EX-10.2: FORM OF TAX SHARING AGREEMENT



 


Exhibit 10.2






TAX SHARING AGREEMENT



by and among



TRW INC.



AND ITS AFFILIATES,



and



TRW AUTOMOTIVE INC.



AND ITS AFFILIATES



 



Dated



[         ], 2002



 







 


TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Page
	 	 	 	 	 	 	 	

	Section 1
	 	Definitions	 	 	2	 
	
	
	
	

	Section 2
	 	Preparation and Filing of Tax Returns	 	 	9	 
	
	
	
	

	 	2.01
	 	TRW's Responsibility	 	 	9	 
	
	
	
	

	 	2.02
	 	TRW Automotive's Responsibility	 	 	9	 
	
	
	
	

	 	2.03
	 	Agent	 	 	9	 
	
	
	
	

	 	2.04
	 	Provision of Tax Return Information	 	 	10	 
	
	
	
	

	 	2.05
	 	Manner of Filing Tax Returns	 	 	11	 
	
	
	
	

	 	2.06
	 	Special Rules for Determining Separate Tax Liability	 	 	12	 
	
	
	
	

	 	2.07
	 	Special Rules for Allocation of Tax Assets	 	 	15	 
	
	
	
	

	Section 3
	 	Liability for Taxes	 	 	16	 
	
	
	
	

	 	3.01
	 	TRW Automotive's Liability for Taxes	 	 	16	 
	
	
	
	

	 	3.02
	 	TRW's Liability for Taxes	 	 	16	 
	
	
	
	

	 	3.03
	 	Payment of Tax Liability	 	 	17	 
	
	
	
	

	 	3.04
	 	Computation	 	 	17	 
	
	
	
	

	Section 4
	 	Distribution Taxes and Deconsolidation	 	 	17	 
	
	
	
	

	 	4.01
	 	Distribution Taxes	 	 	17	 
	
	
	
	

	 	4.02
	 	Private Letter Rulings	 	 	19	 
	
	
	
	

	 	4.03
	 	Continuing Covenants	 	 	20	 
	
	
	
	

	Section 5
	 	Tax Reporting	 	 	23	 
	
	
	
	

	 	5.01
	 	Employee Wages	 	 	23	 
	
	
	
	

	Section 6
	 	Indemnification	 	 	23	 
	
	
	
	

	 	6.01
	 	Generally	 	 	23	 
	
	
	
	

	 	6.02
	 	Inaccurate or Incomplete Information	 	 	24	 
	
	
	
	

	 	6.03
	 	No Indemnification for Tax Items	 	 	24	 
	
	
	
	

	Section 7
	 	Payments	 	 	24	 
	
	
	
	

	 	7.01
	 	Estimated Tax Payments	 	 	24	 
	
	
	
	

	 	7.02
	 	Redetermination Amounts	 	 	24	 
	
	
	
	

	 	7.03
	 	Payments of Refunds and Credits	 	 	25	 
	
	
	
	

	 	7.04
	 	Payments Under This Agreement	 	 	25	 
	
	
	
	

	Section 8
	 	Tax Proceedings	 	 	26	 
	
	
	
	

	 	8.01
	 	In General	 	 	26	 
	
	
	
	

	 	8.02
	 	Participation of non-Filing Party	 	 	26	 
	
	
	
	

	 	8.03
	 	Notice	 	 	27	 
	
	
	
	

	 	8.04
	 	Control of Distribution Tax Proceedings	 	 	27	 



i







 




	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Page
	 	 	 	 	 	 	 	

	
	
	
	

	Section 9
	 	Miscellaneous Provisions	 	 	27	 
	
	
	
	

	 	9.01
	 	Effectiveness	 	 	27	 
	
	
	
	

	 	9.02
	 	Cooperation and Exchange of Information	 	 	27	 
	
	
	
	

	 	9.03
	 	Dispute Resolution	 	 	28	 
	
	
	
	

	 	9.04
	 	Notices	 	 	29	 
	
	
	
	

	 	9.05
	 	Changes in Law	 	 	30	 
	
	
	
	

	 	9.06
	 	Confidentiality	 	 	30	 
	
	
	
	

	 	9.07
	 	Successors	 	 	31	 
	
	
	
	

	 	9.08
	 	Affiliates	 	 	31	 
	
	
	
	

	 	9.09
	 	Authorization, Etc	 	 	31	 
	
	
	
	

	 	9.10
	 	Entire Agreement	 	 	32	 
	
	
	
	

	 	9.11
	 	Applicable Law; Jurisdiction	 	 	32	 
	
	
	
	

	 	9.12
	 	Counterparts	 	 	32	 
	
	
	
	

	 	9.13
	 	Severability	 	 	32	 
	
	
	
	

	 	9.14
	 	No Third Party Beneficiaries	 	 	32	 
	
	
	
	

	 	9.15
	 	Waivers, Etc	 	 	33	 
	
	
	
	

	 	9.16
	 	Setoff	 	 	33	 
	
	
	
	

	 	9.17
	 	Other Remedies	 	 	33	 
	
	
	
	

	 	9.18
	 	Amendment and Modification	 	 	33	 
	
	
	
	

	 	9.19
	 	Waiver of Jury Trial	 	 	33	 




ii









 





TAX SHARING AGREEMENT



         THIS TAX SHARING AGREEMENT (this “Agreement”) dated as of [       ], 2002, by and among TRW Inc., an Ohio corporation (“TRW”), each TRW Affiliate
(as defined below), TRW Automotive Inc., a Delaware corporation and currently a
direct subsidiary of TRW (“TRW Automotive”), and each TRW Automotive Affiliate
(as defined below) is entered into in connection with the Distribution (as
defined below).


RECITALS



         WHEREAS, as of the date hereof, TRW and its direct and indirect domestic
subsidiaries are members of an Affiliated Group (as defined below), of which
TRW is the common parent;


         WHEREAS, as set forth in the Master Distribution Agreement by and between
TRW and TRW Automotive, dated as of the date hereof (the “Master Distribution
Agreement”), and subject to the terms and conditions thereof, TRW, together
with TRW Automotive UK Ltd. (“TAUK”), will transfer or cause to be transferred
to TRW Automotive or a TRW Automotive Subsidiary (as defined in the Master
Distribution Agreement) all of the TRW Automotive Assets (as defined in the
Master Distribution Agreement), and TRW Automotive will assume all of the TRW
Automotive Liabilities (as defined in the Master Distribution Agreement), as
contemplated by the Master Distribution Agreement (the “Contribution”);


         WHEREAS, as set forth in the Master Distribution Agreement, and subject to
the terms and conditions thereof, TRW intends to distribute all of the issued
and outstanding shares of TRW Automotive common stock that it owns to the TRW
shareholders on a pro rata basis with respect to its outstanding shares of TRW
common stock (the “Distribution”);


         WHEREAS, the Contribution and the Distribution are intended to qualify as
a tax-free reorganization and distribution under sections 351, 355 and
368(a)(1)(D) of the Code (as defined below);


         WHEREAS, in contemplation of the Distribution pursuant to which TRW
Automotive (and its direct and indirect domestic subsidiaries) will cease to be
members of the TRW Group (as defined below) the parties hereto have determined
to enter into this Agreement, setting forth their agreement with respect to
certain tax matters.


AGREEMENT



         NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto (each on behalf of itself, each of its
subsidiaries as of the Contribution, and its future subsidiaries) hereby agree
as follows:


 







 



Section 1. Definitions



         As used in this Agreement, capitalized terms shall have the following
meanings (such meanings to be equally applicable to both the singular and the
plural forms of the terms defined):


         “Affiliated Group” means an affiliated group of corporations within the
meaning of Section 1504(a)(1) of the Code that files a consolidated return.


         “After Tax Amount” means any additional amount necessary to reflect the
hypothetical Tax consequences of the receipt or accrual of any payment required
to be made under this Agreement (including payment of an additional amount or
amounts hereunder and the effect of the deductions available for interest paid
or accrued and for Taxes such as state and local Income Taxes), determined by
using the highest applicable statutory corporate Income Tax rate (or rates, in
the case of an item that affects more than one Tax) for the relevant taxable
period (or portion thereof).


         “Agreement” has the meaning set forth in the preamble hereto.


         “Audit” means any audit, assessment of Taxes, other examination by any Tax
Authority, proceeding, or appeal of such a proceeding relating to Taxes,
whether administrative or judicial, including proceedings relating to competent
authority determinations.


         “Base Calculation” has the meaning set forth in Section 4.03(e).


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


         “Combined Return” means any Tax Return, other than with respect to United
States federal Income Taxes and Foreign Combined Returns, filed on a
consolidated, combined (including nexus combination, worldwide combination,
domestic combination, line of business combination or any other form of
combination) or unitary basis wherein (i) TRW Automotive, one or more TRW
Automotive Affiliates or a TRW Automotive Division and (ii) TRW, one or more
TRW Affiliates or a TRW Division are included in such Tax Return for any
taxable period or portion thereof.


         “Consolidated Return” means any Tax Return with respect to United States
federal Income Taxes filed on a consolidated basis wherein TRW Automotive or
one or more TRW Automotive Affiliates join in the filing of such Tax Return
(for any taxable period or portion thereof) with TRW or one or more TRW
Affiliates.


         “Contribution” has the meaning set forth in the recitals to this
Agreement.


         “Contribution Date” means the date on which the Contribution begins under
the Master Distribution Agreement, as provided by TRW to TRW Automotive in
writing.


         “Distribution” has the meaning set forth in the recitals to this
Agreement.


2







 


         “Distribution Date” shall have the meaning set forth in the Master
Distribution Agreement.


         “Distribution Taxes” means any Taxes imposed on, increase in Taxes
incurred by, or reduction of a Tax Asset of TRW or any TRW Affiliate, and any
Taxes of a TRW shareholder that are required to be paid or reimbursed by TRW or
any TRW Affiliate pursuant to a legal determination resulting from, or arising
in connection with, the failure of the Distribution to qualify as a tax-free
transaction under Sections 351, 355 and 368(a)(1)(D) of the Code (including,
without limitation, any Tax resulting from the application of Section 355(d) or
Section 355(e) of the Code to the Distribution) or corresponding provisions of
the laws of any other jurisdictions, provided, however, that any such Taxes or
increase in Taxes shall be determined after taking into account any capital
losses of the TRW Group arising from the Transactions that are able to be
utilized by the TRW Group to offset such Taxes or increase in Taxes, but only
to the extent that, but for the imposition of Distribution Taxes, such capital
losses would otherwise not have been utilized by the TRW Group in any taxable
year up to and including the taxable year ending December 31, 2002, but would
have been carried forward to taxable years beginning after December 31, 2002.
Any Income Tax referred to in the immediately preceding sentence shall be
determined using the highest applicable statutory corporate Income Tax rate for
the relevant taxable period (or portion thereof).


         “Estimated Tax Installment Date” means, with respect to United States
federal Income Taxes, the estimated Tax installment due dates prescribed in
Section 6655(c) of the Code and, in the case of any other Tax, means any other
date on which an installment payment of an estimated amount of such Tax is
required to be made.


         “Filing Party” has the meaning set forth in Section 8.01.


         “Final Determination” shall mean the final resolution of liability for any
Tax for any taxable period, by or as a result of: (i) a final and unappealable
decision, judgment, decree or other order by any court of competent
jurisdiction; (ii) a final settlement with the IRS, a closing agreement or
accepted offer in compromise under Code sections 7121 or 7122, or a comparable
agreement under the laws of other jurisdictions, which resolves the Tax
liability for any taxable period; (iii) any allowance of a refund or credit in
respect of an overpayment of Tax, but only after the expiration of all periods
during which such refund may be recovered by the jurisdiction imposing the Tax;
or (iv) any other final disposition, including by reason of the expiration of
the applicable statute of limitations.


