Document:

EX-10.1: FORM OF MASTER DISTRIBUTION AGREEMENT

 

Exhibit 10.1

MASTER DISTRIBUTION AGREEMENT

between

TRW INC.

and

TRW AUTOMOTIVE INC.

Dated as of ______, 2002

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	 	Page
	 	 	 	 	

	 	 	
ARTICLE I DEFINITIONS	 	 
	
	
	
	

	Section 1.1	 	
Definitions
	 	2
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	
ARTICLE II RESTRUCTURING	 	 
	
	
	
	

	 	 	 	 	 
	
	
	
	

	Section 2.1	 	
Restructuring
	 	15
	
	
	
	

	Section 2.2	 	
Intercompany Arrangements
	 	17
	
	
	
	

	Section 2.3	 	
Guarantees
	 	18
	
	
	
	

	Section 2.4	 	
Cash Management
	 	19
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	
ARTICLE III THE DISTRIBUTION	 	 
	
	
	
	

	 	 	 	 	 
	
	
	
	

	Section 3.1	 	
Cooperation Prior to the Distribution
	 	20
	
	
	
	

	Section 3.2	 	
TRW Board Action; Distribution Procedures
	 	22
	
	
	
	

	Section 3.3	 	
Conditions Precedent to the Distribution
	 	22
	
	
	
	

	Section 3.4	 	
The Distribution
	 	24
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	
ARTICLE IV INDEMNIFICATION; MUTUAL RELEASE	 	 
	
	
	
	

	 	 	 	 	 
	
	
	
	

	Section 4.1	 	
Indemnification by TRW
	 	24
	
	
	
	

	Section 4.2	 	
Indemnification by TRW Automotive
	 	25
	
	
	
	

	Section 4.3	 	
Limitations on Indemnification Obligations
	 	27
	
	
	
	

	Section 4.4	 	
Procedures for Indemnification
	 	28
	
	
	
	

	Section 4.5	 	
Nature of Remedies
	 	28
	
	
	
	

	Section 4.6	 	
Survival of Indemnities
	 	29
	
	
	
	

	Section 4.7	 	
Right of Inquiry
	 	29
	
	
	
	

	Section 4.8	 	
Mutual Release
	 	30
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	
ARTICLE V CERTAIN ADDITIONAL MATTERS AND COVENANTS	 	 
	
	
	
	

	 	 	 	 	 
	
	
	
	

	Section 5.1	 	
Use of Names; Intellectual Property Licenses
	 	30
	
	
	
	

	Section 5.2	 	
Further Assurances; Cooperation
	 	31
	
	
	
	

	Section 5.3	 	
Non-Competition
	 	32
	
	
	
	

	Section 5.4	 	
Access to Information
	 	32
	
	
	
	

	Section 5.5	 	
Production of Witnesses
	 	34
	
	
	
	

	Section 5.6	 	
Reimbursement
	 	34
	
	
	
	

	Section 5.7	 	
Retention of Records
	 	35
	
	
	
	

	Section 5.8	 	
Confidentiality
	 	35
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	
ARTICLE VI TERMINATION	 	 

 i

	 	 	 	 	 	 	 

 

 

	 	 	 	 	 	 	 
	 	 	 	 	 	Page
	
	
	
	

	Section 6.1	 	
Termination
	 	 	35	 
	
	
	
	

	 	 	 	 	 	 	 
	
	
	
	

	 	 	
ARTICLE VII MISCELLANEOUS	 	 	 	 
	
	
	
	

	 	 	 	 	 	 	 
	
	
	
	

	Section 7.1	 	
Notices
	 	 	36	 
	
	
	
	

	Section 7.2	 	
Amendments and Waivers
	 	 	36	 
	
	
	
	

	Section 7.3	 	
Headings
	 	 	37	 
	
	
	
	

	Section 7.4	 	
Counterparts
	 	 	37	 
	
	
	
	

	Section 7.5	 	
Entire Agreement
	 	 	37	 
	
	
	
	

	Section 7.6	 	
Governing Law
	 	 	37	 
	
	
	
	

	Section 7.7	 	
Resolution of Disputes
	 	 	37	 
	
	
	
	

	Section 7.8	 	
Waiver of Jury Trial
	 	 	39	 
	
	
	
	

	Section 7.9	 	
Assignment
	 	 	39	 
	
	
	
	

	Section 7.10	 	
Fees and Expenses
	 	 	39	 
	
	
	
	

	Section 7.11	 	
Binding Nature; Third-Party Beneficiaries
	 	 	39	 
	
	
	
	

	Section 7.12	 	
Severability
	 	 	39	 
	
	
	
	

	Section 7.13	 	
No Right of Setoff
	 	 	40	 
	
	
	
	

	Section 7.14	 	
Currency
	 	 	40	 
	
	
	
	

	Section 7.15	 	
Specific Performance
	 	 	40	 
	
	
	
	

	Section 7.16	 	
Construction
	 	 	40	 

 ii

 

 

	 	 	 	 	 	 	 
	 
	 	 	
List of Schedules and Exhibits
	
	
	
	

	 
	Schedule A	 	
TRW Automotive Businesses
	
	
	
	

	Schedule B	 	
TRW Automotive U.S. Subsidiaries
	
	
	
	

	Schedule C	 	
TRW Automotive U.S. Divisions
	
	
	
	

	Schedule 1.1(a)	 	
TRW Divested and Discontinued Operations
	
	
	
	

	Schedule 1.1(b)	 	
TRW Entities
	
	
	
	

	Schedule 1.1(c)	 	
Specified TRW Liabilities
	
	
	
	

	Schedule 1.1(d)	 	
TRW Marks
	
	
	
	

	Schedule 1.1(e)	 	
TRW Automotive Divested and Discontinued Operations
	
	
	
	

	Schedule 1.1(f)	 	
TRW Automotive Entities
	
	
	
	

	Schedule 1.1(g)	 	
Specified TRW Automotive Liabilities
	
	
	
	

	Schedule 1.1(h)	 	
TRW Automotive Marks
	
	
	
	

	 	 	 
	
	
	
	

	 	 	 
	
	
	
	

	Exhibit A	 	
Restructuring Transactions
	
	
	
	

	Exhibit B	 	
Form of Employee Matters Agreement
	
	
	
	

	Exhibit C	 	
Form of Insurance Allocation Agreement
	
	
	
	

	Exhibit D	 	
Form of Intellectual Property License Agreements
	
	
	
	

	Exhibit E	 	
Form of Tax Sharing Agreement
	
	
	
	

	Exhibit F	 	
Form of Trademark License Agreement
	
	
	
	

	Exhibit G	 	
Form of Transition Services Agreement
	
	
	
	

	Exhibit H	 	
TRW Automotive Certificate of Incorporation
	
	
	
	

	Exhibit I	 	
TRW Automotive By-Laws
	
	
	
	

	Exhibit J	 	
Records Retention Policy

 iii

 

 

MASTER DISTRIBUTION AGREEMENT

         MASTER DISTRIBUTION AGREEMENT (this “Agreement”), dated as of      ,
2002, by and between TRW INC., an Ohio corporation (“TRW”), and
TRW AUTOMOTIVE INC., a Delaware corporation and a wholly owned subsidiary of TRW
(“TRW Automotive”).

         WHEREAS, TRW, acting directly and through certain Subsidiaries, and
by virtue of its equity interests in certain entities, is engaged worldwide in
the design, manufacture and sale of steering, suspension, braking, engine,
safety, electronic, engineered fastening and other components and systems for
passenger cars, light trucks and commercial vehicles, including inflatable
restraint, seat belt and steering wheel components and systems; braking
components systems and related products; steering and suspension systems and
components; chassis components modules and integrated vehicle control systems;
vehicle dynamic control systems and electronics; access, security and safety
electronics systems; display and heating, ventilating and air conditioning
electronics; engineered and plastic fasteners and precision plastic moldings
and assemblies; engine components and systems; commercial steering systems and
components; and aftermarket operations, including parts, service and technical
and diagnostic support, as such businesses are described on Schedule A which
references the Operating Unit Codes (collectively, the “TRW Automotive Business”);

         WHEREAS, the TRW Board has determined that it would be appropriate
and desirable to completely separate the TRW Automotive Business from TRW;

         WHEREAS, TRW has caused TRW Automotive to be incorporated in order to effect
such separation, TRW currently owns all of the issued and outstanding
shares of common stock, par value $0.001 per share, of TRW Automotive (the “TRW Automotive
Common Stock”), and TRW Automotive currently conducts no business operations and has no
significant assets or liabilities;

         WHEREAS, the TRW Board and the TRW Automotive Board have each determined that
it would be appropriate and desirable for TRW to contribute and transfer
to TRW Automotive, and for TRW Automotive to receive and assume, directly or indirectly,
substantially all of the assets and liabilities currently associated with the
TRW Automotive Business and the stock or similar interests currently held by TRW
in Subsidiaries and other entities that conduct the TRW Automotive Business (the
transactions described in this recital are referred to collectively as the
“Restructuring” and are currently contemplated to be effected in accordance
with Article II and Exhibit A);

         WHEREAS, TRW and TRW Automotive currently contemplate that, on or prior to
the Distribution Declaration Date, (i) TRW will enter into the ASG Sale
Agreement and consummate the ASG Sale, (ii) TRW Automotive and TAUK will enter into the
TRW Automotive Equity Sale Agreement and consummate the TRW Automotive Equity Sale and (iii)
TRW Automotive will consummate the Debt Financing;

 

 

         WHEREAS, it is the intention of the parties to this Agreement that the
Restructuring and the Distribution will qualify as transactions described in
Sections 351, Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code
of 1986, as amended (the “Code”); and

         WHEREAS, the parties intend in this Agreement and the Ancillary Agreements
to set forth the principal arrangements between them regarding the separation
of the TRW Automotive Business from TRW.

         NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements contained in this Agreement, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

         Section 1.1    Definitions. As used in this Agreement, the following terms
shall have the following meanings:

         “Action” shall mean any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, grand jury or any
Governmental Entity.

         “Active TRW Employee” shall mean any individual who, immediately
after the Distribution Date, will be employed by a member of the TRW Group
pursuant to Section 2.1(a) of the Employee Matters Agreement.

         “Active TRW Automotive Employee” shall mean any individual who, immediately after
the Distribution Date, will be employed by a member of the TRW Automotive Group
pursuant to Section 2.1(b) of the Employee Matters Agreement.

         “Affiliate” shall mean, with respect to any Person, any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, the term “control” as
applied to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management of that Person,
whether through ownership of voting securities or otherwise.

         “Agent” shall mean the distribution agent appointed by TRW to
distribute shares of TRW Automotive Common Stock pursuant to the Distribution.

         “Agreement” shall have the meaning ascribed to such term in the preamble
hereto.

         “Ancillary Agreements” shall mean all of the written agreements,
instruments, understandings, assignments or other arrangements entered into by
TRW and TRW Automotive in connection with the transactions contemplated hereby,
including

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the Conveyancing and Assumption Instruments, the Employee Matters
Agreement, the Insurance Allocation Agreement, the Intellectual Property
License Agreements, the Tax Sharing Agreement, the Trademark License Agreement
and the Transition Services Agreement.

         “ASG Business” shall mean the worldwide design, manufacture, sale and
distribution of aeronautical systems and equipment, and the provision of
services, in the product areas of flight control systems, cargo systems, hoists
and winches, power systems, engine systems and missile actuation systems.

         “ASG Purchaser” shall mean the purchaser of the ASG Business pursuant to
the terms and subject to the conditions contained in the ASG Sale Agreement.

         “ASG Sale” shall mean the sale to the ASG Purchaser of substantially all
of the assets and liabilities currently associated with the ASG Business and
the stock or similar interests currently held by TRW in Subsidiaries and
other entities that conduct the ASG Business, pursuant to the terms and subject
to the conditions contained in the ASG Sale Agreement.

         “ASG Sale Agreement” shall mean the master agreement of purchase and sale,
dated as of      , 2002, between the ASG Purchaser and TRW.

