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Master Separation And Distribution Agreement

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EXHIBIT 10(a)


MASTER SEPARATION AND DISTRIBUTION AGREEMENT


THIS MASTER SEPARATION AND DISTRIBUTION AGREEMENT (the " Agreement" ) is made and entered into as of April 4, 2004, by and between Motorola, Inc., a Delaware corporation (" Motorola" ), and Freescale Semiconductor, Inc., a Delaware corporation (" Freescale" ). Capitalized terms used and not otherwise defined in this Agreement have the meanings ascribed to such terms in Article 1 of this Agreement.


RECITALS


WHEREAS, Motorola has determined that it would be appropriate, desirable and in the best interests of Motorola and Motorola' s stockholders to separate the SPS Business from Motorola;

WHEREAS, in connection with the separation of the SPS Business from Motorola, Motorola desires to contribute or otherwise transfer, and to cause certain of its Subsidiaries to contribute or otherwise transfer, certain Assets and Liabilities associated with the SPS Business, including the stock or other equity interests of certain of Motorola' s Subsidiaries dedicated to the SPS Business, to Freescale and certain of Freescale' s Subsidiaries (collectively, the " Contribution" );

WHEREAS, Freescale intends to offer and sell for its own account a limited number of shares of Freescale Class A Common Stock pursuant to an initial public offering of such shares (the " IPO" ), and in furtherance thereof, Freescale has previously filed the IPO Registration Statement with the SEC which has not yet become effective;

WHEREAS, in connection with the Contribution and in exchange for the SPS Assets contributed by Motorola directly to Freescale, Freescale intends to (i) convert the Freescale Common Stock held by Motorola into shares of Freescale Class B Common Stock such that Motorola will own all of the outstanding Freescale Class B Common Stock immediately following the consummation of the IPO, (ii) distribute to Motorola a portion of the IPO proceeds and Freescale Borrowing proceeds, which Motorola intends to transfer to creditors of Motorola, and (iii) assume the SPS Liabilities;


WHEREAS, Motorola intends, after the IPO, to distribute to holders of shares of Motorola Common Stock the outstanding shares of Freescale Common Stock then owned by Motorola (the " Distribution" );


WHEREAS, Motorola and Freescale intend that the contribution of Assets by Motorola to Freescale pursuant to Section 2.1 of this Agreement and the Distribution, taken together, will qualify as a reorganization for U.S. federal income tax purposes pursuant to which no gain or loss will be recognized by Motorola or its stockholders under Section 355, 361(b)(3), 368(a)(1)(D) and related provisions of 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 and the Ancillary Agreements to set forth the principal arrangements between them regarding the Contribution, the IPO and the Distribution:


AGREEMENT


NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows:


ARTICLE 1 DEFINITIONS

The following terms, as used in this Agreement, have the following meanings:


" Action" means any suit, arbitration, inquiry, proceeding or investigation by or before any court, governmental or other regulatory or administrative agency or commission or any arbitration tribunal asserted by a Person.

" ADR" has the meaning set forth in Section 9.3(b) of this Agreement.


" Affiliate" of any specified Person means any other Person directly or indirectly " controlling ," " controlled by ," or " under common control with" (within the meaning of the Securities Act), such specified Person; provided , however , that for purposes of this Agreement, unless this Agreement expressly provides otherwise, the determination of whether a Person is an Affiliate of another Person will be made assuming that no member of the Motorola Group is an Affiliate of any member of the Freescale Group.


" Agreement" has the meaning set forth in the preamble to this Agreement.


" Ancillary Agreements" means each of the Contribution Agreements, the Employee Matters Agreement, the Freescale Transition Services Agreement, the Intellectual Property Assignment Agreement, the Intellectual Property License Agreement, the Motorola Transition Services Agreement, the Registration Rights Agreement and the Tax Sharing Agreement, including any exhibits, schedules, attachments, tables or other appendices thereto, and each agreement and other instrument contemplated herein or therein.


" Annual Financial Statements" has the meaning set forth in Section 5.1(a)(v) of this Agreement.


" Assets" means assets, properties and rights (including goodwill and rights arising under Contracts), wherever located (including in the possession of vendors, other Persons 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.

" Bad Act" has the meaning set forth in Section 2.2 of this Agreement.


" Business Day" means a day other than a Saturday, a Sunday or a day on which banking institutions located in Chicago, Illinois or New York, New York are authorized or obligated by law or executive order to close.


" Claimed Amount" has the meaning set forth in Section 8.3(a) of this Agreement.

