EMPLOYEE MATTERS AGREEMENT
BY AND AMONG
MOTOROLA, INC.,
SCG HOLDING CORPORATION
AND
SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC
DATED
AS OF MAY 11, 1999
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
1.1 Previously Defined Terms.....................................1
1.2 Terms Defined in the Reorganization or Recapitalization
Agreement....................................................1
1.3 General Definitions..........................................1
1.4 Amendment of Schedules.......................................3
1.5 Interpretation...............................................4
ARTICLE II
GENERAL PROVISIONS
2.1 Transfer of Transferred Employees............................4
2.2 Transfer of Contractors and Consultants......................4
2.3 Novation of Contracts........................................4
2.4 Maintenance of Employment Terms and Conditions...............4
2.5 Employment Records...........................................6
2.6 Transfer of Inactive SCG Employees...........................6
2.7 No Third Party Beneficiaries.................................6
2.8 PSIP Profit Sharing Contribution for 1999....................7
ARTICLE III
ADDITIONAL EMPLOYMENT MATTERS
3.1 Employment Taxes.............................................7
ARTICLE IV
ADDITIONAL EMPLOYEE BENEFIT MATTERS
4.1 US Retirement Plans..........................................7
4.2 Foreign Retirement Plans.....................................8
4.3 Compliance with Law; Mutual Cooperation.....................10
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Labor Matters...............................................10
5.2 Representations and Warranties for Employee Benefit Plans...11
ARTICLE VI
INDEMNIFICATIONS
6.1 Survival Periods............................................12
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6.2 Indemnification By Motorola.................................12
6.3 Indemnification by the Company and SCILLC...................13
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions Precedent to Transfers of Employees and
Benefit Assets..............................................14
ARTICLE VIII
MISCELLANEOUS
8.1 Further Actions.............................................15
8.2 Notices.....................................................15
8.3 Expenses....................................................15
8.4 Entire Agreement............................................15
8.5 Assignment; Binding Effect; Severability....................15
8.6 Governing Law...............................................15
8.7 Execution in Counterparts...................................15
8.8 Headings....................................................15
8.9 Amendment and Waiver........................................16
8.10 U.S. Currency...............................................16
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EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT dated as of May 11, 1999 ("AGREEMENT")
by and among Motorola, Inc., a Delaware corporation ("PARENT" or "MOTOROLA"),
SCG Holding Corporation, a Delaware corporation and a wholly owned subsidiary of
Motorola (the "COMPANY"), and Semiconductor Components Industries, LLC, a
Delaware limited liability company ("SCI LLC"), the sole member of which is the
Company.
RECITALS
A. Motorola engages through its Semiconductor Components Group
("SCG") in the development, manufacture and sale of discrete and integrated
circuit semiconductor products and related products.
B. Concurrently herewith, Motorola, the Company, and SCI LLC are
entering into that certain Reorganization Agreement (as such Agreement may
hereafter be amended from time to time, the "REORGANIZATION AGREEMENT"), under
which the SCG operations will be reorganized under SCI LLC upon consummation of
the transactions contemplated thereunder.
C. Concurrently herewith, Motorola, the Company and certain other
parties are entering into that certain Agreement and Plan of Recapitalization
and Share Purchase (the "RECAPITALIZATION AGREEMENT").
D. It is contemplated under the Reorganization Agreement that
Motorola, the Company, and SCI LLC enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, conditions, representations, warranties and agreements hereinafter
set forth, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 PREVIOUSLY DEFINED TERMS. Each term defined in the first
paragraph and Recitals shall have the meaning set forth above whenever used
herein, unless otherwise expressly provided herein or unless the context hereof
clearly requires otherwise.
1.2 TERMS DEFINED IN THE REORGANIZATION OR RECAPITALIZATION
AGREEMENT. Each term defined in the Reorganization or Recapitalization Agreement
shall have the same meaning wherever used herein, unless otherwise expressly
provided herein or unless the context hereof clearly requires otherwise.
1.3 GENERAL DEFINITIONS. In addition to the terms defined in the
first paragraph and Recitals and those defined in the Reorganization Agreement,
whenever used herein, the following terms shall have the meanings set forth
below unless otherwise expressly provided or unless the context clearly requires
otherwise:
"EMPLOYEE BENEFIT PLAN" means any plan, fund, or program which (a)
provides medical, surgical, hospital or dental care or benefits, or
benefits in the event of sickness, accidental, disability, or death
benefits, apprenticeship
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or other training programs, or day care centers, scholarship funds, or
prepaid legal services, or (b) provides retirement income to employees
or results in a deferral of income by employees for periods extending
to the termination of covered employment or beyond, but excluding any
plan, fund or program which provides severance, unemployment or
vacation benefits.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"FOREIGN RETIREMENT PLAN TRANSFER AGREEMENT" means a written agreement
between the parties relating t the transfer of assets and liabilities
from a Retirement Plan maintained by an Existing SCG Entity outside of
the United States to a successor Retirement Plan maintained by an SCG
Party for the benefit of Transferred Employees. Each Foreign Retirement
Plan Transfer Agreement shall (a) comply with the requirements of
applicable law in the jurisdiction in which the subject Retirement Plan
is located, and (b) provide for a transfer of assets and liabilities in
accordance with Section 4.2(a), in the case of an agreement relating to
a defined benefit Retirement Plan, or Section 4.2(b), in the case of an
agreement relating to a defined contribution Retirement Plan.
"EXPATRIATE EMPLOYEES" means (a) those employees hired in one country
by an Existing SCG Entity and (b) who have been designated as
expatriates and assigned or sent to work in another country on a
temporary basis.
"INACTIVE SCG EMPLOYEES" means SCG Employees who, immediately prior to
the Closing Date, are absent from work due to an authorized leave of
absence or due to long term disability, or short term disability,
including, without limitation, those employees identified on SCHEDULE
1.3A.