         “Assets” shall mean any and all assets, properties and rights, whether
tangible or intangible, whether real, personal or mixed, whether fixed,
contingent or otherwise, and wherever located, including:

         (a)  interests in real property of whatever nature, together with all
buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property that are appurtenant thereto, all such items under
construction, and all easements, licenses, rights and appurtenances relating to
the foregoing;

         (b)  machinery, equipment, vehicles, furniture and fixtures, leasehold
improvements, supplies, repair parts, tools, plant, laboratory and office
equipment and other tangible personal property, including any and all leases
with respect thereto, together with any rights or claims arising out of the
breach of any express or implied warranty by the manufacturers or sellers of
any of such assets or any component part thereof;

         (c)  inventories, including raw materials, work-in-process, finished goods,
parts and accessories;

         (d)  cash, bank accounts, notes, loans and accounts receivable (whether
current or not current), interests as beneficiary under letters of credit,
advances and performance and surety bonds;

         (e)  banker’s acceptances, shares of stock, bonds, debentures, evidences of
indebtedness, certificates of interest or participation in profit-sharing
agreements,

3

 

collateral-trust certificates, investment contracts, voting trust
certificates, puts, calls, straddles, options, swaps, collars, caps and other
securities or hedging arrangements of any kind;

         (f)  financial, accounting and operating data and records, including books,
records, electronic data, notes, sales and sales promotional data, purchasing
materials and data, advertising materials, credit information, cost and pricing
information, customer and supplier lists, reference catalogs, payroll and
personnel records, facility blueprints and plant layouts, minute books, stock
ledgers, stock transfer records and other similar property, rights and
information;

         (g)  all Intellectual Property;

         (h)  agreements, leases, contracts, sale orders, purchase orders, open bids
and other commitments and all rights therein;

         (i)  prepaid expenses, deposits and retentions held by third parties;

         (j)  all claims, causes of action, chooses in action, rights under
insurance policies, rights under express or implied warranties, rights of
recovery, rights of set-off and rights of subrogation, whether known or
unknown, whenever arising;

         (k)  licenses, franchises, permits, authorizations, approvals and
qualifications; and

         (l)  goodwill and going concern value.

         “Business Day” shall mean any day that is not a Saturday, Sunday or other
day on which banks are required or authorized by law to be closed in the city
of Cleveland, Ohio.

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

         “Commission” shall mean the Securities and Exchange Commission.

         “Conveyancing and Assumption Instruments” shall mean, collectively, the
various bills of sale, agreements, instruments and other documents which may be
necessary or appropriate to effect the transfers of Assets and the assumptions
of Liabilities in connection with the Restructuring in the manner contemplated
by this Agreement (including Exhibit A) and the Ancillary Agreements.

         “CPR” shall have the meaning ascribed to such term in Section 7.7(b)(i).

         “Debt Financing” shall mean not less than $ billion of debt financing
to be incurred or assumed by TRW Automotive from one or more financial institutions
under one or more credit facilities and/or through the issuance of its debt
securities in one or more public offerings or private placements.

4

 

         “Disclosure Documents” shall mean, collectively, the Form S-1, the Proxy
Statement, any registration statement or prospectus or offering memorandum in
connection with the Debt Financing, the registration statement on Form 8-A to
register the TRW Automotive Common Stock under the Exchange Act, the Current Reports on
Form 8-K filed by either TRW or TRW Automotive in connection with the matters
contemplated by this Agreement or any Ancillary Agreement and the other reports
or filings made by TRW or TRW Automotive under the Securities Act or the Exchange
Act in connection with the matters contemplated by this Agreement or any of the
Ancillary Agreements.

         “Dispute” shall have the meaning ascribed to such term in Section 7.7.

         “Distribution” shall mean the distribution by TRW to the holders of
shares of TRW Common Stock on the Distribution Record Date of all of the
shares of TRW Automotive Common Stock held by TRW.

         “Distribution Date” shall mean the date to be determined by the TRW
Board in its sole and absolute discretion when the Distribution shall be
affected.

         “Distribution Declaration Date” shall mean the date to be determined by
the TRW Board in its sole and absolute discretion when (i) the TRW
Board shall formally declare the Distribution and set the Distribution Record
Date and the Distribution Date and (ii) the Restructuring shall be completed
(and is currently contemplated to occur on the last business day of the fiscal
month ending immediately prior to the Distribution).

         “Distribution Record Date” shall mean the date to be determined by the
TRW Board in its sole and absolute discretion as the record date for the
Distribution.

         “Employee Matters Agreement” shall mean the Employee Matters Agreement,
dated as of the date of this Agreement, between TRW and TRW Automotive, the form
of which is attached hereto as Exhibit B.

         “Environment” shall mean soils, surface water, sediments, groundwater, any
present or potential drinking water supply, the indoor or outdoor atmosphere or
any other environmental media.

         “Environmental Condition” shall mean the presence of Hazardous Substances
in the Environment or building materials, or the Release of Hazardous
Substances to the Environment or from building materials, including the
migration or movement of Hazardous Substances in or through the Environment.

         “Environmental Laws” shall mean all foreign, federal, state and local
laws, regulations, rules and ordinances, and any amendments now or hereafter
adopted, including common law, relating to pollution or protection of the
environment or human health and safety, including laws relating to releases or
threatened releases of Hazardous Substances into the indoor or outdoor
environment (including ambient air, surface water, groundwater, land, surface
and subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or

5

 

 handling of
Hazardous Substances and all laws and regulations with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Substances, and all laws relating to endangered or threatened species of fish,
wildlife and plants and the management or use of natural resources.

         “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

         “Foreign Exchange Rate” shall mean, with respect to any currency other
than United States dollars as of any date of determination, the average of the
opening bid and asked rates on such date at which such currency may be
exchanged for United States dollars as quoted by      except that, with
respect to any Indemnifiable Loss covered by insurance, the Foreign Exchange
Rate for such currency shall be as set forth in Section 4.3(b)(ii).

         “Form S-1” shall mean the registration statement on Form S-1 to be filed
by TRW Automotive with the Commission to affect the registration of the TRW Automotive Common
Stock pursuant to the Securities Act, including all amendments thereto filed by
TRW Automotive with the Commission prior to the Distribution.

         “Governmental Entity” shall mean any federal, state, provincial, county,
municipal or local government in the United States, or any political
subdivision of any of the foregoing, or any non-U.S. entity of a type similar
to the foregoing, or any entity, authority, agency, ministry, commission,
tribunal, arbitral body, court or other similar body exercising executive,
legislative, judicial, regulatory or administrative authority or functions of
or pertaining to government, including any authority or quasi-governmental
entity established to perform any of these functions.

         “Group” shall mean the TRW Automotive Group or the TRW Group, as applicable.

         “Hazardous Substances” shall mean any chemicals, materials or substances
defined as or included in the definition of “hazardous substances”, “hazardous
wastes”, “hazardous materials”, “hazardous constituents”, restricted hazardous
materials”, “extremely hazardous substances”, “toxic substances”,
“contaminants”, “pollutants”, “toxic pollutants”, or words of similar meaning
and regulatory effect under any applicable Environmental Law, including oil,
waste oil and petroleum products, polychlorinated biphenyls or any other
chemicals, materials or substances defined or regulated as toxic or hazardous
or as a pollutant or contaminant under any applicable Environmental Law.

         “Indemnifiable Losses” shall have the meaning ascribed to such term in
Section 4.1(a).

         “Indemnified Party” shall mean a TRW Indemnified Party or a TRW Automotive
Indemnified Party, as the case may be.

         “Indemnifying Party” shall have the meaning ascribed to such term in
Section 4.4.

6

 

         “Information” shall have the meaning ascribed to such term in Section
5.4(a).

         “Insurance Allocation Agreement” shall mean the Insurance Allocation
Agreement, dated as of the date of this Agreement, between TRW Automotive and TRW,
the form of which is attached hereto as Exhibit C.

         “Intellectual Property” shall mean (i) all United States, international
and foreign patents and applications therefor and all reexaminations, reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, trade secrets, proprietary information, and know how;
(iii) all copyrights, copyrights registrations and applications therefor, and
all other rights corresponding thereto throughout the world; (iv) all domain
names, uniform resource locators and other names and locators associated with
the Internet; (v) all computer software, including all source code, object
code, and firmware; and (vi) all trade names, logos, common law trademarks and
service marks, trademark and service mark registrations and applications
therefor throughout the world.

         “Intellectual Property License Agreements” shall mean the TRW
Intellectual Property License Agreement and the TRW Automotive Intellectual Property
License Agreement.

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

         “Liabilities” shall mean any and all debts, liabilities, commitments,
fines, penalties, forfeitures, guarantees and obligations, absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including all costs and expenses
relating thereto, and including those debts, liabilities and obligations
arising under any law, rule, regulation, Action, threatened Action, order or
consent decree of any Governmental Entity or any award of any arbitrator of any
kind, and those arising under any contract, commitment or undertaking.

         “Licensed Intellectual Property” shall mean the Intellectual Property to
be licensed either by TRW or another member of the TRW Group to
TRW Automotive or another member of the TRW Automotive Group pursuant to the TRW
Intellectual Property License Agreement (“TRW Licensed IP”) or by TRW Automotive
or another member of the
TRW Automotive Group to TRW or another member of the TRW Group pursuant
to the TRW Automotive Intellectual Property License Agreement (“TRW Automotive Licensed IP”).

         “Litigation Matters” shall have the meaning ascribed to such term in
Section 5.4(b)(i).

         “Net Debt” shall mean, with respect to any Operating Unit Code, the
aggregate indebtedness thereof (including interests in accounts receivables
transferred pursuant to off-balance sheet financing from accounts receivable
securitization activities) minus the sum of the cash and cash equivalents
thereof.

7

 

         “NYSE” shall mean New York Stock Exchange, Inc.

         “OGCL” shall mean the Ohio General Corporation Law, as amended.

         “Off-Site Location” shall mean any real property other than the real
property owned or leased on or prior to the Distribution Declaration Date by
TRW or its Subsidiaries.

         “Operating Unit Codes” shall mean the codes representing the operating
units of TRW and its Subsidiaries and Affiliates as of the Restructuring
Funding Date, which operating units submit periodic financial data to TRW.

         “Person” shall mean any individual, corporation, general partnership,
limited partnership, limited liability partnership, limited liability company,
joint stock company, unincorporated organization or association, trust, joint
venture or other organization or entity (including any Governmental Entity) as
well as any syndicate or group that would be deemed to be a person under
Section 13(d)(3) of the Exchange Act.

         “Privileged Information” shall have the meaning ascribed to such term in
Section 5.4(b)(i).

         “Proxy Statement” shall mean the proxy statement on Schedule 14A to be
sent to the holders of shares of TRW Common Stock in connection with the
Special Meeting.

         “Release” shall mean any release, threatened release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor environment
(including ambient air, surface water, groundwater, and surface or subsurface
strata) or into or out of any property, including the movement of Hazardous
Substances through or in the air, soil, surface water, groundwater or property.

         “Remediation” shall mean an action of any kind to address an Environmental
Condition, including the following activities: (i) monitoring, investigation,
assessment, treatment, cleanup, containment, removal, mitigation, response or
restoration work; (ii) obtaining any permits, consents, approvals or
authorizations of any Governmental Entity necessary to conduct any such
activity; (iii) preparing and implementing any plans or studies for any such
activity; (iv) obtaining a written notice from a Governmental Entity with
jurisdiction over the real property owned or leased on or prior to the
Distribution Declaration Date by TRW or its Subsidiaries or an Off-Site
Location under Environmental Laws that no material additional work is required
by such Governmental Entity; (v) the use, implementation, application,
installation, operation or maintenance of removal actions on the real property
owned or leased on or prior to the Distribution Declaration Date by TRW or
its Subsidiaries or an Off-Site Location, remedial technologies applied to the
surface or subsurface soils, excavation and

8

 

 treatment or disposal of soils at
real property owned or leased on or prior to the Distribution Declaration Date
by TRW or its Subsidiaries or an Off-Site Location, systems for short-term
and long-term treatment of surface water or groundwater, engineering controls
or institutional controls; and (vi) any other activities reasonably determined
to be necessary or appropriate or required under Environmental Laws to address
an Environmental Condition.

         “Restructuring” shall have the meaning ascribed to such term in the
recitals hereto.

         “Restructuring Funding Actual Amount” shall mean the aggregate Net Debt of
the Operating Unit Codes of the TRW Automotive Business (as set forth on Schedule A) as
of the Restructuring Funding Date (as submitted in the ordinary course to
TRW).

         “Restructuring Funding Date” shall mean the last business day of the
fiscal month on or immediately following the Distribution Declaration Date.

         “Restructuring Funding Target Amount” shall mean $     .

         “Ruling Request” shall mean the private letter ruling request filed by
TRW with the IRS, as supplemented and amended from time to time, with
respect to certain tax aspects of the Restructuring and the Distribution.

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

         “Special Meeting” shall mean the special meeting of shareholders of
TRW to consider the Distribution and certain related matters.

         “Special Meeting Record Date” shall mean the record date for shareholders
of TRW entitled to vote at the Special Meeting.

9

 

         “Subsidiary” shall mean, with respect to any Person, any corporation,
partnership, joint venture or other business entity in which such Person
directly or indirectly owns, in the aggregate, a majority of the equity
interest.

         “TAUK”
shall mean TRW Automotive UK Ltd., a company organized under the laws
of [England and Wales].