" Claim Notice" has the meaning set forth in Section 8.3(a) of this Agreement.


" Code" means the Internal Revenue Code of 1986, as amended.


" 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.


" Contribution" has the meaning set forth in the Recitals to this Agreement.

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" Contribution Agreements" means the agreements entered into by and between Motorola and certain of the Motorola Subsidiaries, on the one hand, and Freescale and certain of the Freescale Subsidiaries, on the other hand, pursuant to which the Contribution will be effected.

" Controlling Party" has the meaning set forth in Section 8.3(d)(ii) of this Agreement.


" Covered Subsidiary" means a corporation or other legal entity controlled or owned, directly or indirectly, by Motorola or Freescale, as applicable, that satisfies the definition of " Subsidiary" under a Motorola insurance policy.


" Damages" means all losses, claims, demands, damages, Liabilities, judgments, dues, penalties, assessments, fines (civil, criminal or administrative), costs, liens, forfeitures, settlements, fees or expenses (including reasonable attorneys' fees and expenses and any other expenses reasonably incurred in connection with investigating, prosecuting or defending a claim or Action), of any nature or kind, whether or not the same would properly be reflected on a balance sheet.

" Dispute" has the meaning set forth in Section 9.3(a) of this Agreement.


" Distribution" has the meaning set forth in the Recitals to this Agreement.


" Distribution Agent" has the meaning set forth in Section 4.4(a) of this Agreement.

" Distribution Date" means the date on which the Distribution occurs.


" Effective Date" means April 4, 2004.


" Employee Matters Agreement" means that certain Employee Matters Agreement entered into by and between Motorola and Freescale effective as of the Effective Date, as such Employee Matters Agreement may be amended from time to time.

" Environmental Law" means any federal, state, local, foreign or international statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, common law (including tort and environmental nuisance law), legal doctrine, order, judgment, decree, injunction, requirement or agreement with any governmental authority, now or hereafter in effect, relating to health, safety, pollution or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or to emissions, discharges, releases or threatened releases of any substance currently or at any time hereafter listed, defined, designated or classified as hazardous, toxic, waste, radioactive or dangerous, or otherwise regulated, under any of the foregoing, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any such substances, including the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund Amendments and Reauthorization Act and the Resource Conservation and Recovery Act and comparable provisions in state, local, foreign or international law.


" Environmental Liabilities" means all Liabilities relating to, arising out of, or resulting from, any Environmental Law or Contract relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance with any product take back requirements or with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.


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" Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, together with the rules and regulations promulgated thereunder.


" Existing IP Litigation Matters" means the following pending litigation matters: (i) Motorola, Inc. v. Analog Devices, Inc., No. 1:03-CV-0131, United States District Court, Eastern District of Texas (Beaumont Division); (ii) STMicroelectronics v. Motorola, Inc., No. 4:03cv276, United States District Court, Eastern District of Texas (Sherman Division); and (iii) Motorola, Inc. v. Micron Technology, Inc., No. A04 CA 007, United States District Court, Western District of Texas (Austin Division).


" Financial Statements" means the Annual Financial Statements and Quarterly Financial Statements collectively.

" Freescale" has the meaning set forth in the preamble to this Agreement.


" Freescale Bank Facilities" means the term loan facility and revolving credit facility, if any, contemplated to be entered into by Freescale concurrently with the IPO with a syndicate of bank and institutional lenders on such terms and conditions as agreed to by Motorola, Freescale and the other parties to the Freescale Bank Facilities.


" Freescale High Yield Notes" means the senior unsecured notes contemplated to be issued by Freescale concurrently with the IPO on such terms and conditions as agreed to by Motorola, Freescale and the underwriters for the Freescale High Yield Notes.

" Freescale Borrowing" means new indebtedness of Freescale and its Subsidiaries to be incurred by the IPO pursuant to the Freescale Bank Facilities and the issuance of the Freescale High Yield Notes.

" Freescale Capital Stock" means all classes or series of capital stock of Freescale, including the Freescale Class A Common Stock, the Freescale Class B Common Stock, and all options, warrants and other rights to acquire such capital stock.

" Freescale Class A Common Stock" means the Class A common stock, $0.01 par value per share, of Freescale.

" Freescale Class B Common Stock" means the Class B common stock, $0.01 par value per share, of Freescale.


" Freescale Common Stock" means the common stock of Freescale, including the Freescale Class A Common Stock and the Freescale Class B Common Stock.