"RETAINED EMPLOYEE BENEFIT PLAN LIABILITIES" means liabilities under an
Employee Benefit Plan maintained by Motorola or any other Existing SCG
Entity prior to the Closing Date other than (i) liabilities for
benefits of the Transferred Employees accrued as of the Closing Date
under any Retirement Plan for which there is a transfer of assets and
liabilities in accordance with Article IV of the Employee Matters
Agreement, or (ii) those Employee Benefits Plans maintained by Motorola
Philippines, Motorola Semiconductor Sdn, Bhd and Slovakia Electronics
Industries s.a. for Transferred Employees and those Employee Benefits
Plan maintained by the SMP joint venture in Malaysia, the Leshan joint
venture in China, the Czech Republic joint ventures.
"RETIREMENT PLAN" means an Employee Benefit Plan that provides
retirement income to employees or results in a deferral of income by
employees for periods extending to the termination of covered
employment or beyond.
"SCG EMPLOYEES" means all employees of the Existing SCG Parties who,
immediately prior to the Closing Date, work primarily in the operation
of the Business, EXCEPT, HOWEVER, Expatriate Employees.
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"TRANSFERRED CONTRACTORS" means consultants and independent
contractors, whose services as of the Closing Date are provided
primarily to the Business in support of its day-to-day operations,
including without limitation, those whose Contracts are listed in the
Disclosure Letter.
"TRANSFERRED EMPLOYEES" means Transferred SCG Employees, Transferred
Shared Services Employees, and Transferred Expatriate Employees.
"TRANSFERRED EXPATRIATE EMPLOYEES" means those Expatriate Employees
identified on SCHEDULE 1.3B.
"TRANSFERRED SCG EMPLOYEES" means all SCG Employees including, without
limitation, those employees identified on SCHEDULE 1.3C, EXCEPT,
HOWEVER, Inactive SCG Employees.
"TRANSFERRED SHARED SERVICES EMPLOYEES" means those employees
identified on SCHEDULE 1.3D.
"US RETIREMENT PLAN TRANSFER AGREEMENT" means the written agreement
between the parties relating to the transfer of assets and liabilities
from the qualified Motorola, Inc. Pension Plan or the qualified
Motorola, Inc. Profit Sharing and Investment Plan to qualified
Retirement Plans maintained by an SCG Party, in accordance with
Section 4.1.
1.4 AMENDMENT OF SCHEDULES.
(a) No later than seven Business Days prior to the
Closing Date, Motorola shall provide SCI LLC amended copies of Schedules 1.3(a)
through 1.3(d) setting forth the applicable groups of employees as of a date no
earlier than the thirtieth calendar day prior to the Closing Date. SCI LLC shall
have two Business days to object to such amended schedules in writing. If SCI
LLC so objects to such schedules, Motorola and SCI LLC shall use their
respective Reasonable Efforts to resolve the objections of SCI LLC to their
mutual and reasonable satisfaction. If SCI LLC does not so object, such
schedules shall be final, subject to the obligations of the parties hereto to
use their respective Reasonable Efforts before, on, or after the Closing to
resolve to their mutual and reasonable satisfaction the employment status of any
employee who was erroneously included on or left off of a schedule. Motorola
shall use its best efforts to accurately identify on each of Schedules 1.3(a)
through 1.3(d) all individuals who are included in the categories described in
the provision of Section 1.3 relating to the corresponding Schedule.
(b) No schedules, other than Schedules 1.3(a) through
1.3(d), 2.4(a) and 5.2(a) shall be amended after the signing of this Agreement.
No later than thirty calendar days after the signing of this Agreement, Motorola
shall provide SCI LLC with amended copies of Schedules 2.4(a) and 5.2(a) to this
Agreement only with respect to countries other than the United States, Japan,
Malaysia, Philippines, Mexico, France and Germany. Items added to Schedules
2.4(a) or 5.2(a) after the signing of this Agreement that have a Material
Adverse Effect shall be treated as nondisclosed items for purposes of assessing
liability under the Agreement. SCI LLC shall have two business days to object to
such amended schedules in writing. If SCI LLC objects to such schedules, the
parties hereto shall use their respective Reasonable Efforts to resolve the
objections of SCI LLC to their mutual and reasonable satisfaction. If SCI LLC
does not object, such schedules shall be final.
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In the case of any representation or warranty by Motorola, if SCI LLC does not
object to the amended schedule or SCI LLC objects but the parties are able to
resolve the objections to their mutual and reasonable satisfaction, then such
amendment will be deemed to have cured any breach of any applicable
representation or warranty made in this Agreement.
1.5 INTERPRETATION. Unless the context of this Agreement otherwise
requires, (a) words of any gender shall be deemed to include each other gender,
(b) words using the singular or plural number shall also include the plural or
singular number, respectively, and (c) reference to "hereof", "herein", "hereby"
and similar terms shall refer to this entire Agreement.
ARTICLE II
GENERAL PROVISIONS
2.1 TRANSFER OF TRANSFERRED EMPLOYEES.
(a) The parties hereto acknowledge and agree that,
wherever legally permissible, on the Closing Date, Transferred Employees shall
become employees of the applicable SCG Parties by operation of applicable local
law and/or pursuant to the terms of any necessary transfer agreement relating to
that jurisdiction. Where such transfer is not possible in the manner described
in the previous sentence, the SCG Parties shall offer Transferred Employees
employment in accordance with the procedures required by applicable local law to
effectuate their employment with the applicable SCG Party commencing on the
Closing Date.
(b) From the date hereof until the Closing Date, Motorola
shall use its Reasonable Efforts, and shall cause the other Existing SCG
Entities to use their Reasonable Efforts, to comply with the requirements of
applicable law in respect of such transfers of employment, including, without
limitation, providing any advance or other written notices to affected employees
and/or their respective representative required under applicable law and
consulting with employee representatives as required under applicable law.
Motorola is not liable for any breach resulting from the failure of TPG Holding
and/or TPG Acquisition to cooperate with, and/or provide information to,
Motorola in conjunction with the consultation and notification of employees.
2.2 TRANSFER OF CONTRACTORS AND CONSULTANTS. The parties hereof
acknowledge and agree that, on the Closing Date, Motorola shall use its
Reasonable Efforts to cause all contracts or agreements with Transferred
Contractors to be transferred or assigned to the applicable SCG Party.
