Exhibit 10.1

 

Execution Version

 

EMPLOYEE MATTERS AGREEMENT

 

BY AND BETWEEN

 

EXTERRAN HOLDINGS, INC.

 

AND

 

EXTERRAN CORPORATION

 

DATED AS OF NOVEMBER 3, 2015

 

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EMPLOYEE MATTERS AGREEMENT

 

This Employee Matters Agreement (the “Agreement”) is entered into effective as
of November 3, 2015, by and between Exterran Holdings, Inc. (to be renamed
Archrock, Inc.), a Delaware corporation (“RemainCo”), and Exterran Corporation,
a Delaware corporation and wholly owned subsidiary of RemainCo (“SpinCo”), each
a “Party” and together, the “Parties.”  Capitalized terms used but not otherwise
defined shall have the respective meanings assigned to them in Article I.

 

RECITALS:

 

WHEREAS, RemainCo owns all of the issued and outstanding shares of SpinCo Common
Stock;

 

WHEREAS, the Board of Directors of RemainCo (the “RemainCo Board”) has
determined that it is appropriate, advisable and in the best interests of
RemainCo and its stockholders for RemainCo to separate the SpinCo Business from
the RemainCo Business, as more fully described in the Information Statement, on
the terms and conditions set forth herein and in the Separation Agreement (as
defined below);

 

WHEREAS, to effect this separation, the Parties and certain of their
subsidiaries are entering into that certain Separation and Distribution
Agreement dated as of November 3, 2015 (as amended from time to time, the
“Separation Agreement”); and

 

WHEREAS, in connection with their entry into the Separation Agreement, RemainCo
and SpinCo are entering into this Agreement for the purpose of allocating
between and among them and certain of their subsidiaries certain assets,
Liabilities and responsibilities with respect to certain (i) employees,
independent contractors and directors, (ii) compensation, equity and benefit
plans, programs and arrangements and (iii) other employee-related matters.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements,
provisions and covenants contained in this Agreement, the Parties hereby agree
as follows:

 

ARTICLE I
DEFINITIONS

 

For purposes of this Agreement, the following terms shall have the following
meanings:

 

“ACA” means the Patient Protection and Affordable Care Act of 2010, as amended.

 

“Accrued PTO” means, with respect to a SpinCo Employee or a RemainCo Employee,
such individual’s accrued vacation, if any.

 

“Action” means any demand, action, claim, dispute, suit, countersuit,
arbitration, inquiry, subpoena, proceeding or investigation of any nature
(whether criminal, civil, legislative, administrative, regulatory, prosecutorial
or otherwise) by or before any Governmental Authority or in any arbitration or
mediation.

 

“Affiliate” shall mean, when used with respect to any specified Person, a Person
that directly or indirectly controls, is controlled by, or is under common
control with such specified Person.  For the purpose of this definition,
“control” (including with correlative meanings, “controlled by” and “under
common control with”) means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or other interests, by
contract, agreement, obligation, indenture, instrument, lease, promise,

 

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arrangement, release, warranty, commitment, undertaking or otherwise.  It is
expressly agreed that, from and after the Effective Time and for purposes of
this Agreement, no SpinCo Entity shall be deemed to be an Affiliate of any
RemainCo Entity, and no RemainCo Entity shall be deemed an Affiliate of any
SpinCo Entity.

 

“Agent” means American Stock Transfer & Trust Co., LLC, as the distribution
agent appointed by RemainCo to distribute to the stockholders of RemainCo all of
the outstanding shares of SpinCo Common Stock pursuant to the External
Distribution.

 

“Agreement” shall have the meaning set forth in the Preamble.

 

“Allocable Portion” means the portion of a Shared Liability for which RemainCo
or SpinCo shall be responsible hereunder, which shall be allocated 50% to
RemainCo and 50% to SpinCo.

 

“Ancillary Agreements” shall have such meaning as provided in the Separation
Agreement.

 

“Assets” shall have such meaning as provided in the Separation Agreement.

 

“Auditing Party” shall have the meaning set forth in Section 11.11.

 

“Benefit Plan” shall mean any compensation and/or benefit plan, program,
arrangement, agreement or other commitment that is sponsored, maintained,
entered into or contributed to by an entity or with respect to which such entity
otherwise has any liability or obligation, whether fixed or contingent,
including each such (i) employment, consulting, noncompetition, nondisclosure,
nonsolicitation, severance, termination, pension, retirement, supplemental
retirement, excess benefit, profit sharing, bonus, incentive, sales incentive,
commission, management objective program, deferred compensation, retention,
transaction, change in control and similar plan, program, arrangement, agreement
or other commitment, (ii) stock option, restricted stock, stock unit,
performance stock, stock appreciation, stock purchase, deferred stock or other
compensatory equity or equity-based plan, program, arrangement, agreement or
other commitment, (iii) savings, life, health, disability, accident, medical,
dental, vision, cafeteria, insurance, flexible spending,
adoption/dependent/employee assistance, tuition, vacation, relocation,
paid-time-off, other fringe benefit and other employee compensation plan,
program, arrangement, agreement or other commitment, including in each case,
each “employee benefit plan” as defined in Section 3(3) of ERISA and any trust,
escrow, funding, insurance or other agreement related to any of the foregoing.

 

“COBRA” shall mean the continuation coverage requirements for “group health
plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and as codified in Code Section 4980B and Sections 601 through
608 of ERISA, together with all regulations promulgated thereunder.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Contractor” shall mean, with respect to any SpinCo Entity or RemainCo Entity,
any independent individual or agency personnel who works or has worked for such
entity (including, without limitation, full-time, part-time or temporary
workers).  Contractors may include, without limitation, independent contractors
who invoice a SpinCo Entity or a RemainCo Entity (as applicable) directly for
services provided and agency workers for which the applicable agency invoices a
SpinCo Entity or a RemainCo Entity (as applicable) for services provided.  For
the avoidance of doubt, Contractors shall not include third-party firms, vendors
or other entities that provide services relating to a particular expertise or
subject matter to a SpinCo Entity or a RemainCo Entity or any of their employees
or other personnel.

 

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“Director” shall mean, with respect to any SpinCo Entity or RemainCo Entity, a
non-employee member of the board of directors or managers, as applicable, of
such entity.

 

“Dispute Committee” shall have the meaning provided in the Separation Agreement.

 

“Distribution Date” shall mean the date on which RemainCo, through the Agent,
distributes all of the issued and outstanding shares of SpinCo Common Stock to
holders of RemainCo Common Stock in the External Distribution.

 

“Distribution Ratio” shall mean the quotient obtained by dividing (i) one by
(ii) two.

 

“Effective Time” shall mean 11:59 p.m. Eastern Time, or such other time as
RemainCo may determine, on the Distribution Date.

 

“Employee” shall mean, with respect to any SpinCo Entity or RemainCo Entity, any
full-time or part-time employee of such entity.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.

 

“External Distribution” shall have the meaning provided in the Separation
Agreement.

 

“Exterran Pre-Adjustment Stock Value” shall mean the closing price per share of
Exterran Holdings, Inc. common stock trading “regular way” on the New York Stock
Exchange on the Distribution Date.

 

“Force Majeure” shall have the meaning provided in the Separation Agreement.

 

“Former RemainCo Employee” shall mean any Employee, Contractor or Director who
(A) provides or provided services primarily for the benefit of the RemainCo
Business and who either (i) terminates or has terminated his or her employment
or other service relationship with any RemainCo Entity at any time (whether
prior to, on or after the Effective Time), or (ii) terminates or has terminated
his or her employment or other service relationship with any SpinCo Entity on or
prior to the Effective Time, and (B) the Parties determine to be a Former
RemainCo Employee.  Former RemainCo Employees shall include, without limitation,
those Employees, Contractors and Directors set forth on Exhibit A attached
hereto.  For the avoidance of doubt, any transfer of employment or other service
relationship between the RemainCo Entities and/or the SpinCo Entities for
purposes of effectuating the Internal Distribution and/or External Distribution
shall not constitute a termination of employment or other service relationship
for purposes of this definition.  To the extent such designation is not readily
made, the Parties agree to negotiate in good faith to agree upon a designation
as a Former Shared Employee, Former RemainCo Employee or a Former SpinCo
Employee.

 

“Former Shared Employee” shall mean any Employee, Contractor or Director who
(A) provides or provided services primarily for the benefit of both the SpinCo
Business and the RemainCo Business (rather than primarily to one or the other),
(B) terminates his or her employment or other service relationship with any
RemainCo Entity or any SpinCo Entity on or prior to the Effective Time, and
(C) the Parties determine to be a Former Shared Employee.  Former Shared
Employees shall include, without limitation, those Employees, Contractors and
Directors set forth on Exhibit B attached hereto. For the avoidance of doubt,
any transfer of employment or other service relationship between the RemainCo

 

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Entities and/or the SpinCo Entities for purposes of effectuating the Internal
Distribution and/or External Distribution shall not constitute a termination of
employment or other service relationship for purposes of this definition. The
Parties shall negotiate in good faith to agree upon a designation as a Former
Shared Employee, Former RemainCo Employee or a Former SpinCo Employee.

 

“Former SpinCo Employee” shall mean any Employee, Contractor or Director who
(A) provides or provided services primarily for the benefit of the SpinCo
Business and who (i) terminates or has terminated his or her employment or other
service relationship with any SpinCo Entity at any time (whether prior to, on or
after the Effective Time) or (ii) terminates or has terminated his or her
employment or other service relationship with any RemainCo Entity on or prior to
the Effective Time, and (B) the Parties determine to be a Former SpinCo
Employee.  Former SpinCo Employees shall include, without limitation, those
Employees, Contractors and Directors set forth on Exhibit C attached hereto. 
For the avoidance of doubt, any transfer of employment or other service
relationship between the RemainCo Entities and/or the SpinCo Entities for
purposes of effectuating the Internal Distribution and/or External Distribution
shall not constitute a termination of employment or other service relationship
for purposes of this definition.  To the extent such designation is not readily
made, the Parties agree to negotiate in good faith to agree upon a designation
as a Former Shared Employee, Former RemainCo Employee or a Former SpinCo
Employee.

 

“Governmental Authority” shall mean any nation or government, any state,
province, municipality or other political subdivision thereof, and any entity,
body, agency, commission, department, board, bureau, court, tribunal or other
instrumentality, whether federal, state, provincial, regional, local, domestic,
foreign or multinational, exercising executive, legislative, judicial,
regulatory, administrative or other similar functions of, or pertaining to,
government and any official thereof.

 

“HIPAA” shall mean the Health Insurance Portability and Accountability Act of
1996, as amended.

 

“Information Statement” shall have such meaning as provided in the Separation
Agreement.

 

“Internal Distribution” shall have such meaning as provided in the Separation
Agreement.

 

“IRS” shall mean the U.S. Internal Revenue Service.

 

“Law” shall mean any national, supranational, federal, state, provincial,
regional, local or similar law (including common law), statute, code, order,
ordinance, rule, regulation, treaty (including any income tax treaty), license,
permit, authorization, approval, consent, decree, injunction, binding judicial
or administrative interpretation or other legally enforceable requirement, in
each case, enacted, promulgated, issued or entered by a Governmental Authority.

 

“Liabilities” shall have such meaning as provided in the Separation Agreement.

 

“New RemainCo Cash Incentive Plan” shall have the meaning set forth in
Section 8.1(a).

 

“New SpinCo Cash Incentive Plan” shall have the meaning set forth in
Section 8.1(a).

 

“Participating Company” shall mean, (i) with respect to a SpinCo Benefit Plan,
any SpinCo Entity and, prior to the External Distribution, each RemainCo Entity,
in each case, that is a participating employer in such SpinCo Benefit Plan; and
(ii) with respect to a RemainCo Benefit Plan, any RemainCo Entity and, prior to
the External Distribution, any SpinCo Entity, in each case, that is a
participating employer in such RemainCo Benefit Plan.

 

“Party” and “Parties” shall have the meanings set forth in the Preamble.

 

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“Person” shall mean any individual, general or limited partnership, corporation,
business trust, joint venture, association, company, limited liability company,
unincorporated organization, a limited liability entity, any other entity and
any Governmental Authority.

 

“Prime Rate” shall have the meaning set forth in the Separation Agreement.

 

“RemainCo” shall have the meaning set forth in the Preamble.

 

“RemainCo 401(k) Plan” shall have the meaning set forth in Section 5.1.

 

“RemainCo Allocation Factor” shall mean the quotient obtained by dividing
(i) the RemainCo Post-Adjustment Stock Value, by (ii) the sum of (A) the
RemainCo Post-Adjustment Stock Value, plus (B) the product of (x) the SpinCo
Stock Value times (y) the Distribution Ratio.

 

“RemainCo Benefit Plan” shall mean each Benefit Plan (i) that is not a SpinCo
Benefit Plan, (ii) which is sponsored, maintained, entered into or contributed
to by any RemainCo Entity, and (iii) under which more than one service provider
is eligible to receive compensation and/or benefits, including the RemainCo
Equity Plans, the RemainCo Deferred Compensation Plan, the RemainCo ESPP, the
RemainCo Health and Welfare Plans, the RemainCo Cafeteria Plan and the RemainCo
Cash Incentive Plans.

 

“RemainCo Board” shall have the meaning set forth in the Recitals.

 

“RemainCo Business” shall mean all businesses and operations (whether or not
such businesses or operations are or have been terminated, divested or
discontinued) conducted prior to the Effective Time by the RemainCo Entities
that are not included in the SpinCo Business.

 

“RemainCo Cafeteria Plan” shall mean a “cafeteria plan” (within the meaning of
Section 125 of the Code) maintained by any RemainCo Entity.

 

“RemainCo Cash Incentive Plans” shall have the meaning set forth in
Section 8.1(b).

 

“RemainCo Common Stock” shall mean the issued and outstanding shares of common
stock, par value $0.01 per share, of RemainCo.

 

“RemainCo Deferred Compensation Plan” shall mean the Exterran Holdings, Inc.
Deferred Compensation Plan, as amended and/or restated from time to time.

 

“RemainCo Deferred Compensation Trust” shall have the meaning set forth in
Section 6.2.

 

“RemainCo Director Stock and Deferral Plan” shall mean the Exterran
Holdings, Inc. Directors’ Stock and Deferral Plan, as amended and/or restated
from time to time.

 

“RemainCo Employee” shall mean each Employee, Contractor or Director who
provides services primarily for the benefit of the RemainCo Business and who,
following the Effective Time, remains employed by or in service with any
RemainCo Entity, including any such active employees and any such employees on
approved leaves of absence.  RemainCo Employees shall include, without
limitation, those Employees, Contractors and Directors set forth on Exhibit D
attached hereto.

 

“RemainCo Entities” shall mean, collectively, RemainCo and each RemainCo
Subsidiary.

 

“RemainCo ESPP” means the Exterran Holdings, Inc. Employee Stock Purchase Plan,
as amended.