         “Foreign Combined Return” means any Tax Return filed with respect to
foreign Income Taxes whether on a consolidated, combined, group relief or
unitary basis wherein TRW or one or more TRW Affiliates join in the filing of
such Tax Return (for any taxable period or portion thereof) with TRW Automotive
or one or more TRW Automotive Affiliates.


         “Group Relief” means (a) trading losses, excess capital allowances,
non-trading deficits on loan relationships, charges on income, Schedule A
losses or management expenses eligible for surrender by one member of a group
of companies to another member of the group of


3







 




companies pursuant to Chapter IV Part X of the Taxes Act as amended; and (b) a tax
refund capable of being surrendered or claimed under Section 102 of the Finance
Act of 1989.]


         “Income Tax” shall mean any federal, state, local or foreign Tax
determined by reference to net income, net worth, gross receipts or capital, or
any such Taxes imposed in lieu of such a Tax. For the avoidance of doubt, the
term “Income Tax” includes any franchise Tax, net worth, gross receipts,
capital or any such Taxes imposed in lieu of such a Tax.


         “Independent Firm” has the meaning set forth in Section 9.03.


         “Initial Ruling” means any private letter ruling issued by the IRS in
connection with the Contribution, the Distribution and other matters in
response to TRW’s request for such a letter ruling filed on April 22, 2002.


         “Investor” means the purchaser of stock of TRW Automotive from TAUK and/or
TRW Automotive, as the case may be.


         “IRS” means the United States Internal Revenue Service or any successor
thereto, including, but not limited to its agents, representatives and
attorneys.


         “Joint Responsibility Item” means any Tax Item for which the non-Filing
Party’s liability under this Agreement could exceed $100,000 but not a Sole
Responsibility Item.


         “Management Profit” means US GAAP profit before taxes and interest income
and expense.


         “Master Distribution Agreement” has the meaning set forth in the recitals
to this Agreement.


         “Non-Income Tax Return” means (i) any Tax Return relating to any Tax other
than an Income Tax and (ii) any reports, business license filings and similar
filings that are required to be made on an annual basis with any governmental
authority for which the TRW Group tax department has traditionally had
responsibility for filing.


         “Operating Unit Code” has the meaning set forth in the Master Distribution
Agreement.


         “Overriding Principle” shall have the meaning set forth in Section 2.06(a)
of this Agreement.


         “Owed Party” has the meaning set forth in Section 7.04.


         “Owing Party” has the meaning set forth in Section 7.04.


         “Payment Period” has the meaning set forth in Section 7.04(e).


         “Permitted Issuance” has the meaning set forth in Section 4.03(e) of this
Agreement.


4







 


         “Post-Distribution Period” means a taxable period beginning on or after
the Distribution Date.


         “Pre-Distribution Period” means any taxable period beginning before the
Distribution Date.


         “Pro Forma TRW Automotive Group Consolidated Return” means a pro forma
Consolidated Return prepared pursuant to Section 2.06(b) of this Agreement.


         “Pro Forma TRW Automotive Group Combined Return” means a pro forma
Combined Return prepared pursuant to Section 2.06(d) of this Agreement.


         “Pro Forma TRW Group Foreign Return” means a pro forma foreign Tax Return
prepared pursuant to Section 2.06(e) of this Agreement.


         “Pro Forma TRW Group Combined Return” means a pro forma Combined Return
prepared pursuant to Section 2.06(f) of this Agreement.


         “Restructuring Taxes” means any and all Taxes arising as a result of or
with respect to any Transaction effected in connection with the Contribution or
the Separation after reductions for interest expense and all other available
Tax attributes and credits including Group Relief.


         “Ruling Documents” means (1) the request for a private letter ruling under
Section 355 and various other sections of the Code, filed with the IRS on April
22, 2002, together with any supplemental filings or ruling requests or other
materials subsequently submitted on behalf of TRW, its subsidiaries and
shareholders to the IRS, the appendices and exhibits thereto, and any rulings
issued by the IRS to TRW (or any TRW Affiliate) in connection with the
Contribution, the Distribution and other matters and (2) any similar filings
submitted to, or rulings issued by, any other Taxing Authority in connection
with the Contribution, the Distribution and other matters.


         “Ruling Newco” shall have the meaning set forth in the Ruling Documents.


         “Separation” means any transaction occurring prior to the Distribution
whereby TRW Business assets are separated from the TRW Automotive Business
assets in anticipation of the Distribution.


         “Sole Responsibility Item” means any Tax Item for which the non-Filing
Party has the entire economic liability under this Agreement.


         “Supplemental Ruling” means (1) any ruling issued by the IRS in connection
with the Distribution, Separation or Contribution other than a ruling in
response to TRW’s request for a private letter ruling filed on April 22, 2002,
and (2) any similar ruling issued by any other Taxing Authority addressing the
application of a provision of the laws of another jurisdiction to the
Distribution, Separation or Contribution.


5







 


         “Supplemental Ruling Documents” means (1) the request for a Supplemental
Ruling and any materials, appendices and exhibits submitted or filed therewith
and any Supplemental Rulings issued by the IRS to TRW and (2) any similar
filings submitted to, or rulings issued by, any other Taxing Authority in
connection with the Distribution.


         “TAUK” has the meaning set forth in the recitals to this Agreement.


         “TAUK Sale” shall mean the sale of the stock of TRW Automotive by TAUK to
the Investor.


         “Taxes” means all federal, state, local or foreign taxes, charges, fees,
duties, levies, imposts, rates or other assessments, including, but not limited
to, income, gross receipts, excise, property, sales, use, license, capital
stock, transfer, franchise, payroll, withholding, social security, value added,
estimated or other taxes (including any interest, penalties or additions
attributable thereto) and a “Tax” shall mean any one of such Taxes.


         “Tax Asset” means any Tax Item that has accrued for Tax purposes, but has
not been used during the taxable period in which it has accrued, and that could
reduce a Tax in another taxable period, including a net operating loss, net
capital loss, investment tax credit, foreign tax credit, charitable deduction
or credit related to alternative minimum tax or any other Tax credit.


         “Tax Benefit” means a reduction in the Tax liability (or increase in
refund or credit or any item of deduction or expense) of a taxpayer (or of the
Affiliated Group of which it is a member) for any taxable period. Except as
otherwise provided in this Agreement, a Tax Benefit shall be deemed to have
been realized or received from a Tax Item in a taxable period only if and to
the extent that the Tax liability of the taxpayer (or of the Affiliated Group
of which it is a member) for such period, after taking into account the effect
of the Tax Item on the Tax liability of such taxpayer in the current period and
all prior periods, is less than it would have been had such Tax liability been
determined without regard to such Tax Item.


         “Tax Detriment” means an increase in the Tax liability (or reduction in
refund or credit or any item of deduction or expense) of a taxpayer (or of the
Affiliated Group of which it is a member) for any taxable period. Except as
otherwise provided in this Agreement, a Tax Detriment shall be deemed to have
been realized or received from a Tax Item in a taxable period only if and to
the extent that the Tax liability of the taxpayer (or of the Affiliated Group
of which it is a member) for such period, after taking into account the effect
of the Tax Item on the Tax liability of such taxpayer in the current period and
all prior periods, is more than it would have been had such Tax liability been
determined without regard to such Tax Item.


         “Tax Item” means any item of income, gain, loss, deduction, expense or
credit, or other attribute that may have the effect of increasing or decreasing
any Tax.


         “Tax Return” means any return, report, certificate, form or similar
statement or document (including any related or supporting information or
schedule attached thereto and any information return, amended tax return, claim
for refund or declaration of estimated Tax)


6







 




required to be supplied to, or
filed with, a Taxing Authority in connection with the determination,
assessment or collection of any Tax or the administration of any laws,
regulations or administrative requirements relating to any Tax.


         “Taxing Authority” means any governmental authority or any subdivision,
agency, commission or authority thereof or any quasi-governmental or private
body having jurisdiction over the assessment, determination, collection or
imposition of any Tax (including the IRS).


         “Transactions” shall mean (i) any and all transactions undertaken pursuant
to Section 2.1 and Exhibit A of the Master Distribution Agreement and all other
transactions ancillary thereto undertaken to effect the Separation and the
Distribution and (ii) the TAUK Sale.


         “TRW” has the meaning set forth in the preamble hereto.


         “TRW Affiliate” means any corporation or other entity directly or
indirectly “controlled” by TRW where “control” means the ownership of 50
percent of the ownership interests of such corporation or other entity (by vote
or value) or the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such corporation or other
entity, but at all times excluding TRW Automotive or any TRW Automotive
Affiliate.


         “TRW Automotive” has the meaning set forth in the preamble hereto.


         “TRW Automotive Affiliate” means any corporation or other entity directly
or indirectly “controlled” by TRW Automotive at the time in question, where
“control” means the ownership of 50 percent of the ownership interests of such
corporation or other entity (by vote or value) or the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such corporation or other entity. For the avoidance of doubt, the
term “TRW Automotive Affiliate” shall include Ruling Newco.


         “TRW Automotive Business” has the meaning set forth in the Master
Distribution Agreement and includes any business formerly conducted by TRW
Automotive, any TRW Automotive Affiliate or their respective current or former
Subsidiaries, including, without limitation, the businesses formerly or
currently conducted by Lucas Varity Ltd. and its worldwide current or former
operations and what is referred to in TRW’s Form 10K for the fiscal year ending
December 31, 2001 as the Automotive Segment of TRW.


         “TRW Automotive Business Records” has the meaning set forth in Section
9.02(b).


         “TRW Automotive Division” shall mean a division of the TRW Automotive
Business that is conducted by TRW or any TRW Affiliate under its own Operating
Unit Code.


         “TRW Automotive Employee” means an employee of TRW Automotive or any TRW
Automotive Affiliate immediately after the Distribution.


7







 


         “TRW Automotive Group” means the Affiliated Group, or similar group of
entities as defined under corresponding provisions of the laws of other
jurisdictions, of which TRW Automotive will be the common parent corporation
immediately after the Distribution and
including any corporation or other entity which may become a member of
such group from time to time.


         “TRW Automotive Separate Tax Liability” means an amount equal to the Tax
liability that either (a) a TRW Automotive Division or (b) TRW Automotive and
each TRW Automotive Affiliate, in each case, would have incurred if they had
filed a consolidated return, combined return or a separate return, as the case
may be, separate from the members of the TRW Group, for the relevant Tax
period, as such amount shall be computed by TRW in a manner consistent with (i)
general Tax accounting principles, (ii) the Code and the Treasury regulations
promulgated thereunder, and all applicable foreign tax laws and regulations,
(iii) past practice, if any, and (iv) Section 2.06, provided however, that
nothing shall prevent the TRW Automotive Separate Tax Liability from being a
positive tax liability even though the Tax Return may show a consolidated tax
loss, a minimum tax or other amount.


         “TRW Business” means all of the businesses and operations conducted by TRW
and the TRW Affiliates, excluding the TRW Automotive Business as previously
defined, at any time whether prior to or after the Distribution Date, and any
and all of the business and operations conducted by TRW Automotive or any TRW
Automotive Affiliate at any time prior to the Distribution Date that are not
part of the TRW Automotive Business and that are transferred from TRW
Automotive or the relevant TRW Automotive Affiliate to TRW or any TRW Affiliate
prior to the Distribution in accordance with the terms of the Master
Distribution Agreement.


         “TRW Division” shall mean a division of the TRW Business that is conducted
by TRW Automotive or any TRW Automotive Affiliate under its own Operating Unit
Code.


         “TRW Employee” means an employee of TRW or any TRW Affiliate immediately
after the Distribution.


         “TRW Group” means the Affiliated Group, or similar group of entities as
defined under corresponding provisions of the laws of other jurisdictions, of
which TRW is the common parent corporation, and any corporation or other entity
which may be, may have been or may become a member of such group from time to
time, but excluding any member of the TRW Automotive Group.