2.3 NOVATION OF CONTRACTS. The parties hereto agree to use their
Reasonable Efforts to cause any contracts with Transferred Employees and
Transferred Contractors that cannot be assigned and that do not transfer (for
any reason) by operation of law to be novated to the applicable SCG Party
effective as of the Closing Date.
2.4 MAINTENANCE OF EMPLOYMENT TERMS AND CONDITIONS.
(a) SCI LLC will, and will cause the other SCG Parties to
(x) continue the employment of Transferred Employees immediately following the
Closing Date and (y) for the one year period ending on the first anniversary of
the Closing Date (subject in
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each case to the employee's continued employment with an SCG Party), (1) pay to
such employees salary or wage rates, as applicable, that are at least equal to
the salary or wage rates paid to such employees by the applicable Existing SCG
Entity immediately prior to the Closing Date and (2) provide such employees with
terms and conditions of employment, including Employee Benefit Plans, that are
substantially similar, in the aggregate, to the terms and conditions of such
employees' employment, including Employee Benefit Plans, provided by the
Existing SCG Entities to such employees immediately prior to the Closing Date,
other than compensation, benefits, or terms and conditions of employment
provided by an Existing SCG Entity pursuant to the Motorola Incentive Plan of
1998, the Motorola Share Option Plan of 1996, the Motorola Share Option Plan of
1982, or any other stock option, stock purchase or other equity based incentive
plan or program of an Existing SCG Entity. The parties hereto agree that
SCHEDULE 2.4(A), which sets out certain terms and conditions of employment of
employees in the existing SCG Entities prior to the Closing Date, though not
necessarily a fully comprehensive list, shall be considered as a reference point
for purposes of determining whether terms and conditions are substantially
similar, in the aggregate, as required by the prior sentence. Notwithstanding
the foregoing, no SCG Party shall be obligated to continue the employment of any
Transferred Employee for any period after Closing Date.
(b) The obligation of SCI LLC and the SCG Parties under
Section 2.4 includes, without limitation, assuming all liabilities on or after
the Closing Date to Transferred Employees for accrued, but unused, vacation,
holiday, severance, sick time or other paid or unpaid leave, or any other terms
and conditions of employment provided by the Existing SCG Entities to such
employees immediately prior to the Closing Date, excluding (i) Retained Employee
Benefit Plan Liabilities and (ii) Closing Date Transferred Employee Accruals,
and crediting each transferred Employee for his or her years of service with the
Existing SCG Entities prior to the Closing Date for purposes of vacation,
holiday, severance, sick time or other paid or unpaid leave, or any other terms
and conditions of employment provided by the Existing SCG Entities to such
employees immediately prior to the Closing Date and for determining eligibility
to participate, vesting and benefit accrual in any Employee Benefit Plan
established or maintained by any SCG Party for the benefit of Transferred
Employees to the extent such service was recognized under the corresponding
payroll practice or Employee Benefits Plan of the applicable Motorola Transferor
covering such Transferred Employees; provided, however, that in the case of
Retirement Plans, the obligation to credit Transferred Employees for their years
of service with the Existing SCG Entities prior to the Closing Date for benefit
accrual purposes shall be subject to the transfer of assets and liabilities in
accordance with Article IV hereof.
(c) To the extent permitted by law, any Employee Benefit
Plan maintained by an SCG Party pursuant to this Agreement providing medical,
surgical, hospital or dental care or benefits, or benefits in the event of
sickness, accident, disability or death (1) shall not provide any exclusion for
pre-existing condition or waiting period with respect to a Transferred Employee
(or any covered beneficiary or dependent), except to the extent such exclusion
or waiting period would have applied to such individual under the corresponding
Existing SCG Entity Employee Benefit Plan; (2) shall provide credit for payments
within the Plan's fiscal year which includes the Closing Date by a Transferred
Employee (or any covered beneficiary or dependent) for deductibles, copayments,
premiums out-of-pocket expenditures and similar amounts paid to the
corresponding Existing SCG Entity Employee Benefit Plan; and (3) may take into
account benefits provided and payments made to or on behalf of a Transferred
Employee or any covered
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beneficiary or dependent) under the corresponding Existing SCG Entity Employee
Benefit Plan in calculating aggregate maximum benefits or annual maximum
benefits.
(d) Effective as of the Closing Date, Company shall be
responsible for the costs of establishing and maintaining Employee Benefit Plans
for the Transferred Employees pursuant to the terms of this Agreement. Neither
any Existing SCG Entity, nor any Existing SCG Entity Employee Benefit Plan,
shall be liable for payment of claims incurred on or after the Closing Date in
respect of Transferred Employees (or their covered beneficiaries or dependents)
under an Employee Benefit Plan established, maintained or contributed to by an
SCG Party on or after the Closing Date. Effective as of the Closing Date, any
SCG Parties Employee Benefit Plan shall be liable for payment of claims incurred
on or after the Closing Date in respect of Transferred Employees (or their
covered beneficiaries or dependents) under such Employee Benefit Plan. Neither
any SCG Party nor any SCG Party Employee Benefit Plan shall be liable for
payment of claims incurred before the Closing Date by any Transferred Employees
(or their covered beneficiaries or dependents) with respect to any Retained
Employee Benefit Plan Liabilities.
(e) Nothing in this Agreement shall be construed as
granting to any SCG Party the right to participate in any Employee Benefit Plan
established or maintained by Motorola or to demand any transfer or spin off of
assets from any such Employee Benefit Plan except as specifically otherwise
provided in a US Retirement Transfer Agreement or a Foreign Retirement Transfer
Agreement.
(f) The SCG Parties shall maintain such
government-mandated Employee Benefit Plans as shall be required by applicable
law.
2.5 EMPLOYMENT RECORDS. The parties agree that on or within a
reasonable time period after the Closing Date, the Existing SCG Entities shall
provide to the SCG Parties all employment records for the Transferred Employees
required to be kept under applicable law or necessary for the conduct of the
Business, provided (a) that the Existing SCG Entities shall not include any
records to the extent such a Transfer would violate applicable law or cause the
Existing SCG Entities to break any agreement with a third party and (b) that
such records are in the possession of the Existing SCG Entities. The Existing
SCG Entities and/or the Motorola Transferors may keep copies of such records.
