard Company
and
Agilent Technologies, Inc.
November 1, 1999
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TABLE OF CONTENTS
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ARTICLE I. MUTUAL RELEASES; INDEMNIFICATION........................................................................... 1
Section 1.1. Release of Pre-Closing Claims..................................................................... 1
Section 1.2. Indemnification by Agilent........................................................................ 2
Section 1.3. Indemnification by HP............................................................................. 2
Section 1.4. Indemnification With Respect to Environmental Actions and Conditions.............................. 3
Section 1.5. Procedures for Defense, Settlement and Indemnification of Third Party Claims...................... 4
Section 1.6. Agilent Contingent Liabilities In Excess of $50 Million........................................... 6
Section 1.7. Additional Matters................................................................................ 7
Section 1.8. Survival of Indemnities........................................................................... 7
Section 1.9. Alleged Infringement or Misappropriation against HP for Products Ordered from the Agilent Business 8
Section 1.10. Claims of Alleged Infringement or Misappropriation against Agilent for Products from HP Business.. 9
Section 1.11. Reimbursement For Certain Losses and Liabilities Not Covered By HP's Insurance Policies........... 9
ARTICLE II. INSURANCE MATTERS......................................................................................... 11
Section 2.1. Agilent Insurance Coverage During the Transition Period........................................... 11
Section 2.2. Cooperation and Agreement Not to Release Carriers................................................. 11
Section 2.3. Agilent Insurance Coverage After the Insurance Transition Period.................................. 12
Section 2.4. Responsibilities for Self-insured Obligations..................................................... 12
Section 2.5. Procedures With Respect to Insured Agilent Liabilities............................................ 12
Section 2.6. Insufficient Limits of Liability for HP Liabilities and Agilent Liabilities....................... 12
Section 2.7. Cooperation....................................................................................... 14
Section 2.8. No Assignment or Waiver........................................................................... 14
Section 2.9. No Liability...................................................................................... 14
Section 2.10. No Restrictions................................................................................... 14
Section 2.12. Agreement Regarding Insurance Covering Environmental Actions...................................... 14
Section 2.13. Matters Governed by Employee Matters Agreement.................................................... 15
ARTICLE III. MISCELLANEOUS............................................................................................ 15
Section 3.1. Entire Agreement.................................................................................. 15
Section 3.2. Governing Law..................................................................................... 15
Section 3.3. Notices........................................................................................... 15
Section 3.4. Parties in Interest............................................................................... 15
Section 3.5. Other Agreements Evidencing Indemnification Obligations........................................... 15
Section 3.6. Counterparts...................................................................................... 16
Section 3.7. Assignment........................................................................................ 16
Section 3.8. Severability...................................................................................... 16
Section 3.9. Failure or Indulgence Not Waiver.................................................................. 16
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Section 3.10. Amendment......................................................................................... 16
Section 3.11. Authority......................................................................................... 16
Section 3.12. Interpretation.................................................................................... 16
ARTICLE IV. DEFINITIONS............................................................................................... 17
Section 4.1. Action............................................................................................ 17
Section 4.2. Affiliated Company................................................................................ 17
Section 4.3. Agilent Business.................................................................................. 17
Section 4.4. Agilent Contingent Liability...................................................................... 17
Section 4.5. Agilent Contracts................................................................................. 18
Section 4.6. Agilent Covered Parties........................................................................... 18
Section 4.7. Agilent Facilities................................................................................ 18
Section 4.8. Agilent Group..................................................................................... 18
Section 4.9. Agilent Indemnitees............................................................................... 18
Section 4.10. Agilent Liabilities............................................................................... 18
Section 4.11. Agilent Schedule 1 Facilities..................................................................... 18
Section 4.12. Agilent Schedule 2 Facilities..................................................................... 18
Section 4.13. Assets............................................................................................ 19
Section 4.14. Assignment Agreement.............................................................................. 19
Section 4.15. Change of Control................................................................................. 19
Section 4.16. Claims Committee.................................................................................. 19
Section 4.17. Commingled Claims................................................................................. 19
Section 4.18. Coverage Amount................................................................................... 20
Section 4.19. Employee Matters Agreement........................................................................ 20
Section 4.20. Environmental Actions............................................................................. 20
Section 4.21. Environmental Conditions.......................................................................... 20
Section 4.22. Environmental Laws................................................................................ 20
Section 4.23. Excess Portion.................................................................................... 20
Section 4.24. Hazardous Materials............................................................................... 20
Section 4.25. HP Business....................................................................................... 20
Section 4.26. HP Facilities..................................................................................... 20
Section 4.27. HP Group.......................................................................................... 21
Section 4.28. HP Indemnitees.................................................................................... 21
Section 4.29. Indemnitee........................................................................................ 21
Section 4.30. Insurance Policies................................................................................ 21
Section 4.31. Insurance Proceeds................................................................................ 21
Section 4.32. Insurance Transition Period....................................................................... 21
Section 4.33. Insured Agilent Liability......................................................................... 21
Section 4.34. IPO Liabilities................................................................................... 21
Section 4.35. IPO Registration Statement........................................................................ 21
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Section 4.36. Liabilities....................................................................................... 21
Section 4.37. Non-US Plan....................................................................................... 21
Section 4.38. Person............................................................................................ 22
Section 4.39. Pre-Separation Third Party Site Liabilities....................................................... 22
Section 4.40. Prime Rate........................................................................................ 22
Section 4.41. Related Agilent Contingent Liabilities............................................................ 22
Section 4.42. Release........................................................................................... 22
Section 4.43. Separation........................................................................................ 22
Section 4.44. Separation Agreement.............................................................................. 22
Section 4.45. Separation Date................................................................................... 22
Section 4.46. Shared Agilent Percentage......................................................................... 22
Section 4.47. Shared HP Percentage.............................................................................. 22
Section 4.48. Shared Percentage................................................................................. 22
Section 4.49. Subsidiary........................................................................................ 23
Section 4.50. Tax Sharing Agreement............................................................................. 23
Section 4.51. Taxes............................................................................................. 23
Section 4.52. Third Party Claim................................................................................. 23
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<PAGE>
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
This Indemnification and Insurance Matters Agreement (this "Agreement") is
entered into on November 1, 1999 between Hewlett-Packard Company, a Delaware
corporation ("HP"), and Agilent Technologies, Inc., a Delaware corporation
("Agilent"). Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to such terms in the Article IV below.
RECITALS
WHEREAS, HP and its Subsidiaries have transferred or will transfer to
Agilent and its Subsidiaries effective as of the Separation Date, substantially
all of the assets of the Agilent Business in accordance with the Master
Separation and Distribution Agreement dated as of August 12, 1999 between the
parties (the "Separation Agreement").
WHEREAS, the parties desire to set forth certain agreements regarding
indemnification and insurance.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I.
MUTUAL RELEASES; INDEMNIFICATION
Section 1.1. Release of Pre-Closing Claims.
(a) Agilent Release. Except as provided in Section 1.1(c), effective as
of the Separation Date, Agilent does hereby, for itself and as agent for each
member of the Agilent Group, remise, release and forever discharge the HP
Indemnitees from any and all Liabilities whatsoever, whether at law or in equity
(including any right of contribution), whether arising under any contract or
agreement, by operation of law or otherwise, existing or arising from any acts
or events occurring or failing to occur or alleged to have occurred or to have
failed to occur or any conditions existing or alleged to have existed on or
before the Separation Date, including in connection with the transactions and
all other activities to implement any of the Separation, the IPO and the
Distribution.
(b) HP Release. Except as provided in Section 1.1(c), effective as of the
Separation Date, HP does hereby, for itself and as agent for each member of the
HP Group, remise, release and forever discharge the Agilent Indemnitees from any
and all Liabilities whatsoever, whether at law or in equity (including any right
of contribution), whether arising under any contract or agreement, by operation
of law or otherwise, existing or arising from any acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any
conditions existing or alleged to have existed on or before the Separation Date,
including in connection with the transactions and all other activities to
implement any of the Separation, the IPO and the Distribution.
<PAGE>
(c) No Impairment. Nothing contained in Section 1.1(a) or (b) shall
impair any right of any Person to enforce the Separation Agreement or any
Ancillary Agreement (including this Agreement), in each case in accordance with
its terms.
(d) No Actions as to Released Claims. Agilent agrees, for itself and as
agent for each member of the Agilent Group, not to make any claim or demand, or
commence any Action asserting any claim or demand, including any claim of
contribution or any indemnification, against HP or any member of the HP Group,
or any other Person released pursuant to Section 1.1(a), with respect to any
Liabilities released pursuant to Section 1.1(a). HP agrees, for itself and as
agent for each member of the HP Group, not to make any claim or demand, or
commence any Action asserting any claim or demand, including any claim of
contribution or any indemnification, against Agilent or any member of the
Agilent Group, or any other Person released pursuant to Section 1.1(b), with
respect to any Liabilities released pursuant to Section 1.1(b).
(e) Further Instruments. At any time, at the request of any other party,
each party shall cause each member of its respective Group to execute and
deliver releases reflecting the provisions hereof.
Section 1.2. Indemnification by Agilent. Except as otherwise provided in
this Agreement, Agilent shall, for itself and as agent for each member of the
Agilent Group, indemnify, defend (or, where applicable, pay the defense costs
for) and hold harmless the HP Indemnitees from and against any and all
Liabilities that any third party seeks to impose upon the HP Indemnitees, or
which are imposed upon the HP Indemnitees, and that relate to, arise out of or
result from any of the following items (without duplication):
(i) the Agilent Business, any Agilent Liability or any Agilent Contract;
(ii) any breach by Agilent or any member of the Agilent Group of the
Separation Agreement or any of the Ancillary Agreements (including
this Agreement); and
(iii) any IPO Liabilities in excess of the Shared HP Percentage.
In the event that any member of the Agilent Group makes a payment to the HP
Indemnitees hereunder, and any of the HP Indemnitees subsequently diminishes the
Liability on account of which such payment was made, either directly or through
a third-party recovery, HP will promptly repay (or will procure an HP Indemnitee
to promptly repay) such member of the Agilent Group the amount by which the
payment made by such member of the Agilent Group exceeds the actual cost of the
associated indemnified Liability. This Section 1.2 shall not apply to any
Liability indemnified under Section 1.4.
Section 1.3. Indemnification by HP. Except as otherwise provided in this
Agreement, HP shall, for itself and as agent for each member of the HP Group,
indemnify, defend (or, where applicable, pay the defense costs for) and hold
harmless the Agilent Indemnitees from and against any and all Liabilities that
any third party seeks to impose upon the Agilent Indemnitees, or which
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are imposed upon the Agilent Indemnitees, and that relate to, arise out of or
result from any of the following items (without duplication):
(i) the HP Business or any Liability of the HP Group other than the
Agilent Liabilities;
(ii) any breach by HP or any member of the HP Group of the
Separation Agreement or any of the Ancillary Agreements (including this
Agreement); and
(iii) any IPO Liabilities in excess of the Shared Agilent Percentage.
In the event that any member of the HP Group makes a payment to the Agilent
Indemnitees hereunder, and any of the Agilent Indemnitees subsequently
diminishes the Liability on account of which such payment was made, either
directly or through a third-party recovery, Agilent will promptly repay (or will
procure an Agilent Indemnitee to promptly repay) such member of the HP Group the
amount by which the payment made by such member of the HP Group exceeds the
actual cost of the indemnified Liability. This Section 1.3 shall not apply to
any Liability indemnified under Section 1.4.
Section 1.4. Indemnification With Respect to Environmental Actions and
Conditions.
(a) Indemnification by Agilent. Agilent shall, for itself and as agent
for each member of the Agilent Group, indemnify, defend and hold harmless the HP
Indemnitees from and against any and all Environmental Actions relating to,
arising out of or resulting from any of the following items:
(i) Except as arising out of the operations of the HP Group on and
after the Separation Date, Environmental Conditions (x) arising out of
operations occurring on and after the Separation Date at any of the Agilent
Schedule 2 Facilities, or (y) on any of the Agilent Schedule 2 Facilities
arising from an event causing contamination that first occurs on or after the
Separation Date (including any Release of Hazardous Materials occurring after
the Separation Date that migrates to any of the Agilent Schedule 2 Facilities);
and
(ii) Except as arising out of the operations of the HP Group on and
after the Separation Date or as a result of a Release from any HP Facilities,
Environmental Conditions on, under, about or arising out of operations occurring
at any time, whether before or after the Separation Date, at any of the Agilent
Schedule 1 Facilities (including any Release of Hazardous Materials occurring
after the Separation Date that migrates at any time to any of the Agilent
Schedule 1 Facilities);
(b) Indemnification by HP. HP shall, for itself and as agent for each
member of the HP Group, indemnify, defend and hold harmless the Agilent
Indemnitees from and against any and all Environmental Actions relating to,
arising out of or resulting from any of the following items:
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(i) Environmental Conditions (x) existing on, under, about or in
the vicinity of any of the Agilent Schedule 2 Facilities prior to the Separation
Date (including any Release of Hazardous Materials occurring prior to the
Separation Date which migrates to any of the Agilent Schedule 2 Facilities after
the Separation Date), or (y) arising out of operations occurring on or before
the Separation Date at any of the Agilent Schedule 2 Facilities;
(ii) Except as arising out of the operations of the Agilent Group on
and after the Separation Date, Environmental Conditions on, under, about or
arising out of operations occurring at any time, whether before or after the
Separation Date, at any of the HP Facilities; and
(iii) Pre-Separation Third Party Site Liabilities.
(c) Agreement Regarding Payments to Indemnitee. In the event an
Indemnifying Party makes any payment to or on behalf of an Indemnitee with
respect to an Environmental Action for which the Indemnifying Party is obligated
to indemnify under this Section 1.4, and the Indemnitee subsequently receives
any payment from a third party on account of the same financial obligation
covered by the payment made by the Indemnifying Party for that Environmental
Action or otherwise diminishes the financial obligation, the Indemnitee will
promptly pay the Indemnifying Party the amount by which the payment made by the
Indemnifying Party, exceeds the actual cost of the financial obligation.
Section 1.5. Procedures for Defense, Settlement and Indemnification of
Third Party Claims.
(a) Notice of Claims. If an HP Indemnitee or an Agilent Indemnitee (as
applicable) (an "Indemnitee") shall receive notice or otherwise learn of the
assertion by a Person (including any Governmental Authority) who is not a member
of the HP Group or the Agilent Group of any claim or of the commencement by any
such Person of any Action (collectively, a "Third Party Claim") with respect to
which a party (an "Indemnifying Party") may be obligated to provide
indemnification to such Indemnitee pursuant to Section 1.2, 1.3 or 1.4, or any
other section of the Separation Agreement or any Ancillary Agreement (including
this Agreement), HP and Agilent (as applicable) will ensure that such Indemnitee
shall give such Indemnifying Party written notice thereof within 30 days after
becoming aware of such Third Party Claim. Any such notice shall describe the
Third Party Claim in reasonable detail. Notwithstanding the foregoing, the delay
or failure of any Indemnitee or other Person to give notice as provided in this
Section 1.5(a) shall not relieve the related Indemnifying Party of its
obligations under this Article I, except to the extent that such Indemnifying
Party is actually and substantially prejudiced by such delay or failure to give
notice.
(b) Claims Involving Commingled Products or Employees. If a Third Party
Claim (including a claim relating to the Year 2000 problem) involves (i) a
commingled product with components supplied by both the Agilent Business and the
HP Business, (ii) an employee, consultant or contractor that was employed by
both the Agilent Business and the HP Business or (iii) any similar claims
involving both the Agilent Business and the HP Business (collectively,
"Commingled
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Claims"), the Claims Committee shall have the power to resolve whether and to
the extent any Commingled Claim is an Agilent Contingent Liability.
(c) Claims Committee. Any of the parties may refer any dispute regarding
the provisions of this Article I to the Claims Committee for resolution. All
determinations of the Claims Committee, if unanimous, shall be binding on all of
the parties and their respective successors and assigns. The Claims Committee
shall reach a resolution that minimizes expenses for all parties and seeks to
avoid hiring multiple counsel. In determining whether a Commingled Claim is an
Agilent Contingent Liability, the Claims Committee shall consider whether the
event, act or omission giving rise the Liability relates primarily to the
Agilent Business. In the event a Liability arises from both an event, act or
omission relating primarily to the Agilent Business and an event, act or
omission relating primarily to the HP Business, the Claims Committee shall
apportion the Liability in accordance with relative fault, and it may re-
apportion the Liability as it learns of additional facts bearing on that
assessment. In the event that the Claims Committee cannot reach a unanimous
determination as to the nature, status or handling of any such claims within 30
days after such referral (unless the Claims Committee unanimously agrees to a
longer time period), the issue will be submitted for resolution pursuant to the
procedures set forth in the dispute resolution provisions contained in Section
5.9 of the Separation Agreement.
(d) Defense of Commingled Claims. With respect to Commingled Claims, the
party whose business sold the product, who last employed the employee or whose
business is primarily related to the event, act or omission giving rise to the
potential Liability shall manage the defense of, and may seek to settle or
compromise, any such Commingled Claims. If the party managing the defense of
such Commingled Claim is an Indemnitee with respect thereto, the costs and
expenses of such defense shall be borne by the Indemnifying Party to the extent
of the indemnity provided in the Separation Agreement, this Agreement or any
Ancillary Agreement.
(e) Defense of Claims Involving IPO Liabilities. HP shall manage the
defense of, and may seek to settle or compromise, any Third Party Claim
involving IPO Liabilities, and the costs and expenses thereof shall be included
in the calculation of the amount of the indemnification obligations pursuant to
Section 1.2(iii) and Section 1.3(iii) of this Agreement.
(f) Defense By Indemnifying Party. Other than in the case of a Commingled
Claim or a Third Party Claim involving IPO Liabilities, an Indemnifying Party
will manage the defense of and (unless the Indemnifying Party has specified any
reservations or exceptions to the obligation to manage the defense or to
indemnify that have been referred to, but not resolved by, the Claims Committee)
may settle or compromise any Third Party Claim. Within 30 days after the receipt
of notice from an Indemnitee in accordance with Section 1.5(a) (or sooner, if
the nature of such Third Party Claim so requires), the Indemnifying Party shall
notify the Indemnitee that the Indemnifying Party will assume responsibility for
managing the defense of such Third Party Claim, which notice shall specify any
reservations or exceptions.
(g) Defense By Indemnitee. If an Indemnifying Party fails to assume
responsibility for managing the defense of a Third Party Claim, or fails to
notify an Indemnitee that it will assume responsibility as provided in Section
1.5(f), such Indemnitee may manage the defense of such Third
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Party Claim; provided, however, that the Indemnifying Party shall reimburse all
such costs and expenses in the event it is ultimately determined, in accordance
with the procedures governing the Claims Committee, that the Indemnifying Party
is obligated to indemnify the Indemnitee with respect to such Third Party Claim.
(h) No Settlement By Indemnitee Without Consent. Unless the Indemnifying
Party has failed to manage the defense of the Third Party Claim in accordance
with the terms of this Agreement, no Indemnitee may settle or compromise any
Third Party Claim without the consent of the Indemnifying Party.
(i) No Consent to Certain Judgments or Settlements Without Consent.
Notwithstanding Section 1.5(f) above, no party shall consent to entry of any
judgment or enter into any settlement of a Third Party Claim without the consent
of the other party (such consent not to be unreasonably withheld) if the effect
of such judgment or settlement is to (A) permit any injunction, declaratory
judgment, other order or other nonmonetary relief to be entered, directly or
indirectly, against the other party or (B) affect the other party in a material
fashion due to the allocation of Liabilities and related indemnities set forth
in the Separation Agreement, this Agreement or any other Ancillary Agreement.
Section 1.6. Agilent Contingent Liabilities In Excess of $50 Million.
(a) Excess Portions. Notwithstanding anything to the contrary in this
Agreement or the Assignment Agreement, if the aggregate amount paid by the
Agilent Group, less any related Insurance Proceeds and any other amounts
recovered (including by way of set off) from third parties unaffiliated with HP,
in respect of any single Agilent Contingent Liability or any Related Agilent
Contingent Liabilities is in excess of $50 million, arising from written demands
made or suits or similar proceedings filed within four years following the
Separation Date that demand or seek monetary damages, services or non-monetary
relief, Agilent shall be entitled to reimbursement from HP for the Shared HP
Percentage of the Excess Portion.
(b) Insurance Proceeds. In the event that after any payment is made by HP
to Agilent in accordance with the allocation set forth in Section 1.6(a), any
member of the Agilent Group receives any Insurance Proceeds or obtains any other
amounts that, in any such case, would reduce the amount paid by the Agilent
Group in respect of the applicable Agilent Contingent Liability or Liabilities,
Agilent will promptly notify HP of the receipt of such Insurance Proceeds or
otherwise and will promptly reimburse HP for the amount of any payment that
Agilent would not have been entitled to receive if it had received such
Insurance Proceeds on or prior to the date it received a payment pursuant to
this Section.
(c) Notice of Agilent Contingent Liabilities Involving an Excess Portion.
Agilent agrees to use its reasonable commercial efforts to advise HP if it
becomes aware of one or more Agilent Contingent Liabilities that may, in the
aggregate, result in payments of $50 million or more; provided, however, that no
delay or failure to give any such notice shall relieve HP of any obligation
pursuant to this Agreement unless it is actually and substantially prejudiced as
a result of such delay or failure.
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(d) Termination Upon Assignment or Change of Control. Notwithstanding
anything to the contrary in this Agreement or any other Ancillary Agreement, the
right to receive reimbursement under this Section 1.6 may not be assigned or
delegated by Agilent and shall terminate upon a Change of Control of Agilent
(other than as a result of the Distribution).
Section 1.7. Additional Matters.
(a) Cooperation in Defense and Settlement. With respect to any Third Party
Claim that implicates both Agilent and HP in a material fashion due to the
allocation of Liabilities, responsibilities for management of defense and
related indemnities set forth in the Separation Agreement, this Agreement or any
of the Ancillary Agreements, the parties agree to cooperate fully and maintain a
joint defense (in a manner that will preserve the attorney-client privilege with
respect thereto) so as to minimize such Liabilities and defense costs associated
therewith. The party that is not responsible for managing the defense of such
Third Party Claims shall, upon reasonable request, be consulted with respect to
significant matters relating thereto and may, if necessary or helpful, associate
counsel to assist in the defense of such claims.
(b) Substitution. In the event of an Action in which the Indemnifying
Party is not a named defendant, if either the Indemnitee or the Indemnifying
Party shall so request, the parties shall endeavor to substitute the
Indemnifying Party for the named defendant. If such substitution or addition
cannot be achieved for any reason or is not requested, the rights and
obligations of the parties regarding indemnification and the management of the
defense of claims as set forth in this Article I shall not be altered.
(c) Subrogation. In the event of payment by or on behalf of any
Indemnifying Party to or on behalf of any Indemnitee in connection with any
Third Party Claim, such Indemnifying Party shall be subrogated to and shall
stand in the place of such Indemnitee, in whole or in part based upon whether
the Indemnifying Party has paid all or only part of the Indemnitee's Liability,
as to any events or circumstances in respect of which such Indemnitee may have
any right, defense or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or against any other
person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.
(d) Not Applicable to Taxes. This Agreement shall not apply to Taxes
(which are covered by the Tax Sharing Agreement).
Section 1.8. Survival of Indemnities. Subject to Section 1.6(d) and
Section 3.7, the rights and obligations of the members of the HP Group and the
Agilent Group under this Article I shall survive the sale or other transfer by
any party of any Assets or businesses or the assignment by it of any Liabilities
or the sale by any member of the HP Group or the Agilent Group of the capital
stock or other equity interests of any Subsidiary to any Person.
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Section 1.9. Alleged Infringement or Misappropriation against HP for
Products Ordered from the Agilent Business.
(a) Definitions. As used in this Section 1.9, the following terms have
the following meanings. "Agilent Product" means any product of the Agilent
Business that was or is furnished by the Agilent Business prior to the
Separation Date or (to the extent that there is no separate agreement between
the purchaser and seller governing the purchase and sale of such product) on or
after the Separation Date. "Eligible Buyer" means any member of the HP Group, HP
Subcontractors and other third parties mutually agreed to in writing by the
parties who purchase Agilent Products from the Agilent Business. "HP
Subcontractors" means third party entities which perform contract work for any
member of the HP Group and which acquire Agilent Products from the Agilent
Business. HP Subcontractors are independent contractors of a member of the HP
Group, and are not legally related to any member of the HP Group as agent,
employee, partner, joint venture or other manner.
(b) Obligation. Agilent shall manage the defense of any third party
claim, suit, or proceeding brought against any member of the HP Group, any
Eligible Buyer, or their customers insofar as it is based on a claim that any
Agilent Product constitutes an infringement of any third party's patent,
copyright, trademark, trade name, or unauthorized trade secret use; provided
that (i) Agilent is notified promptly in writing of such claim and is supplied
with information and assistance as reasonably necessary, and (ii) Agilent is
given sole control to handle the defense or settlement of any such claim, suit
or proceeding. Agilent agrees to pay all damages and costs awarded therein
against HP, any Eligible Buyer, or their customers.
(c) Enjoined Products. In case any Agilent Product or any part thereof in
such suit is held to constitute an infringement for which Agilent is liable and
its use is enjoined, Agilent shall, at its own expense and at its option, either
(i) procure for HP, the Eligible Buyers and their customers the right to
continue to use the Agilent Product, or (ii) if applicable, replace the Agilent
Product with a noninfringing Agilent Product of equivalent function and
performance, or modify it so it becomes noninfringing without detracting from
function or performance; provided, however, that if any of the foregoing
alternatives are not reasonably possible, then (iii) accept return of the
Agilent Product and refund to HP or the Eligible Buyer, as applicable, the price
paid for the infringing Agilent Product less a reasonable sum for past use.
(d) Exceptions. Notwithstanding the foregoing, Agilent shall have no
responsibility for claims arising from (i) modifications of the Agilent Product
made by HP or any Eligible Buyer if such claim would not have arisen but for
such modifications, or (ii) combination or use of the Agilent Product with
products not supplied by Agilent if such claim would not have arisen but for
such combination or use, or (iii) Agilent's compliance with HP's designs or
specifications, or (iv) Agilent Product use prohibited by specifications or
related application notes.
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Section 1.10. Claims of Alleged Infringement or Misappropriation against
Agilent for Products from HP Business.
(a) Definitions. As used in this Section 1.10, the following terms have
the following meanings. "HP Product" means any product of the HP Business that
was or is furnished by the HP Business prior to the Separation Date or (to the
extent that there is no separate agreement between the purchaser and seller
governing the purchase and sale of such product) on or after the Separation
Date. "Eligible Buyer" means any member of the Agilent Group, Agilent
Subcontractors and other third parties mutually agreed to in writing by the
parties who purchase HP Products from the HP Business. "Agilent Subcontractors"
means third party entities which perform contract work for any member of the
Agilent Group and which acquire HP Products from the HP Business. Agilent
Subcontractors are independent contractors of a member of the Agilent Group, and
are not legally related to any member of the Agilent Group as agent, employee,
partner, joint venture or other manner.
(b) Obligation. HP shall manage the defense of any third party claim,
suit, or proceeding brought against any member of the Agilent Group, any
Eligible Buyer, or their customers insofar as it is based on a claim that any HP
Product constitutes an infringement of any third party's patent, copyright,
trademark, trade name, or unauthorized trade secret use; provided that (i) HP is
notified promptly in writing of such claim and is supplied with information and
assistance as reasonably necessary, and (ii) HP is given sole control to handle
the defense or settlement of any such claim, suit or proceeding. HP agrees to
pay all damages and costs awarded therein against Agilent, any Eligible Buyer,
or their customers.
(c) Enjoined Products. In case any HP Product or any part thereof in such
suit is held to constitute an infringement for which HP is liable and its use is
enjoined, HP shall, at its own expense and at its option, either (i) procure for
Agilent, the Eligible Buyers and their customers the right to continue to use
the HP Product, or (ii) if applicable, replace the HP Product with a
noninfringing HP Product of equivalent function and performance, or modify it so
it becomes noninfringing without detracting from function or performance;
provided, however, that if any of the foregoing alternatives are not reasonably
possible, then (iii) accept return of the HP Product and refund to Agilent or
the Eligible Buyer, as applicable, the price paid for the infringing HP Product
less a reasonable sum for past use.
(d) Exceptions. Notwithstanding the foregoing, HP shall have no
responsibility for claims arising from (i) modifications of the HP Product made
by Agilent or any Eligible Buyer if such claim would not have arisen but for
such modifications, or (ii) combination or use of the HP Product with products
not supplied by HP if such claim would not have arisen but for such combination
or use, or (iii) HP's compliance with Agilent's designs or specifications, or
(iv) HP Product use prohibited by specifications or related application notes.
Section 1.11. Reimbursement For Certain Losses and Liabilities Not Covered
By HP's Insurance Policies. Except as set forth in Section 1.2(iii) and Section
1.3(iii), notwithstanding anything to the contrary in this Agreement or the
Assignment Agreement, if:
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(a) the Agilent Group suffers one or more losses of real property,
personal property or business interruption resulting therefrom arising from an
earthquake occurring between the Separation Date and Distribution Date; or
(b) the Agilent Group suffers one or more first-party property losses
between the Separation Date and the Distribution Date of a type that is covered
by HP's Insurance Policies or that is covered by standard form insurance
policies in use at the time; or
(c) events, acts or omissions occur between the Separation Date and the
Distribution Date that give rise to one or more Third Party Claims that result
in an Agilent Liability (including the costs of defending against such claims)
of a type that is covered by HP's Insurance Policies or that is covered by
standard form insurance policies in use at the time, but only to the extent that
suits or similar proceedings are filed or written demands are made in connection
with such Third Party Claims within four years following the Distribution Date
that seek or demand monetary damages, services or non-monetary relief; or
(d) Releases first occur between the Separation Date and the Distribution
Date that give rise to one or more Environmental Actions that result in an
Agilent Liability (including the costs of defending against such Environmental
Actions), but only to the extent that suits or similar proceedings are filed,
orders or decrees are issued, written notice that such Environmental Action will
be commenced is received by Agilent or HP, or written demands are made in
connection with such Environmental Actions within four years following the
Distribution Date that seek or demand monetary damages, services or non-monetary
relief; and
(e) the aggregate amount of Agilent's loss and Liabilities described in
clauses (a), (b), (c) and (d), exclusive of amounts covered by HP's Insurance
Policies or other insurance policies that provide coverage to Agilent, exceeds
$20 million, then HP shall reimburse Agilent to the extent that the aggregate
amount of Agilent's loss and Liabilities described in clauses (a), (b), (c) and
(d), exclusive of amounts covered by HP's Insurance Policies or other insurance
policies that provide coverage to Agilent, exceeds $20 million.
(f) Interpretation. In the case of any Agilent Liability a portion of
which arises out of events, acts or omissions occurring prior to the Separation
Date and a portion of which arises out of events, acts or omissions occurring on
or after the Separation Date but prior to the Distribution Date, only that
portion that arises out of events, acts or omissions occurring on or after the
Separation Date and prior to the Distribution Date shall be subject to this
Section 1.11. In the case of any Agilent Liability a portion of which arises out
of events, acts or omissions occurring prior to the Distribution Date and a
portion of which arises out of events, acts or omissions occurring on or after
the Distribution Date, only that portion that arises out of events, acts or
omissions occurring prior to the Distribution Date shall be subject to this
Section 1.11. For purposes of the foregoing, an Agilent Liability shall be
deemed to have arisen out of events, acts or omission occurring on or after the
Separation Date and before the Distribution Date if all the elements necessary
for the assertion of a claim with respect to such Agilent Liability shall have
occurred on or prior to the Distribution Date, such that the claim, were it
asserted in an Action on or after the Separation Date but prior to the
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Distribution Date, would not be dismissed by a court on ripeness or similar
grounds. For purposes of clarification of the foregoing, the parties agree that
no Agilent Liability relating to, arising out of or resulting from any
obligation of any Person to perform the executory portion of any contract or
agreement existing as of the Distribution Date, or to satisfy any obligation
accrued under any Plan (as defined in the Employee Matters Agreement) as of the
Separation Date, shall be subject to this Section 1.11. For purposes of
determining whether a claim relating to the Year 2000 problem is subject to this
Section 1.11, claims relating to products shipped on or after the Separation
Date but prior to the Distribution Date shall be deemed to have arisen during
such period. This Section 1.11(f) shall not apply to any Agilent Liability
covered by Section 1.11(d).
ARTICLE II.
INSURANCE MATTERS
Section 2.1. Agilent Insurance Coverage During the Transition Period.
(a) Maintain Comparable Insurance. Throughout the period beginning on the
Separation Date and ending on the Distribution Date (i.e., the "Insurance
Transition Period"), HP shall, subject to insurance market conditions and other
factors beyond its control, maintain policies of insurance, including for the
benefit of Agilent or any of its Subsidiaries, directors, officers, employees or
other covered parties (collectively, the "Agilent Covered Parties") which are
comparable to those maintained generally by HP; provided, however, that if HP
determines that (i) the amount or scope of such coverage will be reduced to a
level materially inferior to the level of coverage in existence immediately
prior to the Insurance Transition Period or (ii) the retention or deductible
level applicable to such coverage, if any, will be increased to a level
materially greater than the levels in existence immediately prior to the
Insurance Transition Period, HP shall give Agilent notice of such determination
as promptly as practicable. Upon notice of such determination, Agilent shall be
entitled to no less than 60 days to evaluate its options regarding continuance
of coverage hereunder and may cancel its interest in all or any portion of such
coverage as of any day within such 60 day period. Except as provided below,
during the Insurance Transition Period, such policies of insurance shall cover
Agilent Covered Parties for liabilities and losses insured prior to the
Distribution Date.
(b) Reimbursement for Premiums. Agilent shall promptly pay or reimburse
HP, as the case may be, for premium expenses, and Agilent Covered Parties shall
promptly pay or reimburse HP for any costs and expenses which HP may incur in
connection with the insurance coverages maintained pursuant to this Section 2.1,
including but not limited to any subsequent premium adjustments. All payments
and reimbursements by Agilent and Agilent Covered Parties to HP shall be made
within fifteen (15) days after Agilent's receipt of an invoice from HP.
Section 2.2. Cooperation and Agreement Not to Release Carriers. Each of
HP and Agilent will share such information as is reasonably necessary in order
to permit the other to manage and conduct its insurance matters in an orderly
fashion. Each of HP and Agilent, at the request of the other, shall cooperate
with and use commercially reasonable efforts to assist the other in recoveries
for claims made under any insurance policy for the benefit of any insured party,
and neither HP nor
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Agilent, nor any of their Subsidiaries, shall take any action which would
intentionally jeopardize or otherwise interfere with either party's ability to
collect any proceeds payable pursuant to any insurance policy. Except as
otherwise contemplated by the Separation Agreement, this Agreement or any
Ancillary Agreement, after the Separation Date, neither HP nor Agilent shall
(and shall ensure that no member of their respective Groups shall), without the
consent of the other, provide any insurance carrier with a release, or amend,
modify or waive any rights under any such policy or agreement, if such release,
amendment, modification or waiver would adversely affect any rights or potential
rights of any member of the other Group thereunder. However, nothing in this
Section 2.2 shall (A) preclude any member of any Group from presenting any claim
or from exhausting any policy limit, (B) require any member of any Group to pay
any premium or other amount or to incur any Liability, (C) require any member of
any Group to renew, extend or continue any policy in force or (D) except as
otherwise provided in Section 2.12, apply to HP in connection with rights to
coverage for Environmental Actions under Insurance Policies in effect prior to
the Separation Date.
Section 2.3. Agilent Insurance Coverage After the Insurance Transition
Period. From and after expiration of the Insurance Transition Period, Agilent,
and Agilent alone, shall be responsible for obtaining and maintaining insurance
programs for its risk of loss and such insurance arrangements shall be separate
and apart from HP's insurance programs. Notwithstanding the foregoing, HP, upon
the request of Agilent, shall use all commercially reasonable efforts to assist
Agilent in the transition to its own separate insurance programs from and after
the Insurance Transition Period, and shall provide Agilent with any information
that is in the possession of HP and is reasonably available and necessary to
either obtain insurance coverages for Agilent or to assist Agilent in preventing
unintended self-insurance, in whatever form.
Section 2.4. Responsibilities for Self-insured Obligations. Agilent will
reimburse HP for all amounts necessary to exhaust or otherwise satisfy all
applicable self-insured retentions, amounts for fronted policies, deductibles
and retrospective premium adjustments and similar amounts not covered by
Insurance Policies in connection with Agilent Liabilities and Insured Agilent
Liabilities.
Section 2.5. Procedures With Respect to Insured Agilent Liabilities.
(a) Reimbursement. Agilent will reimburse HP for all amounts incurred to
pursue insurance recoveries from Insurance Policies for Insured Agilent
Liabilities.
(b) Management of Claims. The defense of claims, suits or actions giving
rise to potential or actual Insured Agilent Liabilities will be managed (in
conjunction with HP's insurers, as appropriate) by the party that would have had
responsibility for managing such claims, suits or actions had such Insured
Agilent Liabilities been Agilent Liabilities.
Section 2.6. Insufficient Limits of Liability for HP Liabilities and
Agilent Liabilities.
(a) Insufficient Limits of Liability. In the event that there are
insufficient limits of liability available under HP's Insurance Policies in
effect prior to the Distribution Date to cover the Liabilities of HP and/or
Agilent that would otherwise be covered by such Insurance Policies, then to
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the extent that other insurance is not available to HP and/or Agilent for such
Liabilities an adjustment will be made in accordance with the following
procedures:
(i) Each party will be allocated an amount equal to their Shared
Percentage of the lesser of (A) the available limits of liability available
under HP's Insurance Policies in effect prior to the Distribution Date net of
uncollectible amounts attributable to insurer insolvencies, and (B) the proceeds
received from HP's Insurance Policies if the Liabilities are the subject of
disputed coverage claims and, following consultation with each other, HP and/or
Agilent agree to accept less than full policy limits from HP's and Agilent's
insurers (the "Coverage Amount").
(ii) A party who receives more than its share of the Coverage Amount
(the "Overallocated Party") agrees to reimburse the other party (the
"Underallocated Party") to the extent that the Liabilities of the Underallocated
Party that would have been covered under such Insurance Policies (subject to the
limitations of Section 2.12) is less than the Underallocated Party's share of
the Coverage Amount.
(iii) This Section 2.6(a) shall terminate three years following the
Distribution Date; provided, however, that either party may extend the three
year period applicable to these provisions by up to five additional two-year
periods, or as otherwise shall be agreed to in order to accomplish the
allocation objective set forth above and in order to have access to any
available coverage under the Insurance Policies.
(b) Illustrations. The following illustrations are intended to provide
guidance concerning how this Section is intended to apply to claims implicating
insurance policies issued prior to the Distribution Date. The effects of Section
1.11 are not considered in these illustrations.
(i) Illustration No. 1. Ten separate claims are brought arising
from ten separate "occurrences," each resulting in an Agilent Liability of $10
million. The self-insured retention is $10 million "per occurrence." Result:
This Section is inapplicable. Agilent may pursue self-insurance, to the extent
it is permitted to do so by law, subject to reimbursement of HP under Section
2.4 of this Agreement.
(ii) Illustration No. 2. Ten separate claims are brought arising
from ten separate "occurrences," each resulting in an Agilent Liability of $40
million, for a total of $400 million. Fifteen separate claims are brought
arising from fifteen separate "occurrences," each resulting in an HP Liability
of $40 million, for a total of $600 million. The limits of liability in the
Insurance Policies applicable to the claims is $200 million. The self-insured
retention is $10 million "per occurrence." Therefore, Agilent and HP each incur
the first $10 million "per occurrence," leaving a remaining liability (after the
payment of self-insured retentions) of $30 million "per occurrence," or $300
million in the aggregate for Agilent and $450 million in the aggregate for HP.
The Agilent Liabilities are incurred prior to the HP Liabilities, and paid for
by HP's Insurance Policies in effect prior to the Distribution Date, which are
exhausted by these payments. This leaves Agilent with an additional liability of
$100 million (plus its self-insured retentions of $100 million). Result: The
$200 million limit is split 82/18: $164 million is allocated to HP and $36
million is allocated to Agilent. Agilent should pay HP $164 million, HP's share
of the Coverage Amount.
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(iii) Illustration No. 3. Same as Illustration No. 2, except that
HP's claims ($200 million) were paid for by HP's Insurance Policies in effect
prior to the Distribution Date, which are exhausted by these payments. This
leaves Agilent with a liability of $300 million (plus its self-insured
retentions of $100 million). HP should pay Agilent $36 million.
Section 2.7. Cooperation. HP and Agilent will cooperate with each other
in all respects, and they shall execute any additional documents which are
reasonably necessary, to effectuate the provisions of this Article II.
Section 2.8. No Assignment or Waiver. This Agreement shall not be
considered as an attempted assignment of any policy of insurance or as a
contract of insurance and shall not be construed to waive any right or remedy of
any member of the HP Group in respect of any Insurance Policy or any other
contract or policy of insurance.
Section 2.9. No Liability. Agilent does hereby, for itself and as agent
for each other member of the Agilent Group, agree that no member of the HP Group
or any HP Indemnitee shall have any Liability whatsoever as a result of the
insurance policies and practices of HP and its Subsidiaries as in effect at any
time prior to the Distribution Date, including as a result of the level or scope
of any such insurance, the creditworthiness of any insurance carrier, the terms
and conditions of any policy, the adequacy or timeliness of any notice to any
insurance carrier with respect to any claim or potential claim or otherwise.
Section 2.10. No Restrictions. Nothing in this Agreement shall be deemed
to restrict any member of the Agilent Group from acquiring at its own expense
any other insurance policy in respect of any Liabilities or covering any period.
Section 2.11. Further Agreements. The Parties acknowledge that they intend
to allocate financial obligations without violating any laws regarding
insurance, self-insurance or other financial responsibility. If it is determined
that any action undertake pursuant to the Separation Agreement, this Agreement
or any Ancillary Agreement is violative of any insurance, self-insurance or
related financial responsibility law or regulation, the parties agree to work
together to do whatever is necessary to comply with such law or regulation while
trying to accomplish, as much as possible, the allocation of financial
obligations as intended in the Separation Agreement, this Agreement and any
Ancillary Agreement.
Section 2.12. Agreement Regarding Insurance Covering Environmental Actions.
Notwithstanding anything to the contrary in this Agreement (including Article II
hereof), the Separation Agreement or any Ancillary Agreement:
(a) Except as set forth in Section 2.12(b), Agilent shall not make any
claim against, or be entitled to any proceeds from, any primary, umbrella or
excess general liability policy in effect prior to the Separation Date for any
Environmental Actions;
(b) In the event that a claim arises out of an Environmental Action in
connection with an Agilent Schedule 1 Facility and the claim could be covered
under any primary, umbrella or excess
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general liability policy in effect prior to the Separation Date, and provided
that at the time the claim is made HP has not fully and finally released or
agreed to release (at HP's sole discretion) the insurance carrier with respect
to coverage applicable to that claim under such policy, Agilent shall be
permitted to submit the claim to HP for submission to the relevant insurance
carrier, HP shall control all negotiations on the claim and the policy with the
insurance carrier and Agilent shall be entitled to an equitable apportionment of
any proceeds received by HP from the policy.
Section 2.13. Matters Governed by Employee Matters Agreement. This Article
II shall not apply to any insurance policies that are the subject of the
Employee Matters Agreement.
ARTICLE III.
MISCELLANEOUS
Section 3.1. Entire Agreement. This Agreement, the Master Separation
Agreement, the other Ancillary Agreements and the Exhibits and Schedules
attached hereto and thereto, constitutes the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all prior
written and oral and all contemporaneous oral agreements and understandings with
respect to the subject matter hereof.
Section 3.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware as to all matters
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
Section 3.3. Notices. Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii)
one (1) business day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one (1) business day after being deposited with
an overnight courier service or (v) four (4) days after being deposited in the
U.S. mail, First Class with postage prepaid, and addressed to the attention of
the party's General Counsel at the address of its principal executive office or
such other address as a party may request by notifying the other in writing.
Section 3.4. Parties in Interest. This Agreement, including the Schedules
and Exhibits hereto, and the other documents referred to herein, shall be
binding upon HP, HP's Subsidiaries, Agilent and Agilent's Subsidiaries and inure
solely to the benefit of the Agilent Indemnitees and the HP Indemnitees and
their respective permitted assigns, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
Section 3.5. Other Agreements Evidencing Indemnification Obligations. HP
hereby agrees to execute, for the benefit of any Agilent Indemnitee, such
documents as may be reasonably requested by such Agilent Indemnitee, evidencing
HP's agreement that the indemnification obligations of HP set forth in this
Agreement inure to the benefit of and are enforceable by such Agilent
Indemnitee. Agilent hereby agrees to execute, for the benefit of any HP
Indemnitee, such
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documents as may be reasonably requested by such HP Indemnitee, evidencing
Agilent's agreement that the indemnification obligations of Agilent set forth in
this Agreement inure to the benefit of and are enforceable by such HP
Indemnitee.
Section 3.6. Counterparts. This Agreement, including the Schedules and
Exhibits hereto, and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
Section 3.7. Assignment. The rights and obligations in this Agreement may
not be assigned or delegated by any party hereto, in whole or in part, without
the express prior written consent of the other party hereto.
Section 3.8. Severability. If any term or other provision of this
Agreement or the Schedules or Exhibits attached hereto is determined by a
nonappealable decision by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the fullest extent
possible.
Section 3.9. Failure or Indulgence Not Waiver. No failure or delay on the
part of either party hereto in the exercise of any right hereunder shall impair
such right or be construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right.
Section 3.10. Amendment. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to this Agreement.
Section 3.11. Authority. Each of the parties hereto represents to the
other that (a) it has the corporate or other requisite power and authority to
execute, deliver and perform this Agreement, (b) the execution, delivery and
performance of this Agreement by it have been duly authorized by all necessary
corporate or other action, (c) it has duly and validly executed and delivered
this Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.
Section 3.12. Interpretation. The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table or contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a
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Section, Exhibit or Schedule, such reference shall be to an Article or Section
of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.
ARTICLE IV.
DEFINITIONS
Section 4.1. Action. "Action" means any demand, action, suit, countersuit,
arbitration, inquiry, proceeding or investigation by or before any federal,
state, local, foreign or international governmental authority or any arbitration
or mediation tribunal.
Section 4.2. Affiliated Company. "Affiliated Company" means, with respect
to HP, any entity in which HP holds a 50% or less ownership interest that is
listed on Schedule 7.1(a) to the Separation Agreement and, with respect to
Agilent, any entity in which Agilent holds a 50% or less ownership interest and
that is listed on Schedule 7.1(b) to the Separation Agreement. Schedules 7.1(a)
and 7.1(b) may be amended from time to time after the date hereof upon mutual
written consent of the parties.
Section 4.3. Agilent Business. "Agilent Business" means (a) the business
and operations of the business entities of HP currently known under the
following names, as described in the IPO Registration Statement and as such
business and operations will continue following the Separation Date: (i) the
Test and Measurement Organization, (ii) the Semiconductor Products Group, (iii)
the Chemical Analysis Group, (iv) the Healthcare Solutions Group and (v) the
portion of HP Labs and infrastructure organizations related to these businesses
and (b) except as otherwise expressly provided herein, any terminated, divested
or discontinued businesses or operations that at the time of termination,
divestiture or discontinuation primarily related to the Agilent Business as then
conducted.