 

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“RemainCo Equity Awards” shall mean, collectively, any equity award granted
pursuant to any RemainCo Equity Plan.

 

“RemainCo Equity Plans” shall mean, collectively, the Exterran Holdings, Inc.
2013 Stock Incentive Plan, the Exterran Holdings, Inc. Amended and Restated 2007
Stock Incentive Plan, the Hanover Compressor Company 2003 Stock Incentive Plan
and the Universal Compression Holdings, Inc. Incentive Stock Option Plan, in
each case, as amended and/or restated from time to time, and any other stock
option or equity incentive compensation plan or arrangement maintained by any
RemainCo Entity on or prior to the Distribution Date for the benefit of
employees, consultants, directors and/or other service providers of any RemainCo
Entity; provided, however, that RemainCo Equity Plans shall not include the
Exterran Partners, L.P. Long-Term Incentive Plan.

 

“RemainCo Health and Welfare Plans” shall have the meaning set forth in
Section 7.1.

 

“RemainCo Individual Agreement” shall mean each Benefit Plan sponsored,
maintained, entered into or contributed to by any RemainCo Entity or with
respect to which any RemainCo Entity otherwise has any liability or obligation,
whether fixed or contingent, in any case, under which no more than one service
provider is eligible to receive compensation and/or benefits.

 

“RemainCo Option” shall mean an option to purchase shares of RemainCo Common
Stock granted pursuant to any RemainCo Equity Plan.

 

“RemainCo Participant” shall mean any individual who, (i) prior to the
Distribution Date, is eligible to participate in one or more RemainCo Benefit
Plans, and (ii) following the Distribution Date, is (A) a RemainCo Employee who
is eligible to participate in one or more RemainCo Benefit Plans, (B) a Former
RemainCo Employee or Former Shared Employee, in either case, who remains
entitled to payments, benefits and/or participation under any RemainCo Benefit
Plan, (C) a Former SpinCo Employee who terminated employment or other service on
or prior to the Distribution Date, to the extent such individual remains
entitled to payments, benefits and/or participation under any RemainCo Benefit
Plan, or (D) a beneficiary, dependent or alternate payee of any of the
foregoing.

 

“RemainCo Performance Unit Award” shall mean an award of RemainCo performance
units granted under any RemainCo Equity Plan.

 

“RemainCo Post-Adjustment Stock Value” shall mean the closing per share price of
RemainCo Common Stock trading in the “ex-dividend” market on the Distribution
Date.

 

“RemainCo Ratio” shall mean the quotient obtained by dividing the Exterran
Pre-Adjustment Stock Value by the RemainCo Post-Adjustment Stock Value.

 

“RemainCo Restricted Stock Award” shall mean an award of restricted shares of
RemainCo Common Stock granted under any RemainCo Equity Plan.

 

“RemainCo RSU Award” shall mean an award of restricted stock units granted under
any RemainCo Equity Plan.

 

“RemainCo Subsidiary” shall mean each Subsidiary of RemainCo after the Effective
Time.

 

“Roll-Over Consents” shall have the meaning set forth in Section 7.6(e).

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

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“Separation Agreement” shall have the meaning set forth in the Recitals.

 

“Shared Benefit Plan Claim” shall mean any Action (a) brought with respect to a
Benefit Plan in which both RemainCo Participants and SpinCo Participants were
eligible to participate prior to the Distribution Date and (b) the basis of
which arose prior to the Distribution Date.

 

“Shared Benefit Plan Liability” shall mean, collectively, (a) all Liabilities
relating to, arising out of, or resulting from any Shared Benefit Plan Claim or
(b) all Liabilities relating to, arising out of, or resulting from any Benefit
Plan in which both RemainCo Participants and SpinCo Participants were eligible
to participate prior to the Distribution Date and which relates to the form,
terms and conditions of, or the administration, operation, maintenance of, such
Benefit Plan prior to the Distribution Date, including, without limitation any
direct and indirect costs, fees (including attorney’s fees and/or consulting
fees) and expenses actually incurred by any RemainCo Entity or SpinCo Entity
with respect to a Shared Benefit Plan Claim, or in connection with any
corrective actions taken with respect to a Benefit Plan covered by clause
(b) hereof.

 

“Shared Claims” shall have the meaning set forth in Section 2.3(b)(iii).

 

“Shared Liability” shall mean any Liability that is allocated, divided or
otherwise split between RemainCo and SpinCo in accordance with this Agreement,
including, without limitation, any Liability arising from or with respect to a
Shared Claim.  For the avoidance of doubt, Shared Liabilities shall not include
any Liability that is allocated under this Agreement entirely to SpinCo and the
SpinCo Entities, on the one hand, or entirely to RemainCo and the RemainCo
Entities, on the other hand.

 

“SpinCo” shall have the meaning set forth in the Preamble.

 

“SpinCo 401(k) Plan” shall mean the Exterran 401(k) Plan, as amended and/or
restated from time to time.

 

“SpinCo Allocation Factor” shall mean the quotient obtained by dividing (i) the
product of (A) the SpinCo Stock Value times (B) the Distribution Ratio, by
(ii) the sum of (A) the RemainCo Post-Adjustment Stock Value, plus (B) the
product of (x) the SpinCo Stock Value times (y) the Distribution Ratio.

 

“SpinCo Balance Sheet” shall have such meaning as provided in the Separation
Agreement.

 

“SpinCo Benefit Plan” shall mean each Benefit Plan sponsored, maintained,
entered into or contributed to by any SpinCo Entity or with respect to which any
SpinCo Entity otherwise has any liability or obligation, whether fixed or
contingent, in any case, under which more than one service provider is eligible
to receive compensation and/or benefits, including the SpinCo 401(k) Plan, the
SpinCo Cafeteria Plan, the SpinCo Health and Welfare Plans and the SpinCo Cash
Incentive Plan.

 

“SpinCo Board” shall mean the Board of Directors of SpinCo.

 

“SpinCo Business” shall mean (a) the contract operations and aftermarket
services businesses conducted for the benefit of customers outside of the United
States by, and the global fabrication business of, RemainCo and the direct and
indirect RemainCo Subsidiaries on a consolidated basis immediately prior to the
date hereof, and (b) without limiting the foregoing clause (a) and except as
otherwise expressly provided in this Agreement, (i) the global provision of
aftermarket services with respect to production equipment by RemainCo and the
direct and indirect RemainCo Subsidiaries on a consolidated basis immediately
prior to the date hereof and (ii) any terminated, divested or discontinued
businesses, Assets or operations that were of such a nature that they would be
part of the SpinCo Business (as described in the

 

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foregoing clause (a)) had they not been terminated, divested or discontinued
(regardless of whether they ever operated under the “SpinCo” name); provided,
however, that the SpinCo Business shall exclude the businesses set forth on
Schedule 1.1G of the Separation Agreement.

 

“SpinCo Cafeteria Plan” shall mean the “cafeteria plan” (within the meaning of
Section 125 of the Code) maintained by SpinCo.

 

“SpinCo Cash Incentive Plans” shall have the meaning set forth in
Section 8.1(c).

 

“SpinCo Common Stock” shall mean the issued and outstanding shares of common
stock, par value $0.01 per share, of SpinCo.

 

“SpinCo Deferred Compensation Plan” shall have the meaning set forth in
Section 6.1.

 

“SpinCo Deferred Compensation Trust” shall have the meaning set forth in
Section 6.1.

 

“SpinCo Director Stock and Deferral Plan” shall have the meaning set forth in
Section 4.11.

 

“SpinCo Employee” shall mean each Employee, Contractor or Director who provides
services primarily for the benefit of the SpinCo Business and who, following the
Effective Time, remains employed by or in service with any SpinCo Entity,
including any such active employees and any such employees on approved leaves of
absence.  SpinCo Employees shall include, without limitation, those Employees,
Contractors and Directors set forth on Exhibit E attached hereto.

 

“SpinCo Entities” shall mean, collectively, SpinCo and each SpinCo Subsidiary.

 

“SpinCo Equity Awards” shall mean, collectively, any equity award granted
pursuant to the SpinCo Equity Plan.

 

“SpinCo Equity Plan” shall have the meaning set forth in Section 4.12.

 

“SpinCo Health and Welfare Plans” shall have the meaning set forth in
Section 7.1.

 

“SpinCo Individual Agreement” shall mean each Benefit Plan sponsored, maintained
entered into or contributed to by any SpinCo Entity or with respect to which any
SpinCo Entity otherwise has any liability or obligation, whether fixed or
contingent, in any case, under which no more than one service provider is
eligible to receive compensation and/or benefits.

 

“SpinCo Option” shall mean an option to purchase shares of SpinCo Common Stock
issued pursuant to the SpinCo Equity Plan as part of an equitable adjustment to
a RemainCo Option made in connection with the External Distribution.

 

“SpinCo Participant” shall mean any individual who, (i) prior to the
Distribution Date, is eligible to participate in one or more SpinCo Benefit
Plans, and (ii) following the Distribution Date, is (A) a SpinCo Employee who is
eligible to participate in one or more SpinCo Benefit Plans, (B) a Former SpinCo
Employee or Former Shared Employee, in either case, who remains entitled to
payments, benefits and/or participation under any SpinCo Benefit Plan, (C) a
Former RemainCo Employee who terminated employment or other service on or prior
to the Distribution Date, to the extent such individual remains entitled to
payments, benefits and/or participation under any SpinCo Benefit Plan, or (D) a
beneficiary, dependent or alternate payee of any of the foregoing.

 

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“SpinCo Performance Unit Award” shall mean an award of performance units issued
pursuant to the SpinCo Equity Plan as part of an equitable adjustment to a
RemainCo Performance Unit Award made in connection with the External
Distribution.

 

“SpinCo Ratio” shall mean the quotient obtained by dividing the Exterran
Pre-Adjustment Stock Value by the SpinCo Stock Value.

 

“SpinCo Restricted Stock Award” shall mean an award of restricted SpinCo Common
Stock issued pursuant to the SpinCo Equity Plan as part of an equitable
adjustment to a RemainCo Restricted Stock Award made in connection with the
External Distribution.

 

“SpinCo RSU Award” shall mean an award of restricted stock units issued pursuant
to the SpinCo Equity Plan as part of an equitable adjustment to a RemainCo RSU
Award made in connection with the External Distribution.

 

“SpinCo Stock Value” shall mean the closing price per share of SpinCo Common
Stock trading in the “when-issued” market on the Distribution Date.

 

“SpinCo Subsidiary” shall mean each Subsidiary of SpinCo after the External
Distribution.

 

“Subsidiary” shall mean, with respect to any specified Person, any corporation,
limited liability company, joint venture or partnership of which such Person
(a) beneficially owns or controls, either directly or indirectly, more than
fifty percent (50%) of (i) the total combined voting power of all classes of
voting securities of such Person, (ii) the total combined equity interests or
(iii) the capital or profit interests, in the case of a partnership, or
(b) otherwise has the power to vote, either directly or indirectly, sufficient
securities to elect a majority of the board of directors or similar governing
body.

 

ARTICLE II
GENERAL PRINCIPLES

 

Section 2.1            Post-Distribution Employment. Immediately after the
Effective Time, by virtue of this Agreement and without further action by any
Person, (a) each SpinCo Employee shall continue to be employed or engaged at
SpinCo or such other SpinCo Entity as employs or engages such SpinCo Employee as
of immediately prior to the Effective Time, and (b) each RemainCo Employee shall
continue to be employed or engaged at RemainCo or such other RemainCo Entity as
employs or engages such RemainCo Employee as of immediately prior to the
Effective Time. The Parties shall cooperate to effectuate any transfers of
employment contemplated by this Agreement, including transfers necessary to
ensure that all SpinCo Employees are employed or engaged at a SpinCo Entity and
all RemainCo Employees are employed or engaged at a RemainCo Entity, in each
case, as of immediately prior to the Effective Time.

 

Section 2.2            No Termination/Severance; No Change in Control. Except as
otherwise set forth in Section 7.6(e), no SpinCo Employee or RemainCo Employee
shall be deemed to (a) terminate employment or service solely by virtue of the
consummation of the External Distribution, any transfer of employment or other
service relationship contemplated hereby, or any related transactions or events
contemplated by the Separation Agreement, this Agreement or any Ancillary
Agreement, or (b) become entitled to any severance, termination, separation or
similar rights, payments or benefits, whether under any Benefit Plan or
otherwise, in connection with any of the foregoing.  Neither the External
Distribution nor any other transaction(s) contemplated by the Separation
Agreement, this Agreement or any Ancillary Agreement shall constitute or be
deemed to constitute a “change in control,” a “change of control,” “corporate
change” or any similar corporate transaction impacting the vesting or payment of
any amounts or benefits for purposes of any SpinCo Benefit Plan or RemainCo
Benefit Plan.

 

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Section 2.3            Employment Law Liabilities.

 

(a)           Separate Employers. Subject to the provisions of ERISA and the
Code, on and after the Distribution Date, each RemainCo Entity shall be a
separate and independent employer from each SpinCo Entity.

 

(b)           Employment Litigation.   Except as otherwise expressly provided in
this Agreement (and subject to Sections 2.3(b)(iii) and (iv) below):

 

(i)            RemainCo and/or the other RemainCo Entities shall be solely
liable for, and no SpinCo Entity shall have any obligation or Liability with
respect to, any employment-related claims and Liabilities (A) regarding RemainCo
Employees and/or prospective RemainCo Employees relating to, arising out of, or
resulting from the prospective employment or service, actual employment or
service and/or termination of employment or service, in any case, of such
individual(s) with any RemainCo Entity or any SpinCo Entity, whether the basis
for such claims arose before, on, or after the Distribution Date, including,
without limitation, any claim or Liability relating to or arising out of any
such individual’s participation in a RemainCo Benefit Plan or SpinCo Benefit
Plan; (B) regarding Former RemainCo Employees relating to, arising out of, or
resulting from the prospective employment or service, actual employment or
service and/or termination of employment or service, in any case, of such
individual(s) with any RemainCo Entity or any SpinCo Entity, if such claim or
Liability arose before the Distribution Date and, at the time such claim or
Liability was incurred, such Former RemainCo Employee was providing services
primarily for the benefit of the RemainCo Business, including, without
limitation, any claim or Liability relating to or arising out of any such
individual’s participation in a RemainCo Benefit Plan or SpinCo Benefit Plan
prior to the Distribution Date; and (C) regarding, relating to or arising out of
the Benefit Plan(s) set forth on Schedule A attached hereto.