After the Closing Date, as may be necessary for any business purpose of the
Motorola Transferors or to permit the Motorola Transferors to respond to any
government inquiry or audit, defend any claim or lawsuit or administer any
Employee Benefit Plan, the Company and/or SCI LLC will cause the SCG Parties to
allow the Motorola Transferors reasonable access to and, if requested, copies of
any records relating to Transferred Employees, provided (a) that the SCG Parties
shall not include any records to the extent that inclusion thereof would violate
applicable law or cause any SCG Party to breach an agreement with a third party
and (b) that such records are in the possession of the SCG Parties.
2.6 TRANSFER OF INACTIVE SCG EMPLOYEES. SCI LLC agrees to cause
the applicable SCG Party to preserve the right of Inactive SCG Employees to
return to active employment, and to offer employment on substantially similar
terms and conditions of employment, at the expiration of any authorized leave or
the termination of disability. As of the date of any Inactive SCG Employee's
return, he or she shall be treated for purposes of this Agreement in the same
manner as a Transferred Employee whose employment transferred on the Closing
Date to an SCG Party.
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2.7 NO THIRD PARTY BENEFICIARIES. No employee of any Existing SCG
Entity or any SCG Party shall be considered a third party beneficiary of any
right or obligation created by this Agreement. Nothing in this Agreement,
express or implied, shall be deemed to confer upon any person any rights under
or with respect to any plan, program or arrangement described in or contemplated
by this Agreement. Nothing in this Agreement, express or implied, shall create a
third-party beneficiary relationship or otherwise confer any benefit,
entitlement, or right upon any person or entity other than the parties to this
Agreement and their respective corporate affiliates. This Agreement shall only
be enforceable by the parties hereto.
2.8 PSIP PROFIT SHARING CONTRIBUTION FOR 1999. If, following the
end of the 1999 Plan Year, Motorola determines that a Profit Sharing
Contribution (as defined in the PSIP) is payable to the PSIP (as defined in
Section 4.1(b) below) pursuant to the terms of the PSIP, Motorola shall make a
Profit Sharing Contribution to the PSIP in accordance with the terms of the PSIP
and the share of such contribution attributable to the contributions of the
Transferred Employees (up to 3% of pay for the period of January 1, 1999 through
the Closing Date) determined under Section 10.4(e) of the PSIP shall be directly
transferred to the SCG US 401(k) Plan no later than April 30, 2000 and shall be
invested in accordance with the Transferred Employees election in the SCG US
401(k) Plan as of December 31, 1999.
ARTICLE III
ADDITIONAL EMPLOYMENT MATTERS
3.1 EMPLOYMENT TAXES. The parties hereto agree that (i) Motorola
will be relieved from furnishing Forms W-2 to any Transferred Employees employed
in the US who will be employed by an SCG Party in the US for the calendar year
within which the Closing Date occurs; (ii) Forms W-2 furnished to such
Transferred Employees by the applicable SCG Party will include wages paid and
taxes withheld by both Motorola and such SCG Party; (iii) Motorola will be
relieved from filing Forms W-2 with the Social Security Administration; and (iv)
Motorola's entire Form W-2 reporting obligations for such Transferred Employees
will be assumed by the applicable SCG Party . To the extent necessary to comply
with applicable legal requirements, Motorola shall and SCI shall cause any other
SCG Parties operating in the United States to enter into an agreement
substantially similar to the foregoing sentence with respect to any Transferred
Employees employed in the US who will be employed by such other SCG Parties.
Motorola will, and SCI will, and will cause the other SCG Parties operating in
the United States to, (i) treat each such SCG Party as a "successor employer"
and Motorola as a predecessor," within the meaning of sections 3121(a)(I) and
3306(b)(I) of the Code, with respect to Transferred Employees who are employed
by such SCG Party for purposes of Taxes imposed under the United States Federal
Unemployment Tax ("FUTA") or the United States Federal Insurance Contributions
Act ("FICA") and (ii) comply with the "alternate procedures" provided in Revenue
Procedure 96-60, 1996-3 CB 399.
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ARTICLE IV
ADDITIONAL EMPLOYEE BENEFIT MATTERS
4.1 US RETIREMENT PLANS.
(a) Effective as of the Closing Date and for twelve (12)
months after the Closing Date, SCI LLC will, or will cause the appropriate SCG
Party to, establish and maintain a tax-qualified Retirement Plan ("SCG US
Retirement Plan") containing terms that are substantially identical to the terms
of the Motorola Inc. Pension Plan. The SCG US Retirement Plan shall grant to
United States Transferred Employees credit for all purposes of the plan for
service and compensation earned prior to the Closing Date and taken into account
for a corresponding purpose under the Motorola Inc. Pension Plan subject to the
transfer of assets and liabilities in accordance with the US Retirement Plan
Transfer Agreement. Motorola and the SCG Party shall enter into a US Retirement
Plan Transfer Agreement in the form attached as Exhibit 4.1(a) simultaneously
with this Agreement that will reflect the amount of assets and liabilities of
the Motorola Inc. Pension Plan that will be transferred to the SCG US Retirement
Plan.
(b) Effective as of the Closing Date and for twelve (12)
months after the Closing Date, SCI LLC will, or will cause the appropriate SCG
Party to, establish and shall maintain a 401(k) and profit sharing Retirement
Plan ("SCG US 401(k) Plan"), containing terms that are substantially identical
to the Motorola, Inc. Profit Sharing and Investment Plan ("PSIP"). The SCG US
401(k) Plan shall grant to United States Transferred Employees credit for all
purposes of the plan for service completed prior to the Closing Date and taken
into account for a corresponding purpose under the PSIP. Motorola and the SCG
Party shall enter into a US Retirement Plan Transfer Agreement in the form
attached as Exhibit 4.1(b) simultaneously with this Agreement that will reflect
the amount of assets and liabilities that will be transferred from the PSIP to
the SCG US 401(k) Plan.