Section 4.4. Agilent Contingent Liability. "Agilent Contingent Liability"
means any Liability, other than Liabilities for Taxes (which are governed by the
Tax Sharing Agreement), of a member of the HP Group or the Agilent Group that
primarily relates to the Agilent Business, whenever arising, to any Person other
than a member of the HP Group or the Agilent Group, if and to the extent that
(i) such Liability arises out of the events, acts or omissions occurring as of
the Separation Date and (ii) the existence or scope of the obligation of a
member of the HP Group or the Agilent Group as of the Separation Date with
respect to such Liability was not acknowledged, fixed or determined in any
material respect, due to a dispute or other uncertainty as of the Separation
Date or as a result of the failure of such Liability to have been discovered or
asserted as of the Separation Date (it being understood that the existence of a
litigation or other reserve with respect to any Liability shall not be
sufficient for such Liability to be considered acknowledged, fixed or
determined). In the case of any Liability a portion of which arises out of
events, acts or omissions occurring prior to the Separation Date and a portion
of which arises out of events, acts or omissions occurring on or after the
Separation Date, only that portion that arises out of events, acts or omissions
occurring prior to the Separation Date shall be considered an Agilent Contingent
Liability. For purposes of the foregoing, a Liability shall be deemed to have
arisen out of events, acts or omissions occurring prior to the Separation Date
if all the elements necessary for the assertion of a
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claim with respect to such Liability shall have occurred on or prior to the
Separation Date, such that the claim, were it asserted in an Action on or prior
to the Separation Date, would not be dismissed by a court on ripeness or similar
grounds. For purposes of clarification of the foregoing, the parties agree that
no Liability relating to, arising out of or resulting from any obligation of any
Person to perform the executory portion of any contract or agreement existing as
of the Separation Date, or to satisfy any obligation accrued under any Plan (as
defined in the Employee Matters Agreement) as of the Separation Date, shall be
deemed to be an Agilent Contingent Liability. For purposes of determining
whether a claim relating to the Year 2000 problem is an Agilent Contingent
Liability, claims relating to products shipped prior to the Separation Date
shall be deemed to have arisen prior to the Separation Date.
Section 4.5. Agilent Contracts. "Agilent Contracts" has the meaning set
forth in Section 4.8 of the Assignment Agreement.
Section 4.6. Agilent Covered Parties. "Agilent Covered Parties" shall
have the meaning set forth in Section 2.1(a) of this Agreement.
Section 4.7. Agilent Facilities. "Agilent Facilities" means the total of
the Agilent Schedule 1 Facilities and the Agilent Schedule 2 Facilities.
Section 4.8. Agilent Group. "Agilent Group" means Agilent, each
Subsidiary and Affiliated Company of Agilent immediately after the Separation
Date or that is contemplated to be a Subsidiary or Affiliated Company of Agilent
pursuant to the Non-US Plan and each Person that becomes a Subsidiary or
Affiliate Company of Agilent after the Separation Date.
Section 4.9. Agilent Indemnitees. "Agilent Indemnitees" means Agilent,
each member of the Agilent Group and each of their respective directors,
officers and employees.
Section 4.10. Agilent Liabilities. "Agilent Liabilities" has the meaning
set forth in Section 1.3 of the Assignment Agreement.
Section 4.11. Agilent Schedule 1 Facilities. "Agilent Schedule 1
Facilities" means the real property, groundwater, surface water and improvements
on those properties listed on the Owned and Leased Properties Spreadsheet (as
defined in the Real Estate Matters Agreement) excluding the Agilent Schedule 2
Facilities. In the event that, prior to the Separation Date, any property listed
on the Owned and Leased Properties Spreadsheet dated July 20, 1999 is
transferred to a third party (excluding any member of the HP Group or the
Agilent Group), HP and Agilent shall mutually agree, for the purposes of the
indemnification obligations set forth in Section 1.4 of this Agreement, whether
such property shall be considered an Agilent Schedule 1 Facility or an HP
Facility.
Section 4.12. Agilent Schedule 2 Facilities. "Agilent Schedule 2
Facilities" means the real property, groundwater, surface water and improvements
thereon which shall be owned or occupied by a member of the Agilent Group on and
after the Separation Date and which are identified on a disclosure letter
entitled "The Agilent Schedule 2 Facilities," which disclosure letter shall be
delivered to Agilent by HP on the Separation Date.
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Section 4.13. Assets. "Assets" has the meaning set forth in Section 4.14
of the Assignment Agreement.
Section 4.14. Assignment Agreement. "Assignment Agreement" means the
General Assignment and Assumption Agreement attached as Exhibit C to the
Separation Agreement.
Section 4.15. Change of Control. "Change of Control" with respect to any
Person means the occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of such Person representing 50% or more of
the total voting power represented by such Person's then outstanding voting
securities; or
(ii) A change in the composition of the Board of
Directors of such Person occurring within a two-year period as a result of which
fewer than a majority of the directors are "Incumbent Directors." "Incumbent
Directors" shall mean directors who either (A) are directors of such Person as
of the date hereof, or (B) are elected, or nominated for election, to the Board
of Directors with the affirmative votes (either by a specific vote or by
approval of the proxy statement of such Person in which such person is named as
a nominee for election as a director without objection to such nomination) of at
least three-quarters of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors of such Person); or
(iii) The consummation of (A) a merger or consolidation
of such Person with any other corporation, other than a merger or consolidation
which would result in the voting securities of such Person outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or the entity that controls such surviving entity) at least fifty percent (50%)
of the total voting power represented by the voting securities of such Person,
such surviving entity or the entity that controls such Person or such surviving
entity outstanding immediately after such merger or consolidation, or (B) the
sale or disposition by such Person of all or substantially all such Person's
assets; or
(iv) The shareholders of such Person approve a plan of
complete liquidation of such Person.
Section 4.16. Claims Committee. "Claims Committee" means a committee
composed of (i) either the General Counsel or Associate General Counsel of HP
and (i) either the General Counsel or Associate General Counsel of Agilent.
Section 4.17. Commingled Claims. "Commingled Claims" has the meaning set
forth in Section 1.5(b) of this Agreement.
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<PAGE>
Section 4.18. Coverage Amount. "Coverage Amount" has the meaning set forth
in Section 2.6(a) of this Agreement.
Section 4.19. Employee Matters Agreement. "Employee Matters Agreement"
means the Employee Matters Agreement attached as Exhibit E to the Separation
Agreement.
Section 4.20. Environmental Actions. "Environmental Actions" means any
notice, claim, act, cause of action, order, decree or investigation by any third
party (including, without limitation, any Governmental Authority) alleging
potential liability (including potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, damage to
flora or fauna caused by Environmental Conditions, real property damages,
personal injuries or penalties) arising out of, based on or resulting from the
Release of any Hazardous Materials. "Environmental Actions" shall not include
any personal injury claim made by any employee of the Agilent Group or the HP
Group arising during the course or scope of the employment of such employee for
the HP Group or for the Agilent Group.
Section 4.21. Environmental Conditions. "Environmental Conditions" means
the presence in the environment, including the soil, groundwater, surface water
or ambient air, of any Hazardous Material at a level which requires
investigation or remediation (including, without limitation, investigation,
study, health or risk assessment, monitoring, removal, treatment or transport)
under any Environmental Laws.
Section 4.22. Environmental Laws. "Environmental Laws" means all laws and
regulations of any Governmental Authority with jurisdiction that relate to the
protection of the environment (including ambient air, surface water, ground
water, land surface or subsurface strata) including laws and regulations
relating to the Release of Hazardous Materials, or otherwise relating to the
treatment, storage, disposal, transport or handling of Hazardous Materials, or
to the exposure of any individual to a Release of Hazardous Materials.
Section 4.23. Excess Portion. "Excess Portion" means that portion, if any,
of the aggregate amount actually paid by Agilent (together with any members of
the Agilent Group), in respect of any single Agilent Contingent Liability or any
Related Agilent Contingent Liabilities that is in excess of $50 million.
Section 4.24. Hazardous Materials. "Hazardous Materials" means chemicals,
pollutants, contaminants, wastes, toxic substances, radioactive and biological
materials, hazardous substances, petroleum and petroleum products or any
fraction thereof.
Section 4.25. HP Business. "HP Business" means any business of HP other
than the Agilent Business.
Section 4.26. HP Facilities. "HP Facilities" means all of the real
property and improvements thereon owned or occupied at any time on or before the
Separation Date by HP, whether for the HP Business or the Agilent Business,
excluding the Agilent Facilities.
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<PAGE>
Section 4.27. HP Group. "HP Group" means HP, each Subsidiary and
Affiliated Company of HP (other than any member of the Agilent Group)
immediately after the Separation Date, after giving effect to the Non-US Plan
and each Person that becomes a Subsidiary or Affiliate Company of HP after the
Separation Date.
Section 4.28. HP Indemnitees. "HP Indemnitees" means HP, each member of
the HP Group and each of their respective directors, officers and employees.
Section 4.29. Indemnitee. "Indemnitee" has the meaning set forth in
Section 1.5(a) hereof.
Section 4.30. Insurance Policies. "Insurance Policies" means insurance
policies pursuant to which a Person makes a true risk transfer to an insurer.
Section 4.31. Insurance Proceeds. "Insurance Proceeds" means those monies:
(a) received by an insured from an insurance carrier; or
(b) paid by an insurance carrier on behalf of the insured;
from Insurance Policies.
Section 4.32. Insurance Transition Period. "Insurance Transition Period"
has the meaning set forth in Section 2.1 of this Agreement.
Section 4.33. Insured Agilent Liability. "Insured Agilent Liability" means
any Agilent Liability to the extent that (i) it is covered under the terms of
HP's Insurance Policies in effect prior to the Distribution Date and (ii)
Agilent is not a named insured under, or otherwise entitled to the benefits of,
such Insurance Policies.
Section 4.34. IPO Liabilities. "IPO Liabilities" means any Liabilities of
the Agilent Group or the HP Group relating to, arising out of or resulting from
any untrue statement or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, with respect to all
information contained in any IPO Registration Statement or any preliminary,
final or supplemental prospectus forming a part of a IPO Registration Statement.
Section 4.35. IPO Registration Statement. "IPO Registration Statement"
means the registration statement on Form S-1 pursuant to the Securities Act to
be filed with the SEC registering the shares of common stock of Agilent to be
issued in the IPO, together with all amendments thereto.
Section 4.36. Liabilities. "Liabilities" has the meaning set forth in the
Assignment Agreement.
Section 4.37. Non-US Plan. "Non-US Plan" means the plan of reorganization
described in Exhibit M of the Separation Agreement.
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<PAGE>
Section 4.38. Person. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
Section 4.39. Pre-Separation Third Party Site Liabilities. "Pre-
Separation Third Party Site Liabilities" means any and all Environmental Actions
arising out of Hazardous Materials found on, under or about any landfill any
waste storage, transfer or recycling site and resulting from or arising out of
Hazardous Materials stored, treated, recycled disposed or otherwise handled at
such site prior to the Separation Date (whether for the operation of the Agilent
Business or for the operation of any past or presently (as of the date hereof)
existing HP Business as operated on or before the Separation Date).
Section 4.40. Prime Rate. "Prime Rate" means the prime rate as published
in the Wall Street Journal on the date of determination.
Section 4.41. Related Agilent Contingent Liabilities. "Related Agilent
Contingent Liabilities" means any set or group of Agilent Contingent Liabilities
arising from any single Action (including any group of Actions that are
consolidated as a single Action and any Action or Actions certified as a class
action) or any Action that is brought or threatened to be brought as a class
action and that is settled.
Section 4.42. Release. "Release" means any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through ambient air, soil,
surface water, groundwater, wetlands, land or subsurface strata.
Section 4.43. Separation. "Separation" means the transfer and
contribution from HP to Agilent, and Agilent's receipt and assumption of,
directly or indirectly, substantially all of the Assets and Liabilities
currently associated with the Agilent Business and the stock, investments or
similar interests currently held by HP in subsidiaries and other entities that
conduct such business.
Section 4.44. Separation Agreement. "Separation Agreement" means the
Master Separation and Distribution Agreement dated as of August 12, 1999, of
which this is an Exhibit thereto.
Section 4.45. Separation Date. "Separation Date" means 12:01 a.m.,
Pacific Time, November 1, 1999, or such date as may be fixed by the Board of
Directors of HP.
Section 4.46. Shared Agilent Percentage. "Shared Agilent Percentage"
means 18%.
Section 4.47. Shared HP Percentage. "Shared HP Percentage" means 82%.
Section 4.48. Shared Percentage. "Shared Percentage" means the Shared
Agilent Percentage or the Shared HP Percentage, as the case may be.
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<PAGE>
Section 4.49. Subsidiary. "Subsidiary" means with respect to any
specified Person, any corporation, any limited liability company, any
partnership or other legal entity of which such Person or its Subsidiaries owns,
directly or indirectly, more than 50% of the stock or other equity interest
entitled to vote on the election of the members of the board of directors or
similar governing body. Unless context otherwise requires, reference to HP and
its Subsidiaries shall not include the subsidiaries of HP that will be
transferred to Agilent after giving effect to the Separation, including the
actions taken pursuant to the Non-US Plan.
Section 4.50. Tax Sharing Agreement. "Tax Sharing Agreement" means the Tax
Sharing Agreement, attached as Exhibit F to the Separation Agreement.
Section 4.51. Taxes. "Taxes" has the meaning set forth in the Tax Sharing
Agreement.
Section 4.52. Third Party Claim. "Third Party Claim" has the meaning set
forth in Section 1.5(a) of this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Indemnification and
Insurance Matters Agreement to be executed on its behalf by its officers
thereunto duly authorized on the day and year first above written.
HEWLETT-PACKARD COMPANY
By: /s/ Ann O. Baskins
-----------------------------------
Name: Ann O. Baskins
---------------------------------
Title: Associate General Counsel and
--------------------------------
Assistant Secretary
AGILENT TECHNOLOGIES, INC.
By: /s/ Craig Nordlund
-----------------------------------
Name: Craig Nordlund
---------------------------------
Title: Senior Vice President, General
--------------------------------
Counsel and Secretary.
[Signature Page to Indemnification and Insurance Matters Agreement]
<PAGE>
EXHIBIT 2.14
EXHIBIT M
NON U.S. PLAN
This Exhibit summarises the transactions to be undertaken to effect the
Separation in relation to the subsidiaries and businesses outside the United
States of HP and Agilent. The transactions are summarised by country and,
together, constitute the "Non-US Plan". In this Exhibit, references to "Agilent
Assets", "Agilent Liabilities" or "Agilent Business", shall be deemed to be
references to the Agilent Assets, Agilent Liabilities or Agilent Business of the
relevant entity as defined in the local transfer agreements. In addition, the
following expressions shall have the following meanings:
"Agilent Cayman" means Agilent Technologies Cayman Islands Inc.
"Agilent Cervin" means Agilent Technologies Cervin S.ar.l.
"Agilent Europe" means Agilent Technologies Europe B.V.
"Agilent International" means Agilent Technologies International B.V.
"Agilent Leman" means Agilent Technologies Leman S.ar.l.
"Agilent Sarl" means Agilent Technologies S.ar.l.
"Agilent WorldTrade" means Agilent Technologies World Trade, Inc.
"ATI" means Agilent Technologies Netherlands Investments B.V.
"HP Delaware" means Hewlett-Packard Delaware, Inc.
"HP Europe" means Hewlett-Packard Europe B.V.
"HP Inter-Americas" means Hewlett-Packard Inter-Americas
"HP International" means Hewlett-Packard International B.V.
"HPNI" means Hewlett-Packard Nederland Investments B.V.
"HP S.A." means Hewlett-Packard S.A.
"HP WorldTrade" means Hewlett-Packard World Trade, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
Argentina Hewlett-Packard Argentina S.A. ("HP Argentina"). HP
S.A. will establish a new corporate entity, Inversiones
Agilent Technologies SRL ("Argentina Holdco"), and HP
S.A. will contribute part of the shares of HP Argentina
(representing the value of the Agilent Business) to
Argentina Holdco. HP Argentina will transfer the
Agilent Assets and the Agilent Liabilities to a second
new corporate entity, Agilent Technologies Argentina
SRL ("Agilent Argentina"), established by Argentina
Holdco, in consideration of cancellation of the shares
Argentina Holdco owns in HP Argentina.
- -------------------------------------------------------------------------------
Australia Hewlett-Packard Australia Limited ("HP Australia"). HP
will contribute cash to HP WorldTrade which will
contribute the cash to Agilent WorldTrade. Agilent
WorldTrade will use the cash received from HP
WorldTrade to subscribe for shares in a new corporate
entity, Agilent Technologies Australia Pty. Ltd.
("Agilent Australia"), having a value equal to the
market value of the Agilent Assets and Agilent
Liabilities of HP Australia. HP Australia will then
transfer its Agilent Assets to Agilent Australia in
consideration for cash and an assumption of the Agilent
Liabilities by Agilent Australia. HP Australia will
declare and pay a cash dividend to its shareholder
Hewlett-Packard Australia Holdings Pty Ltd ("HP
Australia Holdings").
- -------------------------------------------------------------------------------
Austria Hewlett-Packard Gessellschaft m.b.H ("HP Austria"). HP
Austria will undertake a demerger by way of a
contribution in kind under Austrian law. First a new
corporate entity, Agilent Technologies Osterreich GmbH
("Agilent Austria"), will be established as a
subsidiary of HP S.A. and subsequently the Agilent
Assets and Agilent Liabilities will be contributed in
kind by HP Austria to Agilent Austria.
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<PAGE>
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Country Transaction Description
- -------------------------------------------------------------------------------
Belgium Hewlett-Packard Belgium SA/NV ("HP Belgium"). HP
Belgium will undergo a spin-off by way of a statutory
contribution of a "branch of activity" under Belgian
law. This entails the contribution by HP Belgium of
all its Agilent Assets and Agilent Liabilities to a new
corporate entity, Agilent Technologies S.A./N.V.
("Agilent Belgium"), established by HP Belgium, in
return for shares in Agilent Belgium. The shares in
Agilent Belgium will be distributed by HP Belgium to
HP Europe as a dividend.
- -------------------------------------------------------------------------------
Brazil Hewlett-Packard Brasil S.A. ("HP Brazil"). HP Brazil
will undertake a demerger by way of a spin-off under
Brazilian law. A new corporate entity, Agilent
Technologies Brasil Ltda. ("Agilent Brazil"), will be
established by HP Brazil and a nominee shareholder (who
will own a minority interest). HP Brazil will transfer
its Agilent Assets and Agilent Liabilities to Agilent
Brazil in exchange for quotas of Agilent Brazil by way
of asset contribution. HP Brazil will distribute the
quotas of Agilent Brazil to HP as a dividend after
securing approval from Central Bank regarding HP's
ownership in Agilent Brazil.
- -------------------------------------------------------------------------------
Canada Hewlett-Packard (Canada) Ltd. ("HP Canada"). HP Europe
will establish a new corporate entity, Agilent
Technologies Canada Inc. ("Agilent Canada"), and HP
Canada will transfer its Agilent Assets and Agilent
Liabilities to Agilent Canada in exchange for shares in
Agilent Canada. HP Europe will contribute shares in HP
Canada to Agilent Canada. HP Canada and Agilent Canada
will then redeem or repurchase the shares each company
holds in the other, leaving HP Canada and Agilent
Canada as separate wholly owned subsidiaries of HP
Europe.
- -------------------------------------------------------------------------------
Chile Hewlett-Packard de Chile S.A. ("HP Chile"). HP Chile
will not spin-off or restructure as the Agilent
Business in Chile currently has no contracts with third
parties, employees or assets. No assets or liabilities
will be transferred. A new corporate entity, Agilent
Technologias Chile Limitada ("Agilent Chile"), will be
established by Agilent WorldTrade to undertake the
Agilent Business in Chile in the future.
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<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
China Hewlett-Packard Shanghai Analytical Products Co.,
Limited ("HPSF"). Hewlett-Packard (China) Investment
Limited ("HPCI") will transfer its interest in HPSF
(the "Equity Interest") to HP Europe. The
consideration is likely to be cash or a cash
equivalent. HP Europe will subsequently transfer the
Equity Interest to Agilent Technologies Mauritius
Limited ("Agilent Mauritius") in consideration for
which Agilent Mauritius will issue shares to HP Europe.
Hewlett-Packard Medical Products (Qingdao) Limited
("HPMP"). The restructuring will be effected in the
same manner as the restructuring of HPSF.
China Hewlett-Packard Company Limited ("HP China").
Agilent Mauritius and China Electronics Import and
Export Corporation ("CEIEC") will incorporate a new
equity joint venture company in the PRC, Agilent
Technologies Company Limited ("Agilent China").
Agilent China will use cash contributed by Agilent
Mauritius and CEIEC (as well as borrowings) to purchase
HP China's Agilent Assets. To the extent that such
proceeds can constitute distributable profits, HP China
will distribute the cash proceeds to HPCI and CEIEC as
a dividend.
HP-Scitech Joint Software Development Center Co., Ltd.
("HP-Scitech"). A new wholly foreign-owned corporate
entity, Agilent Technologies Software Company Limited
("Agilent Software"), will be established by Agilent
Mauritius to carry out the same function as HP-Scitech.
Agilent Software will purchase all the assets of
HP-Scitech for cash. Action to liquidate HP-Scitech
will either be initiated immediately after the sale of
its assets or after 12 May 2000 when the term of
HP-Scitech expires.
Shanghai Huatek Software Engineering Company Limited
("Huatek"). HP will transfer its interest in Huatek
(the "Equity Interest") to Agilent WorldTrade. The
consideration is likely to be cash or a cash equivalent.
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<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
Colombia Hewlett-Packard Colombia S.A. ("HP Colombia"). HP
Colombia will not spin-off or restructure as the
Agilent Business in Colombia currently has no contracts
with third parties, only has three employees and no
assets will be transferred. A new corporate entity,
Agilent Technologies Colombia Ltda. ("Agilent
Colombia"), will be established by Agilent WorldTrade
to undertake the Agilent Business in Colombia in the
future.
- -------------------------------------------------------------------------------
Costa Rica Servicios de Sistemas Hewlett-Packard S.A. ("HP Costa
Rica"). HP Costa Rica will not spin-off or restructure
as the whole of its business is part of the Agilent
Business. The shares of HP Costa Rica will be
transferred by HP WorldTrade to Agilent WorldTrade (as
part of the demerger of HP WorldTrade). HP Costa Rica
will change its name to Agilent Technologias de Costa
Rica S.A..
- -------------------------------------------------------------------------------
Denmark Hewlett-Packard A/S ("HP Denmark"). HP Denmark will
undertake a statutory demerger under Danish law whereby
all Agilent Assets and Agilent Liabilities will be
transferred to a new corporate entity, Agilent
Technologies Denmark A/S ("Agilent Denmark"), through a
legal spin-off. All of the shares in Agilent Denmark
will be held by HP S.A.
- -------------------------------------------------------------------------------
Finland Hewlett-Packard Oy ("HP Finland"). HP Finland will
undertake a statutory demerger, a legal split-up, under
Finnish law, whereby two Finnish new corporate entities
will be established, one for the Agilent Business
(Agilent Technologies Finland Oy) and one for the other
businesses of HP Finland. All assets and liabilities
of HP Finland will be transferred to one of the new
corporate entities by way of "general succession". All
of the shares of each of the new corporate entities
will be held by the sole shareholder of HP Finland, HP
S.A. HP Finland will be dissolved by operation of law.
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<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
France Hewlett-Packard S.A.S. ("HP France"). HP France will
contribute in kind its Agilent Assets and Agilent
Liabilities to a new corporate entity, Agilent
Technologies France ("Agilent France"), established by
HP France in exchange for shares of Agilent France.
Subsequently, HP France will sell its shares in Agilent
France to a second new corporate entity, Agilent
Technologies Holding ("Agilent France Holding") for
cash. Agilent France Holding is held directly by HP
Europe.
- -------------------------------------------------------------------------------
Germany Hewlett-Packard Holding GmbH ("HP Holding GmbH"). HP
Holding GmbH will establish a new corporate entity,
Agilent Technologies Deutschland GmbH ("Agilent GmbH").
Additionally, HP International will establish
Hewlett-Packard United B.V. (Netherlands) ("HP United")
which in its turn will establish a new corporate
entity, Agilent Technologies Deutschland
Beteiligungsgesellschaft mbH ("Agilent Holding GmbH").
HP United will also establish Agilent International.
Through a number of transactions, HP International will
become the sole shareholder of HP Holding GmbH.
For the real estate, a new entity, Agilent Technologies
Deutschland GmbH & Co. Immobilien KG ("Agilent Real
Estate") will be established by Agilent GmbH. The
existing real estate entity, Hewlett-Packard GmbH & Co.
Immobilien KG ("HP Real Estate"), will sell the real
estate belonging to the Agilent Business to Agilent
Real Estate for cash contributed to Agilent Real Estate
by HP Holding GmbH via Agilent GmbH. The cash will
then be returned to HP Holding GmbH by HP Real Estate.
HP International will contribute its shares in HP
Holding GmbH to HP United.
After HP Real Estate has been transformed into a GmbH,
i.e. a limited liability company under German law, HP
Holding GmbH will contribute its interest in HP Real
Estate to Hewlett-Packard GmbH ("HP GmbH") in
consideration for which HP GmbH will issue new shares
to HP Holding GmbH.
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<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
HP GmbH will spin-off its Agilent Assets and Agilent
Liabilities to Agilent GmbH on the basis of the German
Transformation Act, so that the Agilent Assets and
Agilent Liabilities will be transferred to Agilent GmbH
by means of "universal succession".
Subsequently, HP Holding GmbH will spin-off its shares
in Agilent GmbH and its interest in Agilent Real Estate
to Agilent Holding GmbH on the basis of the German
Transformation Act.
HP United will contribute its shares in Agilent Holding
GmbH to Agilent International.
HP International. HP United will transfer the shares
in Agilent International to HP International by means
of dividend distribution/capital reduction in kind,
whereafter HP International will transfer the shares in
Agilent International to HP Europe by means of dividend
distribution/capital reduction in kind.
- -------------------------------------------------------------------------------
Hong Kong Hewlett-Packard Hong Kong Limited ("HP Hong Kong") and
Hewlett-Packard Asia Pacific Limited ("HP Asia
Pacific"). Agilent WorldTrade will establish a new
corporate entity, Agilent Technologies Hong Kong
Limited ("Agilent Hong Kong"). HP will issue a
promissory note to HP WorldTrade. HP WorldTrade will
transfer the promissory note by way of contribution to
Agilent WorldTrade. Agilent WorldTrade will transfer
the promissory note to Agilent Hong Kong by way of
contribution.
HP Hong Kong will then transfer its Agilent Assets to
Agilent Hong Kong in consideration for the promissory
note and an assumption of the Agilent Liabilities by
Agilent Hong Kong. HP Hong Kong will then distribute
the promissory note to HP as a dividend in specie,
effectively cancelling the promissory note.
The structure for HP Asia Pacific is the same as the
above such that HP will issue 2 promissory notes, one
in respect of HP Hong Kong and the other in respect of
HP Asia Pacific.
- -------------------------------------------------------------------------------
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<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
India Hewlett-Packard India Limited ("HP India"). HP Europe
will establish a new corporate entity, Agilent
Technologies India Pvt. Ltd. ("Agilent India"). HP
Europe will contribute cash to Agilent India. HP India
will then transfer its Agilent Assets to Agilent India
in consideration for cash and an assumption of the
Agilent Liabilities by Agilent India. Subsequently, HP
India will distribute the cash to HP Europe as a
dividend.
- -------------------------------------------------------------------------------
Ireland Hewlett-Packard Ireland Limited ("HP Ireland"). HP
Europe will establish a new corporate entity, Agilent
Technologies Ireland Limited ("Agilent Ireland"). Upon
incorporation of Agilent Ireland an agreement will be
entered into between HP Ireland and Agilent Ireland for
the transfer of the Agilent Assets and Agilent
Liabilities to Agilent Ireland in consideration for
which Agilent Ireland will issue shares to HP Europe.
- -------------------------------------------------------------------------------
Israel Hewlett-Packard (Israel) Ltd ("HP Israel"). HP Europe
will establish a new corporate entity, Agilent
Technologies Israel Ltd ("Agilent Israel"). HP Israel
will transfer its Agilent Assets and Agilent
Liabilities to Agilent Israel for cash.
- -------------------------------------------------------------------------------
Italy Hewlett-Packard Italiana S.p.A ("HP Italy"). In order
to separate the Agilent Business from the other
businesses, HP Italy will undergo a partial demerger (a
legal spin-off) under Italian law. This entails
establishing a new corporate entity, Agilent
Technologies Italia S.p.A. ("Agilent Italy"), by the
current shareholders of HP Italy, HP Europe and HP
Switzerland, to which HP Italy will transfer its
Agilent Assets and Agilent Liabilities by operation of
law. In exchange for the transfer of the Agilent Assets
and Agilent Liabilities, shares in Agilent Italy will
be allotted directly to the shareholders of HP Italy
proportionally to their current shareholding in HP
Italy.
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<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
Japan Hewlett-Packard Japan, Ltd ("HP Japan or Agilent
Japan"). HP Nederland B.V. will establish a new
corporate entity in Japan, Hewlett-Packard Japan, Ltd
("New HP Japan"). All of the shares of New HP Japan
will be transferred by HP Nederland B.V. to HPNI. HP
Europe will transfer to HPNI a 40% interest in the
shares of HP Japan held by HP Europe. Subsequently, HP
Japan will transfer its entire business assets other
than the Agilent Business to New HP Japan. Subsequently,
HP Japan will change its name to Agilent Technologies
Japan, Ltd. and therefore HP Japan will be hereinafter
referred to as "Agilent Japan".
At the time of the transfer of the business, the shares
of New HP Japan will be held by HPNI (100%) and the
shares of Agilent Japan will be held by HP Europe
(25%), HPNI (40%), HP WorldTrade (10%) and a minority
shareholder which is Yokogawa Electric Works ("YEW")
(25%).
Subsequent to the transfer, (i) HP Europe will sell a
10% interest in the shares of Agilent Japan to HPNI,
(ii) ATI will receive the 50% interest of HPNI in the
shares of Agilent Japan (which is all of HPNI's
interest) as a result of the demerger of HPNI, (iii)
Agilent Europe will receive the 15% interest of HP
Europe in the shares of Agilent Japan (which is all of
HP Europe's interest) as a result of the demerger of HP
Europe, (iv) Agilent WorldTrade will receive the 10%
interest of HP WorldTrade in the shares of Agilent
Japan (which is all of HP WorldTrade's interest). At
this stage, the shares of Agilent Japan will be held by
ATI (50%), Agilent Europe (15%), Agilent WorldTrade
(10%) and YEW (25%). The 25% minority interest of YEW
will be bought out over time in a series of
transactions resulting in the shares of Agilent Japan
being held by ATI (70.3%), Agilent Europe (17.8%),
Agilent WorldTrade (11.9%).
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<PAGE>
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Country Transaction Description
- -------------------------------------------------------------------------------
Yokogawa Analytical Systems Inc ("YAN") is a Japanese
company established prior to the demerger which will
also have its ownership changed as a result of the
demerger. At the time of the transfer, the shares in
YAN are held by HP Europe (35.7%), HP WorldTrade
(15.3%) and YEW (49%). In a series of transactions
following the transfer, the shares in YAN will be
transferred so that the final share interest in YAN
will be held by Agilent WorldTrade (15.3%), ATI (35.7%)
and YEW (49%).
- -------------------------------------------------------------------------------
Korea Hewlett-Packard Korea, Ltd ("HP Korea"). A new
corporate entity, Agilent Technologies Korea Limited
("Agilent Sales Korea"), will be established by Agilent
WorldTrade (44.11%) and HP Europe (55.89%). A second
new corporate entity, Agilent Technologies Limited
("Agilent Manufacturing Korea"), will be established by
Agilent WorldTrade (44.11%) and HP Europe (55.89%). HP
Korea will transfer its Agilent Assets which relate to
its sales activities to Agilent Sales Korea in
consideration for cash and an assumption of the Agilent
Liabilities which relate to HP Korea's sales activities
by Agilent Sales Korea. HP Korea will transfer its
Agilent Assets which relate to its manufacturing
activities to Agilent Manufacturing Korea in
consideration for cash and an assumption of the Agilent
Liabilities which relate to HP Korea's manufacturing
activities by Agilent Manufacturing Korea. HP Korea
will distribute the cash generated from the transfer to
its shareholders (HP and HP Europe) through a capital
reduction procedure.
- -------------------------------------------------------------------------------
Malaysia Hewlett-Packard Sales (Malaysia) Sdn. Bhd. ("HPMS").
Agilent WorldTrade will establish a new corporate
entity, Agilent Technologies Sales (Malaysia) Sdn. Bhd.
("Agilent Malaysia"). HPMS will transfer its Agilent
Assets to Agilent Malaysia in consideration for an
assumption of the Agilent Liabilities (of an amount
equal to the value of the Agilent Assets) by Agilent
Malaysia.
- -------------------------------------------------------------------------------
Page 10
<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
Hewlett-Packard Malaysia Sdn. Bhd. ("HP Malaysia
(Penang)"). Currently the whole of the business of HP
Malaysia (Penang) is part of the Agilent Business. The
shares of HP Malaysia (Penang) will be transferred to
Agilent Sarl (as part of the demerger of HP S.A.). HP
Malaysia (Penang) will change its name to Agilent
Technologies (Malaysia) Sdn. Bhd..
Hewlett-Packard Microwave Products (M) Sdn. Bhd. ("HP
Microwave Products"). Currently the whole of the
business of HP Microwave Products is part of the
Agilent Business. The shares of HP Microwave Products
will be transferred to Agilent Europe (as part of the
demerger of HP Europe). HP Microwave Products will
change its name to Agilent Technologies Microwave
Products (M) Sdn. Bhd..
- -------------------------------------------------------------------------------
Mexico Hewlett-Packard Mexico S.A. de C.V. ("HP Mexico"). The
demerger process will be carried out through a
statutory spin-off of the Agilent Business of HP Mexico
under the Mexican Commercial Companies Law. As a
result a new corporate entity, Agilent Technologies
Mexico, S. de R.L. de C.V. ("Agilent Mexico"), will be
established and the Agilent Assets and Agilent
Liabilities will be transferred to Agilent Mexico by
operation of law. Agilent Mexico's shareholders will
be the same as those of HP Mexico (HP Europe and HP).
- -------------------------------------------------------------------------------
Netherlands Hewlett-Packard Nederland B.V. ("HP Netherlands"). HP
Netherlands will transfer its Agilent Assets and
Agilent Liabilities to a new corporate entity, Agilent
Technologies Netherlands B.V. ("Agilent Netherlands")
owned by HPNI (the present shareholder of HP
Netherlands), by means of a statutory demerger, a legal
split-off, under Dutch law. The transfer will take
place by operation of law. As part of this split-off,
Agilent Netherlands will issue shares to HPNI.
- -------------------------------------------------------------------------------
Page 11
<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
New Zealand Hewlett-Packard (NZ) Limited ("HP New Zealand").
Agilent WorldTrade will establish a new corporate
entity, Agilent Technologies New Zealand Limited
("Agilent New Zealand"). HP New Zealand will transfer
its Agilent Assets to Agilent New Zealand in
consideration for an assumption of the Agilent
Liabilities (of an amount equal to the value of the
Agilent Assets) by Agilent New Zealand.
- -------------------------------------------------------------------------------
Norway Hewlett-Packard Norge AS ("HP Norway"). HP Norway will
carry out a statutory demerger, a legal spin-off, under
Norwegian law by which the Agilent Assets and Agilent
Liabilities will be transferred to a new corporate
entity, Agilent Technologies Norway AS ("Agilent
Technologies Norway AS"), established by HP S.A. As a
result of the legal spin-off, HP S.A. will then be the
sole shareholder of HP Norway and Agilent Norway, which
together will have, in aggregate, the same nominal
share capital as HP Norway had prior to legal spin-off.
HP S.A. will also establish a holding company, Agilent
Technologies Holding Norway AS (Agilent Technologies
Norway Holding AS), which will acquire for cash the
shares in Agilent Technologies Norway AS immediately
after the demerger referred to above.
- -------------------------------------------------------------------------------
Philippines Hewlett-Packard Philippines Corporation ("HP
Philippines"). HP Europe will establish a new
corporate entity, Agilent Technologies Philippines
Corporation ("Agilent Philippines"). HP Philippines
will transfer its Agilent Assets to Agilent Philippines
in consideration for an assumption of the Agilent
Liabilities by Agilent Philippines.
- -------------------------------------------------------------------------------
Poland Hewlett-Packard Polska Sp. z o.o. ("HP Poland"). A
part of the HP Business will be sold to a third party
distributor. HP Poland will transfer its remaining
Agilent Assets to Agilent Technologies Poland Sp. z
o.o. ("Agilent Poland"), a wholly-owned subsidiary of
HP WorldTrade, in consideration for cash and the
assumption of the remaining Agilent Liabilities by
Agilent Poland.
- -------------------------------------------------------------------------------
Page 12
<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
Portugal Hewlett-Packard Portugal - Sistemas de Informatica e
Medida, S.A. ("HP Portugal"). HP WorldTrade will
establish a new corporate entity, Medidax - Sistemas de
Teste e de Medida, Unipessoal Lda. ("Agilent
Portugal"). HP Portugal will transfer its Agilent
employees to Agilent Portugal and Agilent Portugal will
assume the Agilent Liabilities.
- -------------------------------------------------------------------------------
Puerto Rico HP Inter-Americas. Agilent WorldTrade will establish a
new corporate entity, Agilent Technologies
Inter-Americas, Inc. ("Agilent Inter-Americas"), a
Delaware corporation. HP will contribute cash to HP
WorldTrade which will contribute the cash to Agilent
WorldTrade. Agilent WorldTrade in its turn will
contribute the cash to Agilent Inter-Americas. HP
Inter-Americas will transfer its Agilent Assets to
Agilent Inter-Americas in consideration for cash and an
assumption of the Agilent Liabilities by Agilent
Inter-Americas. HP Inter-Americas will then distribute
a cash dividend to HP. Agilent Inter-Americas will set
up a branch to conduct business in Puerto Rico.
- -------------------------------------------------------------------------------
Russia ZAO Hewlett-Packard A.O. ("HP Russia"). HP WorldTrade
will establish a new corporate entity, Agilent
Technologies LLC ("Agilent Russia"). HP Russia will
transfer its Agilent Assets to Agilent Russia in
consideration for cash and an assumption of the Agilent
Liabilities by Agilent Russia.
- -------------------------------------------------------------------------------
Singapore Hewlett-Packard Singapore (Sales) Pte Ltd ("HP
Singapore Sales"). HP Europe will establish a new
corporate entity, Agilent Technologies Singapore
(Sales) Pte Ltd ("Agilent Sales Singapore"). HP Europe
will contribute a promissory note to Agilent Sales
Singapore. HP Singapore Sales will transfer its
Agilent Assets to Agilent Sales Singapore in
consideration for the promissory note and an assumption
of the Agilent Liabilities by Agilent Sales Singapore.
HP Singapore Manufacturing will subsequently distribute
the promissory note to HP Europe as a dividend,
effectively cancelling the promissory note.
- -------------------------------------------------------------------------------
Page 13
<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
Hewlett-Packard Singapore (Private) Limited ("HP
Singapore Manufacturing"). HP Europe will establish a
new corporate entity, Agilent Technologies Singapore
Pte Ltd. ("Agilent Manufacturing Singapore"). HP
Europe will contribute a promissory note to Agilent
Manufacturing Singapore. HP Singapore Manufacturing
will transfer its Agilent Assets to Agilent
Manufacturing Singapore in consideration for the
promissory note and an assumption of the Agilent
Liabilities. HP Singapore Manufacturing will
subsequently distribute the promissory note to HP
Europe as a dividend, effectively cancelling the
promissory note.
Hewlett-Packard Singapore Vision Operation Pte Ltd
("SVO") and Chartered Silicon Partners Pte Ltd ("CSP").
SVO is owned by HP Europe and CSP is 30% owned by HP
Europe. The shares in SVO and CSP which are owned by
HP Europe will be transferred to Agilent Europe as part
of the demerger of HP Europe. SVO will change its name
to Agilent Technologies Singapore Vision Operation Pte
Ltd.
- -------------------------------------------------------------------------------
Spain Hewlett-Packard Espanola, S.A. ("HP Spain"). HP
Spain will undertake a statutory demerger under Spanish
law whereby all Agilent Assets and Agilent Liabilities
will be transferred to a new corporate entity, Agilent
Technologies Spain, S.L. (Agilent Spain), established
by Hewlett-Packard Holding Espanola, S.L. ("HP Spanish
Holdco") through a legal spin-off. Following the
spin-off, the shares in Agilent Spain will be
transferred by HP Spanish Holdco to Agilent Spanish
Holdco, a wholly-owned subsidiary of HP S.A., for cash.
- -------------------------------------------------------------------------------
Sweden Hewlett-Packard Sverige Aktiebolag ("HP Sweden"). HP
S.A. will establish a new corporate entity, Agilent
Technologies Sweden AB ("Agilent Sweden"). HP S.A.
will contribute cash to Agilent Sweden. HP Sweden will
then transfer its Agilent Assets to Agilent Sweden in
consideration for cash and an assumption of the Agilent
Liabilities by Agilent Sweden.
- --------------------------------------------------------------------------------
Page 14
<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
HP S.A. will also establish a holding company (Agilent
Technologies Holding Sweden AB) which will acquire for
cash the shares in Agilent Sweden immediately after the
demerger referred to above.
- -------------------------------------------------------------------------------
Switzerland Hewlett-Packard (Schweiz) AG ("HP Switzerland"). HP
Switzerland has established a new corporate entity,
Agilent Technologies Switzerland AG ("Agilent
Switzerland"), and will contribute its Agilent Assets
and Agilent Liabilities to Agilent Switzerland. HP
Switzerland will sell the shares of Agilent Switzerland
to HP S.A. for nominal value.
Agilent Europe will register a Swiss branch to which HP
Europe will transfer the Agilent Business presently
conducted by its Swiss branch, as part of the demerger
of HP Europe.
- -------------------------------------------------------------------------------
Taiwan Hewlett-Packard Taiwan Ltd ("HP Taiwan"). Agilent
WorldTrade will establish a new corporate entity,
Agilent Technologies Taiwan Ltd ("Agilent Taiwan"). HP
will contribute cash to Agilent WorldTrade and Agilent
WorldTrade will contribute the cash to Agilent Taiwan.
HP Taiwan will transfer its Agilent Assets to Agilent
Taiwan in consideration for cash and an assumption of
the Agilent Liabilities by Agilent Taiwan. HP Taiwan
will then distribute the cash to HP by way of dividend
and/or reduction of capital.
- -------------------------------------------------------------------------------
Thailand Hewlett-Packard (Thailand) Ltd. ("HP Thailand").
Agilent WorldTrade will establish a new corporate
entity, Agilent Technologies (Thailand) Limited
("Agilent Thailand"). HP Thailand will transfer its
Agilent Assets to Agilent Thailand in consideration for
an assumption of the Agilent Liabilities (of an amount
equal to the value of the Agilent Assets) by Agilent
Thailand.
- -------------------------------------------------------------------------------
Turkey Hewlett-Packard Bilgisayar ve Olcum Sistemleri A.P ("HP
Turkey"). HP WorldTrade will establish a new corporate
entity, Agilent Technologies Olcum Sistemleri Limited
Perketi ("Agilent Turkey"). HP Turkey will transfer
its Agilent Assets to Agilent Turkey in consideration
for cash.
- -------------------------------------------------------------------------------
Page 15
<PAGE>
- -------------------------------------------------------------------------------
Country Transaction Description
- -------------------------------------------------------------------------------
United Kingdom Hewlett-Packard Limited ("HPUK"). Hewlett-Packard
Start B.V. (Netherlands) ("HP Start") will establish a
new corporate entity, Agilent Technologies UK Limited
("Agilent UK"). HPUK will declare a dividend in specie
to its sole shareholder, HP Start, which will be
satisfied by HPUK's transfer of all of its Agilent
Assets to Agilent UK. As consideration for the
transfer of the Agilent Assets, Agilent UK will assume
all of HPUK's Agilent Liabilities and issue shares of
Agilent UK to HP Start. HP Start will then distribute
such shares to its sole shareholder, HP Europe, as a
dividend in specie.
- -------------------------------------------------------------------------------
Venezuela Hewlett-Packard de Venezuela C.A. ("HP Venezuela"). HP
Delaware will establish a new corporate entity, Agilent
Technologies de Venezuela, S.R.L. ("Agilent
Venezuela"). HP Venezuela will distribute, as a
dividend, a promissory note equal to the value of the
Agilent Business to HP Delaware and a promissory note
equal to 11% of the total distribution to HP
Inter-Americas. HP Delaware will contribute this
promissory note to Agilent Venezuela. HP Venezuela
will transfer its Agilent Assets to Agilent Venezuela
in consideration for the promissory note and an
assumption of the Agilent Liabilities by Agilent
Venezuela. HP Delaware will contribute its respective
interest in Agilent Venezuela to HP WorldTrade who will
in turn contribute that interest to Agilent WorldTrade.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Holding Companies Transaction Description
- -------------------------------------------------------------------------------
HP S.A. HP S.A. HP S.A. will contribute the shares in its
(Switzerland) Agilent subsidiaries to the capital of Agilent Cervin,
Agilent Sarl and Agilent Leman, all wholly owned
subsidiaries of HP S.A., as follows:
Agilent Cervin: Agilent Holding Norway
Agilent Holding Sweden
Agilent Holding Spain
Agilent Sarl: Agilent Cayman
Agilent Malaysia
- -------------------------------------------------------------------------------
Page 16
<PAGE>
- -------------------------------------------------------------------------------
Agilent Leman: Agilent Argentina
Agilent Austria
Agilent Denmark
Agilent Finland
Agilent Switzerland
Subsequently HP S.A. will sell the shares in Agilent
Cervin, Agilent Sarl and Agilent Leman to HP Europe, for
nominal value.
- -------------------------------------------------------------------------------
HPNI HPNI. Following the demerger of HP Japan and of HP
(Netherlands) Netherlands, HPNI will transfer the shares in Agilent
Japan and Agilent Netherlands to ATI, a wholly owned
subsidiary of HP Europe, by means of a statutory demerger,
a legal split-off, under Dutch law. The transfer will take
place by operation of law. As part of this split-off, ATI
will issue shares to HP Europe.
- -------------------------------------------------------------------------------
HP Europe HP Europe. Following the demerger of HP S.A., HP
(Netherlands) Europe will transfer the shares in its Agilent
subsidiaries (including those of ATI, Agilent Cervin,
Agilent Sarl and Agilent Leman) and the Agilent Assets and
Agilent Liabilities of its Swiss branch to Agilent Europe,
a wholly owned subsidiary of HP WorldTrade, by means of a
statutory demerger, a legal split-off, under Dutch law.
The transfer will take place by operation of law. As part
of this split-off, Agilent Europe will issue shares to HP
WorldTrade.