         “TRW Separate Tax Liability” means an amount equal to the Tax liability
that either (a) a TRW Division or (b) TRW and each TRW Affiliate, in each case,
would have incurred if they had filed a consolidated return, combined return or
a separate return, as the case may be, separate from the members of the TRW
Automotive Group, for the relevant Tax period, as such amount shall be computed
by TRW Automotive in a manner consistent with (i) general Tax accounting
principles, (ii) the Code and the Treasury regulations promulgated thereunder,
and all applicable foreign tax laws and regulations, and (iii) past practice,
if any, and, provided however, that nothing shall prevent the TRW Separate Tax
Liability from being a positive tax liability


8







 




even though the Tax Return may
show a consolidated tax loss or a minimum tax or other amount.


Section 2. Preparation and Filing of Tax Returns



         2.01 TRW’s Responsibility. Subject to the other applicable provisions of
this Agreement, TRW shall have the sole and exclusive responsibility for the
preparation and filing of (i) all Consolidated Returns and all Combined Returns
legally required to be filed by TRW or any TRW Affiliate for any taxable
periods and (ii) all Tax Returns legally required to be filed by TRW or any TRW
Affiliate for any taxable periods, regardless of whether such returns are filed
on a separate, consolidated, combined, unitary or group basis, including,
without limitation:



	 	(a)	 	state and local Income Tax Returns;
	 
	 	(b)	 	foreign Income Tax Returns; and
	 
	 	(c)	 	Non-Income Tax Returns required to be filed with
respect to the TRW Business or any part thereof.



         2.02 TRW Automotive’s Responsibility. TRW Automotive shall have sole and
exclusive responsibility for the preparation and filing of all Tax Returns
(other than Consolidated Returns and Combined Returns, which are the sole
responsibility of TRW as provided in Section 2.01 of this Agreement) legally
required to be filed by TRW Automotive or any TRW Automotive Affiliate for any
taxable periods, regardless of whether such returns are filed on a separate,
consolidated, combined, unitary or group basis, including, without limitation:



	 	(a)	 	US federal Income Tax Returns (other than
Consolidated Returns);
	 
	 	(b)	 	state and local Income Tax Returns (including
Combined Returns);
	 
	 	(c)	 	foreign Income Tax Returns, whether separate or
consolidated;
	 
	 	(d)	 	Foreign Combined Returns; and
	 
	 	(e)	 	Non-Income Tax Returns required to be filed with
respect to the TRW Automotive Business or any part thereof.



         2.03 Agent. Subject to the other applicable provisions of this Agreement,


                  (a) TRW Automotive hereby irrevocably designates, and agrees to cause each
TRW Automotive Affiliate to so designate, TRW as its sole and exclusive agent
and attorney-in-fact to take such action (including execution of documents) as
TRW, in its sole discretion, may deem appropriate in any and all matters
(including Audits) relating to any Tax Return described in Section 2.01 of this
Agreement.



9







 





                  (b) TRW hereby irrevocably designates, and agrees to cause each TRW
Affiliate to so designate, TRW Automotive as its sole and exclusive agent and
attorney-in-fact to take such action (including execution of documents) as TRW
Automotive, in its sole discretion, may deem appropriate in any and all matters
(including Audits) relating to any Tax Return described in Section 2.02(b) and
2.02(d) of this Agreement.



         2.04 Provision of Tax Return Information


                  (a) TRW Automotive shall provide TRW all documents and information, and
make available employees and officers of TRW Automotive as TRW reasonably
requests, on a mutually convenient basis during normal business hours, to aid
TRW in preparing any Tax Return described in Section 2.01 of this Agreement to
the extent that such Tax Return relates to the TRW Automotive Business and any
TRW Automotive Separate Tax Liability, or to contest any Audit of any such Tax
Return. Without limiting the foregoing, in this regard, TRW Automotive agrees
to provide (1) the information set forth in Appendix A to this Agreement, on or
before the dates set forth therein, with respect to Consolidated Returns, and
(2) the information set forth in Appendix B to this Agreement, on or before the
dates set forth therein, with respect to Combined Returns.



                  (b) TRW shall provide TRW Automotive all documents and information, and
make available employees and officers of TRW as TRW Automotive reasonably
requests, on a mutually convenient basis during normal business hours to aid
TRW Automotive in preparing any Tax Return described in Section 2.02 of this
Agreement to the extent that such Tax Return relates to the TRW Business and
any TRW Separate Tax Liability, or to contest any Audit of any such Tax Return.
Without limiting the foregoing, in this regard, TRW agrees to provide (1) the
information set forth in Appendix C to this Agreement, on or before the dates
set forth therein, with respect to Foreign Combined Returns, (2) the
information set forth in Appendix D to this Agreement, on or before the dates
set forth therein, with respect to Combined Returns and (3) any relevant
historical information and Tax Returns. In addition, TRW will provide
employees of TRW Automotive responsible for filing Tax Returns with access to
any private letter rulings, together with any requests therefor and related
documents, issued to TRW prior to the Distribution Date, and will provide TRW
Automotive with a copy of such rulings or documents to the extent that the
issues discussed therein are relevant to TRW Automotive or any TRW Automotive
Affiliate, not later than five (5) days after the receipt of a written request
therefor.



                  (c) In the case of any Tax Return due (with applicable extensions ) 120
days or more after the Distribution Date which includes TRW Automotive, any TRW
Automotive Affiliate or a TRW Automotive Division, TRW shall provide to TRW
Automotive the Consolidated Return, at least 30 days prior to the due date
(with extensions) for the filing of such Tax Return for review and comment.
Worksheets and supporting documents will be made reasonably available to TRW
Automotive. TRW Automotive shall provide its comments to TRW at least 15 days
prior to the due date (with extensions) for the filing of such Tax Return. In
the case of any Tax Return due (with applicable extensions ) 120days or more
after the Distribution Date which includes TRW, a TRW Affiliate or a TRW Division,
TRW Automotive shall provide to TRW a pro forma draft of the portion of such
Tax Return that reflects the TRW


10







 




Separate Tax Liability, in accordance with
Section 2.06(e) and 2.06(f), at least 30 days prior to the due date (with
extensions) for the filing of such Tax Return for review and comment.
Worksheets and supporting documents will be made reasonably available to TRW.
TRW shall provide its comments to TRW Automotive at least 15 days prior to the
due date (with extensions) for the filing of such Tax Return. If the
non-Filing Party has not provided its comments on the Consolidated Return or
the pro forma draft of the Tax Return, as the case may be, the Filing Party
shall file such Tax Return reporting all Tax Items in the manner as originally
set forth on the Consolidated Return or the pro forma draft of the Tax Return,
as the case may be, provided to the non-Filing Party.


                  (d) If the Filing Party disagrees with comments provided by the non-Filing
Party on the reporting of any Tax Item on any Tax Return as described in
2.04(c), and the parties cannot resolve their differences, TRW and TRW
Automotive shall jointly retain an Independent Firm to determine whether the
proposed reporting of TRW or TRW Automotive is more appropriate in accordance
with Section 9.03 of this Agreement. The relevant Tax Item shall be reported in
the manner that the Independent Firm determines is more appropriate. If a
dispute regarding the reporting of any Tax Item has not been resolved by the
due date (with extension) for the filing of any Tax Return, the Filing Party
shall file such Tax Return reporting all Tax Items in the manner as originally
set forth on the pro forma draft of the portion of the Tax Return provided to
the non-Filing Party and the Filing Party agrees that it will thereafter file
an amended Tax Return, if necessary, reporting any disputed Tax Item in the
manner determined by the Independent Firm, and any other Tax Item as agreed
upon by TRW and TRW Automotive.



         2.05 Manner of Filing Tax Returns.


                  (a) Unless otherwise required by a Taxing Authority, the parties hereby
agree to prepare and file all Tax Returns, and to take all other actions, in a
manner consistent with (1) this Agreement, (2) any Ruling Documents, and (3)
any Supplemental Ruling Documents. All Tax Returns shall be filed on a timely
basis (taking into account applicable extensions) by the party responsible for
filing such returns under this Agreement. TRW shall prepare the Consolidated
Return for the taxable year that includes the Distribution Date and shall be
entitled to amend any Consolidated Return for any prior taxable year in each
case as deemed necessary in its sole and absolute discretion in order for TRW
to realize the Tax Benefits resulting from the Transactions in accordance with
the Overriding Principle.



                  (b) Except as otherwise provided in Sections 2.05(c), 2.06 or 2.07 and
subject to the review process provided by 2.04(c) of this Agreement, the Filing
Party shall determine (1) the manner in which such Tax Return shall be prepared
and filed, including but not limited to the elections, method of accounting,
positions, conventions and principles of taxation to be used and the manner in
which any Tax Item shall be reported, (2) allocation of Tax Assets, including
without limitation, base period amounts, (3) whether to carryback any Tax Asset
from the TRW Group or TRW Automotive Group, (4) whether to deduct or credit foreign
Income Taxes, (5) whether any extensions shall be requested, (6) whether any
amended Tax Returns shall be filed, (7) whether any claims for refund shall be
made, (8) whether any refunds shall be paid by way of


11







 




refund or credited
against any liability for the related Tax, and (9) whether to retain outside
firms to prepare or review such Tax Returns.


                  (c) With respect to Pre-Distribution Periods, in the event that a Tax Item
affects a Tax Return described in Section 2.01 of this Agreement and also
affects a Tax Return described in Section 2.02 of this Agreement, the Filing
Party shall conform the treatment of such Tax Item in any Tax Return described
in Section 2.02 of this Agreement to the treatment of such Tax Item in the
applicable Tax Return described in Section 2.01 of this Agreement.



                  (d) Any Tax Return described in (i) Section 2.01 of this Agreement (but
only with respect to a TRW Automotive Separate Tax Liability and Tax Items of
TRW Automotive, any TRW Automotive Division or any TRW Automotive Affiliate) or
(ii) Section 2.02 of this Agreement (but only with respect to a TRW Separate
Tax Liability and Tax Items of TRW, any TRW Division or any TRW Affiliate), in
either case if such Tax Return is filed after the date of this Agreement, shall
be prepared on a basis consistent with the elections, methods of accounting,
positions, conventions and principles of taxation and the manner in which any
Tax Item or other information is reported as reflected on the most recently
filed prior Tax Returns involving similar matters. The preceding sentence
shall not apply (1) to the extent otherwise required by Sections 2.06 and 2.07
of this Agreement, (2) if the Filing Party obtains the prior written consent
(which consent shall not be unreasonably withheld) of the non-Filing Party, (3)
if there is a change in controlling law, or (4) if a change in tax accounting
method has been filed prior to the Distribution Date.



         2.06 Special Rules for Determining Separate Tax Liability.


                  (a) Notwithstanding anything to the contrary in this Agreement, TRW and
TRW Automotive acknowledge and agree that any and all net Tax Benefits arising
or resulting from the Transactions (whether in the taxable year that includes
the Distribution Date, or in any prior or future taxable period) shall be for
the account of the TRW Group (the “Overriding Principle”). For the avoidance
of doubt, such Tax Benefits resulting from the Transactions may include,
without limitation, those resulting from the following Tax Items: (i) any
capital loss, capital loss carryback or capital loss carryforward arising from
the Transactions, (ii) any foreign currency loss arising in connection with the
settlement of intercompany accounts between members of the TRW Group and the
TRW Automotive Group, (iii) any foreign tax credit, foreign tax credit
carryback, or foreign tax credit carryforward made available as a result of the
filing of any amended Tax Return for a taxable year that precedes the taxable
year that includes the Distribution, or as a result of any dividend
distribution necessary to effect the Separation, (iv) any foreign currency loss
realized as a result of the Transactions pursuant to Sections 987 and 988 of
the Code and (v) any deductions arising from expenses incurred by the TRW Group
or the TRW Automotive Group, as the case may be, in connection with the
Transactions, but shall not
include any Tax Benefit resulting from an operating loss of the TRW
Automotive Group to the extent that such operating loss would have arisen
without regard to the Transactions and is utilized to generate a Tax refund
(after taking into account all other deductions, losses and credits available
to a filing party pursuant to this Agreement, including those generated by the
Transactions).