 

(ii)           SpinCo and/or the other SpinCo Entities shall be solely liable
for, and no RemainCo Entity shall have any obligation or Liability with respect
to, any employment-related claims and Liabilities (A) regarding SpinCo Employees
and/or prospective SpinCo Employees relating to, arising out of, or resulting
from the prospective employment or service, actual employment or service and/or
termination of employment or service, in any case, of such individual(s) with
any SpinCo Entity or RemainCo Entity, whether the basis for such claims arose
before, on, or after the Distribution Date, including, without limitation, any
claim or Liability relating to or arising out of any such individual’s
participation in a SpinCo Benefit Plan or a RemainCo Benefit Plan; and
(B) regarding Former SpinCo Employees, relating to, arising out of, or resulting
from the prospective employment or service, actual employment or service and/or
termination of employment or service, in any case, of such individual(s) with
any SpinCo Entity or RemainCo entity, if such claim or Liability arose before
the Distribution Date and, at the time such claim or Liability was incurred,
such Former SpinCo Employee was providing services primarily for the benefit of
the SpinCo Business, including, without limitation, any claim or Liability
relating to or arising out of any such individual’s participation in a RemainCo
Benefit Plan or SpinCo Benefit Plan prior to the Distribution Date.

 

(iii)          Notwithstanding the foregoing, any employment-related claims and
Liabilities (A) regarding Former Shared Employees, relating to, arising out of,
or resulting from the employment or service and/or termination of employment or
service, in any case, of such individual(s) with any SpinCo Entity or any
RemainCo Entity if such claim or Liability arose before the Distribution Date;
and (B) regarding RemainCo Employees, Former RemainCo Employees, SpinCo
Employees, Former SpinCo Employees and/or Former Shared Employees, relating to,
arising out of, or resulting from the transfer of employment or service of such
individual(s) between the

 

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RemainCo Entities and the SpinCo Entities in connection with the Internal
Distribution and/or the External Distribution (collectively, the “Shared
Claims”), in any case, shall be allocated between SpinCo and the SpinCo
Entities, on one hand, and RemainCo and the RemainCo Entities, on the other
hand, in accordance with the Parties’ Allocable Portion thereof.

 

(iv)          Further notwithstanding the foregoing, any Shared Benefit Plan
Liabilities shall be allocated between SpinCo and the SpinCo Entities, on one
hand, and RemainCo and the RemainCo Entities, on the other hand, in accordance
with the Parties’ Allocable Portion thereof; provided, however, that any actual
amounts, payments or benefits payable, paid or provided to RemainCo Employees,
Former RemainCo Employees, SpinCo Employees, Former SpinCo Employees and/or
Former Shared Employees, in any case, relating to, arising out of, or resulting
from any Shared Benefit Plan Claim shall be allocated between SpinCo and/or the
SpinCo Entities, on one hand, and RemainCo and/or the RemainCo Entities, on the
other hand, in accordance with Sections 2.3(b)(i), (ii) and (iii) above.

 

(c)           Claims; Shared Claims; Shared Benefit Plan Claims; Prior Notice of
Claims Settlement.

 

(i)            Subject to Section 2.3(c)(ii) below, RemainCo shall defend any
employee claims and employment-related claims for which any RemainCo Entity is
liable under this Agreement, and SpinCo shall defend any employee claims and
employment-related claims for which any SpinCo Entity is liable under this
Agreement.

 

(ii)           SpinCo may commence defense of any Shared Claims and/or Shared
Benefit Plan Claims pending decision of the Dispute Committee (or decision
regarding an Action, if applicable), but shall not be obligated to do so. If
SpinCo commences any such defense and subsequently RemainCo is determined
hereunder to have the exclusive obligation to such Shared Claim or Shared
Benefit Plan Claim (as applicable), then, upon the request of RemainCo, SpinCo
shall promptly discontinue the defense of such matter and transfer the control
thereof to RemainCo. In such event, RemainCo will reimburse SpinCo for all costs
and expenses incurred prior to the resolution of such dispute in the defense of
such Shared Claim or Shared Benefit Plan Claim (as applicable).

 

(iii)          Each Party hereto shall, when applicable, notify in writing and
consult with the other Party prior to making any settlement of an employee claim
or an employment-related claim for which it is liable under this Agreement, for
the purpose of attempting to avoid any prejudice to such other Party arising
from the settlement. For the avoidance of doubt, nothing herein shall prevent
any Party from settling any employment-related claim or shall confer upon any
Party any rights of consent or other rights (other than to notice of proposed
settlement and consultation) with respect to any employee claim against another
Party.

 

Section 2.4            Reimbursement; Late Payments.

 

(a)           Reimbursement of SpinCo. From time to time after the External
Distribution, RemainCo shall promptly reimburse SpinCo, upon SpinCo’s reasonable
request and the presentation by SpinCo of such substantiating documentation as
RemainCo shall reasonably require, for the cost of any obligations or
Liabilities satisfied or assumed by a SpinCo Entity that are the responsibility
of a RemainCo Entity pursuant to this Agreement. Except as otherwise provided in
this Agreement, any such request for reimbursement must be made by SpinCo as
promptly as practicable following, but in no event later than one hundred twenty
(120) days following, the date on which such obligations or Liabilities are
satisfied or assumed, as applicable, by a SpinCo Entity.

 

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(b)           Reimbursement of RemainCo. From time to time after the External
Distribution, SpinCo shall promptly reimburse RemainCo, upon RemainCo’s
reasonable request and the presentation by RemainCo of such substantiating
documentation as SpinCo shall reasonably require, for the cost of any
obligations or Liabilities satisfied or assumed by a RemainCo Entity that are
the responsibility of a SpinCo Entity pursuant to this Agreement. Except as
otherwise provided in this Agreement, any such request for reimbursement must be
made by RemainCo as promptly as practicable following, but in no event later
than one hundred twenty (120) days following, the date on which such obligations
or Liabilities are satisfied or assumed, as applicable, by a RemainCo Entity.

 

(c)           Late Payments.   Except as expressly provided to the contrary in
this Agreement, any amount not paid when due pursuant to this Agreement (and any
amounts billed or otherwise invoiced or demanded and properly payable that are
not paid within one hundred twenty (120) days of such bill, invoice or other
demand) shall accrue interest at a rate per annum equal to the Prime Rate plus
one and one-half percent (1.5%).

 

ARTICLE III

TERMINATION OF PARTICIPATION IN SPINCO BENEFIT PLANS; SERVICE CREDIT

 

Section 3.1            Termination of Participation in Benefit Plans; Adoption
of New RemainCo Benefit Plans.

 

(a)           Except as otherwise expressly provided in this Agreement or as
otherwise expressly agreed to in writing between the Parties, effective as of
the Effective Time, (i) RemainCo and each other RemainCo Entity shall cease to
be a Participating Company in each SpinCo Benefit Plan (to the extent any such
RemainCo Entity was such a Participating Company in such SpinCo Benefit Plan as
of immediately prior to the External Distribution), (ii) each RemainCo
Participant shall cease to participate in, be covered by, accrue benefits under
or be eligible to contribute to any SpinCo Benefit Plan (to the extent any such
RemainCo Participant so participated in any SpinCo Benefit Plan as of
immediately prior to the External Distribution), (iii) SpinCo and each other
SpinCo Entity shall cease to be a Participating Company in each RemainCo Benefit
Plan (to the extent any such SpinCo Entity was such a Participating Company in
such RemainCo Benefit Plan as of immediately prior to the External
Distribution), and (iv) each SpinCo Participant shall cease to participate in,
be covered by, accrue benefits under or be eligible to contribute to any
RemainCo Benefit Plan (to the extent any such SpinCo Participant so participated
in any RemainCo Benefit Plan as of immediately prior to the External
Distribution) and, in each case, SpinCo and RemainCo shall take all necessary
action prior to the Effective Time to effectuate each such cessation.

 

(b)           Except as otherwise expressly set forth in this Agreement, from
and after the Distribution Date, (A) SpinCo and/or the other SpinCo Entities
shall be solely liable for, and no RemainCo Entity shall have any obligation or
Liability under, any SpinCo Benefit Plan or SpinCo Individual Agreement, and
(B) RemainCo and/or the other RemainCo Entities shall be solely liable for, and
no SpinCo Entity shall have any obligation or Liability under, any RemainCo
Benefit Plan or any RemainCo Individual Agreement.

 

Section 3.2            Service Recognition.

 

(a)           Pre-Distribution Service Credit. With respect to RemainCo
Participants, each RemainCo Benefit Plan shall provide that all service, all
compensation and all other benefit-affecting determinations (including with
respect to vesting) that, as of immediately prior to the Effective Time,
(A) were recognized under the corresponding SpinCo Benefit Plan, or (B) would
have been recognized under the corresponding SpinCo Benefit Plan in which such
RemainCo Participant was eligible to participate immediately prior to the
Effective Time, had such RemainCo Participant actually participated in such
corresponding SpinCo Benefit Plan, shall be taken into account under such
RemainCo Benefit Plan to the same extent as credit was

 

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(or would have been) recognized under the corresponding SpinCo Benefit Plan,
except to the extent that duplication of benefits would result.

 

(b)           Post-Distribution Service Credit. Except to the extent imposed by
applicable Law or required by this Agreement, (i) no SpinCo Entity shall be
obligated to recognize any service of a RemainCo Employee after the Distribution
Date for any purpose under any SpinCo Benefit Plan, and (ii) no RemainCo Entity
shall be obligated to recognize any service of a SpinCo Employee after the
Distribution Date for any purpose under any RemainCo Benefit Plan; provided,
however, that nothing herein shall prohibit any SpinCo Entity or any RemainCo
Entity from recognizing such service.

 

ARTICLE IV
ADJUSTMENT OF REMAINCO EQUITY AWARDS; ESTABLISHMENT OF SPINCO EQUITY PLAN

 

Section 4.1            Treatment of Outstanding RemainCo Options.

 

(a)           Subject to Sections 4.1(b), 4.1(c), 4.1(d), 4.5, 4.6, 4.7 and 4.8:

 

(i)            RemainCo Options Granted Prior to 2015.  Each RemainCo Option
that remains outstanding as of immediately prior to the Effective Time that was
granted prior to calendar year 2015 shall be converted, as of immediately prior
to the Effective Time, into both a RemainCo Option and a SpinCo Option pursuant
to the following adjustment mechanisms (and shall otherwise be subject to the
same terms and conditions after the Effective Time as applicable to such
RemainCo Option immediately prior to the Effective Time):

 

(A)          Shares Subject to New SpinCo Option. The number of shares of SpinCo
Common Stock subject to the new SpinCo Option shall be equal to the product
obtained by multiplying (x) the number of shares of RemainCo Common Stock
subject to the RemainCo Option immediately prior to the Effective Time, times
(y) the SpinCo Allocation Factor, times (z) the SpinCo Ratio, and rounding down
to the nearest whole share.

 

(B)          Exercise Price of New SpinCo Option. The per share exercise price
of the new SpinCo Option shall be equal to the quotient obtained by dividing
(x) the per share exercise price of the RemainCo Option immediately prior to the
Effective Time, by (y) the SpinCo Ratio, and rounding such quotient up to the
nearest whole cent.

 

(C)          Shares Subject to Post-External Distribution RemainCo Option.  The
number of shares of RemainCo Common Stock subject to the post-External
Distribution RemainCo Option shall be equal to the product obtained by
multiplying (x) the number of shares of RemainCo Common Stock subject to the
RemainCo Option immediately prior to the Effective Time, times (y) the RemainCo
Allocation Factor, times (z) the RemainCo Ratio, and rounding down to the
nearest whole share.

 

(D)          Exercise Price of Post-External Distribution RemainCo Option. The
per share exercise price of the post- External Distribution RemainCo Option
shall be equal to the quotient obtained by dividing (x) the per share exercise
price of the pre-External Distribution RemainCo Option immediately prior to the
Effective Time, by (y) the RemainCo Ratio, and rounding such quotient up to the
nearest whole cent.

 

(ii)           RemainCo Options Granted in 2015 and Held by RemainCo Employees. 
In the event that RemainCo grants any RemainCo Options in calendar year 2015,
each RemainCo Option

 

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that remains outstanding and is held by a RemainCo Employee, in each case, as of
immediately prior to the Effective Time that was granted in calendar year 2015
shall be adjusted, as of immediately prior to the Effective Time, solely into a
RemainCo Option pursuant to the following adjustment mechanisms (and shall
otherwise be subject to the same terms and conditions after the Effective Time
as applicable to such RemainCo Option immediately prior to the Effective Time):

 

(A)          Shares Subject to Post-External Distribution RemainCo Option. The
number of shares of RemainCo Common Stock subject to the post-External
Distribution RemainCo Option shall be equal to the product obtained by
multiplying (x) the number of shares of RemainCo Common Stock subject to the
RemainCo Option immediately prior to the Effective Time, times (y) the RemainCo
Ratio, and rounding such product down to the nearest whole share.

 

(B)          Exercise Price of Post-External Distribution RemainCo Option. The
per share exercise price of the post-External Distribution RemainCo Option shall
be equal to the quotient obtained by dividing (x) the per share exercise price
of the RemainCo Option immediately prior to the Effective Time, by (y) the
RemainCo Ratio, and rounding such quotient up to the nearest whole cent.

 

(iii)          RemainCo Options Granted in 2015 and Held by SpinCo Employees. 
In the event that RemainCo grants any RemainCo Options in calendar year 2015,
each RemainCo Option that remains outstanding and is held by a SpinCo Employee,
in each case, as of immediately prior to the Effective Time that was granted in
calendar year 2015 shall be converted, as of immediately prior to the Effective
Time, solely into a SpinCo Option pursuant to the following adjustment
mechanisms (and shall otherwise be subject to the same terms and conditions
after the Effective Time as applicable to such RemainCo Option immediately prior
to the Effective Time):

 

(A)          Shares Subject to SpinCo Option. The number of shares of SpinCo
Common Stock subject to the SpinCo Option shall be equal to the product obtained
by multiplying (I) the number of shares of RemainCo Common Stock subject to the
RemainCo Option immediately prior to the Effective Time, times (II) the SpinCo
Ratio, and rounding such product down to the nearest whole share.

 

(B)          Exercise Price of SpinCo Option. The per share exercise price of
the SpinCo Option shall be equal to the quotient obtained by dividing (I) the
per share exercise price of the RemainCo Option immediately prior to the
Effective Time, by (II) the SpinCo Ratio, and rounding such quotient up to the
nearest whole cent.

 

(b)           Notwithstanding Section 4.1(a) above, each RemainCo Option that is
intended to qualify as an “incentive stock option” (within the meaning of
Section 422 of the Code) and that is held by a RemainCo Employee or a SpinCo
Employee, in either case, who elected prior to the External Distribution to
preserve the incentive stock option treatment of such RemainCo Option, will be
treated in accordance with such election through the conversion of such RemainCo
Option solely into (i) if the holder is a RemainCo Employee, a RemainCo Option
in accordance with Section 4.1(a)(ii) above, or (ii) if the holder is a SpinCo
Employee, a SpinCo Option in accordance with Section 4.1(a)(iii) above. 
Notwithstanding the foregoing, in no event shall the holder have more than
thirty (30) days to make such election.

 

(c)           In addition, notwithstanding anything to the contrary contained in
Sections 4.1(a) or (b) above, each RemainCo Option that, immediately prior to
the Effective Time, remains outstanding and is held by any individual who is a
Former SpinCo Employee, a Former RemainCo Employee or Former Shared Employee,
shall be adjusted, as of immediately prior to the Effective Time, solely into a
RemainCo Option in accordance with Section 4.1(a)(ii) above.