         “Tax Authority” shall mean any U.S., non-U.S., federal, national, state,
provincial, county or municipal or other local government, any subdivision,
agency, commission or authority thereof, or any quasi-governmental body
exercising any taxing authority or any other authority exercising tax
regulatory authority.

         “Tax Benefit” shall mean the present value of any refund, credit or
reduction in otherwise required Tax payments, including any interest payable
thereon, as and when such refund, credit or reduction is realized.

         “Tax Opinion” shall mean an opinion from PricewaterhouseCoopers LLP, tax
counsel to TRW, addressed and satisfactory to the TRW Board in its
sole discretion, with respect to certain tax aspects of the Restructuring and
the Distribution.

         “Taxes” shall mean any and all taxes, fees, levies duties, tariffs or
other charges of any kind (and all related interest, additions to tax and
penalties), imposed by any Governmental Entity, including income, profits
transfer, gains, gross receipts, excise, inventory, property (real, personal or
intangible), custom duty, sales, use, license, registration withholding,
payroll, employment social security, workers’ compensation, unemployment
compensation, net worth, capital stock, ad valorem, stamp, documentary,
value added and franchise taxes and similar charges whether computed on a
unitary, combined or any other basis.

         “Tax Sharing Agreement” shall mean the Tax Sharing Agreement, dated as of
the date of this Agreement, between TRW Automotive and TRW, the form of which is
attached hereto as Exhibit E.

         “Trademark License Agreement” shall mean the Trademark License Agreement,
dated as of the date of this Agreement, between TRW Automotive and TRW, the form
of which is attached hereto as Exhibit F.

         “Transition Services Agreement” shall mean the Transition Services
Agreement, dated as of the date of this Agreement, between TRW Automotive and TRW,
the form of which is attached hereto as Exhibit G.

         “TRW Assets” shall mean, collectively, (i) all Assets which are
expressly allocated to any member of the TRW Group pursuant to this
Agreement, the Employee Matters Agreement, the Insurance Allocation Agreement,
the Intellectual Property License Agreements, the Tax Sharing Agreement, the
Trademark License Agreement, the Transition Services Agreement or any other
Ancillary Agreement, (ii) all Assets (other than those described in paragraph
(i) of the definition of “TRW Automotive Assets”) which immediately prior to the
Distribution Declaration Date are owned by TRW or any of its Subsidiaries
(including members of the TRW Group) and which are used or held for use
primarily in the TRW Business, as the same shall exist as of such time,
and (iii) all other Assets of TRW and its Subsidiaries not otherwise
included in the TRW Automotive Assets.

         “TRW Automotive Assets” shall mean, collectively, (i) all Assets which are
expressly allocated to any member of the TRW Automotive Group pursuant to this
Agreement, the Employee Matters Agreement, the Insurance Allocation Agreement,
the Intellectual Property License Agreements, the Tax Sharing Agreement, the
Trademark License Agreement, the Transition Services Agreement or any other
Ancillary Agreement, (ii) all Assets (other than those described in paragraph
(i) of the definition of “TRW Assets”) which immediately prior to the
Distribution Declaration Date are owned by TRW or any of its Subsidiaries
(including members of the TRW Automotive Group) and which are used or held for use
primarily in the TRW Automotive Business, as the same shall exist as of such time.

10

 

         “TRW Automotive Bank Accounts” shall mean the bank accounts of TRW Automotive and the
other members of the TRW Automotive Group.

         “TRW Automotive Board” shall mean the board of directors of TRW Automotive.

         “TRW Automotive Business” shall have the meaning ascribed to such term in the
recitals hereto.

         “TRW Automotive By-Laws” shall mean the By-Laws of TRW Automotive, substantially in the
form of Exhibit I, to be in effect on the Distribution Date.

         “TRW Automotive Charter” shall mean the Certificate of Incorporation of TRW Automotive to
be in effect as of the Distribution Date, substantially in the form of Exhibit
H, to be in effect on the Distribution Date.

         “TRW Automotive Common Stock” shall have the meaning ascribed to such term in the
recitals hereto.

         “TRW Automotive Directors” shall mean the individuals contemplated by the Form S-1
to be members of the TRW Automotive Board immediately following the Distribution Date.

         “TRW Automotive Divested and Discontinued Operations Liabilities” shall mean any
Liabilities related to the businesses and operations divested or discontinued
from the TRW Automotive Business prior to the Distribution Declaration Date, including
any such Liabilities related to the divestitures and discontinuances set forth
on Schedule 1.1(e).

         “TRW Automotive Entities” shall mean the Persons listed on Schedule 1.1(f).

         “TRW Automotive Environmental Liabilities” shall mean all Actions, Liabilities or
requirements arising under, from or related to Environmental Law or Hazardous
Substances relating to or arising with respect to the TRW Automotive Assets or the
TRW Automotive Business, including the following: (i) any violation or alleged
violation of or non-compliance with Environmental Laws, whether or not such
violation or non-compliance commenced or occurred prior to the Distribution
Declaration Date or commences or occurs on or after the Distribution
Declaration Date, with respect to the ownership, lease, maintenance or
operation of the TRW Automotive Assets or the TRW Automotive Business, including any fines or
penalties and the costs associated with correcting any such violations or
non-compliance; (ii) loss of life, injury to Persons or property or damage to
natural resources (whether or not such loss, injury or damage arose or was made
manifest before the Distribution Declaration Date or arises or becomes manifest
on or after the Distribution Declaration Date) caused (or allegedly caused) by
any Environmental Condition at, on, in, under, migrating or discharged from or
in the vicinity of the TRW Automotive Assets, whether or not such Environmental
Condition arose or first became present prior to, on or after the Distribution
Declaration Date; (iii) any Remediation (whether or not such Remediation
commenced before the Distribution Declaration Date or commences on or after the
Distribution Declaration Date) of any Environmental Condition at, on, in,
under, migrating or discharged from or in the vicinity of the TRW Automotive Assets,
whether or not such Environmental Condition arose or first became present prior to, on or
after the Distribution Declaration Date; (iv) any loss of life, injury to
persons or property or damage to natural resources (whether or not such loss,
injury or damage arose or was made manifest before the Distribution Declaration
Date or arises or becomes manifest on or after the Distribution Declaration
Date) caused (or allegedly caused) by Hazardous Substances that have been
generated in connection with the TRW Automotive Business and transported or allegedly
transported to any Off-Site Location or the arrangement for such activities,
prior to, on or after the Distribution Declaration Date; and (v) the
Remediation (whether or not such Remediation commenced before the Distribution
Declaration Date or commences on or after the Distribution Declaration Date) of
Environmental Conditions related to Hazardous Substances that have been
generated in connection with the TRW Automotive Business and transported or allegedly
transported to any Off-Site Location, or the arrangement for such activities,
prior to, on or after the Distribution Declaration Date.

11

 

         “TRW Automotive Equity Sale” shall mean the issuance by TRW Automotive, and the sale by
TAUK, of an aggregate of      shares of TRW Automotive Preferred Stock (representing
     % of the outstanding shares of TRW Automotive Common Stock to be outstanding
immediately following the TRW Automotive Equity Sale, assuming conversion of such
shares into TRW Automotive Common Stock) to the TRW Automotive Equity Sponsor, pursuant to the
terms and subject to the conditions contained in the TRW Automotive Equity Sale
Agreement.

         “TRW Automotive Equity Sale Agreement” shall mean the preferred stock purchase
agreement, dated as of      , 2002, by and among TRW Automotive, TAUK and the TRW Automotive
Equity Sponsor.

         “TRW Automotive Equity Sponsor” shall mean the purchaser of shares of TRW Automotive
Preferred Stock in the TRW Automotive Equity Sale.

         “TRW Automotive Group” shall mean TRW Automotive, each Subsidiary of TRW Automotive and each other
Person that is either controlled directly or indirectly by TRW Automotive after the
Distribution Declaration Date.

         “TRW Automotive Indemnified Parties” shall have the meaning ascribed to such term
in Section 4.1(a).

         “TRW Automotive Intellectual Property” shall mean all of the Intellectual Property
which immediately prior to the Distribution Declaration Date is owned by or, to
the extent assignable to TRW Automotive, licensed to TRW or any of its
Subsidiaries (including members of the TRW Automotive Group) and which is used or held
for use primarily in the TRW Automotive Business, as the same shall exist at such time,
including the TRW Automotive Marks (but specifically excluding the TRW Marks) and
the TRW Automotive Licensed IP.

         “TRW Automotive Intellectual Property License Agreement” shall mean the
intellectual property license agreement, dated as of the date of this
Agreement, between TRW Automotive and TRW, the form of which is attached hereto as
Exhibit D-2.

         “TRW Automotive Liabilities” shall mean, collectively, (i) all Liabilities for
which any member of the TRW Automotive Group is expressly made responsible pursuant to
this Agreement, the Employee Matters Agreement, the Insurance Allocation
Agreement, the Intellectual Property License Agreements, the Tax Sharing
Agreement, the Trademark License Agreement or the Transition Services
Agreement, (ii) all Liabilities (other than those described in paragraphs (i),
(iii) and (iv) of the definition of “TRW Liabilities”) of TRW or any
of its Subsidiaries (including members of the TRW Automotive Group) to the extent
resulting from or relating to the TRW Automotive Assets or the TRW Automotive Business, (iii)
the TRW Automotive Environmental Liabilities, (iv) the TRW Automotive Divested and Discontinued
Operations Liabilities and (v) the Liabilities specified on Schedule 1.1(g).

         “TRW Automotive Marks” shall mean the names listed on Schedule 1.1(h) and all
corporate symbols and logos related thereto and all derivatives thereof and any
other name, mark or symbol connoting such names or constituting a formative
thereof.

         “TRW Automotive Preferred Stock” shall mean the Series A Convertible Preferred
Stock, par value $0.001 per share, of TRW Automotive.

         “TRW Automotive Subsidiary” shall mean (i) on or prior to the Distribution
Declaration Date, each Subsidiary of TRW that is a TRW Automotive Entity or (ii)
following the Distribution Declaration Date, each Subsidiary of TRW Automotive.

         “TRW Bank Accounts” shall mean the bank accounts of TRW and the
other members of the TRW Group.

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         “TRW Board” shall mean the board of directors of TRW.

         “TRW Business” shall mean: (i) the worldwide design, manufacture,
sale and distribution of products and services in the fields of systems
engineering, systems integration, software development, modeling and
simulation, testing and evaluation, training and information technology for
high technology systems, products and services in the fields of strategic
missiles; intelligence management and processing; command, control and
communications; missile and air defense; airborne reconnaissance; homeland
security; public safety and transportation; logistics and training; health and
human services; integrated supply chain; tax systems; and air traffic control;
(ii) the worldwide design, manufacture, sale and distribution of spacecraft
systems and subsystems; electronic systems, including communication systems for
space and defense; commercial telecommunications products; gallium arsenide and
indium phosphide advanced semiconductors for satellite and telecommunications
applications; digital broadband space payloads; space science instruments;
advanced avionics systems; high energy laser systems; and spacecraft products,
including solar arrays and reflectors; (iii) the ASG Business and (iv) all
other businesses (including the businesses and operations related to TRW
Assets) not otherwise included in the TRW Automotive Business.

         “TRW Common Stock” shall mean the common stock, par value $0.625 per
share, of TRW.

         “TRW Divested and Discontinued Operations Liabilities” shall mean,
any Liabilities related to the businesses and operations divested or
discontinued from the TRW Automotive Business prior to the Distribution Declaration
Date, including any such Liabilities related to the divestitures and
discontinuances set forth on Schedule 1.1(a).

         “TRW Entities” shall mean the Persons listed on Schedule 1.1(b).

         “TRW Group” shall mean TRW, each Subsidiary of TRW and each
other Person that is either controlled directly or indirectly by TRW after
the Distribution Declaration Date.

         “TRW Indemnified Parties” shall have the meaning ascribed to such
term in Section 4.2(a).

         “TRW Intellectual Property” shall mean all of the Intellectual
Property which immediately prior to the Distribution Declaration Date is owned
by or licensed to TRW or any of its Subsidiaries (including members of the
TRW Automotive Group) and which is used or held for use primarily in the TRW
Business, as the same shall exist at such time, including the TRW Marks
and TRW Licensed IP.

         “TRW Intellectual Property License Agreement” shall mean the
intellectual property license agreement, dated as of the date of this
Agreement, between TRW Automotive and TRW, the form of which is attached hereto as
Exhibit D-1.