" Freescale Group" means Freescale, each Person that Freescale directly or indirectly controls (within the meaning of the Securities Act) immediately after the Effective Date, and each other Person that becomes an Affiliate of Freescale after the Effective Date.

" Freescale Indebtedness" means the aggregate principal amount of total liabilities (whether long-term or short-term) for borrowed money (including capitalized leases) of the Freescale Group collectively, as determined for purposes of its Financial Statements prepared in accordance with GAAP.

" Freescale Indemnified Parties" has the meaning set forth in Section 8.2 of this Agreement.

" Freescale Public Documents" has the meaning set forth in Section 5.1(a)(viii) of this Agreement.


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" Freescale Shared Contract" means any Contract included in the SPS Assets relating in part to the Motorola Business.


" Freescale Transfer Agent" means the transfer agent and registrar for the Freescale Class A Common Stock.


" Freescale Transition Services Agreement" means the Transition Services Agreement entered into by and between Motorola and Freescale effective as of the Effective Date, pursuant to which one or more members of the Motorola Group will provide certain transition services to one or more members of the Freescale Group, as such Freescale Transition Services Agreement may be amended from time to time.

" Freescale Voting Stock" has the meaning set forth in Section 5.2 of this Agreement.


" Freescale' s Auditors" has the meaning set forth in Section 5.1(b)(i) of this Agreement.


" GAAP" means U.S. generally accepted accounting principles, consistently applied.

" Global Reorganization and Restructuring Plan" means the Global Reorganization and Restructuring Plan in substantially the form attached to this Agreement as Exhibit A , pursuant to which certain Assets and Liabilities will be transferred between the parties and their Affiliates in connection with the Contribution.


" Group" means either the Motorola Group or the Freescale Group, as the context requires.

" Indemnified Party" has the meaning set forth in Section 8.3(a) of this Agreement.


" Indemnifying Party" has the meaning set forth in Section 8.3(a) of this Agreement.


" 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.

" Intellectual Property" has the meaning set forth in the Intellectual Property Assignment Agreement.

" Intellectual Property Assignment Agreement" means that certain Intellectual Property Assignment Agreement entered into by and between Motorola and Freescale effective as of the Effective Date, as such Intellectual Property Assignment Agreement may be amended from time to time.

" Intellectual Property License Agreement" means that certain Intellectual Property License Agreement entered into by and between Motorola and Freescale effective as of the Effective Date, as such Intellectual Property License Agreement may be amended from time to time.

" Intended Transferee" has the meaning set forth in Section 2.5(b) of this Agreement.


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" Intended Transferor" has the meaning set forth in Section 2.5(b) of this Agreement.


" Inter-Group Indebtedness" means indebtedness for borrowed funds between a member of the Motorola Group and a member of the Freescale Group as set forth on the Motorola Treasury capitalization plan.

" IPO" has the meaning set forth in the Recitals to this Agreement.


" IPO Registration Statement" means the registration statement on Form S-1 (SEC File No. 111250) as filed by Freescale with the SEC in connection with the IPO, together with all amendments and supplements thereto.

" IPO Settlement Date" means the date on which the First Time of Delivery (as defined in the Underwriting Agreement) occurs.


" Iridium Claims" means any Liability in respect of any governmental, judicial or adversarial proceeding, litigation, arbitration, dispute, claim, cause of action or investigation, relating to the Iridium satellite communications business, including without limitation Freeland v. Iridium World Communications, Inc., et al., M&C Partners III v. Galvin, et al., Statutory Committee of Unsecured Creditors v. Motorola, Inc. and the proceedings relating to the private criminal complaint and the civil suit brought by Iridium India Telecom Ltd. against Motorola, Inc., et al.