 

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(d)           The adjustments to the RemainCo Options contemplated by this
Agreement, including without limitation, adjustments to the exercise price of
RemainCo Options, to the number of shares subject to RemainCo Options and with
respect to conversions into SpinCo Options, are all intended to comply in all
respects with the requirements of Sections 409A and 424 of the Code, in each
case, to the extent applicable, and all such provisions shall be interpreted and
implemented in accordance with the foregoing.

 

Section 4.2            Treatment of Outstanding RemainCo Restricted Stock
Awards.  Subject to Sections 4.5, 4.6, 4.7 and 4.8:

 

(a)           RemainCo Restricted Stock Awards Granted Prior to 2015.  Each
RemainCo Restricted Stock Award that remains outstanding as of immediately prior
to the Effective Time that was granted prior to calendar year 2015 shall be
converted, as of immediately prior to the Effective Time, into both a RemainCo
Restricted Stock Award and a SpinCo Restricted Stock Award pursuant to the
following adjustment mechanisms (and shall otherwise be subject to the same
terms and conditions after the Effective Time as applicable to such RemainCo
Restricted Stock Award immediately prior to the Effective Time):

 

(i)            Shares Subject to New SpinCo Restricted Stock Award. The number
of shares of SpinCo Common Stock subject to the new SpinCo Restricted Stock
Award shall be equal to the number of shares of SpinCo Common Stock to which the
holder of the underlying RemainCo Restricted Stock Award would be entitled on
the Distribution Date had such award consisted of unrestricted shares of
RemainCo Common Stock as of the record date of the External Distribution (i.e.,
the product obtained by multiplying (x) the number of shares of RemainCo Common
Stock subject to the RemainCo Restricted Stock Award immediately prior to the
Effective Time, times (y) the Distribution Ratio).

 

(ii)           Shares Subject to Post-External Distribution RemainCo Restricted
Stock Award.  The number of shares of RemainCo Common Stock subject to the
post-External Distribution RemainCo Restricted Stock Award shall be equal to the
number of shares of RemainCo Common Stock subject to the RemainCo Restricted
Stock Award immediately prior to the Effective Time.

 

(b)           RemainCo Restricted Stock Awards Granted in 2015 and Held by
RemainCo Employees.  Each RemainCo Restricted Stock Award that remains
outstanding and is held by a RemainCo Employee, in each case, as of immediately
prior to the Effective Time that was granted in calendar year 2015 shall be
adjusted, as of immediately prior to the Effective Time, solely into a RemainCo
Restricted Stock Award that (i) covers a number of post-External Distribution
shares of RemainCo Common Stock determined by multiplying (x) the number of
shares of RemainCo Common Stock covered by the RemainCo Restricted Stock Award
immediately prior to the Effective Time times (y) the RemainCo Ratio (rounding
such product down to the nearest whole share), and (ii) is subject to the same
terms and conditions after the Effective Time as applied to such RemainCo
Restricted Stock Award immediately prior to the Effective Time.

 

(c)           RemainCo Restricted Stock Awards Granted in 2015 and Held by
SpinCo Employees.  Each RemainCo Restricted Stock Award that remains outstanding
and is held by a SpinCo Employee, in each case, as of immediately prior to the
Effective Time that was granted in calendar year 2015 shall be converted, as of
immediately prior to the Effective Time, solely into a SpinCo Restricted Stock
Award that (i) covers a number of shares of SpinCo Common Stock equal to the
product obtained by multiplying (x) the number of shares of RemainCo Common
Stock covered by the RemainCo Restricted Stock Award immediately prior to the
Effective Time times (y) the SpinCo Ratio (rounding such product down to the
nearest whole share), and (ii) is otherwise subject to the same terms and
conditions after the Effective Time as applied to such RemainCo Restricted Stock
Award immediately prior to the Effective Time.

 

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Section 4.3            Treatment of Outstanding RemainCo RSU Awards.  Subject to
Sections 4.5, 4.6, 4.7 and 4.8:

 

(a)           RemainCo RSU Awards Granted Prior to 2015.  Each RemainCo RSU
Award that remains outstanding as of immediately prior to the Effective Time
that was granted prior to calendar year 2015 shall be converted, as of
immediately prior to the Effective Time, into both a RemainCo RSU Award and a
SpinCo RSU Award pursuant to the following adjustment mechanisms (and shall
otherwise be subject to the same terms and conditions after the Effective Time
as applicable to such RemainCo RSU Award immediately prior to the Effective
Time):

 

(i)            Shares Subject to New SpinCo RSU Award. The number of shares of
SpinCo Common Stock subject to the new SpinCo RSU Award shall be equal to the
number of shares of SpinCo Common Stock to which the holder of the underlying
RemainCo RSU Award would be entitled on the Distribution Date had such award
consisted of actual shares of RemainCo Common Stock as of the record date of the
External Distribution (i.e., the product obtained by multiplying (x) the number
of shares of RemainCo Common Stock subject to the RemainCo RSU Award immediately
prior to the Effective Time, times (y) the Distribution Ratio).

 

(ii)           Shares Subject to Post-External Distribution RemainCo RSU Award. 
The number of shares of RemainCo Common Stock subject to the post-External
Distribution RemainCo RSU Award shall be equal to the number of shares of
RemainCo Common Stock subject to the RemainCo RSU Award immediately prior to the
Effective Time.

 

(b)           RemainCo RSU Awards Granted in 2015 and Held by RemainCo
Employees.  Each RemainCo RSU Award that remains outstanding and is held by a
RemainCo Employee, in each case, as of immediately prior to the Effective Time
that was granted in calendar year 2015 shall be adjusted, as of immediately
prior to the Effective Time, solely into a RemainCo RSU Award that (i) covers a
number of post-External Distribution shares of RemainCo Common Stock determined
by multiplying (x) the number of shares of RemainCo Common Stock covered by the
RemainCo RSU Award immediately prior to the Effective Time times (y) the
RemainCo Ratio (rounding such product down to the nearest whole share), and
(ii) is subject to the same terms and conditions after the Effective Time as
applied to such RemainCo RSU Award immediately prior to the Effective Time.

 

(c)           RemainCo RSU Awards Granted in 2015 and Held by SpinCo Employees. 
Each RemainCo RSU Award that remains outstanding and is held by a SpinCo
Employee, in each case, as of immediately prior to the Effective Time that was
granted in calendar year 2015 shall be converted, as of immediately prior to the
Effective Time, solely into a SpinCo RSU Award that (i) covers a number of
shares of SpinCo Common Stock equal to the product obtained by multiplying
(x) the number of shares of RemainCo Common Stock covered by the RemainCo RSU
Award immediately prior to the Effective Time times (y) the SpinCo Ratio
(rounding such product down to the nearest whole share), and (ii) is otherwise
subject to the same terms and conditions after the Effective Time as applied to
such RemainCo RSU Award immediately prior to the Effective Time.

 

Section 4.4            Treatment of Outstanding RemainCo Performance Unit
Awards.  Subject to Sections 4.5, 4.6, 4.7 and 4.8:

 

(a)           RemainCo Performance Unit Awards Granted Prior to 2015.  Each
RemainCo Performance Unit Award that remains outstanding as of immediately prior
to the Effective Time that was granted prior to calendar year 2015 shall be
converted, as of immediately prior to the Effective Time, into both a RemainCo
Performance Unit Award and a SpinCo Performance Unit Award pursuant to the
following adjustment mechanisms (and shall otherwise be subject to the same
terms and conditions after the

 

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Effective Time as applicable to such RemainCo Performance Unit Award immediately
prior to the Effective Time):

 

(i)            Shares Subject to New SpinCo Performance Unit Award. The number
of shares of SpinCo Common Stock subject to the new SpinCo Performance Unit
Award shall be equal to the number of shares of SpinCo Common Stock to which the
holder of the underlying RemainCo Performance Unit Award would be entitled on
the Distribution Date had such award consisted of actual shares of RemainCo
Common Stock as of the record date of the External Distribution (i.e., the
product obtained by multiplying (x) the number of shares of RemainCo Common
Stock subject to the RemainCo Performance Unit Award immediately prior to the
Effective Time, times (y) the Distribution Ratio).

 

(ii)           Shares Subject to Post-External Distribution RemainCo Performance
Unit Award.  The number of shares of RemainCo Common Stock subject to the
post-External Distribution RemainCo Performance Unit Award shall be equal to the
number of shares of RemainCo Common Stock subject to the RemainCo Performance
Unit Award immediately prior to the Effective Time.

 

(b)           RemainCo Performance Unit Awards Granted in 2015 and Held by
RemainCo Employees.  Each RemainCo Performance Unit Award that remains
outstanding and is held by a RemainCo Employee, in each case, as of immediately
prior to the Effective Time that was granted in calendar year 2015 shall be
adjusted, as of immediately prior to the Effective Time, solely into a RemainCo
Performance Unit Award that (i) covers a target number of post-External
Distribution shares of RemainCo Common Stock determined by multiplying (x) the
target number of shares of RemainCo Common Stock covered by the RemainCo
Performance Unit Award immediately prior to the Effective Time times (y) the
RemainCo Ratio (rounding such product down to the nearest whole share), and
(ii) is subject to the same terms and conditions after the Effective Time as
applied to such RemainCo Performance Unit Award immediately prior to the
Effective Time.

 

(c)           RemainCo Performance Unit Awards Granted in 2015 and Held by
SpinCo Employees.  Each RemainCo Performance Unit Award that remains outstanding
and is held by a SpinCo Employee, in each case, as of immediately prior to the
Effective Time that was granted in calendar year 2015 shall be converted, as of
immediately prior to the Effective Time, solely into a SpinCo Performance Unit
Award that (i) covers a target number of shares of SpinCo Common Stock equal to
the product obtained by multiplying (x) the target number of shares of RemainCo
Common Stock covered by the RemainCo Performance Unit Award immediately prior to
the Effective Time times (y) the SpinCo Ratio (rounding such product down to the
nearest whole share), and (ii) is otherwise subject to the same terms and
conditions after the Effective Time as applied to such RemainCo Performance Unit
Award immediately prior to the Effective Time.

 

Section 4.5            Miscellaneous Terms.  The External Distribution shall
not, in and of itself, constitute a termination of employment or service for any
RemainCo Employee or any SpinCo Employee for purposes of any RemainCo Equity
Awards or SpinCo Equity Awards, as applicable, held by such individual.  With
respect to awards adjusted or granted in accordance with this Article IV,
(a) employment with or service to RemainCo and/or its Affiliates shall be
treated as employment with or service to, as applicable, SpinCo with respect to
SpinCo Equity Awards held by RemainCo Employees and (b) employment with or
service to SpinCo and/or its Affiliates shall be treated as employment with or
service to, as applicable, RemainCo with respect to RemainCo Equity Awards held
by SpinCo Employees.

 

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Section 4.6            Adjustment of Certain Accelerated Vesting Provisions

 

(a)           Notwithstanding the foregoing, with respect to any unvested SpinCo
Equity Awards granted to a RemainCo Employee in accordance with this Agreement,
if the original RemainCo Equity Award (that was adjusted into the SpinCo Equity
Award) was subject, as of immediately prior to the External Distribution, to
accelerated vesting provisions (i) by reference to a termination of employment
or service with RemainCo and/or (ii) in connection with a “Corporate Change” (as
defined in the applicable award agreement and/or RemainCo Equity Plan) of
RemainCo, then the SpinCo Equity Award also shall be subject to such same
acceleration provisions upon the RemainCo Employee’s termination of employment
or service with the relevant RemainCo Entity(ies) and/or in connection with a
Corporate Change of RemainCo.

 

(b)           Further notwithstanding the foregoing, with respect to any
unvested RemainCo Equity Awards or unvested SpinCo Equity Awards granted to a
SpinCo Employee in accordance with this Agreement, if the original RemainCo
Equity Award (including any RemainCo Equity Award that was adjusted into the
SpinCo Equity Award), was subject, as of immediately prior to the External
Distribution, to accelerated vesting provisions (i) by reference to a
termination of employment or service with RemainCo and/or (ii) in connection
with a “Corporate Change” (as defined in the applicable award agreement and/or
RemainCo Equity Plan) of RemainCo, then the RemainCo Equity Award or SpinCo
Equity Award, as applicable, also shall be subject to such same acceleration
provisions upon the SpinCo Employee’s termination of employment or service with
the relevant SpinCo entity(ies) and/or in connection with a Corporate Change of
SpinCo.

 

(c)           In addition, with respect to any unvested SpinCo Equity Awards
held by a RemainCo Employee following the Effective Time, notwithstanding
anything herein or in the applicable award agreement to the contrary, such
SpinCo Equity Awards will vest in full upon a “Corporate Change” (as defined in
the applicable award agreement and/or SpinCo Equity Plan) of SpinCo.  Further,
with respect to any unvested RemainCo Equity Awards which are adjusted as of
immediately prior to the Effective Time and continue to be held by a SpinCo
Employee following the External Distribution, in each case, in accordance with
this Agreement, notwithstanding anything herein or in the applicable award
agreement to the contrary, such RemainCo Equity Awards will vest in full upon a
“Corporate Change” (as defined in the applicable award agreement and/or RemainCo
Equity Plan) of RemainCo.

 

(d)           Additionally, notwithstanding anything herein or in the applicable
award agreement to the contrary, if, following the Effective Time, the RemainCo
Board determines, in its discretion, to accelerate in full the vesting of all
RemainCo Equity Awards then held by RemainCo Employees and Former RemainCo
Employees (other than in connection with a “Corporate Change” (as defined in the
applicable award agreement and/or RemainCo Equity Plan)), the RemainCo Board
shall also accelerate in full the vesting of all outstanding RemainCo Equity
Awards which are then held by SpinCo Employees and Former SpinCo Employees. 
Further notwithstanding anything herein or in the applicable award agreement to
the contrary, if, following the Effective Time, the SpinCo Board determines, in
its discretion, to accelerate in full the vesting of all SpinCo Equity Awards
then held by SpinCo Employees and Former SpinCo Employees (other than in
connection with a “Corporate Change” (as defined in the applicable award
agreement and/or SpinCo Equity Plan)), the SpinCo Board shall also accelerate in
full the vesting of all outstanding SpinCo Equity Awards which are then held by
RemainCo Employees and Former RemainCo Employees.

 

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Section 4.7            Waiting Period for Exercisability of Options and
Settlement of Awards.

 

(a)           RemainCo Options and Settlement of RemainCo RSU Awards and
RemainCo Performance Unit Awards.  RemainCo may determine, in its sole
discretion, that, for reasons of administrative convenience, RemainCo Options
shall not be exercisable, and that RemainCo RSU Awards and RemainCo Performance
Unit Awards shall not be settled, in each case, during a period beginning on a
date prior to the Distribution Date determined by RemainCo in its sole
discretion, and continuing until reasonably practicable after the Effective
Time.