- -------------------------------------------------------------------------------
Page 17
<PAGE>
- -------------------------------------------------------------------------------
Finance Company Transaction Description
- -------------------------------------------------------------------------------
Belgian Coordination Agilent Cayman will set up a new Belgian Coordination
Center Center ("Agilent BCC") together with Agilent Belgium
and Agilent Europe (each of which will own a minority
interest). HP S.A. will contribute a promissory note
to Agilent Cayman who in turn will sell the promissory
note for cash to HP Manufacturing (see Singapore).
Agilent Cayman will subsequently contribute the cash to
Agilent BCC. Hewlett-Packard Coordination Center S.A.
("HP BCC") will transfer certain of its assets to
Agilent BCC in consideration for cash and an assumption
of certain liabilities.
- -------------------------------------------------------------------------------
Page 18
<PAGE>
EXHIBIT 2.15
EXECUTION COPY
U.S. $250,000,000
FIVE YEAR CREDIT AGREEMENT
Dated as of November 5, 1999
Among
AGILENT TECHNOLOGIES, INC.
as Borrower
-- --------
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders,
-- ------- -------
SALOMON SMITH BARNEY INC.
as Lead Arranger and Sole Book Manager,
-- ---- -------- --- ---- ---- -------
CHASE SECURITIES INC.
as Syndication Agent,
-- ----------- -----
CREDIT SUISSE FIRST BOSTON
as Documentation Agent
-- ------------- -----
and
CITICORP USA, INC.
as Agent
-- -----
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<TABLE>
<S> <C>
SECTION 1.01. Certain Defined Terms........................................................ 1
---------------------
SECTION 1.02. Computation of Time Periods.................................................. 13
---------------------------
SECTION 1.03. Accounting Terms............................................................. 13
----------------
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances................................................ 13
-----------------------------
SECTION 2.02. Making the Revolving Credit Advances......................................... 14
------------------------------------
SECTION 2.03. The Competitive Bid Advances................................................. 15
----------------------------
SECTION 2.04. Fees......................................................................... 18
----
SECTION 2.05. Optional Termination or Reduction of the Commitments......................... 18
----------------------------------------------------
SECTION 2.06. Repayment of Revolving Credit Advances....................................... 18
--------------------------------------
SECTION 2.07. Interest on Revolving Credit Advances........................................ 18
-------------------------------------
SECTION 2.08. Interest Rate Determination.................................................. 19
---------------------------
SECTION 2.09. Optional Conversion of Revolving Credit Advances............................. 20
------------------------------------------------
SECTION 2.10. Prepayments of Revolving Credit Advances...................................... 20
----------------------------------------
SECTION 2.11. Increased Costs.............................................................. 20
---------------
SECTION 2.12. Illegality................................................................... 21
----------
SECTION 2.13. Payments and Computations.................................................... 21
-------------------------
SECTION 2.14. Taxes........................................................................ 22
-----
SECTION 2.15. Sharing of Payments, Etc..................................................... 23
-------------------------
SECTION 2.16. Evidence of Debt............................................................. 24
----------------
SECTION 2.17. Use of Proceeds.............................................................. 24
---------------
SECTION 2.18. Increase in the Aggregate Commitments........................................ 24
-------------------------------------
SECTION 2.19. Extension of Termination Date................................................ 25
-----------------------------
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03.............. 27
---------------------------------------------------------------
SECTION 3.02. Conditions Precedent to Each Revolving Credit Borrowing,..................... 28
-------------------------------------------------------
SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing....................... 29
------------------------------------------------------
SECTION 3.04. Determinations Under Section 3.01............................................ 30
---------------------------------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower............................... 30
----------------------------------------------
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants........................................................ 31
---------------------
SECTION 5.02. Negative Covenants........................................................... 33
------------------
SECTION 5.03. Financial Covenants.......................................................... 35
-------------------
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default............................................................ 35
-----------------
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action..................................................... 37
------------------------
SECTION 7.02. Agent's Reliance, Etc........................................................ 37
----------------------
SECTION 7.03. CUSA and Affiliates.......................................................... 37
-------------------
SECTION 7.04. Lender Credit Decision....................................................... 38
----------------------
SECTION 7.05. Indemnification.............................................................. 38
---------------
SECTION 7.06. Successor Agent.............................................................. 38
---------------
</TABLE>
<PAGE>
ii
<TABLE>
<S> <C>
SECTION 7.07. Other Agents................................................................. 38
------------
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc.............................................................. 39
----------------
SECTION 8.02. Notices, Etc................................................................. 39
-------------
SECTION 8.03. No Waiver; Remedies.......................................................... 39
-------------------
SECTION 8.04. Costs and Expenses........................................................... 39
------------------
SECTION 8.05. Right of Set-off............................................................. 40
----------------
SECTION 8.06. Binding Effect............................................................... 41
--------------
SECTION 8.07. Assignments and Participations............................................... 41
------------------------------
SECTION 8.08. Confidentiality.............................................................. 43
---------------
SECTION 8.09. Governing Law................................................................ 43
-------------
SECTION 8.10. Execution in Counterparts.................................................... 44
-------------------------
SECTION 8.11. Jurisdiction, Etc............................................................ 44
------------------
SECTION 8.12. Waiver of Jury Trial......................................................... 45
--------------------
</TABLE>
<PAGE>
iii
Schedules
- ---------
Schedule I - List of Applicable Lending Offices
Schedule 5.02(a) - Existing Liens
Exhibits
- --------
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Revolving Credit Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Opinion of Counsel for the Borrower
<PAGE>
FIVE YEAR CREDIT AGREEMENT
Dated as of November 5, 1999
AGILENT TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"),
--------
the banks, financial institutions and other institutional lenders (the "Initial
-------
Lenders") listed on the signature pages hereof, SALOMON SMITH BARNEY INC., as
- -------
lead arranger and sole book manager (the "Arranger"), CHASE SECURITIES INC., as
--------
syndication agent, CREDIT SUISSE FIRST BOSTON, as documentation agent, and
CITICORP USA, INC. ("CUSA"), as administrative agent (the "Agent") for the
---- -----
Lenders (as hereinafter defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Advance" means a Revolving Credit Advance or a Competitive Bid
-------
Advance.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 5% or more of the
Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"Agent's Account" means the account of the Agent maintained by the
---------------
Agent at Citibank at its office at 399 Park Avenue, New York, New York
10043, Account No. 36852248, Attention: Pam Cole.
"Applicable Lending Office" means, with respect to each Lender, such
-------------------------
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance and, in the case of a Competitive Bid Advance, the office of such
Lender notified by such Lender to the Agent as its Applicable Lending
Office with respect to such Competitive Bid Advance.
"Applicable Margin" means (a) for Base Rate Advances, 0% per annum and
-----------------
(b) for Eurodollar Rate Advances, as of any date prior to the Debt Rating
Date 0.310% per annum and as of any date on or after the Debt Rating Date,
a percentage per annum determined by reference to the Debt Rating in effect
on such date as set forth below:
<TABLE>
<CAPTION>
Debt Rating Applicable Margin for
S&P/Moody's Eurodollar Rate Advances
====================================================================
<S> <C>
Level 1
-------
At least A or above by S&P or A2 or 0.220%
above by Moody's
--------------------------------------------------------------------
Level 2
-------
Less than Level 1 but at least A- by 0.310%
</TABLE>
<PAGE>
2
<TABLE>
<S> <C>
---------------------------------------------------------------------
S&P or A3 by Moody's
---------------------------------------------------------------------
Level 3
-------
Less than Level 2 but at least BBB+ 0.400%
by S&P or Baa1 by Moody's
---------------------------------------------------------------------
Level 4
-------
Less than Level 3 but at least BBB by 0.450%
S&P or Baa2 by Moody's
Level 5
-------
Less than Level 4 but at least BBB- 0.800%
by S&P and Baa3 by Moody's
Level 6
-------
Less than Level 5 or if such rating can 1.000%
not be determined
=====================================================================
</TABLE>
"Applicable Percentage" means, as of any date prior to the Debt
---------------------
Rating Date 0.090% per annum and as of any date on or after the Debt Rating
Date a percentage per annum determined by reference to the Debt Rating in
effect on such date as set forth below:
<TABLE>
<CAPTION>
Debt Rating
S&P/Moody's Applicable Percentage
====================================================================
<S> <C>
Level 1
-------
At least A or above by S&P or A2 or 0.080%
above by Moody's
---------------------------------------------------------------------
Level 2
-------
Less than Level 1 but at least A- by 0.090%
S&P or A3 by Moody's
---------------------------------------------------------------------
Level 3
-------
Less than Level 2 but at least BBB+ 0.100%
by S&P or Baa1 by Moody's
---------------------------------------------------------------------
Level 4
-------
Less than Level 3 but at least BBB by 0.150%
S&P or Baa2 by Moody's
Level 5
-------
Less than Level 4 but at least BBB- by 0.200%
S&P and Baa3 by Moody's
Level 6
-------
Less than Level 5 or if such rating can 0.250%
not be determined
====================================================================
</TABLE>
<PAGE>
3
"Applicable Utilization Fee" means, as of any date on which the
--------------------------
average aggregate Advances during the most recently completed calender month
exceed 33% of the aggregate Commitments, and prior to the Debt Rating Date
0.100% per annum and as of any date on or after the Debt Rating Date a
percentage per annum determined by reference to the Debt Rating in effect on
such date as set forth below:
<TABLE>
<CAPTION>
Debt Rating Applicable Utilization Fee
S&P/Moody's (Usage greater than 33%)
======================================================================
<S> <C>
Level 1
-------
At least A or above by S&P or A2 or 0.050%
above by Moody's
----------------------------------------------------------------------
Level 2
------- 0.100%
Less than Level 1 but at least A- by
S&P or A3 by Moody's
----------------------------------------------------------------------
Level 3
-------
Less than Level 2 but at least BBB+ 0.100%
by S&P or Baa1 by Moody's
Level 4
-------
Less than Level 3 but at least BBB by 0.150%
S&P or Baa2 by Moody's
Level 5
-------
Less than Level 4 but at least BBB- 0.150%
by S&P and Baa3 by Moody's
Level 6
-------
Less than Level 5 or if such rating can 0.250%
not be determined
======================================================================
</TABLE>
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an Eligible Assignee, and accepted by the Agent, in
substantially the form of Exhibit C hereto.
"Assuming Lender" has the meaning specified in Section 2.18(d).
---------------
"Assumption Agreement" has the meaning specified in Section
--------------------
2.18(d)(ii).
"Base Rate" means a fluctuating interest rate per annum in effect from
---------
time to time, which rate per annum shall at all times be equal to the highest
of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of 1% or, if there is
no nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of 1% per
annum, plus (ii) the rate obtained by dividing (A) the latest three-week
----
moving average of secondary market morning offering rates in the United
States for three-month certificates of deposit of major United States money
market banks, such three-week
<PAGE>
4
moving average (adjusted to the basis of a year of 360 days) being
determined weekly on each Monday (or, if such day is not a Business Day, on
the next succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve Bank
of New York or, if such publication shall be suspended or terminated, on
the basis of quotations for such rates received by Citibank from three New
York certificate of deposit dealers of recognized standing selected by
Citibank, by (B) a percentage equal to 100% minus the average of the daily
percentages specified during such three-week period by the Board of
Governors of the Federal Reserve System (or any successor) for determining
the maximum reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement) for Citibank
with respect to liabilities consisting of or including (among other
liabilities) three-month U.S. dollar non-personal time deposits in the
United States, plus (iii) the average during such three-week period of the
----
annual assessment rates estimated by Citibank for determining the then
current annual assessment payable by Citibank to the Federal Deposit
Insurance Corporation (or any successor) for insuring U.S. dollar deposits
of Citibank in the United States;
(c) 1/2 of one percent per annum above the Federal Funds Rate;
and
(d) for the period from December 15, 1999 through January 15,
2000, two percent per annum above the Federal Funds Rate.
"Base Rate Advance" means a Revolving Credit Advance that bears
-----------------
interest as provided in Section 2.07(a)(i).
"Borrowing" means a Revolving Credit Borrowing or a Competitive Bid
---------
Borrowing.
"Business Day" means a day of the year on which banks are not required
------------
or authorized by law to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances or LIBO Rate Advances,
on which dealings are carried on in the London interbank market.
"Citibank" means Citibank, N.A.
--------
"Commitment" means as to any Lender (a) the amount set forth opposite
----------
such Lender's name on the signature pages hereof, (b) if such Lender has
become a Lender hereunder pursuant to an Assumption Agreement, the amount
set forth in such Assumption Agreement or (c) if such Lender has entered
into any Assignment and Acceptance, the amount set forth for such Lender in
the Register maintained by the Agent pursuant to Section 8.07(d), as such
amount may be reduced pursuant to Section 2.05 or increased pursuant to
Section 2.18.
"Commitment Date" has the meaning specified in Section 2.18(b).
---------------
"Commitment Increase" has the meaning specified in Section 2.18(a).
-------------------
"Competitive Bid Advance" means an advance by a Lender to the Borrower
-----------------------
as part of a Competitive Bid Borrowing resulting from the competitive
bidding procedure described in Section 2.03 and refers to a Fixed Rate
Advance or a LIBO Rate Advance.
"Competitive Bid Borrowing" means a borrowing consisting of
-------------------------
simultaneous Competitive Bid Advances from each of the Lenders whose offer
to make one or more Competitive Bid Advances as part of such borrowing has
been accepted under the competitive bidding procedure described in Section
2.03.
<PAGE>
5
"Competitive Bid Note" means a promissory note of the Borrower payable
--------------------
to the order of any Lender, in substantially the form of Exhibit A-2
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from a Competitive Bid Advance made by such Lender.
"Competitive Bid Reduction" has the meaning specified in Section 2.01.
-------------------------
"Confidential Information" means information that the Borrower
------------------------
furnishes to the Agent or any Lender in a writing designated as
confidential, but does not include any such information that is or becomes
generally available to the public or that is or becomes available to the
Agent or such Lender from a source other than the Borrower.
"Consenting Lender" has the meaning specified in Section 2.19(b).
-----------------
"Consolidated" refers to the consolidation of accounts in accordance
------------
with GAAP.
"Convert", "Conversion" and "Converted" each refers to a conversion of
------- ---------- ---------
Revolving Credit Advances of one Type into Revolving Credit Advances of the
other Type pursuant to Section 2.08 or 2.09.
"CUSA" has the meaning specified in the recital of parties to this
----
Agreement.
"Debt" of any Person means, without duplication, (a) all indebtedness
----
of such Person for borrowed money, (b) all obligations of such Person for
the deferred purchase price of property or services (other than any account
payable arising in the ordinary course of business, provided that no
material part of such account is more than sixty (60) days past due (unless
subject to a bona fide dispute diligently contested and for which adequate
reserves have been established)), (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all
obligations of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale
of such property), (e) all obligations of such Person as lessee under
leases that have been or should be, in accordance with GAAP, recorded as
capital leases, (f) all obligations, contingent or otherwise, of such
Person in respect of acceptances, letters of credit or similar extensions
of credit, (g) all obligations of such Person in respect of Hedge
Agreements, (h) all Debt of others referred to in clauses (a) through (g)
above or clause (i) below guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (1) to pay or purchase such Debt or to advance
or supply funds for the payment or purchase of such Debt, (2) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment
of such Debt or to assure the holder of such Debt against loss, (3) to
supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such
property is received or such services are rendered) or (4) otherwise to
assure a creditor against loss, and (i) all Debt referred to in clauses (a)
through (h) above secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) any Lien on
property (including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or become
liable for the payment of such Debt. In no event shall the term "Debt"
include (i) any lease properly classified as an operating lease in
accordance with GAAP, (ii) any obligations under open purchase orders
entered into in the ordinary course of business and not yet due and
payable, (iii) any accrued expenses, (iv) any deferred income, or (v) any
income taxes not at the time delinquent or thereafter payable without
penalty.
"Debt Rating" means, as of any date, the Public Debt Rating in effect
-----------
on such date or, if no Public Debt Rating is then in effect, the Implied
Debt Rating in effect on such date. For purposes of the foregoing, (a) if
only one of S&P and Moody's shall have in effect a Public Debt Rating or an
Implied Debt Rating, the Applicable Margin, the Applicable Percentage and
the Applicable Utilization Fee shall be determined by
<PAGE>
6
reference to the available rating; (b) if after January 31, 2000 neither
S&P nor Moody's shall have in effect a Public Debt Rating or an Implied
Debt Rating, the Applicable Margin, the Applicable Percentage and the
Applicable Utilization Fee will be set in accordance with Level 6 under the
definition of "Applicable Margin", "Applicable Percentage" or "Applicable
----------------- --------------------- ----------
Utilization Fee", as the case may be; (c) if the ratings established by S&P
---------------
and Moody's shall fall within different levels, the Applicable Margin, the
Applicable Percentage and the Applicable Utilization Fee shall be based, in
the case where either of such ratings are below BBB- by S&P or Baa3 by
Moody's, upon the lower of such ratings and, in each other case upon the
higher of such ratings; (d) if any rating established by S&P or Moody's
shall be changed, such change shall be effective as of the date on which
such change is first announced publicly by the rating agency making such
change; and (e) if S&P or Moody's shall change the basis on which ratings
are established, each reference to the Public Debt Rating or the Implied
Debt Rating announced by S&P or Moody's, as the case may be, shall refer to
the then equivalent rating by S&P or Moody's, as the case may be.
"Debt Rating Date" means the earlier of the date on which the first
----------------
Debt Rating is announced and January 31, 2000.
"Default" means any Event of Default or any event that would
-------
constitute an Event of Default but for the requirement that notice be given
or time elapse or both.
"Domestic Lending Office" means, with respect to any Lender, the
-----------------------
office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or in the Assumption Agreement or the
Assignment and Acceptance pursuant to which it became a Lender, or such
other office of such Lender as such Lender may from time to time specify to
the Borrower and the Agent.
"EBITDA" means, for any period, net income (or net loss) plus the sum
------ ----
of (a) interest expense, (b) income tax expense, (c) depreciation expense
and (d) amortization expense, in each case determined in accordance with
GAAP for such period.
"Effective Date" has the meaning specified in Section 3.01.
--------------
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender;
-----------------
and (iii) any other Person approved by the Agent and, in each case, unless
an Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with Section 8.07, approved by the
Borrower, such approval not to be unreasonably withheld or delayed;
provided, however, that neither the Borrower nor an Affiliate of the
-------- -------
Borrower shall qualify as an Eligible Assignee.
"Environmental Action" means any action, suit, demand, demand letter,
--------------------
claim, notice of non-compliance or violation, notice of liability or
potential liability, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, Environmental
Permit or Hazardous Materials or arising from alleged injury or threat of
injury to health, safety or the environment, including, without limitation,
(a) by any governmental or regulatory authority for enforcement, cleanup,
removal, response, remedial or other actions or damages and (b) by any
governmental or regulatory authority or any third party for damages,
contribution, indemnification, cost recovery, compensation or injunctive
relief.
"Environmental Law" means any federal, state, local or foreign
-----------------
statute, law, ordinance, rule, regulation, code, order, judgment, decree or
judicial or agency interpretation, policy or guidance relating to pollution
or protection of the environment, health, safety or natural resources,
including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
<PAGE>
7
"Environmental Permit" means any permit, approval, identification
--------------------
number, license or other authorization required under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
---------------
ERISA is a member of the Borrower's controlled group, or under common
control with the Borrower, within the meaning of Section 414 of the
Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event,
-----------
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC, or (ii) the requirements of subsection (1) of Section
4043(b) of ERISA (without regard to subsection (2) of such Section) are met
with a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of
a Plan, and an event described in paragraph (9), (10), (11), (12) or (13)
of Section 4043(c) of ERISA is reasonably expected to occur with respect to
such Plan within the following 30 days; (b) the application for a minimum
funding waiver with respect to a Plan; (c) the provision by the
administrator of any Plan of a notice of intent to terminate such Plan
pursuant to Section 4041(a)(2) of ERISA (including any such notice with
respect to a plan amendment referred to in Section 4041(e) of ERISA); (d)
the cessation of operations at a facility of the Borrower or any ERISA
Affiliate in the circumstances described in Section 4062(e) of ERISA; (e)
the withdrawal by the Borrower or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial employer,
as defined in Section 4001(a)(2) of ERISA; (f) the conditions for the
imposition of a lien under Section 302(f) of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to Section 307 of ERISA; or
(h) the institution by the PBGC of proceedings to terminate a Plan pursuant
to Section 4042 of ERISA, or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes grounds for the
termination of, or the appointment of a trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
-------------------------
office of such Lender specified as its "Eurodollar Lending Office" opposite
its name on Schedule I hereto or in the Assumption Agreement or the
Assignment and Acceptance pursuant to which it became a Lender (or, if no
such office is specified, its Domestic Lending Office), or such other
office of such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
---------------
Rate Advance comprising part of the same Revolving Credit Borrowing, an
interest rate per annum equal to the rate per annum obtained by dividing
(a) the rate per annum (rounded upward to the nearest whole multiple of
1/16 of 1% per annum) appearing on Dow Jones Markets Telerate Page 3750 (or
any successor page) as the London interbank offered rate for deposits in
U.S. dollars at approximately 11:00 A.M. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to
such Interest Period or, if for any reason such rate is not available, the
average (rounded upward to the nearest whole multiple of 1/16 of 1% per
annum, if such average is not such a multiple) of the rate per annum at
which deposits in U.S. dollars are offered by the principal office of each
of the Reference Banks in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days before the
first day of such Interest Period in an amount substantially equal to such
Reference Bank's (or in the case of Citibank, CUSA's) Eurodollar Rate
Advance comprising part of such Revolving Credit Borrowing to be
outstanding during such Interest Period and for a period equal to such
Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage for such Interest Period. If the Dow Jones Markets Page
3750 (or any successor page) is
<PAGE>
8
unavailable, the Eurodollar Rate for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Revolving Credit
Borrowing shall be determined by the Agent on the basis of applicable rates
furnished to and received by the Agent from the Reference Banks two
Business Days before the first day of such Interest Period, subject,
-------
however, to the provisions of Section 2.08.
-------
"Eurodollar Rate Advance" means a Revolving Credit Advance that bears
-----------------------
interest as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for all
----------------------------------
Eurodollar Rate Advances or LIBO Rate Advances comprising part of the same
Borrowing means the reserve percentage applicable two Business Days before
the first day of such Interest Period under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in New York
City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate
on Eurodollar Rate Advances or LIBO Rate Advances is determined) having a
term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
-----------------
"Extension Date" has the meaning specified in Section 2.19(b).
--------------
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by
it.
"Fixed Rate Advances" has the meaning specified in Section 2.03(a)(i).
-------------------
"Funded Debt" of any Person means Debt in respect of the Advances, in
-----------
the case of the Borrower, and all other Debt of such Person under clause
(a) through (e) of the definition of Debt and obligations, contingent or
otherwise, of such Person in respect of syndicated acceptances, letters of
credit and similar extensions of credit (other than trade letters of
credit) in each case that by its terms matures more than one year after the
date of its creation or matures within one year from such date but is
renewable or extendible, at the option of such Person, to a date more than
one year after such date or arises under a revolving credit or similar
agreement that obligates the lender or lenders to extend credit during a
period of more than one year after such date, including, without
limitation, all amounts of Funded Debt of such Person required to be paid
or prepaid within one year after the date of its creation.
"GAAP" has the meaning specified in Section 1.03.
----
"Granting Lender" has the meaning specified in Section 8.07(f).
---------------
"Hazardous Materials" means (a) petroleum and petroleum products,
-------------------
byproducts or breakdown products, radioactive materials, asbestos-
containing materials, polychlorinated biphenyls and radon gas and (b) any
other chemicals, materials or substances designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminant under any
Environmental Law.
<PAGE>
9
"Hedge Agreements" means interest rate swap, cap or collar agreements,
----------------
interest rate future or option contracts, currency swap agreements,
currency future or option contracts and other similar agreements.
"Implied Debt Rating" means the rating assigned by S&P to the
-------------------
Borrower's unsecured "implied senior debt" from time to time, as reported
by S&P pursuant to a report or notification in writing issued by S&P, and
as reported by Moody's pursuant to a notification in writing issued by
Moody's.
"Increase Date" has the meaning specified in Section 2.18(a).
-------------
"Increasing Lender" has the meaning specified in Section 2.18(b).
-----------------
"Information Memorandum" means the information memorandum dated
----------------------
October 8, 1999 used by the Agent in connection with the syndication of the
Commitments.
"Interest Period" means, for each Eurodollar Rate Advance comprising
---------------
part of the same Revolving Credit Borrowing and each LIBO Rate Advance
comprising part of the same Competitive Bid Borrowing, the period
commencing on the date of such Eurodollar Rate Advance or LIBO Rate Advance
or the date of the Conversion of any Base Rate Advance into such Eurodollar
Rate Advance and ending on the last day of the period selected by the
Borrower pursuant to the provisions below and, thereafter, with respect to
Eurodollar Rate Advances, each subsequent period commencing on the last day
of the immediately preceding Interest Period and ending on the last day of
the period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or six
months, or if available to all Lenders nine or twelve months, as the
Borrower may, upon notice received by the Agent not later than 12:00 noon
(New York City time) on the third Business Day prior to the first day of
such Interest Period, select; provided, however, that:
-------- -------
(i) the Borrower may not select any Interest Period that ends
after the Termination Date;
(ii) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Revolving Credit
Borrowing or for LIBO Rate Advances comprising part of the same
Competitive Bid Borrowing shall be of the same duration;
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that, if such extension would cause
-------- -------
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day; and
(iv) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Lenders" means the Initial Lenders, each Assuming Lender that shall
-------
become a party hereto pursuant to Section 2.18 or 2.19 and each Person that
shall become a party hereto pursuant to Section 8.07.
<PAGE>
10
"LIBO Rate" means, for any Interest Period for all LIBO Rate Advances
---------
comprising part of the same Competitive Bid Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the rate per
annum (rounded upward to the nearest whole multiple of 1/16 of 1% per
annum) appearing on Dow Jones Markets Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in U.S. dollars at
approximately 11:00 A.M. (London time) two Business Days prior to the first
day of such Interest Period for a term comparable to such Interest Period
or, if for any reason such rate is not available, the average (rounded
upward to the nearest whole multiple of 1/16 of 1% per annum, if such
average is not such a multiple) of the rate per annum at which deposits in
U.S. dollars offered by the principal office of each of the Reference Banks
in London, England to prime banks in the London interbank market at 11:00
A.M. (London time) two Business Days before the first day of such Interest
Period in an amount substantially equal to the amount that would be the
Reference Banks' (or in the case of Citibank, CUSA's) respective ratable
shares of such Borrowing if such Borrowing were to be a Revolving Credit
Borrowing to be outstanding during such Interest Period and for a period
equal to such Interest Period by (b) a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage for such Interest Period. If the Dow
Jones Markets Telerate Page 3750 (or any successor page) is unavailable,
the LIBO Rate for any Interest Period for each LIBO Rate Advance comprising
part of the same Competitive Bid Borrowing shall be determined by the Agent
on the basis of applicable rates furnished to and received by the Agent
from the Reference Banks two Business Days before the first day of such
Interest Period, subject, however, to the provisions of Section 2.08.
------- -------
"LIBO Rate Advances" means a Competitive Bid Advance bearing interest
------------------
based on the LIBO Rate.
"Lien" means any lien, security interest or other charge or
----
encumbrance of any kind, including, without limitation, the lien or
retained security title of a conditional vendor and any easement, right of
way or other encumbrance on title to real property.
"Material Adverse Change" means any material adverse change in the
-----------------------
business, condition (financial or otherwise), or results of operations of
the Borrower or the Borrower and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, condition (financial or otherwise), results of operations or
prospects of the Borrower or the Borrower and its Subsidiaries taken as a
whole, (b) the rights and remedies of the Agent or any Lender under this
Agreement or any Note or (c) the ability of the Borrower to perform its
obligations under this Agreement or any Note.
"Material Subsidiary" means a Subsidiary, if, as of the date of
-------------------
determination, either (a) the assets of such Subsidiary equal 5% or more of
the Borrower's Consolidated total assets as of the date of the most
recently completed fiscal year, or (b) the total revenue of which
represented 5% or more of the Borrower's Consolidated total revenue for the
most recently completed fiscal year.
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan, as defined in Section
------------------
4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making
or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
----------------------
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower or any ERISA Affiliate and at least one Person other than the
Borrower and the ERISA Affiliates or (b) was so maintained and in respect
of which the Borrower or any ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"Non-Consenting Lender" has the meaning specified in Section 2.18(b).
---------------------
<PAGE>
11
"Note" means a Revolving Credit Note or a Competitive Bid Note.
----
"Notice of Revolving Credit Borrowing" has the meaning specified in
------------------------------------
Section 2.02(a).
"Notice of Competitive Bid Borrowing" has the meaning specified in
-----------------------------------
Section 2.03(a).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
----
successor).
"Permitted Liens" means such of the following as to which no
---------------
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced: (a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under Section
5.01(b) hereof; (b) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's Liens and other similar
Liens arising in the ordinary course of business securing obligations that
are not overdue for a period of more than 30 days or that are being
diligently contested by it in good faith and by proper proceedings as to
which appropriate reserves are being maintained; (c) pledges or deposits to
secure obligations under workers' compensation laws or similar legislation
or to secure public or statutory obligations; (d) easements, rights of way
and other encumbrances on title to real property that do not render title
to the property encumbered thereby unmarketable or materially adversely
affect the use of such property for its present purposes; (e) Liens in
favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties incurred in connection with the
importation of goods in the ordinary course of business; (f) Liens incurred
in connection with leases, subleases, licenses and sublicenses granted to
third parties not interfering in any material respect with the business of
the Borrower and its Subsidiaries and any interest or title of a lessee or
licensee under any such leases, subleases, licenses or sublicenses; (g)
deposits securing the performance of bids, tenders, contracts or leases, or
to secure obligations under surety or appeal bonds or to secure indemnity
or surety obligations in the ordinary course of business; and (h) banker's
liens and similar Liens (including set-off rights) in respect of bank
deposits.
"Permitted Receivables Facility" means one or more accounts receivable
------------------------------
financing arrangements including (a) the sale of accounts receivable and
related property by the Borrower or any Subsidiary to a financing party or
a special purpose vehicle, or an undivided interest in the same, or (b) the
granting of a security interest in accounts receivable and any related
property by the Borrower or any Subsidiary; provided, however, that in the
-------- -------
case of clause (a) and (b) above the aggregate outstanding principal amount
of advances or other amounts received under such financing arrangements at
any time shall not exceed 85% of the aggregate outstanding amount owing
under accounts receivable of the Borrower and its Subsidiaries at such
time.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association,
joint venture, limited liability company or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
"Public Debt Rating" means, as of any date, the rating that has been
------------------
most recently announced by either S&P or Moody's, as the case may be, for
any class of non-credit enhanced long-term senior unsecured debt issued by
the Borrower, provided that in the event there is more than one rating from
--------
either such rating agency, the lowest of such ratings announced by such
rating agency.
"Reference Banks" means Citibank, The Chase Manhattan Bank and Credit
---------------
Suisse First Boston.
"Register" has the meaning specified in Section 8.07(d).
--------
<PAGE>
12
"Required Lenders" means at any time Lenders owed at least a majority
----------------
in interest of the then aggregate unpaid principal amount of the Revolving
Credit Advances owing to Lenders, or, if no such principal amount is then
outstanding, Lenders having at least a majority in interest of the
Commitments.
"Revolving Credit Advance" means an advance by a Lender to the
------------------------
Borrower as part of a Revolving Credit Borrowing and refers to a Base Rate
Advance or a Eurodollar Rate Advance (each of which shall be a "Type" of
----
Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
--------------------------
simultaneous Revolving Credit Advances of the same Type made by each of the
Lenders pursuant to Section 2.01.
"Revolving Credit Note" means a promissory note of the Borrower
---------------------
payable to the order of any Lender, delivered pursuant to a request made
under Section 2.16 in substantially the form of Exhibit A-1 hereto,
evidencing the aggregate indebtedness of the Borrower to such Lender
resulting from the Revolving Credit Advances made by such Lender.
"S&P" means Standard & Poor's Rating Services, a division of The
---
McGraw-Hill Companies, Inc.
"Single Employer Plan" means a single employer plan, as defined in
--------------------
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower or any ERISA Affiliate and no Person other than the Borrower and
the ERISA Affiliates or (b) was so maintained and in respect of which the
Borrower or any ERISA Affiliate could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"SPC" has the meaning specified in Section 8.07(f).
---
"Subsidiary" of any Person means any corporation, partnership, joint
----------
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency), (b) the interest in the capital or
profits of such limited liability company, partnership or joint venture or
(c) the beneficial interest in such trust or estate is at the time directly
or indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Termination Date" means the earlier of (a) November 5, 2004, subject
----------------
to the extension thereof pursuant to Section 2.19 and (b) the date of
termination in whole of the Commitments pursuant to Section 2.05 or 6.01;
provided, however, that the Termination Date of any Lender that is a Non-
-------- -------
Consenting Lender to any requested extension pursuant to Section 2.19 shall
be the Termination Date in effect immediately prior to the applicable
Extension Date for all purposes of this Agreement.
"Voting Stock" means capital stock issued by a corporation, or
------------
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening of
such a contingency.
"Withdrawal Liability" has the meaning specified in Part I of Subtitle
--------------------
E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
<PAGE>
13
SECTION 1.03. Accounting Terms. All accounting terms not
----------------
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e) ("GAAP").
----
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances. Each Lender severally
-----------------------------
agrees, on the terms and conditions hereinafter set forth, to make Revolving
Credit Advances to the Borrower from time to time on any Business Day during the
period from the Effective Date until the Termination Date in an aggregate amount
not to exceed at any time outstanding such Lender's Commitment provided that the
--------
aggregate amount of the Commitments of the Lenders shall be deemed used from
time to time to the extent of the aggregate amount of the Competitive Bid
Advances then outstanding and such deemed use of the aggregate amount of the
Commitments shall be allocated among the Lenders ratably according to their
respective Commitments (such deemed use of the aggregate amount of the
Commitments being a "Competitive Bid Reduction"). Each Revolving Credit
-------------------------
Borrowing shall be in an aggregate amount of $10,000,000 or an integral multiple
of $1,000,000 in excess thereof and shall consist of Revolving Credit Advances
of the same Type made on the same day by the Lenders ratably according to their
respective Commitments. Within the limits of each Lender's Commitment, the
Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.10 and
reborrow under this Section 2.01.
SECTION 2.02. Making the Revolving Credit Advances. (a) Each
------------------------------------
Revolving Credit Borrowing shall be made on notice, given not later than (x)
12:00 noon (New York City time) on the third Business Day prior to the date of
the proposed Revolving Credit Borrowing in the case of a Revolving Credit
Borrowing consisting of Eurodollar Rate Advances or (y) 12:00 noon (New York
City time) on the Business Day which is the date of the proposed Revolving
Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Base
Rate Advances, by the Borrower to the Agent, which shall give to each Lender
prompt notice thereof by telecopier or telex. Each such notice of a Revolving
Credit Borrowing (a "Notice of Revolving Credit Borrowing") shall be by
------------------------------------
telephone, confirmed immediately in writing, or telecopier or telex in
substantially the form of Exhibit B-1 hereto, specifying therein the requested
(i) date of such Revolving Credit Borrowing, (ii) Type of Advances comprising
such Revolving Credit Borrowing, (iii) aggregate amount of such Revolving Credit
Borrowing, and (iv) in the case of a Revolving Credit Borrowing consisting of
Eurodollar Rate Advances, initial Interest Period for each such Revolving Credit
Advance. Each Lender shall, before 2:00 P.M. (New York City time) on the date
of such Revolving Credit Borrowing make available for the account of its
Applicable Lending Office to the Agent at the Agent's Account, in same day
funds, such Lender's ratable portion of such Revolving Credit Borrowing. After
the Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Agent will make such funds available to
the Borrower at the Agent's address referred to in Section 8.02.
(b) Anything in subsection (a) above to the contrary notwithstanding,
(i) the Borrower may not select Eurodollar Rate Advances for any Revolving
Credit Borrowing if the aggregate amount of such Revolving Credit Borrowing is
less than $10,000,000 or if the obligation of the Lenders to make Eurodollar
Rate Advances shall then be suspended pursuant to Section 2.08 or 2.12 and (ii)
the Eurodollar Rate Advances may not be outstanding as part of more than six
separate Revolving Credit Borrowings.
(c) Each Notice of Revolving Credit Borrowing shall be irrevocable
and binding on the Borrower. In the case of any Revolving Credit Borrowing that
the related Notice of Revolving Credit Borrowing specifies is to be comprised of
Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified in such Notice of Revolving Credit
Borrowing for such Revolving Credit Borrowing the applicable conditions set
forth in Article III, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the
<PAGE>
14
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund the Revolving Credit Advance to be made by such Lender as part of such
Revolving Credit Borrowing when such Revolving Credit Advance, as a result of
such failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender prior
to the date of any Revolving Credit Borrowing that such Lender will not make
available to the Agent such Lender's ratable portion of such Revolving Credit
Borrowing, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Revolving Credit Borrowing in accordance with
subsection (a) of this Section 2.02 and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made such ratable
portion available to the Agent, such Lender and the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Agent, at (i) in the
case of the Borrower, the interest rate applicable at the time to Revolving
Credit Advances comprising such Revolving Credit Borrowing and (ii) in the case
of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent
such corresponding amount, such amount so repaid shall constitute such Lender's
Revolving Credit Advance as part of such Revolving Credit Borrowing for purposes
of this Agreement.
(e) The failure of any Lender to make the Revolving Credit Advance to
be made by it as part of any Revolving Credit Borrowing shall not relieve any
other Lender of its obligation, if any, hereunder to make its Revolving Credit
Advance on the date of such Revolving Credit Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make the Revolving Credit
Advance to be made by such other Lender on the date of any Revolving Credit
Borrowing.
SECTION 2.03. The Competitive Bid Advances. (a) Each Lender
----------------------------
severally agrees that the Borrower may make Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the date hereof until the date occurring 30 days prior to the Termination Date
in the manner set forth below; provided that, following the making of each
--------
Competitive Bid Borrowing, the aggregate amount of the Advances then outstanding
shall not exceed the aggregate amount of the Commitments of the Lenders
(computed without regard to any Competitive Bid Reduction).
(i) The Borrower may request a Competitive Bid Borrowing under this
Section 2.03 by delivering to the Agent, by telecopier or telex, a notice
of a Competitive Bid Borrowing (a "Notice of Competitive Bid Borrowing"),
-----------------------------------
in substantially the form of Exhibit B-2 hereto, specifying therein the
requested (v) date of such proposed Competitive Bid Borrowing, (w)
aggregate amount of such proposed Competitive Bid Borrowing, (x) in the
case of a Competitive Bid Borrowing consisting of LIBO Rate Advances,
Interest Period, or in the case of a Competitive Bid Borrowing consisting
of Fixed Rate Advances, maturity date for repayment of each Fixed Rate
Advance to be made as part of such Competitive Bid Borrowing (which
maturity date may not be earlier than the date occurring 30 days after the
date of such Competitive Bid Borrowing or later than the earlier of (I) 180
days after the date of such Competitive Bid Borrowing and (II) the
Termination Date), (y) interest payment date or dates relating thereto, and
(z) other terms (if any) to be applicable to such Competitive Bid
Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one
Business Day prior to the date of the proposed Competitive Bid Borrowing,
if the Borrower shall specify in the Notice of Competitive Bid Borrowing
that the rates of interest to be offered by the Lenders shall be fixed
rates per annum (the Advances comprising any such Competitive Bid Borrowing
being referred to herein as "Fixed Rate Advances") and (B) at least four
-------------------
Business Days prior to the date of the proposed Competitive Bid Borrowing,
if the Borrower shall instead specify in the Notice of Competitive Bid
Borrowing that the Advances comprising such Competitive Bid Borrowing shall
be LIBO Rate Advances. Each Notice of Competitive Bid Borrowing shall be
irrevocable and binding on the Borrower. The Agent shall in turn promptly
notify each Lender of each request for a Competitive Bid Borrowing received
by it from the Borrower by sending such Lender a copy of the related Notice
of Competitive Bid Borrowing.
<PAGE>
15
(ii) Each Lender may, if, in its sole discretion, it elects to do
so, irrevocably offer to make one or more Competitive Bid Advances to the
Borrower as part of such proposed Competitive Bid Borrowing at a rate or
rates of interest specified by such Lender in its sole discretion, by
notifying the Agent (which shall give prompt notice thereof to the
Borrower), (A) before 9:30 A.M. (New York City time) on the date of such
proposed Competitive Bid Borrowing, in the case of a Competitive Bid
Borrowing consisting of Fixed Rate Advances and (B) before 10:00 A.M. (New
York City time) three Business Days before the date of such proposed
Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing
consisting of LIBO Rate Advances of the minimum amount and maximum amount
of each Competitive Bid Advance which such Lender would be willing to make
as part of such proposed Competitive Bid Borrowing (which amounts of such
proposed Competitive Bid may, subject to the proviso to the first sentence
of this Section 2.03(a), exceed such Lender's Commitment, if any), the rate
or rates of interest therefor and such Lender's Applicable Lending Office
with respect to such Competitive Bid Advance; provided that if the Agent in
--------
its capacity as a Lender shall, in its sole discretion, elect to make any
such offer, it shall notify the Borrower of such offer at least 30 minutes
before the time and on the date on which notice of such election is to be
given to the Agent, by the other Lenders. If any Lender shall elect not to
make such an offer, such Lender shall so notify the Agent before 10:00 A.M.
(New York City time), and such Lender shall not be obligated to, and shall
not, make any Competitive Bid Advance as part of such Competitive Bid
Borrowing; provided that the failure by any Lender to give such notice
--------
shall not cause such Lender to be obligated to make any Competitive Bid
Advance as part of such proposed Competitive Bid Borrowing.
(iii) The Borrower shall, in turn, (A) before 10:30 A.M. (New York
City time) on the date of such proposed Competitive Bid Borrowing, in the
case of a Competitive Bid Borrowing consisting of Fixed Rate Advances and
(B) before 12:00 noon (New York City time) three Business Days before the
date of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of LIBO Rate Advances, either:
(x) cancel such Competitive Bid Borrowing by giving the Agent
notice to that effect, or
(y) accept one or more of the offers made by any Lender or
Lenders pursuant to paragraph (ii) above, in its sole discretion, by
giving notice to the Agent of the amount of each Competitive Bid
Advance (which amount shall be equal to or greater than the minimum
amount, and equal to or less than the maximum amount, notified to the
Borrower by the Agent on behalf of such Lender for such Competitive
Bid Advance pursuant to paragraph (ii) above) to be made by each
Lender as part of such Competitive Bid Borrowing, and reject any
remaining offers made by Lenders pursuant to paragraph (ii) above by
giving the Agent notice to that effect, provided, however that the
-------- -------
aggregate amount of Competitive Bid Advances so accepted shall not
exceed the proposed Competitive Bid Borrowing specified in the related
Notice of Competitive Bid Borrowing. The Borrower shall accept the
offers made by any Lender or Lenders to make Competitive Bid Advances
in order of the lowest to the highest rates of interest offered by
such Lenders. If two or more Lenders have offered the same interest
rate, the amount to be borrowed at such interest rate will be
allocated among such Lenders in proportion to the amount that each
such Lender offered at such interest rate.
(iv) If the Borrower notifies the Agent that such Competitive Bid
Borrowing is cancelled pursuant to paragraph (iii)(x) above, the Agent
shall give prompt notice thereof to the Lenders and such Competitive Bid
Borrowing shall not be made.
(v) If the Borrower accepts one or more of the offers made by any
Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent shall in
turn promptly notify (A) each Lender that has made an offer as described in
paragraph (ii) above, of the date and aggregate amount of such Competitive
Bid Borrowing and whether or not any offer or offers made by such Lender
pursuant to paragraph (ii) above have been accepted
<PAGE>
16
by the Borrower, (B) each Lender that is to make a Competitive Bid Advance
as part of such Competitive Bid Borrowing, of the amount of each
Competitive Bid Advance to be made by such Lender as part of such
Competitive Bid Borrowing, and (C) each Lender that is to make a
Competitive Bid Advance as part of such Competitive Bid Borrowing, upon
receipt, that the Agent has received forms of documents appearing to
fulfill the applicable conditions set forth in Article III. Each Lender
that is to make a Competitive Bid Advance as part of such Competitive Bid
Borrowing shall, before 12:00 noon (New York City time) on the date of such
Competitive Bid Borrowing specified in the notice received from the Agent
pursuant to clause (A) of the preceding sentence or any later time when
such Lender shall have received notice from the Agent pursuant to clause
(C) of the preceding sentence, make available for the account of its
Applicable Lending Office to the Agent at its address referred to in
Section 8.02, in same day funds, such Lender's portion of such Competitive
Bid Borrowing. Upon fulfillment of the applicable conditions set forth in
Article III and after receipt by the Agent of such funds, the Agent will
make such funds available to the Borrower at the location specified by the
Borrower in its Notice of Competitive Bid Borrowing. Promptly after each
Competitive Bid Borrowing the Agent will notify each Lender of the amount
of the Competitive Bid Borrowing, the consequent Competitive Bid Reduction
and the dates upon which such Competitive Bid Reduction commenced and will
terminate. Competitive Bid Advances made by any Lender pursuant to this
Section 2.03 shall not affect the obligation of any such Lender to make
Revolving Credit Advances hereunder.
(vi) If the Borrower notifies the Agent that it accepts one or more of
the offers made by any Lender or Lenders pursuant to paragraph (iii)(y)
above, such notice of acceptance shall be irrevocable and binding on the
Borrower. The Borrower shall indemnify each Lender against any loss, cost
or expense incurred by such Lender as a result of any failure to fulfill on
or before the date specified in the related Notice of Competitive Bid
Borrowing for such Competitive Bid Borrowing the applicable conditions set
forth in Article III, including, without limitation, any loss (including
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Competitive Bid Advance to be made by such Lender as
part of such Competitive Bid Borrowing when such Competitive Bid Advance,
as a result of such failure, is not made on such date.
(b) Each Competitive Bid Borrowing shall be in an aggregate amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof and,
following the making of each Competitive Bid Borrowing, the Borrower shall be in
compliance with the limitation set forth in the proviso to the first sentence of
subsection (a) above.
(c) Within the limits and on the conditions set forth in this Section
2.03, the Borrower may from time to time borrow under this Section 2.03, repay
or prepay pursuant to subsection (d) below, and reborrow under this Section
2.03, provided that a Competitive Bid Borrowing shall not be made within three
--------
Business Days of the date of any other Competitive Bid Borrowing.
(d) The Borrower shall repay to the Agent for the account of each
Lender that has made a Competitive Bid Advance, on the maturity date of each
Competitive Bid Advance (such maturity date being that specified by the Borrower
for repayment of such Competitive Bid Advance in the related Notice of
Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and
provided in the Competitive Bid Note evidencing such Competitive Bid Advance),
the then unpaid principal amount of such Competitive Bid Advance. The Borrower
shall have no right to prepay any principal amount of any Competitive Bid
Advance unless, and then only on the terms, specified by the Borrower for such
Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above and set forth in the Competitive
Bid Note evidencing such Competitive Bid Advance.