12







 





                  (b) As described in this Section 2.06(b), TRW shall prepare a Pro Forma
TRW Automotive Group Consolidated Return for the taxable year that includes the
Distribution Date assuming that the Transactions never occurred. The TRW
Automotive Separate Tax Liability shall be the TRW Automotive Group’s liability
for U.S. federal Income Taxes for such taxable period, as determined on such
Pro Forma TRW Automotive Group Consolidated Return prepared as though TRW
Automotive, together with each eligible TRW Automotive Affiliate and TRW
Automotive Division, filed their own consolidated return on a separate company
basis. Except as otherwise provided in the next sentence, the TRW Automotive
Separate Tax Liability shall be computed by (i) including only Tax Items
accrued by TRW Automotive, any TRW Automotive Affiliate or TRW Automotive
Division during such taxable year but ending on the date of the Distribution,
and that did not arise or result from the Transactions and (ii) applying the
highest marginal corporate Tax rate in effect for such taxable period (or any
portion thereof), provided, however, that TRW shall determine whether to deduct
or credit any foreign Income Tax Items of TRW Automotive or any TRW Automotive
Affiliate on any such Pro Forma TRW Automotive Group Consolidated Return based
on the elections and positions taken on the Consolidated Return as filed. For
the avoidance of doubt, the Pro Forma TRW Automotive Group Consolidated Return
shall be prepared, and the TRW Automotive Separate Tax Liability shall be
computed, assuming that (i) a Tax Item (whether an item of income or expense)
resulting from a dividend or royalty payment actually made by TRW Automotive, a
TRW Automotive Affiliate or TRW Automotive Division to TRW or a TRW Affiliate,
was instead received by TRW Automotive, (ii) any subpart F income accrued by a
TRW Automotive Affiliate or TRW Automotive Division which was taxable to TRW
was instead taxable to TRW Automotive, (iii) the interest expense allocable to
TRW Automotive shall be the product of (A) TRW Automotive’s third party debt at
the time of the Distribution, divided by the total third party debt (determined
on a daily average basis) giving rise to the interest expense described in
clause (B), and (B) the total third party interest expense actually utilized on
the Consolidated Return filed by TRW pursuant to Section 2.05(a) for the
taxable year that includes the Distribution Date, and (iv) any intercompany
charges accrued for Management Profit reporting purposes by TRW Automotive, any
TRW Automotive Affiliate or TRW Automotive Division to TRW (to the extent such
companies or operations are included in the Consolidated Return) in respect of
general overhead or management expenses had been accrued by TRW Automotive. To
the extent that the calculation of the TRW Automotive Group Separate Tax
Liability shown due on such pro forma Tax Return is a negative amount, and
reflects an operating loss of the TRW Automotive Group that was actually
utilized by TRW on any Consolidated Return filed by TRW pursuant to Section
2.01 of this Agreement to generate a Tax refund (after taking into account all
other deductions, losses and credits available to TRW on such Combined Return,
including those generated by the Transactions), the TRW Automotive Group
Separate Tax Liability shall be zero, and TRW shall pay over to the TRW
Automotive Group, in accordance with the provisions of Article 7 of this
Agreement, the amount of any Tax refund so obtained.



                  (c) For all taxable years prior to the taxable year that includes the
Distribution Date, if TRW files an amended Consolidated Return (other than an
amended Consolidated Return described pursuant to Section 2.05(a) of this
Agreement) or in the event of a redetermination described in Section 7.02 of
this Agreement, TRW shall prepare an amended Pro


13







 




Forma TRW Automotive Group
Consolidated Return for the taxable year that such amended Consolidated Return
was filed. The TRW Automotive Separate Tax Liability shown due on such Pro
Forma TRW Automotive Group Consolidated Return shall be computed pursuant to
the principles described in Section 2.06(b) of this Agreement including an
interest expense deduction based on the third party debt of TRW Automotive at
the time of the Distribution.


                  (d) As described in this Section 2.06(d), TRW shall prepare Pro Forma TRW
Automotive Group Combined Returns for any state or local income, franchise,
franchise tax based on income or Michigan single business Tax for the taxable
year that includes the Distribution Date assuming that the Transactions never
occurred and pursuant to the principles described in Section 2.06(b) of this
Agreement. Any resulting Tax liability shown due on such pro forma Tax Return
will be allocated between the TRW Group and the TRW Automotive Group based on
the relative contributions of the TRW Group and the TRW Automotive Group to the
apportionment factor or factors applicable to such Pro Forma TRW Automotive
Group Combined Return, as appropriate.



                  (e) TRW Automotive shall prepare Pro Forma TRW Group Foreign Returns for
all foreign Tax Returns required to be filed by TRW Automotive pursuant to
Section 2.02 of this Agreement that include TRW, a TRW Division or any TRW
Affiliate, as the case may be. The TRW Separate Tax Liability shall be the TRW
Group’s liability for foreign Taxes for such taxable period, as determined on
such Pro Forma TRW Group Foreign Return prepared as though TRW, together with
each eligible TRW Affiliate and TRW Division, filed their own foreign combined
or group Tax Return on a separate company basis. Except as otherwise provided
in the next sentence, the TRW Separate Tax Liability shall be computed by (i)
including only Tax Items accrued by TRW, any TRW Division or any TRW Affiliate
during such taxable year (or otherwise allocated thereto under Section 2.07 of
this Agreement) and (ii) applying the highest marginal corporate Tax rate in
effect for such taxable period (or any portion thereof). For the avoidance of
doubt, the Pro Forma TRW Group Foreign Return shall be prepared, and the TRW
Separate Tax Liability shall be computed, assuming that (i) the interest
expense allocable to TRW shall be based on the relative Operating Unit Code
profits of the TRW Divisions and TRW Automotive Divisions as taken into account
in the computation of the Management Profit before Taxes and (ii) all
Restructuring Taxes are allocated to TRW.



                  (f) TRW Automotive shall prepare Pro Forma TRW Group Combined Returns for
all state or local Tax Returns (including any state or local income, franchise,
franchise tax based on income or Michigan single business Tax Returns) required
to be filed by TRW Automotive pursuant to Section 2.02 of this Agreement that
include TRW, a TRW Division or any TRW Affiliate, as the case may be. The TRW
Separate Tax Liability shall be computed by (i) including only Tax Items
accrued by TRW, any TRW Division or any TRW Affiliate (or otherwise allocated
thereto under Section 2.07 of this Agreement) and (ii) applying the highest
marginal corporate Tax rate in effect for such taxable period (or any portion
thereof). Any resulting Tax liability shown due on any pro forma Tax Return prepared
pursuant to this Section 2.06(f) will be allocated between the TRW Group and
the TRW Automotive Group based on the relative contributions of the TRW Group
and the TRW Automotive Group to the


14







 




apportionment factor or factors applicable
to such Pro Forma TRW Automotive Group Combined Return, as appropriate.


         2.07 Special Rules for Allocation of Tax Assets


                  (a) In General. All allocations of Tax Assets shall be made consistent
with the Overriding Principle unless otherwise prohibited by controlling legal
authority. TRW and TRW Automotive shall cooperate in determining the
allocation of any Tax Assets among TRW, each TRW Affiliate, TRW Automotive, and
each TRW Automotive Affiliate in connection with the Distribution.



                  (b) Carrybacks. Neither TRW Automotive nor any TRW Automotive Affiliate
shall carryback any Tax Asset of the TRW Automotive Group from a
Post-Distribution Period (other than a carryback of any Tax Asset attributable
to Distribution Taxes for which the liability is borne by TRW or any TRW
Affiliate) to any Pre-Distribution Period, unless TRW Automotive has received
prior written consent by TRW or such carryback is mandatory under federal,
state or foreign law or regulation, provided, however, that TRW Automotive
hereby expressly agrees to elect (under Section 172(b)(3) of the Code, Treas.
Reg. §1.1502-21(b)(3), and, to the extent feasible, any similar provision of
any state, local or foreign Tax law) to relinquish any right to carryback net
operating losses to any Pre-Distribution Periods of TRW (in which event no
payment shall be due from TRW to TRW Automotive in respect of such net
operating losses) and provided, further, that to the extent TRW Automotive or
any TRW Automotive Affiliate is entitled to elect to relinquish any right to
carryback any other Tax Asset under federal, state or foreign law or
regulation, such election shall be made.



                  (c) Carryforwards. Consistent with the Overriding Principle, TRW
Automotive agrees to pay to TRW the Tax Benefit that TRW Automotive or any TRW
Automotive Affiliate realizes from the use in any Post-Distribution Period of a
carryforward of any Tax Asset of the TRW Automotive Group from a
Pre-Distribution Period to the extent that such Tax Asset was previously
utilized by the TRW Group on a Consolidated Return for a Pre-Distribution
Period which has been amended in order for TRW to realize the Tax Benefits
resulting from the Transactions pursuant to Section 2.05(a); provided, however,
that TRW Automotive shall use any Tax Asset carryforward before using any Tax
Assets from any other year beginning after the Distribution Date, unless
otherwise required by law. If subsequent to the payment by TRW Automotive to
TRW of the Tax Benefit of a carryforward of a Tax Asset of the TRW Automotive
Group, there shall be a Final Determination which results in a (1) change to
the amount of the Tax Asset so carried forward or (2) change to the amount of
such Tax Benefit, TRW Automotive shall repay to TRW, or TRW shall repay to TRW
Automotive, as the case may be, any amount which would not have been payable to
such other party pursuant to this Section 2.07(c) had the amount of the benefit
been determined in light of these events. The party making
payment to the other party due to such Final Determination shall also
reimburse the recipient of the repayment for any interest and penalties
incurred and applicable to such repayment amount.



15







 





                  (d) Certification Provided to TRW. Immediately after TRW Automotive files
any Tax Return for a Post-Distribution Period, the tax director of TRW
Automotive must provide TRW with a statement certifying under penalties of
perjury that the requirements under Sections 2.07(b) and 2.07(c) of this
Agreement have been met.



                  (e) Earnings and Profits. TRW will advise TRW Automotive in writing of
the decrease in TRW earnings and profits attributable to the Distribution under
Section 312(h) of the Code and Treas. Reg. §1.1502-33(e)(3), as well as the
amounts of any allocations required under Prop. Treas. Reg. § 1.367(b)-8 or
Treas. Reg. §§ 1.1248-2 or -3 (or other applicable Treasury Regulations), on or
before the first anniversary of the Distribution; provided, however, that TRW
shall provide TRW Automotive with estimates of such amounts (determined in
accordance with past practice) prior to such anniversary as reasonably
requested by TRW Automotive. In the event that any temporary or final
amendments to the Treasury Regulations referenced in the preceding sentence are
promulgated after the date of this Agreement that provide for any election to
apply such regulations retroactively (including any election that would permit
retroactive application of the rules set forth in Prop. Treas. Reg. §
1.367(b)-5), then any such election shall be made only to the extent that TRW
and TRW Automotive agree to make such election.



                  (f) Within 180 days after the Distribution Date, TRW will provide to TRW
Automotive, pursuant to Section 41 of the Code, the base period information the
TRW Automotive Group will need to properly compute its research tax credits for
any taxable period beginning on or after the Distribution Date.



Section 3. Liability for Taxes



         3.01 TRW Automotive’s Liability for Taxes. TRW Automotive and each TRW
Automotive Affiliate shall be jointly and severally liable for all Taxes
incurred with respect to Tax Returns described in Section 2.02 of this
Agreement, the TRW Automotive Separate Tax Liability, and all Taxes imposed by
any Taxing Authority on the TRW Automotive Business, TRW Automotive or any TRW
Automotive Affiliate for any taxable period, provided however, that TRW
Automotive and each TRW Automotive Affiliate shall not be liable for a TRW
Separate Tax Liability or for Taxes incurred with respect to a Tax Return
described in Sections 2.01 of this Agreement. Except as otherwise provided in
Section 2.07, TRW Automotive shall be entitled to receive and retain all
refunds and credits of Taxes previously incurred by TRW Automotive or the TRW
Automotive Business with respect to such Taxes.