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         “TRW Liabilities” shall mean, collectively, (i) all Liabilities for
which any member of the TRW Group is expressly made responsible pursuant
to this Agreement, the Employee Matters Agreement, the Insurance Allocation
Agreement, the Intellectual Property License Agreements, the Tax Sharing
Agreement, the Trademark License Agreement or the Transition Services
Agreement, (ii) all Liabilities (other than those described in paragraphs (i),
(iii), (iv) and (v) of the definition of “TRW Automotive Liabilities”) of TRW or
any of its Subsidiaries (including members of the TRW Group) to the extent
resulting from or relating to the TRW Assets or the TRW Business,
(iii) the TRW Divested and Discontinued Operations Liabilities and (iv)
the Liabilities specified on Schedule 1.1(c).

         “TRW Marks” shall mean the names listed on Schedule 1.1(d) and all
corporate symbols and logos related thereto and all derivatives thereof and any
other name, mark or symbol connoting such names or constituting a formative
thereof.

         “TRW Series 1 Preferred Stock” shall mean the Cumulative Serial
Preference Stock II, $4.40 Convertible Series 1, of TRW.

         “TRW Series 3 Preferred Stock” shall mean the Cumulative Serial
Preference Stock II, $4.50 Convertible Series 3, of TRW.

         “TRW Subsidiary” shall mean each Subsidiary of TRW other than
TRW Automotive and any TRW Automotive Subsidiary.

14

 

ARTICLE II

RESTRUCTURING

         Section 2.1          Restructuring. On or prior to the Distribution Declaration
Date, TRW and TRW Automotive shall take, or cause to be taken, the following
actions more fully described in Exhibit A:

         (a)  Except as otherwise specifically contemplated by this Agreement
(including Exhibit A) and the Ancillary Agreements, TRW and each TRW
Subsidiary shall transfer, assign and convey, or cause to be transferred,
assigned or conveyed, to TRW Automotive or a TRW Automotive Subsidiary, as appropriate, all
right, title and interest of TRW and each of the TRW Subsidiaries in
the TRW Automotive Entities;

         (b)  Except as otherwise specifically contemplated by this Agreement
(including Exhibit A) and the Ancillary Agreements, TRW Automotive and each TRW Automotive
Subsidiary shall transfer, assign and convey, or cause to be transferred,
assigned or conveyed, to TRW or a TRW Subsidiary, as appropriate, any
and all right, title and interest of TRW Automotive and each of the TRW Automotive Subsidiaries
in the TRW Entities;

         (c)  Except as otherwise specifically contemplated by this Agreement
(including Exhibit A) and the Ancillary Agreements, TRW and each TRW
Subsidiary shall transfer, assign and convey, or cause to be transferred,
assigned or conveyed, to TRW Automotive or a TRW Automotive Subsidiary, as appropriate, any and
all right, title and interest of TRW and each of the TRW Subsidiaries
in the TRW Automotive Assets;

         (d)  Except as otherwise specifically contemplated by this Agreement
(including Exhibit A) and the Ancillary Agreements, TRW Automotive and each TRW Automotive
Subsidiary shall transfer, assign and convey, or cause to be transferred,
assigned or conveyed, to
TRW or a TRW Subsidiary, as appropriate, any and all right,
title and interest of TRW Automotive and each of the TRW Automotive Subsidiaries in the
TRW Assets;

         (e)  Except as otherwise specifically contemplated by this Agreement
(including Exhibit A) and the Ancillary Agreements, TRW Automotive or a TRW Automotive
Subsidiary, as appropriate, shall unconditionally assume and undertake to pay,
perform and discharge, in a timely manner and in accordance with the terms
thereof, all Liabilities of TRW and the TRW Subsidiaries that are
TRW Automotive Liabilities;

         (f)  Except as otherwise specifically contemplated by this Agreement
(including Exhibit A) and the Ancillary Agreements, TRW or a TRW
Subsidiary, as appropriate, shall unconditionally assume and undertake to pay,
perform and discharge, in a timely manner and in accordance with the terms
thereof, all Liabilities of TRW Automotive and the TRW Automotive Subsidiaries that are
TRW Liabilities.

         (g)  In the event that at any time or from time to time (whether prior to,
on or after the Distribution Declaration Date) either party (or any member of
such party’s respective Group) shall receive or otherwise possess any Asset
that is allocated to any other Person pursuant to this Agreement or any
Ancillary Agreement, such party shall

15

 

 promptly transfer, or cause to be
transferred, such Asset to the Person so entitled thereto. Prior to any such
transfer, the Person receiving or possessing such Asset shall hold such Asset
in trust for the benefit of the Person entitled thereto (at the expense of the
Person entitled thereto) without the payment of any consideration. Each party
shall reimburse the other party or make financial adjustments or other
adjustments to remedy any mistakes or omissions relating to any of the Assets
transferred (or to be transferred) hereunder.

         (h)  In the event that at any time or from time to time (whether prior to,
on or after the Distribution Declaration Date) either party determines that the
other party (or any member of such other party’s respective Group) shall not
have unconditionally assumed any Liabilities that are allocated to such other
party (or a member of such other party’s respective Group) pursuant to this
Agreement or any Ancillary Agreement, such other party shall promptly execute
and deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such actions as the
requesting party may reasonably request to unconditionally assume, or cause to
be unconditionally assumed, such Liabilities. Each party shall reimburse the
other party or make financial adjustments or other adjustments to remedy any
mistakes or omissions relating to any of the Liabilities assumed (or to be
assumed) hereunder.

         (i)  The parties hereto currently contemplate effecting the transactions
contemplated by this Section 2.1 in the manner more fully described in Exhibit
A. In connection with the transfers of Assets and the assumptions of
Liabilities contemplated by this Section 2.1 and Exhibit A, TRW and TRW Automotive
shall execute or cause to be executed by the appropriate entities the
Conveyance and Assumption Instruments. The transfers of capital stock
contemplated by this Section 2.1 and Exhibit A shall be effected by means of
delivery of stock certificates duly endorsed or accompanied by duly executed
stock powers and notation on the stock record books of the corporation or
other legal entities involved and, to the extent required by applicable law, by
notation on appropriate registries.

         (j)  Notwithstanding anything contained in this Agreement or in any
Ancillary Agreement to the contrary, nothing in this Agreement or in any
Ancillary Agreement shall be deemed to require the conveyance, assignment,
transfer or assumption of any Asset or Liability that by its terms or by
operation of applicable law cannot be freely conveyed, assigned, transferred or
assumed. To the extent the parties have been unable to obtain any governmental
or any third party consents or approvals required under applicable law for the
transfer of any Asset or Liability and to the extent not otherwise prohibited
by the terms of such Asset or Liability, TRW and the other members of the
TRW Group or TRW Automotive and the other members of the TRW Automotive Group, as the case
may be, shall continue to be bound by the terms of such applicable Asset or
Liability, and the other party shall pay, perform and discharge fully all of
the obligations of TRW and the other members of the TRW Group or
TRW Automotive and the other members of the TRW Automotive Group, as the case may be, under
such Assets (to the extent that the corresponding benefit is received) and
Liabilities from and after the Distribution Declaration Date. TRW or
TRW Automotive, as the case may be, shall, without consideration therefor, pay, assign
and remit to the other party promptly all monies, rights and other

16

 

consideration received in respect of such performance. TRW and the other
members of the TRW Group or TRW Automotive and the other members of the TRW Automotive
Group, as the case may be, shall exercise or exploit their rights in respect of
such Assets only as reasonably directed by the other party and at the other
party’s expense. For not more than 180 days following the Distribution
Declaration Date, each party hereto shall continue to use commercially
reasonable efforts to obtain all such unobtained consents or approvals required
to be obtained by it at the earliest practicable date. If and when any such
consents or approvals shall be obtained, TRW and the other members of the
TRW Group or TRW Automotive and the other members of the TRW Automotive Group, as the case
may be, shall promptly assign such Assets and Liabilities thereunder to the
other party without payment of consideration, and the other party shall,
without the payment of any consideration therefor, accept and assume such
Assets and Liabilities. Each party shall execute such good and sufficient
instruments as may be necessary to evidence such assignment and assumption.

         (k)  Each of TRW (on behalf of itself and each other member of the
TRW Group) and TRW Automotive (on behalf of itself and each other member of the
TRW Automotive Group) understands and agrees that, except as expressly set forth in any
Ancillary Agreement, no party to this Agreement, any Ancillary Agreement or any
other agreement or document contemplated by this Agreement or any Ancillary
Agreement either has or is, in such agreement or otherwise, representing or
warranting in any way as to the Assets, Subsidiaries, businesses or Liabilities
retained, transferred or assumed as contemplated hereby or thereby, as to any
consents or approvals required in connection with the transactions contemplated
by this Agreement or any Ancillary Agreement, as to the value or freedom from
any lien of, or any other matter concerning, any Assets, Subsidiaries,
businesses or Liabilities of such party, or as to the absence of any defenses
or rights of
setoff or freedom from counterclaim with respect to any claim or other
Assets or Subsidiaries of any party, or as to the legal sufficiency of any
assignment, document or instrument delivered hereunder or thereunder to convey
title to any Asset, Subsidiary, business or Liability or thing of value upon
the execution, delivery or filing hereof or thereof. Except as may expressly
be set forth in this Agreement or any Ancillary Agreement, all Assets,
Subsidiaries, businesses and Liabilities being transferred, retained or assumed
as contemplated by this Agreement or Ancillary Agreement are being transferred,
retained or assumed, on an “as is”, “where is” basis (and, in the case of the
transfer of any real property, by means of a quitclaim or similar form deed or
conveyance) and the respective transferees shall bear the economic and legal
risks that any conveyance shall prove to be insufficient or that the title to
any Asset, Subsidiary, business or Liability shall be other than good and
marketable and free and clear of any lien. Notwithstanding the foregoing,
TRW and TRW Automotive shall each use commercially reasonable efforts and
cooperate at its own expense to resolve any problems with respect to title and
to remove liens.

         Section 2.2    Intercompany Arrangements.

         (a)  Except as otherwise contemplated by the transactions contemplated by
Exhibit A and the last sentence of this Section 2.2(a), TRW, on behalf of
itself and each other member of the TRW Group, and TRW Automotive, on behalf of

17

 

itself and each other member of the TRW Automotive Group, hereby settle and eliminate,
by cancellation or transfer to a member of the other Group (whether to cancel
or transfer and the manner thereof shall be determined by TRW), effective
as of the Distribution Declaration Date, all intercompany receivables, payables
and other balances (including intercompany cash management balances) existing
immediately prior to the Distribution Declaration Date between TRW and/or
any other member of the TRW Group, on the one hand, and TRW Automotive and/or any
other member of the TRW Automotive Group, on the other hand. The provisions of this
Section 2.2(a) shall not apply to any intercompany receivables, payables and
other balances arising under this Agreement or any Ancillary Agreement.

         (b)  Except as otherwise contemplated by the transactions contemplated by
Exhibit A and the last sentence of this Section 2.2(b), in furtherance of the
mutual release and other provisions of Section 4.8, TRW, on behalf of
itself and each other member of the TRW Group, and TRW Automotive, on behalf of
itself and each other member of the TRW Automotive Group, hereby terminate any and all
agreements, arrangements, commitments or understandings in existence as of the
Distribution Declaration Date, whether or not in writing, between or among
TRW and/or any other member of the TRW Group, on the one hand, and
TRW Automotive and/or any other member of the TRW Automotive Group, on the other hand. No such
terminated agreement, arrangement, commitment or understanding (including any
provision thereof which purports to survive termination) shall be of any
further force or effect after the Distribution Declaration Date. The
provisions of this Section 2.2(b) shall not apply to this Agreement or any
Ancillary
Agreement or any agreements, arrangements, commitments or understandings
to which any Person other than the parties hereto and their respective
Affiliates is a party.

         Section 2.3    Guarantees.

         (a)  Except as otherwise contemplated by the terms of this Agreement
(including Exhibit A), TRW and TRW Automotive shall cooperate, and shall cause the
members of their respective Groups to cooperate, to terminate, or to cause
TRW or another member of the TRW Group to be substituted in all
respects for TRW Automotive and the other members of the TRW Automotive Group in respect of,
all obligations of TRW Automotive and the other members of the TRW Automotive Group under any
loan, financing, lease, contract, or other obligation in existence as of the
Distribution Declaration Date pertaining to the TRW Business for which
TRW Automotive or any other member of the TRW Automotive Group may be liable, as guarantor,
original tenant, primary obligor or otherwise. If such a termination or
substitution is not effected by the Distribution Declaration Date, (i) TRW
shall indemnify and hold harmless the TRW Automotive Indemnified Parties for any
Indemnifiable Loss arising from or relating thereto (in accordance with the
provisions of Article IV) and (ii) without the prior written consent of TRW Automotive,
from and after the Distribution Declaration Date, TRW shall not, and shall
not permit any other member of the TRW Group to, renew or extend the term
of, increase its obligations under, or transfer to a third party, any loan,
guarantee, lease, contract or other obligation for which TRW Automotive or any other
member of the TRW Automotive Group is or may be liable unless all obligations of TRW Automotive
and the

18

 

other members of the TRW Automotive Group with respect thereto are thereupon
terminated by documentation reasonably satisfactory in form and substance to
TRW Automotive.