4.2 FOREIGN RETIREMENT PLANS.
(a) With respect to the defined benefit arrangements
maintained by Existing SCG Entities operating in Germany, Japan, Mexico,
Philippines, and any other jurisdiction in which Motorola and SCI LLC mutually
determine that an Existing SCG Entity maintains a foreign defined benefit
Retirement Plan primarily for more than 50 non-United States Transferred
Employees ("Foreign Retirement Plans"), effective as of the Closing Date, and
for a period of at least twelve (12) months thereafter, SCI LLC will, or will
cause the appropriate SCG Party to, establish and maintain Foreign Retirement
Plans containing terms that are substantially identical to the terms of the
defined benefit plan of the corresponding Existing SCG Entity. The SCG Foreign
Retirement Plans shall grant to the applicable Transferred Employees credit for
all purposes of the plans for service and compensation earned prior to the
Closing Date and taken into account for a corresponding purpose under the
corresponding SCG Existing Entity Foreign Retirement Plan, subject, in the case
of credit for benefit accrual purposes, to the transfer of assets and
liabilities to the successor Foreign Retirement Plan of the applicable SCG
Party. If the SCG Existing Entity has set aside assets in a separate trust or
fund to assist such SCG Existing Entity in satisfying its obligations under its
Foreign Retirement Plan, such SCG Existing Entity and the corresponding SCG
Party shall enter into a Foreign Retirement Plan Transfer Agreement prior to the
Closing Date that will provide for the transfer of (x) assets equal to the
lesser of (i) the Applicable DB Transfer Amount (as defined below) and (ii) the
proportion of the total value of assets held in
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such separate trust or fund which the DT Transfer Amount (calculated using 100%
of accumulated benefit obligation (as defined below) in lieu of 115% in the
manner described below) bears to the total accumulated benefit obligation (as
defined below) for the SCG Existing Entity Foreign Retirement Plan and (y) the
related liabilities of the SCG Existing Entity Foreign Retirement Plan with
respect to Transferred Employees who participate in the Foreign Retirement Plan
only to an appropriate SCG Party Foreign Retirement Plan within thirty days
after the Closing Date. To the extent that the amount of assets transferred or
to be transferred to an SCG Party Foreign Retirement Plan pursuant to a Foreign
Retirement Plan Transfer Agreement is less than the Applicable DB Transfer
Amount for such plan or, if no assets are available for transfer pursuant to a
Foreign Retirement Plan Transfer Agreement, Motorola shall, within thirty days
after the Closing Date, transfer to the applicable SCG Party an amount, in cash,
equal to the remainder of (A) the Applicable DB Transfer Amount less (B) the
amount, if any, to be transferred to such SCG Party Foreign Retirement Plan
pursuant to the applicable Foreign Retirement Plan Transfer Agreement. All
transferred amounts shall inure to the benefit of the Transferred Employees. The
term "Applicable DB Transfer Amount" shall mean, with respect to each Foreign
Retirement Plan, an amount equal to the sum of (1) 115% of the "accumulated
benefit obligation," within the meaning of Financial Accounting Standards Board
Statement No. 87 ("FASB 87"), with respect to the Transferred Employees who
participate in such Foreign Retirement Plan, calculated (x) as of the Closing
Date, (y) pursuant to FASB 87, and (z) using the Motorola actuarial assumptions
which are specified on Schedule B hereto for each jurisdiction and (2) interest
on the amount determined under clause (1) for the period from the Closing Date
to the actual date of transfer at the interest rate set forth on Schedule B for
the applicable jurisdiction using Motorola assumptions. If the employment by an
SCG Party of a Transferred Employee terminates for any reason before the
transfer of assets and liabilities contemplated by this section with respect to
such Transferred Employee, no transfer shall be made for such Transferred
Employee, and the Existing SCG Entity shall retain all assets and liabilities
attributable to such Transferred Employee's accrued benefit. The transfers
hereunder shall be in accordance with the laws of the applicable jurisdiction.
Motorola shall not be responsible for the transfer of assets or credit with
respect to termination pay based in whole or in part on years of service.
Notwithstanding the above, the amount of retirement assets to be transferred or
credit attributable to the Foreign Retirement Plan for Mexico Transferred
Employees shall be calculated with a years of service component for involuntary
termination, in accordance with the methodology set forth in this Section
4.2(a).
(b) With respect to the defined contribution arrangements
providing individual account balances maintained by Existing SCG Entities
located in Brazil, Canada, Hong Kong, Malaysia, Puerto Rico, Thailand, United
Kingdom, and any other jurisdictions in which Motorola and SCI LLC mutually
determine that an Existing Entity maintains a foreign defined contribution
Retirement Plan primarily for more than 50 non-United States Transferred
Employees (the "Foreign DC Retirement Plan"), effective as of the Closing Date,
and for a period of at least twelve (12) months thereafter, SCI LLC will, or
will cause the appropriate SCG Party to, maintain a Foreign DC Retirement Plan
for applicable Transferred Employees containing terms that are substantially
identical to the terms of the defined contribution plan of the corresponding
Existing SCG Entity. The SCG Foreign DC Retirement Plans shall grant to
Transferred Employees credit for all purposes of the plans for service and
compensation earned prior to the Closing Date and taken into account for a
corresponding purpose under the corresponding SCG Existing Entity Foreign DC
Retirement Plans. If the SCG Existing Entity has set aside assets in a separate
trust or fund to assist such SCG Existing Entity in satisfying its obligations
under its Foreign DC Retirement Plan, such
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SCG Existing Entity and the corresponding SCG Party shall enter into a Foreign
Retirement Plan Transfer Agreement prior to the Closing Date that will provide
for the transfer of (x) assets equal to the portion of such trust or fund
attributable to the Applicable DC Transfer Amount (as defined below) and (y) the
related liabilities of the SCG Existing Entity Foreign DC Retirement Plan only
to an appropriate SCG Foreign DC Retirement Plan within thirty days after the
Closing Date. To the extent the amount of assets transferred or to be
transferred to an SCG Party Foreign Retirement Plan pursuant to a Foreign
Retirement Plan Transfer Agreement is less than the Applicable DC Transfer
Amount for such plan or if no assets are available for transfer pursuant to a
Foreign Retirement Plan Transfer Agreement, Motorola shall, within thirty days
after the Closing Date, transfer to the applicable SCG Party an amount, in cash
equal to the remainder of (A) the Applicable DC Transfer Amount less (B) the
amount, if any to be transferred to such SCG Party Foreign Retirement Plan
pursuant to the applicable Foreign Retirement Plan Transfer Agreement. The term
"Applicable DC Transfer Amount" shall mean, with respect to each Foreign
Retirement Plan, an amount equal to the sum of (i) the individual account
balances accrued with respect to the applicable Transferred Employees as of the
Closing Date and (ii) interest on the amount determined under clause (1) for the
period from the Closing Date to the actual date of transfer based on the
interest earned with respect to the applicable SCG Existing Entity Foreign DC
Retirement Plan calculated on a daily basis of 1/365th for the number of days
between the Closing Date and the actual date of transfer. All transferred
amounts shall inure to the benefit of the Transferred Employees. If the
employment by a SCG party of a Transferred Employee terminates for any reason
before the transfer of assets and liabilities contemplated by this section with
respect to such Transferred Employee, no transfer shall be made for such
Transferred Employee, and the Existing SCG Entity shall retain all assets and
liabilities attributable to such Transferred Employee's accrued benefit. The
transfers hereunder shall be in accordance with the laws of the applicable
jurisdiction. If applicable, as of the Closing Date, each Transferred Employee
shall have an account under the SCG Foreign DC Retirement Plan that shall
reflect the employee's benefit as a result of such past service credit.