         3.02 TRW’s Liability for Taxes. TRW and each TRW Affiliate shall be
jointly and severally liable for all Taxes incurred with respect to Tax Returns
described in Section 2.01 of this Agreement, TRW Separate Tax Liability, all
Restructuring Taxes, and all Taxes imposed by any Taxing Authority on the TRW
Business, TRW or any TRW Affiliate for any taxable period, provided
however, that TRW and each TRW Affiliate shall not be liable for a TRW
Automotive Separate Tax Liability or for Taxes incurred with respect to a Tax
Return described in Section 2.02 of this Agreement. TRW shall be entitled to
receive and retain all refunds and credits of Taxes previously incurred by TRW
with respect to such Taxes for which it is liable.


16







 


         3.03 Payment of Tax Liability. If one party is liable or responsible for
Taxes, under Section 3 of this Agreement, with respect to Tax Returns for which
another party is responsible for preparing and filing, or with respect to Taxes
that are paid by another party, then the liable or responsible party shall pay
the Taxes (or a reimbursement of such Taxes) to the other party pursuant to
Section 7.04 of this Agreement.


         3.04 Computation. No later than December 15, 2002 the Filing Party of
any Tax Return with respect to which a TRW Automotive Separate Tax Liability or
TRW Separate Tax Liability is required to be computed, the Filing Party shall
provide the non-Filing Party with a written calculation in reasonable detail
setting forth the amount of any TRW Automotive Separate Tax Liability or TRW
Separate Tax liability, as the case may be, or estimated TRW Automotive
Separate Tax Liability or TRW Separate Tax Liability, as the case may be (for
purposes of Section 7.01 of this Agreement), provided, however, that copies of
all work sheets and other materials used in preparation thereof shall not be
provided to the non-Filing Party, but will be made reasonably available to the
non-Filing Party for inspection. The non-Filing Party shall have the right to
review and comment on such calculation, except as provided in Sections 2.05,
2.06 and 2.07 of this Agreement. The non-Filing Party shall provide such
comments to the Filing Party within 15 days of receipt of the written
calculation of the TRW Automotive Separate Tax Liability or TRW Separate Tax
liability, as the case may be, or estimated TRW Automotive Separate Tax
Liability or TRW Separate Tax Liability, as the case may be. Any dispute with
respect to such calculation shall be resolved pursuant to Section 9.03 of this
Agreement, provided, however, that, notwithstanding any dispute with respect to
any such calculation, in no event shall any payment attributable to the amount
of any TRW Automotive Separate Tax Liability or TRW Separate Tax liability, as
the case may be, or estimated TRW Automotive Separate Tax Liability or TRW
Separate Tax liability, as the case may be, be paid later than the date
provided in Section 7 of this Agreement.


Section 4. Distribution Taxes and Deconsolidation



         4.01 Distribution Taxes.


                  (a) TRW’s Liability for Distribution Taxes. Notwithstanding Sections 3.01
through 3.03 of this Agreement, TRW and each TRW Affiliate shall be jointly and
severally liable for any Distribution Taxes, to the extent that such Distribution
Taxes are attributable to, caused by, or result from, one or more of the
following:



                           (i) any action or omission by TRW (or any TRW Affiliate)
inconsistent with any material, information, covenant or representation
in the Ruling Documents, Supplemental Ruling Documents, Initial Ruling,
or Supplemental Ruling (for the avoidance of doubt, disclosure of any
action or fact that is inconsistent with any material, information,
covenant or representation submitted to the IRS in connection with the
Ruling Documents, Supplemental Ruling Documents, Initial Ruling, or
Supplemental Ruling shall not relieve TRW (or any TRW Affiliate) of
liability under this Agreement);


17







 




                           (ii) any action or omission by TRW (or any TRW Affiliate),
including, without limitation, a cessation, transfer to Affiliates, or
disposition of its active trades or businesses, or an issuance of stock,
stock buyback or payment of an extraordinary dividend by TRW (or any TRW
Affiliate) following the Distribution;



                           (iii) any acquisition of any stock or assets of TRW (or any TRW
Affiliate) by one or more other persons (other than TRW Automotive or a
TRW Automotive Affiliate) prior to or following the Distribution; or



                           (iv) any issuance of stock by TRW (or any TRW Affiliate), or change
in ownership of stock in TRW (or any TRW Affiliate) after the
Distribution Date.



For the avoidance of doubt, if any issuance or acquisition of stock or assets
of TRW (or any TRW Affiliate) results in one or more persons owning a 50% or
greater interest in TRW (or any TRW Affiliate, (whether standing alone or when
coupled with one or more other transactions within the meaning of Section
355(e) of the Code), 100% of the amount of any Distribution Taxes resulting
therefrom shall be attributable to TRW.


                  (b) TRW Automotive’s Liability for Distribution Taxes. Notwithstanding
Sections 3.01 through 3.03 of this Agreement, TRW Automotive and each TRW
Automotive Affiliate shall be jointly and severally liable for any Distribution
Taxes, to the extent that such Distribution Taxes are attributable to, caused
by, or result from, one or more of the following:



                           (i) any action or omission by TRW Automotive (or any TRW Automotive
Affiliate) after the Distribution that is inconsistent with any material
or information relating to facts or matters related to TRW Automotive
(or any TRW Automotive Affiliate) or the TRW Automotive Business, that
has been provided to or by TRW Automotive, and any covenant or
representation in the Ruling Documents, Supplemental Ruling Documents,
Initial Ruling, or Supplemental Ruling;



                           (ii) any action or omission by TRW Automotive (or any TRW
Automotive Affiliate), including, without limitation, a cessation,
transfer to Affiliates, or disposition of its active trades or
businesses, or an issuance of stock, stock buyback or payment of an
extraordinary dividend by TRW Automotive (or any TRW Automotive
Affiliate) following the Distribution;



                           (iii) any acquisition of any stock or assets of TRW Automotive (or
any TRW Automotive Affiliate) by one or more other persons (other than
TRW or any TRW Affiliate) following the Distribution; or



                           (iv) any issuance of stock by TRW Automotive (or any TRW Automotive
Affiliate), including any Permitted Issuance and any issuance pursuant
to the exercise of employee stock options or other employment related
arrangements or the exercise of warrants, or change in ownership of
stock in TRW Automotive (or any TRW Automotive Affiliate) after the
Distribution.


18







 




For the avoidance of doubt, if any issuance or acquisition of stock or assets
of TRW Automotive (or any TRW Automotive Affiliate) results in one or more
persons owning a 50% or greater interest in TRW Automotive (or any TRW
Automotive Affiliate) (whether standing alone or when coupled with one or more
other transactions within the meaning of Section 355(e) of the Code), 100% of
the amount of any Distribution Taxes resulting therefrom shall be attributable
to TRW Automotive.


                  (c) Joint Liability for Remaining Distribution Taxes. TRW shall be liable
for 50% and TRW Automotive and each TRW Automotive Affiliate shall be jointly
and severally liable for 50% of any Distribution Taxes not otherwise allocated
by Sections 4.01(a) or (b).



         4.02 Private Letter Rulings.


                  (a) In General. Each of TRW and TRW Automotive represents that, as of the
date of this Agreement, it and its Affiliates know of no fact that may cause
the Tax treatment of the Distribution to be other than that contemplated in the
Initial Ruling. Each of TRW and TRW Automotive represent and warrant that
neither it nor any of its Affiliates has any plan or intention to take any
action which is inconsistent with any factual statements or representations in
the Initial Ruling.



                  (b) Information. TRW has provided TRW Automotive with accurate and
complete copies of all Ruling Documents submitted on or prior to the date
hereof and shall provide TRW Automotive with copies of all additional Ruling
Documents prepared after the date hereof prior to the submission of such Ruling
Documents to a Taxing Authority, provided however, that (i) TRW shall not be
required to provide TRW Automotive with copies of the portion of any Ruling
Documents that are not related to the TRW Automotive Business if TRW reasonably
believes that such provision would reveal confidential information or harm TRW,
and (ii) neither TRW Automotive nor any TRW Automotive Affiliate will be bound
by, subject to any limitation as a result of, or otherwise chargeable with
knowledge of, any information that was not disclosed as a result of
subparagraph (i) hereof. Each party shall keep all Ruling Documents and
information regarding all Ruling Documents confidential pursuant to Section
9.06 of this Agreement.



                  (c) Supplemental Rulings.



                           (i) In General. TRW agrees that at the reasonable request of TRW
Automotive, TRW shall cooperate with TRW Automotive and use its
reasonable best efforts to seek to obtain, as expeditiously as possible,
a Supplemental Ruling or other guidance from the IRS or any other Taxing
Authority for the purpose of confirming (1) the continuing validity of
any ruling issued by any Taxing Authority addressing the application of
the law to the Distribution or (2) compliance on the part of TRW
Automotive (or any TRW Automotive Affiliate) with its obligations under
Section 4.01(b) of this Agreement. However, TRW shall not be obligated
to seek a Supplemental Ruling if it reasonably believes that seeking
such Supplemental Ruling would adversely affect TRW (or any TRW
Affiliate) other than merely as a matter of inconvenience or in


19







 




respect
of nominal costs or overhead associated therewith. Further, in no event
shall TRW be required to file any Supplemental Ruling Documents unless
TRW Automotive represents that (1) it has read the Supplemental Ruling
Documents and (2) all information and representations, if any, relating
to TRW Automotive (or any TRW Automotive Affiliate) contained in the
Supplemental Ruling Documents are true, correct and complete in all
material respects. TRW Automotive shall reimburse TRW for all direct
costs and expenses, including without limitation, attorney fees,
accountant fees and filing fees, incurred by TRW in obtaining a
Supplemental Ruling requested by TRW Automotive. Neither TRW Automotive
nor any TRW Automotive Affiliate shall seek any guidance (whether
written or oral) from the IRS or any other Taxing Authority concerning
the Distribution except as set forth in this Section 4.02(c). The
preceding sentence shall not in any way limit the ability of any outside
counsel to TRW Automotive to request informal guidance from the IRS
regarding such issues on an anonymous basis.


                           (ii) Participation Rights. If TRW requests a Supplemental Ruling
or other guidance from the IRS or any other Taxing Authority after the
date of this Agreement, TRW shall (A) keep TRW Automotive informed in a
timely manner of all material actions taken or proposed to be taken by
TRW in connection therewith, (B) reasonably in advance of the
submission of any such Supplemental Ruling Documents provide TRW
Automotive with a draft copy thereof, (C) consult in good faith with and
reasonably consider TRW Automotive’s comments on such draft copy, (D)
provide TRW Automotive with a final copy of any such Supplemental Ruling
Documents and (E) provide TRW Automotive with notice reasonably in
advance of, and TRW Automotive shall have the right to attend, any
meetings with the Taxing Authority (subject to the approval of the
Taxing Authority) that relate to such Supplemental Ruling. If TRW
requests a Supplemental Ruling or other guidance from the IRS or any
other Taxing Authority after the date of this Agreement, TRW Automotive
shall cooperate with TRW, including without limitation, providing any
information and copies of relevant documents reasonably requested by
TRW.



         4.03 Continuing Covenants.


                  (a) In General. Each of TRW (for itself and each TRW Affiliate) and TRW
Automotive (for itself and each TRW Automotive Affiliate) agrees (1) not to
take any action reasonably expected to result in an increased Tax liability to
the other, a reduction in a Tax Asset of the other or an increased liability to
the other under this Agreement and (2) to take any action reasonably requested
by the other that would reasonably be expected to result in a Tax Benefit or
avoid a Tax Detriment to the other, provided, in either such case, that the
taking or refraining to take such action (A) is consistent with the Overriding
Principle and (B) does not result in any additional cost not fully compensated
for by the other party or any other adverse effect to such party. The parties
hereby acknowledge that the preceding sentence is not intended to limit, and
therefore shall not apply to, the rights of the parties with respect to matters
otherwise covered by this Agreement.