 

(b)           SpinCo Options and Settlement of SpinCo RSU Awards and SpinCo
Performance Unit Awards.  SpinCo may determine, in its sole discretion, that,
for reasons of administrative convenience, SpinCo Options shall not be
exercisable, and that SpinCo RSU Awards and SpinCo Performance Unit Awards shall
not be settled, in each case, during a period beginning on the Distribution Date
and continuing until reasonably practicable after the Effective Time.

 

Section 4.8            No Accelerated Vesting. The Parties hereto acknowledge
and agree that in no event shall the vesting of any SpinCo Equity Awards and/or
RemainCo Equity Awards, in any case, accelerate solely by reason of the
transactions or events contemplated by the Separation Agreement, this Agreement
or any other Ancillary Agreement.

 

Section 4.9            Tax Deduction. The Parties acknowledge and agree that
each of the applicable tax deductions for which they may be eligible for federal
income tax purposes with regard to the SpinCo Equity Awards and SpinCo Equity
Awards, in any case, shall be determined in accordance with Revenue Ruling
2002-1.

 

Section 4.10          Employee Stock Purchase Plan.  As soon as reasonably
practicable following the Effective Time, SpinCo and/or RemainCo (as applicable)
will refund to each RemainCo Employee and each SpinCo Employee, in each case,
who has ceased to be a participant in the RemainCo ESPP for any reason as of
immediately prior to the Effective Time the full amount of such employee’s
account balance under RemainCo ESPP.

 

Section 4.11          Treatment of Director Stock and Deferral Plan. Prior to
the Effective Time, RemainCo shall cause SpinCo to adopt a new Director stock
and deferral plan (the “SpinCo Director Stock and Deferral Plan”) for the
benefit of eligible SpinCo Directors.  The SpinCo Director Stock and Deferral
Plan shall constitute a SpinCo Benefit Plan for the purposes of this Agreement. 
Following the Effective Time, RemainCo (acting directly or through any RemainCo
Entity) shall be responsible for any and all Liabilities and other obligations
with respect to the RemainCo Director Stock and Deferral Plan, and SpinCo
(acting directly or through any SpinCo Entity) shall be responsible for any and
all Liabilities and other obligations with respect to the new SpinCo Director
Stock and Deferral Plan.

 

Section 4.12          Adoption and Approval of SpinCo Equity Plan. Prior to the
Effective Time, RemainCo shall cause SpinCo to adopt the SpinCo 2015 Stock
Incentive Plan (the “SpinCo Equity Plan”).  In addition, prior to the Effective
Time, RemainCo shall approve the SpinCo Equity Plan as the sole stockholder of
SpinCo.

 

Section 4.13          Cooperation. Each of the Parties shall establish an
appropriate administration system in order to handle, in an orderly manner that
complies with applicable Laws, (i) exercises of SpinCo Options and RemainCo
Options, (ii) the settlement of other SpinCo Equity Awards and RemainCo Equity
Awards, (iii) the vesting of SpinCo Equity Awards and RemainCo Equity Awards and
(iv) the satisfaction of applicable withholding taxes with respect to SpinCo
Equity Awards and RemainCo Equity Awards. The Parties shall work together to
unify and consolidate all indicative data and payroll and employment information
on regular timetables and make certain that each applicable entity’s data and
records in respect of such awards are correct and updated on a timely basis. The
foregoing shall include employment status

 

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and information required for tax withholding/remittance and reporting,
compliance with trading windows and compliance with the requirements of the
Exchange Act and other applicable Laws.

 

Section 4.14          SEC Registration. SpinCo agrees that it shall use
reasonable efforts to maintain on a continuous basis an effective registration
statement(s) under the Securities Act (and maintain the prospectus(es) contained
therein for its/their intended use) with respect to the shares of SpinCo Common
Stock authorized for issuance under the SpinCo Equity Plan.  RemainCo agrees
that, following the Distribution Date, it shall use reasonable efforts to
continue to maintain a Form S-8 Registration Statement (and maintain the
prospectus(es) contained therein for its/their intended use) with respect to and
cause to be registered pursuant to the Securities Act, the shares of RemainCo
Common Stock authorized for issuance under the RemainCo Equity Plans as required
pursuant to the Securities Act and any applicable rules or regulations
thereunder.

 

Section 4.15          Section 16(b) of the Exchange Act; Code Sections
162(m) and 409A.

 

(a)           By approving the form, terms and conditions of, and the entrance
by RemainCo and SpinCo into, this Agreement, the RemainCo Board and the SpinCo
Board intend to exempt from the short-swing profit recovery provisions of
Section 16(b) of the Exchange Act, by reason of the application of Rule 16b-3
thereunder, all acquisitions and dispositions of RemainCo Equity Awards and/or
SpinCo Equity Awards by Directors and executive officers of each of RemainCo and
SpinCo contemplated herein, and the RemainCo Board and the SpinCo Board also
intend to expressly approve, in respect of any RemainCo Equity Awards and/or
SpinCo Equity Awards, the use of any method for the payment of an exercise price
and the satisfaction of any applicable tax withholding (specifically including
the actual or constructive tendering of shares in payment of an exercise price
and the withholding of shares from delivery in satisfaction of applicable tax
withholding requirements) to the extent such method is permitted under the
RemainCo Equity Plan or SpinCo Equity Plan (as applicable) and the applicable
award agreement.

 

(b)           Notwithstanding anything in this Agreement to the contrary, to the
extent that RemainCo and/or SpinCo determine that it is necessary or appropriate
to subject any annual incentive or long-term incentive award, or other
compensation, to treatment that is different from that otherwise provided herein
in order to preserve the intended tax treatment of such compensation, RemainCo
and SpinCo agree to negotiate in good faith regarding the need for any such
different treatment and to take such actions as may be necessary or appropriate
that are intended to preserve the intended tax treatment of such compensation,
including, without limitation, actions intended to ensure that (i) a federal
income tax deduction for the payment of any annual incentive or long-term
incentive award, or other compensation, is not limited by reason of
Section 162(m) of the Code, and (ii) the treatment of such annual incentive or
long-term incentive award, or other compensation, does not cause the imposition
of a tax under Section 409A of the Code.

 

ARTICLE V
TAX-QUALIFIED DEFINED CONTRIBUTION PLAN

 

Section 5.1            SpinCo 401(k) Plan; RemainCo 401(k) Plan.  RemainCo or
another RemainCo Entity shall establish a defined contribution plan and trust
solely for the benefit of eligible RemainCo Participants (the “RemainCo
401(k) Plan”), effective as of immediately following the Effective Time.  The
RemainCo 401(k) Plan shall constitute a RemainCo Benefit Plan for the purposes
of this Agreement.  RemainCo shall be responsible for taking all necessary,
reasonable and appropriate action to maintain and administer the RemainCo
401(k) Plan so that it is qualified under Section 401(a) of the Code and the
related trust thereunder is exempt under Section 501(a) of the Code. Following
the Effective Time, RemainCo (acting directly or through any RemainCo Entity)
shall be responsible for any and all Liabilities and other obligations with
respect to the RemainCo 401(k) Plan, and SpinCo (acting directly or through any
SpinCo

 

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Entity) shall be responsible for any and all Liabilities and other obligations
with respect to the SpinCo 401(k) Plan.

 

Section 5.2            Transfer of SpinCo 401(k) Plan Assets.  As soon as
practicable following the Distribution Date (or such later time as mutually
agreed by the Parties), SpinCo shall cause the accounts (including any
promissory notes related to outstanding participant loans) in the SpinCo
401(k) Plan attributable to eligible RemainCo Participants (other than Former
RemainCo Employees, Former SpinCo Employees and Former Shared Employees) and
their beneficiaries and alternate payees, if any, and all of the assets in the
SpinCo 401(k) Plan related thereto to be transferred to the RemainCo
401(k) Plan, and RemainCo shall cause the RemainCo 401(k) Plan to accept such
transfer of accounts, promissory notes and underlying assets and, effective as
of the date of such transfer, to assume and to fully perform, pay and discharge,
all obligations relating to the accounts of such RemainCo Participants (to the
extent the assets related to those accounts are actually transferred from the
SpinCo 401(k) Plan to the RemainCo 401(k) Plan).  SpinCo shall cause the SpinCo
401(k) Plan to retain the accounts (including any promissory notes related to
outstanding participant loans) and assets attributable to any Former SpinCo
Employee, any Former RemainCo Employee and any Former Shared Employee, in any
case, whose employment or service terminated prior to the Distribution Date.

 

Section 5.3            No Distributions.  No distribution of account balances
shall be made to any RemainCo Participant solely on account of the transfers
from the SpinCo 401(k) Plan described in Section 5.2 above.

 

Section 5.4            Regulatory Filings.  In connection with the transfer of
assets and Liabilities from the SpinCo 401(k) Plan to the RemainCo 401(k) Plan
contemplated in this Article V, RemainCo and SpinCo (each acting directly or
through any RemainCo Entity or any SpinCo Entity, as applicable) shall cooperate
in making any and all appropriate filings required by the IRS, or required under
the Code, ERISA or any applicable regulations, and shall take all such action as
may be necessary and appropriate to cause such plan-to-plan transfer to take
place; provided, however, that RemainCo shall be solely responsible for
complying with any requirements and applying for any IRS determination letters
with respect to the RemainCo 401(k) Plan.

 

ARTICLE VI
NONQUALIFIED DEFERRED COMPENSATION PLAN

 

Section 6.1            Treatment of Non-Qualified Deferred Compensation Plan.
Effective prior to the Effective Time, SpinCo or a SpinCo Entity shall establish
a new non-qualified deferred compensation plan (the “SpinCo Deferred
Compensation Plan”) and a related trust (the “SpinCo Deferred Compensation
Trust”) for the benefit of eligible SpinCo Participants.  The SpinCo Deferred
Compensation Plan shall constitute a SpinCo Benefit Plan for the purposes of
this Agreement.  Following the Effective Time, RemainCo (acting directly or
through any RemainCo Entity) shall be responsible for any and all Liabilities
and other obligations with respect to the RemainCo Deferred Compensation Plan,
and SpinCo (acting directly or through any SpinCo Entity) shall be responsible
for any and all Liabilities and other obligations with respect to the new SpinCo
Deferred Compensation Plan.

 

Section 6.2            Transfer of Trust Assets.  As soon as practicable
following the establishment of the SpinCo Deferred Compensation Plan and prior
to the Distribution Date, RemainCo shall transfer, or cause to be transferred,
from the trust funding the RemainCo Deferred Compensation Plan (the “RemainCo
Deferred Compensation Trust”) to the SpinCo Deferred Compensation Trust that
portion of the assets held in the RemainCo Deferred Compensation Trust as of the
date of transfer that is attributable to SpinCo Employees, and SpinCo shall
cause the SpinCo Deferred Compensation Trust to accept such transfer.

 

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ARTICLE VII
HEALTH AND WELFARE PLANS; WORKERS’ COMPENSATION

 

Section 7.1                                    Health and Welfare Benefit
Plans.  As of the Distribution Date, RemainCo or one or more RemainCo
Subsidiaries maintains each of the health and welfare plans set forth on
Exhibit F hereto (the “RemainCo Health and Welfare Plans”) for the benefit of
eligible employees of the RemainCo Entities and their dependents and
beneficiaries, each of which shall remain in effect immediately following the
External Distribution.  In addition, as of the Distribution Date, SpinCo or one
or more of the SpinCo Entities maintains each of the health and welfare plans
set forth on Exhibit G hereto (the “SpinCo Health and Welfare Plans”).

 

Section 7.2                                    Terms of Participation in
RemainCo Health and Welfare Plans.  RemainCo shall cause all RemainCo Health and
Welfare Plans to (a) waive all limitations as to preexisting conditions,
exclusions and service conditions with respect to participation and coverage
requirements applicable to individuals who are RemainCo Participants immediately
following the Effective Time, other than limitations that were in effect with
respect to such RemainCo Participants as of immediately prior to the Effective
Time under the corresponding SpinCo Health and Welfare Plan(s), and (b) waive
any waiting period limitation or evidence of insurability requirement that would
otherwise be applicable, following the Distribution Date, to an individual who
is a RemainCo Participant immediately following the Effective Time to the extent
such RemainCo Participant had satisfied any similar limitation under the
corresponding SpinCo Health and Welfare Plan(s).  Additionally, the RemainCo
Health and Welfare Plans shall provide that the RemainCo Participants are
credited with or otherwise have taken into account, to the extent applicable,
any expenses incurred towards deductibles, co-payments or out-of-pocket limits
credited to such individual, in each case, under the terms of the corresponding
SpinCo Health and Welfare Plans for the plan year in which the External
Distribution occurs as if such amounts had been paid by such individual under
the RemainCo Health and Welfare Plans.  As of the Distribution Date, RemainCo
shall use its reasonable best efforts to cause the RemainCo Health and Welfare
Plans to recognize and give effect to all elections and designations (including
all coverage and contribution elections and beneficiary designations) made by
each RemainCo Participant under, or with respect to, the corresponding SpinCo
Health and Welfare Plans for plan year 2015.

 

Section 7.3                                    Cafeteria Plan.  As soon as
practicable following the Distribution Date and if and to the extent not
effected prior to the Distribution Date, SpinCo (acting directly or through any
other SpinCo Entity) shall, in accordance with Revenue Ruling 2002-32, cause the
portion of the SpinCo Cafeteria Plan applicable to the RemainCo Participants to
be segregated into a separate component and the account balances in such
component to be transferred to the RemainCo Cafeteria Plan, which will include
any health flexible spending account and dependent care plan. The RemainCo
Cafeteria Plan shall reimburse SpinCo or the SpinCo Cafeteria Plan to the extent
amounts were paid by the SpinCo Cafeteria Plan and not collected from the
RemainCo Participant and such amounts are subsequently collected by the RemainCo
Cafeteria Plan with respect to such RemainCo Participant.

 

Section 7.4                                    COBRA, HIPAA and ACA.

 

(a)                                 RemainCo (acting directly or through any
other RemainCo Entity) and the RemainCo Health and Welfare Plans shall be solely
responsible for compliance with the health care continuation coverage
requirements of COBRA with respect to each individual who is a RemainCo
Participant (or a dependent or beneficiary thereof) at the time such individual
experiences a COBRA qualifying event.  SpinCo (acting directly or through any
other SpinCo Entity) and the SpinCo Health and Welfare Plans shall be solely
responsible for compliance with the health care continuation coverage
requirements of COBRA with respect to each individual who is a SpinCo
Participant (or a dependent or beneficiary thereof) at the time such individual
experiences a COBRA qualifying event.  Notwithstanding the foregoing, during the

 

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period commencing on the Distribution Date and ending on the fourteen (14)-month
anniversary thereof, (i) any Liability actually incurred by any SpinCo Entity or
any RemainCo Entity in connection with the provision of COBRA continuation
coverage to any RemainCo Employee, Former RemainCo Employee, SpinCo Employee,
Former SpinCo Employee and/or Former Shared Employee shall be allocated sixty
percent (60%) to SpinCo and forty percent (40%) to RemainCo, and (ii) RemainCo
shall indemnify SpinCo, on the one hand, and SpinCo shall indemnity RemainCo, on
the other hand, with respect to the allocation of Liabilities set forth in the
preceding clause (i) in accordance with Article X. Neither the consummation of
the Distribution, any transfer of employment contemplated hereby, or any related
transactions or events contemplated by the Separation Agreement, this Agreement
or any Ancillary Agreement shall constitute a COBRA qualifying event for
purposes of COBRA with respect to any SpinCo Participant or any RemainCo
Participant (or any dependent or beneficiary thereof).