" Iridium Data" means any data, disk or any other Information relating to the Iridium satellite communications business, including, but without limitation, data located on mainframe systems IBM 9672-Y36 and a 9672-R36 on enterprise storage server IBM 2105 Model F20 DASD with any of the following volume identification numbers: PCIC40, PDAB02, PDAB03, PDAB04, PDAB06, PDAB07, PDAB08, PDAB55, PDAB57, PDAB58, PDB201, PDB204, PDB205, PDBT00, PMIG40, PPRV60, PPRV61, PPRV62, PPRV63, PPRV64, PPRV65, PPRV66, PPRV67, PPRV68, PPRV69, PPRV6A, PPRV6B, PPRV6C, PPRV6D, PPRV6E, PPRV6F, PPRV6G, PPRV6H, PPRV6I, PPRV6J, PPRV6K, PPRV6L, PPRV6M, PPRV6N, PPRV6O, PPRV6P, PPRV6Q, PPRV6R, PPRV6S, PPRV6T, PPRV6U, PPRV6V, PPRV6W, PPRV6X, PPRV6Y, PPRV6Z, PPRV70, PPRV71, PPRV72, PPRV73, PPRV74, PPRV75, PPRV76, PPRV77, PPRV78, PPRV79, PPRV7A, PPRV7B, PPRV7C, PPRV7D, PPRV7E, PPRV7F, PPRV7G, PPRV7H, PPRV7I, PPRV7J, PPRV7K, PPRV7L, PPRV7M, PPRV7N, PPRV7O, PPRV7P, PPRV7Q, PPRV7R, PPRV7S, PPRV7T, PPRV7U, SGEGT1, SGEGT2, SGEGT3 and SGEGT4.


" IRS" means the United States Internal Revenue Service.


" Key Ancillary Agreements" means each of the Employee Matters Agreement, the Freescale Transition Services Agreement, the Intellectual Property Assignment Agreement, the Intellectual Property License Agreement, the Motorola Transition Services Agreement, the Registration Rights Agreement and the Tax Sharing Agreement, including any exhibits, schedules, attachments, tables or other appendices thereto.

" Liabilities" means debts, liabilities (including Environmental Liabilities), guarantees, assurances, commitments and obligations of any nature or description, 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 (i) any Contract or tort based on negligence or strict liability or (ii) any act or failure to act by any past or present Representative, whether or not such act or failure to act was


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within such Representative' s authority), and whether or not the same would be required by GAAP to be reflected in financial statements or disclosed in the notes thereto.


" Motorola" has the meaning set forth in the preamble to this Agreement.


" Motorola Annual Statements" has the meaning set forth in Section 5.1(b)(ii) of this Agreement.


" Motorola Business" means the businesses or operations of the Motorola Group other than the SPS Business.

" Motorola Common Stock" means the common stock, par value $3.00 per share, of Motorola.

" Motorola Credit Agreement" means that certain Motorola, Inc. Multi-Year Credit Agreement dated as of May 30, 2002 entered into between Motorola and the lenders party thereto, as the same may be amended or replaced from time to time.


" Motorola Disclosure Portions" means all material set forth in, or incorporated by reference into, the IPO Registration Statement to the extent relating exclusively to (i) the Motorola Group, (ii) the Motorola Business, (iii) Motorola' s intentions with respect to the Distribution, or (iv) the 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.


" Motorola Group" means Motorola and each Person that is an Affiliate of Motorola (other than any member of the Freescale Group) immediately after the Effective Date, and each other Person that becomes an Affiliate of Motorola after the Effective Date.

" Motorola Indemnified Parties" has the meaning set forth in Section 8.1 of this Agreement.

" Motorola Liabilities" means the Liabilities of Motorola other than the SPS Liabilities.


" Motorola Public Filings" has the meaning set forth in Section 5.1(a)(xii) of this Agreement.


" Motorola Shared Contract" means any Contract relating in part to the SPS Business not included in the SPS Assets.


" Motorola Transition Services Agreement" means the Transition Services Agreement entered into by and between Motorola and Freescale effective as of the Effective Date, pursuant to which one or more members of the Freescale Group will provide certain transition services to one or more members of the Motorola Group, as such Motorola Transition Services Agreement may be amended from time to time.


" Motorola' s Auditors" has the meaning set forth in Section 5.1(b)(ii) of this Agreement.

" Non-controlling Party" has the meaning set forth in Section 8.3(d)(ii) of this Agreement.

" Ordinary Course of Business" means the ordinary course of the SPS Business as conducted by Motorola and its Subsidiaries prior to the Effective Date consistent with historical custom and practice during normal day-to-day operations and not requiring any special authorization of any nature.

" Owning Party" has the meaning set forth in Section 6.2 of this Agreement.


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" 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.


" Possessor" has the meaning set forth in Section 6.3 of this Agreement.

" Quarterly Financial Statements" has the meaning set forth in Section 5.1(a)(iv) of this Agreement.


" Record Date" means the close of business on the date to be determined by Motorola' s Board of Directors as the record date for determining the stockholders of Motorola entitled to receive shares of Freescale Common Stock pursuant to the Distribution.


" Registration Rights Agreement" means the Registration Rights Agreement to be entered into between Motorola and Freescale prior to the IPO, as such Registration Rights Agreement may be amended from time to time.