20









 



                  (b) TRW Automotive Restrictions.



                           (i) TRW Automotive agrees that it will not take or fail to take, or
permit any TRW Automotive Affiliate to take or fail to take, any action
where such action or failure to act would be inconsistent with any
material, information, covenant or representation that relates to facts
or matters related to TRW Automotive (or any TRW Automotive Affiliate)
or within the control of TRW Automotive and is contained in the Ruling
Documents, Supplemental Ruling Documents, Initial Ruling or Supplemental
Ruling (except where such material, information, covenant or
representation was not previously disclosed to TRW Automotive). TRW
Automotive agrees that it will not take (and it will cause the TRW
Automotive Affiliates to refrain from taking) any position on a Tax
Return that is inconsistent with the treatment of (i) the Contribution
as a tax-free reorganization under Sections 351 and 368(a)(1)(D) of the
Code and (ii) the Distribution as tax free under Sections 351, 355 and
368(a)(1)(D) of the Code.



                           (ii) TRW Automotive shall not make or cause to be made any
distribution in the taxable year that includes the Distribution Date out
of any TRW Automotive Affiliate that constituted a “Controlled Foreign
Corporation” (as defined in Section 957 of the Code) of TRW without the
written consent of TRW, which TRW may withhold in its sole and absolute
discretion.



                  (c) TRW Restrictions. TRW agrees that it will not take or fail to take,
or permit any TRW Affiliate to take or fail to take, any action where such
action or failure to act would be inconsistent with any material, information,
covenant or representation in the Ruling Documents, Supplemental Ruling
Documents, Initial Ruling or Supplemental Ruling, other than as permitted by
this Section 4. TRW agrees that it will not take (and it will cause the TRW
Affiliates to refrain from taking) any position on a Tax Return that is
inconsistent with the treatment of (i) the Contribution as a tax-free
reorganization under Sections 351 and 368(a)(1)(D) of the Code and (ii) the
Distribution as tax free under Sections 351, 355 and 368(a)(1)(D) of the Code.



                  (d) Certain TRW Automotive Actions Following the Distribution. TRW
Automotive agrees that, except as otherwise provided in the next sentence of
this Section
4.03(d), during the two (2) year period following the Distribution, prior
to entering into any agreement (or understanding, arrangement or negotiations)
to (1) sell all or substantially all of the assets of TRW Automotive or any TRW
Automotive Affiliate, (2) merge TRW Automotive, or any TRW Automotive Affiliate
with another entity, without regard to which party is the surviving entity, (3)
transfer any assets of TRW Automotive in a transaction described in Section 351
(other than a transfer to a corporation which files a Consolidated Return or
Foreign Combined Return with TRW Automotive and which is wholly-owned, directly
or indirectly, by TRW Automotive) or subparagraph (C) or (D) of Section
368(a)(1) of the Code, (4) issue stock of TRW Automotive or any TRW Automotive
Affiliate (or any instrument that is convertible or exchangeable into any such
stock) in an acquisition or public or private offering (excluding any issuance
pursuant to the exercise of employee stock options or other employment related
arrangements having customary terms and conditions and that satisfy the
requirements of

21







 




temporary Treasury Regulations section 1.355-7T(e)(3)(ii) or
1.355-7T(d)(6)), or (5) facilitate or otherwise participate in any acquisition
of stock in TRW Automotive by any shareholder owning 5% or more of the
outstanding stock of TRW Automotive, unless in any such case TRW and TRW
Automotive agree otherwise, TRW Automotive shall request that TRW obtain a
Supplemental Ruling in accordance with Section 4.02(c) of this Agreement to the
effect that such transaction will not adversely affect the treatment of the
Distribution under Section 355 of the Code or result in the imposition of
Distribution Taxes. In the case of a merger of TRW Automotive or any TRW
Automotive Affiliate with another entity within the TRW Automotive Group, TRW
Automotive shall not be required to obtain a Supplemental Ruling, but instead
must receive an opinion of nationally recognized tax counsel to the effect that
such transaction will not adversely affect the treatment of the Distribution
under Section 355 of the Code or result in the imposition of Distribution
Taxes, provided, however, that if such tax counsel or such opinion of such tax
counsel is unacceptable to TRW, then TRW Automotive must obtain a Supplemental
Ruling from the Service providing that such merger will not adversely affect
the treatment of the Distribution under Section 355 of the Code or result in
the imposition of Distribution Taxes. TRW Automotive (or any TRW Automotive
Affiliate) shall only undertake any of such actions after TRW’s receipt of such
a Supplemental Ruling or opinion of tax counsel, as the case may be, and
pursuant to the terms and conditions of any such Supplemental Ruling or opinion
of tax counsel, as the case may be, or as otherwise consented to in writing in
advance by TRW. The parties hereby agree that they will act in good faith to
take all reasonable steps necessary to amend this Section 4.03(d), from time to
time, by mutual agreement, to (i) add certain actions to the list contained
herein, or (ii) remove certain actions from the list contained herein, in
either case, in order to reflect any relevant change in law, regulation or
administrative interpretation occurring after the date of this Agreement.



                  (e) Permitted Issuances. Notwithstanding Section 4.03(d)(4), TRW
Automotive shall be permitted to sell shares of its capital stock to the
Investor pursuant to the Preferred Stock Purchase Agreement and enter into an
agreement to issue shares of its capital stock (the latter case, a “Permitted
Issuance”); provided however, that (i) prior to a Permitted Issuance, TRW
Automotive obtains an opinion of a nationally recognized tax counsel, with such
counsel and such opinion being reasonably acceptable to TRW, that such
Permitted Issuance will not adversely affect the qualification of the
Distribution for nonrecognition treatment under Sections 351, 355 and 368 of
the Code or result in the imposition of Distribution Taxes (which
opinion shall be delivered to TRW no later than ten (10) days following
the entering into of any such agreement), and (ii) following such Permitted
Issuances no person or persons will have acquired a 45% or greater interest (by
vote and value) in the stock of TRW Automotive or any TRW Automotive
Affiliate, provided, however, that if such tax counsel or such opinion of such
tax counsel is unacceptable to TRW, then TRW Automotive must obtain a
supplemental ruling from the Service providing that such Permitted Issuance
will not adversely affect the qualification of the Distribution for
nonrecognition treatment under Sections 351, 355 and 368 of the Code or result
in the imposition of Distribution Taxes. For purposes of determining the
amount of stock of TRW Automotive or any TRW Automotive Affiliate that will
have been acquired by any person or persons following any Permitted Issuance,
the amount of stock of TRW Automotive or any TRW Automotive Affiliate that is
considered to have been acquired by

22







 




one or more persons shall be calculated as
follows: (i) the amount of stock in TRW Automotive that has been acquired by
the Investor, whether acquired from TAUK or directly from TRW Automotive, shall
be agreed to by TRW and TRW Automotive and shall be set forth in a side letter
to be executed no later than 60 days following the Distribution (the “Base
Calculation”), and (ii) the Base Calculation shall be increased, on a
cumulative basis, by all issuances (whether or not such issuances are Permitted
Issuances) and acquisitions of stock of TRW Automotive or any TRW Automotive
Affiliate from the date immediately following the Distribution to the date
immediately following the Permitted Issuance at issue. Notwithstanding the
previous sentence, for purposes of determining the amount of stock of TRW
Automotive or any TRW Automotive Affiliate that will have been acquired, any
issuance pursuant to the exercise of employee stock options or other employment
related arrangements having customary terms and conditions and that satisfy the
requirements of temporary Treasury Regulations section 1.355-7T(e)(3)(ii) or
any successor regulations thereto issued under Section 355(e) of the Code shall
be disregarded.



                  (f) Notice of Specified Transactions. Not later than twenty (20) days
prior to entering into any oral or written contract or agreement, and not later
that five (5) days after it first becomes aware of any negotiations, plan or
intention (regardless of whether it is a party to such negotiations, plan or
intention), regarding any of the transactions described in paragraph (d), TRW
Automotive shall provide written notice of its intent to consummate such
transaction or the negotiations, plan or intention of which it becomes aware,
as the case may be, to TRW.



Section 5. Tax Reporting



         5.01 Employee Wages. At TRW’s request and upon 60 days notice by TRW, TRW
Automotive shall assume the Form W-2 and Form W-3 reporting obligations
(including the filing of all forms necessary to comply with magnetic media
reporting requirements) of TRW with respect to any employee of the TRW
Automotive Business that TRW Automotive employs during the calendar year which
includes the Distribution Date consistent with the procedures set forth in
Section 5 of Rev. Proc. 96-60, 1996-2 C.B. 399.


Section 6. Indemnification



         6.01 Generally. The TRW Group shall jointly and severally indemnify TRW Automotive,
each TRW Automotive Affiliate, and their respective directors, officers and
employees, and hold them harmless from and against any and all Taxes for which
TRW or any TRW Affiliate is liable under this Agreement and any loss, cost,
damage or expense, including reasonable attorneys’ fees and costs, that is
attributable to, or results from, the failure of TRW, any TRW Affiliate or any
director, officer or employee to make any payment required to be made under
this Agreement. TRW Automotive and each member of the TRW Automotive Group
shall jointly and severally indemnify TRW, each TRW Affiliate, and their
respective directors, officers and employees, and hold them harmless from and
against any and all Taxes for which TRW Automotive or any TRW Automotive
Affiliate is liable under this Agreement and any loss, cost, damage or expense,
including reasonable attorneys’ fees and costs, that is attributable to, or
results from, the failure of TRW Automotive, any TRW Automotive Affiliate


23







 




or
any director, officer or employee to make any payment required to be made under
this Agreement.


         6.02 Inaccurate or Incomplete Information. The TRW Group shall jointly
and severally indemnify TRW Automotive, each TRW Automotive Affiliate, and
their respective directors, officers and employees, and hold them harmless from
and against any cost, fine, penalty, or other expense of any kind attributable
to the failure of TRW or any TRW Affiliate in supplying TRW Automotive or any
TRW Automotive Affiliate with inaccurate or incomplete information, in
connection with the preparation of any Tax Return. The TRW Automotive Group
shall jointly and severally indemnify TRW, each TRW Affiliate, and their
respective directors, officers and employees, and hold them harmless from and
against any cost, fine, penalty, or other expenses of any kind attributable to
the failure of TRW Automotive or any TRW Automotive Affiliate in supplying TRW
or any TRW Affiliate with inaccurate or incomplete information, in connection
with the preparation of any Tax Return.


         6.03 No Indemnification for Tax Items. Nothing in this Agreement shall be
construed as a guarantee of the existence or amount of any loss, credit,
carryforward, basis or other Tax Item, whether past, present or future, of TRW,
any TRW Affiliate, TRW Automotive or any TRW Automotive Affiliate. In
addition, for the avoidance of doubt, nothing in this Agreement shall be
construed to require compensation by either party hereto in respect of any
financial accounting deferred tax assets or liabilities or other financial
accounting items.


Section 7. Payments



         7.01 Estimated Tax Payments. Not later than ten (10) business days prior
to each Estimated Tax Installment Date with respect to a taxable period for
which a Consolidated Return or a Combined Return (described in Section 2.01 of
this Agreement) will be filed, TRW Automotive shall pay to TRW on behalf of the
TRW Automotive Group an amount equal to the amount of any estimated TRW
Automotive Separate Tax Liability that TRW Automotive otherwise would have been
required to pay to a Taxing Authority on such Estimated Tax Installment Date.
Not later than ten (10) business days prior to each Estimated Tax Installment
Date with respect to a taxable period for which a Foreign Combined Return or
Combined Return (described in
Section 2.02 of this Agreement) will be filed, TRW shall pay to TRW Automotive
on behalf of the TRW Group an amount equal to the amount of any estimated TRW
Separate Tax Liability that TRW otherwise would have been required to pay to a
Taxing Authority on such Estimated Tax Installment Date.