         (b)  Except as otherwise contemplated by the terms of this Agreement
(including Exhibit A), TRW and TRW Automotive shall cooperate, and shall cause the
members of their respective Groups to cooperate, to terminate, or to cause
TRW Automotive or another member of the TRW Automotive Group to be substituted in all respects
for TRW and the other members of the TRW Group in respect of, all
obligations of TRW and the other members of the TRW Group under any
loan, guarantee, financing, lease, contract or other obligation in existence as
of the Distribution Declaration Date pertaining to the TRW Automotive Business for
which TRW or any other member of the TRW Group may be liable, as
guarantor, original tenant, primary obligor or otherwise. If such a
termination or substitution is not effected by the Distribution Declaration
Date, (i) TRW Automotive shall indemnify and hold harmless the TRW Indemnified
Parties for any Indemnifiable Loss arising from or relating thereto (in
accordance with the provisions of Article IV) and (ii) without the prior
written consent of TRW, from and after the Distribution Declaration Date,
TRW Automotive shall not, and shall not permit any other member of the TRW Automotive Group to,
renew or extend the term of, increase its obligations under, or transfer to a
third party, any loan, guarantee, lease, contract or other obligation for which
TRW or any other member of the TRW Group is or may be liable unless
all obligations of TRW and the other members of the TRW Group with
respect
thereto are thereupon terminated by documentation reasonably satisfactory
in form and substance to TRW.

         Section 2.4          Cash Management.

         (a)  In the event that the aggregate Restructuring Funding Actual Amount
(i) exceeds the Restructuring Funding Target Amount, TRW shall pay to
TRW Automotive (by wire transfer of immediately available funds to an account
designated in advance by TRW Automotive), within five (5) Business Days after the
Restructuring Funding Date, an amount equal to such excess or (ii) is less than
the Restructuring Funding Target Amount, TRW Automotive shall pay to TRW (by wire
transfer of immediately available funds to an account designated in advance by
TRW), within five (5) Business Days after the Restructuring Funding Date,
an amount equal to such deficit.

         (b)  TRW Automotive shall, and shall cause each other member of the TRW Automotive Group
to, forward promptly to TRW (for the account of TRW or the applicable
member of the TRW Group) any payments in respect of TRW Assets
received by TRW Automotive or any member of the TRW Automotive Group after the Distribution
Declaration Date, whether received in lock boxes, via wire transfer or
otherwise. Such amounts shall be forwarded by wire transfer to an account
designated by TRW in advance in the case of payments received within 30
days after the Distribution Declaration Date and by check in the case of
payments received thereafter.

         (c)  TRW shall, and shall cause each other member of the TRW
Group to, forward promptly to TRW Automotive (for the account of TRW Automotive or the
applicable member of the TRW Automotive Group) any payments in respect of TRW Automotive Assets

19

 

received by TRW or any member of the TRW Group after the Distribution
Declaration Date, whether received in lock boxes, via wire transfer or
otherwise. Such amounts shall be forwarded by wire transfer to an account
designated by TRW Automotive in advance in the case of payments received within 30 days
after the Distribution Declaration Date and by check in the case of payments
received thereafter.

         (d)  TRW Automotive shall, or shall cause a member of the TRW Automotive Group to, fund all
amounts in respect of checks, electronic debits and other similar charges that
are outstanding immediately prior to the Distribution Declaration Date and
presented for payment on or after the Distribution Declaration Date from TRW Automotive
Bank Accounts. TRW shall, or shall cause a member of the TRW Group
to, fund all amounts in respect of checks, electronic debits and other similar
charges that are outstanding immediately prior to the Distribution Declaration
Date and presented for payment at or after the Distribution Declaration Date
from TRW Bank Accounts. Within five (5) Business Days following
TRW’s request, TRW Automotive shall reimburse TRW (by wire transfer to an
account designated by TRW in advance), for the account of TRW or the
applicable member of the TRW Group, for all such amounts funded by a
member of the TRW Group in respect of checks, electronic debits and other
similar
charges relating to the TRW Automotive Business or the TRW Automotive Liabilities that are
outstanding immediately prior to the Distribution Declaration Date and
presented for payment and funded on or after the Distribution Declaration Date
from TRW Bank Accounts. No checks, electronic debits and other similar
charges relating to the TRW Automotive Business or the TRW Automotive Liabilities shall be
issued on any TRW Bank Accounts on or after the Distribution Declaration
Date.

ARTICLE III

THE DISTRIBUTION

         Section 3.1    Cooperation Prior to the Distribution. Prior to the
Distribution, TRW and/or TRW Automotive, as applicable, shall take the following
actions (to the extent such actions shall not have been taken prior to the date
of this Agreement):

         (a)  TRW and TRW Automotive shall take any steps necessary to increase the
outstanding shares of TRW Automotive Common Stock so that, except as otherwise
contemplated by this Agreement or any Ancillary Agreement, the number of
outstanding shares of TRW Automotive Common Stock held by TRW immediately prior to
the Distribution shall equal the number of shares of TRW Common Stock
outstanding on the Distribution Record Date.

         (b)  TRW shall cause all of the TRW Automotive Directors and Active TRW Automotive
Employees who will not be directors or officers of TRW or any TRW
Entity following the Distribution to resign, effective as of the Distribution
Date, from all boards of directors or similar governing bodies of TRW and
the TRW Entities on which they serve, and from all positions as officers
of TRW and the TRW Entities in which they serve. TRW shall
cause all of its directors and the Active

20

 

TRW Employees who will not be
directors or officers of TRW Automotive or any TRW Automotive Entity following the Distribution
to resign, effective as of the Distribution Date, from all boards of directors
or similar governing bodies of TRW Automotive and the TRW Automotive Entities on which they
serve, and from all positions as officers of TRW Automotive and the TRW Automotive Entities in
which they serve.

         (c)  TRW and TRW Automotive shall take all actions which may be required to
elect or otherwise appoint the TRW Automotive Directors to constitute the TRW Automotive Board
as of the Distribution Date.

         (d)  (i) The TRW Automotive Board shall (A) approve the TRW Automotive Charter and shall
cause the same to be filed with the Secretary of State of the State of Delaware
and (B) adopt the TRW Automotive By-Laws, and (ii) TRW, as sole stockholder of
TRW Automotive, shall approve the TRW Automotive Charter.

         (e)  TRW and TRW Automotive shall prepare, and TRW Automotive shall file with the
Commission, the Form S-1 and the Proxy Statement, which documents shall set
forth appropriate disclosure concerning TRW Automotive, TRW, the Restructuring,
the TRW Automotive Equity Sale, the Distribution, the Special Meeting and other related
matters. TRW and TRW Automotive shall use their commercially reasonable efforts
to cause the Form S-1 and the Proxy Statement to be declared effective or
cleared (as the case may be) by the Commission.

         (f)  TRW and TRW Automotive shall prepare, and TRW shall mail to the
holders of shares of TRW Common Stock as of the Special Meeting Record
Date, the Proxy Statement.

         (g)  TRW and TRW Automotive shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereof which are appropriate to reflect the establishment of, or
amendments to, any employee benefit and other plans contemplated by the
Employee Matters Agreement or this Agreement.

         (h)  TRW and TRW Automotive shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements.

         (i)  TRW and TRW Automotive shall prepare, and TRW Automotive shall file and seek to
make effective, subject to official notice of issuance, an application to
permit the listing of TRW Automotive Common Stock on the NYSE.

         (j)  TRW and TRW Automotive shall use their commercially reasonable efforts to
obtain the rulings contemplated by the Ruling Request in form and substance
satisfactory to the TRW Board as advised by counsel.

         (k)  TRW and TRW Automotive shall use their commercially reasonable efforts to
secure for TRW Automotive the Debt Financing on or prior to the Distribution
Declaration

21

 

Date. In connection therewith, TRW and TRW Automotive shall enter
into such agreements and prepare (and file with the Commission if required)
such documents as may be required in connection with the Debt Financing.

         (l)  TRW and TRW Automotive shall use their commercially reasonable efforts to
consummate the TRW Automotive Equity Sale on or prior to the Distribution Declaration
Date. In connection therewith, TRW and TRW Automotive shall enter into the TRW Automotive
Equity Sale Agreement and such other agreements as may be required in
connection with the TRW Automotive Equity Sale.

         (m)  TRW shall redeem all outstanding shares of TRW Series 1
Preferred Stock and TRW Series 3 Preferred Stock in accordance with the
Amended Articles of Incorporation of TRW prior to Special Meeting Record
Date.

         Section 3.2          TRW Board Action; Distribution Procedures. Subject to
the satisfaction or waiver of the conditions set forth in Section 3.3, on the
Distribution Declaration Date, the TRW Board shall establish the
Distribution Record Date and the Distribution Date and any appropriate
procedures in connection with the Distribution. Prior to the Distribution,
TRW shall enter into an agreement with the Agent providing for, among
other things, the payment of the Distribution to the holders of TRW Common
Stock in accordance with this Article III (currently contemplated to be
effected through a book-entry system, subject to the right of holders of shares
of TRW Automotive Common Stock to request a physical certificate).

         Section 3.3          Conditions Precedent to the Distribution. In no event shall
the Distribution Declaration Date occur prior to such time as the following
conditions shall have been satisfied or waived:

         (a)  The rulings contemplated by the Ruling Request shall have been granted
in form and substance satisfactory to TRW in its sole discretion and such
rulings shall be in full force and effect, or, alternatively, the Tax Opinion
shall have been received by the TRW Board;

         (b)  all third party consents and approvals by Governmental Entities
required in connection with the transactions contemplated by this Agreement or
the Ancillary Agreements shall have been received, except where the failure to
obtain such consents or approvals would not have a material adverse effect on
either (A) the ability of the parties to consummate the transactions
contemplated by this Agreement or the Ancillary Agreements or (B) the business,
financial condition or results of operations of TRW or TRW Automotive;

         (c)  the transactions contemplated by Article II and Exhibit A, including
the transfers and related transactions as provided in Section 2.1 and Exhibit
A, the settlement of intercompany arrangements as provided in Section 2.2 and
the termination of guaranties and similar agreements as provided by Section
2.3, shall have been consummated in all material respects, to the extent
required to be consummated prior to the Distribution;

22

 

         (d) 
TRW Automotive and the TRW Automotive Subsidiaries shall have no more than $     of
Net Debt in the aggregate;

         (e) 
TRW shall be satisfied in its sole discretion with the treatment
of the indebtedness of TRW and its Subsidiaries in connection with the
Restructuring and the Distribution, including the allocation of such
indebtedness between the TRW Group and the TRW Automotive Group;

         (f) 
the Debt Financing shall have been consummated;

         (g) 
the ASG Sale shall have been consummated in all material respects;

         (h) 
the TRW Automotive Common Stock shall have been authorized for listing on the
NYSE to the extent contemplated by this Agreement and by the Employee Matters
Agreement, subject to official notice of issuance;

         (i) 
the TRW Automotive Board, composed as contemplated by the Form S-1, shall have
been duly elected or appointed;

         (j)  the
Form S-1 shall have been declared effective by the Commission and
no stop order issued by the Commission with respect thereto shall be in effect;

         (k) 
the Proxy Statement shall have been cleared by the Commission;

         (l) 
the Distribution shall have been approved by the holders of shares of
TRW capital stock in accordance with the OGCL;

         (m) 
the applicable parties shall have entered into each of the Ancillary
Agreements and the transactions or actions contemplated by the Ancillary
Agreements to be completed prior to the Distribution, if any, shall have been
completed in all material respects;

         (n) 
the TRW Board shall have received an opinion, addressed and
satisfactory to the TRW Board in its sole discretion, from American
Appraisal
Associates, Inc. (or another independent solvency or appraisal firm
selected by the TRW Board), and the TRW Board shall be otherwise
satisfied in its sole discretion, as to matters relating to the solvency and
adequacy of capital of TRW and TRW Automotive after, and giving effect to, the
transactions contemplated by this Agreement, the ASG Agreement, the TRW Automotive
Equity Sale Agreement and the Ancillary Agreements, and as to the sufficiency
of TRW’s surplus to permit the Distribution under the OGCL; and

         (o) 
no Action shall have been commenced and be pending to restrain or
challenge the Distribution, and no inquiry shall have been received or threat
made that in the reasonable judgment of the TRW Board may lead to such an
Action.