 

(b)                                 RemainCo (acting directly or through any
other RemainCo Entity) shall be responsible for compliance with any certificate
of creditable coverage of other applicable requirements of HIPAA or Medicare
applicable to the RemainCo Health and Welfare Plans with respect to RemainCo
Participants.  SpinCo (acting directly or through any other SpinCo Entity) shall
be responsible for compliance with any certificate of creditable coverage of
other applicable requirements of HIPAA or Medicare applicable to the SpinCo
Health and Welfare Plans with respect to SpinCo Participants.

 

(c)                                  RemainCo (acting directly or through any
other RemainCo Entity) shall be responsible for compliance with any reporting
requirements of the ACA applicable to the RemainCo Health and Welfare Plans with
respect to RemainCo Participants.  SpinCo (acting directly or through any other
SpinCo Entity) shall be responsible for compliance with any reporting
requirements of the ACA applicable to the SpinCo Health and Welfare Plans with
respect to SpinCo Participants.

 

Section 7.5                                    SpinCo to Provide Information. To
the extent permitted by Law, SpinCo or the relevant SpinCo Health and Welfare
Plan shall provide to RemainCo or the relevant RemainCo Health and Welfare Plan
(to the extent that relevant information is in SpinCo’s possession) such data as
may be necessary for RemainCo to comply with its obligations hereunder, which
may include the names of RemainCo Participants who were participants in or
otherwise entitled to benefits under the SpinCo Health and Welfare Plans prior
to the External Distribution, together with each such individual’s service
credit under such plans, information concerning each such individual’s current
plan-year expenses incurred towards deductibles, out-of-pocket limits and
co-payments, maximum benefit payments, and any benefit usage towards plan limits
thereunder.  SpinCo shall, as soon as practicable after requested, provide
RemainCo with such additional information that is in SpinCo’s possession (and
not already in the possession of a RemainCo Entity) as may be reasonably
requested by RemainCo and necessary to administer effectively any RemainCo
Health and Welfare Plan.  SpinCo and each RemainCo Entity shall enter into such
other agreements as are necessary to comply with this Section 7.5, including but
not limited to any agreements required by HIPAA.

 

Section 7.6                                    Liabilities.

 

(a)                                 Insured Benefits. With respect to employee
welfare and fringe benefits that are provided through the purchase of insurance,
(i) RemainCo shall cause the RemainCo Health and Welfare Plans to, through such
insurance policies, pay and discharge all eligible claims of RemainCo
Participants that are incurred on or after the enrollment of such RemainCo
Participants in the RemainCo Health and Welfare Plans, and (ii) SpinCo shall
cause the SpinCo Health and Welfare Plans to, through such insurance policies
pay and discharge all eligible claims of SpinCo Participants that are incurred
on or after the Distribution Date (provided that such SpinCo Participants are
enrolled in the SpinCo Health and Welfare Plans).  For the avoidance of doubt,
except as otherwise expressly set forth in this Article VII, neither SpinCo
Health and Welfare Plans nor RemainCo Health and Welfare Plans shall be
responsible for any claims that arise

 

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following a RemainCo Participant’s termination of participation in a SpinCo
Health and Welfare Plan if the RemainCo Participant does not validly enroll in
an applicable RemainCo Health and Welfare Plan.

 

(b)                                 Self-Insured Benefits. With respect to
employee health or medical benefits that are provided through a self-insured
plan or program (i) RemainCo shall cause the RemainCo Health and Welfare Plans
to, through such self-insured plan or program, pay and discharge all eligible
claims of RemainCo Participants (A) who were participants in the SpinCo Health
and Welfare Plans prior to the Distribution Date that have not been filed as of
the Distribution Date by the SpinCo Health and Welfare Plans or (B) that are
incurred on or after the enrollment of such RemainCo Participants in the
RemainCo Health and Welfare Plans, and (ii) SpinCo shall cause the SpinCo Health
and Welfare Plans to, through such self-insured plan or program, continue to pay
and discharge all eligible claims of SpinCo Participants incurred before or
after the Distribution Date. For the avoidance of doubt, neither SpinCo Health
and Welfare Plans nor RemainCo Health and Welfare Plans shall be responsible for
any claims that arise following a RemainCo Participant’s termination of
participation in a SpinCo Health and Welfare Plan if the RemainCo Participant
does not validly enroll in an applicable RemainCo Health and Welfare Plan. 
RemainCo shall reimburse SpinCo for any Liabilities actually incurred on or
after the Distribution Date by any SpinCo Entity or the SpinCo Health and
Welfare Plans for the benefit of (x) RemainCo Employees or (y) Former RemainCo
Employees who terminated employment or service prior to the Distribution Date.

 

(c)                                  Short-Term and Long-Term Disability
Benefits.

 

(i)                                     Long-Term Disability Benefits. Any
RemainCo Employee, Former RemainCo Employee, SpinCo Employee, Former SpinCo
Employee or Former Shared Employee who becomes entitled to receive long-term
disability under any SpinCo Health and Welfare Plan prior to the Distribution
Date shall continue to receive long-term disability benefits under such SpinCo
Health and Welfare Plan following the Distribution Date, provided, however, that
RemainCo shall indemnify SpinCo in accordance with Article X with respect to
(A) any Liability actually incurred by any SpinCo Entity in connection with the
provision of long-term disability benefits in accordance with the foregoing to
(x) any RemainCo Employee and (y) any Former RemainCo Employee who terminated
employment or service prior to the Distribution Date; and (B) RemainCo’s
Allocable Portion of any Liability actually incurred by any SpinCo Entity in
connection with the provision of long-term disability benefits to any Former
Shared Employee.

 

(ii)                                  Short-Term Disability Benefits. Any Former
RemainCo Employee or RemainCo Employee who becomes entitled to receive
short-term disability benefits under any SpinCo Benefit Plan prior to the
Distribution Date shall, as applicable, be transferred to, and receive any
short-term disability benefits to which such Former RemainCo Employee or
RemainCo Employee is entitled under, the RemainCo Health and Welfare Plans as of
the Distribution Date in accordance with the terms of such plans.  Any Former
SpinCo Employee or SpinCo Employee who becomes entitled to receive short-term
disability benefits under any SpinCo Benefit Plan prior to the Distribution Date
shall, as applicable, continue to receive any short-term disability benefits to
which such Former SpinCo Employee or SpinCo Employee is entitled under, the
SpinCo Welfare Plans as of the Distribution Date in accordance with the terms of
such plans.

 

(d)                                 Incurred Claim Definition. For purposes of
this Article VII, a claim or Liability shall generally be deemed to be incurred
(i) with respect to medical, dental, vision and/or prescription drug benefits,
on the date that the health services giving rise to such claim or Liability are
rendered or performed and not when such claim is made; provided, however that
with respect to a period of continuous hospitalization, a claim is incurred upon
the first date of such hospitalization and not on the date that such services
are performed and (ii) with respect to life insurance, accidental death and
dismemberment and business travel accident insurance, upon the occurrence of the
event giving rise to such claim or Liability.

 

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(e)                                  Accrued Paid-Time-Off. Prior to the
Distribution Date, to the extent required by applicable Law, RemainCo shall
solicit in writing the consent of each RemainCo Employee to rollover to RemainCo
or another RemainCo Entity, such RemainCo Employee’s Accrued PTO as of the
Effective Time (the “Rollover Consents”).  With respect to each RemainCo
Employee who (w) is not required to consent to such a rollover under applicable
Law or (x) timely provides such Rollover Consent to RemainCo and consents to
such a rollover, RemainCo shall (directly or through another RemainCo Entity)
recognize and honor the Accrued PTO credited to each RemainCo Employee by such
individual’s employer immediately prior to the Effective Time. To the extent
permitted and/or required under applicable Law, the Accrued PTO of any RemainCo
Employee who (y) elects in his or her Rollover Consent to receive a payment of
his or her Accrued PTO or (z) does not timely provide a Rollover Consent to
RemainCo, shall be paid to such individual(s) in a cash lump sum upon the
transfer of such individual’s employment between the RemainCo Entities and the
SpinCo Entities in connection with the Internal Distribution and/or the External
Distribution.  RemainCo shall reimburse SpinCo for any Accrued PTO paid to
RemainCo Employees by any SpinCo Entity upon their transfer of employment from
any SpinCo Entity to any RemainCo Entity in connection with the Internal
Distribution and/or the External Distribution.  Notwithstanding the foregoing,
(x) all Accrued PTO shall be used in accordance with the terms and conditions of
the post-External Distribution employer’s applicable policies and programs, to
the extent permissible by Law, and (y) any paid-time-off accruals in respect of
post-External Distribution services (if any) shall be made in accordance with
the terms and conditions of the post-External Distribution employer’s applicable
policies and programs (except to the extent otherwise provided in an applicable
SpinCo Individual Agreement or RemainCo Individual Agreement).

 

Section 7.7                                    Workers’ Compensation
Liabilities.  All workers’ compensation Liabilities relating to, arising out of,
or resulting from any claim by a RemainCo Employee, Former RemainCo Employee or
Former Shared Employee that results from an accident occurring, or from an
occupational disease which becomes manifest (collectively, “Workers’ Comp
Liabilities”) before, as of or after the Effective Time, shall be retained by
and be obligations of RemainCo or its insurers. All Workers’ Comp Liabilities
relating to, arising out of, or resulting from any claim by a SpinCo Employee or
Former SpinCo Employee that arises or manifests prior to the date on which such
SpinCo Employee or Former SpinCo Employee was covered by an applicable workers’
compensation insurance program maintained by a SpinCo Entity shall be
obligations of RemainCo and its insurers, provided, however, that SpinCo shall
indemnify RemainCo in accordance with Article X with respect to (A) any Workers’
Comp Liability actually incurred by any RemainCo Entity with respect to (i) any
SpinCo Employee or (ii) any Former SpinCo Employee who terminated employment or
service prior to the Distribution Date; and (B) SpinCo’s Allocable Portion of
any Workers’ Comp Liability actually incurred by any RemainCo Entity with
respect to any Former Shared Employee.  All Workers’ Comp Liabilities relating
to, arising out of, or resulting from any claim by a SpinCo Employee or Former
SpinCo Employee that arises or manifests on or after the date on which such
SpinCo Employee or Former SpinCo Employee was covered under a workers’
compensation insurance program maintained by a SpinCo Entity shall be
obligations of SpinCo and its insurers.  For purposes of this Agreement, a
compensable injury giving rise to a Workers’ Comp Liability shall be deemed to
be sustained upon the occurrence of the event giving rise to eligibility for
workers’ compensation benefits or at the time that an occupational disease
becomes manifest, as the case may be. Each RemainCo Entity and each SpinCo
Entity shall cooperate with respect to any notification to appropriate
Governmental Authorities of the effective time and the issuance of new, or the
transfer of existing, workers’ compensation insurance policies and claims
handling contracts.

 

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ARTICLE VIII

 

CASH INCENTIVE COMPENSATION

 

Section 8.1                                    New Cash Incentive Plans.

 

(a)                                 Effective on or following the Distribution
Date, SpinCo may, or may cause another SpinCo Entity to, adopt, for the benefit
of eligible SpinCo Participants, a cash incentive program for the calendar year
in which the Distribution Date occurs (the “New SpinCo Cash Incentive Plan”). 
Any New SpinCo Cash Incentive Plan shall constitute a SpinCo Benefit Plan for
purposes of this Agreement.  In addition, effective on or following the
Distribution Date, RemainCo may, or may cause another RemainCo Entity to, adopt,
for the benefit of eligible RemainCo Participants, a cash incentive program for
the calendar year in which the Distribution Date occurs (the “New RemainCo Cash
Incentive Plan”).  Any New RemainCo Cash Incentive Plan shall constitute a
RemainCo Benefit Plan for purposes of this Agreement.

 

(b)                                 SpinCo Cash Incentive Liabilities. 
Following the Effective Time, SpinCo shall assume or retain, as applicable,
responsibility for any and all payments, obligations and other Liabilities
relating to (a) any amounts that any Former SpinCo Employee or SpinCo Employee
has either earned (if not payable by its terms prior to the Distribution Date)
or become eligible to earn, in either case, as of the Effective Time under any
RemainCo Benefit Plan(s) providing cash incentive compensation, commissions or
similar cash payments, cash incentive, annual performance bonus, commission and
similar cash plan or program maintained by RemainCo in which one or more SpinCo
Employees is eligible to participate as of immediately prior to the Effective
Time (excluding, for the avoidance of doubt, any such plans maintained by a
SpinCo Entity that are not RemainCo Benefit Plans) (collectively, the “RemainCo
Cash Incentive Plans”), and (b) any amounts that any Former SpinCo Employee or
SpinCo Employee has earned or is eligible to earn under any New SpinCo Cash
Incentive Plan, and shall fully perform, pay and discharge the foregoing if and
when such payments, obligations and/or other Liabilities become due.  Following
the Effective Time, the SpinCo Entities shall be solely responsible for, and no
RemainCo Entities shall have any obligation or Liability with respect to, any
and all payments, obligations and other Liabilities under any New SpinCo Cash
Incentive Plan, the SpinCo Cash Incentive Plan(s) and any other cash incentive,
annual performance bonus, commission and similar cash plan or program maintained
by SpinCo, and shall fully perform, pay and discharge the forgoing if and when
such payments, obligations and/or other Liabilities become due.

 

(c)                                  RemainCo Cash Incentive Liabilities. 
Following the Effective Time, RemainCo shall assume or retain, as applicable,
responsibility for any and all payments, obligations and other Liabilities
relating to (a) any amounts that any Former RemainCo Employee or RemainCo
Employee has either earned (if not payable by its terms prior to the
Distribution Date) or become eligible to earn, in either case, as of the
Effective Time under any SpinCo Benefit Plan(s) providing cash incentive
compensation, commissions or similar cash payments, cash incentive, annual
performance bonus, commission and similar cash plan or program maintained by
SpinCo in which one or more RemainCo Employees is eligible to participate as of
immediately prior to the Effective Time (excluding, for the avoidance of doubt,
any such plans maintained by a RemainCo Entity that are not SpinCo Benefit
Plans) (collectively, the “SpinCo Cash Incentive Plans”), and (b) any amounts
that any Former RemainCo Employee or RemainCo Employee has earned or is eligible
to earn under any New RemainCo Cash Incentive Plan or any RemainCo Cash
Incentive Plan(s), and shall fully perform, pay and discharge the foregoing if
and when such payments, obligations and/or other Liabilities become due. 
Following the Effective Time, the RemainCo Entities shall be solely responsible
for, and no SpinCo Entities shall have any obligation or Liability with respect
to, any and all payments, obligations and other Liabilities under any New
RemainCo Cash Incentive Plan, the RemainCo Cash Incentive Plan(s) and any other
cash incentive, annual performance bonus, commission and similar cash plan or
program maintained by RemainCo, and shall fully perform, pay and discharge the
foregoing if and when such payments, obligations and/or other Liabilities become
due.