" Regulation S-K" means Regulation S-K of the General Rules and Regulations promulgated by the SEC pursuant to the Securities Act.


" Regulation S-X" means Regulation S-X of the General Rules and Regulations promulgated by the SEC pursuant to the Securities Act.

" Representatives" means, with respect to any Person, any of such Person' s directors, officers, employees, agents, consultants, advisors, accountants or attorneys.


" Requestor" has the meaning set forth in Section 6.3 of this Agreement.

" Retention Period" has the meaning set forth in Section 6.4 of this Agreement.

" SEC" means the United States Securities and Exchange Commission or any successor agency.


" Securities Act" means the Securities Act of 1933, as amended from time to time, together with the rules and regulations promulgated thereunder.

" SPS Assets" means all of Motorola' s and its Subsidiaries' right, title and interest in and to:

(i) any and all Assets of Motorola and its Subsidiaries that are used exclusively or held for use exclusively in the SPS Business; and


(ii) any and all Assets that are expressly listed, scheduled or otherwise clearly described in a Contribution Agreement or any other Ancillary Agreement as Assets to be transferred to Freescale or any other member of the Freescale Group.


" SPS Business" means (i) the businesses and operations conducted by the Semiconductor Products Sector of Motorola and its Affiliates (including, for purposes of this definition, any member of the Freescale Group) prior to the Effective Date, including as described in the IPO Registration Statement, and (ii) except as otherwise expressly provided in this Agreement, any terminated, divested or discontinued businesses or operations that at the time of such termination, divestiture or discontinuation related to the SPS Business (as described in the foregoing clause (i)) as then conducted.


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" SPS Liabilities" means the following:

(i) any and all Liabilities to the extent arising out of or relating to the SPS Business or the SPS Assets, in each case whether such Liabilities arise or accrue prior to, on or after the Effective Date (other than Tax-related Liabilities which are specifically retained by Motorola under the Tax Sharing Agreement and employee-related Liabilities which are specifically retained by Motorola under the Employee Matters Agreement);

(ii) any and all Liabilities to the extent arising out of or relating to the operation of any business conducted by any member of the Freescale Group at any time after the Effective Date;


(iii) any and all Liabilities that are expressly listed, scheduled or otherwise clearly described in a Contribution Agreement or any other Ancillary Agreement as Liabilities to be assumed by Freescale or any member of the Freescale Group; and


(iv) all obligations of the Freescale Group under or pursuant to this Agreement, any Ancillary Agreement or any other instrument entered into in connection herewith or therewith.

" Steering Committee" has the meaning set forth in Section 9.3(a)(i) of this Agreement.

" Subsidiary" means with respect to any specified Person, any corporation or other legal entity of which such Person or any of its Subsidiaries controls or 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 to the board of directors or similar governing body; provided , however , that unless the context otherwise requires, references to Subsidiaries of Motorola will not include the entities that will be transferred to Freescale or other members of the Freescale Group pursuant to this Agreement, including, without limitation, the entities listed on Exhibit 21.1 to the IPO Registration Statement, whether the transfer of such entities occurs prior to or after the Effective Date.

" Tax" and " Taxes" have the meanings set forth in the Tax Sharing Agreement.


" Tax Advisor" has the meaning set forth in the Tax Sharing Agreement.


" Tax Control" means the definition of " control" set forth in Section 368(c) of the Code.

" Tax-Free Status" has the meaning set forth in the Tax Sharing Agreement.


" Tax Sharing Agreement" means that certain Tax Sharing Agreement entered into by and between Motorola and Freescale effective as of the Effective Date, as such Tax Sharing Agreement may be amended from time to time.

" Third-Party Claim" has the meaning set forth in Section 8.3(d)(i) of this Agreement.

" Underwriters" means the managing underwriters for the IPO as described in the IPO Registration Statement.


" Underwriting Agreement" means the Underwriting Agreement between Motorola, Freescale and the Underwriters relating to the IPO, as amended from time to time.


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ARTICLE 2

CONTRIBUTION AND ASSUMPTION


Section 2.1 Contribution of SPS Assets . Unless otherwise provided in this Agreement or in any Ancillary Agreement, on the Effective Date, Motorola will (and Motorola will cause its applicable Subsidiaries to) assign, transfer and convey to Freescale and its applicable Subsidiaries, and Freescale will (and Freescale will cause its applicable Subsidiaries to) receive and accept from Motorola a
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