4.3 COMPLIANCE WITH LAW; MUTUAL COOPERATION. In connection with
the transfers described in Sections 4.1 and 4.2, the parties shall each use
Reasonable Efforts to cooperate in effectuating such transfers in accordance
with applicable law and to make all required filings and deliver all notices
required under applicable law in connection therewith.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 LABOR MATTERS. Except as set forth in Schedule 5.1: (i) there
are no charges, complaints or controversies pending or, to Motorola's Knowledge,
threatened, between the Business and any of its respective current or former
employees, which charges, complaints or controversies have had, or would have, a
Material Adverse Effect; (ii) the Business is not a party to any material
collective bargaining agreement or other labor union contract applicable to
Transferred Employees, nor, to Motorola's Knowledge, are there any activities or
proceedings of any labor union to organize any such employees; and (iii) to
Motorola's Knowledge, there are no strikes, slowdowns, work stoppages, lockouts,
or threats thereof, by or with respect to any of the Business employees. Each of
the Existing SCG Entities have complied with all applicable laws pertaining to
the employment or termination of employment of employees and the retention,
categorization or termination of other service
10
providers relating to the Business, including, without limitation, all such laws
relating to labor relations, equal employment opportunities, fair employment
practices, prohibited discrimination or distinction or other similar employment
activities, except for any failures to comply that, individually or in the
aggregate, would not have or result in a Material Adverse Effect or a material
adverse effect on the Business in the United States, Philippines, Malaysia,
Japan or Mexico.
5.2 REPRESENTATIONS AND WARRANTIES FOR EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.2(a) lists all material Employee Benefit
Plans established or maintained by each Business for any current Transferred
Employee. The representations and warranties in this Section 5.2 relate solely
to the Employee Benefit Plans specified below in Section 5.2(b) covering
Transferred Employees as of the date of Schedule 2.4(a), other than any Retained
Employee Benefit Plan Liabilities.
(b) Where applicable, with respect to each of the
Motorola Business Employee Benefit Plans, true and complete copies of (i) all
plan documents (including all amendments and modifications thereof) or, if none,
a summary thereof, and all related trust agreements, insurance contracts and
other funding arrangements; (ii) the three most recently filed United States
Department of Labor Form 5500 series and all schedules thereto, as applicable
(or, in the case of a Foreign Retirement Plan with respect to which a transfer
of assets and liabilities occurs under Section 4.2, comparable information
returns); (iii) the current summary plan descriptions and all summary material
modifications thereto as applicable; (iv) the two most recent actuarial reports,
if applicable; and (v) the most recent determination letter (or equivalent
determination of a Foreign Retirement Plan) issued with respect to each Employee
Benefit Plan, as applicable, have been delivered or made available to SCI LLC as
of the Closing Date.
(c) Except as disclosed on Schedule 5.2(c) each Employee
Benefit Plan has been maintained, operated and administered in compliance with
its terms and the applicable provisions of ERISA, the Code, or other applicable
law, except for noncompliance which would not result in a Material Adverse
Effect or a material adverse effect on the Business in a Principal Location.
(d) Except as disclosed on Schedule 5.2(d), each Employee
Benefit Plan which is intended to meet the qualification requirements of Section
401(a) of the Code has received a favorable determination letter from the IRS,
and such Plan has not been amended since the date of its most recent
determination letter in any respect which would result in a Material Adverse
Effect or a material adverse effect on the Business in a Principal Location.
(e) Except as disclosed on Schedule 5.2(e), there are no
pending, or to the best of Motorola's Knowledge, threatened audits or
investigations by any governmental agency involving any Motorola Employee
Benefit Plan from which SCI LLC or any SCG Party shall receive a transfer of
assets and liabilities under Article IV, and to the best of Motorola's
Knowledge, there are no threatened or pending claims (except for routine claims
for benefits payable in the ordinary operation of the Motorola Employee Benefit
Plan), suits, or proceedings involving any such Motorola Employee Benefit Plan
that would have a Material Adverse Effect on the Business.
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(f) Except as disclosed on Schedule 5.2(f), with respect
to any Motorola Business Employee Benefit Plan that is a "group health plan"
within the meaning of Section 607 of ERISA and that is subject to Section 4980B
of the Code, Motorola complies with the continuation coverage requirements of
the Code and ERISA with respect to Transferred Employees (and their eligible
dependents), except where noncompliance would result in a Material Adverse
Effect on the Business or a material adverse effect on the Business in a
Principal Location.
(g) Except as disclosed on Schedule 5.2(g), with respect
to any Motorola Employee Benefit Plan from which SCI LLC or any SCG Party shall
receive a transfer of assets and liabilities pursuant to Article IV, all
contributions, premiums, expenses and other payments required to be made by the
applicable Existing SCG Entity by the Closing Date have been made.