         7.02 Redetermination Amounts. (a) In the event of a redetermination of
any Tax Item on any Tax Return, as a result of a refund of Taxes paid, a Final
Determination or any settlement or compromise with any Taxing Authority which
in any such case would affect the TRW Automotive Separate Tax Liability or TRW
Separate Tax Liability, as the case may be, the Filing Party shall prepare a
revised Pro Forma TRW Automotive Group Consolidated Return or pro forma Tax
Return, as the case may be, in accordance with Section 2.06 of this Agreement
for the relevant taxable period reflecting the redetermination of such Tax Item
as a result of such refund, Final Determination, settlement or compromise. TRW
Automotive shall pay to TRW, or TRW


24







 




shall pay to TRW Automotive, as
appropriate, an amount equal to the difference, if any, between (i) the TRW
Automotive Separate Tax Liability reflected on such revised Pro Forma
Consolidated Return and the TRW Automotive Separate Tax Liability for such
period as originally computed pursuant to this Agreement and (ii) the TRW
Separate Tax liability reflected on such revised pro forma Tax Return and the
TRW Separate Tax liability for such period as originally computed pursuant to
this Agreement, plus, in each case, its respective share of any interest or
penalties imposed by the Taxing Authority. Such payment to the other party
shall be made in accordance with Section 7.04(e) of this Agreement.


                  (b) If and to the extent that TRW has received payment for Group Relief
and such Group Relief is disallowed or unavailable for any reason whatsoever
then TRW Automotive agrees that it shall have no right to any repayment,
set-off or cancellation from TRW of sums paid or payable for Group Relief and
any sum due by TRW Automotive to TRW shall remain due.



         7.03 Payments of Refunds and Credits. Except as otherwise provided in
this Agreement, if one party receives a refund or credit of any Tax to which
the other party is entitled pursuant to Section 3.03 of this Agreement, the
party receiving such refund or credit shall pay to the other party the amount
of such refund or credit pursuant to Section 7.04 of this Agreement.


         7.04 Payments Under This Agreement. In the event that one party (the
“Owing Party”) is required to make a payment to another party (the “Owed
Party”) pursuant to this Agreement, then such payments shall be made according
to this Section 7.04.


                  (a) In General. All payments shall be made to the Owed Party or to the
appropriate Taxing Authority as specified by the Owed Party within the time
prescribed for
payment in this Agreement, or if no period is prescribed, within ten (10)
days after delivery of written notice of payment owing together with a
computation of the amounts due. All payments made pursuant to this Agreement
shall be made by wire transfer.



                  (b) Treatment of Payments. Unless otherwise required by any Final
Determination, the parties agree that any payments made by one party to another
party (other than payments of interest pursuant to Section 7.04(e) of this
Agreement and payments of After Tax Amounts pursuant to Section 7.04(d) of this
Agreement) pursuant to this Agreement shall be treated for all Tax and
financial accounting purposes as nontaxable payments (dividend distributions or
capital contributions, as the case may be) made immediately prior to the
Distribution and, accordingly, as not includible in the taxable income of the
recipient or as deductible by the payor.



                  (c) Prompt Performance. All actions required to be taken (including
payments) by any party under this Agreement shall be performed within the time
prescribed for performance in this Agreement, or if no period is prescribed,
such actions shall be performed promptly.


25







 





                  (d) After Tax Amounts. If pursuant to a Final Determination it is
determined that the receipt or accrual of any payment made under this Agreement
(other than payments of interest pursuant to Section 7.04(e) of this Agreement)
is subject to any Tax, the party making such payment shall be liable for (a)
the After Tax Amount with respect to such payment and (b) interest at the rate
described in Section 7.04(e) of this Agreement on the amount of such Tax from
the date such Tax accrues through the date of payment of such After Tax Amount.
A party making a demand for a payment pursuant to this Agreement and for a
payment of an After Tax Amount with respect to such payment shall separately
specify and compute such After Tax Amount. However, a party may choose not to
specify an After Tax Amount in a demand for payment pursuant to this Agreement
without thereby being deemed to have waived its right subsequently to demand an
After Tax Amount with respect to such payment.



                  (e) Interest. Payments pursuant to this Agreement that are not made
within the period prescribed in this Agreement (the “Payment Period”) shall
bear interest for the period from and including the date immediately following
the last date of the Payment Period through and including the date of payment
at a per annum rate equal to the prime rate as published in The Wall Street
Journal on the last day of such Payment Period, plus one percent (1%). Such
interest will be payable at the same time as the payment to which it relates
and shall be calculated on the basis of a year of 365 days and the actual
number of days for which due.



Section 8. Tax Proceedings



         8.01 In General. Except as otherwise provided in this Agreement, the
party responsible for preparing and filing a Tax Return pursuant to Section 2
of this Agreement (the “Filing Party”) shall have the exclusive right, in its
sole discretion, to control, contest, and represent the interests of TRW, any
TRW Affiliate, TRW Automotive, and any TRW Automotive Affiliate in any Audit
relating to such Tax Return and to resolve, settle or agree to any deficiency, claim
or adjustment proposed, asserted or assessed in connection with or as a result
of any such Audit. The Filing Party’s rights shall extend to any matter
pertaining to the management and control of an Audit, including execution of
waivers, choice of forum, scheduling of conferences and the resolution of any
Tax Item. Any costs incurred in handling, settling, or contesting an Audit
shall be borne by the Filing Party.


         8.02 Participation of non-Filing Party. The Filing Party must give the
non-Filing Party reasonable notice of any deficiency, claim or adjustment with
respect to any Sole Responsibility Item or Joint Responsibility Item. The
non-Filing Party shall have control over decisions to resolve, settle or
otherwise agree to any deficiency, claim or adjustment with respect to any Sole
Responsibility Item, at its own expense. With respect to items other than Sole
Responsibility Items, the non-Filing Party shall have the right to participate,
at its own expense, in any deficiency, claim or adjustment only if such
deficiency, claim or adjustment will potentially increase the tax liability of
the non-Filing Party. The Filing Party and the non-Filing Party shall have
joint control over decisions to resolve, settle or otherwise agree to any
deficiency, claim or adjustment with respect to any Joint Responsibility Item.
The Filing Party shall not settle any Audit it controls concerning all Tax
Items on a basis that would reasonably be expected to adversely affect the
non-Filing Party by at least $100,000 without obtaining such non-Filing


26







 




Party’s
consent, which consent shall not be unreasonably withheld if failure to consent
would adversely affect the Filing Party. For the avoidance of doubt, this
Section 8.02 shall govern any claim or contest relating to the allocation of
Tax Assets as described in Section 2.07.


         8.03 Notice. Within thirty (30) days after a party becomes aware of the
existence of a Tax issue that may give rise to an indemnification obligation
under this Agreement, such party shall give prompt notice to the other party of
such issue (such notice shall contain factual information, to the extent known,
describing any asserted tax liability in reasonable detail), and shall promptly
forward to the other party copies of all notices and material communications
with any Taxing Authority relating to such issue. Notwithstanding any
provision in Section 9.15 to the contrary, if a party to this Agreement fails
to provide the other party notice as required by this Section 8.03, and the
failure results in a detriment to the other party then any amount which the
other party is otherwise required to pay pursuant to this Agreement shall be
reduced by the amount of such detriment.


         8.04 Control of Distribution Tax Proceedings. TRW shall have the
exclusive right, in its sole discretion, to control, contest, and represent the
interests of TRW, any TRW Affiliate, TRW Automotive, and any TRW Automotive
Affiliate in any Audits relating to Distribution Taxes and to resolve, settle
or agree to any deficiency, claim or adjustment proposed, asserted or assessed
in connection with or as a result of any such Audit; provided however, that TRW
shall not settle any such audit with respect to Distribution Taxes with a
Taxing Authority in exchange for a settlement on an issue or issues
unrelated to such Distribution Taxes that would reasonably be expected to
result in a material Tax cost to TRW Automotive or any TRW Automotive
Affiliate, without the prior consent of TRW Automotive, which consent shall not
be unreasonably withheld. TRW’s rights shall extend to any matter pertaining
to the management and control of such Audit, including execution of waivers,
choice of forum, scheduling of conferences and the resolution of any Tax Item;
provided however, to the extent that TRW Automotive is obligated to bear at
least 50% of the liability for any Distribution Taxes under Section 4.01(c),
TRW and TRW Automotive shall have joint control over decisions to resolve,
settle or otherwise agree to any deficiency, claim or adjustment. TRW
Automotive may assume sole control of any Audits relating to Distribution Taxes
if it acknowledges in writing that it has sole liability for any Distribution
Taxes under Section 4.01(b) that might arise in such Audit and can demonstrate
to the reasonable satisfaction of TRW that it can satisfy its liability for any
such Distribution Taxes by posting a bond or letter of credit on behalf of TRW.
If TRW Automotive is unable to demonstrate to the reasonable satisfaction of
TRW that it will be able to satisfy its liability for such Distribution Taxes,
but acknowledges in writing that it has sole liability for any Distribution
Taxes under Section 4.01(b), TRW Automotive and TRW shall have joint control
over the Audit.


Section 9. Miscellaneous Provisions



         9.01 Effectiveness. This Agreement shall become effective on the Distribution Date.


         9.02 Cooperation and Exchange of Information.


27







 


                  (a) Cooperation. TRW Automotive and TRW shall each cooperate fully (and
each shall cause its respective affiliates to cooperate fully) with all
reasonable requests from another party for information and materials not
otherwise available to the requesting party in connection with the preparation
and filing of Tax Returns, claims for refund, and Audits concerning issues or
other matters covered by this Agreement or in connection with the determination
of a liability for Taxes or a right to a refund of Taxes. Such cooperation
shall include, without limitation:



                           (i) the retention until the expiration of the applicable statute of
limitations, and the provision upon request, of copies of all Tax
Returns, books, records (including information regarding ownership and
Tax basis of property), documentation and other information relating to
the Tax Returns, including accompanying schedules, related work papers,
and documents relating to rulings or other determinations by Taxing
Authorities;



                           (ii) the execution of any document that may be necessary or
reasonably helpful in connection with any Tax Proceeding, or the filing
of a Tax Return or refund claim by a member of the TRW Group or the TRW
Automotive Group,
including certification, to the best of a party’s knowledge, of the
accuracy and completeness of the information it has supplied; and



                           (iii) the use of the party’s reasonable best efforts to obtain any
documentation that may be necessary or reasonably helpful in connection
with any of the foregoing. Each party shall make its employees and
facilities available on a reasonable and mutually convenient basis in
connection with the foregoing matters.



                  (b) Retention of Records. Any party that is in possession of
documentation of TRW (or any TRW Affiliate) or TRW Automotive (or any TRW
Automotive Affiliate) relating to the TRW Automotive Business, including
without limitation, books, records, Tax Returns and all supporting schedules
and information relating thereto (the “TRW Automotive Business Records”) shall
retain such TRW Automotive Business Records for a period of seven (7) years
following the Distribution Date. Thereafter, any party wishing to dispose of
TRW Automotive Business Records in its possession (after the expiration of the
applicable statute of limitations), shall provide written notice to the other
party describing the documentation proposed to be destroyed or disposed of
sixty (60) business days prior to taking such action. The other party may
arrange to take delivery of any or all of the documentation described in the
notice at its expense during the succeeding sixty (60) day period.