(e) The Borrower shall pay interest on the unpaid principal amount of
each Competitive Bid Advance from the date of such Competitive Bid Advance to
the date the principal amount of such Competitive Bid Advance is repaid in full,
at the rate of interest for such Competitive Bid Advance specified by the Lender
making such Competitive Bid Advance in its notice with respect thereto delivered
pursuant to subsection (a)(ii) above, payable on the interest payment date or
dates specified by the Borrower for such Competitive Bid Advance in the related
Notice of
<PAGE>
17
Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above, as
provided in the Competitive Bid Note evidencing such Competitive Bid Advance.
Upon the occurrence and during the continuance of an Event of Default under
Section 6.01(a) related to the failure to pay principal, interest or fees, the
Borrower shall pay interest on the amount of unpaid principal of and interest on
each Competitive Bid Advance owing to a Lender, payable in arrears on the date
or dates interest is payable thereon, at a rate per annum equal at all times to
2% per annum above the rate per annum required to be paid on such Competitive
Bid Advance under the terms of the Competitive Bid Note evidencing such
Competitive Bid Advance unless otherwise agreed in such Competitive Bid Note.
(f) The indebtedness of the Borrower resulting from each Competitive
Bid Advance made to the Borrower as part of a Competitive Bid Borrowing shall be
evidenced by a separate Competitive Bid Note of the Borrower payable to the
order of the Lender making such Competitive Bid Advance.
(g) Upon delivery of each Notice of Competitive Bid Borrowing, the
Borrower shall pay a non-refundable fee to the Agent for its own account as such
fee may from time to time be agreed between the Borrower and the Agent.
SECTION 2.04. Fees. (a) Facility Fee. The Borrower agrees to pay
---- ------------
to the Agent for the account of each Lender a facility fee on the aggregate
amount of such Lender's Commitment from the date hereof in the case of each
Initial Lender and from the effective date specified in the Assumption Agreement
or in the Assignment and Acceptance pursuant to which it became a Lender in the
case of each other Lender until the Termination Date at a rate per annum equal
to the Applicable Percentage in effect from time to time, payable in arrears
quarterly on the last day of each March, June, September and December,
commencing December 31, 1999, and on the Termination Date.
(b) Agent's Fees. The Borrower shall pay to the Agent for its own
------------
account such fees as may from time to time be agreed between the Borrower and
the Agent.
SECTION 2.05. Optional Termination or Reduction of the Commitments.
----------------------------------------------------
The Borrower shall have the right, upon at least three Business Days' notice to
the Agent, to terminate in whole or reduce ratably in part the unused portions
of the respective Commitments of the Lenders, provided that each partial
--------
reduction shall be in the aggregate amount of $10,000,000 or an integral
multiple of $1,000,000 in excess thereof and provided further that the
--------- -------
aggregate amount of the Commitments of the Lenders shall not be reduced to an
amount that is less than the aggregate principal amount of the Competitive Bid
Advances then outstanding. Any Commitment or portion of a Commitment which is
reduced or terminated pursuant to this Section 2.05 may not be reinstated.
SECTION 2.06. Repayment of Revolving Credit Advances. The Borrower
--------------------------------------
shall repay to the Agent for the ratable account of the Lenders on the
Termination Date the aggregate principal amount of the Revolving Credit Advances
then outstanding.
SECTION 2.07. Interest on Revolving Credit Advances. (a) Scheduled
------------------------------------- ---------
Interest. The Borrower shall pay interest on the unpaid principal amount of
- --------
each Revolving Credit Advance owing to each Lender from the date of such
Revolving Credit Advance until such principal amount shall be paid in full, at
the following rates per annum:
(i) Base Rate Advances. During such periods as such Revolving Credit
------------------
Advance is a Base Rate Advance, a rate per annum equal at all times to the
sum of (x) the Base Rate in effect from time to time plus (y) the
----
Applicable Margin in effect from time to time plus (z) the Applicable
----
Utilization Fee in effect from time to time, payable in arrears quarterly
on the last day of each March, June, September and December during such
periods and on the date such Base Rate Advance shall be Converted or paid
in full.
(ii) Eurodollar Rate Advances. During such periods as such Revolving
------------------------
Credit Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Revolving Credit
<PAGE>
18
Advance to the sum of (x) the Eurodollar Rate for such Interest Period for
such Revolving Credit Advance plus (y) the Applicable Margin in effect from
----
time to time plus (z) the Applicable Utilization Fee in effect from time to
----
time, payable in arrears on the last day of such Interest Period and, if
such Interest Period has a duration of more than three months, on each day
that occurs during such Interest Period every three months from the first
day of such Interest Period and on the date such Eurodollar Rate Advance
shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the continuance
----------------
of an Event of Default under Section 6.01(a) related to the failure to pay
principal, interest or fees, the Borrower shall pay interest on (i) the unpaid
principal amount of each Revolving Credit Advance owing to each Lender, payable
in arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate
per annum equal at all times to 2% per annum above the rate per annum required
to be paid on such Revolving Credit Advance pursuant to clause (a)(i) or (a)(ii)
above and (ii) to the fullest extent permitted by law, the amount of any
interest, fee or other amount payable hereunder that is not paid when due, from
the date such amount shall be due until such amount shall be paid in full,
payable in arrears on the date such amount shall be paid in full and on demand,
at a rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on Base Rate Advances pursuant to clause (a)(i) above.
SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank
---------------------------
agrees to furnish to the Agent timely information for the purpose of determining
each Eurodollar Rate and each LIBO Rate. If any one or more of the Reference
Banks shall not furnish such timely information to the Agent for the purpose of
determining any such interest rate, the Agent shall determine such interest rate
on the basis of timely information furnished by the remaining Reference Banks.
The Agent shall give prompt notice to the Borrower and the Lenders of the
applicable interest rate determined by the Agent for purposes of Section
2.07(a)(i) or (ii), and the rate, if any, furnished by each Reference Bank for
the purpose of determining the interest rate under Section 2.07(a)(ii).
(b) If, with respect to any Eurodollar Rate Advances, the Required
Lenders notify the Agent that the Eurodollar Rate for any Interest Period for
such Advances will not adequately reflect the cost to such Required Lenders of
making, funding or maintaining their respective Eurodollar Rate Advances for
such Interest Period, the Agent shall forthwith so notify the Borrower and the
Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance, and (ii) the obligation of the Lenders to make, or to Convert Revolving
Credit Advances into, Eurodollar Rate Advances shall be suspended until the
Agent shall notify the Borrower and the Lenders that the circumstances causing
such suspension no longer exist.
(c) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the Agent will
forthwith so notify the Borrower and the Lenders and such Advances will
automatically, on the last day of the then existing Interest Period therefor, be
Converted into Base Rate Advances.
(d) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $10,000,000, such Advances shall
automatically Convert into Base Rate Advances.
(e) Upon the occurrence and during the continuance of any Event of
Default, (i) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(ii) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
(f) If Dow Jones Markets Telerate Page 3750 is unavailable and fewer
than two Reference Banks furnish timely information to the Agent for determining
the Eurodollar Rate or LIBO Rate for any Eurodollar Rate Advances or LIBO Rate
Advances, as the case may be,
<PAGE>
19
(i) the Agent shall forthwith notify the Borrower and the Lenders
that the interest rate cannot be determined for such Eurodollar Rate
Advances or LIBO Rate Advances, as the case may be,
(ii) with respect to Eurodollar Rate Advances, each such Advance
will automatically, on the last day of the then existing Interest Period
therefor, be prepaid by the Borrower or be automatically Converted into a
Base Rate Advance (or if such Advance is then a Base Rate Advance, will
continue as a Base Rate Advance), and
(iii) the obligation of the Lenders to make Eurodollar Rate Advances
or LIBO Rate Advances or to Convert Revolving Credit Advances into
Eurodollar Rate Advances shall be suspended until the Agent shall notify
the Borrower and the Lenders that the circumstances causing such suspension
no longer exist.
SECTION 2.09. Optional Conversion of Revolving Credit Advances. The
------------------------------------------------
Borrower may on any Business Day, upon notice given to the Agent not later than
12:00 noon (New York City time) on the third Business Day prior to the date of
the proposed Conversion and subject to the provisions of Sections 2.08 and 2.12,
Convert all Revolving Credit Advances of one Type comprising the same Borrowing
into Revolving Credit Advances of the other Type; provided, however, that any
-------- -------
Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made
only on the last day of an Interest Period for such Eurodollar Rate Advances,
any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in
an amount not less than the minimum amount specified in Section 2.02(b) and no
Conversion of any Revolving Credit Advances shall result in more separate
Revolving Credit Borrowings than permitted under Section 2.02(b). Each such
notice of a Conversion shall, within the restrictions specified above, specify
(i) the date of such Conversion, (ii) the Revolving Credit Advances to be
Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for each such Advance. Each notice of
Conversion shall be irrevocable and binding on the Borrower.
SECTION 2.10. Prepayments of Revolving Credit Advances. The Borrower
----------------------------------------
may, upon notice at least two Business Days' prior to the date of such
prepayment, in the case of Eurodollar Rate Advances, and not later than 12:00
noon (New York City time) on the date of such prepayment, in the case of Base
Rate Advances, to the Agent stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Borrower shall, prepay
the outstanding principal amount of the Revolving Credit Advances comprising
part of the same Revolving Credit Borrowing in whole or ratably in part,
together with accrued interest to the date of such prepayment on the principal
amount prepaid; provided, however, that (x) each partial prepayment shall be in
-------- -------
an aggregate principal amount of $10,000,000 or an integral multiple of
$1,000,000 in excess thereof and (y) in the event of any such prepayment of a
Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 8.04(c).
SECTION 2.11. Increased Costs. (a) If, due to either (i) the
---------------
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Eurodollar Rate Advances or LIBO Rate Advances
(excluding for purposes of this Section 2.11 any such increased costs resulting
from (i) Taxes or Other Taxes (as to which Section 2.14 shall govern) and (ii)
changes in the basis of taxation of overall net income or overall gross income
by the United States or by the foreign jurisdiction or state under the laws of
which such Lender is organized or has its Applicable Lending Office or any
political subdivision thereof), then the Borrower shall from time to time, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender additional amounts sufficient to compensate
such Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrower and the Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
<PAGE>
20
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Agent), the Borrower shall pay to the
Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder. A certificate as to such amounts
submitted to the Borrower and the Agent by such Lender shall be conclusive and
binding for all purposes, absent manifest error.
SECTION 2.12. Illegality. Notwithstanding any other provision of
----------
this Agreement, if any Lender shall notify the Agent that the introduction of or
any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for any Lender or its Eurodollar Lending Office to perform its
obligations hereunder to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances hereunder, (a) each Eurodollar Rate Advance will
automatically, upon such demand, Convert into a Base Rate Advance and (b) the
obligation of the Lenders to make Eurodollar Rate Advances or LIBO Rate Advances
or to Convert Revolving Credit Advances into Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
SECTION 2.13. Payments and Computations. (a) The Borrower shall
-------------------------
make each payment hereunder not later than 12:00 noon (New York City time) on
the day when due to the Agent at the Agent's Account in same day funds. The
Agent will promptly thereafter cause to be distributed like funds relating to
the payment of principal or interest or facility fees ratably (other than
amounts payable pursuant to Section 2.03, 2.11, 2.14 or 8.04(c)) to the Lenders
for the account of their respective Applicable Lending Offices, and like funds
relating to the payment of any other amount payable to any Lender to such Lender
for the account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon any Assuming Lender becoming
a Lender hereunder as a result of a Commitment Increase pursuant to Section 2.18
or an extension of the Termination Date pursuant to Section 2.19, and upon the
Agent's receipt of such Lender's Assumption Agreement and recording of the
information contained therein in the Register, from and after the applicable
Increase Date or Extension Date, as the case may be, the Agent shall make all
payments hereunder and under any Notes issued in connection therewith in respect
of the interest assumed thereby to the Assuming Lender. Upon its acceptance of
an Assignment and Acceptance and recording of the information contained therein
in the Register pursuant to Section 8.07(c), from and after the effective date
specified in such Assignment and Acceptance, the Agent shall make all payments
hereunder and under the Notes in respect of the interest assigned thereby to the
Lender assignee thereunder, and the parties to such Assignment and Acceptance
shall make all appropriate adjustments in such payments for periods prior to
such effective date directly between themselves.
(b) All computations of interest based on the Base Rate shall be made
by the Agent on the basis of a year of 365 or 366 days, as the case may be, all
computations of interest based on the Eurodollar Rate, the LIBO Rate or the
Federal Funds Rate or in respect of Fixed Rate Advances, facility fees and
utilization fees shall be made by the Agent on the basis of a year of 360 days,
in each case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest or
facility fees are payable. Each determination by the Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(c) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or facility fee, as the case
may be; provided, however, that, if such extension would cause payment of
-------- -------
interest on or principal of Eurodollar Rate Advances or LIBO Rate Advances to be
made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
(d) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Lenders hereunder that the
Borrower will not make such payment in full, the Agent may assume
<PAGE>
21
that the Borrower has made such payment in full to the Agent on such date and
the Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent the Borrower shall not have so made such payment in full to
the Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Agent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower
-----
hereunder or under the Notes shall be made, in accordance with Section 2.13,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent, taxes
---------
imposed on its overall net income, and franchise taxes imposed on it in lieu of
net income taxes, by the jurisdiction under the laws of which such Lender or the
Agent (as the case may be) is organized or any political subdivision thereof
and, in the case of each Lender, taxes imposed on its overall net income, and
franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction
of such Lender's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law
-----
to deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Lender or the Agent, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14) such Lender or
the Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
(b) In addition, the Borrower shall pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or under the Notes or from the
execution, delivery or registration of, performing under, or otherwise with
respect to, this Agreement or the Notes (hereinafter referred to as "Other
-----
Taxes").
- -----
(c) The Borrower shall indemnify each Lender and the Agent for and
hold it harmless against the full amount of Taxes or Other Taxes (including,
without limitation, taxes of any kind imposed by any jurisdiction on amounts
payable under this Section 2.14) imposed on or paid by such Lender or the Agent
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. This indemnification shall
be made within 30 days from the date such Lender or the Agent (as the case may
be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent, at its address referred to in Section 8.02,
the original or a certified copy of a receipt evidencing such payment. In the
case of any payment hereunder or under the Notes by or on behalf of the Borrower
through an account or branch outside the United States or by or on behalf of the
Borrower by a payor that is not a United States person, if the Borrower
determines that no Taxes are payable in respect thereof, the Borrower shall
furnish, or shall cause such payor to furnish, to the Agent, at such address, an
opinion of counsel acceptable to the Agent stating that such payment is exempt
from Taxes. For purposes of this subsection (d) and subsection (e), the terms
"United States" and "United States person" shall have the meanings specified in
- -------------- --------------------
Section 7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Initial Lender and on the date of the Assumption
Agreement or the Assignment and Acceptance pursuant to which it becomes a Lender
in the case of each other Lender, and from time to time thereafter as requested
in writing by the Borrower (but only so long as such Lender remains lawfully
able to do so), shall provide each of the Agent and the Borrower with two
original Internal Revenue Service forms 1001 or 4224, as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, certifying
that such Lender is exempt from or entitled to a reduced rate of United States
withholding tax on payments
<PAGE>
22
pursuant to this Agreement or the Notes. If the form provided by a Lender at the
time such Lender first becomes a party to this Agreement indicates a United
States interest withholding tax rate in excess of zero, withholding tax at such
rate shall be considered excluded from Taxes unless and until such Lender
provides the appropriate forms certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods governed by such form; provided, however, that, if at the date of
-------- -------
the Assignment and Acceptance pursuant to which a Lender assignee becomes a
party to this Agreement, the Lender assignor was entitled to payments under
subsection (a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender assignee on such date. If any form or
document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224, that the Lender reasonably considers to be confidential, the Lender shall
give notice thereof to the Borrower and shall not be obligated to include in
such form or document such confidential information.
(f) For any period with respect to which a Lender has failed to
provide the Borrower with the appropriate form described in Section 2.14(e)
(other than if such failure is due to a change in law occurring subsequent to
----- ----
the date on which a form originally was required to be provided, or if such form
otherwise is not required under subsection (e) above), such Lender shall not be
entitled to indemnification under Section 2.14(a) or (c) with respect to Taxes
imposed by the United States by reason of such failure; provided, however, that
-------- -------
should a Lender become subject to Taxes because of its failure to deliver a form
required hereunder, the Borrower shall take such steps as the Lender shall
reasonably request to assist the Lender to recover such Taxes.
(g) Any Lender claiming any additional amounts payable pursuant to
this Section 2.14 agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Eurodollar Lending Office if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain
------------------------
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Revolving Credit Advances owing to
it (other than pursuant to Section 2.11, 2.14 or 8.04(c)) in excess of its
ratable share of payments on account of the Revolving Credit Advances obtained
by all the Lenders, such Lender shall forthwith purchase from the other Lenders
such participations in the Revolving Credit Advances owing to them as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; provided, however, that if all or any portion of such excess
-------- -------
payment is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the purchasing
Lender the purchase price to the extent of such recovery together with an amount
equal to such Lender's ratable share (according to the proportion of (i) the
amount of such Lender's required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.15 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
SECTION 2.16. Evidence of Debt. (a) Each Lender shall maintain in
----------------
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Revolving Credit
Advance owing to such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder in respect of Revolving Credit Advances. The Borrower agrees that upon
notice by any Lender to the Borrower (with a copy of such notice to the Agent)
to the effect that a Revolving Credit Note is required or appropriate in order
for such Lender to evidence (whether for purposes of pledge, enforcement or
otherwise) the Revolving Credit Advances owing to, or to be made by, such
Lender, the Borrower shall
<PAGE>
23
promptly execute and deliver to such Lender a Revolving Credit Note payable to
the order of such Lender in a principal amount up to the Commitment of such
Lender.
(b) The Register maintained by the Agent pursuant to Section 8.07(d)
shall include a control account, and a subsidiary account for each Lender, in
which accounts (taken together) shall be recorded (i) the date and amount of
each Borrowing made hereunder, the Type of Advances comprising such Borrowing
and, if appropriate, the Interest Period applicable thereto, (ii) the terms of
each Assumption Agreement and each Assignment and Acceptance delivered to and
accepted by it, (iii) the amount of any principal or interest due and payable or
to become due and payable from the Borrower to each Lender hereunder and (iv)
the amount of any sum received by the Agent from the Borrower hereunder and each
Lender's share thereof.
(c) Entries made in good faith by the Agent in the Register pursuant
to subsection (b) above, and by each Lender in its account or accounts pursuant
to subsection (a) above, shall be prima facie evidence of the amount of
----- -----
principal and interest due and payable or to become due and payable from the
Borrower to, in the case of the Register, each Lender and, in the case of such
account or accounts, such Lender, under this Agreement, absent manifest error;
provided, however, that the failure of the Agent or such Lender to make an
- -------- -------
entry, or any finding that an entry is incorrect, in the Register or such
account or accounts shall not limit or otherwise affect the obligations of the
Borrower under this Agreement.
SECTION 2.17. Use of Proceeds. The proceeds of the Advances shall be
---------------
available (and the Borrower agrees that it shall use such proceeds) solely for
general corporate purposes (including, without limitation, working capital,
back-stop of commercial paper programs and acquisition financing) of the
Borrower and its Subsidiaries.
SECTION 2.18. Increase in the Aggregate Commitments. (a) The
-------------------------------------
Borrower may, at any time but in any event not more than once in any calendar
year prior to the Termination Date, by notice to the Agent, request that the
aggregate amount of the Commitment be increased by an amount of $15,000,000 or
an integral multiple of $1,000,000 in excess thereof (each a "Commitment
----------
Increase") to be effective as of a date that is at least 90 days prior to the
- --------
scheduled Termination Date then in effect (the "Increase Date") as specified in
-------------
the related notice to the Agent; provided, however that (i) in no event shall
-------- -------
the aggregate amount of the Commitments at any time exceed $350,000,000 and (ii)
on the date of any request by the Borrower for a Commitment Increase and on the
related Increase Date, the applicable conditions set forth in Article III shall
be satisfied.
(b) The Agent shall promptly notify the Lenders of a request by the
Borrower for a Commitment Increase, which notice shall include (i) the proposed
amount of such requested Commitment Increase, (ii) the proposed Increase Date
and (iii) the date by which Lenders wishing to participate in the Commitment
Increase must commit to an increase in the amount of their respective
Commitments (the "Commitment Date"). Each Lender that is willing to participate
---------------
in such requested Commitment Increase (each an "Increasing Lender") shall, in
-----------------
its sole discretion, give written notice to the Agent on or prior to the
Commitment Date of the amount by which it is willing to increase its Commitment.
If the Lenders notify the Agent that they are willing to increase the amount of
their respective Commitments by an aggregate amount that exceeds the amount of
the requested Commitment Increase, the requested Commitment Increase shall be
allocated among the Lenders willing to participate based on the ratio of each
Increasing Lender's proposed Commitment Increase to the aggregate amount of all
Increasing Lenders' proposed Commitment Increase.
(c) Promptly following each Commitment Date, the Agent shall notify
the Borrower as to the amount, if any, by which the Lenders are willing to
participate in the requested Commitment Increase. If the aggregate amount by
which the Lenders are willing to participate in any requested Commitment
Increase on any such Commitment Date is less than the requested Commitment
Increase, then the Borrower may extend offers to one or more Eligible Assignees
to participate in any portion of the requested Commitment Increase that has not
been committed to by the Lenders as of the applicable Commitment Date; provided,
--------
however, that the Commitment of each such Eligible Assignee shall be in an
- -------
amount of $15,000,000 or an integral multiple of $1,000,000 in excess thereof.
<PAGE>
24
(d) On each Increase Date, each Eligible Assignee that accepts an
offer to participate in a requested Commitment Increase in accordance with
Section 2.18(c) (each such Eligible Assignee and each Eligible Assignee that
agrees to an extension of the Termination Date in accordance with Section
2.19(c), an "Assuming Lender") shall become a Lender party to this Agreement as
---------------
of such Increase Date and the Commitment of each Increasing Lender for such
requested Commitment Increase shall be so increased by such amount (or by the
amount allocated to such Lender pursuant to the last sentence of Section
2.18(b)) as of such Increase Date; provided, however, that the Agent shall have
-------- -------
received on or before such Increase Date the following, each dated such date:
(i) (A) certified copies of resolutions of the Board of Directors
of the Borrower or the Executive Committee of such Board approving the
Commitment Increase and the corresponding modifications to this Agreement
and (B) an opinion of counsel for the Borrower (which may be in-house
counsel), in substantially the form of Exhibit D hereto;
(ii) an assumption agreement from each Assuming Lender, if any, in
form and substance satisfactory to the Borrower and the Agent (each an
"Assumption Agreement"), duly executed by such Eligible Assignee, the Agent
---------------------
and the Borrower; and
(iii) confirmation from each Increasing Lender of the increase in the
amount of its Commitment in a writing satisfactory to the Borrower and the
Agent.
On each Increase Date, upon fulfillment of the conditions set forth in the
immediately preceding sentence of this Section 2.18(d), the Agent shall notify
the Lenders (including, without limitation, each Assuming Lender) and the
Borrower, on or before 1:00 P.M. (New York City time), by telecopier or telex,
of the occurrence of the Commitment Increase to be effected on such Increase
Date and shall record in the Register the relevant information with respect to
each Increasing Lender and each Assuming Lender on such date.
SECTION 2.19. Extension of Termination Date. (a) At least 45 days
-----------------------------
but not more than 60 days prior to each anniversary of the Effective Date, the
Borrower, by written notice to the Agent, may request an extension of the
Termination Date in effect at such time by one year from its then scheduled
expiration. The Agent shall promptly notify each Lender of such request, and
each Lender shall in turn, in its sole discretion, not earlier than 30 days
prior to such anniversary date and in any event not later than 20 days prior to
such anniversary date, notify the Borrower and the Agent in writing as to
whether such Lender will consent to such extension. If any Lender shall fail to
notify the Agent and the Borrower in writing of its consent to any such request
for extension of the Termination Date at least 20 days prior to such anniversary
date, such Lender shall be deemed to be a Non-Consenting Lender with respect to
such request. The Agent shall notify the Borrower not later than 15 days prior
to such anniversary date of the decision of the Lenders regarding the Borrower's
request for an extension of the Termination Date.
(b) If all the Lenders consent in writing to any such request in
accordance with subsection (a) of this Section 2.19, the Termination Date in
effect at such time shall, effective as at the Termination Date (the "Extension
---------
Date"), be extended for one year; provided that on each Extension Date the
- ---- --------
applicable conditions set forth in Article III shall be satisfied. If less than
all of the Lenders consent in writing to any such request in accordance with
subsection (a) of this Section 2.19, the Termination Date in effect at such time
shall, effective as at the applicable Extension Date, be extended as to those
Lenders that so consented (each a "Consenting Lender") but shall not be extended
-----------------
as to any other Lender (each a "Non-Consenting Lender"). To the extent that the
---------------------
Termination Date is not extended as to any Lender pursuant to this Section 2.19
and the Commitment of such Lender is not assumed in accordance with subsection
(c) of this Section 2.19 on or prior to the applicable Extension Date, the
Commitment of such Non-Consenting Lender shall automatically terminate in whole
on such unextended Termination Date without any further notice or other action
by the Borrower, such Lender or any other Person; provided that such Non-
--------
Consenting Lender's rights under Sections 2.11, 2.14 and 8.04, and its
obligations under Section 7.05, shall survive the Termination Date for such
Lender as to matters occurring prior to such date. It is understood and agreed
that no Lender shall have any obligation whatsoever to agree to any request made
by the Borrower for any requested extension of the Termination Date.
<PAGE>
25
(c) If less than all of the Lenders consent to any such request
pursuant to subsection (a) of this Section 2.19, the Agent shall promptly so
notify the Consenting Lenders, and each Consenting Lender may, in its sole
discretion, give written notice to the Agent not later than 10 days prior to the
Termination Date of the amount of the Non-Consenting Lenders' Commitments for
which it is willing to accept an assignment. If the Consenting Lenders notify
the Agent that they are willing to accept assignments of Commitments in an
aggregate amount that exceeds the amount of the Commitments of the Non-
Consenting Lenders, such Commitments shall be allocated among the Consenting
Lenders willing to accept such assignments in such amounts as are agreed between
the Borrower and the Agent. If after giving effect to the assignments of
Commitments described above there remains any Commitments of Non-Consenting
Lenders, the Borrower may arrange for one or more Consenting Lenders or other
Eligible Assignees as Assuming Lenders to assume, effective as of the Extension
Date, any Non-Consenting Lender's Commitment and all of the obligations of such
Non-Consenting Lender under this Agreement thereafter arising, without recourse
to or warranty by, or expense to, such Non-Consenting Lender; provided, however,
-------- -------
that the amount of the Commitment of any such Assuming Lender as a result of
such substitution shall in no event be less than $15,000,000 unless the amount
of the Commitment of such Non-Consenting Lender is less than $15,000,000, in
which case such Assuming Lender shall assume all of such lesser amount; and
provided further that:
- -------- -------
(i) any such Consenting Lender or Assuming Lender shall have paid
to such Non-Consenting Lender (A) the aggregate principal amount of, and
any interest accrued and unpaid to the effective date of the assignment on,
the outstanding Advances, if any, of such Non-Consenting Lender plus (B)
----
any accrued but unpaid facility fees owing to such Non-Consenting Lender as
of the effective date of such assignment;
(ii) all additional costs reimbursements, expense reimbursements and
indemnities payable to such Non-Consenting Lender, and all other accrued
and unpaid amounts owing to such Non-Consenting Lender hereunder, as of the
effective date of such assignment shall have been paid to such Non-
Consenting Lender; and
(iii) with respect to any such Assuming Lender, the applicable
processing and recordation fee required under Section 8.07(a) for such
assignment shall have been paid;
provided further that such Non-Consenting Lender's rights under Sections 2.11,
- -------- -------
2.14 and 8.04, and its obligations under Section 7.05, shall survive such
substitution as to matters occurring prior to the date of substitution. At
least three Business Days prior to any Extension Date, (A) each such Assuming
Lender, if any, shall have delivered to the Borrower and the Agent an Assumption
Agreement, duly executed by such Assuming Lender, such Non-Consenting Lender,
the Borrower and the Agent, (B) any such Consenting Lender shall have delivered
confirmation in writing satisfactory to the Borrower and the Agent as to the
increase in the amount of its Commitment and (C) each Non-Consenting Lender
being replaced pursuant to this Section 2.19 shall have delivered to the Agent
any Note or Notes held by such Non-Consenting Lender. Upon the payment or
prepayment of all amounts referred to in clauses (i), (ii) and (iii) of the
immediately preceding sentence, each such Consenting Lender or Assuming Lender,
as of the Extension Date, will be substituted for such Non-Consenting Lender
under this Agreement and shall be a Lender for all purposes of this Agreement,
without any further acknowledgment by or the consent of the other Lenders, and
the obligations of each such Non-Consenting Lender hereunder shall, by the
provisions hereof, be released and discharged.
(d) If (after giving effect to any assignments pursuant to subsection
(b) of this Section 2.19) Lenders having at least 51% of the aggregate
Commitments in effect on the date immediately before such Extension Date consent
in writing to a requested extension (whether by execution or delivery of an
Assumption Agreement or otherwise) not later than one Business Day prior to such
Extension Date, the Agent shall so notify the Borrower, and, so long as no
Default shall have occurred and be continuing as of such Extension Date, or
shall occur as a consequence thereof, the Termination Date then in effect shall
be extended for the additional one-year period as described in subsection (a) of
this Section 2.19, and all references in this Agreement, and in the Notes, if
any, to the "Termination Date" shall, with respect to each Consenting Lender and
----------------
each Assuming Lender for such Extension Date, refer to the Termination Date as
so extended. Promptly following each Extension Date, the Agent shall notify the
Lenders (including, without limitation, each Assuming Lender) of the extension
of the scheduled Termination Date in effect immediately prior thereto and shall
<PAGE>
26
thereupon record in the Register the relevant information with respect to each
such Consenting Lender and each such Assuming Lender.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01
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and 2.03. Sections 2.01 and 2.03 of this Agreement shall become effective on
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and as of the first date (the "Effective Date") on which the following
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conditions precedent have been satisfied:
(a) There shall have occurred no Material Adverse Change since
October 31, 1998.
(b) There shall exist no action, suit, investigation, litigation or
proceeding affecting the Borrower or any of its Subsidiaries pending or
threatened before any court, governmental agency or arbitrator that (i)
could be reasonably expected to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of this
Agreement or any Note or the consummation of the transactions contemplated
hereby.
(c) Nothing shall have come to the attention of the Lenders during
the course of their due diligence investigation to lead them to believe
that the Information Memorandum was or has become misleading, incorrect or
incomplete in any material respect; without limiting the generality of the
foregoing, the Lenders shall have been given such access to the management,
records, books of account, contracts and properties of the Borrower and its
Subsidiaries as they shall have requested.
(d) All governmental and third party consents and approvals necessary
in connection with the transactions contemplated hereby shall have been
obtained (without the imposition of any conditions that are not acceptable
to the Lenders) and shall remain in effect, and no law or regulation shall
be applicable in the reasonable judgment of the Lenders that restrains,
prevents or imposes materially adverse conditions upon the transactions
contemplated hereby.
(e) The Borrower shall have notified each Lender and the Agent in
writing as to the proposed Effective Date.
(f) The Borrower shall have paid all accrued fees and expenses of the
Agent and the Lenders (including the accrued reasonable invoiced fees and
expenses of counsel to the Agent).
(g) On the Effective Date, the following statements shall be true and
the Agent shall have received for the account of each Lender a certificate
signed by a duly authorized officer of the Borrower, dated the Effective
Date, stating that:
(i) The representations and warranties contained in Section 4.01
are correct on and as of the Effective Date, and
(ii) No event has occurred and is continuing that constitutes a
Default.
(h) The Agent shall have received on or before the Effective Date the
following, each dated such day, in form and substance satisfactory to the
Agent and (except for the Revolving Credit Notes) in sufficient copies for
each Lender:
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(i) The Revolving Credit Notes to the order of the Lenders to
the extent requested by any Lender pursuant to Section 2.16.
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower approving this Agreement and the Notes, and
of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement and the
Notes.
(iii) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement and the
Notes and the other documents to be delivered hereunder.
(iv) A favorable opinion of Wilson Sonsini Goodrich & Rosati,
counsel for the Borrower, substantially in the form of Exhibit D
hereto and as to such other matters as any Lender through the Agent
may reasonably request.
(v) A favorable opinion of Shearman & Sterling, counsel for
the Agent, in form and substance satisfactory to the Agent.
SECTION 3.02. Conditions Precedent to Each Revolving Credit
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Borrowing, Increase Date and Extension Date. The obligation of each Lender to
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make a Revolving Credit Advance on the occasion of each Revolving Credit
Borrowing, each Commitment Increase and each extension of Commitments pursuant
to Section 2.19 shall be subject to the conditions precedent that the Effective
Date shall have occurred and on the date of such Revolving Credit Borrowing, the
applicable Increase Date or the applicable Extension Date (a) the following
statements shall be true (and each of the giving of the applicable Notice of
Revolving Credit Borrowing, request for Commitment Increase or request for
Commitment Extension and the acceptance by the Borrower of the proceeds of such
Revolving Credit Borrowing shall constitute a representation and warranty by the
Borrower that on the date of such Borrowing, such Increase Date or such
Extension Date such statements are true):
(i) the representations and warranties contained in Section 4.01
(except, in the case of Revolving Credit Borrowings, the representations
set forth in the last sentence of subsection (e) thereof and in subsection
(f)(i) thereof) are correct on and as of such date, before and after giving
effect to such Revolving Credit Borrowing, such Increase Date or such
Extension Date and to the application of the proceeds therefrom, as though
made on and as of such date unless such representations and warranties
relate to an earlier date, in which case as of such earlier date, and
(ii) no event has occurred and is continuing, or would result from
such Revolving Credit Borrowing, such Increase Date, such Extension Date or
from the application of the proceeds therefrom, that constitutes a Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing.
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The obligation of each Lender that is to make a Competitive Bid Advance on the
occasion of a Competitive Bid Borrowing to make such Competitive Bid Advance as
part of such Competitive Bid Borrowing is subject to the conditions precedent
that (i) the Agent shall have received the written confirmatory Notice of
Competitive Bid Borrowing with respect thereto, (ii) on or before the date of
such Competitive Bid Borrowing, but prior to such Competitive Bid Borrowing, the
Agent shall have received a Competitive Bid Note payable to the order of such
Lender for each of the one or more Competitive Bid Advances to be made by such
Lender as part of such Competitive Bid Borrowing, in a principal amount equal to
the principal amount of the Competitive Bid Advance to be evidenced thereby and
otherwise on such terms as were agreed to for such Competitive Bid Advance in
accordance with Section 2.03, and (iii) on the date of such Competitive Bid
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Borrowing the following statements shall be true (and each of the giving of the
applicable Notice of Competitive Bid Borrowing and the acceptance by the
Borrower of the proceeds of such Competitive Bid Borrowing shall constitute a
representation and warranty by the Borrower that on the date of such Competitive
Bid Borrowing such statements are true):
(a) the representations and warranties contained in Section 4.01 are
correct on and as of the date of such Competitive Bid Borrowing, before and
after giving effect to such Competitive Bid Borrowing and to the
application of the proceeds therefrom, as though made on and as of such
date,
(b) no event has occurred and is continuing, or would result from
such Competitive Bid Borrowing or from the application of the proceeds
therefrom, that constitutes a Default, and
(c) no event has occurred and no circumstance exists as a result of
which the information concerning the Borrower that has been provided to the
Agent and each Lender by the Borrower in connection herewith would include
an untrue statement of a material fact or omit to state any material fact
or any fact necessary to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 3.04. Determinations Under Section 3.01. For purposes of
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determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the date that the Borrower,
by notice to the Lenders, designates as the proposed Effective Date, specifying
its objection thereto. The Agent shall promptly notify the Lenders of the
occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
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Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Notes to be delivered by it, and the consummation of the
transactions contemplated hereby, are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate action, and do
not contravene (i) the Borrower's charter or by-laws, or (ii) any law or
(iii) any contractual restriction binding on or affecting the Borrower the
breach of which would limit in any respect the ability or right of the
Borrower to perform its obligations under this Agreement or the Notes.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for the due execution, delivery and performance by
the Borrower of this Agreement or the Notes to be delivered by it.
(d) This Agreement has been, and each of the Notes to be delivered by
it when delivered hereunder will have been, duly executed and delivered by
the Borrower. This Agreement is, and each of the
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Notes when delivered hereunder will be, the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in accordance
with their respective terms.
(e) The Consolidated balance sheet of the Borrower and its
Subsidiaries as at October 31, 1998, and the related Consolidated
statements of income and cash flows of the Borrower and its Subsidiaries
for the fiscal year then ended, and the Consolidated balance sheet of the
Borrower and its Subsidiaries as at July 31, 1999, and the related
Consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for the nine months then ended, in each case, accompanied by
an opinion of PricewaterhouseCoopers LLP, independent public accountants,
copies of which have been furnished to each Lender, fairly present, the
Consolidated financial condition of the Borrower and its Subsidiaries as at
such dates and the Consolidated results of the operations of the Borrower
and its Subsidiaries for the periods ended on such dates, all in accordance
with generally accepted accounting principles consistently applied. Since
October 31, 1998, there has been no Material Adverse Change.
(f) There is no pending or, to the Borrower's knowledge, threatened
action, suit, investigation, litigation or proceeding, including, without
limitation, any Environmental Action, affecting the Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator that (i)
could reasonably be likely to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of this
Agreement or any Note or the consummation of the transactions contemplated
hereby.
(g) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning
of Regulation U issued by the Board of Governors of the Federal Reserve
System), and no proceeds of any Advance will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
(h) The Borrower is not an "investment company", or a company
"controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
(i) The Borrower has (i) initiated a review and assessment of all
areas within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that could
be adversely affected by the risk that computer applications used by the
Borrower or any of its Subsidiaries (or suppliers, vendors and customers)
may be unable to recognize and perform properly date sensitive functions
involving certain dates prior to and any date after December 31, 1999 (the
"Year 2000 Problem"), (ii) developed a plan and timetable for addressing
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the Year 2000 Problem on a timely basis and (iii) to date, implemented that
plan in accordance with such timetable. Based on the foregoing, the
Borrower believes that all computer applications (including those of its
suppliers, vendors and customers) that are material to its or any of its
Subsidiaries' business and operations are reasonably expected on a timely
basis to be able to perform properly date-sensitive functions for all dates
before, on and after January 1, 2000, except to the extent that a failure
to do so could not reasonably be expected to have a Material Adverse
Effect.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
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remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
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Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and Environmental Laws.
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(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
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Subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all material taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (ii) all lawful claims that, if
unpaid, might by law reasonably be expected to become a Lien upon its
property; provided, however, that neither the Borrower nor any of its
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Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and by
proper proceedings and as to which appropriate reserves are being
maintained, unless and until any Lien resulting therefrom attaches to its
property and becomes enforceable against its other creditors.
(c) Maintenance of Insurance. Maintain, and cause each of its
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Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks
as is expected to be carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower
or such Subsidiary operates.
(d) Preservation of Corporate Existence, Etc. Preserve and maintain,
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and cause each of its Material Subsidiaries to preserve and maintain, its
corporate existence, rights (charter and statutory) and franchises;
provided, however, that the Borrower and its Material Subsidiaries may
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consummate any merger or consolidation permitted under Section 5.02(b) and
provided further that neither the Borrower nor any of its Material
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Subsidiaries shall be required to preserve any right or franchise that is
not material to the business of the Borrower and its Material Subsidiaries,
or if the Board of Directors of the Borrower or such Material Subsidiary
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Borrower or such Material Subsidiary, as the
case may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such Material Subsidiary or the Lenders.
(e) Visitation Rights. At any reasonable time and from time to time,
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permit the Agent or any of the Lenders or any agents or representatives
thereof, to examine and make copies of and abstracts from the records and
books of account of, and visit the properties of, the Borrower and any of
its Material Subsidiaries, and to discuss the affairs, finances and
accounts of the Borrower and any of its Material Subsidiaries with any of
their officers or directors and with their independent certified public
accountants.
(f) Keeping of Books. Keep, and cause each of its Material
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Subsidiaries to keep, proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets
and business of the Borrower and each such Material Subsidiary in
accordance with generally accepted accounting principles in effect from
time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and cause
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each of its Material Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in good
working order and condition, ordinary wear and tear excepted.
(h) Transactions with Affiliates. Conduct, and cause each of its
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Subsidiaries to conduct, all transactions otherwise permitted under this
Agreement with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Borrower or such Subsidiary than it
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate, provided, however, that (i) the Borrower or any of its
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Subsidiaries may conduct transactions with the Borrower or any of its
Subsidiaries which are fair and reasonable, and (ii) the Borrower or any of
its Subsidiaries may conduct any transaction with Hewlett-Packard Company
("HP") in connection with (A) the realignment of HP's testing and
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measurement business into the Borrower and its Subsidiaries, (B) the
divestiture by HP of its interests in the Borrower and its Subsidiaries
(whether through the public offering of the Borrower's stock, or the
distribution by HP of its capital stock in the Borrower to its
stockholders), or (C) the establishment of the Borrower and its
Subsidiaries as an independent going concern.
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(i) Reporting Requirements. Furnish to the Lenders:
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(i) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Borrower, the Consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such quarter and Consolidated statements
of income and cash flows of the Borrower and its Subsidiaries for the
period commencing at the end of the previous fiscal year and ending
with the end of such quarter, duly certified (subject to year-end
audit adjustments and the absence of footnotes) by the chief financial
officer of the Borrower as having been prepared in accordance with
generally accepted accounting principles and a certificate of the
chief financial officer of the Borrower as to compliance with the
terms of this Agreement and setting forth in reasonable detail the
calculations necessary to demonstrate compliance with Section 5.03,
provided that in the event of any change in GAAP used in the
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preparation of such financial statements, the Borrower shall also
provide, if necessary for the determination of compliance with Section
5.03, a statement of reconciliation conforming such financial
statements to GAAP;
(ii) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, a copy of the annual
audit report for such year for the Borrower and its Subsidiaries,
containing the Consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such fiscal year and Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for such fiscal year, in each case accompanied by an
opinion acceptable to the Required Lenders by PricewaterhouseCoopers
LLP or other independent public accountants acceptable to the Required
Lenders and a certificate of the chief financial officer of the
Borrower as to compliance with the terms of this Agreement and setting
forth in reasonable detail the calculations necessary to demonstrate
compliance with Section 5.03, provided that in the event of any
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change in GAAP used in the preparation of such financial statements,
the Borrower shall also provide, if necessary for the determination of
compliance with Section 5.03, a statement of reconciliation conforming
such financial statements to GAAP;
(iii) as soon as possible and in any event within five days
after the occurrence of each Default continuing on the date of such
statement, a statement of the chief financial officer of the Borrower
setting forth details of such Default and the action that the Borrower
has taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof, copies of
all reports that the Borrower sends to any of its securityholders, and
copies of all reports filed on Forms 10-Q and 10-K and any 8-K which
announces significant events affecting the business, condition
(financial or otherwise), or results of operations of the Borrower or
the Borrower and its Subsidiaries and registration statements filed on
forms S-1, S-3 or S-4 that the Borrower or any Subsidiary files with
the Securities and Exchange Commission or any national securities
exchange;
(v) promptly after the commencement thereof, notice of all
actions and proceedings before any court, governmental agency or
arbitrator affecting the Borrower or any of its Subsidiaries of the
type described in Section 4.01(f); and
(vi) such other information respecting the Borrower or any of
its Subsidiaries as any Lender through the Agent may from time to time
reasonably request.
SECTION 5.02. Negative Covenants. So long as any Advance shall
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remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will not:
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(a) Liens, Etc. Create or suffer to exist, or permit any of its
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Subsidiaries to create or suffer to exist, any Lien on or with respect to
any of its properties, whether now owned or hereafter acquired, or assign,
or permit any of its Subsidiaries to assign accounts receivable, other
than:
(i) Permitted Liens,
(ii) purchase money Liens (including Liens incurred in
connection with construction and Liens in the nature of capital
leases) upon or in any real property or equipment or other fixed
assets acquired or held by the Borrower or any Subsidiary in the
ordinary course of business to secure the purchase price or
construction cost of such property or equipment or other fixed assets
or to secure Debt incurred solely for the purpose of financing the
acquisition or construction of such property or equipment, or Liens
existing on such property or equipment at the time of its acquisition
(other than any such Liens created in contemplation of such
acquisition that were not incurred to finance the acquisition of such
property) or extensions, renewals or replacements of any of the
foregoing for the same or a lesser amount, provided, however, that no
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such Lien shall extend to or cover any properties of any character
other than the real property or equipment or other fixed assets being
acquired or any attachments, replacements, improvements, additions or
accessions thereto or any proceeds thereof, and no such extension,
renewal or replacement shall extend to or cover any properties not
theretofore subject to the Lien being extended, renewed or replaced,
(iii) the Liens existing on the Effective Date and described on
Schedule 5.02(a) hereto,
(iv) Liens on accounts receivable and related property of the
Borrower or any Subsidiary incurred in connection with a Permitted
Receivables Facility,
(v) Liens on documents of title or goods in transit securing
reimbursement obligations of the Borrower or any of its Subsidiaries
under letters of credit or purchase contracts,
(vi) other Liens securing Debt outstanding or other obligations
in aggregate principal amount not to exceed 10% of the aggregate of
the Borrower's Consolidated total assets as of the end of the most
recently completed fiscal quarter,
(vii) the replacement, extension or renewal of any Lien
permitted by clause (ii) or (iii) above upon or in the same property
theretofore subject thereto or the replacement, extension or renewal
(without increase in the amount or change in any direct or contingent
obligor) of the Debt secured thereby,
(viii) Liens on property or assets of a Subsidiary of the
Borrower to secure obligations of such Subsidiary to the Borrower or a
Subsidiary of the Borrower,
(ix) Liens on property or assets of a Person existing at the
time such Person is merged into or consolidated with the Borrower or
any Subsidiary of the Borrower or becomes a Subsidiary of the
Borrower; provided that such Liens were not created in contemplation
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of such merger, consolidation or investment and do not extend to any
assets other than those of the Person merged into or consolidated with
the Borrower or such Subsidiary or acquired by the Borrower or such
Subsidiary,
(x) Liens securing judgments not resulting in an Event of
Default under Section 6.01(f), and
(xi) Liens on insurance proceeds in favor of insurance
companies with respect to the financing of insurance premiums.
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(b) Mergers, Etc. Merge or consolidate with or into, or convey,
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transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, any Person, or permit any of its Material
Subsidiaries to do so, except that (i) any Material Subsidiary of the
Borrower may merge or consolidate with or into, or dispose of assets to,
any other Material Subsidiary of the Borrower, and except that any Material
Subsidiary of the Borrower may merge into or dispose of assets to the
Borrower, and (ii) a Material Subsidiary may merge into or consolidate with
any Person provided that in the case of any such merger or consolidation
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the survivor of such merger or the Person formed by such consolidation
shall be a Material Subsidiary of the Borrower, provided, in each case,
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that no Default shall have occurred and be continuing at the time of such
proposed transaction or would result therefrom.
(c) Accounting Changes. Make or permit, or permit any of its
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Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by generally accepted
accounting principles.
(d) Change in Nature of Business. Neither the Borrower nor any of
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its Material Subsidiaries shall engage in any line of business other than
the lines of business in which the Borrower and its Material Subsidiaries
are currently engaged, and any other businesses incidental or reasonably
related thereto, or any businesses that are, as determined by the Board of
Directors of the Borrower, appropriate extensions thereof.