23

 

         The
foregoing conditions are for the sole benefit of TRW and shall
not give rise to or create any duty on the part of TRW or the TRW
Board to waive or not to waive such conditions or in any way limit TRW’s
rights of termination set forth in this Agreement. Any determination made by
the TRW Board prior to the Distribution Declaration Date concerning the
satisfaction or waiver of any or all of the conditions set forth in this
Section 3.3 shall be conclusive.

         Section 3.4     The Distribution. On the Distribution Date, TRW shall
deliver to the Agent a share certificate representing all of the then
outstanding shares of TRW Automotive Common Stock owned by TRW and shall instruct
the Agent to distribute, on or as soon as practicable following the
Distribution Date, such shares of TRW Automotive Common Stock to the holders of record
of shares of TRW Common Stock on the Distribution Record Date. TRW Automotive
agrees to provide all share certificates and any information that the Agent
shall require in order to effect the Distribution (it being understood that the
Distribution is currently contemplated to be effected through a book-entry
system, subject to the right of holders of shares of TRW Automotive Common Stock to
request a physical certificate). All shares of TRW Automotive Common Stock issued in
the Distribution shall be duly authorized, validly issued, fully paid and
nonassessable.

ARTICLE IV

INDEMNIFICATION; MUTUAL RELEASE

         Section 4.1     Indemnification by TRW.

         (a) 
Except for all claims related to Taxes (which shall be governed solely
by the Tax Sharing Agreement) and subject to the other provisions of this
Article IV, from and after the Distribution Declaration Date, TRW shall
indemnify, defend and hold harmless TRW Automotive, each of its directors, officers,
employees, agents and Affiliates and each of the heirs, executors, successors,
assigns of, and persons, if any, who control (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange
Act), any of the foregoing (the “TRW Automotive Indemnified Parties”) from and
against the TRW Liabilities and any and all losses, claims and Liabilities
(including the costs and expenses of any and all Actions, threatened Actions,
demands, assessments, judgments, settlements and compromises relating thereto
and reasonable attorneys’ fees and any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any such Actions or
threatened Actions) (collectively, “Indemnifiable Losses”) of the TRW Automotive
Indemnified Parties arising out of or due to:

		
	 	          
   (i) the failure or alleged failure of TRW or any other
member of the TRW Group to pay, perform or otherwise
discharge in a timely manner any of the TRW Liabilities;
	 
	 	          
   (ii) the TRW Business; and

24

 

		
	 	          
   (iii) any material breach by TRW or any other member of
the TRW Group of this Agreement or any of the Ancillary
Agreements.

         (b) 
Subject to the other provisions of this Article IV, from and after the
Distribution Declaration Date, TRW shall indemnify, defend and hold
harmless each of the TRW Automotive Indemnified Parties from and against any and all
Indemnifiable Losses of the TRW Automotive Indemnified Parties arising out of or based
upon:

		
	 	          
   (i) any untrue statement of material fact or alleged untrue
statement of a material fact contained in any Disclosure Document
and any information provided in connection therewith, or the
omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made,
not misleading, except insofar as such Indemnifiable Losses are
caused by any such untrue statement or omission or alleged untrue
statement or omission (A) relating primarily to TRW Automotive or any
other member of the TRW Automotive Group or the TRW Automotive Business or (B)
based upon information that is furnished to TRW by TRW Automotive or
any other member of the TRW Automotive Group expressly for use therein;
and
	 
	 	          
   (ii) any untrue statement of material fact or alleged untrue
statement of a material fact contained in any document (other than
a Disclosure Document) filed by TRW or any other member of
the TRW Group with the Commission pursuant to the Securities
Act or the Exchange Act or filed with any other Governmental
Entity pursuant to applicable law, and any information provided in
connection therewith, or the omission or alleged omission to state
a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under
which they were made, not misleading, except insofar as such
Indemnifiable Losses are caused by any such untrue statement or
omission or alleged untrue statement or omission (A) relating
primarily to TRW Automotive or any other member of the TRW Automotive Group
or the TRW Automotive Business or (B) based upon information that is
either furnished to TRW by TRW Automotive or any other member of the
TRW Automotive Group expressly for use therein or incorporated by
reference by TRW from any filings made by TRW Automotive or any other
member of the TRW Automotive Group with the Commission under the
Securities Act or the Exchange Act or filed with any other
Governmental Entity pursuant to applicable law, if that statement
or omission was made or occurred on or after the Distribution
Date.

         Section 4.2     Indemnification by TRW Automotive.

         (a) 
Except for all claims related to Taxes (which, along with other
related matters, shall be governed solely by the Tax Sharing Agreement,
notwithstanding

25

 

anything contained in this Agreement) and subject to the other
provisions of this Article IV, from and after the Distribution Declaration
Date, TRW Automotive shall indemnify, defend and hold harmless TRW, each of its
directors, officers, employees, agents and Affiliates and each of the heirs,
executors, successors, assigns of, and persons, if any, who control (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act),
any of the foregoing (the “TRW Indemnified Parties”) from and against the
TRW Automotive Liabilities and any and all Indemnifiable Losses of the TRW
Indemnified Parties arising out of or due to:

		
	 	          
   (i) the failure or alleged failure of TRW Automotive or any other
member of the TRW Automotive Group to pay, perform or otherwise discharge
in a timely manner any of the TRW Automotive Liabilities;
	 
	 	          
   (ii) the TRW Automotive Business; and
	 
	 	          
   (iii) any material breach by TRW Automotive or any other member of
the TRW Automotive Group of this Agreement or any of the Ancillary
Agreements.

         (b) 
Subject to the other provisions of this Article IV, from and after the
Distribution Declaration Date, TRW Automotive shall indemnify, defend and hold harmless
each of the TRW Indemnified Parties from and against any and all
Indemnifiable Losses of the TRW Indemnified Parties arising out of or
based upon:

		
	 	        
     (i) any untrue statement of material fact or alleged untrue
statement of a material fact contained in any Disclosure Document
and any information provided in connection therewith, or the
omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made,
not misleading, in each case to the extent, but only to the
extent, that such Indemnifiable Losses are caused by any such
untrue statement or omission or alleged untrue
statement or omission (A) relating primarily to TRW Automotive or any
other member of the TRW Automotive Group or the TRW Automotive Business or (B)
based upon information that is furnished to TRW by TRW Automotive or
any other member of the TRW Automotive Group expressly for use therein;
and
	 
	 	        
     (ii) any untrue statement of material fact or alleged untrue
statement of a material fact contained in any document (other than
a Disclosure Document) filed by TRW Automotive or any other member of the
TRW Automotive Group with the Commission pursuant to the Securities Act or
the Exchange Act or filed with any other Governmental Entity
pursuant to applicable law, and any information provided in
connection therewith, or the omission or alleged omission to state
a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under
which they were made, not misleading, except insofar as such
Indemnifiable Losses are caused by any such untrue 

26

 

		
	 	statement or
omission or alleged untrue statement or omission (A) relating
primarily to TRW or any other member of the TRW Group or
the TRW Business or (B) based upon information that is either
furnished to TRW Automotive by TRW or any other member of the
TRW Group expressly for use therein or incorporated by
reference by TRW Automotive from any filings made by TRW or any other
member of the TRW Group with the Commission under the
Securities Act or the Exchange Act or filed with any other
Governmental Entity pursuant to applicable law, if that statement
or omission was made or occurred on or after the Distribution
Date.

         Section 4.3     Limitations on Indemnification Obligations.

         (a) 
For purposes of this Agreement, Indemnifiable Losses shall be
calculated after giving effect to any related Tax Benefit and net of any
reserves and amounts recovered from third parties, including insurance proceeds
recovered under insurance policies with respect to such Indemnifiable Losses.
Any Indemnified Party having a claim under this Article IV shall make a good
faith effort to recover all losses, costs, damages and expenses from insurers
of such Indemnified Party under applicable Policies so as to reduce the amount
of any Indemnifiable Losses hereunder. No Indemnified Party shall, in any
event, be entitled to any punitive, incidental, indirect, special or
consequential damages resulting from or arising out of any claim under this
Article IV.

         (b) 
In the event that any indemnification payment required to be made
hereunder shall be denominated in a currency other than United States dollars,
the amount of such payment shall be translated into United States dollars using
the Foreign Exchange Rate for such currency determined in accordance with the
following rules:

		
	 	        
     (i) with respect to an Indemnifiable Loss arising from
payment by a financial institution under a guarantee, comfort
letter, letter of credit, foreign exchange contract or similar
instrument, the Foreign Exchange Rate for such currency shall be
determined as of the date on which such financial institution
shall have been reimbursed;
	 
	 	        
     (ii) with respect to an Indemnifiable Loss covered by
insurance, the Foreign Exchange Rate for such currency shall be
the Foreign Exchange Rate employed by the insurance company
providing such insurance in settling such Indemnifiable Loss with
the Indemnifying Party; and
	 
	 	        
     (iii) with respect to an Indemnifiable Loss not covered by
clauses (i) or (ii) above, the indemnification payment shall be
paid in the applicable local currency without any translation into
United States dollars.

27

 

         Section 4.4     Procedures for Indemnification. If an Indemnified
Party intends to seek indemnification pursuant to this Article IV, such
Indemnified Party shall promptly provide written notice to the party
from whom indemnification is being sought (the “Indemnifying Party”), in
writing in accordance with Section 7.1 of such claim describing such
claim in reasonable detail including the sections of this Agreement
which form the basis for such claim, copies of all material written
evidence thereof and the estimated amount of the Indemnifiable Losses
that have been or may be sustained by the Indemnified Party; provided,
that the failure to provide such notice shall not affect the obligations
of the Indemnifying Party unless it is actually materially prejudiced
thereby. In particular, in case of any investigation or audit for which
indemnification of an Indemnified Party under this Article IV is
reasonably likely, such Indemnified Party shall inform the Indemnifying
Party at the commencement of such investigation or audit, to the extent
practical, so that the Indemnifying Party may participate therein. In
the event that such claim involves a claim by a third party against the
Indemnified Party, the Indemnifying Party shall have 20 days after
receipt of such notice to decide whether it will undertake, conduct and
control, through counsel of its own choosing and at its own expense, the
settlement or defense thereof, and if it so decides, the Indemnified
Party shall cooperate with the Indemnifying Party in connection with the
settlement or defense of such claim; provided, however, that the
Indemnified Party may participate in such settlement or defense through
counsel chosen by it; provided, further, that the fees and expenses of
such counsel shall be borne by the Indemnified Party; provided, further,
that if there exists or is reasonably likely to exist a conflict of
interest that would make it inappropriate in the reasonable judgment of
the Indemnified Party for the same counsel to represent both the
Indemnified Party and the Indemnifying Party, then the Indemnified Party
shall be entitled to retain one law firm at the Indemnifying Party’s
expense. Notwithstanding anything in this Section 4.4 to the contrary,
the
Indemnifying Party may, without the consent of the Indemnified
Party, settle or compromise any action or consent to the entry of any
judgment which is solely for money damages, which includes as an
unconditional term thereof the delivery by the claimant or plaintiff to
the Indemnified Party of a duly executed written release of the
Indemnified Party from all liability in respect of such action, which
release shall be reasonably satisfactory in form and substance to
counsel for the Indemnified Party, and which does not involve an
admission of guilt or liability. So long as the Indemnifying Party has
agreed to undertake, conduct and control the settlement or defense of
any such claim and is contesting any such claim in good faith, the
Indemnified Party shall not pay or settle any such claim without the
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed.

         Section 4.5     Nature of Remedies. The remedies set forth in this
Article IV shall be the sole and exclusive remedies of, and in lieu of any
other remedies that may be available to, the Indemnified Parties arising out of
or relating to, whether based on contract, tort or other claims, this
Agreement, the Ancillary Agreements or any other agreements or documents signed
or executed in relation to the transactions

28

 

contemplated hereby and thereby by
the parties to this Agreement or their Affiliates, except as otherwise
expressly provided in this Agreement, the Ancillary Agreements or such other
agreements or documents. If, for any reason, the indemnification provided in
Article IV is unavailable to any Indemnified Party, or insufficient to hold it
harmless, then the Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Indemnifiable Losses in
such proportion as is appropriate to reflect all relevant equitable
considerations.

         Section 4.6     Survival of Indemnities. The obligations of TRW Automotive and
TRW under this Article IV shall survive the Distribution Date and the sale
or other transfer by it of any Assets or businesses or the assignment by it of
any Liabilities, with respect to any Indemnifiable Loss of the other related to
such Assets, businesses or Liabilities. Such obligations shall be binding upon
the successors and assigns of the TRW Business or the TRW Automotive Business, as
the case may be, and upon any transferee of all or substantially all of the
assets (in one transaction or a series of related transactions) of the TRW
Business or the TRW Automotive Business, which transferee shall assume in writing such
obligations. If 25% or more of the Assets comprising the TRW Business or
the TRW Automotive Business immediately following the Distribution, as the case may be,
are spun off to the respective stockholders of TRW or TRW Automotive, such
spun-off entity shall assume in writing a proportionate share of the indemnity
obligation contained herein of TRW or TRW Automotive, as the case may be, based
upon the relative assets of such spun-off entity and the remaining assets in
its parent, and thereafter TRW or TRW Automotive, as the case may be, shall be
released from the proportionate share so assumed. The assumption of
obligations of a transferee or spun-off entity shall not apply with respect to
any transaction consummated after the twentieth anniversary of the date of this
Agreement.