 

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ARTICLE IX

 

PAYROLL REPORTING AND WITHHOLDING

 

Section 9.1                                    Form W-2 Reporting.

 

(a)                                 Payroll. With respect to RemainCo Employees,
the Parties shall adopt the “standard procedure” for preparing and filing IRS
Forms W-2 (Wage and Tax Statements), as described in Revenue Procedure 2004-53.

 

(b)                                 Form 941. Each Party shall be responsible
for filing IRS Forms 941 for its respective employees.

 

Section 9.2                                    Garnishments, Tax Levies, Child
Support Orders, and Wage Assignments. With respect to garnishments, tax levies,
child support orders, and wage assignments in effect with SpinCo (or any other
SpinCo Entity) as of the Distribution Date for any RemainCo Employees or Former
RemainCo Employees, RemainCo (and any other employing RemainCo Entity), as
appropriate, shall honor such payroll deduction authorizations and shall
continue to make payroll deductions and payments to the authorized payee, as
specified by the court or governmental order which was on file with SpinCo as of
immediately prior to the Distribution Date. SpinCo shall, as soon as practicable
after the Distribution Date, provide RemainCo (and any other employing RemainCo
Entity), as appropriate, with such information in SpinCo’s possession (and not
already in the possession of a RemainCo Entity) or employee consents as may be
reasonably requested by the RemainCo Entities and necessary for the RemainCo
Entities to make the payroll deductions and payments to the authorized payee as
required by this Section 9.2.

 

Section 9.3                                    Authorizations for Payroll
Deductions. Unless otherwise prohibited by a Benefit Plan or by this Agreement
or an Ancillary Agreement, RemainCo and the other RemainCo Entities, as
appropriate, shall honor payroll deduction authorizations attributable to any
RemainCo Employee that are in effect with any SpinCo Entity as of immediately
prior to the Effective Time relating to such RemainCo Employee, and shall not
require that such RemainCo Employee submit a new authorization to the extent
that the type of deduction by RemainCo or any other RemainCo Entity, as
appropriate, does not differ from that made by the SpinCo Entity prior to the
Distribution Date.  Such deduction types include: pre-tax contributions to any
Benefit Plan, including any voluntary benefit plan; scheduled loan repayments to
any Benefit Plan; and direct deposit of payroll, employee relocation loans, and
other types of authorized company receivables usually collectible through
payroll deductions. Each Party shall, as soon as practicable after the
Distribution Date, provide the other Party with such information in its
possession as may be reasonably requested by the other Party and as necessary
for that Party to honor the payroll deduction authorizations contemplated by
this Section 9.3.

 

ARTICLE X
INDEMNIFICATION

 

Section 10.1                             General Indemnification. Any claim for
indemnification under this Agreement shall be governed by, and be subject to,
the provisions of Article VII of the Separation Agreement, which provisions are
hereby incorporated by reference into this Agreement.

 

ARTICLE XI
GENERAL AND ADMINISTRATIVE

 

Section 11.1                             Business Associate Agreements. The
Parties hereby agree to enter into any business associate agreements that may be
required for the sharing of any information pursuant to this Agreement to comply
with the requirements of HIPAA.

 

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Section 11.2                             Non-Solicitation.  The Parties
acknowledge and agree that they are subject to and bound by certain
nonsolicitation restrictions set forth in Section 9.4 of the Separation
Agreement, and that the Parties shall comply with their respective obligations
thereunder.

 

Section 11.3                             Employee Records.

 

(a)                                 Records Relating to RemainCo Employees and
Former RemainCo Employees.  To the extent permitted by applicable Law, all
records and data in any form relating to RemainCo Employees and Former RemainCo
Employees shall be the property of the RemainCo Entities; provided, however,
that records and data pertaining to such an employee and relating to any period
that such employee was (i) employed by any SpinCo Entity and/or (ii) covered
under any Benefit Plan sponsored by any SpinCo Entity (to the extent that such
records or data relate to such coverage) prior to the Distribution Date shall be
shared with the appropriate SpinCo Entities by the RemainCo Entities to the
extent such records are reasonably necessary for payroll or Benefit Plan
purposes.

 

(b)                                 Records Relating to SpinCo Employees, Former
SpinCo Employees and Former Shared Employees.  To the extent permitted by
applicable Law, all records and data in any form relating to SpinCo Employees,
Former SpinCo Employees and Former Shared Employees shall be the property of the
SpinCo Entities; provided, however, that records and data pertaining to such an
employee and relating to any period that such employee was (i) employed by any
RemainCo Entity and/or (ii) covered under any Benefit Plan sponsored by any
RemainCo Entity (to the extent that such records or data relate to such
coverage) prior to the Distribution Date shall be shared with the appropriate
RemainCo Entities by the SpinCo Entities to the extent such records are
reasonably necessary for payroll or Benefit Plan purposes.

 

Section 11.4                             Sharing Of Information. To the extent
permitted by applicable Law, each Party (acting directly or through its
Affiliates) shall use commercially reasonable efforts to provide or make
available, or cause to be provided or made available, to the other Party and its
agents and vendors such information as the other Party may reasonably request to
enable the requesting Party to administer efficiently and accurately each of its
Benefit Plans and to determine the scope of, as well as fulfill, its obligations
under this Agreement; provided, however, that, in the event that the party to
whom the request has been made determines that any such provision of information
could be commercially detrimental, violate any Law or agreement or waive any
attorney-client privilege, then the Parties shall use commercially reasonable
efforts to permit compliance with such obligations to the extent and in a manner
that avoids any such harm or consequence. The Party providing information
pursuant to this Section 11.4 shall only be obligated to provide such
information in the form, condition and format in which it then exists and in no
event shall such party be required to perform any improvement, modification,
conversion, updating or reformatting of any such information. Such information
shall, to the extent reasonably practicable, be provided in the format and at
the times and places requested, but in no event shall the Party providing such
information be obligated to make such information available outside of its
normal business hours and premises. Any information owned by either Party (or
its Subsidiaries) that is provided to a requesting Party pursuant to this
Section 11.4 shall remain the property of the providing Party (or its
Subsidiaries), and 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.  The Party requesting such information agrees
to reimburse the other Party for the reasonable out-of-pocket costs, if any, of
creating, gathering and copying such information or otherwise complying with the
request with respect to such information.  Any information shared or exchanged
pursuant to this Agreement shall be subject to the confidentiality requirements
set forth in the Separation Agreement. With respect to retaining, destroying,
transferring, sharing, copying and permitting access to all such information,
RemainCo and SpinCo shall (and shall cause their respective Subsidiaries to)
comply with all applicable Laws, contracts and internal policies, and shall
indemnify each other and hold each other harmless from and against any and all
Liabilities and claims that arise from a

 

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failure by the indemnifying Party or its Subsidiaries (or their respective
agents) to so comply with any applicable Law, contract and/or internal policy
applicable to such information.

 

Section 11.5                             Reasonable Efforts/Cooperation. Each
Party shall use its commercially reasonable efforts to promptly take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws to consummate the transactions
contemplated by this Agreement, including adopting Benefit Plans and/or Benefit
Plan amendments. The Parties agree to consult and cooperate to the extent
reasonably necessary with respect to any Actions, and, upon reasonable written
request of the other Party, shall use reasonable efforts to make available to
such other Party the former, current and future directors, officers, employees,
other personnel and agents of it and its Subsidiaries (whether as witnesses or
otherwise). The requesting party shall bear all costs and expenses in connection
with the foregoing.  Without limiting the generality of the foregoing, each of
the Parties shall reasonably cooperate in all respects with regard to all
matters relating to the transactions contemplated by this Agreement for which
the other Party seeks a determination letter or private letter ruling from the
IRS, an advisory opinion from the U.S. Department of Labor or any other filing,
consent or approval with respect to or by a Governmental Authority. 
Notwithstanding the foregoing, this Section 11.5 shall not require either Party
to take any step that would significantly interfere, or that such Party
reasonably determines could significantly interfere, with its business.

 

Section 11.6                             Employer Rights.  Except as expressly
provided for in Article VII, nothing in this Agreement shall (a) prohibit any
RemainCo Entity from amending, modifying or terminating any RemainCo Benefit
Plan or RemainCo Individual Agreement at any time, subject to the terms and
conditions thereof, or (b) prohibit any SpinCo Entity from amending, modifying
or terminating any SpinCo Benefit Plan or any SpinCo Individual Agreement at any
time, subject to the terms and conditions thereof.  In addition, nothing in this
Agreement shall be interpreted as an amendment or other modification of any
Benefit Plan.

 

Section 11.7                             Effect on Employment. Without limiting
any other provision of this Agreement, none of the External Distribution or any
actions taken in furtherance of the External Distribution, whether under the
Separation Agreement, this Agreement, any other Ancillary Agreement or
otherwise, in any case, shall in and of itself cause any employee to be deemed
to have incurred a termination of employment or service or, except as expressly
provided in this Agreement, to entitle such individual to any payments or
benefits under any Benefit Plan or otherwise. Furthermore, nothing in this
Agreement is intended to or shall confer upon any SpinCo Employee, Former SpinCo
Employee, Former Shared Employee, RemainCo Employee or Former RemainCo Employee
any right to continued employment or service, or any recall or similar rights to
an individual on layoff or any type of approved leave.

 

Section 11.8                             Consent Of Third Parties. If any
provision of this Agreement is dependent on the consent of any third party and
such consent is withheld, the Parties hereto shall use their reasonable best
efforts to implement the applicable provisions of this Agreement to the fullest
extent practicable. If any provision of this Agreement cannot be implemented due
to the failure of such third party to consent, the Parties hereto shall
negotiate in good faith to implement the provision in a mutually satisfactory
alternative manner.

 

Section 11.9                             Access To Employees. Following the
Distribution Date, SpinCo and RemainCo shall, or shall cause the SpinCo Entities
and the RemainCo Entities, as applicable, to make available to each other those
SpinCo Employees or RemainCo Employees, as applicable, who may reasonably be
needed by the other Party in order to defend or prosecute any legal or
administrative action (other than a legal action between any SpinCo Entities on
the one hand and any RemainCo Entities on the other) to which any employee,
officer, director or Benefit Plan of the SpinCo Entities or RemainCo Entities is
a party and which relates to their respective Benefit Plans prior to the
Distribution Date. The Party to whom an employee is made available in accordance
with this Section 11.9 shall pay or reimburse the other Party for all reasonable

 

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expenses reimbursed by such other Party to such employee in connection
therewith, including all reasonable travel, lodging, and meal expenses, but
excluding any amount for such employee’s time spent in connection herewith.

 

Section 11.10                      Beneficiary Designation/Release Of
Information/Right To Reimbursement. Without limiting any other provision hereof,
to the extent permitted by applicable Law and except as otherwise provided for
in this Agreement, all beneficiary designations, authorizations for the release
of information and rights to reimbursement made by or relating to (a) RemainCo
Participants under SpinCo Benefit Plans or (b) SpinCo Participants under
RemainCo Benefit Plans, and, in either case, in effect immediately prior to the
Effective Time shall be transferred to and be in full force and effect under the
corresponding RemainCo Benefit Plans or SpinCo Benefit Plans, as applicable,
until such beneficiary designations, authorizations or rights are replaced or
revoked by, or no longer apply to, the relevant RemainCo Participant or SpinCo
Participant, as applicable.

 

Section 11.11                      Audit Rights.  Each of SpinCo and RemainCo,
and their duly authorized representatives, shall have the right to conduct
reasonable audits with respect to all information required to be provided to it
by the other Party under this Agreement. The Party conducting the audit (the
“Auditing Party”) may adopt reasonable procedures and guidelines for conducting
audits and the selection of audit representatives under this Section 11.11.  The
Auditing Party shall have the right to make copies of any records at its
expense, subject to any restrictions imposed by applicable Laws and to any
confidentiality provisions set forth in the Separation Agreement, which are
incorporated by reference herein. The Party being audited shall provide the
Auditing Party’s representatives with reasonable access during normal business
hours to its operations, computer systems and paper and electronic files, and
provide workspace to its representatives.  After any audit is completed, the
Party being audited shall have the right to review a draft of the audit findings
and to comment on those findings in writing within thirty (30) days after
receiving such draft.

 

Section 11.12                      Compliance.  As of the Distribution Date,
RemainCo (acting directly or through any RemainCo Entity) shall be solely
responsible for compliance under ERISA and all other applicable Law with respect
to each RemainCo Benefit Plan, and SpinCo (acting directly or through any SpinCo
Entity) shall be solely responsible for compliance under ERISA and all other
applicable Law with respect to each SpinCo Benefit Plan.

 

Section 11.13                      Allocation of Liabilities.

 

(a)                                 With respect to the determination of whether
a Liability shall be treated for purposes of this Agreement as a Liability of
SpinCo or of RemainCo, the express designation of such Liability in this
Agreement shall prevail.  If no such express designation exists, authorized
representatives of SpinCo and RemainCo will determine in good faith by mutual
agreement whether the Liability relates primarily to either the SpinCo Business,
in which case it will be deemed a Liability of SpinCo or the RemainCo Business,
in which case it will be deemed a Liability of RemainCo.  If such
representatives are unable to agree on the business to which such Liability
relates, the treatment of such Liability on the SpinCo Balance Sheet shall
prevail.  If, however, such Liability is not addressed on the SpinCo Balance
Sheet, then such Liability shall be allocated between the Parties in accordance
with the Parties’ Allocable Portion of Shared Liabilities.

 

(b)                                 If either Party or any of its Subsidiaries
shall receive notice or otherwise learn of the assertion of a Shared Liability,
such Party shall give the other Party written notice thereof promptly (and in
any event within fifteen (15) days) after such Person becomes aware of such
Shared Liability. Thereafter, the Party shall deliver to the other Party,
promptly (and in any event within ten (10) days) after the Party’s receipt
thereof, copies of all notices and documents (including court papers) received
by the Party or its Subsidiaries relating to the matter. If a dispute shall
arise between the Parties as to the proper

 

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characterization of any Liability and such Liability cannot be characterized
pursuant to the methodology set forth in Section 11.13(a), then either Party may
refer that dispute to the Dispute Committee in accordance with Section 6.2 of
the Separation Agreement, which is hereby incorporated by reference into this
Agreement.