SECTION 5.03. Financial Covenants. So long as any Advance shall
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remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will maintain a ratio of Funded Debt of the Borrower and its Subsidiaries as of
the last day of each fiscal quarter to Consolidated EBITDA of the Borrower and
its Subsidiaries for the period of four fiscal quarters ended on such day of not
greater than 2.25 to 1.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
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("Events of Default") shall occur and be continuing:
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(a) The Borrower shall fail to pay any principal of any Advance when
the same becomes due and payable; or the Borrower shall fail to pay any
interest on any Advance or make any other payment of fees or other amounts
payable under this Agreement or any Note within three Business Days after
the same becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) in connection with this Agreement
shall prove to have been incorrect in any material respect when made; or
(c) (i) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 5.01(d), (e), (h), (i)(iii) or
(i)(iv), 5.02 or 5.03, or (ii) the Borrower shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement
on its part to be performed or observed if such failure shall remain
unremedied for 15 Business Days after written notice thereof shall have
been given to the Borrower by the Agent or any Lender; or
(d) The Borrower or any of its Material Subsidiaries shall fail to
pay any principal of or premium or interest on any Debt that is outstanding
in a principal or notional amount of at least $50,000,000 in the
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aggregate (but excluding Debt outstanding hereunder) of the Borrower or
such Material Subsidiary (as the case may be), when the same becomes due
and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after
the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity
of such Debt; or
(e) The Borrower or any of its Material Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against the Borrower or any of its Material Subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in
the case of any such proceeding instituted against it (but not instituted
by it), either such proceeding shall remain undismissed or unstayed for a
period of 60 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur;
or the Borrower or any of its Material Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in this
subsection (e); or
(f) Judgments or orders for the payment of money in excess of
$50,000,000 in the aggregate (net of insurance proceeds to the extent that
and for so long as (i) the amount of such judgment or order is covered by a
valid and binding policy of insurance between the defendant and the insurer
covering payment thereof and (ii) such insurer, which shall be rated at
least "A" by A.M. Best Company, has been notified of, and has not disputed
the claim made for payment of, the amount of such judgment or order) shall
be rendered against the Borrower or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 10 consecutive days
during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(g) (i) Any Person or two or more Persons acting in concert (other
than Hewlett-Packard Company) shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Securities Exchange Act of 1934), directly or indirectly, of
Voting Stock of the Borrower (or other securities convertible into such
Voting Stock) representing 30% or more of the combined voting power of all
Voting Stock of the Borrower; or (ii) during any period of up to 24
consecutive months, commencing before or after the date of this Agreement,
individuals who at the beginning of such 24-month period were directors of
the Borrower shall cease for any reason (other than due to death or
disability) to constitute a majority of the board of directors of the
Borrower (except to the extent that individuals who at the beginning of
such 24-month period were replaced by individuals (x) elected by 66-2/3% of
the remaining members of the board of directors of the Borrower or (y)
nominated for election by a majority of the remaining members of the board
of directors of the Borrower and thereafter elected as directors by the
shareholders of the Borrower); or (iii) any Person or two or more Persons
acting in concert (other than Hewlett-Packard Company) shall have acquired
by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation, will result in an Event of Default
under clauses (i) or (ii) above; or
(h) The Borrower or any of its ERISA Affiliates shall incur, or shall
be reasonably likely to incur liability in excess of $50,000,000 in the
aggregate as a result of one or more of the following: (i) the occurrence
of any ERISA Event; (ii) the partial or complete withdrawal of the Borrower
or any of its ERISA Affiliates from a Multiemployer Plan; or (iii) the
reorganization or termination of a Multiemployer Plan;
<PAGE>
35
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
Advances, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
-------- -------
event of an actual or deemed entry of an order for relief with respect to the
Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to
make Advances shall automatically be terminated and (B) the Advances, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby appoints
------------------------
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement as are delegated to the
Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the Agent shall not be
-------- -------
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement or applicable law. The Agent agrees to give to
each Lender prompt notice of each notice given to it by the Borrower pursuant to
the terms of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of
---------------------
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (i) may treat
the Lender that made any Advance as the holder of the Debt resulting therefrom
until the Agent receives and accepts an Assumption Agreement entered into by an
Assuming Lender as provided in Section 2.18 or 2.19, as the case may be, or an
Assignment and Acceptance entered into by such Lender, as assignor, and an
Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult
with legal counsel (including counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations (whether written or oral) made in or
in connection with this Agreement; (iv) shall not have any duty to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Borrower or to inspect the
property (including the books and records) of the Borrower; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 7.03. CUSA and Affiliates. With respect to its Commitment,
-------------------
the Advances made by it and the Note issued to it, CUSA shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include CUSA in its individual capacity.
CUSA and its Affiliates may accept deposits from, lend money to,
<PAGE>
36
act as trustee under indentures of, accept investment banking engagements from
and generally engage in any kind of business with, the Borrower, any of its
Subsidiaries and any Person who may do business with or own securities of the
Borrower or any such Subsidiary, all as if CUSA were not the Agent and without
any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that
----------------------
it has, independently and without reliance upon the Agent or any other Lender
and based on the financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the
---------------
Agent (to the extent not reimbursed by the Borrower), ratably according to the
respective principal amounts of the Revolving Credit Advances then owed to each
of them (or if no Revolving Credit Advances are at the time outstanding, ratably
according to the respective amounts of their Commitments), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against the Agent in
any way relating to or arising out of this Agreement or any action taken or
omitted by the Agent under this Agreement (collectively, the "Indemnified
-----------
Costs"), provided that no Lender shall be liable for any portion of the
--------
Indemnified Costs resulting from the Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse the Agent promptly upon demand for its ratable share of any out-of-
pocket expenses (including reasonable counsel fees) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Agent is not
reimbursed for such expenses by the Borrower. In the case of any investigation,
litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05
applies whether any such investigation, litigation or proceeding is brought by
the Agent, any Lender or a third party.
SECTION 7.06. Successor Agent. The Agent may resign at any time by
---------------
giving written notice thereof to the Lenders and the Borrower and may be removed
at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Article VII shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 7.07. Other Agents. Each Lender hereby acknowledges that
-------------
none of the documentation agent, the syndication agent nor any other Lender
designated as any "Agent" on the signature pages hereof has any liability
hereunder other than in its capacity as a Lender.
<PAGE>
37
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
---------------
provision of this Agreement or the Revolving Credit Notes, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
-------- -------
or consent shall, unless in writing and signed by all the Lenders, do any of the
following: (a) waive any of the conditions specified in Section 3.01, (b)
increase the Commitments of the Lenders or subject the Lenders to any additional
obligations, (c) reduce the principal of, or interest on, the Revolving Credit
Advances or any scheduled fees or other amounts payable hereunder, (d) postpone
any date fixed for any payment of principal of, or interest on, the Revolving
Credit Advances or any scheduled fees or other amounts payable hereunder, (e)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Revolving Credit Advances, or the number of Lenders, that shall be
required for the Lenders or any of them to take any action hereunder or (f)
amend this Section 8.01; and provided further that no amendment, waiver or
-------- -------
consent shall, unless in writing and signed by the Agent in addition to the
Lenders required above to take such action, affect the rights or duties of the
Agent under this Agreement or any Note; and provided further that no amendment,
-------- -------
waiver or consent of Section 8.07(f) shall, unless in writing and signed by each
Lender that has granted a funding option to a SPC in addition to the Lenders
required above to take such action, affect the rights or duties of such Lender
or SPC under this Agreement or any Note.
SECTION 8.02. Notices, Etc. All notices and other communications
------------
provided for hereunder shall be in writing (including telecopier, telegraphic or
telex communication) and mailed, telecopied, telegraphed, telexed or delivered,
if to the Borrower, at its address at 3000 Hanover Street, Palo Alto, California
94304 Attention: Treasurer; if to any Initial Lender, at its Domestic Lending
Office specified opposite its name on Schedule I hereto; if to any other Lender,
at its Domestic Lending Office specified in the Assumption Agreement or the
Assignment and Acceptance pursuant to which it became a Lender; and if to the
Agent, at its address at Two Penns Way, New Castle, Delaware 19720, Attention:
Bank Loan Syndications Department; or, as to the Borrower or the Agent, at such
other address as shall be designated by such party in a written notice to the
other parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the Agent. All
such notices and communications shall, when mailed, telecopied, telegraphed or
telexed, be effective when deposited in the mails, telecopied, delivered to the
telegraph company or confirmed by telex answerback, respectively, except that
notices and communications to the Agent pursuant to Article II, III or VII shall
not be effective until received by the Agent. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any
-------------------
Lender or the Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on
------------------
demand all reasonable costs and expenses of the Agent and the Arranger in
connection with the preparation, execution, delivery, administration,
modification and amendment of this Agreement, the Notes and the other documents
to be delivered hereunder, including, without limitation, (A) all due diligence,
syndication (including printing, distribution and bank meetings),
transportation, computer, duplication, appraisal, consultant, and audit expenses
and (B) the reasonable fees and expenses of counsel for the Agent with respect
thereto and with respect to advising the Agent as to its rights and
responsibilities under this Agreement. The Borrower further agrees to pay on
demand all costs and expenses of the Agent and the Lenders, if any (including,
without limitation, reasonable counsel fees and expenses), in connection with
the enforcement (whether
<PAGE>
38
through negotiations, legal proceedings or otherwise) of this Agreement, the
Notes and the other documents to be delivered hereunder, including, without
limitation, reasonable fees and expenses of counsel for the Agent and each
Lender in connection with the enforcement of rights under this Section 8.04(a).
(b) The Borrower agrees to indemnify and hold harmless the Agent and
each Lender and each of their Affiliates and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against
-----------------
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of (including, without limitation, in
connection with any investigation, litigation or proceeding or preparation of a
defense in connection therewith) (i) the Notes, this Agreement, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Advances or (ii) the actual or alleged presence of Hazardous Materials on
any property of the Borrower or any of its Subsidiaries or any Environmental
Action relating in any way to the Borrower or any of its Subsidiaries, except to
the extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct. In the
case of an investigation, litigation or other proceeding to which the indemnity
in this Section 8.04(b) applies, such indemnity shall be effective whether or
not such investigation, litigation or proceeding is brought by the Borrower, its
directors, shareholders or creditors or an Indemnified Party or any other Person
or any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated. The Borrower also agrees not
to assert any claim for special, indirect, consequential or punitive damages
against the Agent, any Lender, any of their Affiliates, or any of their
respective directors, officers, employees, attorneys and agents, on any theory
of liability, arising out of or otherwise relating to the Notes, this Agreement,
any of the transactions contemplated herein or the actual or proposed use of the
proceeds of the Advances.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance, LIBO Rate Advance is made by the Borrower to or for the account of
a Lender other than on the last day of the Interest Period for such Advance, as
a result of a payment or Conversion pursuant to Section 2.08(d) or (e), 2.10 or
2.12, acceleration of the maturity of the Notes pursuant to Section 6.01 or for
any other reason or by an Eligible Assignee to a Lender other than on the last
day of the Interest Period for such Advance upon an assignment of rights and
obligations under this Agreement pursuant to Section 8.07 as a result of a
demand by the Borrower pursuant to Section 8.07(a), the Borrower shall, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to compensate such
Lender for any additional losses, costs or expenses that it may reasonably incur
as a result of such payment or Conversion, including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Advance.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
Sections 2.11, 2.14 and 8.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the Notes.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during
----------------
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement and the Note held by such Lender, whether or not such Lender shall
have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify the
Borrower after any such set-off and application, provided that the failure to
--------
give such notice shall not affect the validity of such set-off and application.
The rights of each Lender and its Affiliates under this Section are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender and its Affiliates may have.
<PAGE>
39
SECTION 8.06. Binding Effect. This Agreement shall become effective
--------------
(other than Sections 2.01 and 2.03, which shall only become effective upon
satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Borrower and the Agent and when the Agent shall
have been notified by each Initial Lender that such Initial Lender has executed
it and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Agent and each Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may,
------------------------------
with the consent of the Agent and, unless an Event of Default has occurred and
is continuing at the time any assignment is effected in accordance with this
Section 8.07, the Borrower, in each case such approval not to be unreasonably
withheld or delayed, and, if demanded by the Borrower (following a demand by
such Lender pursuant to Section 2.11 or 2.14 or a notice by such Lender pursuant
to Section 2.12) so long as no Default shall have occurred and be continuing,
upon at least 5 Business Days' notice to such Lender and the Agent, will, assign
to one or more Persons all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Revolving Credit Advances owing to it and the Revolving Credit Note or Notes
held by it); provided, however, that (i) each such assignment shall be of a
-------- -------
constant, and not a varying, percentage of all rights and obligations under this
Agreement (other than any right to make Competitive Bid Advances, Competitive
Bid Advances owing to it and Competitive Bid Notes), (ii) except in the case of
an assignment to a Person that, immediately prior to such assignment, was a
Lender or an assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
$15,000,000 or an integral multiple of $1,000,000 in excess thereof, (iii) each
such assignment shall be to an Eligible Assignee, (iv) each such assignment made
as a result of a demand by the Borrower pursuant to this Section 8.07(a) shall
be arranged by the Borrower after consultation with, and subject to the approval
of, the Agent, and shall be either an assignment of all of the rights and
obligations of the assigning Lender under this Agreement or an assignment of a
portion of such rights and obligations made concurrently with another such
assignment or other such assignments that together cover all of the rights and
obligations of the assigning Lender under this Agreement, (v) no Lender shall be
obligated to make any such assignment as a result of a demand by the Borrower
pursuant to this Section 8.07(a) unless and until such Lender shall have
received one or more payments from either the Borrower or one or more Eligible
Assignees in an aggregate amount at least equal to the aggregate outstanding
principal amount of the Advances owing to such Lender, together with accrued
interest thereon to the date of payment of such principal amount and all other
amounts payable to such Lender under this Agreement and all of the obligations
of the Borrower to such Lender shall have been satisfied, (vi) the parties to
each such assignment shall execute and deliver to the Agent, for its acceptance
and recording in the Register, an Assignment and Acceptance, together with any
Revolving Credit Note subject to such assignment and, a processing and
recordation fee of $3,500 payable by the parties to each such assignment,
provided, however, that in the case of each assignment made as a result of a
- -------- -------
demand by the Borrower, such recordation fee shall be payable by the Borrower
except that no such recordation fee shall be payable in the case of an
assignment made at the request of the Borrower to an Eligible Assignee that is
an existing Lender, and (vii) any Lender may, without the approval of the
Borrower or the Agent, assign all or a portion of its rights to any of its
Affiliates. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and
<PAGE>
40
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto; (ii)
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in Section 4.01 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Revolving Credit Note or Notes subject to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower.
(d) The Agent shall maintain at its address referred to in Section
8.02 a copy of each Assumption Agreement and each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lenders and the Commitment of, and principal amount of the
Advances owing to, each Lender from time to time (the "Register"). The entries
--------
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Each Lender may sell participations to one or more banks or other
entities (other than the Borrower or any of its Affiliates) in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and any
Note or Notes held by it); provided, however, that (i) such Lender's obligations
-------- -------
under this Agreement (including, without limitation, its Commitment to the
Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, (iv) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and (v) no participant
under any such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement or any Note, or any consent to any
departure by the Borrower therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder, in each case to the extent subject
to such participation, or postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation.
(f) Each Lender (a "Granting Lender") may grant to a special purpose
---------------
funding vehicle (a "SPC"), identified as such in writing from time to time by
---
the Granting Lender to the Agent and the Borrower, the option to fund all or any
part of any Advance that such Lender is obligated to fund under this Agreement
(and upon the exercise by such SPC of such option to fund, such Lender's
obligations with respect to such Advance shall be deemed satisfied to the extent
of any amounts funded by such SPC); provided, however, that (i) such Lender's
-------- -------
obligations under this Agreement (including, without limitation, its Commitment
to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall
<PAGE>
41
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement (including, without
limitation, Sections 2.11 and 2.14), (iv) any such option granted to a SPC shall
not constitute a commitment by such SPC to fund any Advance and (v) no SPC shall
have any right to approve any amendment or waiver of any provision of this
Agreement or any Note, or any consent to any departure by the Borrower
therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such grant of funding
option, or postpone any date fixed for any payment of principal of, or interest
on, the Notes or any fees or other amounts payable hereunder, in each case to
the extent subject to such grant of funding option. Each party hereto hereby
agrees that no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Lender).
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or SPC or proposed assignee or
participant or SPC, any information relating to the Borrower furnished to such
Lender by or on behalf of the Borrower; provided that, prior to any such
--------
disclosure, the assignee or participant or SPC or proposed assignee or
participant or SPC shall agree to preserve the confidentiality of any
Confidential Information relating to the Borrower received by it from such
Lender.
(h) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances
owing to it and any Note or Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
SECTION 8.08. Confidentiality. Neither the Agent nor any Lender
---------------
shall disclose any Confidential Information to any other Person without the
consent of the Borrower, other than (a) to the Agent's or such Lender's
Affiliates and their officers, directors, employees, agents and advisors and, as
contemplated by Section 8.07(f), to actual or prospective assignees and
participants, and then only on a confidential basis, (b) as required by any law,
rule or regulation or judicial process, (c) to any rating agency when required
by it, provided that, prior to any such disclosure, such rating agency shall
--------
undertake to preserve the confidentiality of any Confidential Information
relating to the Borrower received by it from such Lender and (d) as requested or
required by any state, federal or foreign authority or examiner regulating banks
or banking.
SECTION 8.09. Governing Law. This Agreement and the Notes shall be
-------------
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 8.10. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto
-----------------
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Agreement or
the Notes in the courts of any jurisdiction.
<PAGE>
42
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the Notes
in any New York State or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
43
SECTION 8.12. Waiver of Jury Trial. Each of the Borrower, the Agent
--------------------
and the Lenders hereby irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the Notes or the
actions of the Agent or any Lender in the negotiation, administration,
performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
AGILENT TECHNOLOGIES, INC.
By_______________________________________
Title:
CITICORP USA, INC.
as Agent
By_______________________________________
Title:
<PAGE>
44
Initial Lenders
---------------
Commitment
- ----------
$50,000,000 CITICORP USA, INC.
By_______________________________________
Title:
$37,500,000 THE CHASE MANHATTAN BANK
By_______________________________________
Title:
$37,500,000 CREDIT SUISSE FIRST BOSTON
By_______________________________________
Title:
By_______________________________________
Title:
$12,500,000 STANDARD CHARTERED BANK
By_______________________________________
Title:
$25,000,000 DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By_______________________________________
Title:
By_______________________________________
Title:
<PAGE>
45
$12,500,000 WACHOVIA BANK, N.A.
By_______________________________________
Title:
$25,000,000 HSBC BANK USA
By_______________________________________
Title:
$12,500,000 SOCIETE GENERALE
By_______________________________________
Title:
$12,500,000 CARIPLO-CASSA DI RISPARMIO DELLE
PROVINCIE LOMBARDE SpA
By_______________________________________
Title:
By_______________________________________
Title:
$25,000,000 BANK OF AMERICA, N.A.
By_______________________________________
Title:
$250,000,000 Total of the Commitments
<PAGE>
SCHEDULE I
AGILENT TECHNOLOGIES, INC.
FIVE YEAR CREDIT AGREEMENT
APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
Name of Initial Lender Domestic Lending Office Eurodollar Lending Office
- ---------------------- ----------------------- -------------------------
<S> <C> <C>
Citicorp USA, Inc. Two Penns Way Two Penns Way
New Castle, Delaware 19720 New Castle, Delaware 19720
The Chase Manhattan Bank Chase Manhattan Loan Services Chase Manhattan Loan Services
Group Group
1 Chase Manhattan Plaza, 8th Floor 1 Chase Manhattan Plaza, 8th Floor
New York, NY 10081 New York, NY 10081
Credit Suisse First Boston 11 Madison Avenue 11 Madison Avenue
New York, NY 10010-3629 New York, NY 10010-3629
Standard Chartered Bank 7 World Trade Center 7 World Trade Center
New York, NY 10048 New York, NY 10048
Deutsche Bank AG New York Branch Cayman Islands Branch
31 West 52nd Street c/o New York Branch
New York, NY 10019 31 West 52nd Street
New York, NY 10019
Wachovia Bank 191 Peachtree Street NE 191 Peachtree Street NE
Atlanta, GA 30303 Atlanta, GA 30303
HSBC Bank USA 140 Broadway 140 Broadway
New York, NY 10005 New York, NY 10005
Societe Generale 1221 Avenue of the Americas 1221 Avenue of the Americas
New York, NY 10020 New York, NY 10020
CARIPLO-Cassa di Risparmio 10 East 53rd Street 10 East 53rd Street
delle Provincie Lombarde SpA New York, NY 10022 New York, NY 10022
Bank of America, N.A. Mail Code: CA4-706-05-11 Mail Code: CA4-706-05-11
1850 Gateway Blvd. 1850 Gateway Blvd.
Concord, CA 94520 Concord, CA 94520
</TABLE>
<PAGE>
EXHIBIT A-1 - FORM OF
REVOLVING CREDIT
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 199_
FOR VALUE RECEIVED, the undersigned, AGILENT TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
--------
_________________________ (the "Lender") for the account of its Applicable
------
Lending Office on the Termination Date (each as defined in the Credit Agreement
referred to below) the principal sum of U.S.$[amount of the Lender's Commitment
in figures] or, if less, the aggregate principal amount of the Revolving Credit
Advances made by the Lender to the Borrower pursuant to the Five Year Credit
Agreement dated as of November 5, 1999 among the Borrower, the Lender and
certain other lenders parties thereto, Salomon Smith Barney Inc., as lead
arranger and sole book manager, Chase Securities Inc., as syndication agent,
Credit Suisse First Boston, as documentation agent, and Citicorp USA, Inc., as
administrative agent (the "Agent") for the Lender and such other lenders (as
-----
amended or modified from time to time, the "Credit Agreement"; the terms defined
----------------
therein being used herein as therein defined) outstanding on the Termination
Date.
The Borrower promises to pay interest on the unpaid principal amount
of each Revolving Credit Advance from the date of such Revolving Credit Advance
until such principal amount is paid in full, at such interest rates, and payable
at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Citicorp USA, Inc., as Agent, at 399 Park Avenue, New York,
New York 10043, in same day funds. Each Revolving Credit Advance owing to the
Lender by the Borrower pursuant to the Credit Agreement, and all payments made
on account of principal thereof, shall be recorded by the Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of this
Promissory Note.
This Promissory Note is one of the Revolving Credit Notes referred to
in, and is entitled to the benefits of, the Credit Agreement. The Credit
Agreement, among other things, (i) provides for the making of Revolving Credit
Advances by the Lender to the Borrower from time to time in an aggregate amount
not to exceed at any time outstanding the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Revolving
Credit Advance being evidenced by this Promissory Note and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified.
AGILENT TECHNOLOGIES, INC.
By_______________________________________
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
=========================================================================
Amount of
Amount of Principal Paid Unpaid Principal Notation
Date Advance or Prepaid Balance Made By
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
=========================================================================
</TABLE>
<PAGE>
- -------------------------------------------------------------------------
=========================================================================
EXHIBIT A-2 - FORM OF
COMPETITIVE BID
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 199_
FOR VALUE RECEIVED, the undersigned, AGILENT TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
--------
_________________________ (the "Lender") for the account of its Applicable
------
Lending Office (as defined in the Five Year Credit Agreement dated as of
November 5, 1999 among the Borrower, the Lender and certain other lenders
parties thereto, Salomon Smith Barney Inc., as lead arranger and sole book
manager, Chase Securities Inc., as syndication agent, Credit Suisse First
Boston, as documentation agent, and Citicorp USA, Inc., as administrative agent
(the "Agent") for the Lender and such other lenders (as amended or modified from
-----
time to time, the "Credit Agreement"; the terms defined therein being used
----------------
herein as therein defined)), on _______________, 199_, the principal amount of
U.S.$_______________].
The Borrower promises to pay interest on the unpaid principal amount
hereof from the date hereof until such principal amount is paid in full, at the
interest rate and payable on the interest payment date or dates provided below:
Interest Rate: _____% per annum (calculated on the basis of a year of _____
days for the actual number of days elapsed).
Both principal and interest are payable in lawful money of
________________ to Citicorp USA, Inc., as administrative agent, for the account
of the Lender at the office of _________________________, at
_________________________ in same day funds.
This Promissory Note is one of the Competitive Bid Notes referred to
in, and is entitled to the benefits of, the Credit Agreement. The Credit
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events.
The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
AGILENT TECHNOLOGIES, INC.
By_______________________________________
Title:
<PAGE>
EXHIBIT B-1 - FORM OF NOTICE OF
REVOLVING CREDIT BORROWING
Citicorp USA, Inc., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
Two Penns Way
New Castle, Delaware 19720
[Date]
Attention: Bank Loan Syndications Department
Ladies and Gentlemen:
The undersigned, Agilent Technologies, Inc., refers to the Five Year
Credit Agreement, dated as of November 5, 1999 (as amended or modified from time
to time, the "Credit Agreement", the terms defined therein being used herein as
----------------
therein defined), among the undersigned, certain Lenders parties thereto,
Salomon Smith Barney Inc., as lead arranger and sole book manager, Chase
Securities Inc., as syndication agent, Credit Suisse First Boston, as
documentation agent and Citicorp USA, Inc., as administrative agent (the
"Agent") for said Lenders and hereby gives you notice, irrevocably, pursuant to
-----
Section 2.02 of the Credit Agreement that the undersigned hereby requests a
Revolving Credit Borrowing under the Credit Agreement, and in that connection
sets forth below the information relating to such Revolving Credit Borrowing
(the "Proposed Revolving Credit Borrowing") as required by Section 2.02(a) of
-----------------------------------
the Credit Agreement:
(i) The Business Day of the Proposed Revolving Credit Borrowing is
_______________, __.
(ii) The Type of Advances comprising the Proposed Revolving Credit
Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed Revolving Credit Borrowing
is $_______________.
[(iv) The initial Interest Period for each Eurodollar Rate Advance
made as part of the Proposed Revolving Credit Borrowing is _____ month[s].]
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Revolving
Credit Borrowing:
(A) the representations and warranties contained in Section 4.01 of
the Credit Agreement (except the representations set forth in the last
sentence of subsection (e) thereof and in subsection (f) thereof (other
than clause (ii) thereof)) are correct, before and after giving effect to
the Proposed Revolving Credit Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date; and
<PAGE>
2
(B) no event has occurred and is continuing, or would result from
such Proposed Revolving Credit Borrowing or from the application of the
proceeds therefrom, that constitutes a Default.
Very truly yours,
AGILENT TECHNOLOGIES, INC.
By_______________________________________
Title:
<PAGE>
EXHIBIT B-2 - FORM OF NOTICE OF
COMPETITIVE BID BORROWING
Citicorp USA, Inc., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
Two Penns Way
New Castle, Delaware 19720
[Date]
Attention: Bank Loan Syndications Department
Ladies and Gentlemen:
The undersigned, Agilent Technologies, Inc., refers to the Five Year
Credit Agreement, dated as of November 5, 1999 (as amended or modified from time
to time, the "Credit Agreement", the terms defined therein being used herein as
----------------
therein defined), among the undersigned, certain Lenders parties thereto,
Salomon Smith Barney Inc., as lead arranger and sole book manager, Chase
Securities Inc., as syndication agent, and Credit Suisse First Boston, as
documentation agent and Citicorp USA, Inc., as administrative agent (the
"Agent") for said Lenders and hereby gives you notice, irrevocably, pursuant to
-----
Section 2.03 of the Credit Agreement that the undersigned hereby requests a
Competitive Bid Borrowing under the Credit Agreement, and in that connection
sets forth the terms on which such Competitive Bid Borrowing (the "Proposed
--------
Competitive Bid Borrowing") is requested to be made:
- -------------------------
(A) Date of Competitive Bid Borrowing _______________________________
(B) Amount of Competitive Bid Borrowing _______________________________
(C) [Maturity Date] [Interest Period] _______________________________
(D) Interest Rate Basis _______________________________
(E) Interest Payment Date(s) _______________________________
(F) ___________________ _______________________________
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed
Competitive Bid Borrowing:
(a) the representations and warranties contained in Section 4.01 are
correct, before and after giving effect to the Proposed Competitive Bid
Borrowing and to the application of the proceeds therefrom, as though made
on and as of such date;
(b) no event has occurred and is continuing, or would result from the
Proposed Competitive Bid Borrowing or from the application of the proceeds
therefrom, that constitutes a Default;
(c) no event has occurred and no circumstance exists as a result of
which the information concerning the undersigned that has been provided to
the Agent and each Lender by the undersigned in connection with the Credit
Agreement would include an untrue statement of a material fact or omit to
state any material fact or any fact necessary to make the statements
contained therein, in the light of the circumstances under which they were
made, not misleading; and
(d) the aggregate amount of the Proposed Competitive Bid Borrowing
and all other Borrowings to be made on the same day under the Credit
Agreement is within the aggregate amount of the unused Commitments of the
Lenders.
<PAGE>
2
The undersigned hereby confirms that the Proposed Competitive Bid
Borrowing is to be made available to it in accordance with Section 2.03(a)(v) of
the Credit Agreement.
Very truly yours,
AGILENT TECHNOLOGIES, INC.
By_______________________________________
Title:
<PAGE>
EXHIBIT C - FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Five Year Credit Agreement dated as of
November 5, 1999 (as amended or modified from time to time, the "Credit
------
Agreement") among Agilent Technologies, Inc., a Delaware corporation (the
- ---------
"Borrower"), the Lenders (as defined in the Credit Agreement), Salomon Smith
- ---------
Barney Inc., as lead arranger and sole book manager, Chase Securities Inc., as
syndication agent, Credit Suisse First Boston, as documentation agent, and
Citicorp USA, Inc., as administrative agent (the "Agent") for the Lenders.
-----
Terms defined in the Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I hereto
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, an interest in and to
the Assignor's rights and obligations under the Credit Agreement as of the date
hereof (other than in respect of Competitive Bid Advances and Competitive Bid
Notes) equal to the percentage interest specified on Schedule 1 hereto of all
outstanding rights and obligations under the Credit Agreement (other than in
respect of Competitive Bid Advances and Competitive Bid Notes). After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
the Revolving Credit Advances owing to the Assignee will be as set forth on
Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement or any other instrument or document furnished pursuant thereto;
and (iv) attaches the Revolving Credit Note, if any held by the Assignor and
requests that the Agent exchange such Revolving Credit Note for a new Revolving
Credit Note payable to the order of the Assignee in an amount equal to the
Commitment assumed by the Assignee pursuant hereto or new Revolving Credit Notes
payable to the order of the Assignee in an amount equal to the Commitment
assumed by the Assignee pursuant hereto and the Assignor in an amount equal to
the Commitment retained by the Assignor under the Credit Agreement,
respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will perform
in accordance with their terms all of the obligations that by the terms of the
Credit Agreement are required to be performed by it as a Lender; and (vi)
attaches any U.S. Internal Revenue Service forms required under Section 2.14 of
the Credit Agreement.
4. Following the execution of this Assignment and Acceptance, it
will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
--------------
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
<PAGE>
2
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after
the Effective Date, the Agent shall make all payments under the Credit Agreement
and the Revolving Credit Notes in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and facility
fees with respect thereto) to the Assignee. The Assignor and Assignee shall
make all appropriate adjustments in payments under the Credit Agreement and the
Revolving Credit Notes for periods prior to the Effective Date directly between
themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
<PAGE>
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: __________%
Assignee's Commitment: $__________
Aggregate outstanding principal amount of Revolving Credit Advances
assigned: $__________
Principal amount of Revolving Credit Note payable to Assignee: $__________
Principal amount of Revolving Credit Note payable to Assignor: $__________
Effective Date*: _______________, 199_
[NAME OF ASSIGNOR], as Assignor
By_______________________________________
Title:
Dated: _______________, 199_
[NAME OF ASSIGNEE], as Assignee
By_______________________________________
Title:
Dated: _______________, 199_
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
Accepted [and Approved]/*/ this
______________________________________
* This date should be no earlier than five Business Days after the delivery
of this Assignment and Acceptance to the Agent.
** Required if the Assignee is an Eligible Assignee solely by reason of clause
(viii) of the definition of "Eligible Assignee".
<PAGE>
__________ day of _______________, 199_
_________________________, as Agent
By
Title:
[Approved this __________ day
of _______________, 199_
AGILENT TECHNOLOGIES, INC.
By_______________________]*
Title:
_________________________
* Required if the Assignee is an Eligible Assignee solely by reason of
clauses (iii) through (viii) of the definition of "Eligible Assignee".
<PAGE>
EXHIBIT D - FORM OF
OPINION OF COUNSEL
FOR THE BORROWER
November ___, 1999
To each of the Lenders party to
the Credit Agreement dated as of
November ___, 1999 among Agilent
Technologies Inc., said Lenders and
Citicorp USA, Inc., as Agent for said Lenders
Re: Agilent Technologies, Inc. - Five Year Credit Agreement
Ladies and Gentlemen:
We have acted as special counsel to Agilent Technologies, Inc., a Delaware
corporation ("Borrower"), in connection with the negotiation, execution and
delivery of the Five Year Credit Agreement dated as of November ___, 1999
(including the exhibits and schedules thereto, the "Credit Agreement") among
Borrower and Salomon Smith Barney as Lead Arranger and Sole Book Manager, Chase
Securities Inc., as Syndication Agent, Credit Suisse First Boston, as
Documentation Agent and Citicorp USA, Inc., as Agent (the "Agent") and the other
Lenders party to the Credit Agreement. This opinion is rendered to you pursuant
to Section 3.01(h)(iv) of the Credit Agreement. All capitalized terms used but
not defined herein shall have the respective meanings assigned to such terms in
the Credit Agreement.
In rendering the opinions expressed below, we have examined executed
originals or copies of the following documents:
(a) the Credit Agreement;
(b) the Note;
(c) the Certificate of Incorporation and Bylaws of Borrower, as amended to
date;
(d) records of proceedings of the Board of Directors of Borrower during or
by which resolutions were adopted relating to matters covered by this
opinion;
(e) (i) a certificate of the Secretary of State of the State of Delaware,
dated October 28, 1999, with respect to the standing of Borrower as a
corporation incorporated under the laws of the State of Delaware and
(ii) a Certificate of the Secretary of State of the State of
California dated, October 28, 1999, with respect to the standing of
Borrower as a foreign corporation qualified to do business in the
State of California; and (iii) a tax status certificate from the
Franchise Tax Board of the State of California;
(f) the certificates of the Secretary and certain officers of Borrower as
to certain factual matters; and
(g) each of the documents listed on Annex A hereto (the "Reviewed
-------
Agreements").
In addition, we have examined and relied upon such corporate records of
Borrower as we have deemed necessary or appropriate for purposes of the opinions
expressed below. We have also relied upon and obtained from public officials
and officers of Borrower such other certificates and assurances as we consider
necessary for the rendering of this opinion. The Credit Agreement and the Note
are sometimes referred to herein as the "Transaction Documents."
<PAGE>
2
With your permission and without any verification by us, we have assumed the
following for purposes of rendering the opinions set forth herein:
(i) The genuineness of all signatures, the legal capacity of all natural
persons to execute and deliver documents, the authenticity and
completeness of documents submitted to us as originals and the
completeness and conformity with authentic original documents of all
documents submitted to us as copies, and that all documents, books
and records made available to us by Borrower are accurate and
complete.
(ii) That there are no agreements or understandings between or among
Borrower, Agent, the Lenders or third parties which would expand,
modify or otherwise affect the terms of the Transaction Documents or
the respective rights or obligations of the parties thereunder and
that the Transaction Documents correctly and completely set forth
the intent of all parties thereto.
(iii) That all parties to the Transaction Documents (other than Borrower)
have filed all required franchise tax returns, if any, and paid all
required taxes, if any, under the California Revenue & Taxation
Code.
(iv) That the Transaction Documents have been duly authorized, executed
and delivered by Agent and the Lenders to the extent Agent or the
Lenders are contemplated to be a party thereto and that each of
Agent and each Lender has full power, authority and legal right to
enter into and perform the terms and conditions of the Transaction
Documents to be performed by Agent or such Lender and that each
Transaction Document to which Agent or such Lender is a party
constitutes a legal, valid and binding obligation of Agent or such
Lender, as applicable, enforceable against it in accordance with its
terms.
(v) That each Lender is either (i) a "Bank" as defined in and operating
under that certain act known as the "Bank Act" approved March 1,
1909, as amended, (ii) a bank created and operating under and
pursuant to the laws of the State of California or of the United
States, (iii) a foreign bank complying with the criteria set forth
in Section 1716 of the California Financial Code, as amended, and
that the Lenders are therefore exempt from the restrictions of
Section 1 of Article XV of the California Constitution and related
statutes relating to usury (the "California Usury Law"), or (iv)
otherwise exempt from the California Usury Law.
(vi) With respect to certain matters of fact, that the representations
and warranties of Borrower set forth in the Transaction Documents to
which it is a party, the certificates of certain officers of
Borrower delivered to you in connection with the transactions
contemplated by the Credit Agreement and the certificates of certain
officers of Borrower referred to in paragraph (f) above are true and
correct.
As used in this opinion, the expression "to our knowledge" or "known to us"
with reference to matters of fact means that during the course of our
representation of Borrower in connection with the Transaction Documents, no
information has come to the attention of the attorneys of our firm involved in
this engagement which would give them actual knowledge of the existence or
absence of such facts; however, we have made no independent investigation to
determine the existence or absence of such facts, and any limited inquiry
undertaken by us during the preparation of this opinion should not be regarded
as such an investigation. No inference as to our knowledge of the existence or
absence of any facts underlying any opinion given "to our knowledge" should be
drawn from the fact of our representation of Borrower. Specifically, in
rendering the opinion set forth in paragraph 7 below, we have not made any
independent investigation of court records to determine whether any actions have
been filed. Furthermore, this opinion letter does not purport to encompass
information which may have been communicated to any attorney in our firm who is
a director or officer of Borrower, solely by reason of such attorney's serving
in such capacity.
<PAGE>
3
On the basis of the foregoing and in reliance thereon, and based upon
examination of such questions of law as we have deemed appropriate, and subject
to the assumptions, exceptions, qualifications, and limitations set forth
herein, we advise you that in our opinion:
1. Borrower is a corporation duly incorporated and validly existing in
good standing under the laws of the State of Delaware and is duly
qualified to do business and is in good standing in the state of
California.
2. Borrower has the requisite corporate power and authority to enter into
the Transaction Documents and to carry out the transactions
contemplated thereby.
3. The execution and delivery by Borrower of each Transaction Document to
which it is a party, and the performance by Borrower of its
obligations under each of the Transaction Documents, have been duly
authorized by all necessary corporate action on the part of Borrower.
4. Each of the Transaction Documents constitutes a valid and binding
obligation of Borrower, enforceable against Borrower in accordance
with its terms.
5. The execution and delivery of each of the Transaction Documents and
the borrowing of loans in accordance with the Credit Agreement and
repayment of any loans by Borrower do not (a) conflict with or violate
the Bylaws or Certificate of Incorporation of Borrower; (b) violate or
contravene any United States federal or California state law, statute,
rule or regulation applicable to Borrower; (c) violate or contravene
any order, writ, judgment, decree, determination or award of any
United States federal or California state governmental authority
applicable to Borrower; or (d) to our knowledge, violate or result in
a breach of or constitute any default under any Reviewed Agreement,
or, to our knowledge, result in or require the creation or imposition
of any lien on any of its properties or revenues pursuant to any
provision of any United States federal or California state law, rule
or regulation or any such contractual obligation.
6. No consents, approvals, authorizations, registrations, declarations or
filings are required to be made or obtained by or in respect of the
Company (or on its behalf) with or from any governmental or regulatory
authority or agency of the United States or the State of California
for the due authorization, execution and delivery by the Company of
the Transaction Documents, the undertaking of the covenants set forth
in Transaction Documents, the borrowing of loans in accordance with
the Agreement or the repayment of any such loans by the Company.
7. The extension of credit under the Transaction Documents does not
violate the provisions of Regulations U or X of the Board of Governors
of the Federal Reserve System.
8. To our knowledge, there are no actions or proceedings against Borrower
pending or overtly threatened in writing before any court,
governmental agency or arbitrator which (a) seek to challenge the
enforceability of any of the Transaction Documents, or (b) we believe
are reasonably likely to have a material adverse effect on the ability
of Borrower to perform its obligations under the Transaction
Documents.
The opinions set forth above are subject to the following exceptions,
qualifications, limitations, comments and additional assumptions:
A. We express no opinion as to any matter relating to laws of any
jurisdiction other than the laws of the State of California, the
General Corporation Law of the State of Delaware and the federal laws
of the United States, as such are in effect on the date hereof, and we
have made no inquiry into, and we express no opinion as to, the
statutes, regulations, treaties, common laws or other laws of
<PAGE>
4
any other nation, state or jurisdiction. As you know, we are not
licensed to practice law in the State of Delaware and, accordingly,
our opinions as to Delaware General Corporation Law are based solely
on a review of the official statutes of the State of Delaware. For
purposes of our opinion set forth in paragraph 4 above as to the
enforceablity of the Transaction Documents, we have assumed that a
court located in the State of California were interpreting the
Transaction Documents in accordance with California law
notwithstanding any provision thereof to the effect that such
Transaction Documents are to be governed by, and construed in
accordance with, the laws of the State of New York.
B. We express no opinion as to (i) the effect of any bankruptcy,
insolvency, reorganization, arrangement, fraudulent conveyance,
moratorium or other similar laws relating to or affecting the rights
of creditors generally, or (ii) the effect of general principles of
equity, including without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and the possible
unavailability of specific performance, injunctive relief or other
equitable relief, whether considered in a proceeding in equity or at
law.
C. We express no opinion regarding any of (i) the rights or remedies
available to any party for violations or breaches of any provisions
which are immaterial or the enforcement of which would be unreasonable
under the then existing circumstances, (ii) the rights or remedies
available to any party which takes discretionary action which is
arbitrary, unreasonable or capricious, or is not taken in good faith
or in a commercially reasonable manner, whether or not the Transaction
Documents permit such action, or (iii) the enforceability of any
provision deemed to be "unconscionable" within the meaning of Section
1670.5 of the California Civil Code.
D. We express no opinion as to the legality, validity, binding nature or
enforceability of (i) any provisions in the Transaction Documents
providing for the payment or reimbursement of costs or expenses or
indemnifying a party, to the extent such provisions may be held
unenforceable as contrary to public policy, (ii) any provision of any
Transaction Document insofar as it provides for the payment or
reimbursement of costs and expenses or indemnification for claims,
losses or liabilities in excess of a reasonable amount determined by
any court or other tribunal, (iii) any provisions regarding any
party's ability to collect attorneys' fees and costs in an action
involving the Transaction Documents, if the party is not the
prevailing party in such action (we call your attention to the effect
of Section 1717 of the California Civil Code, which provides that,
where a contract permits one party thereto to recover attorneys' fees,
the prevailing party in any action to enforce any provision of the
contract shall be entitled to recover its reasonable attorneys' fees),
(iv) any provisions of any Transaction Documents imposing penalties or
forfeitures, late payment charges or any increase in interest rate,
upon delinquency in payment or the occurrence of a default to the
extent they bear no reasonable relation to the damage suffered by the
damaged party, constitute a penalty or forfeiture or are otherwise
contrary to public policy, or (v) any provision of the Transaction
Documents to the effect that a statement, certificate, determination
or record shall be deemed conclusive absent manifest error.
E. We express no opinion with respect to the legality, validity, binding
nature or enforceability of (i) any vaguely or broadly stated waiver,
including, without limitation, the waivers of diligence, presentment,
demand, protest or notice, (ii) any waivers or consents (whether or
not characterized as a waiver or consent in the Transaction Documents)
relating to the rights of Borrower or duties owing to it existing as a
matter of law, including, without limitation, waivers of the benefits
of statutory or constitutional provisions, to the extent such waivers
or consents are found by courts to be against public policy or which
are ineffective pursuant to California statutes and judicial
decisions, or (iii) any waivers of any statute of limitations to the
extent such waivers are in excess of four years beyond the statutory
period.
<PAGE>
5
F. We express no opinion with respect to the legality, validity, binding
nature or enforceability of any provision of the Transaction Documents
to the effect that rights or remedies are not exclusive, that every
right or remedy is cumulative and may be exercised in addition to any
other right or remedy, that the election of some particular remedy or
remedies does not preclude recourse to one or more other remedies or
that failure to exercise or delay in exercising rights or remedies
will not operate as a waiver of any such right or remedy.
G. We express no opinion as to any provision of the Transaction Documents
requiring written amendments or waivers of such documents insofar as
it suggests that oral or other modifications, amendments or waivers
could not be effectively agreed upon by the parties or that the
doctrine of promissory estoppel might not apply.
H. We express no opinion as to the applicability or effect of compliance
or non-compliance by any lender (or its agent) with any state, federal
or other laws applicable to such lender (or its agent) or to the
transactions contemplated by the Transaction Documents because of the
nature of its business, including its legal or regulatory status.
I. We express no opinion regarding compliance or non-compliance (or the
effect thereof) with federal or state securities laws.
J. Our opinions set forth in paragraph 1, as to valid existence, due
qualification and good standing are based solely on the certificates
referenced in paragraph (e) above (copies of which have been furnished
to you).
K. Our opinions in clauses (b) and (c) of paragraph 5 above are intended
to express our opinion that the execution, delivery and performance by
Borrower of the Transaction Documents are neither prohibited by, nor
do they subject Borrower to a fine, penalty or similar sanction under
or any law, rule, regulation of the State of California or United
States federal law or any order, writ, judgment, decree, determination
or award of any United States federal or California state governmental
authority that a lawyer practicing in the State of California
exercising customary professional diligence would reasonably recognize
to be applicable to Borrower and the transactions contemplated by the
Transaction Documents; accordingly, our opinions set forth above are
limited to the foregoing.
L. This opinion speaks only at and as of its date and is based solely on
the facts and circumstances known to us at and as of such date. We
express no opinion as to the effect on Agent's or any Lender's rights
under the Transaction Documents of any statute, rule, regulation or
other law which is enacted or becomes effective after, or of any court
decision which changes the law relevant to such rights which is
rendered after, the date of this opinion or the conduct of the parties
following the closing of the contemplated transaction. In addition, in
rendering this opinion, we assume no obligation to revise or
supplement this opinion should the present laws of the jurisdictions
mentioned herein be changed by legislative action, judicial decision
or otherwise.
This opinion is made with the knowledge and understanding that you (but no
other person) may rely thereon in entering into the Credit Agreement and is
solely for your benefit, and this opinion may not be disclosed to or relied upon
by any person other than you, except that (i) this opinion may be disclosed to
(A) bank regulatory and other governmental authorities having jurisdiction over
you requesting (or requiring) such disclosure, and (B) prospective assignees and
participants in connection with the potential transfer of all or part of the
loans or commitments of any Lender, and (ii) this opinion may be relied upon by
assignees of or participants in the loans if the assignments or participations
relating thereto are permitted under and made in accordance with the Credit
Agreement; provided that in no event does this opinion extend to any issue or
--------
matter related to any such assignment
<PAGE>
6
or participation or arising from or out of any such assignment or participation
(as distinct from the subject transaction).