         Section 4.7     Right of Inquiry.

         (a) 
In the event of a material adverse change after the Distribution
Declaration Date in the financial condition of TRW Automotive or TRW, which change
creates a substantial likelihood that TRW Automotive or TRW, as the case may be,
will not be able to satisfy or otherwise settle, when due, its indemnification
obligations to the other party under this Article IV, TRW or TRW Automotive, as
the case may be, shall have the right, subject to entering into an agreement
with the other party to preserve confidentiality and any applicable privilege
for the benefit of such other party, upon consultation with such other party,
to have limited access on reasonable prior notice to such other party’s
personnel in order to monitor the status of pending and anticipated Actions for
which TRW or TRW Automotive, as the case may be, could be contingently liable.
Such right of inquiry shall terminate at such time as there is no longer a
substantial likelihood that the applicable party will not be able to satisfy
its indemnification obligations under this Agreement and the Ancillary
Agreements. The inquiring party shall bear its own costs of such inquiry.

         (b) 
In addition to the provisions of Section 4.7(a), each of TRW and
TRW Automotive shall have the right on an annual basis and subject to reasonable prior
notice to meet with the General Counsel of the other party (or such corporate
officer or

29

 

employee designated by such General Counsel) and receive an oral
report, in a forum in which the requesting party may ask reasonable questions
regarding the status of material pending and threatened Actions for which the
requesting party may be contingently liable. For the avoidance of doubt, no
such right shall require TRW or TRW Automotive, as the case may be, to (i) provide
non-public written information, (ii) provide confidential information, (iii)
jeopardize the benefit of any applicable privilege or (iv) engage in lengthy or
burdensome meetings or discussions. In addition, each of TRW and TRW Automotive
shall have the further right to request one additional meeting per year in
connection with the public disclosure by the other party during such year of a
material adverse development in any pending or threatened Action for which the
requesting party may be contingently liable, such meeting otherwise to be on
the same terms as set forth in this Section 4.7(b). Each of TRW and
TRW Automotive shall bear its own cost of attendance at such meetings, which shall,
unless otherwise agreed, be held at the corporate offices of the non-requesting
party.

         Section 4.8     Mutual Release. Effective as of the Distribution Declaration
Date and except as otherwise specifically set forth in this Agreement or any
Ancillary Agreement, TRW, on behalf of itself and the other members of the
TRW Group, and TRW Automotive, on behalf of itself and the other members of the
TRW Automotive Group, hereby releases and forever discharges each TRW Automotive Indemnified
Party (in the case of the release by TRW) or TRW Indemnified Party
(in the case of the release by TRW Automotive), as the case may be, in their respective
capacities as such, of and from all debts, demands, Actions, accounts,
covenants, contracts, agreements, damages and Liabilities whatsoever of every
name and
nature, both in law and in equity, which the releasing party has or ever
had or ever will have, which arise out of or relate to events, circumstances or
actions taken by such other party occurring or failing to occur or any
conditions existing on or prior to the Distribution Declaration Date; provided,
however, that the foregoing general release shall not apply to (i) any
Liabilities or other obligations (including Liabilities with respect to
payment, reimbursement, indemnification or contribution) under this Agreement
or any Ancillary Agreement or assumed, transferred, assigned, allocated or
arising under this Agreement or any Ancillary Agreement (including any
Liability that the parties may have with respect to payment, performance,
reimbursement, indemnification or contribution pursuant to this Agreement or
any Ancillary Agreement for claims brought against the parties by third
parties) and the foregoing release will not affect any party’s right to enforce
this Agreement or any Ancillary Agreement in accordance with their terms.

ARTICLE V

CERTAIN ADDITIONAL MATTERS AND COVENANTS

         Section 5.1     Use of Names; Intellectual Property Licenses.

         (a) 
From and after the Distribution Declaration Date, subject to the next
sentence and Section 5.1(c), TRW or the other members of the TRW
Group shall own all rights of TRW or any of its Affiliates (including
members of the

30

 

TRW Automotive Group) in, and to the use of, the TRW Intellectual
Property and TRW Automotive or the other members of the TRW Automotive Group shall not use or
have any rights to the TRW Intellectual Property. Notwithstanding the
foregoing, the TRW Group agrees to grant to TRW Automotive and the other members
of the TRW Automotive Group a limited trademark license to use certain TRW Marks
solely in connection with the TRW Automotive Business in the form of, and under the
terms of, the Trademark License Agreement.

         (b) 
From and after the Distribution Declaration Date, subject to the next
sentence and Section 5.1(d), TRW Automotive or the other members of the TRW Automotive Group
shall own all rights of TRW or any of its Affiliates (including members of
the TRW Group) in, and to the use of, the TRW Automotive Intellectual Property,
and the TRW Group shall not use or have any rights to the TRW Automotive
Intellectual Property. Notwithstanding the foregoing, TRW and the other
members of the TRW Group shall have the right to grant to the ASG
Purchaser pursuant to the ASG Sale Agreement certain rights to use
the TRW Automotive Intellectual Property. Subject to the preceding sentence, TRW shall cease using the TRW Automotive Marks
as soon as practicable after the Distribution Declaration Date.

         (c) 
The parties shall enter into the TRW Intellectual Property
License Agreement whereby TRW or another member of the TRW Group
shall grant to TRW Automotive or another member of the TRW Automotive Group, effective from and
after the Distribution Declaration Date, in those jurisdictions where TRW
or any other member of the TRW Group has such rights, a non-exclusive license to the TRW Licensed IP,
and to use the foregoing, to make, have made, use and sell products and
processes solely in the field of the TRW Automotive Business.

         (d) 
The parties shall enter into the TRW Automotive Intellectual Property License
Agreement whereby TRW Automotive or another member of the TRW Automotive Group shall grant to
TRW or another member of the TRW Group, effective from and after the
Distribution Declaration Date, in those jurisdictions where TRW Automotive or any other
member of the TRW Automotive Group has such rights, a non-exclusive license to the TRW Automotive Licensed IP, and to use the
foregoing, to make, have made, use and sell products and processes solely in
the field of the TRW Business.

         Section 5.2     Further Assurances; Cooperation. Each of the parties hereto
promptly shall execute such documents and other instruments and take such

31

 

further actions as may be reasonably required or desirable to carry out the
provisions hereof and to consummate the transactions contemplated by this
Agreement and each of the Ancillary Agreements. The parties shall cooperate
with each other in all commercially reasonable respects to ensure the transfer
to TRW Automotive or the other members of the TRW Automotive Group of the TRW Automotive Business, the
TRW Automotive Assets and the TRW Automotive Liabilities, and the retention by TRW or of
the TRW Group of the TRW Business, the TRW Assets and the
TRW Liabilities, including (i) allocating rights and obligations under
contracts, agreements and other arrangements, if any, of TRW that relate
to both the TRW Business and the TRW Automotive Business, (ii) determining whether
to enter into any service or other sharing agreements (other than the Ancillary
Agreements) on a mutually acceptable arm’s-length basis that may be necessary
to assure a smooth and orderly transition, and (iii) obtaining any reasonably
necessary or appropriate third-party consents, licenses and permits in
connection with the Restructuring and the Distribution. In case at any time
after the Distribution Date any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
each party to this Agreement shall take all such necessary or desirable action.

         Section 5.3     
Non-Competition.

         (a) 
Notwithstanding anything to the contrary in this Section 5.3(a), for a
period of ten (10) years from and after the Distribution Declaration Date,
TRW Automotive shall not engage, directly or through any member of the TRW Automotive Group, in
any of the businesses comprising the TRW Business using as its trade name
any name containing the words “TRW”.

         (b) 
Notwithstanding anything to the contrary in this Section 5.3(b), for a
period of ten (10) years from and after the Distribution Declaration Date,
TRW shall not engage, directly or through any member of the TRW
Group, in any of the businesses comprising the TRW Automotive Business using as its
trade name any name containing the words “TRW Automotive”.

         (c) 
From and after the Distribution Declaration Date, TRW shall, and
shall cause the other members of the TRW Group to, comply with all
applicable non-competition obligations of TRW and the other members of the
TRW Group in effect as of the Distribution. From and after the
Distribution Declaration Date, TRW Automotive shall, and shall cause the other members
of the TRW Automotive Group to, comply with all applicable non-competition obligations
of TRW Automotive and the other members of the TRW Automotive Group in effect as of the
Distribution.

         Section 5.4     
Access to Information.

         (a) 
From and after the Distribution Declaration Date, TRW shall
afford to TRW Automotive and its authorized accountants, counsel and other designated
representatives reasonable access and duplicating rights during normal business
hours to all records, books, contracts, instruments, computer data and other
data and information

32

 

(collectively, “Information”) within TRW’s possession
insofar as such access is reasonably required by TRW Automotive, subject to appropriate
restrictions for classified and/or legally privileged information. Similarly,
from and after the Distribution Declaration Date, TRW Automotive shall afford to
TRW and its authorized accountants, counsel and other designated
representatives reasonable access and duplicating rights during normal business
hours to Information within TRW Automotive’s possession, insofar as such access is
reasonably required by TRW, subject to appropriate restrictions for
classified and/or legally privileged information. Information may be requested
under this Article VII for, without limitation, audit, accounting, claims,
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations and for performing this Agreement and the
transactions contemplated hereby, subject to appropriate restrictions for
classified and/or legally privileged information. Neither TRW nor TRW Automotive
shall disclose Information pursuant to this Article VI to the extent such
disclosure requires an export license and such license has not been obtained.

         (b) 
In furtherance of the rights and obligations of the parties set forth
in Section 5.4(a):

		
	 	        
     (i) Each party hereto acknowledges that
(A) the members of
the TRW Group on the one hand, and the members of the TRW Automotive
Group, on the other hand, have or may obtain Information regarding
a member of the other Group, or any of its operations, employees,
Assets or Liabilities (whether in documents or stored in any other
form or known to its employees or agents) that is or may be
protected from disclosure pursuant to the attorney-client
privilege, the work product doctrine or other applicable
privileges (“Privileged Information”); (B) there are a number of
actual, threatened or future Actions that have been or may be
asserted by or against, or otherwise affect, each or both of
TRW and TRW Automotive (or members of either Group) (“Litigation
Matters”); (C) TRW and TRW Automotive have a common legal interest in
Litigation Matters, in the Privileged Information, and in the
preservation of the confidential status of the Privileged
Information, in each case relating to the TRW Business or the
TRW Automotive Business as it existed prior to the Distribution
Declaration Date or relating to or arising in connection with the
relationship between the members of the Groups on or prior to the
Distribution Declaration Date; and (D) TRW and TRW Automotive intend
that the transactions contemplated by this Agreement and the
Ancillary Agreements and any transfer of Privileged Information in
connection herewith or therewith shall not operate as a waiver of
any potentially applicable privilege.
	 
	 	       
      (ii) Each of TRW and
TRW Automotive agrees, on behalf of itself
and each member of its Group, not to disclose or otherwise waive
any privilege attaching to any Privileged Information relating to
the TRW Automotive Business or the TRW Business as it existed prior
to the Distribution Declaration Date, respectively, or relating to
or arising in connection with the relationship between the Groups
on or prior to the 

33

 

		
	 	Distribution Declaration Date, without
providing prompt written notice to and obtaining the prior written
consent of the other, which consent shall not be unreasonably
withheld or delayed and shall not be withheld or delayed if the
other party certifies that such disclosure is to be made in
response to a likely threat of suspension or debarment or similar
action; provided, however, that TRW and TRW Automotive may make such
disclosure or waiver with respect to Privileged Information if
such Privileged Information relates, in the case of TRW,
solely to the TRW Business as it existed prior to the
Distribution Declaration Date or, in the case of TRW Automotive, solely to
the TRW Automotive Business as it existed prior to the Distribution
Declaration Date. In the event of a disagreement between any
member of the TRW Group and any member of the TRW Automotive Group
concerning the reasonableness of withholding such consent, no
disclosure shall be made prior to a final, nonappealable
resolution of such disagreement by a court of competent
jurisdiction.
	 