(h) No Motorola Business Employee Benefit Plan for the
benefit of Transferred Employees in the United States is a "multiemployer
pension plan" as defined in Section 3(37) of ERISA.
ARTICLE VI
INDEMNIFICATIONS
6.1 SURVIVAL PERIODS. All representations and warranties contained
or made in, or in connection with Section 5.2 of this Agreement or any
certificate, document or other instrument delivered in connection herewith,
shall survive the Closing until the expiration of the applicable statute of
limitations. All representations and warranties contained or made in, or in
connection with, Section 5.1 of this Agreement or any certificate, document or
other instrument delivered in connection herewith, shall survive the Closing for
a period of 18 months. The covenants and agreements in this Agreement shall
survive except to the extent they are specifically limited by their terms.
6.2 INDEMNIFICATION BY MOTOROLA. Motorola hereby agrees to
indemnify and hold harmless SCI LLC and the other SCG Parties from and against
any Damages suffered by any or all of them arising out of or resulting from,
under, or in respect to (i) any inaccuracy in or breach by Motorola of its
representations or warranties contained in this Agreement, (ii) any breach by
Motorola of its obligations, covenants or agreements under this Agreement, (iii)
the employment, resignation or termination of employment of any individual prior
to the Closing Date in connection with the operation of the Business by Motorola
or any of its Affiliates, and the termination or resignation after the Closing
Date of any Transferred Employee in Japan or the United States who, prior to the
Closing Date, applied for and was accepted to receive voluntary severance plan
benefits in connection with a reduction in force that was part of the Motorola
Cody restructuring, or who prior to the Closing Date was otherwise identified
for involuntary termination as part of a reduction in force that was part of the
Motorola Cody restructuring, or (iv)(1) any claim incurred after the Closing
Date under an Employee Benefit Plan described in Section 2.4(c) maintained by or
contributed to by Motorola prior to Closing Date which provides for continuing
benefits to former employees or retirees; (2) claims for medical,
hospitalization, vision, dental, death or other welfare benefits (other than
claims for disability benefits) or expense reimbursements incurred prior to the
Closing Date, regardless of whether such claims are reported before, on or after
the Closing Date and provided that a claim will be deemed incurred at the time
the related services or materials (including prescriptions) are rendered or
provided, as the case may be,
12
or, in the case of death or severance benefits, as of the date of such death or
severance; (3) health care continuation coverage required to be provided to any
current or former employee of the Business, or any dependent thereof, pursuant
to Section 4980B of the Code as a result of any "qualifying event" (as defined
in Code Section 4980B and the regulation promulgated thereunder) occurring prior
to the Closing Date, (4) benefits, rights and entitlements accrued prior to the
Closing Date of all current and former executives and other key or management
level employees of the Business under or in respect of any executive
compensation or executive benefits plans; (5) with respect to Inactive SCG
Employees, any and all disability or leave compensation or benefits payable in
respect of any Inactive SCG Employee in respect of any portion of the period
ending on the later of (x) the date, if any, that such person returns to active
employment with an SCG Party and (y) the Closing Date, including liability for
claims for disability compensation, benefits or expense reimbursements arising
in connection with or related to any disability commencing and reported prior to
the Closing Date and claims for medical, hospitalization, vision, dental or
other welfare benefits or expense reimbursement arising in connection with or
related to any disability commencing prior to the Closing Date, and (6) any
claims relating to Transferred Employees under the Employee Benefit Plans that
are Retained Employee Benefit Plans Liabilities. Notwithstanding the foregoing,
no indemnification or hold harmless payment shall be made under clause (iii) or
(iv) of the preceding sentence to the extent that (A) an SCG Party has agreed to
assume assets or liabilities in respect of one or more Employee Benefit Plans
under Article IV hereof, (B) the liability is reflected in the Working Capital
Account, (C) the liability relates to a claim incurred after the Closing Date
under an Employee Benefit Plan or other term or condition of employment with the
SCG Entity with respect to which the SCG Entity has assumed liability under
Section 2.4(b), (D) the liability relates to benefits, rights or compensation
accrued after the Closing Date, (E) the liability relates to a resignation or
termination addressed by Section 6.3 or (F) the liability relates to employment,
resignation or termination after the Closing Date. Any indemnification by
Motorola under this Section 6.2, other than for claims to be reimbursed under
Subsection (iii) or (iv) hereof, or claims relating to Retained Employee Benefit
Plan Liabilities, shall be counted towards and subject to the Deductible Amount
and Marginal Amount described in Section 9.2(b) of the Recapitalization
Agreement.
6.3 INDEMNIFICATION BY THE COMPANY AND SCI LLC.
(a) The Company and SCI LLC hereby agree to indemnify and
hold harmless Motorola from and against any Damages suffered by Motorola or the
Motorola Transferors arising out of or resulting from (i) the employment,
resignation or termination of employment on or after the Closing Date of any
Transferred Employee other than the termination or resignation after the Closing
Date of any Transferred Employee in Japan or the United States who, prior to the
Closing Date, applied for and was accepted to receive voluntary severance plan
benefits in connection with a reduction in force that was part of the Motorola
Cody restructuring, or who prior to the Closing Date was otherwise identified
for involuntary termination as part of a reduction in force that was part of the
Motorola Cody restructuring; (ii) the infringement of the rights of any
employee, trade union representative or other employee representative to
information, consultation, or negotiation if such infringement occurred on or
after the Closing Date; (iii) the termination of any contract between an
Existing SCG Entity or SCG Party and a Transferred Contractor if such
termination occurred as a result of the actions contemplated by the
Reorganization Agreement or occurred after the Closing Date,(iv) the conduct of
any SCG Party after the Closing Date with respect to any employee benefit or
retirement plan, policy, program or
13
arrangement maintained by any SCG Party or to which any SCG Party contributes
pursuant to applicable law on behalf of the Transferred Employees; (v) any
breach by any SCG Party of any of its obligations contained in this Agreement
with respect to benefits matters; (vi) any claim by a Transferred Employee
relating to the coverage, benefits or services received under any employee
benefit or retirement plan, policy, program or arrangement maintained by any SCG
Party after the Closing Date or to which any SCG Party contributes after the
Closing Date pursuant to applicable law on behalf of the Transferred Employees;
(vii) any act or omission after the Closing Date by any SCG Party or any of its
agents in providing the employee benefit or retirement plans, policies, programs
or arrangements maintained by any SCG Party after the Closing Date or to which
any SCG Party contributes after the Closing Date pursuant to applicable law on
behalf of the Transferred Employees; (viii) any assumed assets and liabilities
with respect to any employee benefit or retirement plans, policies, programs or
arrangements maintained by any SCG Party or to which any SCG Party contributes
pursuant to applicable law on behalf of the Transferred Employees, and (ix) any
action prior to the Closing Date that TPG Semiconductor Holding Corp. caused any
SCG Party or any Existing SCG Party to take with respect to an employee benefit
or retirement plan, policy, program or arrangement maintained by any SCG Party.