         9.03 Dispute Resolution. In the event that TRW and TRW Automotive
disagree as to the amount or calculation of any payment to be made under this
Agreement, or the interpretation or application of any provision under this
Agreement, the parties shall attempt in good faith to resolve such dispute. If
such dispute is not resolved within sixty (60) business days following the
commencement of the dispute, TRW and TRW Automotive shall jointly retain a
nationally recognized law or accounting firm, which firm is independent of both
parties (the “Independent Firm”), to resolve the dispute. If TRW and TRW
Automotive are unable to agree on the


28







 




selection of the Independent Firm, the
Independent Firm shall be [ ]. The Independent Firm shall act as an
arbitrator to resolve all points of disagreement and its decision shall be
final and binding upon all parties involved, provided, however, that such
Independent Firm shall not override any decision which either party has the
sole and absolute discretion to determine pursuant to this Agreement.
Following the decision of the Independent Firm, TRW and TRW Automotive shall
each take or cause to be taken any action necessary to implement the decision
of the Independent Firm. The fees and expenses relating to the Independent
Firm shall be borne equally by TRW and TRW Automotive, except that if the
Independent Firm determines that the position advanced by either party is
frivolous, has not been asserted in good faith or for which there is not
substantial authority, 100% of the fees and expenses of the Independent Firm
shall be borne by such party. Notwithstanding anything in this Agreement to
the contrary, the dispute resolution provisions set forth in this Section 9.03
shall not be applicable to any disagreement between the parties relating to
Distribution Taxes and any such dispute shall be settled in a court of law or
as otherwise agreed to by the parties.


         9.04 Notices. All notices, requests and other communications to any party hereunder
shall be in writing (including facsimile transmission) and shall be given (i)
by personal delivery to the appropriate address as set forth below (or at such
other address for the party as shall have been previously specified in writing
to the other party), (ii) by reliable overnight courier service (with
confirmation) to the appropriate address as set forth below (or at such other
address for the party as shall have been previously specified in writing to the
other party), or (iii) by facsimile transmission (with confirmation) to the
appropriate facsimile number set forth below (or at such other facsimile number
for the party as shall have been previously specified in writing to the other
party) with follow-up copy by reliable overnight courier service the next
Business Day:


         If to TRW or any TRW Affiliate, to the Vice President of Corporate Tax of
TRW, with a copy to the General Counsel of TRW, at:



		
	 	         TRW Inc.
	 
	 	         1900 Richmond Road
	 
	 	         Cleveland, Ohio 44124
	 
	 	         Attention: William Warren



         with a copy (which shall not constitute effective notice) to:



		
	 	         Skadden, Arps, Slate, Meagher & Flom LLP
	 
	 	         4 Times Square
	 
	 	         New York, New York 10036
	 
	 	         Attention: Sally A. Thurston



         and a copy (which shall not constitute effective notice) to:



		
	 	         PriceWaterhouseCoopers
	 
	 	         [address]
	 
	 	         Attention: Michael Solomon



29







 




         If to TRW Automotive or any TRW Automotive Affiliate, to the Chief
Financial Officer of TRW Automotive, with a copy to the General Counsel of TRW
Automotive, at:



		
	 	         TRW Automotive
	 
	 	         Address
	 
	 	         Attention:



         with a copy (which shall not constitute effective notice) to:



		
	 	         Firm
	 
	 	         Address
	 
	 	         Attention:



         All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior to 5
p.m. (New York City time) and
such day is a Business Day in the place of receipt. Otherwise, any such
notice, request or communication shall be deemed not to have been received
until the next succeeding Business Day in the place of receipt. Either party
may, by written notice to the other parties, change the address or the party to
which any notice, request, instruction or other documents is to be delivered.


         9.05 Changes in Law.


                  (a) Any reference to a provision of the Code or a law of another
jurisdiction shall include a reference to any applicable successor provision or
law.



                  (b) If, due to any change in applicable law or regulations or their
interpretation by any court of law or other governing body having jurisdiction
subsequent to the date of this Agreement, performance of any provision of this
Agreement or any transaction contemplated thereby shall become impracticable or
impossible, the parties hereto shall use their commercially reasonable efforts
to find and employ an alternative means to achieve the same or substantially
the same result as that contemplated by such provision.



         9.06 Confidentiality. Each party shall hold and cause its directors,
officers, employees, advisors and consultants to hold in strict confidence,
unless compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law, all information (other
than any such information relating solely to the business or affairs of such
party) concerning the other parties hereto furnished it by such other party or
its representatives pursuant to this Agreement (except to the extent that such
information can be shown to have been (1) in the public domain through no fault
of such party or (2) later lawfully acquired from other sources not under a
duty of confidentiality by the party to which it was furnished), and each party
shall not release or disclose such information to any other person, except its
directors, officers, employees, auditors, attorneys, financial advisors,
bankers and other consultants who shall be advised of and agree to be bound by
the provisions of this Section 9.06. Each party shall be deemed to have
satisfied its obligation to hold confidential information concerning or
supplied


30







 




by the other party if it exercises the same care as it takes to
preserve confidentiality for its own similar information.


         9.07 Successors. This Agreement shall be binding on and inure to the
benefit and detriment of any successor, by merger, acquisition of assets or
otherwise, to any of the parties hereto, to the same extent as if such
successor had been an original party.


         9.08 Affiliates. TRW shall cause to be performed, and hereby guarantees
the performance of, all actions, agreements and obligations set forth herein to
be performed by any TRW Affiliate, and TRW Automotive shall cause to be performed, and hereby guarantees the
performance of, all actions, agreements and obligations set forth herein to be
performed by any TRW Automotive Affiliate; provided, however, that (1) if it is
contemplated that a TRW Automotive Affiliate may cease to be a TRW Automotive
Affiliate as a result of a transfer of its stock or other ownership interests
to a third party in exchange for consideration in an amount approximately equal
to the fair market value of the stock or other ownership interests transferred
and such consideration is not distributed outside of the TRW Automotive Group
to the shareholders of TRW Automotive then (a) TRW Automotive shall request in
writing no later than thirty (30) days prior to such cessation that TRW execute
a release of such TRW Automotive Affiliate from its obligations under this
Agreement effective as of such transfer provided that TRW Automotive shall have
confirmed in writing its obligations and the obligations of its remaining TRW
Automotive Affiliates with respect to their own obligations and those of the
departing TRW Automotive Affiliate and that such departing TRW Automotive
Affiliate shall have executed a release of any rights it may have against TRW
or any TRW Affiliate by reason of this Agreement, or (b) TRW Automotive shall
acknowledge in writing no later than thirty (30) days prior to such cessation
that it shall bear 100 percent of the liability for the obligations of TRW
Automotive and each TRW Automotive Affiliate (including the departing TRW
Automotive Affiliate) under this Agreement and (2) if it is contemplated that a
TRW Affiliate may cease to be a TRW Affiliate as a result of a transfer of its
stock or other ownership interests to a third party in exchange for
consideration in an amount approximately equal to the fair market value of the
stock or other ownership interests transferred and such consideration is not
distributed outside of the TRW Group to the shareholders of TRW then (a) TRW
shall request in writing no later than thirty (30) days prior to such cessation
that TRW Automotive execute a release of such TRW Affiliate from its
obligations under this Agreement effective as of such transfer provided that
TRW shall have confirmed in writing its obligations and the obligations of its
remaining TRW Affiliates with respect to their own obligations and the
obligations of the departing TRW Affiliate and that such departing TRW
Affiliate shall have executed a release of any rights it may have against TRW
Automotive or any TRW Automotive Affiliate by reason of this Agreement, or (b)
TRW shall acknowledge in writing no later than thirty (30) days prior to such
cessation that it shall bear 100 percent of the liability for the obligations
of TRW and each TRW Affiliate (including the departing TRW Affiliate) under
this Agreement.


         9.09 Authorization, Etc. Each of the parties hereto hereby represents and
warrants that it has the power and authority to execute, deliver and perform
this Agreement, that this


31







 




Agreement has been duly authorized by all necessary
corporate action on the part of such party, that this Agreement constitutes a
legal, valid and binding obligation of each such party and that the execution,
delivery and performance of this Agreement by such party does not contravene or
conflict with any provision of law or of its charter or bylaws or any
agreement, instrument or order binding on such party.


         9.10 Entire Agreement. This Agreement contains the entire agreement among the parties hereto
with respect to the subject matter hereof and supersedes any prior tax sharing
agreements between TRW (or any TRW Affiliate) and TRW Automotive (or any TRW
Automotive Affiliate) and such prior tax sharing agreements shall have no
further force and effect. If, and to the extent, the provisions of this
Agreement conflict with the Master Distribution Agreement or any other
agreement entered into in connection with the Distribution, the provisions of
this Agreement shall control.


         9.11 Applicable Law; Jurisdiction. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY AND UNCONDITIONALLY (i) AGREES TO BE SUBJECT TO, AND HEREBY
CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE COURTS OF THE STATE OF OHIO
AND OF THE FEDERAL COURTS SITTING IN THE STATE OF OHIO, (ii) TO THE EXTENT SUCH
PARTY IS NOT OTHERWISE SUBJECT TO SERVICE OF PROCESS IN THE STATE OF OHIO,
HEREBY APPOINTS [THE CORPORATION TRUST COMPANY], AS SUCH PARTY’S AGENT IN THE
STATE OF OHIO FOR ACCEPTANCE OF LEGAL PROCESS AND (iii) AGREES THAT SERVICE
MADE ON ANY SUCH AGENT SET FORTH IN (ii) ABOVE SHALL HAVE THE SAME LEGAL FORCE
AND EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY WITHIN THE STATE OF OHIO.


         9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.


         9.13 Severability. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction (or an arbitrator
or arbitration panel) to be invalid, void, or unenforceable, the remainder of
the terms, provisions, covenants, and restrictions set forth herein shall
remain in full force and effect, and shall in no way be affected, impaired, or
invalidated. In the event that any such term, provision, covenant or
restriction is held to be invalid, void or unenforceable, the parties hereto
shall use their best efforts to find and employ an alternate means to achieve
the same or substantially the same result as that contemplated by such terms,
provisions, covenant, or restriction.


         9.14 No Third Party Beneficiaries. This Agreement is solely for the
benefit of TRW, the TRW Affiliates, TRW Automotive and the TRW Automotive
Affiliates. This Agreement should not be deemed to confer upon third parties
any remedy, claim, liability, reimbursement, cause of action or other rights in
excess of those existing without this Agreement.


32







 


         9.15 Waivers, Etc. No failure or delay on the part of a party in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No
modification or waiver of any provision of this Agreement nor consent to any
departure by the parties therefrom shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.


         9.16 Setoff. All payments to be made by any party under this Agreement
may be netted against payments due to such party under this Agreement, but
otherwise shall be made without setoff, counterclaim or withholding, all of
which are hereby expressly waived.


         9.17 Other Remedies. TRW Automotive recognizes that any failure by it or
any TRW Automotive Affiliate to comply with its obligations under Section 4 of
this Agreement would result in Distribution Taxes that would cause irreparable
harm to TRW, TRW Affiliates, and their stockholders. Accordingly, TRW shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement, this
being in addition to any other remedy to which TRW is entitled at law or in
equity.


         9.18 Amendment and Modification. This Agreement may be amended, modified
or supplemented only by a written agreement signed by all of the parties
hereto.


         9.19 Waiver of Jury Trial. Each of the parties hereto irrevocably and
unconditionally waives all right to trial by jury in any litigation, claim,
action, suit, arbitration, inquiry, proceeding, investigation or counterclaim
(whether based in contract, tort or otherwise) arising out of or relating to
this Agreement or the actions of the parties hereto in the negotiation,
administration, performance and enforcement thereof.


33







 


         IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by a duly authorized officer as of the date first above written.



	 	 	 	 	 
	 
	 	 	TRW INC.
	
	
	
	

	 	 	on behalf of itself and the TRW Affiliates
	
	
	
	

	 	 	
By	 	 
	 	 	 	 	

	 	 	Name:
	
	
	
	

	 	 	Title:
	 
	 
	 	 	TRW AUTOMOTIVE INC.
	
	
	
	

	 	 	on behalf of itself and the TRW Automotive Affiliates
	
	
	
	

	 	 	
By	 	 
	 	 	 	 	

	 	 	Name:
	
	
	
	

	 	 	Title:



34