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE>
REVIEWED AGREEMENTS
<PAGE>
EXHIBIT 2.16
EXECUTION COPY
U.S. $250,000,000
364-DAY CREDIT AGREEMENT
Dated as of November 5, 1999
Among
AGILENT TECHNOLOGIES, INC.
as Borrower
-- --------
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders,
-- ------- -------
SALOMON SMITH BARNEY INC.
as Lead Arranger and Sole Book Manager,
-- ---- -------- --- ---- ---- -------
CHASE SECURITIES INC.
as Syndication Agent,
-- ----------- -----
CREDIT SUISSE FIRST BOSTON
as Documentation Agent
-- ------------- -----
and
CITICORP USA, INC.
as Agent
-- -----
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<TABLE>
<S> <C>
SECTION 1.01. Certain Defined Terms......................................1
---------------------
SECTION 1.02. Computation of Time Periods...............................13
---------------------------
SECTION 1.03. Accounting Terms..........................................13
----------------
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances.............................13
-----------------------------
SECTION 2.02. Making the Revolving Credit Advances......................14
------------------------------------
SECTION 2.03. The Competitive Bid Advances..............................15
----------------------------
SECTION 2.04. Fees......................................................18
----
SECTION 2.05. Optional Termination or Reduction of the Commitments......18
----------------------------------------------------
SECTION 2.06. Repayment of Revolving Credit Advances....................18
--------------------------------------
SECTION 2.07. Interest on Revolving Credit Advances.....................18
-------------------------------------
SECTION 2.08. Interest Rate Determination...............................19
---------------------------
SECTION 2.09. Optional Conversion of Revolving Credit Advances..........20
------------------------------------------------
SECTION 2.10. Prepayments of Revolving Credit Advance...................20
---------------------------------------
SECTION 2.11. Increased Costs...........................................20
---------------
SECTION 2.12. Illegality................................................21
----------
SECTION 2.13. Payments and Computations.................................21
-------------------------
SECTION 2.14. Taxes.....................................................22
-----
SECTION 2.15. Sharing of Payments, Etc..................................23
-------------------------
SECTION 2.16. Evidence of Debt..........................................24
----------------
SECTION 2.17. Use of Proceeds...........................................24
---------------
SECTION 2.18. Increase in the Aggregate Commitments.....................24
-------------------------------------
SECTION 2.19. Extension of Termination Date.............................25
-----------------------------
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of
Sections 2.01 and 2.03...................................27
----------------------
SECTION 3.02. Conditions Precedent to Each Revolving
Credit Borrowing.........................................28
----------------
SECTION 3.03. Conditions Precedent to Each Competitive
Bid Borrowing............................................29
-------------
SECTION 3.04. Determinations Under Section 3.01.........................30
---------------------------------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower............30
----------------------------------------------
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants.....................................31
---------------------
SECTION 5.02. Negative Covenants........................................33
------------------
SECTION 5.03. Financial Covenants.......................................35
-------------------
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default.........................................35
-----------------
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action..................................37
------------------------
SECTION 7.02. Agent's Reliance, Etc.....................................37
----------------------
SECTION 7.03. CUSA and Affiliates.......................................37
-------------------
SECTION 7.04. Lender Credit Decision....................................38
----------------------
SECTION 7.05. Indemnification...........................................38
---------------
</TABLE>
<PAGE>
ii
<TABLE>
<S> <C>
SECTION 7.06. Successor Agent...........................................38
---------------
SECTION 7.07. Other Agents..............................................38
-------------
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc...........................................39
---------------
SECTION 8.02. Notices, Etc..............................................39
------------
SECTION 8.03. No Waiver; Remedies.......................................39
-------------------
SECTION 8.04. Costs and Expenses........................................39
------------------
SECTION 8.05. Right of Set-off..........................................40
----------------
SECTION 8.06. Binding Effect............................................41
--------------
SECTION 8.07. Assignments and Participations............................41
------------------------------
SECTION 8.08. Confidentiality...........................................43
---------------
SECTION 8.09. Governing Law.............................................43
-------------
SECTION 8.10. Execution in Counterparts.................................44
-------------------------
SECTION 8.11. Jurisdiction, Etc.........................................44
-----------------
SECTION 8.12. Waiver of Jury Trial......................................45
--------------------
</TABLE>
<PAGE>
iii
Schedules
- ---------
Schedule I - List of Applicable Lending Offices
Schedule 5.02(a) - Existing Liens
Exhibits
- --------------
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Revolving Credit Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Opinion of Counsel for the Borrower
<PAGE>
364-DAY CREDIT AGREEMENT
Dated as of November 5, 1999
AGILENT TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"),
--------
the banks, financial institutions and other institutional lenders (the "Initial
-------
Lenders") listed on the signature pages hereof, SALOMON SMITH BARNEY INC., as
- -------
lead arranger and sole book manager (the "Arranger"), CHASE SECURITIES INC., as
--------
syndication agent, CREDIT SUISSE FIRST BOSTON, as documentation agent, and
CITICORP USA, INC. ("CUSA"), as administrative agent (the "Agent") for the
---- -----
Lenders (as hereinafter defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Advance" means a Revolving Credit Advance or a Competitive Bid
-------
Advance.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 5% or more of the
Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"Agent's Account" means the account of the Agent maintained by the
---------------
Agent at Citibank at its office at 399 Park Avenue, New York, New York
10043, Account No. 36852248, Attention: Pam Cole.
"Applicable Lending Office" means, with respect to each Lender, such
-------------------------
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance and, in the case of a Competitive Bid Advance, the office of such
Lender notified by such Lender to the Agent as its Applicable Lending
Office with respect to such Competitive Bid Advance.
"Applicable Margin" means (a) for Base Rate Advances, 0% per annum and
-----------------
(b) for Eurodollar Rate Advances, as of any date prior to the Debt Rating
Date 0.330% per annum and as of any date on or after the Debt Rating Date,
a percentage per annum determined by reference to the Debt Rating in effect
on such date as set forth below:
<TABLE>
<CAPTION>
Debt Rating Applicable Margin for
S&P/Moody's Eurodollar Rate Advances
=======================================================================
<S> <C>
Level 1
- -------
At least A or above by S&P or A2 or
above by Moody's 0.240%
Level 2
- -------
Less than Level 1 but at least A- by 0.330%
</TABLE>
<PAGE>
2
<TABLE>
<S> <C>
S&P or A3 by Moody's
Level 3
- -------
Less than Level 2 but at least BBB+
by S&P or Baa1 by Moody's 0.410%
Level 4
- -------
Less than Level 3 but at least BBB by
S&P or Baa2 by Moody's 0.475%
Level 5
- -------
Less than Level 4 but at least BBB-
by S&P and Baa3 by Moody's 0.825%
Level 6
- -------
Less than Level 5 or if such rating can
not be determined 1.025%
=======================================================================
</TABLE>
"Applicable Percentage" means, as of any date prior to the Debt
---------------------
Rating Date 0.070% per annum and as of any date on or after the Debt Rating
Date a percentage per annum determined by reference to the Debt Rating in
effect on such date as set forth below:
<TABLE>
<CAPTION>
Debt Rating
S&P/Moody's Applicable Percentage
====================================================================
<S> <C>
Level 1
- -------
At least A or above by S&P or A2 or
above by Moody's
0.060%
Level 2
- -------
Less than Level 1 but at least A- by
S&P or A3 by Moody's
0.070%
Level 3
- -------
Less than Level 2 but at least BBB+
by S&P or Baa1 by Moody's
0.090%
Level 4
- -------
Less than Level 3 but at least BBB by
S&P or Baa2 by Moody's
0.125%
Level 5
- -------
Less than Level 4 but at least BBB- by
S&P and Baa3 by Moody's
0.175%
Level 6
- -------
Less than Level 5 or if such rating can 0.225%
not be determined
=====================================================================
</TABLE>
<PAGE>
3
"Applicable Utilization Fee" means, as of any date on which the
--------------------------
average aggregate Advances during the most recently completed calender
month exceed 33% of the aggregate Commitments, and prior to the Debt Rating
Date 0.100% per annum and as of any date on or after the Debt Rating Date a
percentage per annum determined by reference to the Debt Rating in effect
on such date as set forth below:
<TABLE>
<CAPTION>
Debt Rating Applicable Utilization Fee
S&P/Moody's (Usage greater than 33%)
=========================================================================
<S> <C>
Level 1
- -------
At least A or above by S&P or A2 or
above by Moody's 0.050%
Level 2
- -------
Less than Level 1 but at least A- by
S&P or A3 by Moody's 0.100%
Level 3
- -------
Less than Level 2 but at least BBB+
by S&P or Baa1 by Moody's 0.100%
Level 4
- -------
Less than Level 3 but at least BBB by
S&P or Baa2 by Moody's 0.150%
Level 5
- -------
Less than Level 4 but at least BBB-
by S&P and Baa3 by Moody's 0.150%
Level 6
- -------
Less than Level 5 or if such rating can
not be determined 0.250%
=========================================================================
</TABLE>
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an Eligible Assignee, and accepted by the Agent, in
substantially the form of Exhibit C hereto.
"Assuming Lender" has the meaning specified in Section 2.18(d).
---------------
"Assumption Agreement" has the meaning specified in Section
--------------------
2.18(d)(ii).
"Base Rate" means a fluctuating interest rate per annum in effect from
---------
time to time, which rate per annum shall at all times be equal to the
highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of 1% or, if there is no
nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of 1% per
annum, plus (ii) the rate obtained by dividing (A) the latest three-week
----
moving average of secondary market morning offering rates in the United
States for three-month certificates of deposit of major United States money
market banks, such three-week
<PAGE>
4
moving average (adjusted to the basis of a year of 360 days) being
determined weekly on each Monday (or, if such day is not a Business Day, on
the next succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve Bank
of New York or, if such publication shall be suspended or terminated, on
the basis of quotations for such rates received by Citibank from three New
York certificate of deposit dealers of recognized standing selected by
Citibank, by (B) a percentage equal to 100% minus the average of the daily
percentages specified during such three-week period by the Board of
Governors of the Federal Reserve System (or any successor) for determining
the maximum reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement) for Citibank
with respect to liabilities consisting of or including (among other
liabilities) three-month U.S. dollar non-personal time deposits in the
United States, plus (iii) the average during such three-week period of
----
the annual assessment rates estimated by Citibank for determining the then
current annual assessment payable by Citibank to the Federal Deposit
Insurance Corporation (or any successor) for insuring U.S. dollar deposits
of Citibank in the United States;
(c) 1/2 of one percent per annum above the Federal Funds Rate;
and
(d) for the period from December 15, 1999 through January 15,
2000, two percent per annum above the Federal Funds Rate.
"Base Rate Advance" means a Revolving Credit Advance that bears
-----------------
interest as provided in Section 2.07(a)(i).
"Borrowing" means a Revolving Credit Borrowing or a Competitive Bid
---------
Borrowing.
"Business Day" means a day of the year on which banks are not required
------------
or authorized by law to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances or LIBO Rate Advances,
on which dealings are carried on in the London interbank market.
"Citibank" means Citibank, N.A.
--------
"Commitment" means as to any Lender (a) the amount set forth opposite
----------
such Lender's name on the signature pages hereof, (b) if such Lender has
become a Lender hereunder pursuant to an Assumption Agreement, the amount
set forth in such Assumption Agreement or (c) if such Lender has entered
into any Assignment and Acceptance, the amount set forth for such Lender in
the Register maintained by the Agent pursuant to Section 8.07(d), as such
amount may be reduced pursuant to Section 2.05 or increased pursuant to
Section 2.18.
"Commitment Date" has the meaning specified in Section 2.18(b).
---------------
"Commitment Increase" has the meaning specified in Section 2.18(a).
-------------------
"Competitive Bid Advance" means an advance by a Lender to the Borrower
-----------------------
as part of a Competitive Bid Borrowing resulting from the competitive
bidding procedure described in Section 2.03 and refers to a Fixed Rate
Advance or a LIBO Rate Advance.
"Competitive Bid Borrowing" means a borrowing consisting of
-------------------------
simultaneous Competitive Bid Advances from each of the Lenders whose offer
to make one or more Competitive Bid Advances as part of such borrowing has
been accepted under the competitive bidding procedure described in Section
2.03.
<PAGE>
5
"Competitive Bid Note" means a promissory note of the Borrower payable
--------------------
to the order of any Lender, in substantially the form of Exhibit A-2
hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from a Competitive Bid Advance made by such Lender.
"Competitive Bid Reduction" has the meaning specified in Section 2.01.
-------------------------
"Confidential Information" means information that the Borrower
------------------------
furnishes to the Agent or any Lender in a writing designated as
confidential, but does not include any such information that is or becomes
generally available to the public or that is or becomes available to the
Agent or such Lender from a source other than the Borrower.
"Consenting Lender" has the meaning specified in Section 2.19(b).
-----------------
"Consolidated" refers to the consolidation of accounts in accordance
------------
with GAAP.
"Convert", "Conversion" and "Converted" each refers to a conversion of
------- ---------- ---------
Revolving Credit Advances of one Type into Revolving Credit Advances of the
other Type pursuant to Section 2.08 or 2.09.
"CUSA" has the meaning specified in the recital of parties to this
----
Agreement.
"Debt" of any Person means, without duplication, (a) all indebtedness
----
of such Person for borrowed money, (b) all obligations of such Person for
the deferred purchase price of property or services (other than any account
payable arising in the ordinary course of business, provided that no
material part of such account is more than sixty (60) days past due (unless
subject to a bona fide dispute diligently contested and for which adequate
reserves have been established)), (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all
obligations of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale
of such property), (e) all obligations of such Person as lessee under
leases that have been or should be, in accordance with GAAP, recorded as
capital leases, (f) all obligations, contingent or otherwise, of such
Person in respect of acceptances, letters of credit or similar extensions
of credit, (g) all obligations of such Person in respect of Hedge
Agreements, (h) all Debt of others referred to in clauses (a) through (g)
above or clause (i) below guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (1) to pay or purchase such Debt or to advance
or supply funds for the payment or purchase of such Debt, (2) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment
of such Debt or to assure the holder of such Debt against loss, (3) to
supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such
property is received or such services are rendered) or (4) otherwise to
assure a creditor against loss, and (i) all Debt referred to in clauses (a)
through (h) above secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) any Lien on
property (including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or become
liable for the payment of such Debt. In no event shall the term "Debt"
include (i) any lease properly classified as an operating lease in
accordance with GAAP, (ii) any obligations under open purchase orders
entered into in the ordinary course of business and not yet due and
payable, (iii) any accrued expenses, (iv) any deferred income, or (v) any
income taxes not at the time delinquent or thereafter payable without
penalty.
"Debt Rating" means, as of any date, the Public Debt Rating in effect
-----------
on such date or, if no Public Debt Rating is then in effect, the Implied
Debt Rating in effect on such date. For purposes of the foregoing, (a) if
only one of S&P and Moody's shall have in effect a Public Debt Rating or an
Implied Debt Rating, the Applicable Margin, the Applicable Percentage and
the Applicable Utilization Fee shall be determined by
<PAGE>
6
reference to the available rating; (b) if after January 31, 2000 neither
S&P nor Moody's shall have in effect a Public Debt Rating or an Implied
Debt Rating, the Applicable Margin, the Applicable Percentage and the
Applicable Utilization Fee will be set in accordance with Level 6 under the
definition of "Applicable Margin", "Applicable Percentage" or "Applicable
----------------- --------------------- ----------
Utilization Fee", as the case may be; (c) if the ratings established by S&P
---------------
and Moody's shall fall within different levels, the Applicable Margin, the
Applicable Percentage and the Applicable Utilization Fee shall be based, in
the case where either of such ratings are below BBB- by S&P or Baa3 by
Moody's, upon the lower of such ratings and, in each other case upon the
higher of such ratings; (d) if any rating established by S&P or Moody's
shall be changed, such change shall be effective as of the date on which
such change is first announced publicly by the rating agency making such
change; and (e) if S&P or Moody's shall change the basis on which ratings
are established, each reference to the Public Debt Rating or the Implied
Debt Rating announced by S&P or Moody's, as the case may be, shall refer to
the then equivalent rating by S&P or Moody's, as the case may be.
"Debt Rating Date" means the earlier of the date on which the first
----------------
Debt Rating is announced and January 31, 2000.
"Default" means any Event of Default or any event that would
-------
constitute an Event of Default but for the requirement that notice be given
or time elapse or both.
"Domestic Lending Office" means, with respect to any Lender, the
-----------------------
office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or in the Assumption Agreement or the
Assignment and Acceptance pursuant to which it became a Lender, or such
other office of such Lender as such Lender may from time to time specify to
the Borrower and the Agent.
"EBITDA" means, for any period, net income (or net loss) plus the sum
------ ----
of (a) interest expense, (b) income tax expense, (c) depreciation expense
and (d) amortization expense, in each case determined in accordance with
GAAP for such period.
"Effective Date" has the meaning specified in Section 3.01.
--------------
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender;
-----------------
and (iii) any other Person approved by the Agent and, in each case, unless
an Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with Section 8.07, approved by the
Borrower, such approval not to be unreasonably withheld or delayed;
provided, however, that neither the Borrower nor an Affiliate of the
-------- -------
Borrower shall qualify as an Eligible Assignee.
"Environmental Action" means any action, suit, demand, demand letter,
--------------------
claim, notice of non-compliance or violation, notice of liability or
potential liability, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, Environmental
Permit or Hazardous Materials or arising from alleged injury or threat of
injury to health, safety or the environment, including, without limitation,
(a) by any governmental or regulatory authority for enforcement, cleanup,
removal, response, remedial or other actions or damages and (b) by any
governmental or regulatory authority or any third party for damages,
contribution, indemnification, cost recovery, compensation or injunctive
relief.
"Environmental Law" means any federal, state, local or foreign
-----------------
statute, law, ordinance, rule, regulation, code, order, judgment, decree or
judicial or agency interpretation, policy or guidance relating to pollution
or protection of the environment, health, safety or natural resources,
including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
<PAGE>
7
"Environmental Permit" means any permit, approval, identification
--------------------
number, license or other authorization required under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
---------------
ERISA is a member of the Borrower's controlled group, or under common
control with the Borrower, within the meaning of Section 414 of the
Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event,
-----------
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC, or (ii) the requirements of subsection (1) of Section
4043(b) of ERISA (without regard to subsection (2) of such Section) are met
with a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of
a Plan, and an event described in paragraph (9), (10), (11), (12) or (13)
of Section 4043(c) of ERISA is reasonably expected to occur with respect to
such Plan within the following 30 days; (b) the application for a minimum
funding waiver with respect to a Plan; (c) the provision by the
administrator of any Plan of a notice of intent to terminate such Plan
pursuant to Section 4041(a)(2) of ERISA (including any such notice with
respect to a plan amendment referred to in Section 4041(e) of ERISA); (d)
the cessation of operations at a facility of the Borrower or any ERISA
Affiliate in the circumstances described in Section 4062(e) of ERISA; (e)
the withdrawal by the Borrower or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial employer,
as defined in Section 4001(a)(2) of ERISA; (f) the conditions for the
imposition of a lien under Section 302(f) of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to Section 307 of ERISA; or
(h) the institution by the PBGC of proceedings to terminate a Plan pursuant
to Section 4042 of ERISA, or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes grounds for the
termination of, or the appointment of a trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
-------------------------
office of such Lender specified as its "Eurodollar Lending Office" opposite
its name on Schedule I hereto or in the Assumption Agreement or the
Assignment and Acceptance pursuant to which it became a Lender (or, if no
such office is specified, its Domestic Lending Office), or such other
office of such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
---------------
Rate Advance comprising part of the same Revolving Credit Borrowing, an
interest rate per annum equal to the rate per annum obtained by dividing
(a) the rate per annum (rounded upward to the nearest whole multiple of
1/16 of 1% per annum) appearing on Dow Jones Markets Telerate Page 3750 (or
any successor page) as the London interbank offered rate for deposits in
U.S. dollars at approximately 11:00 A.M. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to
such Interest Period or, if for any reason such rate is not available, the
average (rounded upward to the nearest whole multiple of 1/16 of 1% per
annum, if such average is not such a multiple) of the rate per annum at
which deposits in U.S. dollars are offered by the principal office of each
of the Reference Banks in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days before the
first day of such Interest Period in an amount substantially equal to such
Reference Bank's (or in the case of Citibank, CUSA's) Eurodollar Rate
Advance comprising part of such Revolving Credit Borrowing to be
outstanding during such Interest Period and for a period equal to such
Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage for such Interest Period. If the Dow Jones Markets Page
3750 (or any successor page) is
<PAGE>
8
unavailable, the Eurodollar Rate for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Revolving Credit
Borrowing shall be determined by the Agent on the basis of applicable rates
furnished to and received by the Agent from the Reference Banks two
Business Days before the first day of such Interest Period, subject,
-------
however, to the provisions of Section 2.08.
-------
"Eurodollar Rate Advance" means a Revolving Credit Advance that bears
-----------------------
interest as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for all
----------------------------------
Eurodollar Rate Advances or LIBO Rate Advances comprising part of the same
Borrowing means the reserve percentage applicable two Business Days before
the first day of such Interest Period under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in New York
City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate
on Eurodollar Rate Advances or LIBO Rate Advances is determined) having a
term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
-----------------
"Extension Date" has the meaning specified in Section 2.19(b).
--------------
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by
it.
"Fixed Rate Advances" has the meaning specified in Section 2.03(a)(i).
-------------------
"Funded Debt" of any Person means Debt in respect of the Advances, in
-----------
the case of the Borrower, and all other Debt of such Person under clause
(a) through (e) of the definition of Debt and obligations, contingent or
otherwise, of such Person in respect of syndicated acceptances, letters of
credit and similar extensions of credit (other than trade letters of
credit) in each case that by its terms matures more than one year after the
date of its creation or matures within one year from such date but is
renewable or extendible, at the option of such Person, to a date more than
one year after such date or arises under a revolving credit or similar
agreement that obligates the lender or lenders to extend credit during a
period of more than one year after such date, including, without
limitation, all amounts of Funded Debt of such Person required to be paid
or prepaid within one year after the date of its creation.
"GAAP" has the meaning specified in Section 1.03.
----
"Granting Lender" has the meaning specified in Section 8.07(f).
---------------
"Hazardous Materials" means (a) petroleum and petroleum products,
-------------------
byproducts or breakdown products, radioactive materials, asbestos-
containing materials, polychlorinated biphenyls and radon gas and (b) any
other chemicals, materials or substances designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminant under any
Environmental Law.
<PAGE>
9
"Hedge Agreements" means interest rate swap, cap or collar agreements,
----------------
interest rate future or option contracts, currency swap agreements,
currency future or option contracts and other similar agreements.
"Implied Debt Rating" means the rating assigned by S&P to the
-------------------
Borrower's unsecured "implied senior debt" from time to time, as reported
by S&P pursuant to a report or notification in writing issued by S&P, and
as reported by Moody's pursuant to a notification in writing issued by
Moody's.
"Increase Date" has the meaning specified in Section 2.18(a).
-------------
"Increasing Lender" has the meaning specified in Section 2.18(b).
-----------------
"Information Memorandum" means the information memorandum dated
----------------------
October 8, 1999 used by the Agent in connection with the syndication of the
Commitments.
"Interest Period" means, for each Eurodollar Rate Advance comprising
---------------
part of the same Revolving Credit Borrowing and each LIBO Rate Advance
comprising part of the same Competitive Bid Borrowing, the period
commencing on the date of such Eurodollar Rate Advance or LIBO Rate Advance
or the date of the Conversion of any Base Rate Advance into such Eurodollar
Rate Advance and ending on the last day of the period selected by the
Borrower pursuant to the provisions below and, thereafter, with respect to
Eurodollar Rate Advances, each subsequent period commencing on the last day
of the immediately preceding Interest Period and ending on the last day of
the period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or six
months, or if available to all Lenders nine months, as the Borrower may,
upon notice received by the Agent not later than 12:00 noon (New York City
time) on the third Business Day prior to the first day of such Interest
Period, select; provided, however, that:
-------- -------
(i) the Borrower may not select any Interest Period that ends
after the Termination Date;
(ii) Interest Periods commencing on the same date for Eurodollar
Rate Advances comprising part of the same Revolving Credit Borrowing
or for LIBO Rate Advances comprising part of the same Competitive Bid
Borrowing shall be of the same duration;
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that, if such extension would cause
-------- -------
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day; and
(iv) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Lenders" means the Initial Lenders, each Assuming Lender that shall
-------
become a party hereto pursuant to Section 2.18 or 2.19 and each Person that
shall become a party hereto pursuant to Section 8.07.
"LIBO Rate" means, for any Interest Period for all LIBO Rate Advances
---------
comprising part of the same Competitive Bid Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a)
<PAGE>
10
the rate per annum (rounded upward to the nearest whole multiple of 1/16 of
1% per annum) appearing on Dow Jones Markets Telerate Page 3750 (or any
successor page) as the London interbank offered rate for deposits in U.S.
dollars at approximately 11:00 A.M. (London time) two Business Days prior
to the first day of such Interest Period for a term comparable to such
Interest Period or, if for any reason such rate is not available, the
average (rounded upward to the nearest whole multiple of 1/16 of 1% per
annum, if such average is not such a multiple) of the rate per annum at
which deposits in U.S. dollars offered by the principal office of each of
the Reference Banks in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days before the
first day of such Interest Period in an amount substantially equal to the
amount that would be the Reference Banks' (or in the case of Citibank,
CUSA's) respective ratable shares of such Borrowing if such Borrowing were
to be a Revolving Credit Borrowing to be outstanding during such Interest
Period and for a period equal to such Interest Period by (b) a percentage
equal to 100% minus the Eurodollar Rate Reserve Percentage for such
Interest Period. If the Dow Jones Markets Telerate Page 3750 (or any
successor page) is unavailable, the LIBO Rate for any Interest Period for
each LIBO Rate Advance comprising part of the same Competitive Bid
Borrowing shall be determined by the Agent on the basis of applicable rates
furnished to and received by the Agent from the Reference Banks two
Business Days before the first day of such Interest Period, subject,
-------
however, to the provisions of Section 2.08.
-------
"LIBO Rate Advances" means a Competitive Bid Advance bearing interest
------------------
based on the LIBO Rate.
"Lien" means any lien, security interest or other charge or
----
encumbrance of any kind, including, without limitation, the lien or
retained security title of a conditional vendor and any easement, right of
way or other encumbrance on title to real property.
"Material Adverse Change" means any material adverse change in the
-----------------------
business, condition (financial or otherwise), or results of operations of
the Borrower or the Borrower and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, condition (financial or otherwise), results of operations or
prospects of the Borrower or the Borrower and its Subsidiaries taken as a
whole, (b) the rights and remedies of the Agent or any Lender under this
Agreement or any Note or (c) the ability of the Borrower to perform its
obligations under this Agreement or any Note.
"Material Subsidiary" means a Subsidiary, if, as of the date of
-------------------
determination, either (a) the assets of such Subsidiary equal 5% or more of
the Borrower's Consolidated total assets as of the date of the most
recently completed fiscal year, or (b) the total revenue of which
represented 5% or more of the Borrower's Consolidated total revenue for the
most recently completed fiscal year.
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan, as defined in Section
------------------
4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making
or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
----------------------
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower or any ERISA Affiliate and at least one Person other than the
Borrower and the ERISA Affiliates or (b) was so maintained and in respect
of which the Borrower or any ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"Non-Consenting Lender" has the meaning specified in Section 2.18(b).
---------------------
"Note" means a Revolving Credit Note or a Competitive Bid Note.
----
<PAGE>
11
"Notice of Revolving Credit Borrowing" has the meaning specified in
------------------------------------
Section 2.02(a).
"Notice of Competitive Bid Borrowing" has the meaning specified in
-----------------------------------
Section 2.03(a).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
----
successor).
"Permitted Liens" means such of the following as to which no
---------------
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced: (a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under Section
5.01(b) hereof; (b) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's Liens and other similar
Liens arising in the ordinary course of business securing obligations that
are not overdue for a period of more than 30 days or that are being
diligently contested by it in good faith and by proper proceedings as to
which appropriate reserves are being maintained; (c) pledges or deposits to
secure obligations under workers' compensation laws or similar legislation
or to secure public or statutory obligations; (d) easements, rights of way
and other encumbrances on title to real property that do not render title
to the property encumbered thereby unmarketable or materially adversely
affect the use of such property for its present purposes; (e) Liens in
favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties incurred in connection with the
importation of goods in the ordinary course of business; (f) Liens incurred
in connection with leases, subleases, licenses and sublicenses granted to
third parties not interfering in any material respect with the business of
the Borrower and its Subsidiaries and any interest or title of a lessee or
licensee under any such leases, subleases, licenses or sublicenses; (g)
deposits securing the performance of bids, tenders, contracts or leases, or
to secure obligations under surety or appeal bonds or to secure indemnity
or surety obligations in the ordinary course of business; and (h) banker's
liens and similar Liens (including set-off rights) in respect of bank
deposits.
"Permitted Receivables Facility" means one or more accounts receivable
------------------------------
financing arrangements including (a) the sale of accounts receivable and
related property by the Borrower or any Subsidiary to a financing party or
a special purpose vehicle, or an undivided interest in the same, or (b) the
granting of a security interest in accounts receivable and any related
property by the Borrower or any Subsidiary; provided, however, that in the
-------- -------
case of clause (a) and (b) above the aggregate outstanding principal amount
of advances or other amounts received under such financing arrangements at
any time shall not exceed 85% of the aggregate outstanding amount owing
under accounts receivable of the Borrower and its Subsidiaries at such
time.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association,
joint venture, limited liability company or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
"Public Debt Rating" means, as of any date, the rating that has been
------------------
most recently announced by either S&P or Moody's, as the case may be, for
any class of non-credit enhanced long-term senior unsecured debt issued by
the Borrower, provided that in the event there is more than one rating from
--------
either such rating agency, the lowest of such ratings announced by such
rating agency.
"Reference Banks" means Citibank, The Chase Manhattan Bank and Credit
---------------
Suisse First Boston.
"Register" has the meaning specified in Section 8.07(d).
--------
<PAGE>
12
"Required Lenders" means at any time Lenders owed at least a majority
----------------
in interest of the then aggregate unpaid principal amount of the Revolving
Credit Advances owing to Lenders, or, if no such principal amount is then
outstanding, Lenders having at least a majority in interest of the
Commitments.
"Revolving Credit Advance" means an advance by a Lender to the
------------------------
Borrower as part of a Revolving Credit Borrowing and refers to a Base Rate
Advance or a Eurodollar Rate Advance (each of which shall be a "Type" of
----
Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
--------------------------
simultaneous Revolving Credit Advances of the same Type made by each of the
Lenders pursuant to Section 2.01.
"Revolving Credit Note" means a promissory note of the Borrower
---------------------
payable to the order of any Lender, delivered pursuant to a request made
under Section 2.16 in substantially the form of Exhibit A-1 hereto,
evidencing the aggregate indebtedness of the Borrower to such Lender
resulting from the Revolving Credit Advances made by such Lender.
"S&P" means Standard & Poor's Rating Services, a division of The
---
McGraw-Hill Companies, Inc.
"Single Employer Plan" means a single employer plan, as defined in
--------------------
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower or any ERISA Affiliate and no Person other than the Borrower and
the ERISA Affiliates or (b) was so maintained and in respect of which the
Borrower or any ERISA Affiliate could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"SPC" has the meaning specified in Section 8.07(f).
---
"Subsidiary" of any Person means any corporation, partnership, joint
----------
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency), (b) the interest in the capital or
profits of such limited liability company, partnership or joint venture or
(c) the beneficial interest in such trust or estate is at the time directly
or indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Termination Date" means the earlier of (a) November 3, 2000, subject
----------------
to the extension thereof pursuant to Section 2.19 and (b) the date of
termination in whole of the Commitments pursuant to Section 2.05 or 6.01;
provided, however, that the Termination Date of any Lender that is a Non-
-------- -------
Consenting Lender to any requested extension pursuant to Section 2.19 shall
be the Termination Date in effect immediately prior to the applicable
Extension Date for all purposes of this Agreement.
"Voting Stock" means capital stock issued by a corporation, or
------------
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening of
such a contingency.
"Withdrawal Liability" has the meaning specified in Part I of Subtitle
--------------------
E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
<PAGE>
13
SECTION 1.03. Accounting Terms. All accounting terms not
----------------
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e) ("GAAP").
----
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances. Each Lender severally
-----------------------------
agrees, on the terms and conditions hereinafter set forth, to make Revolving
Credit Advances to the Borrower from time to time on any Business Day during the
period from the Effective Date until the Termination Date in an aggregate amount
not to exceed at any time outstanding such Lender's Commitment provided that the
--------
aggregate amount of the Commitments of the Lenders shall be deemed used from
time to time to the extent of the aggregate amount of the Competitive Bid
Advances then outstanding and such deemed use of the aggregate amount of the
Commitments shall be allocated among the Lenders ratably according to their
respective Commitments (such deemed use of the aggregate amount of the
Commitments being a "Competitive Bid Reduction"). Each Revolving Credit
-------------------------
Borrowing shall be in an aggregate amount of $10,000,000 or an integral multiple
of $1,000,000 in excess thereof and shall consist of Revolving Credit Advances
of the same Type made on the same day by the Lenders ratably according to their
respective Commitments. Within the limits of each Lender's Commitment, the
Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.10 and
reborrow under this Section 2.01.
SECTION 2.02. Making the Revolving Credit Advances. (a) Each
------------------------------------
Revolving Credit Borrowing shall be made on notice, given not later than (x)
12:00 noon (New York City time) on the third Business Day prior to the date of
the proposed Revolving Credit Borrowing in the case of a Revolving Credit
Borrowing consisting of Eurodollar Rate Advances or (y) 12:00 noon (New York
City time) on the Business Day which is the date of the proposed Revolving
Credit Borrowing in the case of a Revolving Credit Borrowing consisting of Base
Rate Advances, by the Borrower to the Agent, which shall give to each Lender
prompt notice thereof by telecopier or telex. Each such notice of a Revolving
Credit Borrowing (a "Notice of Revolving Credit Borrowing") shall be by
------------------------------------
telephone, confirmed immediately in writing, or telecopier or telex in
substantially the form of Exhibit B-1 hereto, specifying therein the requested
(i) date of such Revolving Credit Borrowing, (ii) Type of Advances comprising
such Revolving Credit Borrowing, (iii) aggregate amount of such Revolving Credit
Borrowing, and (iv) in the case of a Revolving Credit Borrowing consisting of
Eurodollar Rate Advances, initial Interest Period for each such Revolving Credit
Advance. Each Lender shall, before 2:00 P.M. (New York City time) on the date
of such Revolving Credit Borrowing make available for the account of its
Applicable Lending Office to the Agent at the Agent's Account, in same day
funds, such Lender's ratable portion of such Revolving Credit Borrowing. After
the Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Agent will make such funds available to
the Borrower at the Agent's address referred to in Section 8.02.
(b) Anything in subsection (a) above to the contrary notwithstanding,
(i) the Borrower may not select Eurodollar Rate Advances for any Revolving
Credit Borrowing if the aggregate amount of such Revolving Credit Borrowing is
less than $10,000,000 or if the obligation of the Lenders to make Eurodollar
Rate Advances shall then be suspended pursuant to Section 2.08 or 2.12 and (ii)
the Eurodollar Rate Advances may not be outstanding as part of more than six
separate Revolving Credit Borrowings.
(c) Each Notice of Revolving Credit Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Revolving Credit Borrowing that the
related Notice of Revolving Credit Borrowing specifies is to be comprised of
Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified in such Notice of Revolving Credit
Borrowing for such Revolving Credit Borrowing the applicable conditions set
forth in Article III, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the
<PAGE>
14
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund the Revolving Credit Advance to be made by such Lender as part of such
Revolving Credit Borrowing when such Revolving Credit Advance, as a result of
such failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender prior to
the date of any Revolving Credit Borrowing that such Lender will not make
available to the Agent such Lender's ratable portion of such Revolving Credit
Borrowing, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Revolving Credit Borrowing in accordance with
subsection (a) of this Section 2.02 and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made such ratable
portion available to the Agent, such Lender and the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Agent, at (i) in the
case of the Borrower, the interest rate applicable at the time to Revolving
Credit Advances comprising such Revolving Credit Borrowing and (ii) in the case
of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent
such corresponding amount, such amount so repaid shall constitute such Lender's
Revolving Credit Advance as part of such Revolving Credit Borrowing for purposes
of this Agreement.
(e) The failure of any Lender to make the Revolving Credit Advance to
be made by it as part of any Revolving Credit Borrowing shall not relieve any
other Lender of its obligation, if any, hereunder to make its Revolving Credit
Advance on the date of such Revolving Credit Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make the Revolving Credit
Advance to be made by such other Lender on the date of any Revolving Credit
Borrowing.
SECTION 2.03. The Competitive Bid Advances. (a) Each Lender
----------------------------
severally agrees that the Borrower may make Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the date hereof until the date occurring 30 days prior to the Termination Date
in the manner set forth below; provided that, following the making of each
--------
Competitive Bid Borrowing, the aggregate amount of the Advances then outstanding
shall not exceed the aggregate amount of the Commitments of the Lenders
(computed without regard to any Competitive Bid Reduction).
(i) The Borrower may request a Competitive Bid Borrowing under this
Section 2.03 by delivering to the Agent, by telecopier or telex, a notice
of a Competitive Bid Borrowing (a "Notice of Competitive Bid Borrowing"),
-----------------------------------
in substantially the form of Exhibit B-2 hereto, specifying therein the
requested (v) date of such proposed Competitive Bid Borrowing, (w)
aggregate amount of such proposed Competitive Bid Borrowing, (x) in the
case of a Competitive Bid Borrowing consisting of LIBO Rate Advances,
Interest Period, or in the case of a Competitive Bid Borrowing consisting
of Fixed Rate Advances, maturity date for repayment of each Fixed Rate
Advance to be made as part of such Competitive Bid Borrowing (which
maturity date may not be earlier than the date occurring 30 days after the
date of such Competitive Bid Borrowing or later than the earlier of (I) 180
days after the date of such Competitive Bid Borrowing and (II) the
Termination Date), (y) interest payment date or dates relating thereto, and
(z) other terms (if any) to be applicable to such Competitive Bid
Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one
Business Day prior to the date of the proposed Competitive Bid Borrowing,
if the Borrower shall specify in the Notice of Competitive Bid Borrowing
that the rates of interest to be offered by the Lenders shall be fixed
rates per annum (the Advances comprising any such Competitive Bid Borrowing
being referred to herein as "Fixed Rate Advances") and (B) at least four
-------------------
Business Days prior to the date of the proposed Competitive Bid Borrowing,
if the Borrower shall instead specify in the Notice of Competitive Bid
Borrowing that the Advances comprising such Competitive Bid Borrowing shall
be LIBO Rate Advances. Each Notice of Competitive Bid Borrowing shall be
irrevocable and binding on the Borrower. The Agent shall in turn promptly
notify each Lender of each request for a Competitive Bid Borrowing received
by it from the Borrower by sending such Lender a copy of the related Notice
of Competitive Bid Borrowing.
<PAGE>
15
(ii) Each Lender may, if, in its sole discretion, it elects to do so,
irrevocably offer to make one or more Competitive Bid Advances to the
Borrower as part of such proposed Competitive Bid Borrowing at a rate or
rates of interest specified by such Lender in its sole discretion, by
notifying the Agent (which shall give prompt notice thereof to the
Borrower), (A) before 9:30 A.M. (New York City time) on the date of such
proposed Competitive Bid Borrowing, in the case of a Competitive Bid
Borrowing consisting of Fixed Rate Advances and (B) before 10:00 A.M. (New
York City time) three Business Days before the date of such proposed
Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing
consisting of LIBO Rate Advances of the minimum amount and maximum amount
of each Competitive Bid Advance which such Lender would be willing to make
as part of such proposed Competitive Bid Borrowing (which amounts of such
proposed Competitive Bid may, subject to the proviso to the first sentence
of this Section 2.03(a), exceed such Lender's Commitment, if any), the rate
or rates of interest therefor and such Lender's Applicable Lending Office
with respect to such Competitive Bid Advance; provided that if the Agent in
--------
its capacity as a Lender shall, in its sole discretion, elect to make any
such offer, it shall notify the Borrower of such offer at least 30 minutes
before the time and on the date on which notice of such election is to be
given to the Agent, by the other Lenders. If any Lender shall elect not to
make such an offer, such Lender shall so notify the Agent before 10:00 A.M.
(New York City time), and such Lender shall not be obligated to, and shall
not, make any Competitive Bid Advance as part of such Competitive Bid
Borrowing; provided that the failure by any Lender to give such notice
--------
shall not cause such Lender to be obligated to make any Competitive Bid
Advance as part of such proposed Competitive Bid Borrowing.
(iii) The Borrower shall, in turn, (A) before 10:30 A.M. (New York
City time) on the date of such proposed Competitive Bid Borrowing, in the
case of a Competitive Bid Borrowing consisting of Fixed Rate Advances and
(B) before 12:00 noon (New York City time) three Business Days before the
date of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of LIBO Rate Advances, either:
(x) cancel such Competitive Bid Borrowing by giving the Agent
notice to that effect, or
(y) accept one or more of the offers made by any Lender or
Lenders pursuant to paragraph (ii) above, in its sole discretion, by
giving notice to the Agent of the amount of each Competitive Bid
Advance (which amount shall be equal to or greater than the minimum
amount, and equal to or less than the maximum amount, notified to the
Borrower by the Agent on behalf of such Lender for such Competitive
Bid Advance pursuant to paragraph (ii) above) to be made by each
Lender as part of such Competitive Bid Borrowing, and reject any
remaining offers made by Lenders pursuant to paragraph (ii) above by
giving the Agent notice to that effect, provided, however that the
-------- -------
aggregate amount of Competitive Bid Advances so accepted shall not
exceed the proposed Competitive Bid Borrowing specified in the related
Notice of Competitive Bid Borrowing. The Borrower shall accept the
offers made by any Lender or Lenders to make Competitive Bid Advances
in order of the lowest to the highest rates of interest offered by
such Lenders. If two or more Lenders have offered the same interest
rate, the amount to be borrowed at such interest rate will be
allocated among such Lenders in proportion to the amount that each
such Lender offered at such interest rate.
(iv) If the Borrower notifies the Agent that such Competitive Bid
Borrowing is cancelled pursuant to paragraph (iii)(x) above, the Agent
shall give prompt notice thereof to the Lenders and such Competitive Bid
Borrowing shall not be made.
(v) If the Borrower accepts one or more of the offers made by any
Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent shall in
turn promptly notify (A) each Lender that has made an offer as described in
paragraph (ii) above, of the date and aggregate amount of such Competitive
Bid Borrowing and whether or not any offer or offers made by such Lender
pursuant to paragraph (ii) above have been accepted
<PAGE>
16
by the Borrower, (B) each Lender that is to make a Competitive Bid Advance
as part of such Competitive Bid Borrowing, of the amount of each
Competitive Bid Advance to be made by such Lender as part of such
Competitive Bid Borrowing, and (C) each Lender that is to make a
Competitive Bid Advance as part of such Competitive Bid Borrowing, upon
receipt, that the Agent has received forms of documents appearing to
fulfill the applicable conditions set forth in Article III. Each Lender
that is to make a Competitive Bid Advance as part of such Competitive Bid
Borrowing shall, before 12:00 noon (New York City time) on the date of such
Competitive Bid Borrowing specified in the notice received from the Agent
pursuant to clause (A) of the preceding sentence or any later time when
such Lender shall have received notice from the Agent pursuant to clause
(C) of the preceding sentence, make available for the account of its
Applicable Lending Office to the Agent at its address
referred to in Section 8.02, in same day funds, such Lender's portion of
such Competitive Bid Borrowing. Upon fulfillment of the applicable
conditions set forth in Article III and after receipt by the Agent of such
funds, the Agent will make such funds available to the Borrower at the
location specified by the Borrower in its Notice of Competitive Bid
Borrowing. Promptly after each Competitive Bid Borrowing the Agent will
notify each Lender of the amount of the Competitive Bid Borrowing, the
consequent Competitive Bid Reduction and the dates upon which such
Competitive Bid Reduction commenced and will terminate. Competitive Bid
Advances made by any Lender pursuant to this Section 2.03 shall not affect
the obligation of any such Lender to make Revolving Credit Advances
hereunder.
(vi) If the Borrower notifies the Agent that it accepts one or more of
the offers made by any Lender or Lenders pursuant to paragraph (iii)(y)
above, such notice of acceptance shall be irrevocable and binding on the
Borrower. The Borrower shall indemnify each Lender against any loss, cost
or expense incurred by such Lender as a result of any failure to fulfill on
or before the date specified in the related Notice of Competitive Bid
Borrowing for such Competitive Bid Borrowing the applicable conditions set
forth in Article III, including, without limitation, any loss (including
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Competitive Bid Advance to be made by such Lender as
part of such Competitive Bid Borrowing when such Competitive Bid Advance,
as a result of such failure, is not made on such date.
(b) Each Competitive Bid Borrowing shall be in an aggregate amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof and,
following the making of each Competitive Bid Borrowing, the Borrower shall be in
compliance with the limitation set forth in the proviso to the first sentence of
subsection (a) above.
(c) Within the limits and on the conditions set forth in this Section
2.03, the Borrower may from time to time borrow under this Section 2.03, repay
or prepay pursuant to subsection (d) below, and reborrow under this Section
2.03, provided that a Competitive Bid Borrowing shall not be made within three
--------
Business Days of the date of any other Competitive Bid Borrowing.
(d) The Borrower shall repay to the Agent for the account of each
Lender that has made a Competitive Bid Advance, on the maturity date of each
Competitive Bid Advance (such maturity date being that specified by the Borrower
for repayment of such Competitive Bid Advance in the related Notice of
Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and
provided in the Competitive Bid Note evidencing such Competitive Bid Advance),
the then unpaid principal amount of such Competitive Bid Advance. The Borrower
shall have no right to prepay any principal amount of any Competitive Bid
Advance unless, and then only on the terms, specified by the Borrower for such
Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above and set forth in the Competitive
Bid Note evidencing such Competitive Bid Advance.
(e) The Borrower shall pay interest on the unpaid principal amount of
each Competitive Bid Advance from the date of such Competitive Bid Advance to
the date the principal amount of such Competitive Bid Advance is repaid in full,
at the rate of interest for such Competitive Bid Advance specified by the Lender
making such Competitive Bid Advance in its notice with respect thereto delivered
pursuant to subsection (a)(ii) above, payable on the interest payment date or
dates specified by the Borrower for such Competitive Bid Advance in the related
Notice of
<PAGE>
17
Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above, as
provided in the Competitive Bid Note evidencing such Competitive Bid Advance.
Upon the occurrence and during the continuance of an Event of Default under
Section 6.01(a) related to the failure to pay principal, interest or fees, the
Borrower shall pay interest on the amount of unpaid principal of and interest on
each Competitive Bid Advance owing to a Lender, payable in arrears on the date
or dates interest is payable thereon, at a rate per annum equal at all times to
2% per annum above the rate per annum required to be paid on such Competitive
Bid Advance under the terms of the Competitive Bid Note evidencing such
Competitive Bid Advance unless otherwise agreed in such Competitive Bid Note.