 

ARTICLE XII
MISCELLANEOUS

 

Section 12.1                             Non-Occurrence of Distribution.
Notwithstanding anything in this Agreement to the contrary, if the Separation
Agreement is terminated prior to the Effective Time, all actions and events that
are, under this Agreement, to be taken or occur effective prior to, as of or
following the Distribution Date, or otherwise in connection with the External
Distribution, shall not be taken or occur, except to the extent otherwise
determined by RemainCo.

 

Section 12.2                             Section 409A. Notwithstanding anything
in this Agreement to the contrary, with respect to any compensation or benefits
that may be subject to Section 409A of the Code and related Department of
Treasury guidance thereunder, the Parties agree to negotiate in good faith
regarding any treatment different from that otherwise provided herein to the
extent necessary or appropriate to (a) exempt such compensation and benefits
from Section 409A of the Code, (b) comply with the requirements of Section 409A
of the Code, and/or (c) otherwise avoid the imposition of tax under Section 409A
of the Code; provided, however, that this Section 12.2 does not create an
obligation on the part of either Party to adopt any amendment, policy or
procedure, to take any other action or to indemnify any Person for any failure
to do any of the foregoing.

 

Section 12.3                             Counterparts; Entire Agreement;
Corporate Power.

 

(a)                                 This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each Party and delivered to each other Party.

 

(b)                                 This Agreement, the Separation Agreement,
the Ancillary Agreements, and the exhibits, annexes and schedules hereto and
thereto, contain the entire agreement between the Parties with respect to the
subject matter hereof, and supersede all previous agreements, negotiations,
discussions, writings, understandings, commitments and conversations with
respect to such subject matter and there are no agreements or understandings
between the Parties with respect to such subject matter other than those set
forth or referred to herein or therein.

 

(c)                                  RemainCo represents on behalf of itself and
each other RemainCo Entity, and SpinCo represents on behalf of itself and each
other SpinCo Entity, as follows:

 

(i)                                     each such Person has the requisite
corporate or other power and authority and has taken all corporate or other
action necessary in order to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby; and

 

(ii)                                  this Agreement has been duly executed and
delivered by it and constitutes a valid and binding agreement of it enforceable
in accordance with the terms thereof.

 

(d)                                 Each Party hereto acknowledges that it and
the other Party hereto may execute this Agreement by facsimile, stamp or
mechanical signature. Each Party hereto expressly adopts and confirms each such
facsimile, stamp or mechanical signature made in its respective name as if it
were a manual signature, agrees that it shall not assert that any such signature
is not adequate to bind such Party to the same

 

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extent as if it were signed manually and agrees that at the reasonable request
of the other Party hereto at any time it shall as promptly as reasonably
practicable cause this Agreement to be manually executed (any such execution to
be as of the date of the initial date thereof).

 

Section 12.4                             Survival of Covenants. Except as
otherwise expressly contemplated by this Agreement, the covenants,
representations and warranties contained in this Agreement, and liability for
the breach of any obligations contained herein, shall survive the Internal
Distribution and the External Distribution and shall remain in full force and
effect.

 

Section 12.5                             Notices. All notices, requests, claims,
demands or other communications under this Agreement shall be in writing and
shall be given or made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by overnight courier service, by facsimile or
electronic transmission with receipt confirmed (followed by delivery of an
original via overnight courier service), or by registered or certified mail
(postage prepaid, return receipt requested) to the respective Parties at the
following addresses (or at such other address for a Party as shall be specified
in a notice given in accordance with this Section 12.5):

 

If to RemainCo, to:

 

Archrock, Inc.
16666 Northchase Dr. 
Houston, Texas 77060
Attention: General Counsel

Fax: (281) 836-8060

 

If to SpinCo, to:

 

Exterran Corporation
4444 Brittmoore Rd
Houston, Texas 77041
Attention: General Counsel

Fax: (281) 836-8036

 

Either Party may, by notice to the other Party, change the address and contact
person to which any such notices are to be given.

 

Section 12.6                             Waivers of Default. Waiver by either
Party of any default by the other Party of any provision of this Agreement shall
not be deemed a waiver by the waiving Party of any subsequent or other default,
nor shall it prejudice the rights of such Party. No failure or delay by any
Party in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof nor shall a single or partial exercise thereof
prejudice any other or further exercise thereof or the exercise of any other
right, power or privilege.

 

Section 12.7                             Amendments. No provisions of this
Agreement shall be deemed waived, amended, supplemented or modified by either
Party, unless such waiver, amendment, supplement or modification is in writing
and signed by the authorized representative of the Party against whom such
waiver, amendment, supplement or modification is sought to be enforced;
provided, at any time prior to the Effective Time, the terms and conditions of
this Agreement may be amended, modified or abandoned by and in the sole and
absolute discretion of the RemainCo Board without the approval of any Person,
including SpinCo or the stockholders of RemainCo.

 

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Section 12.8          Assignability. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective successors and
permitted assigns; provided, however, that no Party hereto or thereto may assign
its respective rights or delegate its respective obligations under this
Agreement without the express prior written consent of the other Party hereto. 
Notwithstanding the foregoing, no consent shall be required for the assignment
of a Party’s rights and obligations under this Agreement in whole in connection
with a change of control of a Party so long as the resulting, surviving or
transferee Person assumes all of the obligations of the relevant Party thereto
by operation of Law or pursuant to an agreement in form and substance reasonably
satisfactory to the other Party.

 

Section 12.9          Termination. This Agreement may be terminated and the
terms and conditions hereof may be amended, modified or abandoned at any time
prior to the Effective Time by and in the sole and absolute discretion of the
RemainCo Board without the approval of any Person, including SpinCo or the
stockholders of RemainCo.  In the event that this Agreement is terminated, this
Agreement shall become null and void and neither Party, nor either Party’s
directors, officers or employees, shall have any liability of any kind to any
Person by reason of this Agreement. After the External Distribution, this
Agreement may not be terminated except by an agreement in writing signed by the
Parties hereto.

 

Section 12.10       Performance. RemainCo shall cause to be performed, and
hereby guarantees the performance of, all actions, agreements and obligations
set forth in this Agreement to be performed by any RemainCo Entity. SpinCo shall
cause to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth in this Agreement to be performed by any
SpinCo Entity. Each Party (including its permitted successors and assigns)
further agrees that it shall (a) give timely notice of the terms, conditions and
continuing obligations contained in this Section 12.10 to all of the other
RemainCo Entities or SpinCo Entities (as applicable), and (b) cause all of the
other RemainCo Entities or SpinCo Entities (as applicable) not to take, or omit
to take, any action which action or omission would violate or cause such party
to violate this Agreement or materially impair such Party’s ability to
consummate the transactions contemplated hereby.

 

Section 12.11       Third-Party Beneficiaries. Except as otherwise expressly
provided in this Agreement, (a) the provisions of this Agreement are solely for
the benefit of the Parties and are not intended to confer upon any Person
(including, without limitation, any stockholders of RemainCo or stockholders of
SpinCo) except the Parties hereto any rights or remedies hereunder; and
(b) there are no third-party beneficiaries of this Agreement, and this Agreement
shall not provide any third Person (including, without limitation, any
stockholders of RemainCo or stockholders of SpinCo) with any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.  Without limiting the generality
of the foregoing, in no event shall any RemainCo Employee, Former RemainCo
Employee, RemainCo Participant, Former Shared Employee, SpinCo Employee, Former
SpinCo Employee or SpinCo Participant (or any dependent, beneficiary or
alternate payee of any of the foregoing) have any third-party rights under this
Agreement. Nothing in this Agreement shall adopt, amend, or terminate or shall
be construed to adopt, amend, terminate, or interpret the terms of, any Benefit
Plan (including any RemainCo Benefit Plan or any SpinCo Benefit Plan), or any
other program or arrangement described in or contemplated by this Agreement.

 

Section 12.12       Headings.  The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.

 

Section 12.13       Governing Law. This Agreement (and any claims or disputes
arising out of or related hereto or to the transactions contemplated hereby or
to the inducement of any party to enter herein, whether for breach of contract,
tortious conduct or otherwise and whether predicated on common law, statute or
otherwise) shall be governed by and construed and interpreted in accordance with
the Laws of the State of

 

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Texas, irrespective of the choice of Laws principles of the State of Texas,
including all matters of validity, construction, effect, enforceability,
performance and remedies.

 

Section 12.14       Dispute Resolution. The provisions of Article VI of the
Separation Agreement shall apply, mutatis mutandis, to all disputes,
controversies or claims (whether arising in contract, tort or otherwise) that
may arise out of or relate to, or arise under or in connection with this
Agreement or the transactions contemplated hereby.

 

Section 12.15       Waiver of Jury Trial. THE PARTIES EXPRESSLY WAIVE AND FORGO
ANY RIGHT TO A TRIAL BY JURY.

 

Section 12.16       Specific Performance. Subject to the provisions of
Article VI of the Separation Agreement, in the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall
have the right to specific performance and injunctive or other equitable relief
(on an interim or permanent basis) in respect of its or their rights under this
Agreement, in addition to any and all other rights and remedies at law or in
equity, and all such rights and remedies shall be cumulative. The Parties agree
that the remedies at law for any breach or threatened breach, including monetary
damages, are inadequate compensation for any loss and that any defense in any
action for specific performance that a remedy at law would be adequate is
waived. Any requirements for the securing or posting of any bond with such
remedy are waived by each of the Parties to this Agreement.

 

Section 12.17       Severability.  If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof or thereof, or the application of such provision to Persons or
circumstances or in jurisdictions other than those as to which it has been held
invalid or unenforceable, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby. Upon such determination, the
Parties shall negotiate in good faith in an effort to agree upon such a suitable
and equitable provision to effect the original intent of the Parties.

 

Section 12.18       Force Majeure.  Neither Party shall be deemed in default of
this Agreement for failure to fulfill any obligation, other than a delay or
failure to make a payment, so long as and to the extent to which any delay or
failure in the fulfillment of such obligations is prevented, frustrated,
hindered or delayed as a consequence of circumstances of Force Majeure. In the
event of any such excused delay, the time for performance shall be extended for
a period equal to the time lost by reason of the delay. A Party claiming the
benefit of this Section 12.18 shall, as soon as reasonably practicable after the
occurrence of any such event, (a) provide written notice to the other Party of
the nature and extent of any such Force Majeure condition; and (b) use
commercially reasonable efforts to remove any such causes and resume performance
under this Agreement as soon as reasonably practicable.

 

Section 12.19       Interpretation. In this Agreement, (a) words in the singular
shall be held to include the plural and vice versa and words of one gender shall
be held to include the other genders as the context requires; (b) the terms
“hereof,” “herein,” “herewith” and words of similar import, and the terms
“Agreement”, “Ancillary Agreement” and “Separation Agreement” shall, unless
otherwise stated, be construed to refer to this Agreement, the applicable
Ancillary Agreement or the Separation Agreement as a whole (including all of the
Schedules, Exhibits, Annexes and Appendices hereto and thereto) and not to any
particular provision of this Agreement, such Ancillary Agreement or the
Separation Agreement; (c) Article, Section, Exhibit, Schedule and Appendix
references are to the Articles, Sections, Exhibits, Schedules and Appendices to
this Agreement (or the applicable Ancillary Agreement or the Separation
Agreement) unless otherwise specified; (d) the word “including” and words of
similar import when used in this Agreement means “including, without
limitation”; (e) the word “or” shall not be exclusive; (f) unless expressly
stated

 

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to the contrary in this Agreement, all references to “the date hereof,” “the
date of this Agreement,” “hereby” and “hereupon” and words of similar import
shall all be references to the date first stated in the preamble to this
Agreement, regardless of any amendment or restatement hereof; (g) unless
otherwise provided, all references to “$” or “dollars” are to United States
dollars; and (h) references to the performance, discharge or fulfillment of any
Liability in accordance with its terms shall have meaning only to the extent
such Liability has terms, and if the Liability does not have terms, the
reference shall mean performance, discharge or fulfillment of such Liability.

 

Section 12.20       Construction. This Agreement shall be construed as if
jointly drafted by the Parties and no rule of construction strict interpretation
shall be applied against either Party. The Parties represent that this Agreement
is entered into with full consideration of any and all rights which the Parties
may have.  The Parties have conducted such investigations they thought
appropriate, and have consulted with such advisors as they deemed appropriate
regarding this Agreement and their rights and asserted rights in connection
therewith.  The Parties are not relying upon any representations or statements
made by the other Party, or such other Party’s employees, agents,
representatives or attorneys, regarding this Agreement, except to the extent
such representations are expressly set forth or incorporated in this Agreement.
The Parties are not relying upon a legal duty, if one exists, on the part of the
other Party (or such other Party’s employees, agents, representatives or
attorneys) to disclose any information in connection with the execution of this
Agreement or their preparation, it being expressly understood that neither Party
shall ever assert any failure to disclose information on the part of the other
Party as a ground for challenging this Agreement.

 

Section 12.21       Limitations of Liability. NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, NEITHER SPINCO NOR ITS AFFILIATES, ON THE ONE HAND,
NOR REMAINCO NOR ITS AFFILIATES, ON THE OTHER HAND, SHALL BE LIABLE UNDER THIS
AGREEMENT TO THE OTHER FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL, INDIRECT,
PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE OR SIMILAR DAMAGES IN EXCESS OF
COMPENSATORY DAMAGES OF THE OTHER ARISING IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY (OTHER THAN ANY SUCH LIABILITY WITH RESPECT TO A THIRD-PARTY
CLAIM).  IN ADDITION, NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NO
INDIVIDUAL WHO IS A SHAREHOLDER, DIRECTOR, EMPLOYEE, OFFICER, AGENT OR
REPRESENTATIVE OF REMAINCO OR SPINCO, IN SUCH INDIVIDUAL’S CAPACITY AS SUCH,
SHALL HAVE ANY LIABILITY IN RESPECT OF OR RELATING TO THE COVENANTS OR
OBLIGATIONS OF REMAINCO OR SPINCO, AS APPLICABLE, UNDER THIS AGREEMENT AND, TO
THE FULLEST EXTENT LEGALLY PERMISSIBLE, EACH OF REMAINCO, FOR ITSELF AND THE
REMAINCO ENTITIES, AND SPINCO FOR ITSELF AND THE SPINCO ENTITIES, AND IN EACH
CASE, FOR THEIR RESPECTIVE SHAREHOLDERS, DIRECTORS, EMPLOYEES AND OFFICERS,
WAIVES AND AGREES NOT TO SEEK TO ASSERT OR ENFORCE ANY SUCH LIABILITY THAT ANY
SUCH PERSON OTHERWISE MIGHT HAVE PURSUANT TO APPLICABLE LAW.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
as of the day and year first above written.

 

 

EXTERRAN HOLDINGS, INC.

 

 

 

By:

/s/ D. Bradley Childers

 

Name: D. Bradley Childers

 

Title: President

 

 

 

 

 

EXTERRAN CORPORATION

 

 

 

By:

/s/ Andrew J. Way

 

Name: Andrew J. Way

 

Title: President

 

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