(b) In jurisdictions in which applicable law, in order to
avoid liability for severance or other termination compensation or Damages,
requires an SCG Party to offer continued employment as of the Closing Date to
Transferred Employees on specific terms and conditions that are determined by
comparison to the terms and conditions provided by the applicable SCG Existing
Entity to such Transferred Employees immediately prior to the Closing Date, and
under applicable law, such Transferred Employee is entitled to severance or
other termination compensation or benefits or Motorola or the other Motorola
Transferors is or are subject to Damages as a result of the failure of the terms
of such offer of employment to comply with such requirements under applicable
law, the applicable SCG Party will be responsible for, and will indemnify, the
Motorola Transferor from and against, payment of such severance compensation,
benefits, and/or Damages to such Transferred Employees. Notwithstanding the
foregoing, in the case of Transferred Employees who are currently employed by
Motorola Japan Limited ("MJL"), (i) the applicable Japanese SCG Party ("SCG
Japan") will offer continued employment to such Transferred Employees on terms
and conditions that are substantially identical to the terms and conditions of
such employees' employment with MJL in effect immediately prior to the Closing
Date (other than with respect to equity based compensation and benefits) (ii)
Motorola, MJL, SCI LLC and the applicable SCG Japan will each use their
Reasonable Efforts to persuade such transferred Employees to consent to the
transfer of their employment to SCG Japan in connection with the consummation of
the transactions contemplated by the Agreement and Plan or Recapitalization and
(iii) MJL and SCG Japan will share equally the cost of the aggregate payments,
if any, required to be made to such Transferred Employees to obtain their
consent to such transfer of employment.
(c) The general indemnification procedures set forth in
Section 9.5 of the Recapitalization Agreement are incorporated herein in their
entirety.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS PRECEDENT TO TRANSFERS OF EMPLOYEES AND BENEFIT
ASSETS. The obligations of the parties hereto to take the actions specified in
this Agreement to occur
14
on or after the Closing Date shall only arise when and if the transactions
contemplated by the Reorganization Agreement have been consummated.
ARTICLE VIII
MISCELLANEOUS
8.1 FURTHER ACTIONS. The parties hereto agree to use all
reasonable good faith efforts to take all actions and to do all things
necessary, proper or advisable to consummate the transactions contemplated
hereby by the applicable closing dates.
8.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given (i) three Business
Days after mailing if mailed by certified or registered mail, return receipt
requested, (ii) one Business Day after delivery to Federal Express or other
nationally recognized overnight express carrier, if sent for overnight delivery
with fee prepaid, (iii) upon receipt if sent via facsimile with receipt
confirmed, or (iv) upon receipt if delivered personally, addressed to the
address set forth in the Recapitalization Agreement or to such other address or
addresses of which the respective party shall have notified the other.
8.3 EXPENSES. Except as otherwise provided in this Agreement, each
party to this Agreement will bear all the fees, costs and expenses which are
incurred by it in connection with the transactions contemplated hereby, whether
or not such transactions are consummated.
8.4 ENTIRE AGREEMENT. The agreement of the parties, which is
comprised of this Agreement, the Exhibits and the Schedules hereto and the
documents referred to herein, sets forth the entire agreement and understanding
between the parties and supersedes any prior agreement or understanding, written
or oral, relating to the subject matter of this Agreement.
8.5 ASSIGNMENT; BINDING EFFECT; SEVERABILITY. This Agreement may
not be assigned by any party hereto. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the successors, legal
representatives and permitted assigns of each party hereto. The provisions of
this Agreement are severable, and in the event that any one or more provisions
are deemed illegal or unenforceable the remaining provisions shall remain in
full force and effect unless the deletion of such provision shall cause this
Agreement to become materially adverse to any party, in which event the parties
shall use reasonable efforts to arrive at an accommodation which best preserves
for the parties the benefits and obligations of the offending provision.
8.6 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws (as opposed to the
conflicts of laws provisions) of the State of New York.
8.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts with the same effect as if the signatures thereto
were upon one instrument.
15
8.8 HEADINGS. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
8.9 AMENDMENT AND WAIVER. The parties may by mutual agreement
amend this Agreement in any respect, and any party, as to such party, may (a)
extend the time for the performance of any of the obligations of any other
party, (b) waive any inaccuracies in representations by any other party, (c)
waive compliance by any other party with any of the agreements contained herein
and performance of any obligations by such other party, and (d) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party against whom
enforcement of the same is sought.
8.10 U.S. CURRENCY. Unless otherwise stated, all dollars specified
in this Agreement, and the Exhibits and Schedules attached or referred to
herein, shall be in U.S. dollars.
[signature page follows]
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IN WITNESS WHEREOF, each of Motorola and the Company has caused this
Employee Matters Agreement to be duly executed on its behalf by its duly
authorized officer as of the day and year first written above.
MOTOROLA, INC.
/s/ Keith Bane
---------------------------------------------
Name: Keith Bane
----------------------------------------
Title: Executive Vice President and President
---------------------------------------
SCG HOLDING CORPORATION
/s/ Theodore W. Schaffner
---------------------------------------------
Name: Theodore W. Schaffner
----------------------------------------
Title: Vice-President
---------------------------------------
SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC
By: SCG Holding Corporation, its sole member
/s/ Theodore W. Schaffner
---------------------------------------------
Name: Theodore W. Schaffner
----------------------------------------
Title: Vice-President
---------------------------------------