(f) The indebtedness of the Borrower resulting from each Competitive
Bid Advance made to the Borrower as part of a Competitive Bid Borrowing shall be
evidenced by a separate Competitive Bid Note of the Borrower payable to the
order of the Lender making such Competitive Bid Advance.
(g) Upon delivery of each Notice of Competitive Bid Borrowing, the
Borrower shall pay a non-refundable fee to the Agent for its own account as such
fee may from time to time be agreed between the Borrower and the Agent.
SECTION 2.04. Fees. (a) Facility Fee. The Borrower agrees to pay
---- ------------
to the Agent for the account of each Lender a facility fee on the aggregate
amount of such Lender's Commitment from the date hereof in the case of each
Initial Lender and from the effective date specified in the Assumption Agreement
or in the Assignment and Acceptance pursuant to which it became a Lender in the
case of each other Lender until the Termination Date at a rate per annum equal
to the Applicable Percentage in effect from time to time, payable in arrears
quarterly on the last day of each March, June, September and December,
commencing December 31, 1999, and on the Termination Date.
(b) Agent's Fees. The Borrower shall pay to the Agent for its own
------------
account such fees as may from time to time be agreed between the Borrower and
the Agent.
SECTION 2.05. Optional Termination or Reduction of the Commitments.
----------------------------------------------------
The Borrower shall have the right, upon at least three Business Days' notice to
the Agent, to terminate in whole or reduce ratably in part the unused portions
of the respective Commitments of the Lenders, provided that each partial
--------
reduction shall be in the aggregate amount of $10,000,000 or an integral
multiple of $1,000,000 in excess thereof and provided further that the
--------- -------
aggregate amount of the Commitments of the Lenders shall not be reduced to an
amount that is less than the aggregate principal amount of the Competitive Bid
Advances then outstanding. Any Commitment or portion of a Commitment which is
reduced or terminated pursuant to this Section 2.05 may not be reinstated.
SECTION 2.06. Repayment of Revolving Credit Advances. The Borrower
--------------------------------------
shall repay to the Agent for the ratable account of the Lenders on the
Termination Date the aggregate principal amount of the Revolving Credit Advances
then outstanding.
SECTION 2.07. Interest on Revolving Credit Advances. (a) Scheduled
------------------------------------- ---------
Interest. The Borrower shall pay interest on the unpaid principal amount of
- --------
each Revolving Credit Advance owing to each Lender from the date of such
Revolving Credit Advance until such principal amount shall be paid in full, at
the following rates per annum:
(i) Base Rate Advances. During such periods as such Revolving Credit
------------------
Advance is a Base Rate Advance, a rate per annum equal at all times to the
sum of (x) the Base Rate in effect from time to time plus (y) the
----
Applicable Margin in effect from time to time plus (z) the Applicable
----
Utilization Fee in effect from time to time, payable in arrears quarterly
on the last day of each March, June, September and December during such
periods and on the date such Base Rate Advance shall be Converted or paid
in full.
(ii) Eurodollar Rate Advances. During such periods as such Revolving
------------------------
Credit Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Revolving Credit Advance to the
sum of (x) the Eurodollar Rate for such Interest Period for such Revolving
Credit
<PAGE>
18
Advance plus (y) the Applicable Margin in effect from time to time
----
plus (z) the Applicable Utilization Fee in effect from time to time,
----
payable in arrears on the last day of such Interest Period and, if such
Interest Period has a duration of more than three months, on each day that
occurs during such Interest Period every three months from the first day of
such Interest Period and on the date such Eurodollar Rate Advance shall be
Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the continuance
----------------
of an Event of Default under Section 6.01(a) related to the failure to pay
principal, interest or fees, the Borrower shall pay interest on (i) the unpaid
principal amount of each Revolving Credit Advance owing to each Lender, payable
in arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate
per annum equal at all times to 2% per annum above the rate per annum required
to be paid on such Revolving Credit Advance pursuant to clause (a)(i) or (a)(ii)
above and (ii) to the fullest extent permitted by law, the amount of any
interest, fee or other amount payable hereunder that is not paid when due, from
the date such amount shall be due until such amount shall be paid in full,
payable in arrears on the date such amount shall be paid in full and on demand,
at a rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on Base Rate Advances pursuant to clause (a)(i) above.
SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank
---------------------------
agrees to furnish to the Agent timely information for the purpose of determining
each Eurodollar Rate and each LIBO Rate. If any one or more of the Reference
Banks shall not furnish such timely information to the Agent for the purpose of
determining any such interest rate, the Agent shall determine such interest rate
on the basis of timely information furnished by the remaining Reference Banks.
The Agent shall give prompt notice to the Borrower and the Lenders of the
applicable interest rate determined by the Agent for purposes of Section
2.07(a)(i) or (ii), and the rate, if any, furnished by each Reference Bank for
the purpose of determining the interest rate under Section 2.07(a)(ii).
(b) If, with respect to any Eurodollar Rate Advances, the Required
Lenders notify the Agent that the Eurodollar Rate for any Interest Period for
such Advances will not adequately reflect the cost to such Required Lenders of
making, funding or maintaining their respective Eurodollar Rate Advances for
such Interest Period, the Agent shall forthwith so notify the Borrower and the
Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance, and (ii) the obligation of the Lenders to make, or to Convert Revolving
Credit Advances into, Eurodollar Rate Advances shall be suspended until the
Agent shall notify the Borrower and the Lenders that the circumstances causing
such suspension no longer exist.
(c) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the Agent will
forthwith so notify the Borrower and the Lenders and such Advances will
automatically, on the last day of the then existing Interest Period therefor, be
Converted into Base Rate Advances.
(d) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $10,000,000, such Advances shall
automatically Convert into Base Rate Advances.
(e) Upon the occurrence and during the continuance of any Event of
Default, (i) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(ii) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
(f) If Dow Jones Markets Telerate Page 3750 is unavailable and fewer
than two Reference Banks furnish timely information to the Agent for determining
the Eurodollar Rate or LIBO Rate for any Eurodollar Rate Advances or LIBO Rate
Advances, as the case may be,
<PAGE>
19
(i) the Agent shall forthwith notify the Borrower and the Lenders that
the interest rate cannot be determined for such Eurodollar Rate Advances or
LIBO Rate Advances, as the case may be,
(ii) with respect to Eurodollar Rate Advances, each such Advance will
automatically, on the last day of the then existing Interest Period
therefor, be prepaid by the Borrower or be automatically Converted into a
Base Rate Advance (or if such Advance is then a Base Rate Advance, will
continue as a Base Rate Advance), and
(iii) the obligation of the Lenders to make Eurodollar Rate Advances
or LIBO Rate Advances or to Convert Revolving Credit Advances into
Eurodollar Rate Advances shall be suspended until the Agent shall notify
the Borrower and the Lenders that the circumstances causing such suspension
no longer exist.
SECTION 2.09. Optional Conversion of Revolving Credit Advances. The
------------------------------------------------
Borrower may on any Business Day, upon notice given to the Agent not later than
12:00 noon (New York City time) on the third Business Day prior to the date of
the proposed Conversion and subject to the provisions of Sections 2.08 and 2.12,
Convert all Revolving Credit Advances of one Type comprising the same Borrowing
into Revolving Credit Advances of the other Type; provided, however, that any
-------- -------
Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made
only on the last day of an Interest Period for such Eurodollar Rate Advances,
any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in
an amount not less than the minimum amount specified in Section 2.02(b) and no
Conversion of any Revolving Credit Advances shall result in more separate
Revolving Credit Borrowings than permitted under Section 2.02(b). Each such
notice of a Conversion shall, within the restrictions specified above, specify
(i) the date of such Conversion, (ii) the Revolving Credit Advances to be
Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for each such Advance. Each notice of
Conversion shall be irrevocable and binding on the Borrower.
SECTION 2.10. Prepayments of Revolving Credit Advances. The Borrower
----------------------------------------
may, upon notice at least two Business Days' prior to the date of such
prepayment, in the case of Eurodollar Rate Advances, and not later than 12:00
noon (New York City time) on the date of such prepayment, in the case of Base
Rate Advances, to the Agent stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Borrower shall, prepay
the outstanding principal amount of the Revolving Credit Advances comprising
part of the same Revolving Credit Borrowing in whole or ratably in part,
together with accrued interest to the date of such prepayment on the principal
amount prepaid; provided, however, that (x) each partial prepayment shall be in
-------- -------
an aggregate principal amount of $10,000,000 or an integral multiple of
$1,000,000 in excess thereof and (y) in the event of any such prepayment of a
Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 8.04(c).
SECTION 2.11. Increased Costs. (a) If, due to either (i) the
---------------
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Eurodollar Rate Advances or LIBO Rate Advances
(excluding for purposes of this Section 2.11 any such increased costs resulting
from (i) Taxes or Other Taxes (as to which Section 2.14 shall govern) and (ii)
changes in the basis of taxation of overall net income or overall gross income
by the United States or by the foreign jurisdiction or state under the laws of
which such Lender is organized or has its Applicable Lending Office or any
political subdivision thereof), then the Borrower shall from time to time, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender additional amounts sufficient to compensate
such Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrower and the Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
<PAGE>
20
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Agent), the Borrower shall pay to the
Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder. A certificate as to such amounts
submitted to the Borrower and the Agent by such Lender shall be conclusive and
binding for all purposes, absent manifest error.
SECTION 2.12. Illegality. Notwithstanding any other provision of
----------
this Agreement, if any Lender shall notify the Agent that the introduction of or
any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for any Lender or its Eurodollar Lending Office to perform its
obligations hereunder to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances hereunder, (a) each Eurodollar Rate Advance will
automatically, upon such demand, Convert into a Base Rate Advance and (b) the
obligation of the Lenders to make Eurodollar Rate Advances or LIBO Rate Advances
or to Convert Revolving Credit Advances into Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
SECTION 2.13. Payments and Computations. (a) The Borrower shall
-------------------------
make each payment hereunder not later than 12:00 noon (New York City time) on
the day when due to the Agent at the Agent's Account in same day funds. The
Agent will promptly thereafter cause to be distributed like funds relating to
the payment of principal or interest or facility fees ratably (other than
amounts payable pursuant to Section 2.03, 2.11, 2.14 or 8.04(c)) to the Lenders
for the account of their respective Applicable Lending Offices, and like funds
relating to the payment of any other amount payable to any Lender to such Lender
for the account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon any Assuming Lender becoming
a Lender hereunder as a result of a Commitment Increase pursuant to Section 2.18
or an extension of the Termination Date pursuant to Section 2.19, and upon the
Agent's receipt of such Lender's Assumption Agreement and recording of the
information contained therein in the Register, from and after the applicable
Increase Date or Extension Date, as the case may be, the Agent shall make all
payments hereunder and under any Notes issued in connection therewith in respect
of the interest assumed thereby to the Assuming Lender. Upon its acceptance of
an Assignment and Acceptance and recording of the information contained therein
in the Register pursuant to Section 8.07(c), from and after the effective date
specified in such Assignment and Acceptance, the Agent shall make all payments
hereunder and under the Notes in respect of the interest assigned thereby to the
Lender assignee thereunder, and the parties to such Assignment and Acceptance
shall make all appropriate adjustments in such payments for periods prior to
such effective date directly between themselves.
(b) All computations of interest based on the Base Rate shall be made
by the Agent on the basis of a year of 365 or 366 days, as the case may be, all
computations of interest based on the Eurodollar Rate, the LIBO Rate or the
Federal Funds Rate or in respect of Fixed Rate Advances, facility fees and
utilization fees shall be made by the Agent on the basis of a year of 360 days,
in each case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest or
facility fees are payable. Each determination by the Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(c) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or facility fee, as the case
may be; provided, however, that, if such extension would cause payment of
-------- -------
interest on or principal of Eurodollar Rate Advances or LIBO Rate Advances to be
made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
(d) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Lenders hereunder that the
Borrower will not make such payment in full, the Agent may assume
<PAGE>
21
that the Borrower has made such payment in full to the Agent on such date and
the Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent the Borrower shall not have so made such payment in full to
the Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Agent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower
-----
hereunder or under the Notes shall be made, in accordance with Section 2.13,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent, taxes
---------
imposed on its overall net income, and franchise taxes imposed on it in lieu of
net income taxes, by the jurisdiction under the laws of which such Lender or the
Agent (as the case may be) is organized or any political subdivision thereof
and, in the case of each Lender, taxes imposed on its overall net income, and
franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction
of such Lender's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law
-----
to deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Lender or the Agent, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14) such Lender or
the Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
(b) In addition, the Borrower shall pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or under the Notes or from the
execution, delivery or registration of, performing under, or otherwise with
respect to, this Agreement or the Notes (hereinafter referred to as "Other
-----
Taxes").
- ------
(c) The Borrower shall indemnify each Lender and the Agent for and
hold it harmless against the full amount of Taxes or Other Taxes (including,
without limitation, taxes of any kind imposed by any jurisdiction on amounts
payable under this Section 2.14) imposed on or paid by such Lender or the Agent
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. This indemnification shall
be made within 30 days from the date such Lender or the Agent (as the case may
be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent, at its address referred to in Section 8.02,
the original or a certified copy of a receipt evidencing such payment. In the
case of any payment hereunder or under the Notes by or on behalf of the Borrower
through an account or branch outside the United States or by or on behalf of the
Borrower by a payor that is not a United States person, if the Borrower
determines that no Taxes are payable in respect thereof, the Borrower shall
furnish, or shall cause such payor to furnish, to the Agent, at such address, an
opinion of counsel acceptable to the Agent stating that such payment is exempt
from Taxes. For purposes of this subsection (d) and subsection (e), the terms
"United States" and "United States person" shall have the meanings specified in
- -------------- --------------------
Section 7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Initial Lender and on the date of the Assumption
Agreement or the Assignment and Acceptance pursuant to which it becomes a Lender
in the case of each other Lender, and from time to time thereafter as requested
in writing by the Borrower (but only so long as such Lender remains lawfully
able to do so), shall provide each of the Agent and the Borrower with two
original Internal Revenue Service forms 1001 or 4224, as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, certifying
that such Lender is exempt from or entitled to a reduced rate of United States
withholding tax on payments
<PAGE>
22
pursuant to this Agreement or the Notes. If the form provided by a Lender at the
time such Lender first becomes a party to this Agreement indicates a United
States interest withholding tax rate in excess of zero, withholding tax at such
rate shall be considered excluded from Taxes unless and until such Lender
provides the appropriate forms certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods governed by such form; provided, however, that, if at the date of
-------- -------
the Assignment and Acceptance pursuant to which a Lender assignee becomes a
party to this Agreement, the Lender assignor was entitled to payments under
subsection (a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender assignee on such date. If any form or
document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224, that the Lender reasonably considers to be confidential, the Lender shall
give notice thereof to the Borrower and shall not be obligated to include in
such form or document such confidential information.
(f) For any period with respect to which a Lender has failed to
provide the Borrower with the appropriate form described in Section 2.14(e)
(other than if such failure is due to a change in law occurring subsequent to
- ------ ----
the date on which a form originally was required to be provided, or if such form
otherwise is not required under subsection (e) above), such Lender shall not be
entitled to indemnification under Section 2.14(a) or (c) with respect to Taxes
imposed by the United States by reason of such failure; provided, however, that
-------- -------
should a Lender become subject to Taxes because of its failure to deliver a form
required hereunder, the Borrower shall take such steps as the Lender shall
reasonably request to assist the Lender to recover such Taxes.
(g) Any Lender claiming any additional amounts payable pursuant to
this Section 2.14 agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Eurodollar Lending Office if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain
------------------------
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Revolving Credit Advances owing to
it (other than pursuant to Section 2.11, 2.14 or 8.04(c)) in excess of its
ratable share of payments on account of the Revolving Credit Advances obtained
by all the Lenders, such Lender shall forthwith purchase from the other Lenders
such participations in the Revolving Credit Advances owing to them as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; provided, however, that if all or any portion of such excess
-------- -------
payment is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the purchasing
Lender the purchase price to the extent of such recovery together with an amount
equal to such Lender's ratable share (according to the proportion of (i) the
amount of such Lender's required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.15 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
SECTION 2.16. Evidence of Debt. (a) Each Lender shall maintain in
----------------
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Revolving Credit
Advance owing to such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder in respect of Revolving Credit Advances. The Borrower agrees that upon
notice by any Lender to the Borrower (with a copy of such notice to the Agent)
to the effect that a Revolving Credit Note is required or appropriate in order
for such Lender to evidence (whether for purposes of pledge, enforcement or
otherwise) the Revolving Credit Advances owing to, or to be made by, such
Lender, the Borrower shall
<PAGE>
23
promptly execute and deliver to such Lender a Revolving Credit Note payable to
the order of such Lender in a principal amount up to the Commitment of such
Lender.
(b) The Register maintained by the Agent pursuant to Section 8.07(d)
shall include a control account, and a subsidiary account for each Lender, in
which accounts (taken together) shall be recorded (i) the date and amount of
each Borrowing made hereunder, the Type of Advances comprising such Borrowing
and, if appropriate, the Interest Period applicable thereto, (ii) the terms of
each Assumption Agreement and each Assignment and Acceptance delivered to and
accepted by it, (iii) the amount of any principal or interest due and payable or
to become due and payable from the Borrower to each Lender hereunder and (iv)
the amount of any sum received by the Agent from the Borrower hereunder and each
Lender's share thereof.
(c) Entries made in good faith by the Agent in the Register pursuant
to subsection (b) above, and by each Lender in its account or accounts pursuant
to subsection (a) above, shall be prima facie evidence of the amount of
----- -----
principal and interest due and payable or to become due and payable from the
Borrower to, in the case of the Register, each Lender and, in the case of such
account or accounts, such Lender, under this Agreement, absent manifest error;
provided, however, that the failure of the Agent or such Lender to make an
- -------- -------
entry, or any finding that an entry is incorrect, in the Register or such
account or accounts shall not limit or otherwise affect the obligations of the
Borrower under this Agreement.
SECTION 2.17. Use of Proceeds. The proceeds of the Advances shall be
---------------
available (and the Borrower agrees that it shall use such proceeds) solely for
general corporate purposes (including, without limitation, working capital,
back-stop of commercial paper programs and acquisition financing) of the
Borrower and its Subsidiaries.
SECTION 2.18. Increase in the Aggregate Commitments. (a) The
-------------------------------------
Borrower may, at any time but in any event not more than once in any calendar
year prior to the Termination Date, by notice to the Agent, request that the
aggregate amount of the Commitment be increased by an amount of $15,000,000 or
an integral multiple of $1,000,000 in excess thereof (each a "Commitment
----------
Increase") to be effective as of a date that is at least 90 days prior to the
- --------
scheduled Termination Date then in effect (the "Increase Date") as specified in
-------------
the related notice to the Agent; provided, however that (i) in no event shall
-------- -------
the aggregate amount of the Commitments at any time exceed $350,000,000 and (ii)
on the date of any request by the Borrower for a Commitment Increase and on the
related Increase Date, the applicable conditions set forth in Article III shall
be satisfied.
(b) The Agent shall promptly notify the Lenders of a request by the
Borrower for a Commitment Increase, which notice shall include (i) the proposed
amount of such requested Commitment Increase, (ii) the proposed Increase Date
and (iii) the date by which Lenders wishing to participate in the Commitment
Increase must commit to an increase in the amount of their respective
Commitments (the "Commitment Date"). Each Lender that is willing to participate
---------------
in such requested Commitment Increase (each an "Increasing Lender") shall, in
-----------------
its sole discretion, give written notice to the Agent on or prior to the
Commitment Date of the amount by which it is willing to increase its Commitment.
If the Lenders notify the Agent that they are willing to increase the amount of
their respective Commitments by an aggregate amount that exceeds the amount of
the requested Commitment Increase, the requested Commitment Increase shall be
allocated among the Lenders willing to participate based on the ratio of each
Increasing Lender's proposed Commitment Increase to the aggregate amount of all
Increasing Lenders' proposed Commitment Increase.
(c) Promptly following each Commitment Date, the Agent shall notify
the Borrower as to the amount, if any, by which the Lenders are willing to
participate in the requested Commitment Increase. If the aggregate amount by
which the Lenders are willing to participate in any requested Commitment
Increase on any such Commitment Date is less than the requested Commitment
Increase, then the Borrower may extend offers to one or more Eligible Assignees
to participate in any portion of the requested Commitment Increase that has not
been committed to by the Lenders as of the applicable Commitment Date; provided,
--------
however, that the Commitment of each such Eligible Assignee shall be in an
- -------
amount of $15,000,000 or an integral multiple of $1,000,000 in excess thereof.
<PAGE>
24
(d) On each Increase Date, each Eligible Assignee that accepts an
offer to participate in a requested Commitment Increase in accordance with
Section 2.18(c) (each such Eligible Assignee and each Eligible Assignee that
agrees to an extension of the Termination Date in accordance with Section
2.19(c), an "Assuming Lender") shall become a Lender party to this Agreement as
---------------
of such Increase Date and the Commitment of each Increasing Lender for such
requested Commitment Increase shall be so increased by such amount (or by the
amount allocated to such Lender pursuant to the last sentence of Section
2.18(b)) as of such Increase Date; provided, however, that the Agent shall have
-------- -------
received on or before such Increase Date the following, each dated such date:
(i) (A) certified copies of resolutions of the Board of Directors of
the Borrower or the Executive Committee of such Board approving the
Commitment Increase and the corresponding modifications to this Agreement
and (B) an opinion of counsel for the Borrower (which may be in-house
counsel), in substantially the form of Exhibit D hereto;
(ii) an assumption agreement from each Assuming Lender, if any, in
form and substance satisfactory to the Borrower and the Agent (each an
"Assumption Agreement"), duly executed by such Eligible Assignee, the Agent
---------------------
and the Borrower; and
(iii) confirmation from each Increasing Lender of the increase in the
amount of its Commitment in a writing satisfactory to the Borrower and the
Agent.
On each Increase Date, upon fulfillment of the conditions set forth in the
immediately preceding sentence of this Section 2.18(d), the Agent shall notify
the Lenders (including, without limitation, each Assuming Lender) and the
Borrower, on or before 1:00 P.M. (New York City time), by telecopier or telex,
of the occurrence of the Commitment Increase to be effected on such Increase
Date and shall record in the Register the relevant information with respect to
each Increasing Lender and each Assuming Lender on such date.
SECTION 2.19. Extension of Termination Date. (a) At least 30 days
-----------------------------
but not more than 45 days prior to the Termination Date, the Borrower, by
written notice to the Agent, may request an extension of the Termination Date in
effect at such time by 364 days from its then scheduled expiration. The Agent
shall promptly notify each Lender of such request, and each Lender shall in
turn, in its sole discretion, not earlier than 30 days prior to the Termination
Date and in any event not later than 20 days prior to the Termination Date,
notify the Borrower and the Agent in writing as to whether such Lender will
consent to such extension. If any Lender shall fail to notify the Agent and the
Borrower in writing of its consent to any such request for extension of the
Termination Date at least 20 days prior to the Termination Date, such Lender
shall be deemed to be a Non-Consenting Lender with respect to such request. The
Agent shall notify the Borrower not later than 15 days prior to the Termination
Date of the decision of the Lenders regarding the Borrower's request for an
extension of the Termination Date.
(b) If all the Lenders consent in writing to any such request in
accordance with subsection (a) of this Section 2.19, the Termination Date in
effect at such time shall, effective as at the Termination Date (the "Extension
---------
Date"), be extended for 364 days; provided that on each Extension Date the
- ---- --------
applicable conditions set forth in Article III shall be satisfied. If less than
all of the Lenders consent in writing to any such request in accordance with
subsection (a) of this Section 2.19, the Termination Date in effect at such time
shall, effective as at the applicable Extension Date, be extended as to those
Lenders that so consented (each a "Consenting Lender") but shall not be extended
-----------------
as to any other Lender (each a "Non-Consenting Lender"). To the extent that the
---------------------
Termination Date is not extended as to any Lender pursuant to this Section 2.19
and the Commitment of such Lender is not assumed in accordance with subsection
(c) of this Section 2.19 on or prior to the applicable Extension Date, the
Commitment of such Non-Consenting Lender shall automatically terminate in whole
on such unextended Termination Date without any further notice or other action
by the Borrower, such Lender or any other Person; provided that such Non-
--------
Consenting Lender's rights under Sections 2.11, 2.14 and 8.04, and its
obligations under Section 7.05, shall survive the Termination Date for such
Lender as to matters occurring prior to such date. It is understood and agreed
that no Lender shall have any obligation whatsoever to agree to any request made
by the Borrower for any requested extension of the Termination Date.
<PAGE>
25
(c) If less than all of the Lenders consent to any such request
pursuant to subsection (a) of this Section 2.19, the Agent shall promptly so
notify the Consenting Lenders, and each Consenting Lender may, in its sole
discretion, give written notice to the Agent not later than 10 days prior to the
Termination Date of the amount of the Non-Consenting Lenders' Commitments for
which it is willing to accept an assignment. If the Consenting Lenders notify
the Agent that they are willing to accept assignments of Commitments in an
aggregate amount that exceeds the amount of the Commitments of the Non-
Consenting Lenders, such Commitments shall be allocated among the Consenting
Lenders willing to accept such assignments in such amounts as are agreed between
the Borrower and the Agent. If after giving effect to the assignments of
Commitments described above there remains any Commitments of Non-Consenting
Lenders, the Borrower may arrange for one or more Consenting Lenders or other
Eligible Assignees as Assuming Lenders to assume, effective as of the Extension
Date, any Non-Consenting Lender's Commitment and all of the obligations of such
Non-Consenting Lender under this Agreement thereafter arising, without recourse
to or warranty by, or expense to, such Non-Consenting Lender; provided, however,
-------- -------
that the amount of the Commitment of any such Assuming Lender as a result of
such substitution shall in no event be less than $15,000,000 unless the amount
of the Commitment of such Non-Consenting Lender is less than $15,000,000, in
which case such Assuming Lender shall assume all of such lesser amount; and
provided further that:
- -------- -------
(i) any such Consenting Lender or Assuming Lender shall have paid to
such Non-Consenting Lender (A) the aggregate principal amount of, and any
interest accrued and unpaid to the effective date of the assignment on, the
outstanding Advances, if any, of such Non-Consenting Lender plus (B) any
----
accrued but unpaid facility fees owing to such Non-Consenting Lender as of
the effective date of such assignment;
(ii) all additional costs reimbursements, expense reimbursements and
indemnities payable to such Non-Consenting Lender, and all other accrued
and unpaid amounts owing to such Non-Consenting Lender hereunder, as of the
effective date of such assignment shall have been paid to such Non-
Consenting Lender; and
(iii) with respect to any such Assuming Lender, the applicable
processing and recordation fee required under Section 8.07(a) for such
assignment shall have been paid;
provided further that such Non-Consenting Lender's rights under Sections 2.11,
- -------- -------
2.14 and 8.04, and its obligations under Section 7.05, shall survive such
substitution as to matters occurring prior to the date of substitution. At
least three Business Days prior to any Extension Date, (A) each such Assuming
Lender, if any, shall have delivered to the Borrower and the Agent an Assumption
Agreement, duly executed by such Assuming Lender, such Non-Consenting Lender,
the Borrower and the Agent, (B) any such Consenting Lender shall have delivered
confirmation in writing satisfactory to the Borrower and the Agent as to the
increase in the amount of its Commitment and (C) each Non-Consenting Lender
being replaced pursuant to this Section 2.19 shall have delivered to the Agent
any Note or Notes held by such Non-Consenting Lender. Upon the payment or
prepayment of all amounts referred to in clauses (i), (ii) and (iii) of the
immediately preceding sentence, each such Consenting Lender or Assuming Lender,
as of the Extension Date, will be substituted for such Non-Consenting Lender
under this Agreement and shall be a Lender for all purposes of this Agreement,
without any further acknowledgment by or the consent of the other Lenders, and
the obligations of each such Non-Consenting Lender hereunder shall, by the
provisions hereof, be released and discharged.
(d) If (after giving effect to any assignments pursuant to subsection
(b) of this Section 2.19) Lenders having at least 51% of the aggregate
Commitments in effect on the date immediately before such Extension Date consent
in writing to a requested extension (whether by execution or delivery of an
Assumption Agreement or otherwise) not later than one Business Day prior to such
Extension Date, the Agent shall so notify the Borrower, and, so long as no
Default shall have occurred and be continuing as of such Extension Date, or
shall occur as a consequence thereof, the Termination Date then in effect shall
be extended for the additional 364 day period as described in subsection (a) of
this Section 2.19, and all references in this Agreement, and in the Notes, if
any, to the "Termination Date" shall, with respect to each Consenting Lender and
----------------
each Assuming Lender for such Extension Date, refer to the Termination Date as
so extended. Promptly following each Extension Date, the Agent shall notify the
Lenders (including, without limitation, each Assuming Lender) of the extension
of the scheduled Termination Date in effect immediately prior thereto and shall
<PAGE>
26
thereupon record in the Register the relevant information with respect to each
such Consenting Lender and each such Assuming Lender.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01
------------------------------------------------------
and 2.03. Sections 2.01 and 2.03 of this Agreement shall become effective on
- --------
and as of the first date (the "Effective Date") on which the following
--------------
conditions precedent have been satisfied:
(a) There shall have occurred no Material Adverse Change since October
31, 1998.
(b) There shall exist no action, suit, investigation, litigation or
proceeding affecting the Borrower or any of its Subsidiaries pending or
threatened before any court, governmental agency or arbitrator that (i)
could be reasonably expected to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of this
Agreement or any Note or the consummation of the transactions contemplated
hereby.
(c) Nothing shall have come to the attention of the Lenders during the
course of their due diligence investigation to lead them to believe that
the Information Memorandum was or has become misleading, incorrect or
incomplete in any material respect; without limiting the generality of the
foregoing, the Lenders shall have been given such access to the management,
records, books of account, contracts and properties of the Borrower and its
Subsidiaries as they shall have requested.
(d) All governmental and third party consents and approvals necessary
in connection with the transactions contemplated hereby shall have been
obtained (without the imposition of any conditions that are not acceptable
to the Lenders) and shall remain in effect, and no law or regulation shall
be applicable in the reasonable judgment of the Lenders that restrains,
prevents or imposes materially adverse conditions upon the transactions
contemplated hereby.
(e) The Borrower shall have notified each Lender and the Agent in
writing as to the proposed Effective Date.
(f) The Borrower shall have paid all accrued fees and expenses of the
Agent and the Lenders (including the accrued reasonable invoiced fees and
expenses of counsel to the Agent).
(g) On the Effective Date, the following statements shall be true and
the Agent shall have received for the account of each Lender a certificate
signed by a duly authorized officer of the Borrower, dated the Effective
Date, stating that:
(i) The representations and warranties contained in Section 4.01
are correct on and as of the Effective Date, and
(ii) No event has occurred and is continuing that constitutes a
Default.
(h) The Agent shall have received on or before the Effective Date the
following, each dated such day, in form and substance satisfactory to the
Agent and (except for the Revolving Credit Notes) in sufficient copies for
each Lender:
<PAGE>
27
(i) The Revolving Credit Notes to the order of the Lenders to the
extent requested by any Lender pursuant to Section 2.16.
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower approving this Agreement and the Notes, and of
all documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement and the Notes.
(iii) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of the officers of
the Borrower authorized to sign this Agreement and the Notes and the other
documents to be delivered hereunder.
(iv) A favorable opinion of Wilson Sonsini Goodrich & Rosati,
counsel for the Borrower, substantially in the form of Exhibit D hereto and
as to such other matters as any Lender through the Agent may reasonably
request.
(v) A favorable opinion of Shearman & Sterling, counsel for the
Agent, in form and substance satisfactory to the Agent.
SECTION 3.02. Conditions Precedent to Each Revolving Credit
---------------------------------------------
Borrowing, Increase Date and Extension Date. The obligation of each Lender to
- -------------------------------------------
make a Revolving Credit Advance on the occasion of each Revolving Credit
Borrowing, each Commitment Increase and each extension of Commitments pursuant
to Section 2.19 shall be subject to the conditions precedent that the Effective
Date shall have occurred and on the date of such Revolving Credit Borrowing, the
applicable Increase Date or the applicable Extension Date (a) the following
statements shall be true (and each of the giving of the applicable Notice of
Revolving Credit Borrowing, request for Commitment Increase or request for
Commitment Extension and the acceptance by the Borrower of the proceeds of such
Revolving Credit Borrowing shall constitute a representation and warranty by the
Borrower that on the date of such Borrowing, such Increase Date or such
Extension Date such statements are true):
(i) the representations and warranties contained in Section 4.01
(except, in the case of Revolving Credit Borrowings, the representations
set forth in the last sentence of subsection (e) thereof and in subsection
(f)(i) thereof) are correct on and as of such date, before and after giving
effect to such Revolving Credit Borrowing, such Increase Date or such
Extension Date and to the application of the proceeds therefrom, as though
made on and as of such date unless such representations and warranties
relate to an earlier date, in which case as of such earlier date, and
(ii) no event has occurred and is continuing, or would result from
such Revolving Credit Borrowing, such Increase Date, such Extension Date or
from the application of the proceeds therefrom, that constitutes a Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing.
------------------------------------------------------
The obligation of each Lender that is to make a Competitive Bid Advance on the
occasion of a Competitive Bid Borrowing to make such Competitive Bid Advance as
part of such Competitive Bid Borrowing is subject to the conditions precedent
that (i) the Agent shall have received the written confirmatory Notice of
Competitive Bid Borrowing with respect thereto, (ii) on or before the date of
such Competitive Bid Borrowing, but prior to such Competitive Bid Borrowing, the
Agent shall have received a Competitive Bid Note payable to the order of such
Lender for each of the one or more Competitive Bid Advances to be made by such
Lender as part of such Competitive Bid Borrowing, in a principal amount equal to
the principal amount of the Competitive Bid Advance to be evidenced thereby and
otherwise on such terms as were agreed to for such Competitive Bid Advance
in accordance with Section 2.03, and (iii) on the date of such Competitive Bid
<PAGE>
28
Borrowing the following statements shall be true (and each of the giving of the
applicable Notice of Competitive Bid Borrowing and the acceptance by the
Borrower of the proceeds of such Competitive Bid Borrowing shall constitute a
representation and warranty by the Borrower that on the date of such Competitive
Bid Borrowing such statements are true):
(a) the representations and warranties contained in Section 4.01 are
correct on and as of the date of such Competitive Bid Borrowing, before and
after giving effect to such Competitive Bid Borrowing and to the
application of the proceeds therefrom, as though made on and as of such
date,
(b) no event has occurred and is continuing, or would result from such
Competitive Bid Borrowing or from the application of the proceeds
therefrom, that constitutes a Default, and
(c) no event has occurred and no circumstance exists as a result of
which the information concerning the Borrower that has been provided to the
Agent and each Lender by the Borrower in connection herewith would include
an untrue statement of a material fact or omit to state any material fact
or any fact necessary to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 3.04. Determinations Under Section 3.01. For purposes of
---------------------------------
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the date that the Borrower,
by notice to the Lenders, designates as the proposed Effective Date, specifying
its objection thereto. The Agent shall promptly notify the Lenders of the
occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
----------------------------------------------
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Notes to be delivered by it, and the consummation of the
transactions contemplated hereby, are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate action, and do
not contravene (i) the Borrower's charter or by-laws, or (ii) any law or
(iii) any contractual restriction binding on or affecting the Borrower the
breach of which would limit in any respect the ability or right of the
Borrower to perform its obligations under this Agreement or the Notes.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for the due execution, delivery and performance by
the Borrower of this Agreement or the Notes to be delivered by it.
(d) This Agreement has been, and each of the Notes to be delivered by
it when delivered hereunder will have been, duly executed and delivered by
the Borrower. This Agreement is, and each of the
<PAGE>
29
Notes when delivered hereunder will be, the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in accordance
with their respective terms.
(e) The Consolidated balance sheet of the Borrower and its
Subsidiaries as at October 31, 1998, and the related Consolidated
statements of income and cash flows of the Borrower and its Subsidiaries
for the fiscal year then ended, and the Consolidated balance sheet of the
Borrower and its Subsidiaries as at July 31, 1999, and the related
Consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for the nine months then ended, in each case, accompanied by
an opinion of PricewaterhouseCoopers LLP, independent public accountants,
copies of which have been furnished to each Lender, fairly present, the
Consolidated financial condition of the Borrower and its Subsidiaries as at
such dates and the Consolidated results of the operations of the Borrower
and its Subsidiaries for the periods ended on such dates, all in accordance
with generally accepted accounting principles consistently applied. Since
October 31, 1998, there has been no Material Adverse Change.
(f) There is no pending or, to the Borrower's knowledge, threatened
action, suit, investigation, litigation or proceeding, including, without
limitation, any Environmental Action, affecting the Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator that (i)
could reasonably be likely to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of this
Agreement or any Note or the consummation of the transactions contemplated
hereby.
(g) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning
of Regulation U issued by the Board of Governors of the Federal Reserve
System), and no proceeds of any Advance will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
(h) The Borrower is not an "investment company", or a company
"controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
(i) The Borrower has (i) initiated a review and assessment of all
areas within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that could
be adversely affected by the risk that computer applications used by the
Borrower or any of its Subsidiaries (or suppliers, vendors and customers)
may be unable to recognize and perform properly date sensitive functions
involving certain dates prior to and any date after December 31, 1999 (the
"Year 2000 Problem"), (ii) developed a plan and timetable for addressing
-----------------
the Year 2000 Problem on a timely basis and (iii) to date, implemented that
plan in accordance with such timetable. Based on the foregoing, the
Borrower believes that all computer applications (including those of its
suppliers, vendors and customers) that are material to its or any of its
Subsidiaries' business and operations are reasonably expected on a timely
basis to be able to perform properly date-sensitive functions for all dates
before, on and after January 1, 2000, except to the extent that a failure
to do so could not reasonably be expected to have a Material Adverse
Effect.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
---------------------
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
-------------------------
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and Environmental Laws.
<PAGE>
30
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
---------------------
Subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all material taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (ii) all lawful claims that, if
unpaid, might by law reasonably be expected to become a Lien upon its
property; provided, however, that neither the Borrower nor any of its
-------- -------
Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and by
proper proceedings and as to which appropriate reserves are being
maintained, unless and until any Lien resulting therefrom attaches to its
property and becomes enforceable against its other creditors.
(c) Maintenance of Insurance. Maintain, and cause each of its
------------------------
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks
as is expected to be carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower
or such Subsidiary operates.
(d) Preservation of Corporate Existence, Etc. Preserve and maintain,
----------------------------------------
and cause each of its Material Subsidiaries to preserve and maintain, its
corporate existence, rights (charter and statutory) and franchises;
provided, however, that the Borrower and its Material Subsidiaries may
-------- -------
consummate any merger or consolidation permitted under Section 5.02(b) and
provided further that neither the Borrower nor any of its Material
-------- -------
Subsidiaries shall be required to preserve any right or franchise that is
not material to the business of the Borrower and its Material Subsidiaries,
or if the Board of Directors of the Borrower or such Material Subsidiary
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Borrower or such Material Subsidiary, as the
case may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such Material Subsidiary or the Lenders.
(e) Visitation Rights. At any reasonable time and from time to time,
-----------------
permit the Agent or any of the Lenders or any agents or representatives
thereof, to examine and make copies of and abstracts from the records and
books of account of, and visit the properties of, the Borrower and any of
its Material Subsidiaries, and to discuss the affairs, finances and
accounts of the Borrower and any of its Material Subsidiaries with any of
their officers or directors and with their independent certified public
accountants.
(f) Keeping of Books. Keep, and cause each of its Material
----------------
Subsidiaries to keep, proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets
and business of the Borrower and each such Material Subsidiary in
accordance with generally accepted accounting principles in effect from
time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and cause
------------------------------
each of its Material Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in good
working order and condition, ordinary wear and tear excepted.
(h) Transactions with Affiliates. Conduct, and cause each of its
----------------------------
Subsidiaries to conduct, all transactions otherwise permitted under this
Agreement with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Borrower or such Subsidiary than it
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate, provided, however, that (i) the Borrower or any of its
-------- -------
Subsidiaries may conduct transactions with the Borrower or any of its
Subsidiaries which are fair and reasonable, and (ii) the Borrower or any of
its Subsidiaries may conduct any transaction with Hewlett-Packard Company
("HP") in connection with (A) the realignment of HP's testing and
--
measurement business into the Borrower and its Subsidiaries, (B) the
divestiture by HP of its interests in the Borrower and its Subsidiaries
(whether through the public offering of the Borrower's stock, or the
distribution by HP of its capital stock in the Borrower to its
stockholders), or (C) the establishment of the Borrower and its
Subsidiaries as an independent going concern.
<PAGE>
31
(i) Reporting Requirements. Furnish to the Lenders:
----------------------
(i) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Borrower, the Consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such quarter and Consolidated statements of
income and cash flows of the Borrower and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end
of such quarter, duly certified (subject to year-end audit adjustments and
the absence of footnotes) by the chief financial officer of the Borrower as
having been prepared in accordance with generally accepted accounting
principles and a certificate of the chief financial officer of the Borrower
as to compliance with the terms of this Agreement and setting forth in
reasonable detail the calculations necessary to demonstrate compliance with
Section 5.03, provided that in the event of any change in GAAP used in the
--------
preparation of such financial statements, the Borrower shall also provide,
if necessary for the determination of compliance with Section 5.03, a
statement of reconciliation conforming such financial statements to GAAP;
(ii) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, a copy of the annual audit
report for such year for the Borrower and its Subsidiaries, containing the
Consolidated balance sheet of the Borrower and its Subsidiaries as of the
end of such fiscal year and Consolidated statements of income and cash
flows of the Borrower and its Subsidiaries for such fiscal year, in each
case accompanied by an opinion acceptable to the Required Lenders by
PricewaterhouseCoopers LLP or other independent public accountants
acceptable to the Required Lenders and a certificate of the chief financial
officer of the Borrower as to compliance with the terms of this Agreement
and setting forth in reasonable detail the calculations necessary to
demonstrate compliance with Section 5.03, provided that in the event of any
--------
change in GAAP used in the preparation of such financial statements, the
Borrower shall also provide, if necessary for the determination of
compliance with Section 5.03, a statement of reconciliation conforming such
financial statements to GAAP;
(iii) as soon as possible and in any event within five days
after the occurrence of each Default continuing on the date of such
statement, a statement of the chief financial officer of the Borrower
setting forth details of such Default and the action that the Borrower has
taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof, copies of all
reports that the Borrower sends to any of its securityholders, and copies
of all reports filed on Forms 10-Q and 10-K and any 8-K which announces
significant events affecting the business, condition (financial or
otherwise), or results of operations of the Borrower or the Borrower and
its Subsidiaries and registration statements filed on forms S-1, S-3 or S-4
that the Borrower or any Subsidiary files with the Securities and Exchange
Commission or any national securities exchange;
(v) promptly after the commencement thereof, notice of all
actions and proceedings before any court, governmental agency or arbitrator
affecting the Borrower or any of its Subsidiaries of the type described in
Section 4.01(f); and
(vi) such other information respecting the Borrower or any of its
Subsidiaries as any Lender through the Agent may from time to time
reasonably request.
SECTION 5.02. Negative Covenants. So long as any Advance shall
------------------
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will not:
<PAGE>
32
(a) Liens, Etc. Create or suffer to exist, or permit any of its
----------
Subsidiaries to create or suffer to exist, any Lien on or with respect to
any of its properties, whether now owned or hereafter acquired, or assign,
or permit any of its Subsidiaries to assign accounts receivable, other
than:
(i) Permitted Liens,
(ii) purchase money Liens (including Liens incurred in connection
with construction and Liens in the nature of capital leases) upon or
in any real property or equipment or other fixed assets acquired or
held by the Borrower or any Subsidiary in the ordinary course of
business to secure the purchase price or construction cost of such
property or equipment or other fixed assets or to secure Debt incurred
solely for the purpose of financing the acquisition or construction of
such property or equipment, or Liens existing on such property or
equipment at the time of its acquisition (other than any such Liens
created in contemplation of such acquisition that were not incurred to
finance the acquisition of such property) or extensions, renewals or
replacements of any of the foregoing for the same or a lesser amount,
provided, however, that no such Lien shall extend to or-------- ------
cover any properties of any character other than the real property or
equipment or other fixed assets being acquired or any attachments,
replacements, improvements, additions or accessions thereto or any
proceeds thereof, and no such extension, renewal or replacement shall
extend to or cover any properties not theretofore subject to the Lien
being extended, renewed or replaced,
(iii) the Liens existing on the Effective Date and described on
Schedule 5.02(a) hereto,
(iv) Liens on accounts receivable and related property of the
Borrower or any Subsidiary incurred in connection with a Permitted
Receivables Facility,
(v) Liens on documents of title or goods in transit securing
reimbursement obligations of the Borrower or any of its Subsidiaries
under letters of credit or purchase contracts,
(vi) other Liens securing Debt outstanding or other obligations
in aggregate principal amount not to exceed 10% of the aggregate of
the Borrower's Consolidated total assets as of the end of the most
recently completed fiscal quarter,
(vii) the replacement, extension or renewal of any Lien
permitted by clause (ii) or (iii) above upon or in the same property
theretofore subject thereto or the replacement, extension or renewal
(without increase in the amount or change in any direct or contingent
obligor) of the Debt secured thereby,
(viii) Liens on property or assets of a Subsidiary of the
Borrower to secure obligations of such Subsidiary to the Borrower or a
Subsidiary of the Borrower,
(ix) Liens on property or assets of a Person existing at the time
such Person is merged into or consolidated with the Borrower or any
Subsidiary of the Borrower or becomes a Subsidiary of the Borrower;
provided that such Liens were not created in contemplation of such
--------
merger, consolidation or investment and do not extend to any assets
other than those of the Person merged into or consolidated with the
Borrower or such Subsidiary or acquired by the Borrower or such
Subsidiary,
(x) Liens securing judgments not resulting in an Event of Default
under Section 6.01(f), and
(xi) Liens on insurance proceeds in favor of insurance companies
with respect to the financing of insurance premiums.
<PAGE>
33
(b) Mergers, Etc. Merge or consolidate with or into, or convey,
------------
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, any Person, or permit any of its Material
Subsidiaries to do so, except that (i) any Material Subsidiary of the
Borrower may merge or consolidate with or into, or dispose of assets to,
any other Material Subsidiary of the Borrower, and except that any Material
Subsidiary of the Borrower may merge into or dispose of assets to the
Borrower, and (ii) a Material Subsidiary may merge into or consolidate with
any Person provided that in the case of any such merger or consolidation
--------
the survivor of such merger or the Person formed by such consolidation
shall be a Material Subsidiary of the Borrower, provided, in each case,
--------
that no Default shall have occurred and be continuing at the time of such
proposed transaction or would result therefrom.
(c) Accounting Changes. Make or permit, or permit any of its
------------------
Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by generally accepted
accounting principles.
(d) Change in Nature of Business. Neither the Borrower nor any of its
----------------------------
Material Subsidiaries shall engage in any line of business other than the
lines of business in which the Borrower and its Material Subsidiaries are
currently engaged, and any other businesses incidental or reasonably
related thereto, or any businesses that are, as determined by the Board of
Directors of the Borrower, appropriate extensions thereof.