	 	        
     (iii) Upon any member of the TRW
Group or any member of
the TRW Automotive Group receiving any subpoena or other
compulsory disclosure notice from a court, other Governmental
Entity or otherwise which requests disclosure of Privileged
Information, in each case relating to the TRW Automotive Business or the
TRW Business, respectively, as it existed prior to the
Distribution Declaration Date or relating to or arising in
connection with the relationship between the members of the Groups
on or prior to the Distribution Declaration Date, the recipient of
the notice shall promptly provide to TRW, in the case of
receipt by a member of the TRW Automotive Group, or TRW Automotive, in the case of
receipt by a member of the TRW Group, a copy of such notice,
the intended response, and all materials or information relating
to the other Group that might be disclosed. In the event of a
disagreement as to the intended response or disclosure, unless and
until the disagreement is resolved as provided in Section
5.4(b)(ii), TRW and TRW Automotive shall cooperate to assert all
defenses to disclosure claimed by either Group, at the cost and
expense of the Group claiming such defense to disclosure, and
shall not disclose any disputed documents or information until all
legal defenses and claims of privilege have been finally
determined.

         
Section 5.5     Production of Witnesses. At all times from and after the
Distribution Declaration Date, each of TRW Automotive and TRW shall use
commercially reasonable efforts to make available to the other upon written
request, the officers, directors, employees and agents of the members of its
Group as witnesses to the extent that such persons may reasonably be required
in connection with any Action in which the requesting party may from time to
time be involved.

         
Section 5.6     Reimbursement. Except to the extent otherwise contemplated
by any Ancillary Agreement, either party providing Information or witness
services to the other party under this Article VI shall be entitled to
receive from the recipient, upon the presentation of invoices therefor,
payments for such amounts,

34

 

relating to supplies, disbursements and other
out-of-pocket expenses and the salary costs of employees (based on the time
such employees spend providing Information or witness services pursuant to
this Section 5.6), as may be reasonably incurred in providing such
Information or witness services.

         
Section 5.7     Retention of Records. Except as otherwise required by law or
agreed to in writing, each of TRW and TRW Automotive may destroy or otherwise
dispose of any of the Information in accordance with the records retention
policy of TRW at the date of this Agreement as set forth on Exhibit J;
provided that, TRW and TRW Automotive shall have the right to request in writing
that the other party retain specified Information relating in any material
respect to the TRW Business or the TRW Automotive Business, respectively, for a
period of time beyond the period contemplated by such records retention policy
(or, alternatively,
deliver such Information to the requesting party prior to the destruction
or disposal thereof) and the other party shall use commercially reasonable
efforts to accommodate such request to the extent such request is reasonable
and at the requesting party’s expense.

         
Section 5.8     Confidentiality. Each of TRW and the other members of
the TRW Group, on the one hand, and TRW Automotive and the other members of the
TRW Automotive Group, on the other hand, shall hold, and shall cause its
representatives, consultants and advisors to hold, in strict confidence, all
Information concerning the other in its possession or furnished by the other or
the other’s representatives pursuant to this Agreement (except to the extent
that such Information has been (a) in the public domain through no fault of
such party or (b) later lawfully acquired from other sources by such party),
and each party shall not release or disclose such Information to any other
Person, except representatives, consultants and advisors, unless compelled to
disclose by judicial or administrative process or, as advised by its counsel,
by other requirements of law. If a party or any member of such party’s Group
becomes legally compelled to disclose any Information, such party shall
promptly notify the other party so that the other party may seek a protective
order or other remedy or waive such party’s compliance with this Section 5.8.
If no protective order or other remedy is obtained or waiver granted, such
party shall furnish only the portion of the Information that it is advised by
counsel is legally required and shall exercise commercially reasonable effort
to obtain reliable assurance that confidential treatment shall be accorded such
Information.

ARTICLE VI

TERMINATION

         
Section 6.1     Termination. Notwithstanding anything contained in this
Agreement or the Ancillary Agreements to the contrary, this Agreement may be
terminated and the Restructuring and the Distribution may be abandoned at any
time prior to the Distribution Declaration Date by and in the sole discretion
of the TRW Board without the approval of TRW Automotive or the shareholders of
TRW. In the event of

35

 

such termination, no party shall have any liability
of any kind to any other party on account of such termination.

ARTICLE VII

MISCELLANEOUS

         
Section 7.1     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:

         
(a)  if to TRW Automotive, to:

	 	 	[

Attention: [

Telecopy: [	]

]

]

         
(b)  if to TRW, to:

	 	 	[

Attention: Secretary

Telecopy: [	]

 

]

         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. (Cleveland, Ohio 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.

         
Section 7.2     Amendments and Waivers. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by an
authorized officer of each party. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by an authorized
officer of the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure.

36

 

         
Section 7.3     Headings. The table of contents and the article, section,
paragraph and other headings contained in this Agreement are inserted for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.

         
Section 7.4     Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.

         
Section 7.5     Entire Agreement. This Agreement, the Ancillary Agreements,
the Exhibits hereto and the Schedules hereto constitute the entire agreement
between the parties hereto with respect to the subject matter hereof, and
supersede and cancel all prior agreements, negotiations, correspondence,
undertakings, understandings and communications of the parties, oral and
written, with respect to the subject matter hereof.

         
Section 7.6     Governing Law. THIS AGREEMENT, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OR CHOICE OF LAWS OR ANY OTHER LAW THAT WOULD MAKE THE LAWS OF ANY
OTHER JURISDICTION OTHER THAN THE STATE OF OHIO APPLICABLE HERETO.

         
Section 7.7     Resolution of Disputes. All disputes arising out of or
relating to this Agreement or an Ancillary Agreement or the breach, termination
or validity thereof or the parties’ performance hereunder or thereunder
(“Dispute”) shall be resolved as provided by this Section 7.7.

         
(a)  Negotiation of Disputes.

		
	 	       
      (i) Any party shall give
the other party written notice of
any Dispute. The parties shall attempt to resolve such Dispute
promptly by negotiation between executive officers who have
authority to settle the Dispute and who are at a higher level of
management than the persons with direct responsibilities for
administration of this Agreement.
	 
	 	       
      (ii) Within 15 days after
delivery of the notice, the party
receiving the notice shall submit to the other a written response.
The notice and the response shall include: (A) a statement of
each party’s position and a summary of arguments supporting that
position and (B) the name and title of the executive officer who
will represent that party and of any other person who will
accompany the executive officer during the negotiations. Within
30 days after delivery of the disputing party’s notice, the
executive officers of both parties shall meet at a mutually
acceptable 

37

 

		
	 	time and place, and thereafter as often as they
reasonably deem necessary, to attempt to resolve the Dispute.

         (b)  Arbitration.

		
	 	       
      (i) If the Dispute has not
been resolved by executive officer
negotiation within 45 days of the disputing party’s notice
requesting negotiation, or if the parties fail to meet within 30
days from delivery of said notice, such Dispute shall on the
demand of any party, be finally settled under the Rules of
Arbitration of the Center for Public Resources (“CPR”) then in
effect, except as modified herein or by mutual agreement of the
parties.
	 
	 	       
      (ii) The arbitration shall be
held in Cleveland, Ohio. The
arbitration proceedings shall be conducted, and the award shall be
rendered, in the English language.
	 
	 	       
      (iii) There shall be three
arbitrators selected pursuant to
the CPR rules from the CPR the CPR national and regional panels.
All arbitrators shall be neutral, disinterested, independent and
impartial.
	 
	 	       
      (iv) In rendering an award,
the arbitral tribunal shall be
required to follow the substantive law of the jurisdiction
designated by the parties herein. This arbitration agreement and
any award rendered thereunder shall be governed by the United
Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, 1958, and the Federal Arbitration Act, 9 USC § 1
et seq. The arbitral tribunal shall not be empowered to award
damages in excess of compensatory damages except in the case of
fraud, and each party hereby irrevocably waives any right to
recover punitive, exemplary or similar damages with respect to any
dispute except in the case of fraud.
	 
	 	       
      (v) The award shall be final
and binding upon the parties and
shall be the sole and exclusive remedy between the parties with
regard to any claim or counterclaim submitted to the arbitral
tribunal. Judgment upon any award may be entered in any court
having jurisdiction thereof.
	 
	 	       
      (vi) By agreeing to arbitration,
the parties do not intend to
deprive any court of its jurisdiction to issue a pre-arbitral
injunction, pre-arbitral attachment or other order in aid of
arbitration proceedings and the enforcement of any award. Without
prejudice to such provisional remedies as may be available under
the jurisdiction of a national court, the arbitral tribunal shall
have full authority to grant provisional remedies or to order the
parties to request that a court modify or vacate any temporary or
preliminary relief issued by a such court, and to award damages
for the failure of any party to respect the arbitral 

38

 

		
	 	tribunal’s
orders to that effect. The parties hereby unconditionally and
irrevocably submit to the non-exclusive jurisdiction of the state
or federal courts located in Cleveland, Ohio for the purpose of
any preliminary relief
in aid of arbitration, or for enforcement of any award, and
hereby waive any objection to such jurisdiction including without
limitation objections by reason of lack of personal jurisdiction,
improper venue, or inconvenient forum.

         (c) 
Notwithstanding the foregoing, any Dispute regarding the following is
not required to be negotiated or arbitrated prior to seeking relief from a
court of competent jurisdiction: breach of any obligation of confidentiality,
infringement, misappropriation or misuse of any intellectual property right.
The parties acknowledge that their remedies at law for such a breach or
threatened breach would be inadequate and, in recognition of this fact, upon
such breach or threatened breach, either party, without posting any bond, and
in addition to all other remedies which may be available, shall be entitled to
immediately seek or obtain equitable relief in the form of specific
performance, a temporary restraining order, a temporary or permanent injunction
or any other equitable remedy which may then be available.

         
Section 7.8     Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

         
Section 7.9     Assignment. This Agreement may not be assigned by either
party without the written consent of the other party. No such assignment shall
relieve either party of any of its rights and obligations hereunder.

         
Section 7.10     Fees and Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, TRW and TRW Automotive shall each
be responsible for one-half of the fees and expenses incurred by TRW and
TRW Automotive in connection with the transactions contemplated by this Agreement.

         
Section 7.11     Binding Nature; Third-Party Beneficiaries. This Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their respective successors and permitted assigns. Except for the provisions
of Article IV of this Agreement which are intended for the benefit of, and to
be enforceable by, any of the applicable Indemnified Parties in their
respective capacities as such, nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person or Persons any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.

         
Section 7.12     Severability. This Agreement shall be deemed severable; the invalidity or
unenforceability of any term or provision of this Agreement shall not affect
the validity or enforceability of this Agreement or of any other term hereof,
which shall remain in full force and effect, for so long as the economic or
legal

39

 

substance of the transactions contemplated by this Agreement is not
affected in any manner materially adverse to any party. If it is ever held
that any restriction hereunder is too broad to permit enforcement of such
restriction to its fullest extent, each party agrees that such restriction may
be enforced to the maximum extent permitted by law, and each party hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such restriction.

         
Section 7.13     No Right of Setoff. Neither party hereto nor any Affiliate
thereof may deduct from, set off, holdback or otherwise reduce in any manner
whatsoever against any amounts such Persons may owe to the other party hereto
or any of it Affiliates any amounts owed by such other party or its Affiliates
to the first party or its Affiliates.

         
Section 7.14     Currency. All monetary amounts mentioned or referred to
herein are in United States dollars unless otherwise indicated.

         
Section 7.15     Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any provision of this
Agreement was not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.

         
Section 7.16     Construction.

         (a) 
For the purposes hereof, (i) words in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other genders as the context requires, (ii) the words “hereof,”
“herein,” and “herewith” and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (including the
Schedules hereto and the Exhibits hereto) and not to any particular provision
of this Agreement, and article, section, paragraph, exhibit and schedule
references are to the articles, sections, paragraphs, and exhibits and
schedules of this Agreement unless otherwise specified, (iii) the words
“including” and words of similar import when used in this Agreement shall mean
“including, without limitation,” unless otherwise specified, (iv) the word “or”
shall not be exclusive, (v) TRW Automotive and TRW will be referred to herein
individually as a “party” and collectively as “parties” (except where the
context otherwise requires) and (vi) the phrases “used primarily in” or “relate
primarily to” are to be determined in relation to the business of TRW and
its Affiliates collectively.

         (b) 
The parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement. In the event of any conflict or inconsistency between the
provisions of this Agreement and the provisions of the Tax Sharing Agreement
(including with respect to indemnification), the provisions of the Tax Sharing
Agreement shall apply.

40

 

         (c)  Any reference to any federal, state, local or non-U.S. statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context otherwise requires.

41

 

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

	 	 	 	 	 
	 	 	TRW INC.
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	
By:	 	 
	 	 	 	 	

	 	 	 	 	Name:

Title:
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	TRW
AUTOMOTIVE INC.
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	
By:	 	 
	 	 	 	 	

	 	 	 	 	Name:

Title: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.

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         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

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