SECTION 5.03. Financial Covenants. So long as any Advance shall
-------------------
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will maintain a ratio of Funded Debt of the Borrower and its Subsidiaries as of
the last day of each fiscal quarter to Consolidated EBITDA of the Borrower and
its Subsidiaries for the period of four fiscal quarters ended on such day of not
greater than 2.25 to 1.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
-----------------
("Events of Default") shall occur and be continuing:
- -------------------
(a) The Borrower shall fail to pay any principal of any Advance when
the same becomes due and payable; or the Borrower shall fail to pay any
interest on any Advance or make any other payment of fees or other amounts
payable under this Agreement or any Note within three Business Days after
the same becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) in connection with this Agreement
shall prove to have been incorrect in any material respect when made; or
(c) (i) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 5.01(d), (e), (h), (i)(iii) or
(i)(iv), 5.02 or 5.03, or (ii) the Borrower shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement
on its part to be performed or observed if such failure shall remain
unremedied for 15 Business Days after written notice thereof shall have
been given to the Borrower by the Agent or any Lender; or
(d) The Borrower or any of its Material Subsidiaries shall fail to pay
any principal of or premium or interest on any Debt that is outstanding in
a principal or notional amount of at least $50,000,000 in the
<PAGE>
34
aggregate (but excluding Debt outstanding hereunder) of the Borrower or
such Material Subsidiary (as the case may be), when the same becomes due
and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after
the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity
of such Debt; or
(e) The Borrower or any of its Material Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against the Borrower or any of its Material Subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in
the case of any such proceeding instituted against it (but not instituted
by it), either such proceeding shall remain undismissed or unstayed for a
period of 60 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur;
or the Borrower or any of its Material Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in this
subsection (e); or
(f) Judgments or orders for the payment of money in excess of
$50,000,000 in the aggregate (net of insurance proceeds to the extent that
and for so long as (i) the amount of such judgment or order is covered by a
valid and binding policy of insurance between the defendant and the insurer
covering payment thereof and (ii) such insurer, which shall be rated at
least "A" by A.M. Best Company, has been notified of, and has not disputed
the claim made for payment of, the amount of such judgment or order) shall
be rendered against the Borrower or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 10 consecutive days
during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(g) (i) Any Person or two or more Persons acting in concert (other
than Hewlett-Packard Company) shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Securities Exchange Act of 1934), directly or indirectly, of
Voting Stock of the Borrower (or other securities convertible into such
Voting Stock) representing 30% or more of the combined voting power of all
Voting Stock of the Borrower; or (ii) during any period of up to 24
consecutive months, commencing before or after the date of this Agreement,
individuals who at the beginning of such 24-month period were directors of
the Borrower shall cease for any reason (other than due to death or
disability) to constitute a majority of the board of directors of the
Borrower (except to the extent that individuals who at the beginning of
such 24-month period were replaced by individuals (x) elected by 66-2/3% of
the remaining members of the board of directors of the Borrower or (y)
nominated for election by a majority of the remaining members of the board
of directors of the Borrower and thereafter elected as directors by the
shareholders of the Borrower); or (iii) any Person or two or more Persons
acting in concert (other than Hewlett-Packard Company) shall have acquired
by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation, will result in an Event of Default
under clauses (i) or (ii) above; or
(h) The Borrower or any of its ERISA Affiliates shall incur, or shall
be reasonably likely to incur liability in excess of $50,000,000 in the
aggregate as a result of one or more of the following: (i) the occurrence
of any ERISA Event; (ii) the partial or complete withdrawal of the Borrower
or any of its ERISA Affiliates from a Multiemployer Plan; or (iii) the
reorganization or termination of a Multiemployer Plan;
<PAGE>
35
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
Advances, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
-------- -------
event of an actual or deemed entry of an order for relief with respect to the
Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to
make Advances shall automatically be terminated and (B) the Advances, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby appoints
------------------------
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement as are delegated to the
Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the Agent shall not be
-------- -------
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement or applicable law. The Agent agrees to give to
each Lender prompt notice of each notice given to it by the Borrower pursuant to
the terms of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of
---------------------
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (i) may treat
the Lender that made any Advance as the holder of the Debt resulting therefrom
until the Agent receives and accepts an Assumption Agreement entered into by an
Assuming Lender as provided in Section 2.18 or 2.19, as the case may be, or an
Assignment and Acceptance entered into by such Lender, as assignor, and an
Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult
with legal counsel (including counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations (whether written or oral) made in or
in connection with this Agreement; (iv) shall not have any duty to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Borrower or to inspect the
property (including the books and records) of the Borrower; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 7.03. CUSA and Affiliates. With respect to its Commitment,
-------------------
the Advances made by it and the Note issued to it, CUSA shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include CUSA in its individual capacity.
CUSA and its Affiliates may accept deposits from, lend money to,
<PAGE>
36
act as trustee under indentures of, accept investment banking engagements from
and generally engage in any kind of business with, the Borrower, any of its
Subsidiaries and any Person who may do business with or own securities of the
Borrower or any such Subsidiary, all as if CUSA were not the Agent and without
any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that
----------------------
it has, independently and without reliance upon the Agent or any other Lender
and based on the financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the
---------------
Agent (to the extent not reimbursed by the Borrower), ratably according to the
respective principal amounts of the Revolving Credit Advances then owed to each
of them (or if no Revolving Credit Advances are at the time outstanding, ratably
according to the respective amounts of their Commitments), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against the Agent in
any way relating to or arising out of this Agreement or any action taken or
omitted by the Agent under this Agreement (collectively, the "Indemnified
-----------
Costs"), provided that no Lender shall be liable for any portion of the
--------
Indemnified Costs resulting from the Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse the Agent promptly upon demand for its ratable share of any out-of-
pocket expenses (including reasonable counsel fees) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Agent is not
reimbursed for such expenses by the Borrower. In the case of any investigation,
litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05
applies whether any such investigation, litigation or proceeding is brought by
the Agent, any Lender or a third party.
SECTION 7.06. Successor Agent. The Agent may resign at any time by
---------------
giving written notice thereof to the Lenders and the Borrower and may be removed
at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Article VII shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 7.07. Other Agents. Each Lender hereby acknowledges that
-------------
none of the documentation agent, the syndication agent nor any other Lender
designated as any "Agent" on the signature pages hereof has any liability
hereunder other than in its capacity as a Lender.
<PAGE>
37
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
---------------
provision of this Agreement or the Revolving Credit Notes, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
-------- -------
or consent shall, unless in writing and signed by all the Lenders, do any of the
following: (a) waive any of the conditions specified in Section 3.01, (b)
increase the Commitments of the Lenders or subject the Lenders to any additional
obligations, (c) reduce the principal of, or interest on, the Revolving Credit
Advances or any scheduled fees or other amounts payable hereunder, (d) postpone
any date fixed for any payment of principal of, or interest on, the Revolving
Credit Advances or any scheduled fees or other amounts payable hereunder, (e)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Revolving Credit Advances, or the number of Lenders, that shall be
required for the Lenders or any of them to take any action hereunder or (f)
amend this Section 8.01; and provided further that no amendment, waiver or
-------- -------
consent shall, unless in writing and signed by the Agent in addition to the
Lenders required above to take such action, affect the rights or duties of the
Agent under this Agreement or any Note; and provided further that no amendment,
-------- -------
waiver or consent of Section 8.07(f) shall, unless in writing and signed by each
Lender that has granted a funding option to a SPC in addition to the Lenders
required above to take such action, affect the rights or duties of such Lender
or SPC under this Agreement or any Note.
SECTION 8.02. Notices, Etc. All notices and other communications
------------
provided for hereunder shall be in writing (including telecopier, telegraphic or
telex communication) and mailed, telecopied, telegraphed, telexed or delivered,
if to the Borrower, at its address at 3000 Hanover Street, Palo Alto, California
94304 Attention: Treasurer; if to any Initial Lender, at its Domestic Lending
Office specified opposite its name on Schedule I hereto; if to any other Lender,
at its Domestic Lending Office specified in the Assumption Agreement or the
Assignment and Acceptance pursuant to which it became a Lender; and if to the
Agent, at its address at Two Penns Way, New Castle, Delaware 19720, Attention:
Bank Loan Syndications Department; or, as to the Borrower or the Agent, at such
other address as shall be designated by such party in a written notice to the
other parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the Agent. All
such notices and communications shall, when mailed, telecopied, telegraphed or
telexed, be effective when deposited in the mails, telecopied, delivered to the
telegraph company or confirmed by telex answerback, respectively, except that
notices and communications to the Agent pursuant to Article II, III or VII shall
not be effective until received by the Agent. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any
-------------------
Lender or the Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on
------------------
demand all reasonable costs and expenses of the Agent and the Arranger in
connection with the preparation, execution, delivery, administration,
modification and amendment of this Agreement, the Notes and the other documents
to be delivered hereunder, including, without limitation, (A) all due diligence,
syndication (including printing, distribution and bank meetings),
transportation, computer, duplication, appraisal, consultant, and audit expenses
and (B) the reasonable fees and expenses of counsel for the Agent with respect
thereto and with respect to advising the Agent as to its rights and
responsibilities under this Agreement. The Borrower further agrees to pay on
demand all costs and expenses of the Agent and the Lenders, if any (including,
without limitation, reasonable counsel fees and expenses), in connection with
the enforcement (whether
<PAGE>
38
through negotiations, legal proceedings or otherwise) of this Agreement, the
Notes and the other documents to be delivered hereunder, including, without
limitation, reasonable fees and expenses of counsel for the Agent and each
Lender in connection with the enforcement of rights under this Section 8.04(a).
(b) The Borrower agrees to indemnify and hold harmless the Agent and
each Lender and each of their Affiliates and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against
-----------------
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of (including, without limitation, in
connection with any investigation, litigation or proceeding or preparation of a
defense in connection therewith) (i) the Notes, this Agreement, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Advances or (ii) the actual or alleged presence of Hazardous Materials on
any property of the Borrower or any of its Subsidiaries or any Environmental
Action relating in any way to the Borrower or any of its Subsidiaries, except to
the extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct. In the
case of an investigation, litigation or other proceeding to which the indemnity
in this Section 8.04(b) applies, such indemnity shall be effective whether or
not such investigation, litigation or proceeding is brought by the Borrower, its
directors, shareholders or creditors or an Indemnified Party or any other Person
or any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated. The Borrower also agrees not
to assert any claim for special, indirect, consequential or punitive damages
against the Agent, any Lender, any of their Affiliates, or any of their
respective directors, officers, employees, attorneys and agents, on any theory
of liability, arising out of or otherwise relating to the Notes, this Agreement,
any of the transactions contemplated herein or the actual or proposed use of the
proceeds of the Advances.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance, LIBO Rate Advance is made by the Borrower to or for the account of
a Lender other than on the last day of the Interest Period for such Advance, as
a result of a payment or Conversion pursuant to Section 2.08(d) or (e), 2.10 or
2.12, acceleration of the maturity of the Notes pursuant to Section 6.01 or for
any other reason or by an Eligible Assignee to a Lender other than on the last
day of the Interest Period for such Advance upon an assignment of rights and
obligations under this Agreement pursuant to Section 8.07 as a result of a
demand by the Borrower pursuant to Section 8.07(a), the Borrower shall, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to compensate such
Lender for any additional losses, costs or expenses that it may reasonably incur
as a result of such payment or Conversion, including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Advance.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
Sections 2.11, 2.14 and 8.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the Notes.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during
----------------
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement and the Note held by such Lender, whether or not such Lender shall
have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify the
Borrower after any such set-off and application, provided that the failure to
--------
give such notice shall not affect the validity of such set-off and application.
The rights of each Lender and its Affiliates under this Section are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender and its Affiliates may have.
<PAGE>
39
SECTION 8.06. Binding Effect. This Agreement shall become effective
--------------
(other than Sections 2.01 and 2.03, which shall only become effective upon
satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Borrower and the Agent and when the Agent shall
have been notified by each Initial Lender that such Initial Lender has executed
it and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Agent and each Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may,
------------------------------
with the consent of the Agent and, unless an Event of Default has occurred and
is continuing at the time any assignment is effected in accordance with this
Section 8.07, the Borrower, in each case such approval not to be unreasonably
withheld or delayed, and, if demanded by the Borrower (following a demand by
such Lender pursuant to Section 2.11 or 2.14 or a notice by such Lender pursuant
to Section 2.12) so long as no Default shall have occurred and be continuing,
upon at least 5 Business Days' notice to such Lender and the Agent, will, assign
to one or more Persons all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Revolving Credit Advances owing to it and the Revolving Credit Note or Notes
held by it); provided, however, that (i) each such assignment shall be of a
-------- -------
constant, and not a varying, percentage of all rights and obligations under this
Agreement (other than any right to make Competitive Bid Advances, Competitive
Bid Advances owing to it and Competitive Bid Notes), (ii) except in the case of
an assignment to a Person that, immediately prior to such assignment, was a
Lender or an assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
$15,000,000 or an integral multiple of $1,000,000 in excess thereof, (iii) each
such assignment shall be to an Eligible Assignee, (iv) each such assignment made
as a result of a demand by the Borrower pursuant to this Section 8.07(a) shall
be arranged by the Borrower after consultation with, and subject to the approval
of, the Agent, and shall be either an assignment of all of the rights and
obligations of the assigning Lender under this Agreement or an assignment of a
portion of such rights and obligations made concurrently with another such
assignment or other such assignments that together cover all of the rights and
obligations of the assigning Lender under this Agreement, (v) no Lender shall be
obligated to make any such assignment as a result of a demand by the Borrower
pursuant to this Section 8.07(a) unless and until such Lender shall have
received one or more payments from either the Borrower or one or more Eligible
Assignees in an aggregate amount at least equal to the aggregate outstanding
principal amount of the Advances owing to such Lender, together with accrued
interest thereon to the date of payment of such principal amount and all other
amounts payable to such Lender under this Agreement and all of the obligations
of the Borrower to such Lender shall have been satisfied, (vi) the parties to
each such assignment shall execute and deliver to the Agent, for its acceptance
and recording in the Register, an Assignment and Acceptance, together with any
Revolving Credit Note subject to such assignment and, a processing and
recordation fee of $3,500 payable by the parties to each such assignment,
provided, however, that in the case of each assignment made as a result of a
- -------- -------
demand by the Borrower, such recordation fee shall be payable by the Borrower
except that no such recordation fee shall be payable in the case of an
assignment made at the request of the Borrower to an Eligible Assignee that is
an existing Lender, and (vii) any Lender may, without the approval of the
Borrower or the Agent, assign all or a portion of its rights to any of its
Affiliates. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and
<PAGE>
40
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto; (ii)
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in Section 4.01 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Revolving Credit Note or Notes subject to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower.
(d) The Agent shall maintain at its address referred to in Section
8.02 a copy of each Assumption Agreement and each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lenders and the Commitment of, and principal amount of the
Advances owing to, each Lender from time to time (the "Register"). The entries
--------
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Each Lender may sell participations to one or more banks or other
entities (other than the Borrower or any of its Affiliates) in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and any
Note or Notes held by it); provided, however, that (i) such Lender's obligations
-------- -------
under this Agreement (including, without limitation, its Commitment to the
Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, (iv) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and (v) no participant
under any such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement or any Note, or any consent to any
departure by the Borrower therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder, in each case to the extent subject
to such participation, or postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation.
(f) Each Lender (a "Granting Lender") may grant to a special purpose
---------------
funding vehicle (a "SPC"), identified as such in writing from time to time by
---
the Granting Lender to the Agent and the Borrower, the option to fund all or any
part of any Advance that such Lender is obligated to fund under this Agreement
(and upon the exercise by such SPC of such option to fund, such Lender's
obligations with respect to such Advance shall be deemed satisfied to the extent
of any amounts funded by such SPC); provided, however, that (i) such Lender's
-------- -------
obligations under this Agreement (including, without limitation, its Commitment
to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall
<PAGE>
41
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement (including, without
limitation, Sections 2.11 and 2.14), (iv) any such option granted to a SPC shall
not constitute a commitment by such SPC to fund any Advance and (v) no SPC shall
have any right to approve any amendment or waiver of any provision of this
Agreement or any Note, or any consent to any departure by the Borrower
therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such grant of funding
option, or postpone any date fixed for any payment of principal of, or interest
on, the Notes or any fees or other amounts payable hereunder, in each case to
the extent subject to such grant of funding option. Each party hereto hereby
agrees that no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Lender).
(g) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 8.07, disclose
to the assignee or participant or SPC or proposed assignee or participant or
SPC, any information relating to the Borrower furnished to such Lender by or on
behalf of the Borrower; provided that, prior to any such disclosure, the
--------
assignee or participant or SPC or proposed assignee or participant or SPC shall
agree to preserve the confidentiality of any Confidential Information relating
to the Borrower received by it from such Lender.
(h) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances
owing to it and any Note or Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
SECTION 8.08. Confidentiality. Neither the Agent nor any Lender
---------------
shall disclose any Confidential Information to any other Person without the
consent of the Borrower, other than (a) to the Agent's or such Lender's
Affiliates and their officers, directors, employees, agents and advisors and, as
contemplated by Section 8.07(f), to actual or prospective assignees and
participants, and then only on a confidential basis, (b) as required by any law,
rule or regulation or judicial process, (c) to any rating agency when required
by it, provided that, prior to any such disclosure, such rating agency shall
--------
undertake to preserve the confidentiality of any Confidential Information
relating to the Borrower received by it from such Lender and (d) as requested or
required by any state, federal or foreign authority or examiner regulating banks
or banking.
SECTION 8.09. Governing Law. This Agreement and the Notes shall be
-------------
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 8.10. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto
-----------------
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Agreement or
the Notes in the courts of any jurisdiction.
<PAGE>
42
(b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the Notes in any New
York State or federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
43
SECTION 8.12. Waiver of Jury Trial. Each of the Borrower, the Agent
--------------------
and the Lenders hereby irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the Notes or the
actions of the Agent or any Lender in the negotiation, administration,
performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
AGILENT TECHNOLOGIES, INC.
By
-------------------------
Title:
CITICORP USA, INC.
as Agent
By
-------------------------
Title:
<PAGE>
44
Initial Lenders
---------------
Commitment
- -----------
$50,000,000 CITICORP USA, INC.
By
--------------------------------
Title:
$37,500,000 THE CHASE MANHATTAN BANK
By
--------------------------------
Title:
$37,500,000 CREDIT SUISSE FIRST BOSTON
By
--------------------------------
Title:
By
--------------------------------
Title:
$12,500,000 STANDARD CHARTERED BANK
By
--------------------------------
Title:
$25,000,000 DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By
--------------------------------
Title:
By
--------------------------------
Title:
<PAGE>
$12,500,000 WACHOVIA BANK, N.A.
By
--------------------------------
Title:
$25,000,000 HSBC BANK USA
By
--------------------------------
Title:
$12,500,000 SOCIETE GENERALE
By
--------------------------------
Title:
$12,500,000 CARIPLO-CASSA DI RISPARMIO DELLE
PROVINCIE LOMBARDE SpA
By
--------------------------------
Title:
By
--------------------------------
Title:
$25,000,000 BANK OF AMERICA, N.A.
By
--------------------------------
Title:
$250,000,000 Total of the Commitments
<PAGE>
SCHEDULE I
AGILENT TECHNOLOGIES, INC.
364-DAY CREDIT AGREEMENT
APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
Name of Initial Lender Domestic Lending Office Eurodollar Lending Office
- -------------------------------- ------------------------------------ ------------------------------------
<S> <C> <C>
Citicorp USA, Inc. Two Penns Way Two Penns Way
New Castle, Delaware 19720 New Castle, Delaware 19720
The Chase Manhattan Bank Chase Manhattan Loan Services Chase Manhattan Loan Services
Group Group
1 Chase Manhattan Plaza, 8th Floor 1 Chase Manhattan Plaza, 8th Floor
New York, NY 10081 New York, NY 10081
Credit Suisse First Boston 11 Madison Avenue 11 Madison Avenue
New York, NY 10010-3629 New York, NY 10010-3629
Standard Chartered Bank 7 World Trade Center 7 World Trade Center
New York, NY 10048 New York, NY 10048
Deutsche Bank AG New York Branch Cayman Islands Branch
31 West 52nd Street c/o New York Branch
New York, NY 10019 31 West 52nd Street
New York, NY 10019
Wachovia Bank 191 Peachtree Street NE 191 Peachtree Street NE
Atlanta, GA 30303 Atlanta, GA 30303
HSBC Bank USA 140 Broadway 140 Broadway
New York, NY 10005 New York, NY 10005
Societe Generale 1221 Avenue of the Americas 1221 Avenue of the Americas
New York, NY 10020 New York, NY 10020
CARIPLO-Cassa di Risparmio 10 East 53rd Street 10 East 53rd Street
delle Provincie Lombarde SpA New York, NY 10022 New York, NY 10022
Bank of America, N.A. Mail Code: CA4-706-05-11 Mail Code: CA4-706-05-11
1850 Gateway Blvd. 1850 Gateway Blvd.
Concord, CA 94520 Concord, CA 94520
</TABLE>
<PAGE>
EXHIBIT A-1 - FORM OF
REVOLVING CREDIT
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 199_
FOR VALUE RECEIVED, the undersigned, AGILENT TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
--------
_________________________ (the "Lender") for the account of its Applicable
------
Lending Office on the Termination Date (each as defined in the Credit Agreement
referred to below) the principal sum of U.S.$[amount of the Lender's Commitment
in figures] or, if less, the aggregate principal amount of the Revolving Credit
Advances made by the Lender to the Borrower pursuant to the 364-Day Credit
Agreement dated as of November 5, 1999 among the Borrower, the Lender and
certain other lenders parties thereto, Salomon Smith Barney Inc., as lead
arranger and sole book manager, Chase Securities Inc., as syndication agent,
Credit Suisse First Boston, as documentation agent, and Citicorp USA, Inc., as
administrative agent (the "Agent") for the Lender and such other lenders (as
-----
amended or modified from time to time, the "Credit Agreement"; the terms defined
----------------
therein being used herein as therein defined) outstanding on the Termination
Date.
The Borrower promises to pay interest on the unpaid principal amount
of each Revolving Credit Advance from the date of such Revolving Credit Advance
until such principal amount is paid in full, at such interest rates, and payable
at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Citicorp USA, Inc., as Agent, at 399 Park Avenue, New York,
New York 10043, in same day funds. Each Revolving Credit Advance owing to the
Lender by the Borrower pursuant to the Credit Agreement, and all payments made
on account of principal thereof, shall be recorded by the Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of this
Promissory Note.
This Promissory Note is one of the Revolving Credit Notes referred to
in, and is entitled to the benefits of, the Credit Agreement. The Credit
Agreement, among other things, (i) provides for the making of Revolving Credit
Advances by the Lender to the Borrower from time to time in an aggregate amount
not to exceed at any time outstanding the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Revolving
Credit Advance being evidenced by this Promissory Note and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified.
AGILENT TECHNOLOGIES, INC.
By
------------------------
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
=========================================================================
Amount of
Amount of Principal Paid Unpaid Principal Notation
Date Advance or Prepaid Balance Made By
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
=========================================================================
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
EXHIBIT A-2 - FORM OF
COMPETITIVE BID
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 199_
FOR VALUE RECEIVED, the undersigned, AGILENT TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
--------
_________________________ (the "Lender") for the account of its Applicable
------
Lending Office (as defined in the 364-Day Credit Agreement dated as of November
5, 1999 among the Borrower, the Lender and certain other lenders parties
thereto, Salomon Smith Barney Inc., as lead arranger and sole book manager,
Chase Securities Inc., as syndication agent, Credit Suisse First Boston, as
documentation agent, and Citicorp USA, Inc., as administrative agent (the
"Agent") for the Lender and such other lenders (as amended or modified from time
-----
to time, the "Credit Agreement"; the terms defined therein being used herein as
----------------
therein defined)), on _______________, 199_, the principal amount of
U.S.$_______________].
The Borrower promises to pay interest on the unpaid principal amount
hereof from the date hereof until such principal amount is paid in full, at the
interest rate and payable on the interest payment date or dates provided below:
Interest Rate: _____% per annum (calculated on the basis of a year of _____
days for the actual number of days elapsed).
Both principal and interest are payable in lawful money of
________________ to Citicorp USA, Inc., as administrative agent, for the account
of the Lender at the office of _________________________, at
_________________________ in same day funds.
This Promissory Note is one of the Competitive Bid Notes referred to
in, and is entitled to the benefits of, the Credit Agreement. The Credit
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events.
The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
AGILENT TECHNOLOGIES, INC.
By
--------------------------
Title:
<PAGE>
EXHIBIT B-1 - FORM OF NOTICE OF
REVOLVING CREDIT BORROWING
Citicorp USA, Inc., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
Two Penns Way
New Castle, Delaware 19720
[Date]
Attention: Bank Loan Syndications Department
Ladies and Gentlemen:
The undersigned, Agilent Technologies, Inc., refers to the 364-Day
Credit Agreement, dated as of November 5, 1999 (as amended or modified from time
to time, the "Credit Agreement", the terms defined therein being used herein as
----------------
therein defined), among the undersigned, certain Lenders parties thereto,
Salomon Smith Barney Inc., as lead arranger and sole book manager, Chase
Securities Inc., as syndication agent, Credit Suisse First Boston, as
documentation agent and Citicorp USA, Inc., as administrative agent (the
"Agent") for said Lenders and hereby gives you notice, irrevocably, pursuant to
-----
Section 2.02 of the Credit Agreement that the undersigned hereby requests a
Revolving Credit Borrowing under the Credit Agreement, and in that connection
sets forth below the information relating to such Revolving Credit Borrowing
(the "Proposed Revolving Credit Borrowing") as required by Section 2.02(a) of
-----------------------------------
the Credit Agreement:
(i) The Business Day of the Proposed Revolving Credit Borrowing is
_______________, __.
(ii) The Type of Advances comprising the Proposed Revolving Credit
Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed Revolving Credit Borrowing
is $_______________.
[(iv) The initial Interest Period for each Eurodollar Rate Advance
made as part of the Proposed Revolving Credit Borrowing is _____ month[s].]
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Revolving
Credit Borrowing:
(A) the representations and warranties contained in Section 4.01 of
the Credit Agreement (except the representations set forth in the last
sentence of subsection (e) thereof and in subsection (f) thereof (other
than clause (ii) thereof)) are correct, before and after giving effect to
the Proposed Revolving Credit Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date; and
<PAGE>
2
(B) no event has occurred and is continuing, or would result from
such Proposed Revolving Credit Borrowing or from the application of the
proceeds therefrom, that constitutes a Default.
Very truly yours,
AGILENT TECHNOLOGIES, INC.
By
---------------------------
Title:
<PAGE>
EXHIBIT B-2 - FORM OF NOTICE OF
COMPETITIVE BID BORROWING
Citicorp USA, Inc., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
Two Penns Way
New Castle, Delaware 19720
[Date]
Attention: Bank Loan Syndications Department
Ladies and Gentlemen:
The undersigned, Agilent Technologies, Inc., refers to the 364-Day
Credit Agreement, dated as of November 5, 1999 (as amended or modified from time
to time, the "Credit Agreement", the terms defined therein being used herein as
----------------
therein defined), among the undersigned, certain Lenders parties thereto,
Salomon Smith Barney Inc., as lead arranger and sole book manager, Chase
Securities Inc., as syndication agent, and Credit Suisse First Boston, as
documentation agent and Citicorp USA, Inc., as administrative agent (the
"Agent") for said Lenders and hereby gives you notice, irrevocably, pursuant to
-----
Section 2.03 of the Credit Agreement that the undersigned hereby requests a
Competitive Bid Borrowing under the Credit Agreement, and in that connection
sets forth the terms on which such Competitive Bid Borrowing (the "Proposed
--------
Competitive Bid Borrowing") is requested to be made:
- -------------------------
(A) Date of Competitive Bid Borrowing ___________________________
(B) Amount of Competitive Bid Borrowing ___________________________
(C) [Maturity Date] [Interest Period] ___________________________
(D) Interest Rate Basis ___________________________
(E) Interest Payment Date(s) ___________________________
(F) _______________________ ___________________________
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed
Competitive Bid Borrowing:
(a) the representations and warranties contained in Section 4.01 are
correct, before and after giving effect to the Proposed Competitive Bid
Borrowing and to the application of the proceeds therefrom, as though made
on and as of such date;
(b) no event has occurred and is continuing, or would result from
the Proposed Competitive Bid Borrowing or from the application of the
proceeds therefrom, that constitutes a Default;
(c) no event has occurred and no circumstance exists as a result of
which the information concerning the undersigned that has been provided to
the Agent and each Lender by the undersigned in connection with the Credit
Agreement would include an untrue statement of a material fact or omit to
state any material fact or any fact necessary to make the statements
contained therein, in the light of the circumstances under which they were
made, not misleading; and
(d) the aggregate amount of the Proposed Competitive Bid Borrowing
and all other Borrowings to be made on the same day under the Credit
Agreement is within the aggregate amount of the unused Commitments of the
Lenders.
<PAGE>
2
The undersigned hereby confirms that the Proposed Competitive Bid
Borrowing is to be made available to it in accordance with Section 2.03(a)(v) of
the Credit Agreement.
Very truly yours,
AGILENT TECHNOLOGIES, INC.
By
---------------------------
Title:
<PAGE>
EXHIBIT C - FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the 364-Day Credit Agreement dated as of November
5, 1999 (as amended or modified from time to time, the "Credit Agreement") among
----------------
Agilent Technologies, Inc., a Delaware corporation (the "Borrower"), the Lenders
--------
(as defined in the Credit Agreement), Salomon Smith Barney Inc., as lead
arranger and sole book manager, Chase Securities Inc., as syndication agent,
Credit Suisse First Boston, as documentation agent, and Citicorp USA, Inc., as
administrative agent (the "Agent") for the Lenders. Terms defined in the
-----
Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I hereto
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, an interest in and to
the Assignor's rights and obligations under the Credit Agreement as of the date
hereof (other than in respect of Competitive Bid Advances and Competitive Bid
Notes) equal to the percentage interest specified on Schedule 1 hereto of all
outstanding rights and obligations under the Credit Agreement (other than in
respect of Competitive Bid Advances and Competitive Bid Notes). After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
the Revolving Credit Advances owing to the Assignee will be as set forth on
Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement or any other instrument or document furnished pursuant thereto;
and (iv) attaches the Revolving Credit Note, if any held by the Assignor and
requests that the Agent exchange such Revolving Credit Note for a new Revolving
Credit Note payable to the order of the Assignee in an amount equal to the
Commitment assumed by the Assignee pursuant hereto or new Revolving Credit Notes
payable to the order of the Assignee in an amount equal to the Commitment
assumed by the Assignee pursuant hereto and the Assignor in an amount equal to
the Commitment retained by the Assignor under the Credit Agreement,
respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will perform
in accordance with their terms all of the obligations that by the terms of the
Credit Agreement are required to be performed by it as a Lender; and (vi)
attaches any U.S. Internal Revenue Service forms required under Section 2.14 of
the Credit Agreement.
4. Following the execution of this Assignment and Acceptance, it
will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
--------------
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
<PAGE>
2
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after
the Effective Date, the Agent shall make all payments under the Credit Agreement
and the Revolving Credit Notes in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and facility
fees with respect thereto) to the Assignee. The Assignor and Assignee shall
make all appropriate adjustments in payments under the Credit Agreement and the
Revolving Credit Notes for periods prior to the Effective Date directly between
themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
<PAGE>
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: _____%
Assignee's Commitment: $__________
Aggregate outstanding principal amount of Revolving
Credit Advances assigned: $__________
Principal amount of Revolving Credit Note payable
to Assignee: $__________
Principal amount of Revolving Credit Note payable
to Assignor: $__________
Effective Date: _______________, 199_
[NAME OF ASSIGNOR], as Assignor
By
----------------------------------
Title:
Dated: _______________, 199_
[NAME OF ASSIGNEE], as Assignee
By
----------------------------------
Title:
Dated: _______________, 199_
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
Accepted [and Approved]** this
- ------------------------------
* This date should be no earlier than five Business Days after the delivery
of this Assignment and Acceptance to the Agent.
** Required if the Assignee is an Eligible Assignee solely by reason of clause
(viii) of the definition of "Eligible Assignee".
<PAGE>
__________ day of _______________, 199_
_________________________, as Agent
By
-------------------------------------
Title:
[Approved this __________ day
of _______________, 199_
AGILENT TECHNOLOGIES, INC.
By
-------------------------------------]*
Title:
- -------------------------------------
* Required if the Assignee is an Eligible Assignee solely by reason of
clauses (iii) through (viii) of the definition of "Eligible Assignee".
<PAGE>
EXHIBIT D - FORM OF
OPINION OF COUNSEL
FOR THE BORROWER
November ___, 1999
To each of the Lenders party to
the Credit Agreement dated as of
November ___, 1999 among Agilent
Technologies Inc., said Lenders and
Citicorp USA, Inc., as Agent for said Lenders
Re: Agilent Technologies, Inc. - 364-Day Credit Agreement
Ladies and Gentlemen:
We have acted as special counsel to Agilent Technologies, Inc., a Delaware
corporation ("Borrower"), in connection with the negotiation, execution and
delivery of the 364-Day Credit Agreement dated as of November ___, 1999
(including the exhibits and schedules thereto, the "Credit Agreement") among
Borrower and Salomon Smith Barney as Lead Arranger and Sole Book Manager, Chase
Securities Inc., as Syndication Agent, Credit Suisse First Boston, as
Documentation Agent and Citicorp USA, Inc., as Agent (the "Agent") and the other
Lenders party to the Credit Agreement. This opinion is rendered to you pursuant
to Section 3.01(h)(iv) of the Credit Agreement. All capitalized terms used but
not defined herein shall have the respective meanings assigned to such terms in
the Credit Agreement.
In rendering the opinions expressed below, we have examined executed
originals or copies of the following documents:
(a) the Credit Agreement;
(b) the Note;
(c) the Certificate of Incorporation and Bylaws of Borrower, as amended to
date;
(d) records of proceedings of the Board of Directors of Borrower during or
by which resolutions were adopted relating to matters covered by this
opinion;
(e) (i) a certificate of the Secretary of State of the State of Delaware,
dated October 28, 1999, with respect to the standing of Borrower as a
corporation incorporated under the laws of the State of Delaware and
(ii) a Certificate of the Secretary of State of the State of
California dated, October 28, 1999, with respect to the standing of
Borrower as a foreign corporation qualified to do business in the
State of California; and (iii) a tax status certificate from the
Franchise Tax Board of the State of California;
(f) the certificates of the Secretary and certain officers of Borrower as
to certain factual matters; and
(g) each of the documents listed on Annex A hereto (the "Reviewed
-------
Agreements").
In addition, we have examined and relied upon such corporate records of
Borrower as we have deemed necessary or appropriate for purposes of the opinions
expressed below. We have also relied upon and obtained from public officials
and officers of Borrower such other certificates and assurances as we consider
necessary for the rendering of this opinion. The Credit Agreement and the Note
are sometimes referred to herein as the "Transaction Documents."
<PAGE>
2
With your permission and without any verification by us, we have assumed the
following for purposes of rendering the opinions set forth herein:
(i) The genuineness of all signatures, the legal capacity of all
natural persons to execute and deliver documents, the authenticity
and completeness of documents submitted to us as originals and the
completeness and conformity with authentic original documents of
all documents submitted to us as copies, and that all documents,
books and records made available to us by Borrower are accurate and
complete.
(ii) That there are no agreements or understandings between or among
Borrower, Agent, the Lenders or third parties which would expand,
modify or otherwise affect the terms of the Transaction Documents
or the respective rights or obligations of the parties thereunder
and that the Transaction Documents correctly and completely set
forth the intent of all parties thereto.
(iii) That all parties to the Transaction Documents (other than Borrower)
have filed all required franchise tax returns, if any, and paid all
required taxes, if any, under the California Revenue & Taxation
Code.
(iv) That the Transaction Documents have been duly authorized, executed
and delivered by Agent and the Lenders to the extent Agent or the
Lenders are contemplated to be a party thereto and that each of
Agent and each Lender has full power, authority and legal right to
enter into and perform the terms and conditions of the Transaction
Documents to be performed by Agent or such Lender and that each
Transaction Document to which Agent or such Lender is a party
constitutes a legal, valid and binding obligation of Agent or such
Lender, as applicable, enforceable against it in accordance with
its terms.
(v) That each Lender is either (i) a "Bank" as defined in and operating
under that certain act known as the "Bank Act" approved March 1,
1909, as amended, (ii) a bank created and operating under and
pursuant to the laws of the State of California or of the United
States, (iii) a foreign bank complying with the criteria set forth
in Section 1716 of the California Financial Code, as amended, and
that the Lenders are therefore exempt from the restrictions of
Section 1 of Article XV of the California Constitution and related
statutes relating to usury (the "California Usury Law"), or (iv)
otherwise exempt from the California Usury Law.
(vi) With respect to certain matters of fact, that the representations
and warranties of Borrower set forth in the Transaction Documents
to which it is a party, the certificates of certain officers of
Borrower delivered to you in connection with the transactions
contemplated by the Credit Agreement and the certificates of
certain officers of Borrower referred to in paragraph (f) above are
true and correct.
As used in this opinion, the expression "to our knowledge" or "known to us"
with reference to matters of fact means that during the course of our
representation of Borrower in connection with the Transaction Documents, no
information has come to the attention of the attorneys of our firm involved in
this engagement which would give them actual knowledge of the existence or
absence of such facts; however, we have made no independent investigation to
determine the existence or absence of such facts, and any limited inquiry
undertaken by us during the preparation of this opinion should not be regarded
as such an investigation. No inference as to our knowledge of the existence or
absence of any facts underlying any opinion given "to our knowledge" should be
drawn from the fact of our representation of Borrower. Specifically, in
rendering the opinion set forth in paragraph 7 below, we have not made any
independent investigation of court records to determine whether any actions have
been filed. Furthermore, this opinion letter does not purport to encompass
information which may have been communicated to any attorney in our firm who is
a director or officer of Borrower, solely by reason of such attorney's serving
in such capacity.
<PAGE>
3
On the basis of the foregoing and in reliance thereon, and based upon
examination of such questions of law as we have deemed appropriate, and subject
to the assumptions, exceptions, qualifications, and limitations set forth
herein, we advise you that in our opinion:
1. Borrower is a corporation duly incorporated and validly existing in
good standing under the laws of the State of Delaware and is duly
qualified to do business and is in good standing in the state of
California.
2. Borrower has the requisite corporate power and authority to enter into
the Transaction Documents and to carry out the transactions
contemplated thereby.
3. The execution and delivery by Borrower of each Transaction Document to
which it is a party, and the performance by Borrower of its
obligations under each of the Transaction Documents, have been duly
authorized by all necessary corporate action on the part of Borrower.
4. Each of the Transaction Documents constitutes a valid and binding
obligation of Borrower, enforceable against Borrower in accordance
with its terms.
5. The execution and delivery of each of the Transaction Documents and
the borrowing of loans in accordance with the Credit Agreement and
repayment of any loans by Borrower do not (a) conflict with or violate
the Bylaws or Certificate of Incorporation of Borrower; (b) violate or
contravene any United States federal or California state law, statute,
rule or regulation applicable to Borrower; (c) violate or contravene
any order, writ, judgment, decree, determination or award of any
United States federal or California state governmental authority
applicable to Borrower; or (d) to our knowledge, violate or result in
a breach of or constitute any default under any Reviewed Agreement,
or, to our knowledge, result in or require the creation or imposition
of any lien on any of its properties or revenues pursuant to any
provision of any United States federal or California state law, rule
or regulation or any such contractual obligation.
6. No consents, approvals, authorizations, registrations, declarations or
filings are required to be made or obtained by or in respect of the
Company (or on its behalf) with or from any governmental or regulatory
authority or agency of the United States or the State of California
for the due authorization, execution and delivery by the Company of
the Transaction Documents, the undertaking of the covenants set forth
in Transaction Documents, the borrowing of loans in accordance with
the Agreement or the repayment of any such loans by the Company.
7. The extension of credit under the Transaction Documents does not
violate the provisions of Regulations U or X of the Board of Governors
of the Federal Reserve System.
8. To our knowledge, there are no actions or proceedings against Borrower
pending or overtly threatened in writing before any court,
governmental agency or arbitrator which (a) seek to challenge the
enforceability of any of the Transaction Documents, or (b) we believe
are reasonably likely to have a material adverse effect on the ability
of Borrower to perform its obligations under the Transaction
Documents.
The opinions set forth above are subject to the following exceptions,
qualifications, limitations, comments and additional assumptions:
A. We express no opinion as to any matter relating to laws of any
jurisdiction other than the laws of the State of California, the
General Corporation Law of the State of Delaware and the federal laws
of the United States, as such are in effect on the date hereof, and we
have made no inquiry into, and we express no opinion as to, the
statutes, regulations, treaties, common laws or other laws of
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4
any other nation, state or jurisdiction. As you know, we are not
licensed to practice law in the State of Delaware and, accordingly,
our opinions as to Delaware General Corporation Law are based solely
on a review of the official statutes of the State of Delaware. For
purposes of our opinion set forth in paragraph 4 above as to the
enforceablity of the Transaction Documents, we have assumed that a
court located in the State of California were interpreting the
Transaction Documents in accordance with California law
notwithstanding any provision thereof to the effect that such
Transaction Documents are to be governed by, and construed in
accordance with, the laws of the State of New York.
B. We express no opinion as to (i) the effect of any bankruptcy,
insolvency, reorganization, arrangement, fraudulent conveyance,
moratorium or other similar laws relating to or affecting the rights
of creditors generally, or (ii) the effect of general principles of
equity, including without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and the possible
unavailability of specific performance, injunctive relief or other
equitable relief, whether considered in a proceeding in equity or at
law.
C. We express no opinion regarding any of (i) the rights or remedies
available to any party for violations or breaches of any provisions
which are immaterial or the enforcement of which would be unreasonable
under the then existing circumstances, (ii) the rights or remedies
available to any party which takes discretionary action which is
arbitrary, unreasonable or capricious, or is not taken in good faith
or in a commercially reasonable manner, whether or not the Transaction
Documents permit such action, or (iii) the enforceability of any
provision deemed to be "unconscionable" within the meaning of Section
1670.5 of the California Civil Code.
D. We express no opinion as to the legality, validity, binding nature or
enforceability of (i) any provisions in the Transaction Documents
providing for the payment or reimbursement of costs or expenses or
indemnifying a party, to the extent such provisions may be held
unenforceable as contrary to public policy, (ii) any provision of any
Transaction Document insofar as it provides for the payment or
reimbursement of costs and expenses or indemnification for claims,
losses or liabilities in excess of a reasonable amount determined by
any court or other tribunal, (iii) any provisions regarding any
party's ability to collect attorneys' fees and costs in an action
involving the Transaction Documents, if the party is not the
prevailing party in such action (we call your attention to the effect
of Section 1717 of the California Civil Code, which provides that,
where a contract permits one party thereto to recover attorneys' fees,
the prevailing party in any action to enforce any provision of the
contract shall be entitled to recover its reasonable attorneys' fees),
(iv) any provisions of any Transaction Documents imposing penalties or
forfeitures, late payment charges or any increase in interest rate,
upon delinquency in payment or the occurrence of a default to the
extent they bear no reasonable relation to the damage suffered by the
damaged party, constitute a penalty or forfeiture or are otherwise
contrary to public policy, or (v) any provision of the Transaction
Documents to the effect that a statement, certificate, determination
or record shall be deemed conclusive absent manifest error.
E. We express no opinion with respect to the legality, validity, binding
nature or enforceability of (i) any vaguely or broadly stated waiver,
including, without limitation, the waivers of diligence, presentment,
demand, protest or notice, (ii) any waivers or consents (whether or
not characterized as a waiver or consent in the Transaction Documents)
relating to the rights of Borrower or duties owing to it existing as a
matter of law, including, without limitation, waivers of the benefits
of statutory or constitutional provisions, to the extent such waivers
or consents are found by courts to be against public policy or which
are ineffective pursuant to California statutes and judicial
decisions, or (iii) any waivers of any statute of limitations to the
extent such waivers are in excess of four years beyond the statutory
period.
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5
F. We express no opinion with respect to the legality, validity, binding
nature or enforceability of any provision of the Transaction Documents
to the effect that rights or remedies are not exclusive, that every
right or remedy is cumulative and may be exercised in addition to any
other right or remedy, that the election of some particular remedy or
remedies does not preclude recourse to one or more other remedies or
that failure to exercise or delay in exercising rights or remedies
will not operate as a waiver of any such right or remedy.
G. We express no opinion as to any provision of the Transaction Documents
requiring written amendments or waivers of such documents insofar as
it suggests that oral or other modifications, amendments or waivers
could not be effectively agreed upon by the parties or that the
doctrine of promissory estoppel might not apply.
H. We express no opinion as to the applicability or effect of compliance
or non-compliance by any lender (or its agent) with any state, federal
or other laws applicable to such lender (or its agent) or to the
transactions contemplated by the Transaction Documents because of the
nature of its business, including its legal or regulatory status.
I. We express no opinion regarding compliance or non-compliance (or the
effect thereof) with federal or state securities laws.
J. Our opinions set forth in paragraph 1, as to valid existence, due
qualification and good standing are based solely on the certificates
referenced in paragraph (e) above (copies of which have been furnished
to you).
K. Our opinions in clauses (b) and (c) of paragraph 5 above are intended
to express our opinion that the execution, delivery and performance by
Borrower of the Transaction Documents are neither prohibited by, nor
do they subject Borrower to a fine, penalty or similar sanction under
or any law, rule, regulation of the State of California or United
States federal law or any order, writ, judgment, decree, determination
or award of any United States federal or California state governmental
authority that a lawyer practicing in the State of California
exercising customary professional diligence would reasonably recognize
to be applicable to Borrower and the transactions contemplated by the
Transaction Documents; accordingly, our opinions set forth above are
limited to the foregoing.
L. This opinion speaks only at and as of its date and is based solely on
the facts and circumstances known to us at and as of such date. We
express no opinion as to the effect on Agent's or any Lender's rights
under the Transaction Documents of any statute, rule, regulation or
other law which is enacted or becomes effective after, or of any court
decision which changes the law relevant to such rights which is
rendered after, the date of this opinion or the conduct of the parties
following the closing of the contemplated transaction. In addition, in
rendering this opinion, we assume no obligation to revise or
supplement this opinion should the present laws of the jurisdictions
mentioned herein be changed by legislative action, judicial decision
or otherwise.
This opinion is made with the knowledge and understanding that you (but no
other person) may rely thereon in entering into the Credit Agreement and is
solely for your benefit, and this opinion may not be disclosed to or relied upon
by any person other than you, except that (i) this opinion may be disclosed to
(A) bank regulatory and other governmental authorities having jurisdiction over
you requesting (or requiring) such disclosure, and (B) prospective assignees and
participants in connection with the potential transfer of all or part of the
loans or commitments of any Lender, and (ii) this opinion may be relied upon by
assignees of or participants in the loans if the assignments or participations
relating thereto are permitted under and made in accordance with the Credit
Agreement; provided that in no event does this opinion extend to any issue or
--------
matter related to any such assignment
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6
or participation or arising from or out of any such assignment or participation
(as distinct from the subject transaction).
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE>
REVIEWED AGREEMENTS
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated November 9, 1999, relating to the consolidated financial
statements of Agilent Technologies, Inc., which appears in such Registration
Statement. We also consent to the reference to us under the heading "Experts"
in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, California
November 9, 1999
